10-K

U.S. Securities and Exchange Commission

Washington, DC 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, 2013.

Commission File Number 000-52099

Yadkin Financial Corporation

(Exact name of registrant as specified in its charter)

North Carolina	20-4495993
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

209 North Bridge Street

Elkin, North Carolina 28621-3404

(Address of principal executive offices)

(336) 526-6300

(Registrant's telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Exchange Act:

Title of each class	Exchange on which registered
Common Stock, Par Value $1.00 Per Share	The NASDAQ Stock Market, LLC

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 [ ]          No [ X ]

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 [ ]          No [ X ]

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

Yes [ X ]         No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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).

Yes [ X ]         No [ ]

Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of 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. [ ]

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.

Large accelerated filer [ ]	Accelerated filer [ X ]
Non-accelerated filer [ ] (Do not check if 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 Act).

Yes [ ] No [ X ]

The aggregate market value of the voting stock of the registrant held by non-affiliates was approximately $182 million based on the closing sale price of $14.04 per share on June 30, 2013. For purposes of the foregoing calculation only, all directors and executive officers of the registrant have been deemed affiliates. The number of shares of common stock outstanding as of February 28, 2013 was 14,384,541.

Documents Incorporated by Reference

None

FORM 10-K TABLE OF CONTENTS

	Page
PART I
Item 1. Business	2
Item 1A. Risk Factors	18
Item 1B. Unresolved Staff Comments	32
Item 2. Properties	32
Item 3. Legal Proceedings	34
Item 4. Mine Safety Disclosures	34
PART II
Item 5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	35
Item 6. Selected Financial Data	36
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation	37
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	64
Item 8. Financial Statements and Supplementary Data	65
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	123
Item 9A. Controls and Procedures	123
Item 9B. Other Information	126
PART III
Item 10. Directors and Executive Officers and Corporate Governance	126
Item 11. Executive Compensation	129
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	133
Item 13. Certain Relationships and Related Transactions and Director Independence	134
Item 14. Principal Accounting Fees and Services	135
PART IV
Item 15. Exhibits, Financial Statement Schedules	136

PART I

CAUTIONARY STATEMENT REGARDING

FORWARD-LOOKING STATEMENTS

This report, including information included or incorporated by reference in this report, contains statements which constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and which statements are inherently subject to risks and uncertainties. These statements are based on many assumptions and estimates and are not guarantees of future performance. Forward looking statements are statements that include projections, predictions, expectations or beliefs about future events or results or otherwise are not statements of historical fact. Such statements are often characterized by the use of qualifying words (and their derivatives) such as “may,” “would,” ”could,” ”should,” ”will,” “expect,” “anticipate,” “predict,” “project,” “potential,” “continue,” “assume,” “believe,” “intend,” “plan,” “forecast,” “goal,” “estimate,” or other statements concerning opinions or judgments of Yadkin Financial Corporation, its subsidiary bank, and its management about future events. Factors that could influence the accuracy of such forward looking statements include, but are not limited to, the financial success or changing strategies of the Bank’s customers or vendors, actions of government regulators, the level of market interest rates, and general economic conditions.

Potential risks and uncertainties that could cause our actual results to differ materially from those anticipated in any forward-looking statements include, but are not limited to, those described below under Item 1A- Risk Factors and the following:

• reduced earnings due to larger than expected credit losses in the sectors of our loan portfolio secured by real estate due to economic factors, including declining real estate values, increasing interest rates, increasing unemployment, or changes in payment behavior or other factors;

• reduced earnings due to larger than expected credit losses because our loans are concentrated by loan type, industry segment, borrower type, or location of the borrower or collateral;

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

• the adequacy of the level of our allowance for loan losses and the amount of loan loss provisions required in future periods;

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

• 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 writedown assets;

• the amount of our loan portfolio collateralized by real estate, and the weakness in the commercial real estate market;

• our efforts to raise capital or otherwise increase and maintain our regulatory capital ratios above the statutory and agreed upon minimums, including the impact of the capital rules under Basel III;

• the impact of our efforts to raise capital on our financial position, liquidity, capital, and profitability;

• the increase in the cost of capital of our Series T and Series T-ACB Preferred Stock in 2014 if we do not redeem within five years of the date of issuance;

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

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

• significant increases in competitive pressure in the banking and financial services industries;

• changes in the interest rate environment which could reduce anticipated or actual margins;

• changes in political conditions or the legislative or regulatory environment, including the effect of recent financial reform legislation on the banking industry;

• general economic conditions, either nationally or regionally and especially in our primary service area, becoming less favorable than expected resulting in, among other things, a deterioration in credit quality;

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

• changes occurring in business conditions and inflation;

• changes in technology;

• changes in monetary and tax policies;

• ability of borrowers to repay loans, which can be adversely affected by a number of factors, including changes in economic conditions, adverse trends or events affecting business industry groups, reductions in real estate values or markets, business closings or lay-offs, natural disasters, which could be exacerbated by potential climate change, and international instability;

• changes in deposit flows;

• 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 as a result of cyber attacks, which

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could disrupt our businesses, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs and cause losses;

• changes in accounting principles, policies or guidelines;

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

• our ability to maintain internal control over financial reporting;

• our reliance on secondary 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, to meet our liquidity needs;

• loss of consumer confidence and economic disruptions resulting from terrorist activities or other military actions;

• changes in the securities markets; and

• other risks and uncertainties detailed from time to time in our filings with the Securities and Exchange Commission (the “SEC”).

These risks are exacerbated by the state of local, national and international financial markets and fiscal situations, and we are unable to predict what impact these uncertain market conditions will have on us in the future. Beginning in 2008 and continuing through 2012, the capital and credit markets experienced extended volatility and disruption. During 2013 and into the first few months of 2014, economic conditions, while slow by historical standards and still fluctuating on a day-to-day basis, have shown general signs of improvement. However, as a result of United States (“U.S.”) government fiscal challenges, continued volatility in European sovereign and bank debt, slow improvement in domestic employment conditions and the economic and monetary policy statements by the Board of Governors of the Federal Reserve System (the “Federal Reserve”), it is difficult to predict if this stabilization is indicative of a lasting trend. While the U.S. economy has been growing since the third quarter of 2009, the rate of growth has been below that of prior post-recession recoveries. Current economic reports predict continued growth in 2014; however, the level of such growth may continue to be below that of historical trends. There can be no assurance that the current level of economic activity will be sustained. Global and domestic fiscal and political challenges could materially and adversely impact the U.S. economy in general, the banking industry and our business, financial condition and results of operations as well as our ability to maintain sufficient capital or other funding for liquidity and business purposes.

We have based our forward-looking statements on our current expectations about future events. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee that these expectations will be achieved. We undertake no obligation to publicly update or otherwise revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Item 1 - Business

Corporate history and address. Yadkin Financial Corporation (the “Company” or “Yadkin”) is a bank holding company incorporated under the laws of North Carolina to serve as the holding company for Yadkin Bank (the “Bank”), a North Carolina chartered commercial bank with its deposits insured by the Federal Deposit Insurance Corporation (“FDIC”) up to applicable limits. The Bank is not a member of the Federal Reserve. The Bank began operations in 1968 and operates in the central piedmont, research triangle area and the northwestern region of North Carolina and the upstate piedmont area of South Carolina. Effective July 1, 2006, the Bank was reorganized and the Bank became the Company’s wholly owned subsidiary. In 2013, the Company and the Bank amended their respective Articles of Incorporation to change their names to Yadkin Financial Corporation and Yadkin Bank, respectively, effective May 28, 2013. Our voting common stock is listed on The Nasdaq Global Select Market ("Nasdaq") under the trading symbol “YDKN.”

On July 31, 2002, the Bank acquired Main Street BankShares, Inc. and its subsidiary, Piedmont Bank, of Statesville, North Carolina. On January 1, 2004, the Bank acquired High Country Financial Corporation, and its subsidiary, High Country Bank, of Boone, North Carolina. On October 1, 2004, the Bank acquired Sidus Financial, LLC (“Sidus”), a mortgage lender that was dissolved as of January 23, 2013. Retail mortgage bank activities are now operated as a division of the Bank. The Bank acquired Cardinal State Bank, of Durham, North Carolina (“Cardinal”) on March 31, 2008. On April 16, 2009, the Company acquired American Community Bancshares, Inc., and its subsidiary, American Community Bank of Monroe, North Carolina (“American Community”).

During 2009, the Bank established five North Carolina limited liability companies (LLCs), Green Street I, LLC, Green Street II, LLC, Green Street III, LLC, Green Street IV, LLC and Green Street V, LLC. The purpose of LLCs is to hold, maintain and sell real estate properties acquired by the Bank.

On May 28, 2013, the Company completed a one-for-three reverse stock split of its common stock. In connection with the reverse stock split, every three shares of issued and outstanding Company common stock on May 28, 2013 were exchanged

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for one share of newly issued common stock. Fractional shares resulting from the reverse stock split were exchanged for a cash payment equal to the fraction to which the shareholder would otherwise have been entitled multiplied by the closing price of the Company's common stock as reported on Nasdaq on the last trading day prior to the effectuation of the reverse stock split.

On January 27, 2014, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with VantageSouth Bancshares, Inc., a Delaware corporation (“VantageSouth”), and Piedmont Community Bank Holdings, Inc., a Delaware corporation and majority stockholder of VantageSouth (“Piedmont”). The Merger Agreement provides that, subject to the terms and conditions set forth therein, VantageSouth and Piedmont will merge with and into the Company (collectively, the “Mergers”), with the Company continuing as the surviving corporation. The Merger Agreement also provides that, immediately following the effective time of the mergers, VantageSouth Bank, a North Carolina banking corporation and wholly owned subsidiary of VantageSouth, will merge with and into the Bank, with the Bank continuing as the surviving bank in the bank merger. The Merger Agreement was approved by each of the boards of directors of the Company, VantageSouth, and Piedmont, and the mergers are expected to close late in the second quarter of 2014, subject to shareholder and regulatory approval and other customary closing conditions.

The Company’s principal executive offices are located at 209 North Bridge Street, Elkin, North Carolina 28621-3404, and the telephone number is (336) 526-6300. Our periodic securities reports on Forms 10-K and 10-Q and our current securities reports on Form 8-K are available on our website at www.yadkinbank.com under the heading “About Us - News & Press Releases.” The information on our website is not incorporated by reference into this Annual Report on Form 10-K.

Business. The Bank’s operations are primarily retail oriented and directed toward individuals and small and medium-sized businesses located in our banking market and, to a lesser extent, areas surrounding our immediate banking market. We provide most traditional commercial and consumer banking services, but our principal activities are the taking of demand and time deposits and the making of consumer and commercial loans. The Bank’s primary source of revenue is the interest income derived from its lending activities.

At December 31, 2013, the Company had total assets of $1,806.0 million, net loans held-for-investment of $1,340.7 million, deposits of $1,518.4 million, and shareholders’ equity of $184.5 million. The Company had net income to common shareholders of $16.9 million and diluted earnings per share of $1.19 for the year ended December 31, 2013. The Company had a net loss to common shareholders of $12.6 million and $17.4 million and diluted losses per share of $1.92 and $2.85 for the years ended December 31, 2012 and 2011, respectively. The net loss in 2012 was primarily the result of additional credit losses incurred as part of an accelerated asset disposition plan. This disposition plan included the sale of approximately $50 million in problem loans and the disposition of foreclosed properties. Net losses in 2011 were related primarily to valuation allowance recorded on deferred tax assets that was reversed in 2012.

Business Offices. Yadkin operates 33 full-service banking offices and is headquartered in Elkin, North Carolina. We operate the offices in Jefferson and West Jefferson (Ashe County), Wilkesboro and North Wilkesboro (Wilkes County), Elkin (Surry County), East Bend, Jonesville and Yadkinville (Yadkin County), Statesville and Mooresville (Iredell County), Cornelius, Charlotte, Mint Hill and Huntersville (Mecklenburg County), Boone (Watauga County), Linville (Avery County), Durham (Durham County), Hillsborough (Orange County), Monroe, Indian Trail and Marshville (Union County); as well as offices in Tega Cay, South Carolina (York County) and Gaffney and Blacksburg, South Carolina (Cherokee County). The Bank has a loan production office in Wilmington, NC (New Hanover County) and mortgage banking offices throughout North and South Carolina.

Banking Market. The Bank’s current banking market consists of the central piedmont counties (most current data available-2013 population) of Iredell (164,000), Mecklenburg (957,000), and Union (211,000), the research triangle counties of Durham (285,000) and Orange (137,000) and the northwestern counties of Ashe (28,000), Avery (18,000), Surry (74,000), Watauga (53,000), Wilkes (70,000) and Yadkin (39,000) in North Carolina and the upstate counties of South Carolina of York (238,000) and Cherokee (56,000) counties, and to a lesser extent, the surrounding areas (the “Yadkin Market”). The Yadkin Market is located along Interstate 77 in the Charlotte metropolitan area, and west of the “Piedmont Triad” area of North Carolina to the northwestern border with Virginia and Tennessee (Source- SNL Financial Data).

We believe Yadkin’s market area is well diversified and strong. The 13 counties in which our branches are located had an estimated 2013 population of 2.3 million people. Median household income in 2013 for these counties was $44,000. Over 99% of the work force is employed in nonagricultural wage and salary positions. The government employs approximately 9% of the work force. The major non-governmental employment sectors were retail trade (10%), health and social assistance (13%), manufacturing (10%), accommodation and food services (8%), finance and insurance (7%) and administrative and waste services (7%). (Source-NC Dept of Commerce & US Census Bureau).

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Competition. Commercial banking in North Carolina and South Carolina is extremely competitive due to state laws that allow statewide branching. North Carolina is the home of one of the ten largest commercial banks in the U.S., Bank of America, N.A., which has branches located in the Yadkin Market.

The following table summarizes Yadkin’s share of the deposit market in each of the thirteen counties as of June 30, 2013.

County	Total Number of Branches	Yadkin Bank Branches	Total Amount of Deposits (000's)	Yadkin Bank Deposits (000's)	Yadkin Bank % of Market Deposits
North Carolina:
Ashe	9	2	484,937	153,803	32	%
Avery	9	1	246,000	16,120	7	%
Durham	62	3	6,018,043	144,014	2	%
Iredell	56	6	2,286,258	222,776	10	%
Mecklenburg	238	6	199,004,221	206,699	<1%
Surry	29	2	1,268,476	95,140	8	%
Union	40	3	1,589,931	159,494	10	%
Watauga	18	2	860,388	105,932	12	%
Wilkes	18	2	759,895	104,836	14	%
Yadkin	10	3	478,974	189,384	40	%
South Carolina:
Cherokee	11	2	470,794	89,939	19	%
York	52	1	2,165,040	19,553	1	%

The financial services industry has been and is experiencing an ongoing trend towards consolidation in which fewer large national and regional banks and other financial institutions are replacing many smaller and more local banks. These larger banks and other financial institutions hold a large accumulation of assets and have significantly greater resources and a wider geographic presence or greater accessibility. In some instances, these larger entities operate without the traditional brick and mortar facilities that restrict geographic presence. Some competitors have more aggressive marketing campaigns and better brand recognition, and are able to offer more services, more favorable pricing or greater customer convenience than the Bank. In addition, competition has increased from new banks and other financial services providers that target our existing or potential customers.

The Bank also competes for deposits in the Yadkin Market with other financial institutions such as credit unions, consumer finance companies, insurance companies, brokerage companies, agencies issuing U.S. government securities and other financial institutions with varying degrees of regulatory restrictions. These competitors may offer higher interest rates, which could decrease the deposits we attract or require us to increase rates to retain existing deposits or attract new deposits. In its lending activities, Yadkin competes with all other financial institutions as well as consumer finance companies, mortgage companies and other lenders. Credit unions have been permitted to expand their membership criteria and expand their loan services to include such traditional bank services as commercial lending. We expect competition in the Yadkin Market to continue to be significant.

We intend to continue to serve the financial needs of consumers and small-to-medium size businesses located primarily in the Yadkin Market. Our lending efforts will be focused on making quality consumer loans, commercial loans to small to medium sized businesses, and home equity loans. While our deposits and loans are derived primarily from customers in our banking market, we make loans and have deposit relationships with individual and business customers in areas surrounding our immediate banking market. We offer a full range of deposit products to include checking and savings accounts, money market accounts, certificates of deposit and individual retirement accounts. We rely on offering competitive interest rates and unmatched customer service to accomplish our deposit objectives.

The Bank strives to offer its products and services in the manner that meets its customers’ expectations. For those customers who prefer to do their banking in a hands-on, face-to-face manner, we believe the Bank offers exceptional personal service. Customers who want to do their banking when and where they choose are able to utilize the automated teller machines, credit and debit card programs, and a full range of internet-based banking options.

Supervision and Regulation. Banking is a complex, highly regulated industry. The primary goals of banking regulations are to maintain a safe and sound banking system and to facilitate the conduct of sound monetary policy. In furtherance of these

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goals, Congress and the North Carolina General Assembly have created largely autonomous regulatory agencies and enacted numerous laws that govern banks, their holding companies and the banking industry. The descriptions of and references to the statutes and regulations below are brief summaries and do not purport to be complete. The descriptions are qualified in their entirety by reference to the specific statutes and regulations discussed.

Recent Legislative and Regulatory Initiatives to Address Financial and Economic Crises. Markets in the U.S. and elsewhere experienced extreme volatility and disruption beginning in the latter half of 2007 that has continued since then. These circumstances have exerted significant downward pressure on prices of equity securities and virtually all other asset classes, and have resulted in substantially increased market volatility, severely constrained credit and capital markets, particularly for financial institutions, and has caused an overall loss of investor confidence. Loan portfolio performances have deteriorated at many institutions resulting from, among other factors, a weak economy and a decline in the value of the collateral supporting their loans. Dramatic slowdowns in the housing industry, due in part to falling home prices and increasing foreclosures and unemployment, have created strains on financial institutions. Many borrowers are now unable to repay their loans, and the collateral securing these loans has, in some cases, declined below the loan balance. In response to the challenges facing the financial services sector, the following regulatory and governmental actions have recently been enacted.

The Dodd-Frank Wall Street Reform and Consumer Protection Act

On July 21, 2010, President Obama signed into law The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) which, among other things, changes the oversight and supervision of financial institutions, includes new minimum capital requirements, creates a new federal agency to regulate consumer financial products and services and implements changes to corporate governance and compensation practices. The Dodd-Frank Act is focused in large part on the financial services industry, particularly bank holding companies with consolidated assets of $50 billion or more, and contains a number of provisions that will affect us, including:

• Minimum Leverage and Risk-Based Capital Requirements.Under the Dodd-Frank Act, the appropriate federal banking agencies are required to establish minimum leverage and risk-based capital requirements on a consolidated basis for all insured depository institutions and bank holding companies, which can be no less than the currently applicable leverage and risk-based capital requirements for depository institutions. As a result, the Company and the Bank will be subject to at least the same capital requirements and must include the same components in regulatory capital.

• Deposit Insurance Modifications. The Dodd-Frank Act modifies the FDIC’s assessment base upon which deposit insurance premiums are calculated. The new assessment base will equal our average total consolidated assets minus the sum of our average tangible equity during the assessment period. The Dodd-Frank Act also permanently raises the standard maximum insurance amount to $250,000.

• Creation of New Governmental Authorities. The Dodd-Frank Act creates various new governmental authorities such as the Financial Stability Oversight Council and the Consumer Financial Protection Bureau, or CFPB, an independent regulatory authority housed within the Federal Reserve. The CFPB has broad authority to regulate the offering and provision of consumer financial products. The CFPB officially came into being on July 21, 2011, and rulemaking authority for a range of consumer financial protection laws (such as the Truth in Lending Act, the Electronic Funds Transfer Act and the Real Estate Settlement Procedures Act, among others) transferred from the Federal Reserve and other federal regulators to the CFPB on that date. The Dodd-Frank Act gives the CFPB authority to supervise and examine depository institutions with more than $10 billion in assets for compliance with these federal consumer laws, although the authority to supervise and examine depository institutions with $10 billion or less in assets, such as the Bank, for compliance with federal consumer laws will remain largely with those institutions’ primary regulators. However, the CFPB may participate in examinations of these smaller institutions on a “sampling basis” and may refer potential enforcement actions against such institutions to their primary regulators. The CFPB also has supervisory and examination authority over certain nonbank institutions that offer consumer financial products. The Dodd-Frank Act identifies a number of covered nonbank institutions, and also authorizes the CFPB to identify additional institutions that will be subject to its jurisdiction. Accordingly, the CFPB may participate in examinations of the Bank, which currently has assets of less than $10 billion, and could supervise and examine our other direct or indirect subsidiaries that offer consumer financial products or services. In addition, the act permits states to adopt consumer protection laws and regulations that are stricter than those regulations promulgated by the CFPB, and state attorneys general are permitted to enforce consumer protection rules adopted by the CFPB against certain institutions.

The Dodd-Frank Act also authorized the CFPB to establish certain minimum standards for the origination of residential

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mortgages, including a determination of the borrower’s ability to repay. Under the Dodd-Frank Act, financial institutions may not make a residential mortgage loan unless they make a “reasonable and good faith determination” that the consumer has a “reasonable ability” to repay the loan. The act allows borrowers to raise certain defenses to foreclosure but provides a full or partial safe harbor from such defenses for loans that are “qualified mortgages.” On January 10, 2013, the CFPB published final rules to, among other things, specify the types of income and assets that may be considered in the ability-to-repay determination, the permissible sources for verification, and the required methods of calculating the loan’s monthly payments. Since then the CFPB made certain modifications to these rules. The rules extend the requirement that creditors verify and document a borrower’s “income and assets” to include all “information” that creditors rely on in determining repayment ability. The rules also provide further examples of third-party documents that may be relied on for such verification, such as government records and check-cashing or funds-transfer service receipts. The new rules were effective beginning on January 10, 2014. The rules also define “qualified mortgages,” imposing both underwriting standards - for example, a borrower’s debt-to-income ratio may not exceed 43% - and limits on the terms of their loans. Points and fees are subject to a relatively stringent cap, and the terms include a wide array of payments that may be made in the course of closing a loan. Certain loans, including interest-only loans and negative amortization loans, cannot be qualified mortgages.

• Executive Compensation and Corporate Governance Requirements. The Dodd-Frank Act requires public companies to include, at least once every three years, a separate non-binding “say on pay” vote in their proxy statement by which stockholders may vote on the compensation of the company’s named executive officers. In addition, if such companies are involved in a merger, acquisition, or consolidation, or if they propose to sell or dispose of all or substantially all of their assets, stockholders have a right to an advisory vote on any golden parachute arrangements in connection with such transaction (frequently referred to as “say-on-golden parachute” vote). Other provisions of the act may impact our corporate governance. For instance, the act requires the SEC to adopt rules:

• prohibiting the listing of any equity security of a company that does not have an independent compensation committee; and

• requiring all exchange-traded companies to adopt clawback policies for incentive compensation paid to executive officers in the event of accounting restatements based on material non-compliance with financial reporting requirements.

The Dodd-Frank Act also authorizes the SEC to issue rules allowing stockholders to include their own nominations for directors in a company’s proxy solicitation materials. Many provisions of the act require the adoption of additional rules to implement the changes. In addition, the act mandates multiple studies that could result in additional legislative action. Governmental intervention and new regulations under these programs could materially and adversely affect our business, financial condition and results of operations.

Basel Capital Standards

In December 2010, the Basel Committee on Banking Supervision (the “BCBS”), an international forum for cooperation on banking supervisory matters, announced the “Basel III” capital standards, which substantially revised the existing capital requirements for banking organizations. Modest revisions were made in June 2011. The Basel III standards operate in conjunction with portions of standards previously released by the BCBS and commonly known as “Basel II” and “Basel 2.5.” On June 7, 2012, the Federal Reserve, the Office of the Comptroller of the Currency (the “OCC”), and the FDIC requested comment on these proposed rules that, taken together, would implement the Basel regulatory capital reforms through what we refer to herein as the “Basel III capital framework.”

On July 2, 2013, the Federal Reserve adopted a final rule for the Basel III capital framework and, on July 9, 2013, the OCC also adopted a final rule and the FDIC adopted the same provisions in the form of an “interim” final rule. The rule will apply to all national and state banks and savings associations and most bank holding companies and savings and loan holding companies, which we collectively refer to herein as “covered” banking organizations. Bank holding companies with less than $500 million in total consolidated assets are not subject to the final rule, nor are savings and loan holding companies substantially engaged in commercial activities or insurance underwriting. In certain respects, the rule imposes more stringent requirements on “advanced approaches” banking organizations-those organizations with $250 billion or more in total consolidated assets, $10 billion or more in total foreign exposures, or that have opted in to the Basel II capital regime. The requirements in the rule begin to phase in on January 1, 2014, for advanced approaches banking organizations, and on January 1, 2015, for other covered banking organizations. The requirements in the rule will be fully phased in by January 1, 2019.

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The rule imposes higher risk-based capital and leverage requirements than those currently in place. Specifically, the rule imposes the following minimum capital requirements:

• a new common equity Tier 1 risk-based capital ratio of 4.5%;

• a Tier 1 risk-based capital ratio of 6% (increased from the current 4% requirement);

• a total risk-based capital ratio of 8% (unchanged from current requirements);

• a leverage ratio of 4% (currently 3% for depository institutions with the highest supervisory composite rating and 4% for other depository institutions); and

• new supplementary leverage ratio of 3% applicable to advanced approaches banking organizations, resulting in a leverage ratio requirement of 7% for such institutions.

Under the rule, Tier 1 capital is redefined to include two components: Common Equity Tier 1 capital and additional Tier 1 capital. The new and highest form of capital, Common Equity Tier 1 capital, consists solely of common stock (plus related surplus), retained earnings, accumulated other comprehensive income, and limited amounts of minority interests that are in the form of common stock. Additional Tier 1 capital includes other perpetual instruments historically included in Tier 1 capital, such as non-cumulative perpetual preferred stock. The rule permits bank holding companies with less than $15 billion in total consolidated assets to continue to include trust preferred securities and cumulative perpetual preferred stock issued before May 19, 2010 in Tier 1 capital, but not in Common Equity Tier 1 capital, subject to certain restrictions. Tier 2 capital consists of instruments that currently qualify in Tier 2 capital plus instruments that the rule has disqualified from Tier 1 capital treatment.

In addition, in order to avoid restrictions on capital distributions or discretionary bonus payments to executives, a covered banking organization must maintain a “capital conservation buffer” on top of its minimum risk-based capital requirements. This buffer must consist solely of Tier 1 Common Equity, but the buffer applies to all three measurements (Common Equity Tier 1, Tier 1 capital and total capital). The capital conservation buffer will be phased in incrementally over time, becoming fully effective on January 1, 2019, and will consist of an additional amount of common equity equal to 2.5% of risk-weighted assets.

The current capital rules require certain deductions from or adjustments to capital. The final rule retains many of these deductions and adjustments and also provides for new ones. As a result, deductions from Common Equity Tier 1capital will be required for goodwill (net of associated deferred tax liabilities); intangible assets such as non-mortgage servicing assets and purchased credit card relationships (net of associated deferred tax liabilities); deferred tax assets that arise from net operating loss and tax credit carryforwards (net of any related valuations allowances and net of deferred tax liabilities); any gain on sale in connection with a securitization exposure; any defined benefit pension fund net asset (net of any associated deferred tax liabilities) held by a bank holding company (this provision does not apply to a bank or savings association); the aggregate amount of outstanding equity investments (including retained earnings) in financial subsidiaries; and identified losses. Savings associations also must deduct investments in certain subsidiaries. Other deductions will be necessary from different levels of capital.

Additionally, the final rule provides for the deduction of three categories of assets: (i) deferred tax assets arising from temporary differences that cannot be realized through net operating loss carrybacks (net of related valuation allowances and of deferred tax liabilities), (ii) mortgage servicing assets (net of associated deferred tax liabilities) and (iii) investments in more than 10% of the issued and outstanding common stock of unconsolidated financial institutions (net of associated deferred tax liabilities). The amount in each category that exceeds 10% of Common Equity Tier 1 capital must be deducted from Common Equity Tier 1 capital. The remaining, non-deducted amounts are then aggregated, and the amount by which this total amount exceeds 15% of Common Equity Tier 1 capital must be deducted from Common Equity Tier 1 capital. Amounts of minority investments in consolidated subsidiaries that exceed certain limits and investments in unconsolidated financial institutions may also have to be deducted from the category of capital to which such instruments belong.

Accumulated other comprehensive income (AOCI) is presumptively included in Common Equity Tier 1 capital and often would operate to reduce this category of capital. The final rule provides a one-time opportunity at the end of the first quarter of 2015 for covered banking organizations to opt out of much of this treatment of AOCI. The final rule also has the effect of increasing capital requirements by increasing the risk weights on certain assets, including high volatility commercial real estate, mortgage servicing rights not includable in Common Equity Tier 1 capital, equity exposures, and claims on securities firms, that are used in the denominator of the three risk-based capital ratios.

The ultimate impact of the rule on the Company and the Bank is currently being reviewed and is dependent upon when certain requirements of the rule will be fully phased in. While the rule contains several provisions that would affect the mortgage lending business, at this point we cannot determine the ultimate effect that the rule will have upon our earnings or financial position.

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Volcker Rule

Section 619 of the Dodd-Frank Act, known as the “Volcker Rule,” prohibits any bank, bank holding company, or affiliate (referred to collectively as “banking entities”) from engaging in two types of activities: “proprietary trading” and the ownership or sponsorship of private equity or hedge funds that are referred to as “covered funds.” On December 10, 2013, our primary federal regulators, the Federal Reserve and the FDIC, together with other federal banking agencies and the SEC and the Commodity Futures Trading Commission, finalized a regulation to implement the Volcker Rule. The deadline for compliance with the Volcker Rule is July 21, 2015.

Proprietary trading includes the purchase or sale as principal of any security, derivative, commodity future, or option on any such instrument for the purpose of benefitting from short-term price movements or realizing short-term profits. Exceptions apply, however. Trading in U.S. Treasuries, obligations or other instruments issued by a government sponsored enterprise, state or municipal obligations, or obligations of the FDIC is permitted. A banking entity also may trade for the purpose of managing its liquidity, provided that it has a bona fide liquidity management plan. Trading activities as agent, broker or custodian; through a deferred compensation or pension plan; as trustee or fiduciary on behalf of customers; in order to satisfy a debt previously contracted; or in repurchase and securities lending agreements are permitted. Additionally, the Volcker Rule permits banking entities to engage in trading that takes the form of risk-mitigating hedging activities.

The covered funds that a banking entity may not sponsor or hold on ownership interest in are, with certain exceptions, funds that are exempt from registration under the Investment Company Act of 1940 because they either have 100 or fewer investors or are owned exclusively by “qualified investors” (generally, high net worth individuals or entities). Wholly owned subsidiaries, joint ventures and acquisition vehicles, foreign pension or retirement funds, insurance company separate accounts (including bank-owned life insurance), public welfare investment funds, and entities formed by the FDIC for the purpose of disposing of assets are not covered funds, and a bank may invest in them. Most securitizations also are not treated as covered funds.

The regulation as issued on December 10, 2013, treated collateralized debt obligations backed by trust preferred securities as covered funds and accordingly subject to divestiture. In an interim final rule issued on January 14, 2014, the agencies exempted collateralized debt obligations (“CDOs”) issued before May 19, 2010, that were backed by trust preferred securities issued before the same date by a bank with total consolidated assets of less than $15 billion or by a mutual holding company and that the bank holding the CDO interest had purchased before December 10, 2013, from the Volcker Rule prohibition. This exemption does not extend to CDOs backed by trust-preferred securities issued by an insurance company.

Future Legislation and Regulations

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 and the Bank 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. Yadkin 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 the Bank could have a material effect on the business of the Company.

Yadkin Financial Corporation

As a bank holding company under the Bank Holding Company Act of 1956, as amended, Yadkin is registered with and subject to regulation by the Federal Reserve. Yadkin is required to file annual and other reports with, and furnish information to, the Federal Reserve. The Federal Reserve conducts periodic examinations of Yadkin and may examine any of its subsidiaries, including the Bank.

The Bank Holding Company Act provides that a bank holding company must obtain the prior approval of the Federal Reserve for the acquisition of more than five percent of the voting stock or substantially all the assets of any bank or bank holding company. In addition, the Bank Holding Company Act restricts the extension of credit to any bank holding company by its subsidiary bank. The Bank Holding Company Act also provides that, with certain exceptions, a bank holding company may not engage in any activities other than those of banking or managing or controlling banks and other authorized subsidiaries or own or control more than five percent of the voting shares of any company that is not a bank. The Federal Reserve has deemed limited activities to be closely related to banking and therefore permissible for a bank holding company.

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The Gramm-Leach-Bliley Financial Services Modernization Act of 1999 (the "Modernization Act") significantly expanded the types of activities in which a bank holding company may engage. Subject to various limitations, the Modernization Act generally permits a bank holding company to elect to become a “financial holding company.” A financial holding company may affiliate with securities firms and insurance companies and engage in other activities that are “financial in nature.” Among the activities that are deemed “financial in nature” are, in addition to traditional lending activities, securities underwriting, dealing in or making a market in securities, sponsoring mutual funds and investment companies, insurance underwriting and agency activities, certain merchant banking activities as well as activities that the Federal Reserve considers to be closely related to banking.

A bank holding company may become a financial holding company under the Modernization Act if each of its subsidiary banks is “well-capitalized” under the Federal Deposit Insurance Corporation Improvement Act prompt corrective action provisions, is well managed and has at least a satisfactory rating under the Community Reinvestment Act. In addition, the bank holding company must file a declaration with the Federal Reserve that the bank holding company wishes to become a financial holding company. A bank holding company that falls out of compliance with these requirements may be required to cease engaging in some of its activities.

Under the Modernization Act, the Federal Reserve serves as the primary “umbrella” regulator of financial holding companies, with supervisory authority over each parent company and limited authority over its subsidiaries. Expanded financial activities of financial holding companies generally will be regulated according to the type of such financial activity: banking activities by banking regulators, securities activities by securities regulators and insurance activities by insurance regulators. The Modernization Act also imposes additional restrictions and heightened disclosure requirements regarding private information collected by financial institutions.

Enforcement Authority. Yadkin will be required to obtain the approval of the Federal Reserve prior to engaging in or, with certain exceptions, acquiring control of more than 5% of the voting shares of a company engaged in, any new activity. Prior to granting such approval, the Federal Reserve must weigh the expected benefits of any such new activity to the public (such as greater convenience, increased competition, or gains in efficiency) against the risk of possible adverse effects of such activity (such as undue concentration of resources, decreased or unfair competition, conflicts of interest, or unsound banking practices). The Federal Reserve has cease-and-desist powers over bank holding companies and their nonbanking subsidiaries where their actions would constitute a serious threat to the safety, soundness or stability of a subsidiary bank. The Federal Reserve also has authority to regulate debt obligations (other than commercial paper) issued by bank holding companies. This authority includes the power to impose interest ceilings and reserve requirements on such debt obligations. A bank holding company and its subsidiaries are also prohibited from engaging in certain tie-in arrangements in connection with any extension of credit, lease or sale of property or furnishing of services.

Interstate Acquisitions. Federal banking law generally provides that a bank holding company may acquire or establish banks in any state of the United States, subject to certain aging and deposit concentration limits. In addition, North Carolina banking laws permit a bank holding company which owns stock of a bank located outside North Carolina to acquire a bank or bank holding company located in North Carolina. Federal banking law will not permit a bank holding company to own or control banks in North Carolina if the acquisition would exceed 20% of the total deposits of all federally-insured deposits in North Carolina.

Capital Adequacy. The Federal Reserve imposes certain capital requirements on the Company under the Bank Holding Company Act, including a minimum leverage ratio and a minimum ratio of “qualifying” capital to risk-weighted assets. These requirements are essentially the same as those that apply to the Bank and are described below under “Yadkin Bank - Capital Adequacy and Prompt Corrective Action.” Subject to our capital requirements and certain other restrictions, including the consent of the Federal Reserve, we are able to borrow money to make a capital contribution to the Bank, and these loans may be repaid from dividends paid from the Bank to the Company. Our ability to pay dividends depends on the ability of the Bank to pay dividends to us, which is subject to regulatory restrictions as described below in “Yadkin Bank - Dividends.” We are also able to raise capital for contribution to the Bank by issuing securities without having to receive regulatory approval, subject to compliance with federal and state securities laws.

Source of Strength for Subsidiary. In accordance with Federal Reserve policy, we are required to act as a source of financial strength to the Bank and to commit resources to support the Bank in circumstances in which we might not otherwise do so. Under the Federal Deposit Insurance Corporate Improvement Act of 1991, or FDICIA, to avoid receivership of its insured depository institution subsidiary, a bank holding company is required to guarantee the compliance of any insured depository institution subsidiary that may become “undercapitalized” within the terms of any capital restoration plan filed by such subsidiary with its appropriate federal banking agency up to the lesser of (i) an amount equal to 5% of the institution’s total assets at the time the institution became undercapitalized, or (ii) the amount which is necessary (or would have been necessary) to bring the institution

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into compliance with all applicable capital standards as of the time the institution fails to comply with such capital restoration plan.

Under the BHCA, the Federal Reserve may require a bank holding company to terminate any activity or relinquish control of a non-bank subsidiary, other than a non-bank subsidiary of a bank, upon the Federal Reserve’s determination that such activity or control constitutes a serious risk to the financial soundness or stability of any depository institution subsidiary of a bank holding company. Further, federal bank regulatory authorities have additional discretion to require a bank holding company to divest itself of any bank or non-bank subsidiaries if the agency determines that divestiture may aid the depository institution’s financial condition.

In addition, the “cross guarantee” provisions of the Federal Deposit Insurance Act require insured depository institutions under common control to reimburse the FDIC for any loss suffered or reasonably anticipated by the FDIC as a result of the default of a commonly controlled insured depository institution or for any assistance provided by the FDIC to a commonly controlled insured depository institution in danger of default. The FDIC’s claim for damages is superior to claims of stockholders of the insured depository institution or its holding company, but is subordinate to claims of depositors, secured creditors and holders of subordinated debt (other than affiliates) of the commonly controlled insured depository institutions.

The FDIA also provides that amounts received from the liquidation or other resolution of any insured depository institution by any receiver must be distributed (after payment of secured claims) to pay the deposit liabilities of the institution prior to payment of any other general or unsecured senior liability, subordinated liability, general creditor or stockholder. This provision would give depositors a preference over general and subordinated creditors and shareholders in the event a receiver is appointed to distribute the assets of the Bank.

Further, any loans by a bank holding company to a subsidiary bank are subordinate in right of payment to deposits and certain other indebtedness of the subsidiary bank. In the event of a bank holding company’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank at a certain level would be assumed by the bankruptcy trustee and entitled to priority payment.

Dividends. As a holding company that does not, as an entity, currently engage in separate business activities of a material nature, our ability to pay cash dividends depends upon the cash dividends received from our Bank and management fees paid by the Bank. We must pay our operating expenses from funds we receive from the Bank. Therefore, shareholders may receive cash dividends from us only to the extent that funds are available after payment of operating expenses. In addition, the Federal Reserve generally prohibits bank holding companies from paying cash dividends except out of operating earnings, provided that the prospective rate of earnings retention appears consistent with the bank holding company’s capital needs, asset quality and overall financial condition. As a North Carolina corporation, our payment of cash dividends is also subject to the restrictions under North Carolina law on the declaration of cash dividends. Under such provisions, cash dividends may not be paid if a corporation will not be able to pay its debts as they become due in the usual course of business after paying such a cash dividend or if the corporation's total assets would be less than the sum of its total liabilities plus the amount that would be needed to satisfy certain liquidation preferential rights.

Also, the payment of cash dividends by Yadkin in the future will be subject to certain other legal and regulatory limitations (including the requirement that Yadkin's capital be maintained at certain minimum levels) and will be subject to ongoing review by banking regulators. As long as shares of our Series T Preferred Stock or our Series T-ACB Preferred Stock are outstanding, no dividends may be paid on our common stock unless all dividends on the Series T Preferred Stock and Series T-ACB Preferred Stock have been paid in full. The Company deferred dividend payments on its Series T and Series T-ACB Preferred Stock and interest payments on the trust preferred securities in the second, third and fourth quarters of 2011 and the first and second quarters of 2012. All deferred payments were made in 2012 and there are no dividends payable outstanding at December 31, 2013. Nevertheless, we may be required to defer dividend payments on the Series T and Series T-ACB Preferred Stock in the future given liquidity levels at the holding company. We are able to defer interest payments on our trust preferred securities for up to twenty consecutive quarters without being deemed in default. There is no assurance that, in the future, Yadkin will have funds available to pay cash dividends, or, even if funds are available, that it will pay dividends in any particular amount or at any particular times, or that it will pay dividends at all.

Change in Control. In addition, and subject to certain exceptions, the Bank Holding Company Act and the Change in Bank Control Act, together with regulations promulgated there under, 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% or more of any class of voting securities of a bank holding company. Control will be presumed to exist if a person

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acquires more than 33% of the total equity of a bank or bank holding company, of which it may own, control or have the power to vote not more than 15% of any class of voting securities.

Yadkin Bank

As a North Carolina bank, the Bank is subject to regulation, supervision and regular examination by the Commission through the North Carolina Commissioner of Banks (the “Commissioner”) and its applicable federal regulator is the FDIC. The Commission and the FDIC have the power to enforce compliance with applicable banking statutes and regulations. Deposits in the bank are insured by the FDIC up to a maximum amount, which is currently $250,000.

The Commission and the FDIC regulate or monitor virtually all areas of the bank’s operations, including:

• security devices and procedures;

• adequacy of capitalization and loss reserves;

• loans;

• investments;

• borrowings;

• deposits;

• mergers;

• issuances of securities;

• payment of dividends;

• interest rates payable on deposits;

• interest rates or fees chargeable on loans;

• establishment of branches;

• corporate reorganizations;

• maintenance of books and records; and

• adequacy of staff training to carry on safe lending and deposit gathering practices.

Federal Regulation. As a North Carolina chartered bank, we are subject to regulation, supervision and regular examination by the FDIC. The FDIC is required to conduct regular on-site examinations of the operations of the Bank and enforces federal laws that set specific requirements for bank capital, the payment of dividends, loans to officers and directors, and types and amounts of loans and investments made by commercial banks. Among other things, the FDIC must approve the establishment of branch offices, conversions, mergers, assumption of deposit liabilities between insured banks and uninsured banks or institutions, and the acquisition or establishment of certain subsidiary corporations. The FDIC can also prevent capital or surplus diminution in transactions where the deposit accounts of the resulting, continuing or assumed bank are insured by the FDIC.

Transactions with Affiliates and Insiders. Various legal limitations restrict the Bank from lending or otherwise supplying funds to the Company or its non-bank subsidiaries. The Company and the Bank are subject to Sections 23A and 23B of the Federal Reserve Act and Federal Reserve Regulation W.

Section 23B of the Federal Reserve Act, among other things, prohibits a bank from engaging in certain transactions with certain affiliates unless the transactions are on terms and under circumstances, including credit standards, that are substantially the same, or at least as favorable to such bank or its subsidiaries, as those prevailing at the time for comparable transactions with or involving other nonaffiliated companies. If there are no comparable transactions, a bank’s (or one of its subsidiaries’) affiliate transaction must be on terms and under circumstances, including credit standards, that in good faith would be offered to, or would apply to, nonaffiliated companies.

Regulation W generally excludes all non-bank and non-savings association subsidiaries of banks from treatment as affiliates, except to the extent that the Federal Reserve decides to treat these subsidiaries as affiliates.

The Bank is also subject to certain restrictions on extensions of credit to executive officers, directors, certain principal shareholders, and their related interests. Those extensions of credit:

• must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with third parties; and

• must not involve more than the normal risk of repayment or present other unfavorable features.

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Effective as of July 21, 2011, the Dodd-Frank Act expands the definition of affiliate for purposes of quantitative and qualitative limitations of Section 23A of the Federal Reserve Act to include mutual funds advised by a depository institution or its affiliates. The Dodd-Frank Act will apply Section 23A and Section 22(h) of the Federal Reserve Act (governing transactions with insiders) to derivative transactions, repurchase agreements and securities lending and borrowing transaction that create credit exposure to an affiliate or an insider. Any such transactions with affiliates must be fully secured. The current exemption from Section 23A for transactions with financial subsidiaries will be eliminated. The Dodd-Frank Act will additionally prohibit an insured depository institution from purchasing an asset from or selling an asset to an insider unless the transaction is on market terms and, if representing more than 10% of capital, is approved in advance by the disinterested directors.

Regulation of Lending Activities. Loans made by the bank are also subject to numerous federal and state laws and regulations, including the Truth-In-Lending Act, Federal Consumer Credit Protection Act, the Equal Credit Opportunity Act, the Real Estate Settlement Procedures Act and Home Mortgage Disclosure Act. Remedies to the borrower or consumer and penalties to the Bank are provided if the Bank fails to comply with these laws and regulations. The scope and requirements of these laws and regulations have expanded significantly in recent years.

Branch Banking. All banks located in North Carolina are authorized to branch statewide. Accordingly, a bank located anywhere in North Carolina has the ability, subject to regulatory approval, to establish branch facilities near any of our facilities and within our market area. If other banks were to establish branch facilities near our facilities, it is uncertain whether these branch facilities would have a material adverse effect on our business.

Pursuant to the Riegel-Neal Interstate Banking and Branching Efficiency Act of 1994 (the “Interstate Banking and Branching Act”), a bank holding company became able to acquire banks in states other than its home state, beginning in September 1995, without regard to the permissibility of such acquisition under state law, subject to certain exceptions. The Interstate Banking and Branching Act also authorized banks to merge across state lines, thereby creating interstate branches, unless a state, prior to the July 1, 1997 effective date, determined to “opt out” of coverage under this provision. In addition, the Interstate Banking and Branching Efficiency Act authorized a bank to open new branches in a state in which it does not already have banking operations if such state enacted a law permitting such “de novo” branching.

North Carolina opted-in to the provision of the Interstate Banking and Branching Act that allows out-of-state banks to branch into their state by establishing a de novo branch in the state, but only on a reciprocal basis. This means that an out-of-state bank could establish a de novo branch in North Carolina only if the home state of such bank would allow North Carolina banks (including national banks with their home office in North Carolina) to establish de novo branches in that home state under substantially the same terms as allowed in North Carolina. Because some states imposed greater limits on de novo branching by out of state banks, prior to the Dodd-Frank Act, this provided a limited barrier of entry into the North Carolina banking market.

The Dodd-Frank Act removes previous state law restrictions on de novo interstate branching in states such as North Carolina. This change effectively permits out-of-state banks to open de novo branches in states where the laws of the state where the de novo to be opened would permit a bank chartered by that sate to open a de novo branch.

Reserve Requirements.Pursuant to regulations of the Federal Reserve, the Bank must maintain average daily reserves against its transaction accounts. During 2013, no reserves were required to be maintained on the first $12.4 million of transaction accounts, but reserves equal to 3.0% were required on the aggregate balances of those accounts between $12.4 million and $79.5 million, and additional reserves were required on aggregate balances in excess of $79.5 million in an amount equal to 10.0% of the excess. These percentages are subject to annual adjustment by the Federal Reserve, which has advised that for the first quarter of 2014, no reserves will be required to be maintained on the first $12.4 million of transaction accounts, but reserves equal to 3.0% will be required on the aggregate balances of those accounts between $12.4 million and $79.5 million, and additional reserves are required on aggregate balances in excess of $79.5 million in an amount equal to 10.0% of the excess. Because required reserves must be maintained in the form of vault cash or in a non-interest bearing account at a Federal Reserve Bank, the effect of the reserve requirement is to reduce the amount of the institution’s interest-earning assets. As of December 31, 2013, the Bank met its reserve requirements.

Community Reinvestment. Under the Community Reinvestment Act (“CRA”), as implemented by regulations of the federal bank regulatory agencies, an insured bank has a continuing and affirmative obligation, consistent with its safe and sound operation, to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The CRA does not establish specific lending requirements or programs for banks, nor does it limit a bank’s discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA. The CRA requires the federal bank regulatory agencies, in connection with their examination of insured banks, to assess the banks’ records of meeting the credit needs of their communities, using the ratings of “outstanding,” “satisfactory,” “needs to improve,” or “substantial noncompliance,” and to take that record into account in its evaluation of certain applications by those banks. All banks are required

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to make public disclosure of their CRA performance ratings. The Bank received a “satisfactory” rating in its most recent CRA examination.

Governmental Monetary Policies. The commercial banking business is affected not only by general economic conditions but also by the monetary policies of the Federal Reserve, a federal banking regulatory agency that regulates the money supply in order to mitigate recessionary and inflationary pressures. Among the techniques used to implement these objectives are open market transactions in United States government securities, changes in the rate paid by banks on bank borrowings, and changes in reserve requirements against bank deposits. These techniques are used in varying combinations to influence overall growth and distribution of bank loans, investments, and deposits, and their use may also affect interest rates charged on loans or paid for deposits. The monetary policies of the Federal Reserve have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. In view of changing conditions in the national economy and money markets, as well as the effect of actions by monetary and fiscal authorities, no prediction can be made as to possible future changes in interest rates, deposit levels, loan demand or the business and earnings of the Bank.

Dividends. Under federal banking law, no cash dividend may be paid if a bank is undercapitalized or insolvent or if payment of the cash dividend would render the bank undercapitalized or insolvent, and no cash dividend may be paid by the bank if it is in default on any deposit insurance assessment due to the FDIC. There can be no assurances such approval would be granted or with regard to how long these restrictions will remain in place.

Insurance of Deposits. The Bank's deposits are insured up to applicable limits by the Deposit Insurance Fund of the FDIC. The Dodd-Frank Act permanently increased the maximum amount of deposit insurance for banks, savings associations and credit unions to $250,000 per account. As insurer, the FDIC imposes deposit insurance premiums and is authorized to conduct examinations of and to require reporting by FDIC insured institutions. It also may prohibit any FDIC insured institution from engaging in any activity the FDIC determines by regulation or order to pose a serious risk to the insurance fund. The FDIC also has the authority to initiate enforcement actions against savings institutions, after giving the OTS an opportunity to take such action, and may terminate the deposit insurance if it determines that the institution has engaged in unsafe or unsound practices or is in an unsafe or unsound condition.

FDIC insured institutions are required to pay a Financing Corporation assessment to fund the interest on bonds issued to resolve thrift failures in the 1980s. The Financing Corporation quarterly assessment for the fourth quarter of 2012 equaled 3.50 basis points for each $100 in domestic deposits at our institution. These assessments, which may be revised based upon the level of deposits, will continue until the bonds mature in the years 2017 through 2019.

The FDIC may terminate the deposit insurance of any insured depository institution, including the Bank, if it determines after a hearing that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC or the OCC. It also may suspend deposit insurance temporarily during the hearing process for the permanent termination of insurance, if the institution has no tangible capital. If insurance of accounts is terminated, the accounts at the institution at the time of the termination, less subsequent withdrawals, shall continue to be insured for a period of six months to two years, as determined by the FDIC. Management is not aware of any practice, condition or violation that might lead to termination of the Bank's deposit insurance.

Consumer Protection Regulations. Activities of the Bank are subject to a variety of statutes and regulations designed to protect consumers. Interest and other charges collected or contracted for by the Bank are subject to state usury laws and federal laws concerning interest rates.

The Bank’s loan operations are also subject to federal laws applicable to credit transactions, such as the:

• The federal Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;

• The Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

• The Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

• The Fair Credit Reporting Act of 1978, as amended by the Fair and Accurate Credit Transactions Act, governing the use and provision of information to credit reporting agencies, certain identity theft protections and certain credit and other disclosures;

• The Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and

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• The rules and regulations of the various federal agencies charged with the responsibility of implementing these federal laws.

The deposit operations of the Bank also are subject to:

• the Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; and

• the Electronic Funds Transfer Act and Regulation E issued by the Federal Reserve Board to implement that Act, which governs automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services.

Changes in Management. Any depository institution that has been chartered less than two years, is not in compliance with the minimum capital requirements of its primary federal banking regulator (currently the FDIC), or is otherwise in a troubled condition must notify its primary federal banking regulator of the proposed addition of any person to the board of directors or the employment of any person as a senior executive officer of the institution at least 30 days before such addition or employment becomes effective. During this 30-day period, the applicable federal banking regulatory agency may disapprove of the addition of such director or employment of such officer. The Bank is not subject to any such requirements.

Enforcement Authority. The federal banking laws also contain civil and criminal penalties available for use by the appropriate regulatory agency against certain “institution-affiliated parties” primarily including management, employees and agents of a financial institution, as well as independent contractors such as attorneys and accountants and others who participate in the conduct of the financial institution’s affairs and who caused or are likely to cause more than minimum financial loss to or a significant adverse affect on the institution, who knowingly or recklessly violate a law or regulation, breach a fiduciary duty or engage in unsafe or unsound practices. These practices can include the failure of an institution to timely file required reports or the submission of inaccurate reports. These laws authorize the appropriate banking agency to issue cease and desist orders that may, among other things, require affirmative action to correct any harm resulting from a violation or practice, including restitution, reimbursement, indemnification or guarantees against loss. A financial institution may also be ordered to restrict its growth, dispose of certain assets or take other action as determined by the primary federal banking agency to be appropriate.

Capital Adequacy and Prompt Corrective Action. Banks and bank holding companies are subject to various regulatory capital requirements administered by state and federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations involve quantitative measures of assets, liabilities and certain off-balance sheet agreements calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk-weighting and other factors.

The Federal Reserve and the FDIC have substantially similar risk-based capital ratio and leverage ratio guidelines for banking organizations. The guidelines are intended to ensure that banking organizations have adequate capital given the risk levels of assets and off-balance sheet agreements. Under the guidelines, banking organizations are required to maintain minimum ratios for Tier 1 capital, as defined below, and total capital to risk-weighted assets (including certain off-balance sheet agreements such as letters of credit). For purposes of calculating the ratios, a banking organization’s assets and some of its specified off-balance sheet agreements are assigned to various risk categories. A depository institution’s or holding company’s capital, in turn, is classified in one of the following three tiers depending on type:

• Core Capital (Tier 1). Tier 1 capital includes common equity, retained earnings, qualifying noncumulative perpetual preferred stock, a limited amount of qualifying cumulative perpetual preferred stock at the holding company level, minority interests in equity accounts of consolidated subsidiaries, qualifying trust preferred securities less goodwill, nonqualifying deferred tax assets, most intangible assets and certain other assets.

• Supplementary Capital (Tier 2). Tier 2 capital includes, among other things, perpetual preferred stock and trust preferred securities not meeting the Tier 1 definition, qualifying mandatory convertible debt securities, qualifying subordinated debt and allowances for loan losses, subject to limitations.

• Market Risk Capital (Tier 3). Tier 3 capital includes qualifying unsecured subordinated debt.

The Company, like other bank holding companies, is currently required to maintain Tier 1 capital and total capital (the sum of Tier 1, Tier 2, and Tier 3 capital) equal to at least 4% and 8%, respectively, of our total risk-weighted assets (including various off-balance sheet agreements such as letters of credit). At least half of the total capital is required to be Tier 1 capital. In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet agreements, are multiplied by a risk-weight based on the risk inherent in the type of asset. The Bank, like other depository institutions, is required to maintain similar capital levels under capital adequacy guidelines. For a depository institution to be considered well-capitalized under the

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regulatory framework for prompt corrective action, its Tier 1 and total capital ratios must be at least 6% and 10% on a risk-weighted basis, respectively.

Bank holding companies and banks subject to the market risk capital guidelines are required to incorporate market and interest rate risk components into their risk-based capital standards. The Company and the Bank are not subject to the market risk capital guidelines.

In addition to the risk-based capital guidelines, bank holding companies and banks are also required to comply with minimum leverage ratio requirements. For bank holding companies that have the highest regulatory examination ratios and are not contemplating significant growth or expansion, the Federal Reserve has adopted a minimum Tier 1 (leverage) capital ratio under which a bank holding company must maintain a minimum level of Tier 1 capital to its total adjusted quarterly average assets (as defined for regulatory purposes) of at least 3%. All other bank holding companies are required to maintain a Tier 1 (leverage) capital ratio of at least 4% unless an appropriate regulatory authority specifies a different minimum. For a depository institution to be considered well-capitalized under the regulatory framework for prompt corrective action, its leverage ratio must be at least 5%. The Federal Reserve has not advised the Company of any specific minimum leverage ratio applicable to it. The FDIC also requires state-chartered, nonmember banks, such as the Bank, to maintain a minimum leverage ratio similar to that adopted by the Federal Reserve. Under the FDIC's leverage capital requirement, the Bank is generally required to maintain a minimum Tier 1 (leverage) capital ratio of not less than 4%. However, as of December 31, 2013, the Bank has committed to regulators that it will maintain a Tier 1 leverage ratio of 8%. The Bank is currently above this level at 11.24% as of December 31, 2013.

As discussed above under “Recent Legislative and Regulatory Initiatives to Address the Financial and Economic Crises - Basel Capital Standards,” Basel III, when fully phased-in, will require certain bank holding companies and their bank subsidiaries to maintain substantially more capital, with a greater emphasis on common equity. On July 7, 2013, the Federal Reserve adopted a final rule implementing the Basel III standards and complementary parts of Basel II and Basel 2.5. On July 9, 2013, the OCC also adopted a final rule and the FDIC adopted the same provisions in the form of an “interim” final rule.

The Federal Deposit Insurance Act (“FDIA”) requires, among other things, that federal banking agencies take prompt corrective action with respect to depository institutions that do not meet minimum capital requirements. The FDIA sets forth the following five capital tiers: well-capitalized, adequately-capitalized, undercapitalized, significantly-undercapitalized and critically-undercapitalized. A depository institution’s capital tier depends on how its capital levels compare with various relevant capital measures and certain other factors as established by regulation. The relevant capital measures are the total capital ratio, Tier 1 capital ratio, and Tier 1 (leverage) capital ratio.

Under the regulations adopted by the federal regulatory authorities, a bank will be categorized as:

• Well-capitalized if the institution has a total capital ratio of 10% or greater, a Tier 1 capital ratio of 6% or greater, a Tier 1 (leverage) capital ratio of 5% or greater and is not subject to any order or written directive by any such regulatory authority to meet and maintain a specific capital level for any capital measure;

• Adequately-capitalized if the institution has a total capital ratio of 8% or greater, a Tier 1 capital ratio of 4% or greater, a Tier 1 (leverage) capital ratio of 4% or greater and is not categorized as well-capitalized;

• Undercapitalized if the institution has a total capital ratio that is less than 8%, a Tier 1 capital ratio of less than 4% or a Tier 1 (leverage) capital ratio of less than 4%;

• Significantly-undercapitalized if the institution has a total capital ratio of less than 6%, a Tier 1 capital ratio of less than 3% or a Tier 1 (leverage) capital ratio of less than 3%; or

• Critically-undercapitalized if the institution’s tangible equity is equal to or less than 2% of average quarterly tangible assets.

However, beginning in January 2015, the minimum capital levels for each prompt corrective action category will be increased pursuant to the new capital regulations adopted in July 2013, as described above under “Recent Legislative and Regulatory Initiatives to Address the Financial and Economic Crises - Basel Capital Standards.”

An institution may be downgraded to, or deemed to be in, a capital category that is lower than 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. A bank’s capital category is determined solely for the purpose of applying prompt corrective action regulations, and the capital category may not constitute an accurate representation of a bank’s overall financial condition for other purposes. If a bank is not well-capitalized, it is subject to certain requirements and restrictions, which get progressively more restrictive if the bank’s regulatory capital level further deteriorates.

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Anti-Money Laundering. Financial institutions must maintain anti-money laundering programs that include established internal policies, procedures, and controls; a designated compliance officer; an ongoing employee training program; and testing of the program by an independent audit function. The Company and the Bank are also prohibited from entering into specified financial transactions and account relationships and must meet enhanced standards for due diligence and “knowing your customer” in their dealings with foreign financial institutions and foreign customers. Financial institutions must take reasonable steps to conduct enhanced scrutiny of account relationships to guard against money laundering and to report any suspicious transactions, and recent laws provide law enforcement authorities with increased access to financial information maintained by banks. Anti-money laundering obligations have been substantially strengthened as a result of the USA Patriot Act, enacted in 2001 and renewed in 2006. Bank regulators routinely examine institutions for compliance with these obligations and are required to consider compliance in connection with the regulatory review of applications. The regulatory authorities have been active in imposing “cease and desist” orders and money penalty sanctions against institutions found to be violating these obligations.

USA PATRIOT Act/Bank Secrecy Act. The USA PATRIOT Act amended, in part, the Bank Secrecy Act and provides for the facilitation of information sharing among governmental entities and financial institutions for the purpose of combating terrorism and money laundering by enhancing anti-money laundering and financial transparency laws, as well as enhanced information collection tools and enforcement mechanics for the U.S. government, including: (i) requiring standards for verifying customer identification at account opening; (ii) rules to promote cooperation among financial institutions, regulators, and law enforcement entities in identifying parties that may be involved in terrorism or money laundering; (iii) reports by nonfinancial trades and businesses filed with the Treasury’s Financial Crimes Enforcement Network for transactions exceeding $10,000; and (iv) filing suspicious activities reports if a bank believes a customer may be violating U.S. laws and regulations and requires enhanced due diligence requirements for financial institutions that administer, maintain, or manage private bank accounts or correspondent accounts for non-U.S. persons. Bank regulators routinely examine institutions for compliance with these obligations and are required to consider compliance in connection with the regulatory review of applications.

Under the USA PATRIOT Act, the FBI can send to the banking regulatory agencies lists of the names of persons suspected of involvement in terrorist activities. The Bank can be requested to search its records for any relationships or transactions with persons on those lists. If the Bank finds any relationships or transactions, it must file a suspicious activity report and contact the FBI.

Office of Foreign Assets Control Regulation. The Office of Foreign Assets Control (“OFAC”), which is a division of the Treasury, is responsible for helping to insure that United States entities do not engage in transactions with “enemies” of the United States, as defined by various Executive Orders and Acts of Congress. OFAC has sent, and will send, our banking regulatory agencies lists of names of persons and organizations suspected of aiding, harboring or engaging in terrorist acts. If the Bank finds a name on any transaction, account or wire transfer that is on an OFAC list, it must freeze such account, file a suspicious activity report and notify the FBI. The Bank has appointed an OFAC compliance officer to oversee the inspection of its accounts and the filing of any notifications. The Bank actively checks high-risk OFAC areas such as new accounts, wire transfers and customer files. The Bank performs these checks utilizing software, which is updated each time a modification is made to the lists provided by OFAC and other agencies of Specially Designated Nationals and Blocked Persons.

Privacy and Credit Reporting.Financial institutions are required to disclose their policies for collecting and protecting confidential information. Customers generally may prevent financial institutions from sharing nonpublic personal financial information with nonaffiliated third parties except under narrow circumstances, such as the processing of transactions requested by the consumer. Additionally, financial institutions generally may not disclose consumer account numbers to any nonaffiliated third party for use in telemarketing, direct mail marketing or other marketing to consumers. It is the Bank’s policy not to disclose any personal information unless required by law. The OCC and the federal banking agencies have prescribed standards for maintaining the security and confidentiality of consumer information. The Bank is subject to such standards, as well as standards for notifying consumers in the event of a security breach.

Like other lending institutions, the Bank utilizes credit bureau data in its underwriting activities. Use of such data is regulated under the Federal Credit Reporting Act on a uniform, nationwide basis, including credit reporting, prescreening, sharing of information between affiliates, and the use of credit data. In addition, pursuant to the Fair and Accurate Credit Transactions Act of 2003 (the “FACT Act”) and the implementing regulations of the federal banking agencies and Federal Trade Commission, the Bank is required to have in place an “identity theft red flags” program to detect, prevent and mitigate identity theft. The Bank has implemented an identity theft red flags program designed to meet the requirements of the FACT Act and the joint final rules. Additionally, the FACT Act amends the Fair Credit Reporting Act to generally prohibit a person from using information received from an affiliate to make a solicitation for marketing purposes to a consumer, unless the consumer is given notice and a reasonable opportunity and a reasonable and simple method to opt out of the making of such solicitations.

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Check 21. The Check Clearing for the 21st Century Act gives “substitute checks,” such as a digital image of a check and copies made from that image, the same legal standing as the original paper check. Some of the major provisions include:

• allowing check truncation without making it mandatory;

• demanding that every financial institution communicate to accountholders in writing a description of its substitute check processing program and their rights under the law;

• legalizing substitutions for and replacements of paper checks without agreement from consumers;

• retaining in place the previously mandated electronic collection and return of checks between financial institutions only when individual agreements are in place;

• requiring that when accountholders request verification, financial institutions produce the original check (or a copy that accurately represents the original) and demonstrate that the account debit was accurate and valid; and

• requiring the re-crediting of funds to an individual’s account on the next business day after a consumer proves that the financial institution has erred.

Federal Home Loan Bank System. The Bank is a member of the Federal Home Loan Bank (“FHLB”) of Atlanta, which is one of 12 regional FHLBs that administer home financing credit for depository institutions. Each FHLB serves as a reserve or central bank for its members within its assigned region. It is funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB System. It makes loans or advances to members in accordance with policies and procedures established by the Board of Directors of the FHLB, which are subject to the oversight of the Federal Housing Financing Board. All advances from the FHLB are subject to the oversight of the Federal Housing Finance Board. All advances from the FHLB are required to be fully secured by sufficient collateral as determined by the FHLB.

Effect of Governmental Monetary Policies. Our earnings are affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. The Federal Reserve Bank’s monetary policies have had, and are likely to continue to have, an important impact on the operating results of commercial banks through its power to implement national monetary policy in order, among other things, to curb inflation or combat a recession. The monetary policies of the Federal Reserve have major effects upon the levels of bank loans, investments and deposits through its open market operations in United States government securities and through its regulation of the discount rate on borrowings of member banks and the reserve requirements against member bank deposits. It is not possible to predict the nature or impact of future changes in monetary and fiscal policies.

State Regulation. As a North Carolina-chartered bank, the Bank is also subject to extensive supervision and regulation by the Commissioner. The Commissioner enforces state laws that set specific requirements for bank capital, the payment of dividends, loans to officers and directors, record keeping, and types and amounts of loans and investments made by commercial banks. Among other things, the approval of the Commissioner is generally required before a North Carolina-chartered commercial bank may establish branch offices. North Carolina banking law requires that any merger, liquidation or sale of substantially all of the assets of the Bank must be approved by the Commissioner and the holders of two thirds of the Bank's outstanding common stock.

Change of Control. North Carolina banking laws provide that no person may directly or indirectly purchase or acquire voting stock of the Bank that would result in the change in control of the Bank unless the Commissioner has approved the acquisition. A person will be deemed to have acquired "control" of the Bank if that person directly or indirectly (i) owns, controls or has power to vote 10% or more of the voting stock of the Bank, or (ii) otherwise possesses the power to direct or cause the direction of the management and policy of the Bank.

Loans. In its lending activities, the Bank is subject to North Carolina usury laws which generally limit or restrict the rates of interest, fees and charges and other terms and conditions in connection with various types of loans. North Carolina banking law also limits the amount that may be loaned to any one borrower.

Incentive Compensation. In June 2010, the Federal Reserve, the FDIC and the OCC issued a 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.

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The Federal Reserve 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.

Number of Employees

At December 31, 2013, the Company had 489 full-time equivalent employees (including our executive officers) and 22 part-time employees. None of the employees are represented by any unions or similar groups, and we have not experienced any type of strike or labor dispute. We consider our relationship with our employees to be good.

Item 1A. Risk Factors

Our business, financial condition, and results of operations could be harmed by any of the following risks, or other risks that have not been identified or which we believe are immaterial or unlikely. Shareholders should carefully consider the risks described below in conjunction with the other information in this Form 10-K and the information incorporated by reference in this Form 10-K, including our consolidated financial statements and related notes.

General Business Risks

Negative developments in the financial industry and the domestic and international credit markets, and the economy in general, may adversely affect our operations and results.

Negative developments in the global credit and securitization markets have resulted in uncertainty in the financial markets in general with the expectation of continued uncertainty in 2014. As a result of this “credit crunch,” commercial as well as consumer loan portfolio performances deteriorated at institutions and the competition for deposits and quality loans has increased significantly. In addition, the values of real estate collateral supporting many commercial loans and home mortgages have declined and may continue to decline. Global securities markets, and bank holding company stock prices in particular, have been negatively affected, as has in general the ability of banks and bank holding companies to raise capital or borrow in the debt markets. As a result, we may face the following risks:

• economic conditions that negatively affect housing prices and the job market may cause the credit · quality of our loan portfolios to deteriorate;

• market developments that affect consumer confidence may cause adverse changes in payment patterns by our customers, causing increases in delinquencies and default rates on loans and other credit facilities;

• the processes that we use to estimate our allowance for loan and lease losses and reserves may no longer be reliable because they rely on judgments, such as forecasts of economic conditions, that may no longer be capable of accurate estimation;

• the value of our securities portfolio may decline; and

• we face increased regulation of our industry, and the costs of compliance with such regulation may increase.

These conditions or similar ones may continue to persist or worsen, causing us to experience continuing or increased adverse effects on our business, financial condition, results of operations and the price of our voting common stock.

We may have higher loan losses than is provided for in our allowance for loan losses.

We attempt to maintain an appropriate allowance for loan losses to provide for losses inherent in our loan portfolio. We periodically determine the amount of the allowance based on consideration of several factors, including:

• an ongoing review of the quality, mix, and size of our overall loan portfolio;

• our historical loan loss experience;

• an evaluation of economic conditions;

• regular reviews of loan delinquencies and loan portfolio quality; and

• the amount and quality of collateral, including guarantees, securing the loans.

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However, there is no precise method of estimating credit losses, since any estimate of loan losses is necessarily subjective and the accuracy depends on the outcome of future events. Continuing deterioration in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may require an increase in the allowance for loan losses. In addition, federal regulators periodically review our allowance for loan losses 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 the amount of our provision or loans charged-off as required by these regulatory agencies could have a negative effect on our operating results.

Also, our actual loan losses could exceed our allowance for loan losses. As of December 31, 2013, approximately 66% of our loan portfolio was composed of construction, commercial mortgage and commercial loans. Repayment of such loans is generally considered more subject to market risk than repayment of residential mortgage loans. Industry experience shows that a portion of loans will become delinquent and a portion of loans will require partial or entire charge-off. Regardless of the underwriting criteria utilized, losses may be experienced as a result of various factors beyond our control, including:

• cost overruns;

• declining property values;

• mismanaged construction;

• inferior or improper construction techniques;

• economic changes or downturns during construction;

• rising interest rates that may prevent sale of the property; and

• failure to sell completed projects or units in a timely manner.

These risks have been exacerbated by the recent developments in national and international financial markets and the economy in general. The occurrence of any of the preceding risks could result in the deterioration of one or more of these loans which could significantly increase our percentage of nonperforming assets. An increase in nonperforming loans may result in a loss of earnings from these loans, an increase in the related provision for loan losses and an increase in charge-offs, all of which could have a material adverse effect on our financial condition and results of operations.

Although we believe the allowance for loan losses is a reasonable estimate of known and inherent losses in our loan portfolio, we cannot fully predict such losses or that our loan loss allowance will be adequate in the future. Excessive loan losses could have a material impact on our financial performance. Consistent with our loan loss reserve methodology, we expect to make additions to our loan loss reserve levels as a result of our loan growth, which may affect our short-term earnings.

We could continue to sustain losses from a further decline in credit quality.

Our earnings are significantly affected by our ability to properly originate, underwrite and service loans. We have, and could continue to, sustain losses if more borrowers, guarantors, or related parties fail to perform in accordance with the terms of their loans or if we fail to detect or respond to deterioration in asset quality in a timely manner. Problems with credit quality or asset quality have, and could continue to, cause our interest income and net interest margin to further decrease and our provisions for loan losses to further increase, which have, and could continue to, adversely affect our business, financial condition, and results of operations. These risks have been exacerbated by the recent developments in national and international financial markets, and we are unable to accurately predict what effect these uncertain market conditions will continue to have on these risks.

Continued changes in local economic conditions have and could continue to lead to higher loan charge-offs and reduce our net income and growth.

We are subject to periodic fluctuations of the local economic conditions, which presently have a negative effect. These fluctuations are not predictable, cannot be controlled, and currently are creating a material adverse impact on our operations and financial condition. Our banking operations are locally oriented and community-based. Accordingly, we continue to be dependent upon local business conditions as well as conditions in the local residential and commercial real estate markets we serve. For example, increases in unemployment and decreases in real estate values, as well as other factors, have and could continue to weaken the economies of the communities we serve. Weaknesses in our market area have and could continue to depress our earnings and consequently our financial condition because:

• customers may not want or need our products or services;

• borrowers may not be able to repay their loans;

• the value of the collateral securing loans to borrowers may decline; and

• the quality of our loan portfolio may decline.

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    All of the latter scenarios have required and could continue to require us to charge off a higher percentage of loans and/or increase provisions for credit losses, which reduces our net income.

If we fail to effectively manage credit risk and interest rate risk, our business and financial condition will suffer.

We must effectively manage credit risk. There are risks inherent in making any loan, including risks with respect to the period of time over which the loan may be repaid, risks relating to proper loan underwriting and guidelines, risks resulting from changes in economic and industry conditions, risks inherent in dealing with individual borrowers and risks resulting from uncertainties as to the future value of collateral. There is no assurance that our credit risk monitoring and loan approval procedures are or will be adequate or will reduce the inherent risks associated with lending. Our credit administration personnel, policies and procedures may not adequately adapt to changes in economic or any other conditions affecting customers and the quality of our loan portfolio. Any failure to manage such credit risks may materially adversely affect our business and our consolidated results of operations and financial condition.

We must also effectively manage interest rate risk. Because mortgage loans typically have much longer maturities than deposits or other types of funding, rising interest rates can raise the cost of funding relative to the value of the mortgage. We manage this risk in part by holding adjustable rate mortgages in portfolios and through other means. Conversely, the value of our mortgage servicing assets may fall when interest rates fall, as borrowers refinance into lower-yield loans. Given current rates, material reductions in rates may not be probable, but as rates rise, then the risk increases. There can be no assurance that we will successfully manage the lending and servicing businesses through all future interest-rate environments.

We are exposed to higher credit risk by commercial real estate, commercial business, and construction lending.

Commercial real estate, commercial business, and construction lending usually involves higher credit risks than that of single-family residential lending. These types of loans involve larger loan balances to a single borrower or groups of related borrowers. Commercial real estate loans may be affected to a greater extent than residential loans by adverse conditions in real estate markets or the economy because commercial real estate borrowers’ ability to repay their loans depends on successful development of their properties, as well as the factors affecting residential real estate borrowers. These loans also involve greater risk because they generally are not fully amortizing over the loan period, but have a balloon payment due at maturity. A borrower’s ability to make a balloon payment typically will depend on being able to either refinance the loan or sell the underlying property in a timely manner.

Risk of loss on a construction loan depends largely upon whether our initial estimate of the property’s value at completion of construction equals or exceeds the cost of the property construction (including interest) and the availability of permanent take-out financing. During the construction phase, a number of factors can result in delays and cost overruns. If estimates of value are inaccurate or if actual construction costs exceed estimates, the value of the property securing the loan may be insufficient to ensure full repayment when completed through a permanent loan or by seizure of collateral.

Commercial business loans are typically based on the borrowers’ ability to repay the loans from the cash flow of their businesses. These loans may involve greater risk because the availability of funds to repay each loan depends substantially on the success of the business itself. In addition, the collateral securing the loans have the following characteristics: (i) depreciate over time, (ii) difficult to appraise and liquidate, and (iii) fluctuate in value based on the success of the business.

Commercial real estate, commercial business, and construction loans are more susceptible to a risk of loss during a downturn in the business cycle. Our underwriting, review, and monitoring cannot eliminate all of the risks related to these loans.

At December 31, 2013, 43% of our loan portfolio was secured by commercial real estate and our outstanding commercial real estate loans were equal to 265% of our total risk-based capital. The banking regulators are giving commercial real estate lending greater scrutiny, and may require banks with higher levels of commercial real estate loans to implement improved underwriting, internal controls, risk management policies and portfolio stress testing, as well as possibly higher levels of allowances for losses and capital levels as a result of commercial real estate lending growth and exposures.

Repayment of our commercial business loans is often dependent on the cash flows of the borrower, which may be unpredictable, and the collateral securing these loans may fluctuate in value.

Our commercial business loans are originated primarily based on the identified cash flow and general liquidity of the borrower and secondarily on the underlying collateral provided by the borrower and/or repayment capacity of any guarantor. The borrower’s cash flow may be unpredictable, and collateral securing these loans may fluctuate in value. Although commercial business loans are often collateralized by equipment, inventory, accounts receivable, or other business assets, the liquidation of

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collateral in the event of default is often an insufficient source of repayment because accounts receivable may be uncollectible and inventories may be obsolete or of limited use. In addition, business assets may depreciate over time, may be difficult to appraise, and may fluctuate in value based on the success of the business. Accordingly, the repayment of commercial business loans depends primarily on the cash flow and credit worthiness of the borrower and secondarily on the underlying collateral value provided by the borrower and liquidity of the guarantor.

Weakness in the markets for residential or commercial real estate, including the secondary residential mortgage loan markets, could reduce our net income and profitability.

Since 2007, the United States has seen softening residential housing markets, increasing delinquency and default rates, and increasingly volatile and constrained secondary credit markets have been affecting the mortgage industry generally. Our financial results may be adversely affected by changes in real estate values in areas in which it operates. Decreases in real estate values in these areas could adversely affect the value of property used as collateral for loans and investments. If poor economic conditions result in decreased demand for real estate loans, then our net income and profits may decrease.

The declines in home prices in many markets across the United States, along with the reduced availability of mortgage credit, also may result in increases in delinquencies and losses in our portfolio of loans related to residential real estate construction and development. Further declines in home prices coupled with an economic recession and associated rises in unemployment levels could drive losses beyond that which are provided for in our allowance for loan losses. In that event, our earnings could be adversely affected.

Additionally, recent weakness in the secondary market for residential lending could have an adverse impact upon our profitability. Significant ongoing disruptions in the secondary market for residential mortgage loans have limited the market for and liquidity of most mortgage loans other than conforming Fannie Mae, Freddie Mac and Ginnie Mae loans. The effects of ongoing mortgage market challenges, combined with the ongoing correction in residential real estate market prices and reduced levels of home sales, could result in further price reductions in single family home values, adversely affecting the value of collateral securing mortgage loans held, mortgage loan originations and gains on sale of mortgage loans. Continued declines in real estate values and home sales volumes, and financial stress on borrowers as a result of job losses, or other factors, could have further adverse effects on borrowers that result in higher delinquencies and greater charge-offs in future periods, which would adversely affect our financial condition or results of operations.

Continuation of the economic downturn could reduce our customer base, our level of deposits, and demand for financial products such as loans.

Our success significantly depends upon the growth in population, income levels, deposits, and housing starts in our markets. The current economic downturn has negatively affected the markets in which we operate and, in turn, the quality of our loan portfolio. If the communities in which we operate do not grow or if prevailing economic conditions locally or nationally remain unfavorable, our business may not succeed. A continuation of the economic downturn would likely result in the continued deterioration of the quality of our loan portfolio and reduce our level of deposits, which in turn would hurt our business. Interest received on loans represented approximately 90.6% of our interest income for the year ended December 31, 2013. If the economic downturn continues or a prolonged economic recession occurs in the economy as a whole, borrowers will be less likely to repay their loans as scheduled. Moreover, in many cases the value of real estate or other collateral that secures our loans has been adversely affected by the economic conditions and could continue to be negatively affected. Unlike many larger institutions, we are not able to spread the risks of unfavorable local economic conditions across a large number of diversified economies. A continued economic downturn could, therefore, result in losses that materially and adversely affect our business.

Our merger of equals transaction with VantageSouth will dilute current shareholders’ stock ownership and could expose us to additional risks.

In connection with our merger of equals transaction with VantageSouth announced on January 27, 2014, we will issue additional shares of common stock, which will dilute current shareholders’ ownership interest in the Company. This merger of equals transaction will require us to incur debt.

Our proposed merger of equals transaction with VantageSouth could involve a number of additional risks, including the risks of:

• incurring the time and expense associated with the merger of equals transaction, resulting in management’s attention being diverted from the operation of our existing business;

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• using inaccurate estimates and judgments to evaluate credit, operations, management, and market risks with respect to the target institution or assets;

• incurring the time and expense required to integrate the operations and personnel of the combined businesses;

• creating an adverse short-term effect on our results of operations; and

• losing key employees and customers as a result of an acquisition that is poorly received.

If we do not successfully manage these risks, the merger of equals transaction could have a material effect on our operating results and financial condition, including short and long-term liquidity.

The Company’s proposed merger with VantageSouth may present certain risks to the Company’s business and operations.

On January 27, 2014, the Company entered into the Merger Agreement with VantageSouth and Piedmont providing for the merger of equals transaction with VantageSouth. The proposed merger of equals transaction presents the following risks, among others:

• the possibility that expected benefits may not materialize in the timeframe expected or at all, or may be more costly to achieve;

• that the transaction may not be timely completed, if at all;

• that prior to the completion of the transaction or thereafter, the Company’s and VantageSouth’s respective businesses may not perform as expected due to transaction-related uncertainty or other factors;

• that the parties are unable to successfully implement integration strategies, due to challenges associated with integrating complex systems, technology, banking centers, and other assets of VantageSouth in a manner that minimizes any adverse effect on customers, suppliers, employees, and other constituencies and integrating VantageSouth’s workforce while maintaining focus on providing consistent, high quality customer service;

• that required regulatory and shareholder approvals are not obtained or other closing conditions are not satisfied in a timely manner or at all;

• reputational risks and the reaction of the companies’ customers to the transaction; and

• whether or not completed, the proposed acquisition may require diversion of the attention of the Company’s management and other key employees from ongoing business activities, including the pursuit of other opportunities that could be beneficial to the Company.

We may be exposed to difficulties in combining the operations of VantageSouth and the Company, which may prevent us from achieving the expected benefits from our merger activities.

We may not be able to fully achieve the strategic objectives and operating efficiencies that we anticipate in our merger activities, including our proposed merger of equals transaction with VantageSouth announced on January 27, 2014. Inherent uncertainties exist in integrating the operations of two companies. In addition, the markets and industries in which the Company and VantageSouth operate are highly competitive. We may lose customers as a result of the merger. We also may lose key personnel as a result of the merger. We may not have discovered all known and unknown factors during the due diligence period. These factors could produce unintended and unexpected consequences for us. Undiscovered factors as a result of the merger, pursued by non-related third party entities, could bring civil, criminal, and financial liabilities against us, our management, and the management of those entities acquired. These factors could contribute to the Company not achieving the expected benefits from the merger within desired time frames.

New or acquired banking office facilities and other facilities may not be profitable.

We may not be able to identify profitable locations for new banking offices. The costs to start up new banking offices or to acquire existing branches, and the additional costs to operate these facilities, may increase our non-interest expense and decrease our earnings in the short term. If branches of other banks become available for sale, we may acquire those offices. It may be difficult to adequately and profitably manage our growth through the establishment or purchase of additional banking offices and we can provide no assurance that any such banking offices will successfully attract enough deposits to offset the expenses of their operation. In addition, any new or acquired banking offices will be subject to regulatory approval, and there can be no assurance that we will succeed in securing such approval.

Yadkin may identify material weaknesses in its internal control over financial reporting that may adversely affect Yadkin’s ability to properly account for non-routine transactions.

As we have grown and expanded, we have added, and expect to acquire or continue to add, businesses and other activities that complement our core retail and commercial banking functions. For example, we acquired American Community in a transaction

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that closed in April 2009. Such acquisitions or additions frequently involve complex operational and financial reporting issues that can, and have, influenced management's internal control system. While we make every effort to thoroughly understand any new activity or acquired entity's business process and properly integrate it into the Company, we encountered difficulties that impacted our internal controls over financial reporting in 2007 and in 2008, and can give no assurance that we will not encounter additional operational and financial reporting difficulties impacting our internal control over financial reporting.

Our small- to medium-sized business target markets may have fewer financial resources to weather a downturn in the economy.

We target the banking and financial services needs of small- and medium-sized businesses. These businesses generally have fewer financial resources in terms of capital borrowing capacity than larger entities. If general economic conditions continue to negatively impact these businesses in the markets in which we operate, our business, financial condition, and results of operation may be adversely affected.

Our deposit insurance premiums could be substantially higher in the future, which could have a material adverse effect on our future earnings.

The FDIC insures deposits at FDIC-insured depository institutions, such as the Bank, up to $250,000 per account. The amount of a particular institution’s deposit insurance assessment is based on that institution’s risk classification under an FDIC risk-based assessment system. An institution’s risk classification is assigned based on its capital levels and the level of supervisory concern the institution poses to its regulators. Recent market developments and bank failures significantly depleted the FDIC’s Deposit Insurance Fund, and reduced the ratio of reserves to insured deposits. As a result of recent economic conditions and the enactment of the Dodd-Frank Act, banks are now assessed deposit insurance premiums based on the bank’s average consolidated total assets, and the FDIC has modified certain risk-based adjustments which increase or decrease a bank’s overall assessment rate. This has resulted in increases to the deposit insurance assessment rates and thus raised deposit premiums for many insured depository institutions. If these increases are insufficient for the Deposit Insurance Fund to meet its funding requirements, further special assessments or increases in deposit insurance premiums may be required. We are generally unable to control the amount of premiums that we are required to pay for FDIC insurance. If there are additional bank or financial institution failures, we may be required to pay even higher FDIC premiums than the recently increased levels. If our financial condition deteriorates or if the bank regulators otherwise have supervisory concerns about us, then our assessments could rise. Any future additional assessments, increases or required prepayments in FDIC insurance premiums could reduce our profitability, may limit our ability to pursue certain business opportunities, or otherwise negatively impact our operations.

Liquidity needs could adversely affect our financial condition and results of operations.

We rely on dividends from our bank subsidiary as our primary source of funds. There can be no assurances such approval would be granted or with regard to how long these restrictions will remain in place. The primary sources of funds of the bank subsidiary are customer deposits and loan repayments. While scheduled loan repayments are a relatively stable source of funds, they are subject to the ability of borrowers to repay the loans. The ability of borrowers to repay loans can be adversely affected by a number of factors, including changes in economic conditions, adverse trends or events affecting business industry groups, reductions in real estate values or markets, business closings or lay-offs, inclement weather, natural disasters and international instability.

Additionally, deposit levels may be affected by a number of factors, including rates paid by competitors, general interest rate levels, regulatory capital requirements, returns available to customers on alternative investments and general economic conditions. Accordingly, we may be required from time to time to rely on secondary sources of liquidity to meet withdrawal demands or otherwise fund operations. Such sources include proceeds from FHLB advances, sales of investment securities and loans, and federal funds lines of credit from correspondent banks, as well as out-of-market time deposits. While we believe that these sources are currently adequate, there can be no assurance they will be sufficient to meet future liquidity demands, particularly if we continue to grow and experience increasing loan demand. We may be required to slow or discontinue loan growth, capital expenditures or other investments or liquidate assets should such sources not be adequate.

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 as a result of cyber attacks, could disrupt our businesses, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs and cause losses.

We rely heavily on communications and information systems to conduct our business. Information security risks for financial institutions such as ours have generally increased in recent years in part because of the proliferation of new technologies, the use of the internet and telecommunications technologies to conduct financial transactions, and the increased sophistication

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and activities of organized crime, hackers, terrorists, activists, and other external parties. As client, public, and regulatory expectations regarding operational and information security have increased, our operational systems and infrastructure must continue to be safeguarded and monitored for potential failures, disruptions, and breakdowns. Our business, financial, accounting and data processing systems, or other operating systems and facilities may stop operating properly or become disabled or damaged as a result of a number of factors, including events that are wholly or partially beyond our control. For example, there could be electrical or telecommunications outages; natural disasters such as earthquakes, tornadoes, and hurricanes; disease pandemics; events arising from local or larger scale political or social matters, including terrorist acts; and, as described below, cyber attacks.

As noted above, our business relies on our digital technologies, computer and email systems, software, and networks to conduct its operations. Although we have information security procedures and controls in place, our technologies, systems, networks, and our clients' devices may become the target of cyber attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of our or our clients' confidential, proprietary and other information, or otherwise disrupt our or our clients' or other third parties' business operations. Third parties with whom we do business or that facilitate our business activities, including financial intermediaries, or vendors that provide services or security solutions for our operations, and other third parties, including the South Carolina Department of Revenue, which had records exposed in a 2012 cyber attack, could also be sources of operational and information security risk to us, including from breakdowns or failures of their own systems or capacity constraints.

While we have disaster recovery and other policies and procedures designed to prevent or limit the effect of the failure, interruption or security breach of our information systems, there can be no assurance that any such failures, interruptions or security breaches will not occur or, if they do occur, that they will be adequately addressed. Our risk and exposure to these matters remains heightened because of the evolving nature of these threats. As a result, cybersecurity and the continued development and enhancement of our controls, processes and practices designed to protect our systems, computers, software, data and networks from attack, damage or unauthorized access remain a focus for us. As threats continue to evolve, we may be required to expend additional resources to continue to modify or enhance our protective measures or to investigate and remediate information security vulnerabilities. Disruptions or failures in the physical infrastructure or operating systems that support our businesses and clients, or cyber attacks or security breaches of the networks, systems or devices that our clients use to access our products and services could result in client attrition, regulatory fines, penalties or intervention, reputational damage, reimbursement or other compensation costs, and/or additional compliance costs, any of which could materially adversely affect our results of operations or financial condition.

We depend on key individuals, and the unexpected loss of one or more of these key individuals could curtail our growth and adversely affect our prospects.

Joseph H. Towell, our president and chief executive officer, has substantial experience in the banking industry and has contributed significantly to our Company since joining in 2008. If we were to lose Mr. Towell's services, he would be difficult to replace and our business and development could be materially and adversely affected. Our success is dependent on the personal contacts and local experience of Mr. Towell and other key management personnel in each of our market areas. Our success also depends on our continued ability to attract and retain experienced loan originators, as well as our ability to retain current key executive management personnel, including the chief financial officer, Jan H. Hollar and chief operating officer, William M. DeMarcus. We have entered into employment agreements with each of these executive officers. The existence of such agreements, however, does not necessarily assure that we will be able to continue to retain their services. The unexpected loss of either of these key personnel could adversely affect our growth strategy and prospects to the extent we are unable to replace such personnel.

We depend on the accuracy and completeness of information about clients and counterparties and our financial condition could be adversely affected if we rely on misleading information.

In deciding whether to extend credit or to enter into other transactions with clients and counterparties, we may rely on information furnished to us by or on behalf of clients and counterparties, including financial statements and other financial information, which we do not independently verify. We also may rely on representations of clients and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. For example, in deciding whether to extend credit to clients, we may assume that a customer's audited financial statements conform with GAAP and present fairly, in all material respects, the financial condition, results of operations and cash flows of the customer. Our financial condition and results of operations could be negatively affected to the extent we rely on financial statements that do not comply with GAAP or are materially misleading.

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Interest rate volatility could significantly harm our business.

Our results of operations are affected by the monetary and fiscal policies of the federal government and the regulatory policies of governmental authorities. A significant component of our earnings is our net interest income. Net interest income is the difference between income from interest-earning assets, such as loans, and the expense of interest-bearing liabilities, such as deposits. We may not be able to effectively manage changes in what we charge as interest on our earning assets and the expense we must pay on interest-bearing liabilities, which may significantly reduce our earnings. The Federal Reserve has made significant changes in interest rates during the last few years. Since rates charged on loans often tend to react to market conditions faster than do rates paid on deposit accounts, these rate changes may have a negative impact on our earnings until we can make appropriate adjustments in our deposit rates. In addition, there are costs associated with our risk management techniques, and these costs could be material. Fluctuations in interest rates are not predictable or controllable and, therefore, there can be no assurances of our ability to continue to maintain a consistent positive spread between the interest earned on our earning assets and the interest paid on our interest-bearing liabilities. These risks are exacerbated by the recent developments in national and international financial markets, and we are unable to accurately predict what effect these uncertain market conditions will have on these risks.

Changes in prevailing interest rates may reduce our profitability.

One of the key measures of our success is our amount of net interest income. Net interest income is the difference between interest income earned on interest-earning assets and interest expense paid on interest-bearing liabilities. Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies, particularly the Federal Reserve.

We are subject to interest rate risk because:

• Assets and liabilities may mature or reprice at different times (for example, if assets reprice faster than liabilities and interest rates are generally falling, net income will initially decline),

• Assets and liabilities may reprice at the same time but by different amounts (for example, when the general level of interest rates is falling, we may reduce rates paid on transaction and savings deposit accounts by an amount that is less than the general decline in market interest rates),

• Short-term and long-term market interest rates may change by different amounts (for example, the shape of the yield curve may impact new or repricing loan yields and funding costs differently), and/or

• The remaining maturity of various assets or liabilities may shorten or lengthen as interest rates change (for example, if long-term mortgage interest rates decline sharply, mortgage-backed securities held in the investment securities available for sale portfolio may prepay significantly earlier than anticipated, which could reduce portfolio income).

Interest rates may also have a direct or indirect impact on loan demand, credit losses, mortgage origination volume, the mortgage-servicing rights portfolio, the value of our pension plan assets and liabilities, and other financial instruments directly or indirectly impacting net income.

Any substantial, unexpected, prolonged change in market interest rates could have a material adverse impact on our business, financial condition, results of operations, and cash flows.

We are exposed to the possibility that more prepayments may be made by customers to pay down loan balances, which could reduce our interest income and profitability.

Prepayment rates stem from consumer behavior, conditions in the housing and financial markets, general U.S. economic conditions, and the relative interest rates on fixed-rate and adjustable-rate loans. Therefore, changes in prepayment rates are difficult to predict. Recognition of deferred loan origination costs and premiums paid in originating these loans are normally recognized over the contractual life of each loan. As prepayments occur, the rate at which net deferred loan origination costs and premiums are expensed will accelerate. The effect of the acceleration of deferred costs and premium amortization may be mitigated by prepayment penalties paid by the borrower when the loan is paid in full within a certain period of time, which varies between loans. If prepayment occurs after the period of time when the loan is subject to a prepayment penalty, the effect of the acceleration of premium and deferred cost amortization is no longer mitigated. We recognize premiums paid on mortgage-backed securities as an adjustment from interest income over the expected life of the security based on the rate of repayment of the securities. Acceleration of prepayments on the loans underlying a mortgage-backed security shortens the life of the security, increases the rate at which premiums are expensed and further reduces interest income. We may not be able to reinvest loan and security prepayments at rates comparable to the prepaid instrument particularly in a period of declining interest rates.

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We face strong competition in our market area, which may limit our asset growth and profitability.

The banking business in our primary market area, which is currently concentrated in the central piedmont, research triangle and northwestern areas of North Carolina, is very competitive, and the level of competition we face may increase further, which may limit our asset growth and profitability. We experience competition in both lending and attracting funds from other banks and nonbank financial institutions located within our market area, some of which are significantly larger, well-established institutions. Nonbank competitors for deposits and deposit-type accounts include savings associations, credit unions, securities firms, money market funds, life insurance companies and the mutual funds industry. For loans, we encounter competition from other banks, savings associations, finance companies, mortgage bankers and brokers, insurance companies, small loan and credit card companies, credit unions, pension trusts and securities firms. We may face a competitive disadvantage as a result of our smaller size, lack of significant multi-state geographic diversification and inability to spread our marketing costs across a broader market.

We may be adversely affected by the soundness of other financial institutions.

Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. We have exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial services industry, including commercial banks, brokers and dealers, investment banks, and other institutional clients. Many of these transactions expose us to credit risk in the event of a default by a counterparty or client. In addition, our credit risk may be exacerbated when the collateral we hold cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure due to us. Any such losses could have a material adverse affect on our financial condition and results of operations.

We could experience a loss due to competition with other financial institutions.

The banking and financial services industry is very competitive. Legal and regulatory developments have made it easier for new and sometimes unregulated competitors to compete with us. The financial services industry has and is experiencing an ongoing trend towards consolidation in which fewer large national and regional banks and other financial institutions are replacing many smaller and more local banks. These larger banks and other financial institutions hold a large accumulation of assets and have significantly greater resources and a wider geographic presence or greater accessibility. In some instances, these larger entities operate without the traditional brick and mortar facilities that restrict geographic presence. Some competitors are able to offer more services, more favorable pricing or greater customer convenience than Yadkin. In addition, competition has increased from new banks and other financial services providers that target our existing or potential customers. As consolidation continues among large banks, we expect other smaller institutions to try to compete in the markets we serve.

Technological developments have allowed competitors, including some non-depository institutions, to compete more effectively in local markets and have expanded the range of financial products, services and capital available to our target customers. If we are unable to implement, maintain and use such technologies effectively, we may not be able to offer products or achieve cost-efficiencies necessary to compete in the industry. In addition, some of these competitors have fewer regulatory constraints and lower cost structures.

Negative public opinion surrounding our company and the financial institutions industry generally could damage our reputation and adversely impact our earnings.

Reputation risk, or the risk to our business, earnings and capital from negative public opinion surrounding our company and the financial institutions industry generally, is inherent in our business. Negative public opinion can result from our actual or alleged conduct in any number of activities, including lending practices, corporate governance and acquisitions, and from actions taken by government regulators and community organizations in response to those activities. Negative public opinion can adversely affect our ability to keep and attract clients and employees and can expose us to litigation and regulatory action. Although we take steps to minimize reputation risk in dealing with our clients and communities, this risk will always be present given the nature of our business.

Any requested or required changes in how we determine the impact of loss share accounting on our financial information could have a material adverse effect on our reported results.

Our financial results are significantly affected by loss share accounting, which is driven by accounting rule interpretations, assumptions and judgments made by us, and subject to ongoing review by our accountants and the regulatory agencies to whom we report such information. Loss share accounting is a complex accounting methodology. Many of the decisions management makes regarding the application of this accounting methodology are subject to question or revision by our accountants and the

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various regulatory agencies to whom we report. As such, any financial information generated through the use of loss share accounting is subject to modification or change. Any significant modification or change in such information could have a material adverse effect on our results of operations and our previously reported results. In some cases, we could be required to apply a new or revised standard retroactively, resulting in us restating prior period financial statements.

Legal and Regulatory Risks

We are subject to extensive regulation that could restrict our activities, have an adverse impact on our operations, and impose financial requirements or limitations on the conduct of our business.

We operate in a highly regulated industry and are subject to examination, supervision, and comprehensive regulation by various regulatory agencies. We are subject to Federal Reserve regulation. Our Bank is subject to extensive regulation, supervision, and examination by our primary federal regulator, the FDIC, the regulating authority that insures customer deposits. Also, as a member of the FHLB, our Bank must comply with applicable regulations of the Federal Housing Finance Board and the FHLB. Regulation by these agencies is intended primarily for the protection of our depositors and the deposit insurance fund and not for the benefit of our shareholders. Our Bank's activities are also regulated under consumer protection laws applicable to our lending, deposit, and other activities. A sufficient claim against us under these laws could have a material adverse effect on our results of operations.

Further, changes in laws, regulations and regulatory practices affecting the financial services industry could subject us to additional costs, limit the types of financial services and products we may offer and/or increase the ability of non-banks to offer competing financial services and products, among other things. Failure to comply with laws, regulations or policies could also result in heightened regulatory scrutiny and in sanctions by regulatory agencies (such as a memorandum of understanding, a written supervisory agreement or a cease and desist order), civil money penalties and/or reputation damage. Any of these consequences could restrict our ability to expand our business or could require us to raise additional capital or sell assets on terms that are not advantageous to us or our shareholders and could have a material adverse effect on our business, financial condition and results of operations. While we have policies and procedures designed to prevent any such violations, such violations may occur despite our best efforts.

The Dodd-Frank Act may have a material adverse effect on our operations.

On July 21, 2010, President Obama signed into law the Dodd-Frank Act, which imposes significant regulatory and compliance changes. The key effects of the Dodd-Frank Act on our business are:

• changes to regulatory capital requirements;

• exclusion of hybrid securities, including trust preferred securities, issued on or after May 19, 2010 from Tier 1 capital;

• creation of new government regulatory agencies (such as the Financial Stability Oversight Council, which oversees systemic risk, and the CFPB, which develops and enforces rules for bank and non-bank providers of consumer financial products);

• potential limitations on federal preemption;

• changes to deposit insurance assessments;

• regulation of debit interchange fees we earn;

• changes in retail banking regulations, including potential limitations on certain fees we may charge; and

• changes in regulation of consumer mortgage loan origination and risk retention.

In addition, the Dodd-Frank Act restricts the ability of banks to engage in certain proprietary trading or to sponsor or invest in private equity or hedge funds. The Dodd-Frank Act also contains provisions designed to limit the ability of insured depository institutions, their holding companies and their affiliates to conduct certain swaps and derivatives activities and to take certain principal positions in financial instruments.

Some provisions of the Dodd-Frank Act became effective immediately upon its enactment. Many provisions, however, will require regulations to be promulgated by various federal agencies in order to be implemented, some but not all of which have been proposed or finalized by the applicable federal agencies. The provisions of the Dodd-Frank Act may have unintended effects, which will not be clear until after implementation. Certain changes resulting from the Dodd-Frank Act may impact the profitability of our business activities, require changes to certain of our business practices, impose upon us more stringent capital, liquidity and leverage requirements or otherwise adversely affect our business. These changes may also require us to invest significant management attention and resources to evaluate and make any changes necessary to comply with new statutory and regulatory requirements. Failure to comply with the new requirements may negatively impact our results of operations and financial condition.

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While we cannot predict what effect any presently contemplated or future changes in the laws or regulations or their interpretations would have on us, these changes could be materially adverse to investors in our common stock.

New capital rules that were recently issued generally require insured depository institutions and their holding companies to hold more capital. The impact of the new rules on our financial condition and operations is uncertain but could be materially adverse.

On July 2, 2013, the Federal Reserve Board adopted a final rule for the Basel III capital framework and, on July 9, 2013, the OCC also adopted a final rule and the FDIC adopted the same provisions in the form of an "interim final rule." These rules substantially amend the regulatory risk-based capital rules applicable to us. The rules phase in over time beginning in 2015 and will become fully effective in 2019. The rules apply to the Company as well as to the Bank.

The final rules increase capital requirements and generally include two new capital measurements that will affect us, a risk-based common equity Tier 1 ratio and a capital conservation buffer. Common Equity Tier 1 (“CET1”) capital is a subset of Tier 1 capital and is limited to common equity (plus related surplus), retained earnings, accumulated other comprehensive income and certain other items. Other instruments that have historically qualified for Tier 1 treatment, including non-cumulative perpetual preferred stock, are consigned to a category known as Additional Tier 1 capital and must be phased out over a period of nine years beginning in 2014. The rules permit bank holding companies with less than $15 billion in assets (such as us) to continue to include trust preferred securities and non-cumulative perpetual preferred stock issued before May 19, 2010 in Tier 1 capital, but not CET1. Tier 2 capital consists of instruments that have historically been placed in Tier 2, as well as cumulative perpetual preferred stock.

The final rules adjust all three categories of capital by requiring new deductions from and adjustments to capital that will result in more stringent capital requirements and may require changes in the ways we do business. Among other things, the current rule on the deduction of mortgage servicing assets from Tier 1 capital has been revised in ways that are likely to require a greater deduction than we currently make and that will require the deduction to be made from CET1. This deduction phases in over a three-year period from 2015 through 2017. We closely monitor our mortgage servicing assets, and we expect to maintain our mortgage servicing asset at levels below the deduction thresholds by a combination of sales of portions of these assets from time to time either on a flowing basis as we originate mortgages or through bulk sale transactions. Additionally, any gains on sale from mortgage loans sold into securitizations must be deducted in full from CET1. This requirement phases in over three years from 2015 through 2017. Under the earlier rule and through 2014, no deduction is required.

Beginning in 2015, the minimum capital requirements for the Company and the Bank will be (i) a CET1 ratio of 4.5%, (ii) a Tier 1 capital (CET1 plus Additional Tier 1 capital) of 6% (up from 4%) and (iii) a total capital ratio of 8% (the current requirement). Our leverage ratio requirement will remain at the 4% level now required. Beginning in 2016, a capital conservation buffer will phase in over three years, ultimately resulting in a requirement of 2.5% on top of the CET1, Tier 1 and total capital requirements, resulting in a require CET1 ratio of 7%, a Tier 1 ratio of 8.5%, and a total capital ratio of 10.5%. Failure to satisfy any of these three capital requirements will result in limits on paying dividends, engaging in share repurchases and paying discretionary bonuses. These limitations will establish a maximum percentage of eligible retained income that could be utilized for such actions. While the final rules will result in higher regulatory capital standards, it is difficult at this time to predict when or how any new standards will ultimately be applied to us.

In addition to the higher required capital ratios and the new deductions and adjustments, the final rules increase the risk weights for certain assets, meaning that we will have to hold more capital against these assets. For example, commercial real estate loans that do not meet certain new underwriting requirements must be risk-weighted at 150%, rather than the current 100%. There are also new risk weights for unsettled transactions and derivatives. We also will be required to hold capital against short-term commitments that are not unconditionally cancelable; currently, there are no capital requirements for these off-balance sheet assets. All changes to the risk weights take effect in full in 2015.

In addition, in the current economic and regulatory environment, bank regulators may impose capital requirements that are more stringent than those required by applicable existing regulations. The application of more stringent capital requirements for us could, among other things, result in lower returns on equity, require the raising of additional capital, and result in regulatory actions if we were to be unable to comply with such requirements. Implementation of changes to asset risk weightings for risk-based capital calculations, items included or deducted in calculating regulatory capital or additional capital conservation buffers, could result in management modifying our business strategy and could limit our ability to make distributions, including paying dividends or buying back our shares.

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The federal banking agencies are likely to issue new liquidity standards that could result in our having to lengthen the term of our funding, restructure our business lines by forcing us to seek new sources of liquidity for them, and/or increase our holdings of liquid assets.

As part of the Basel III capital process, the Basel Committee on Banking Supervision has finalized a new liquidity standard, a liquidity coverage ratio, which requires a banking organization to hold sufficient "high quality liquid assets" to meet liquidity needs for a 30 calendar day liquidity stress scenario. A net stable funding ratio, which imposes a similar requirement over a one-year period, is under consideration. The U.S. banking regulators have said that they intend to adopt such liquidity standards, although they have not yet proposed a rule. New rules could restrict our operations by compelling us to reduce our holdings of illiquid assets and adversely affect our results and financial condition.

We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.

The federal Bank Secrecy Act, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (which we refer to as the "Patriot Act") and other laws and regulations require financial institutions, among other duties, to institute and maintain effective anti-money laundering programs and file suspicious activity and currency transaction reports as appropriate. The federal Financial Crimes Enforcement Network, established by the U.S. Treasury Department to administer the Bank Secrecy Act, is authorized to impose significant civil money penalties for violations of those requirements and has recently engaged in coordinated enforcement efforts with the individual federal banking regulators, as well as the U.S. Department of Justice, Drug Enforcement Administration and Internal Revenue Service. There is also increased scrutiny of compliance with the rules enforced by the OFAC. Federal and state bank regulators also have begun to focus on compliance with Bank Secrecy Act and anti-money laundering regulations. If our policies, procedures and systems are deemed deficient or the policies, procedures and systems of the financial institutions that we have already acquired or may acquire in the future are deficient, we would be subject to liability, including fines and regulatory actions such as restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan, including our acquisition plans, which would negatively impact our business, financial condition and results of operations. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us.

Federal, state and local consumer lending laws may restrict our ability to originate certain mortgage loans or increase our risk of liability with respect to such loans and could increase our cost of doing business.

Federal, state and local laws have been adopted that are intended to eliminate certain lending practices considered "predatory." These laws prohibit practices such as steering borrowers away from more affordable products, selling unnecessary insurance to borrowers, repeatedly refinancing loans and making loans without a reasonable expectation that the borrowers will be able to repay the loans irrespective of the value of the underlying property. Over the course of 2013, the CFPB has issued several rules on mortgage lending, notably a rule requiring all home mortgage lenders to determine a borrower's ability to repay the loan. Loans with certain terms and conditions and that otherwise meet the definition of a "qualified mortgage" may be protected from liability to a borrower for failing to make the necessary determinations. In either case, we may find it necessary to tighten our mortgage loan underwriting standards in response to the CFPB rules, which may constrain our ability to make loans consistent with our business strategies. It is our policy not to make predatory loans and to determine borrowers' ability to repay, but the law and related rules create the potential for increased liability with respect to our lending and loan investment activities. They increase our cost of doing business and, ultimately, may prevent us from making certain loans and cause us to reduce the average percentage rate or the points and fees on loans that we do make.

We are subject to federal and state fair lending laws, and failure to comply with these laws could lead to material penalties.

Federal and state fair lending laws and regulations, such as the Equal Credit Opportunity Act and the Fair Housing Act, impose nondiscriminatory lending requirements on financial institutions. The Department of Justice, CFPB and other federal and state agencies are responsible for enforcing these laws and regulations. Private parties may also have the ability to challenge an institution's performance under fair lending laws in private class action litigation. A successful challenge to our performance under the fair lending laws and regulations could adversely impact our rating under the Community Reinvestment Act and result in a wide variety of sanctions, including the required payment of damages and civil money penalties, injunctive relief, imposition of restrictions on merger and acquisition activity and restrictions on expansion activity, which could negatively impact our reputation, business, financial condition and results of operations.

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The Federal Reserve may require us to commit capital resources to support the Bank.

The Federal Reserve requires a bank holding company to act as a source of financial and managerial strength to a subsidiary bank and to commit resources to support such subsidiary bank. Under the "source of strength" doctrine, the Federal Reserve may require a bank holding company to make capital injections into a troubled subsidiary bank and may charge the bank holding company with engaging in unsafe and unsound practices for failure to commit resources to such a subsidiary bank. In addition, the Dodd-Frank Act directs the federal bank regulators to require that all companies that directly or indirectly control an insured depository institution serve as a source of strength for the institution. Under these requirements, in the future, we could be required to provide financial assistance to our Bank if the Bank experiences financial distress.

A capital injection may be required at times when we do not have the resources to provide it, and therefore we may be required to borrow the funds. In the event of a bank holding company's bankruptcy, the bankruptcy trustee will assume any commitment by the holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank. Moreover, bankruptcy law provides that claims based on any such commitment will be entitled to a priority of payment over the claims of the holding company's general unsecured creditors, including the holders of its note obligations. Thus, any borrowing that must be done by the holding company in order to make the required capital injection becomes more difficult and expensive and will adversely impact the holding company's cash flows, financial condition, results of operations and prospects.

The downgrade of the U.S. credit rating could negatively impact our business, results of operations and financial condition.

Recent U.S. debt ceiling and budget deficit concerns together with signs of deteriorating sovereign debt conditions in Europe, have increased the possibility of additional credit-rating downgrades and economic slowdowns in the U.S. Although U.S. lawmakers passed legislation to raise the federal debt ceiling in 2011, Standard & Poor's Ratings Services lowered its long-term sovereign credit rating on the U.S. from "AAA" to "AA+" in August 2011. The impact of any further downgrades to the U.S. government's sovereign credit rating or its perceived creditworthiness could adversely affect the U.S. and global financial markets and economic conditions. In January 2013, the U.S. government adopted legislation to suspend the debt limit until May 19, 2013. In October 2013, the debt ceiling was suspended until February 7, 2014. Moody's and Fitch have each warned that they may downgrade the U.S. government's rating if the federal debt is not stabilized. A downgrade of the U.S. government's credit rating or a default by the U.S. government to satisfy its debt obligations likely would create broader financial turmoil and uncertainty, which would weigh heavily on the global banking system. It is possible that any such impact could have a material adverse effect on our business, results of operations and financial condition.

Failure to comply with government regulation and supervision could result in sanctions by regulatory agencies, civil money penalties, and damage to our reputation.

Our operations are subject to extensive regulation by federal, state, and local governmental authorities. Given the current disruption in the financial markets, we expect that the government will continue to pass new regulations and laws that will impact us. Compliance with such regulations may increase our costs and limit our ability to pursue business opportunities. Failure to comply with laws, regulations, and policies could result in sanctions by regulatory agencies, civil money penalties, and damage to our reputation. While we have policies and procedures in place that are designed to prevent violations of these laws, regulations, and policies, there can be no assurance that such violations will not occur.

We are party to various lawsuits incidental to our business. Litigation is subject to many uncertainties such that the expenses and ultimate exposure with respect to many of these matters cannot be ascertained.

From time to time, customers and others make claims and take legal action pertaining to our performance of fiduciary responsibilities. Whether customer claims and legal action are legitimate or unfounded, if such claims and legal actions are not resolved in our favor they may result in significant financial liability and/or adversely affect the market perception of us and our products and services as well as impact customer demand for those products and services. Any financial liability or reputation damage could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations.

Risks Related to an Investment in our Common Stock

Our ability to pay cash dividends is limited, and we may be unable to pay future dividends even if we desire to do so.

As a holding company that does not, as an entity, currently engage in separate business activities of a material nature, our ability to pay cash dividends depends upon the cash dividends received from our Bank and management fees paid by the Bank. We must pay our operating expenses from funds we receive from the Bank. Therefore, shareholders may receive cash dividends

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from us only to the extent that funds are available after payment of operating expenses. In addition, the Federal Reserve generally prohibits bank holding companies from paying cash dividends except out of operating earnings, provided that the prospective rate of earnings retention appears consistent with the bank holding company's capital needs, asset quality and overall financial condition. As a North Carolina corporation, our payment of cash dividends is also subject to the restrictions under North Carolina law on the declaration of cash dividends. Under such provisions, cash dividends may not be paid if a corporation will not be able to pay its debts as they become due in the usual course of business after paying such a cash dividend or if the corporation's total assets would be less than the sum of its total liabilities plus the amount that would be needed to satisfy certain liquidation preferential rights.

Also, the payment of cash dividends by Yadkin in the future will be subject to certain other legal and regulatory limitations (including the requirement that Yadkin's capital be maintained at certain minimum levels) and will be subject to ongoing review by banking regulators. As long as shares of our Series T Preferred Stock or our Series T-ACB Preferred Stock are outstanding, no dividends may be paid on our common stock unless all dividends on the Series T Preferred Stock and Series T-ACB Preferred Stock have been paid in full. There is no assurance that, in the future, Yadkin will have funds available to pay cash dividends, or, even if funds are available, that it will pay dividends in any particular amount or at any particular times, or that it will pay dividends at all.

There can be no assurances such approval would be granted or with regard to how long these restrictions will remain in place.

We have implemented anti-takeover strategies that could make it more difficult for another company to purchase us, even though such a purchase may increase shareholder value.

           In many cases, shareholders might receive a premium for their shares if we were purchased by another company. State law and our articles of incorporation and bylaws make it difficult for anyone to purchase us without the approval of our board of directors. For example, our articles of incorporation include certain anti-takeover provisions, such as being subject to the Shareholder Protection Act and Control Share Acquisition Act under North Carolina law, which may have the effect of preventing shareholders from receiving a premium for their shares of common stock and discouraging a change of control of us by allowing minority shareholders to prevent a transaction favored by a majority of the shareholders. The primary purpose of these provisions is to encourage negotiations with our management by persons interested in acquiring control of us. These provisions may also tend to perpetuate present management and make it difficult for shareholders owning less than a majority of the shares to be able to elect even a single director.

Our trading volume has been low compared with larger banks and bank holding companies and the sale of substantial amounts of our voting common stock in the public market could depress the price of our voting common stock.

The average daily trading volume of our shares on The Nasdaq Global Select Market for the three months ended January 31, 2014 was approximately 33,000 shares. Lightly traded stock can be more volatile than stock trading in an active public market like that for the large bank holding companies. We cannot predict the extent to which an active public market for our voting common stock will develop or be sustained. In recent years, the stock market has experienced a high level of price and volume volatility, and market prices for the stock of many companies have experienced wide price fluctuations that have not necessarily been related to their operating performance. Therefore, our shareholders may not be able to sell their shares at the volumes, prices, or times that they desire. We cannot predict the effect, if any, that future sales of our voting common stock in the market, or availability of shares of our voting common stock for sale in the market, will have on the market price of our voting common stock. We therefore can give no assurance that sales of substantial amounts of our voting common stock in the market, or the potential for large amounts of sales in the market, would not cause the price of our voting common stock to decline or impair our ability to raise capital through sales of our common stock.

We have been required to defer dividend payments on our Series T Preferred Stock and Series T-ACB Preferred Stock in the past, which may prevent us from being able to pay dividends on our common stock.

The Federal Reserve required us to defer dividend payments on our Series T and Series T-ACB Preferred Stock and defer interest payments on our trust preferred securities in the second, third and fourth quarters of 2011, and the first and second quarters of 2012. Although all deferred dividend and interest payments were paid in full in the third quarter of 2012, we may be required to defer dividend payments on the Series T and Series T-ACB Preferred Stock and interest payments on the trust preferred securities in the future given liquidity levels at the holding company.

31

The Series T and Series T-ACB Preferred Stock impacts net income available to our common shareholders and earnings per common share, and the warrants we issued may be dilutive to holders of our common stock.

The dividends on the Series T and Series T-ACB Preferred Stock will reduce the net income available to common shareholders and our earnings per common share. The Series T and Series T-ACB Preferred Stock will also receive preferential treatment in the event of liquidation, dissolution or winding up of the Company. Additionally, the ownership interest of the existing holders of our common stock will be diluted to the extent the warrant we issued in conjunction with the sale to Treasury of the Series T-ACB Preferred Stock is exercised. The shares of common stock underlying the warrant represent approximately 0.6% of the shares of our common stock outstanding as of December 31, 2013 (including the shares issuable upon exercise of the warrant in total shares outstanding).

Economic and other circumstances may require us to raise capital at times or in amounts that are unfavorable to us. If we have to issue shares of common stock, they will dilute the percentage ownership interest of existing shareholders and may dilute the book value per share of our common stock and adversely affect the terms on which we may obtain additional capital.

We may need to incur additional debt or equity financing in the future to make strategic acquisitions or investments or to strengthen our capital position. Our ability to raise additional capital, if needed, will depend on, among other things, conditions in the capital markets at that time, which are outside of our control and our financial performance. We cannot provide assurance that such financing will be available to us on acceptable terms or at all, or if we do raise additional capital that it will not be dilutive to existing shareholders.

If we determine, for any reason, that we need to raise capital, subject to applicable NASDAQ rules, our board generally has the authority, without action by or vote of the shareholders, to issue all or part of any authorized but unissued shares of stock for any corporate purpose, including issuance of equity-based incentives under or outside of our equity compensation plans. Additionally, we are not restricted from issuing additional common stock or preferred stock, including any securities that are convertible into or exchangeable for, or that represent the right to receive, common stock or preferred stock or any substantially similar securities. The market price of our common stock could decline as a result of sales by us of a large number of shares of common stock or preferred stock or similar securities in the market or from the perception that such sales could occur. If we issue preferred stock that has a preference over the common stock with respect to the payment of dividends or upon liquidation, dissolution or winding-up, or if we issue preferred stock with voting rights that dilute the voting power of the common stock, the rights of holders of the common stock or the market price of our common stock could be adversely affected. Any issuance of additional shares of stock will dilute the percentage ownership interest of our shareholders and may dilute the book value per share of our common stock. Shares we issue in connection with any such offering will increase the total number of shares and may dilute the economic and voting ownership interest of our existing shareholders.

Item 1B. Unresolved Staff Comments

Not Applicable

Item 2 — Properties

The Company currently operates out of 33 full-service banking offices, eight mortgage lending offices, and nine administrative offices as set forth below:

Office Location	Approximate Square Footage	Year Established/Acquired
110 West Market Street, Elkin, NC	2,350	1968
1318 North Bridge Street Elkin, NC	4,550	1989
101 North Bridge Street, Jonesville, NC	2,275	1971
117 Paulines Street, East Bend, NC	2,400	1998
1404 West D Street, North Wilkesboro, NC	3,178	1984
301 West Main Street, Wilkesboro, NC	2,400	1991
709 East Main Street, Jefferson, NC	4,159	1986
1488 Mount Jefferson Road, West Jefferson, NC	4,900	2001
104 Progress Lane, Yadkinville, NC	4,532	2007

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325 East Front Street, Statesville, NC	4,990	1998
127 North Cross Lane, Statesville, NC	2,485	1997
165 Williamson Road, Mooresville, NC	5,093	1998
520 East Plaza Drive, Mooresville, NC	3,689	2000
19525 West Catawba Avenue, Cornelius, NC	2,834	2000
100 North Statesville Road, Huntersville, NC	2,923	2000
197 Medical Park Road, Mooresville, NC	12,280	2005
3475 East Broad St, Statesville, NC	1,800	2006
149 Jefferson Road, Boone, NC	4,600	1998
2111 Blowing Rock Road, Boone, NC	11,000	2013
3618 Mitchell Ave, Linville, NC	3,000	2005
237 South Churton Street, Hillsborough, NC	3,250	2008
115 East Carver Street, Durham, NC	4,300	2008
3400 Westgate Drive, Durham, NC	2,400	2008
2593 West Roosevelt Boulevard, Monroe, NC	14,774	2009
13860 East Independence Boulevard, Indian Trail, NC	3,850	2009
7001 East Marshville Boulevard, Marshville, NC	3,500	2009
4335 Matthews-Mint Hill Road, Mint Hill, NC	2,500	2009
3500 Mt. Holly-Huntersville Road, Charlotte, NC	4,500	2009
4500 Cameron Valley Parkway, Charlotte, NC	2,800	2009
2130 South Boulevard, Charlotte, NC	5,400	2009
217 North Granard Street, Gaffney, SC	11,000	2009
207 West Cherokee Street, Blacksburg, SC	2,500	2009
1738 Gold Hill Road, Tega Cay, SC	3,100	2009
Offices operated by the mortgage banking division-
701 Green Valley Road, Suite 101, Greensboro, NC	5,000	2010
333 E Six Forks Rd, Suite 18, Raleigh, NC	2,900	2011
1325 E Garrison Blvd, Suite A, Gastonia, NC	1,700	2011
604 12th Street, West Columbia, SC	2,000	2011
2300 S. Croatan Hwy, Nags Head, NC	1,100	2009
671 Jamestown Drive, Suite 208E, Garden City, SC	230	2012
138 Charlotte Street, Suite 251, Asheville, NC	620	2012
5085 Morganton Road, Suite 200-A, Fayetteville, NC	1,000	2012
1040 William Hilton Parkway, Suite 104, Hilton Head Island, SC	1,500	2012
Offices housing administration and operations-
209 North Bridge Street, Elkin, NC	6,120	1979
290 North Bridge Street, Elkin, NC	2,516	1995
204 South Elm Street, Statesville, NC	5,435	2000
120 South Elm Street, Statesville, NC	2,381	2001
482 State Farm Road, Boone, NC	2,900	2003
101 West Main Street, Elkin	13,480	2004
3710 University Drive, Durham, NC	12,000	2008
300 East Broad Street, Statesville, NC	6,000	2009
328 East Broad Street, Statesville, NC	2,500	2010

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Item 3 — Legal Proceedings

In the course of ordinary business, the Company may, from time to time, be named a party to legal actions and proceedings. In accordance with GAAP the Company establishes reserves for litigation and regulatory matters when those matters present loss contingencies that are both probable and estimable. When loss contingencies are not both probable and estimable, the Company does not establish reserves.

Although the Company is a defendant in various legal proceedings arising in the ordinary course of business, there are no legal proceedings pending or, to the best knowledge of management, threatened which, in the opinion of management, will have a material adverse affect on the financial condition or results of operation of the Company.

Item 4 — Mine Safety Disclosures

Not applicable.

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PART II

Item 5 —Market for Registrant’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities

Market for the Common Stock of the Company. Yadkin first issued common stock during 1968 in connection with its initial incorporation and the commencement of its banking operations. Yadkin’s voting common stock is listed on The Nasdaq Global Select Market under the trading symbol “YDKN.” As of February 1, 2014, the Company had 5,327 shareholders of record.

The following table lists high and low published closing prices of Yadkin’s voting common stock (as reported on The Nasdaq Global Select) for the calendar quarters indicated. Stock prices have been adjusted to reflect a 1-for-3 stock split in the second quarter of 2013:

		Sale Price						Sale Price
	Dividends	Common Stock					Dividends	Common Stock
	Paid	High		Low			Paid	High		Low
2013						2012
First Quarter	—	$	12.03	$	8.82	First Quarter	—	$	8.67	$	4.95
Second Quarter	—	14.04		11.55		Second Quarter	—	9.78		7.35
Third Quarter	—	17.23		14.00		Third Quarter	—	10.29		7.80
Fourth Quarter	—	18.79		15.56		Fourth Quarter	—	10.44		8.55

Dividends. In the future, any declaration and payment of cash dividends will be subject to Yadkin's Board of Directors' evaluation of its operating results, financial condition, future growth plans, general business and economic conditions, and tax and other relevant considerations. Also, the payment of cash dividends by Yadkin in the future will be subject to certain other legal and regulatory limitations (including the requirement that Yadkin's capital be maintained at certain minimum levels) and will be subject to ongoing review by banking regulators.

Regulatory restrictions on cash dividends. As a holding company, we are dependent upon our subsidiary, the Bank, to provide funding for our operating expenses and dividends. North Carolina banking law requires that cash dividends be paid out of retained earnings and prohibits the payment of cash dividends if payment of the dividend would cause the bank's surplus to be less than 50% of its paid-in capital. Also, under federal banking law, no cash dividend may be paid if the Bank is undercapitalized or insolvent or if payment of the cash dividend would render the bank undercapitalized or insolvent, and no cash dividend may be paid by the Bank if it is in default of any deposit insurance assessment due to the FDIC. There can be no assurances such approval would be granted or with regard to how long these restrictions will remain in place.

We suspended our common stock repurchase plan in 2008, which we historically used to (1) reduce the number of shares outstanding when our share price in the market made repurchases advantageous and (2) manage capital levels. Therefore, there were no share repurchase transactions for the year ended December 31, 2013.

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Item 6 — Selected Financial Data

	($ in thousands, except per share data)
	At or for the Year Ended December 31,
	2013			2012			2011			2010			2009
Operating Data:
Total interest income	$	74,299		$	78,972		$	88,546		$	97,840		$	93,578
Total interest expense	10,241			17,988			26,041			34,344			31,915
Net interest income	64,058			60,984			62,505			63,496			61,663
Provision for loan losses	(2,685		)	40,374			20,843			24,349			48,439
Net interest income after provision for loan losses	66,743			20,610			41,662			39,147			13,224
Non-interest income	18,404			13,566			18,180			21,935			25,691
Non-interest expenses	55,920			66,811			67,543			62,483			122,848
Income (loss) before income taxes	29,227			(32,635		)	(7,701		)	(1,401		)	(83,933		)
Provision for income taxes	10,401			(23,961		)	6,694			(1,389		)	(8,876		)
Net income (loss)	18,826			(8,674		)	(14,395		)	(12		)	(75,057		)
Preferred stock dividend and amortization of
preferred stock discount	1,877			3,911			2,987			3,181			2,435
Net income (loss) to common shareholders	$	16,949		$	(12,585	)	$	(17,382	)	$	(3,193	)	$	(77,492	)
Per Share Data(1):
Earnings (loss) per share - basic	$	1.19		$	(1.91	)	$	(2.86	)	$	(0.60	)	$	(15.69	)
Earnings (loss) per share - diluted	1.19			(1.91		)	(2.86		)	(0.60		)	(15.69		)
Cash dividends per share	—			—			—			—			0.36
Weighted average shares outstanding (2)
Basic	14,203,099			6,589,971			6,079,668			5,376,547			4,936,108
Diluted	14,224,720			6,589,971			6,079,668			5,376,547			4,936,108
Selected Year-End Balance Sheet Data:
Loans, net, and loans held for sale	$	1,359,596		$	1,312,034		$	1,437,610		$	1,613,206		$	1,677,538
Total assets	1,806,027			1,923,438			1,993,188			2,300,594			2,113,612
Deposits	1,518,423			1,631,662			1,731,341			2,020,406			1,821,752
Shareholders' equity	184,470			170,794			140,586			147,457			152,266
Selected Ratios:
Return (loss) on average assets	0.93%			(0.64)%			(0.82)%			(0.14)%			(3.96)%
Return (loss) on average equity	9.65%			(7.99)%			(12.14)%			(2.08)%			(40.50)%
Dividend payout to common shareholders	—%			—%			—%			—%			(2.29)%
Equity to assets ratio	10.22%			8.88%			7.05%			6.41%			7.20%
(1) Per share data has been updated to reflect a 1-for-3 stock split in 2013.
(2) Weighted average shares outstanding excludes shares of nonvested, restricted stock.

The American Community acquisition's results of operations are included from the date of acquisition, April 16, 2009, forward.

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Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations

The following presents management’s discussion and analysis of our financial condition and results of operations and should be read in conjunction with the financial statements and related notes combined in Item 8 of this report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ significantly from those anticipated in these forward-looking statements as a result of various factors. The following discussion is intended to assist in understanding the financial condition and results of operations of the Company. Because Financial Corporation has no material operations and conducts no business on its own other than owning its subsidiary, Yadkin Bank (“the Bank”), the discussion contained in this Management's Discussion and Analysis concerns primarily the business of the Bank. However, for ease of reading and because the financial statements are presented on a consolidated basis, Yadkin Financial Corporation and Yadkin Bank are collectively referred to herein as the Company unless otherwise noted.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations describes our results of operations for the year ended December 31, 2013 as compared to the year ended December 31, 2012 and the year ended December 31, 2011, and also analyzes our financial condition as of December 31, 2013 as compared to December 31, 2012. Like most financial institutions, we derive most of our income from interest we receive on our loans and investments. Our primary source of funds for making these loans and investments is our deposits, on most of which we pay interest. Consequently, one of the key measures of our success is the amount of net interest income, or the difference between the income on our interest-earning assets, such as loans and investments, and the expense on our interest-bearing liabilities, such as deposits. Another key measure is the spread between the yield we earn on these interest-earning assets and the rate we pay on our interest-bearing liabilities.

There are risks inherent in all loans, so we maintain an allowance for loan losses to absorb our estimate of probable losses on existing loans that may become uncollectible. We establish and maintain this allowance by charging a provision for loan losses against our operating earnings. In the following section, we have included a detailed discussion of this process.

In addition to earning interest on our loans and investments, we earn income through fees and other expenses we charge to our customers. We describe the various components of this noninterest income, as well as our noninterest expense, in the following discussion.

Markets in the United States and elsewhere experienced extreme volatility and disruption since the latter half of 2007. These circumstances have exerted downward pressure on prices of equity securities and virtually all other asset classes, and have resulted in increased market volatility, constrained credit and capital markets, particularly for financial institutions, and has caused an overall loss of investor confidence. Loan portfolio performances deteriorated at many institutions resulting from, among other factors, a weak economy and a decline in the value of the collateral supporting their loans. Slowdowns in the housing industry, due in part to falling home prices and increasing foreclosures and unemployment, have created strains on financial institutions. Many borrowers are now unable to repay their loans, and the value of the collateral securing these loans has, in some cases, declined below the loan balance. The following discussion and analysis describes our performance in this challenging economic environment.

The following discussion and analysis also identifies significant factors that have affected our financial position and operating results during the periods included in the accompanying financial statements. We encourage you to read this discussion and analysis in conjunction with our financial statements and the other statistical information included in this report. Throughout Management Discussion and Analysis we make reference to tangible equity which is a non-GAAP measure. See page 59 for a reconciliation from the GAAP measure to non-GAAP measure.

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Critical Accounting Policies

The accounting and reporting policies of the Company and its subsidiaries are in accordance with accounting principles generally accepted in the United States and conform to general practices within the banking industry. The more critical accounting and reporting policies include the Bank’s accounting for loans, the provision and allowance for loan losses, other real estate owned, goodwill and deferred tax assets. In particular, the Bank’s accounting policies relating to the provision and allowance for loan losses and possible impairment of goodwill involve the use of estimates and require significant judgments to be made by management. Different assumptions in the application of these policies could result in material differences in the consolidated financial position or consolidated results of operations. Please see the discussion below under “Loans,” “Provision for Allowance for Loan Losses,” and “Deferred Tax Assets.” Also, please refer to Note 1 in the “Notes to Consolidated Financial Statements” for additional information regarding all of the Bank’s critical and significant accounting policies.

LOANS – Loans that management has the intent and ability to hold for the foreseeable future are stated at their outstanding principal balances adjusted for any deferred fees and costs. Interest on loans is calculated by using the simple interest method on daily balances of the principal amount outstanding. Loan origination and other fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.

PROVISIONS AND ALLOWANCE FOR LOAN LOSSES – We have established an allowance for loan losses through a provision for loan losses charged to expense on our statements of income. The allowance for loan losses represents an amount which we believe will be adequate to absorb probable losses on existing loans that may become uncollectible. Our judgment as to the adequacy of the allowance for loan losses is based on a number of assumptions about future events, which we believe to be reasonable, but may differ from actual results. Our determination of the allowance for loan losses is based on evaluations of the collectability of loans, including consideration of factors such as the balance of impaired loans, the quality, mix, and size of our overall loan portfolio, economic conditions that may affect the borrower’s ability to repay, the amount and quality of collateral securing the loans, our historical loan loss experience and a review of specific problem loans. We also consider subjective issues such as changes in the lending policies and procedures, changes in the local/national economy, changes in volume or type of credits, changes in volume/severity of problem loans, quality of loan review and board of director oversight, concentrations of credit, and peer group comparisons. Periodically, we adjust the amount of the allowance based on changing circumstances. We charge recognized losses to the allowance for loan losses and add subsequent recoveries back to the allowance for loan losses. There can be no assurance that charge-offs of loans in future periods will not exceed the allowance for loan losses as estimated at any point in time or that provisions for loan losses will not be significant to a particular accounting period, especially considering the overall weakness in the commercial real estate market in our market areas.

OTHER REAL ESTATE OWNED “OREO” - OREO property obtained in satisfaction of a loan is recorded at its estimated fair value less anticipated selling costs based upon the property’s appraised value at the date of transfer, with any difference between the fair value of the property and the carrying value of the loan charged to the allowance for loan losses. Subsequent declines in value are reported as adjustments to the carrying amount and are charged to noninterest expense. Gains or losses resulting from the sale of OREO are recognized in noninterest expense on the date of sale.

DEFERRED TAX ASSETS - At December 31, 2013, we had $23.4 million in net deferred tax assets. A valuation allowance is provided when it is more-likely-than-not that some portion of the deferred tax asset will not be realized. All available evidence, both positive and negative, was considered to determine whether, based on the weight of that evidence, impairment should be recognized. Our forecast process includes judgmental and quantitative elements that may be subject to significant change. If our forecast of taxable income within the carryforward periods available under applicable law is not sufficient to cover the amount of net deferred tax assets, such assets may be impaired. Based on our analysis of both positive and negative evidence we concluded that no valuation allowance should be recorded against deferred tax assets at December 31, 2013.

Financial Condition

The Bank’s total assets decreased 6.10% from $1,923.4 million at December 31, 2012 to $1,806.0 million at December 31, 2013, primarily due to a $97.4 million decrease in cash as excess liquidity from the prior year loan sale was utilized. Total gross loans and loans-held-for sale increased 3.03% from $1,337.2 million at December 31, 2012 to $1,377.7 million at December 31, 2013. Deposits decreased 6.94% from $1,631.7 million at December 31, 2012 to $1,518.4 million at December 31, 2013.

Loans held-for-investment increased by $49.2 million, or 3.76% for the year ended December 31, 2013 as economic conditions improved and the Company saw increased loan demand.

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The table below presents the increases (decreases) in loans by category year over year.

Loan Category		Balance 12/31/13		Balance 12/31/12		Increase (Decrease)			% Increase (Decrease)
	(dollar amounts in millions)
Construction		$	131.0	$	132.0	$	(1	)	(0.8	)%
Commercial real estate		579.7		554.5		25.2			4.5	%
1-4 family mortgage loans		174.1		168.6		5.5			3.3	%
Home equity lines of credit		194.1		191.9		2.2			1.1	%
Multifamily		41.7		35.3		6.4			18.1	%
Commercial (includes deferred costs)		186.4		175.5		10.9			6.2	%
Consumer and other		51.7		51.7		—			—	%
Total loans		$	1,358.7	$	1,309.5	$	49.2		3.8	%

Loan composition includes commercial real estate loans which account for 43% of total loans, followed by commercial and industrial loans at 14%, home equity lines at 14%, residential 1-4 family first mortgage liens at 13%, construction and land development loans at 9%, multifamily loans at 3% and consumer loans at 4%.

The weighted average rate for loans held-for-investment at December 31, 2013 was 5.00% as compared to 5.30% at December 31, 2012. Fixed rate loans comprised 59% and 56% of total loans held-for-investment at December 31, 2013 and 2012, respectively. Fixed rate loans held at the end of the current and prior year yielded 5.32% and 5.81%, respectively, a decrease of 49 basis points. This decrease is primarily due to the repricing of loans at lower rates. At December 31, 2013, and 2012, the aggregate yields of variable rate loans were 4.55% and 4.64%, respectively, a decrease of 9 basis points. The decrease in variable rate loan yields is also attributable to repricing at lower rates as interest rates remain at historical lows.

Mortgage loans held-for-sale decreased by $8.8 million, or 31.7%, as mortgage activity has decreased as rates rise from historically low levels in 2012. These loans are closed, managed, and sold by the mortgage banking segment of the Bank. The Bank continued its strategy of selling mortgage loans mostly to various investors with servicing released and to a lesser extent to the Federal National Mortgage Association and Federal Home Loan Mortgage Corporation with servicing rights retained. Loans held-for-sale are normally sold to investors within two to three weeks after closing. Loans closed by the mortgage banking segment during 2013 totaled $266.0 million, compared to $328.8 million in 2012, with monthly volumes in 2013 ranging from $13.7 million in October to $30.9 million in May.

The securities portfolio decreased by $54.2 million, or 15.80%, due to principal reductions and maturities in the amount of $84.1 million and $80.1 million in sales during 2013 as the Company looked to improve returns. These decreases were partially offset by $123.8 million in purchases during 2013. All securities were held in the available-for-sale category and included U.S. Government agency securities of $16.4 million, or 5.7%, state and municipal securities of $98.7 million, or 34.2%, mortgage-backed securities of $103.4 million, or 35.8%, collateralized mortgage obligations of $67.2 million, or 23.2%, and $3.2 million, or 1.1%, in other common and preferred stocks. The unrealized gains decreased to a net unrealized gain of $8,000 from a net unrealized gain of $6.8 million in 2012. The tax equivalent yield on securities held at December 31, 2013 was 2.96%, an increase from 2.28% a year earlier.

Premises and equipment, net of accumulated depreciation, decreased by $1.2 million from December 31, 2012 to December 31, 2013. Additions were $2.9 million in premises and equipment while depreciation and disposals accounted for a $4.1 million decrease.

Foreclosed real estate, also referred to as OREO, decreased by $5.5 million from December 31, 2012 to December 31, 2013, primarily due to the sale and writedown of $9.7 million in properties in 2013 as part of the previously announced auction of foreclosed properties in the first quarter of 2013.

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The following table presents the foreclosed real estate:

	2013			2012
	(Amounts in thousands)
Beginning balance	$	8,738		$	24,966
Loans transferred to OREO	4,233			13,896
Proceeds of sales, net of selling expenses	(10,579		)	(17,741		)
Net writedowns, gains and losses	875			(12,383		)
Ending balance of OREO	$	3,267		$	8,738

Fair value of OREO is based on recent appraisals or discounted collateral values for properties in which recent appraisals were not available.

Other assets (including FHLB stock, investment in bank owned life insurance, core deposit intangibles, and deferred tax assets) decreased by $6.6 million from December 31, 2012 to December 31, 2013. The decrease was primarily related to deferred tax assets that decreased from $31.4 million to $23.4 million as taxable income was recorded for the year ended December 31, 2013. Other decreases include a $682,000 decrease in FHLB stock and a $680,000 decrease in core deposit intangibles due to amortization. Offsetting the decreases, was a $599,000 increase in investment in bank owned life insurance and a $2.0 million increase in mortgage servicing rights.

Deposits decreased by $113.2 million, or 6.9%, for the year ended December 31, 2013 primarily as a result of a decrease in certificates of deposit of $176.0 million, or 24.0% as management focused on shifting deposit mix from higher cost time deposits to lower cost core deposits. The table below presents increases and decreases in deposits year over year.

Deposit Category	Balance 12/31/13		Balance 12/31/12		Increase (Decrease)			% Increase (Decrease)
	(dollar amounts in millions)
Certificates of Deposit	$	557.3	$	733.3	$	(176.0	)	(24.0	)%
Money market	390.8		363.0		27.8			7.7	%
NOW	224.3		193.1		31.2			16.2	%
Savings	78.4		68.4		10.0			14.6	%
Demand deposits	267.6		273.9		(6.3		)	(2.3	)%
Total deposits	$	1,518.4	$	1,631.7	$	(113.3	)	(6.9	)%

Notwithstanding the decrease in total deposits, interest bearing NOW accounts increased $31.2 million; savings accounts increased $10.0 million and money market accounts increased $27.8 million. Although there is no concentration of deposits from one individual or entity, the Bank does have $227.9 million or 15.0% of its total deposits in the over $100,000 (“jumbo CDs”) category. Jumbo CDs decreased by $88.2 million, or 27.9%, over the balance at December 31, 2012. The Bank’s brokered CD’s are 2.3% of the Bank’s total deposits at December 31, 2013 and are discussed in further detail under “Liquidity Management”.

The weighted-average rate for CDs outstanding on December 31, 2013 was 1.05% down from 1.59% at the end of the prior year. During 2013 the aggregate CD rate decreased as CDs repriced throughout the year. The weighted-average rate paid on outstanding jumbo CDs at December 31, 2013 was 22 basis points higher than on other CDs, an increase from the prior year-end spread of 17 basis points. The weighted-average remaining term on jumbo CDs at December 31, 2013 was 16.6 months, up from 13.5 months, at the end of 2012.

In addition to deposits, funding for the Bank’s assets was obtained from overnight repurchase agreements with businesses in the local market area. Funds borrowed under repurchase agreements decreased from $44.2 million at December 31, 2012 to $28.3 million at December 31, 2013. Advances from the FHLB at December 31, 2013 totaled $25.9 million compared to $25.9 million at December 31, 2012. On November 1, 2007, the Company issued $25.0 million in trust preferred securities at the floating interest rate of three month LIBOR plus 132 basis points. The interest rate at December 31, 2013 was 1.56% and will be effective until March 14, 2014. These securities are classified as long-term debt and mature in the year 2032. The Company now has the option to call for redemption of the securities, although the Company has no plans to redeem at this time. The proceeds provided funding for the acquisition of Cardinal at the end of the first quarter of 2008. In addition to the $25.0 million in trust preferred

40

securities issued in 2007, the Company acquired $10.0 million in trust preferred securities in the American Community acquisition. These trust preferred securities pay cumulative cash distributions quarterly at a rate priced off 90-day LIBOR plus 280 basis points. Their interest rate at December 31, 2013 was 3.05% and they are redeemable on December 15, 2033.

The Company also acquired capital lease obligations in the amount of $2.3 million from American Community. See Note 13 in the Consolidated Financial Statements for further details.

Accrued interest payable decreased $777,000 as total deposits decreased at December 31, 2013. Other liabilities decreased by $1.1 million, or 9.3%, from December 31, 2012 to December 31, 2013. The decrease was due primarily to a liability recorded in the sale of the reinsurance subsidiary in the amount of $1.7 million, as the Bank had entered into an agreement to sale its reinsurance subsidiary for a loss, and a $873,000 payable set up for potential property taxes owed as part of the accelerated asset disposition plan at December 31, 2012. In addition, commercial remittances which represent loan payments due to third parties also decreased $1.4 million from December 31, 2012. These decreases were offset by a $3.0 million increase in accrued incentive compensation at December 31, 2013.

Effect of Economic Trends

The downturn in the real estate market over the past few years has resulted in increased loan delinquencies, defaults and foreclosures. In some cases, this downturn has resulted in a significant impairment to the value of our collateral and our ability to sell the collateral upon foreclosure. Management continues to monitor real estate trends and its effect on our portfolio, and is continuing to monitor credits with weaknesses.

Beginning in September 2007, the Federal Reserve began aggressively lowering the short-term rates which has caused the rates on our short-term or variable rate assets and liabilities to decline. These rates have stayed at historically low levels since 2007 and are projected to remain at these levels over the next 12 months. The following discussion includes our analysis of the effect that we anticipate changes in interest rates will have on our financial condition. However, we can give no assurances as to the future actions of the Federal Reserve or to the anticipated results that will actually occur.

Results of Operations

Net income to common shareholders for 2013 was $16.9 million compared to a net loss of $12.6 million in 2012 and a net loss of $17.4 million in 2011. Basic and diluted net income per common share available to common shareholders was $1.19 in 2013 compared to basic net loss per common share of $(1.91) in 2012 and $(2.86) in 2011. The Company’s net income before preferred dividends for 2013 was $18.8 million, an increase in income of $27.5 million from 2012 net loss before preferred dividends of $8.7 million. Return (loss) on average assets was 0.93% in 2013, (0.64)% in 2012, and (0.82)% in 2011. Return (loss) on average equity was 9.65% in 2013, (7.99)% in 2012, and (12.14)% in 2011. The return on assets and equity increased in 2013 primarily due to increased credit losses in 2012 as the Company executed an asset disposition plan to sell over $50 million in problem loans and foreclosed real estate.

Net Interest Income

Net interest income is the primary source of operating income for the Company. Net interest income is the difference between interest and fee income generated from earning assets and the interest paid on deposits and borrowed funds. The factors that influence net interest income include both changes in interest rates and changes in volume and mix of loans and deposits.

For analytical purposes, net interest income may be reported on a tax-equivalent basis, which illustrates the tax savings on loans and investments exempt from state and/or federal income taxes. The tables that follow, Interest Rates Earned and Paid, and Interest Rate/Volume Analysis, represent components of net interest income for the years 2013, 2012, and 2011. These tables present changes in interest income and expense and net interest income changes caused by rate and/or volume.

Net interest income increased $3.1 million, or 5.0%, in 2013 from 2012 compared to a decrease of $1.5 million, or 2.4%, in 2012 over 2011. As the Rate/Volume Variance Analysis table of earning assets and interest-bearing liabilities shows, the increase in net interest income was attributable to a decreased cost of deposits as the deposit mix shifted from higher cost time deposits to lower cost core deposits and a decrease in volume of deposits. The decrease in rates on deposits led to increased net interest income of $4.1 million on a tax equivalent basis, and the decrease in volume increased net income $3.1 million. Offsetting this increase was a decrease in interest income of $4.7 million due primarily to a decrease in volume of loans. Average earning assets decreased $125.4 million, or 6.9%, in 2013 as compared to 2012 after decreasing $160.9 million, or 8.1%, in 2012. Average loans decreased $65.9 million, or 4.7%, in 2013 compared with a decrease of $135.3 million, or 8.8%, in 2012. Average interest bearing deposits decreased $161.7 million, or 11.3%, in 2013 compared to 2012 after decreasing $205.0 million, or 12.5% from 2011 to

41

2012. Acquisition accounting adjustments increased net interest income by $275,000 in the current year and $307,000 in the prior year.

The net interest margin (tax-equivalent net interest income as a percentage of average interest-earning assets) increased to 3.86% in 2013 from 3.40% in 2012 after increasing to 3.40% in 2012 from 3.21% in 2011. This increase in 2013 is due primarily to a decrease in cost of funds as the deposit mix has shifted from higher cost time deposits to lower cost core deposits, as well as an increase in yields on securities. Excluding the accretion of fair value adjustments recorded in the American Community merger in 2009, net interest margin was 3.84% in 2013, 3.39% in 2012 and 3.19% in 2011, respectively.

Interest spread was 3.71% in 2013 compared to 3.21% in 2012 and 3.03% in 2011. Interest spread measures the difference between the average yield on interest-earning assets (tax-equivalent interest income as a percentage of average interest- earning assets) and the interest paid on interest-bearing liabilities. The rate increase in 2013 was due to an earning asset rate increase from 4.39% in 2012 to 4.46% in 2013 which resulted from an increase in yields on securities as the Company repositioned its portfolio to higher return securities, as well as the impact of decreased nonaccrual loans following the accelerated asset disposition plan. The interest-bearing liability rate declined 42 basis points from 2012 to 2013, due to a shift from higher cost time deposits to lower cost demand deposits. The following table presents the daily average balances, interest income and expense, and average rates earned and paid on interest-earning assets and interest-bearing liabilities of the Company for 2013, 2012, and 2011.

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Interest Rates Earned and Paid

	Year Ended December 31, 2013						Year Ended December 31, 2012						Year Ended December 31, 2011
	Average Balance		Interest		Yield/Rate		Average Balance		Interest		Yield/Rate		Average Balance		Interest		Yield/Rate
	(Dollars in thousands)
Interest-earning assets:
Interest-bearing deposits and
federal funds sold	$	23,280	$	72	0.31	%	$	81,748	$	201	0.25	%	$	141,249	$	376	0.27	%
Investment securities (1)	342,156		7,970		2.33	%	343,137		7,761		2.26	%	309,199		9,226		2.98	%
Total loans (1)(2)(6)	1,333,647		67,719		5.08	%	1,399,590		72,093		5.15	%	1,534,929		80,111		5.22	%
Total interest -earning assets	1,699,083		75,761		4.46	%	1,824,475		80,055		4.39	%	1,985,377		89,713		4.52	%
Non-earning assets	124,481						125,114						142,193
Total assets	$	1,823,564					$	1,949,589					$	2,127,570
Interest-bearing liabilities:
Deposits (7):
NOW and money market	$	595,392	$	1,065	0.18%		$	553,339	$	1,465	0.26%		$	553,656	$	3,299	0.60	%
Savings	74,060		74		0.10%		64,385		85		0.13%		56,964		101		0.18	%
Time certificates	599,629		7,409		1.24%		813,035		14,176		1.74%		1,025,165		20,475		2.00	%
Total interest bearing deposits	1,269,081		8,548				1,430,759		15,726				1,635,785		23,875
Repurchase agreements sold	36,303		117		0.32%		41,463		275		0.66%		43,177		420		0.97	%
Borrowed funds (8)	68,983		1,576		2.28%		61,432		1,987		3.23%		64,548		1,746		2.70	%
Total interest-bearing
liabilities	1,374,367		10,241		0.75%		1,533,654		17,988		1.17%		1,743,510		26,041		1.49	%
Non-interest bearing deposits	261,510						244,136						224,280
Stockholders' equity	175,633						157,133						143,163
Other liabilities	12,054						14,666						16,617
Total average liabilities stockholders' equity	$	1,823,564					$	1,949,589					$	2,127,570
Net interest income (3) and interest rate spread (5)			$	65,520	3.71	%			$	62,067	3.21	%			$	63,672	3.03	%
Net interest margin (4)					3.86	%					3.40	%					3.21	%
(1) Yields relate to investment securities and loans exempt from Federal income taxes are stated on a fully tax-equivalent basis, assuming a Federal income tax rate of 35%. The calculation includes an adjustment for the nondeductible portion of interest expense used to fund tax-exempt assets.
(2) The loan average includes loans on which accrual of interest has been discontinued.
(3) The net interest income is the difference between income from earning assets and interest expense.
(4) Net interest margin is net interest income divided by total average earning assets.
(5) Interest spread is the difference between the average interest rate received on earning assets and the average interest paid on interest-bearing liabilities.
(6) Interest income on loans includes $238,000, $252,000 and $577,000 in accretion of fair market value adjustments related to recent mergers in the years 2013, 2012 and 2011, respectively. Estimated accretion for 2014 is $193,000.
(7) Interest expense on deposits includes $9,000, $235,000 and $302,000 in accretion of fair market value adjustments related to recent mergers for 2013, 2012, and 2011, respectively. Estimated accretion for 2014 is $2,000.
(8) Interest expense on borrowings includes $28,000, $(180,000) and $122,000 in accretion of fair market value adjustments related to recent mergers for 2013, 2012, and 2011, respectively. An adjustment was made in 2012 to adjust the remaining fair market value for early payoff of merger related borrowings. Estimated accretion for 2014 is $31,000.

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The following table analyzes the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. The table distinguishes between (i) changes attributable to volume (changes in volume multiplied by the current period’s rate), and (ii) changes attributable to rate (changes in rate multiplied by the prior period’s volume).

Interest Rate/Volume Analysis

	2013-2012 Net Increase (Decrease) due to change in:									2012-2011 Net Increase (Decrease) due to change in:
	Average Balance			Average Rate			Increase (Decrease)			Average Balance			Average Rate			Increase (Decrease)
	(Amounts in thousands)
Interest-Earning Assets
Federal funds sold & interest bearing deposits	$	(162	)	$	33		$	(129	)	$	(152	)	$	(23	)	$	(175	)
Investment securities	(23		)	232			209			890			(2,356		)	(1,466		)
Total loans	(3,373		)	(1,001		)	(4,374		)	(7,017		)	(1,001		)	(8,018		)
Total earning assets	(3,558		)	(736		)	(4,294		)	(6,279		)	(3,380		)	(9,659		)
Interest-Bearing Liabilities
NOW and money market	93			(493		)	(400		)	(1		)	(1,833		)	(1,834		)
Savings	11			(22		)	(11		)	11			(27		)	(16		)
Time certificates	(3,179		)	(3,588		)	(6,767		)	(3,968		)	(2,331		)	(6,299		)
Total interest-bearing deposits	(3,075		)	(4,103		)	(7,178		)	(3,958		)	(4,191		)	(8,149		)
Borrowed funds	64			(633		)	(569		)	(102		)	198			96
Total interest-bearing liabilities	(3,011		)	(4,736		)	(7,747		)	(4,060		)	(3,993		)	(8,053		)
Net interest income	$	(547	)	$	4,000		$	3,453		$	(2,219	)	$	613		$	(1,606	)
Notes:
–Variances caused by the changes in rate times the changes in volume are allocated equally.
–Income on non-accrual loans is included in the volume and rate variance analysis table only to the extent that it represents interest payments received.

Market Risk, Asset/Liability Management and Interest Rate Sensitivity

The Bank's principal business is the origination or purchase of loans, funded by customer deposits, loan sales, and, to the extent necessary, other borrowed funds. Consequently, a significant portion of the Bank’s assets and liabilities are monetary in nature and fluctuations in interest rates will affect the Bank’s future net interest income and cash flows. Interest rate risk is the Bank’s primary market risk exposure. As part of interest rate risk management, the Company has entered into two interest rate swap agreements to convert certain fixed-rate receivables to floating rates and certain fixed-rate obligations to floating rates.  The interest rate swaps are used to provide fixed rate financing while managing interest rate risk and were not designated as hedges. The Bank has no market risk-sensitive instruments held for trading purposes. The Bank’s exposure to market risk is reviewed on a regular basis by management.

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The Bank measures interest rate sensitivity as the difference between amounts of interest-earning assets and interest- bearing liabilities that either reprice or mature within a given period of time. The difference or the interest rate repricing “gap” provides an indication of the extent to which an institution’s interest rate spread will be affected by changes in interest rates. Generally, during a period of rising interest rates, a negative gap within shorter maturities would adversely affect net interest income, while a positive gap within shorter maturities would result in an increase in net interest income. During a period of falling interest rates, a negative gap within shorter maturities would result in an increase in net interest income while a positive gap within shorter maturities would have the opposite effect. The interest rate sensitivity management function is designed to maintain consistent growth of net interest income with acceptable levels of risk to interest rate changes generally on a one year horizon.

Management uses various resources to measure interest rate risk, including simulating net interest income under different rate scenarios, monitoring changes in asset and liability values under similar rate scenarios and monitoring the gap between rate sensitive assets and liabilities over different time periods.

The rate sensitivity table that follows indicates the volume of interest-earning assets and interest-bearing liabilities as of December 31, 2013 that mature or are expected to reprice within the stated time periods. The asset sensitivity of the Company’s net interest income is reflected in the “Income Shock Summary” table following the “Gap Analysis” table.

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GAP Analysis

	Terms to Repricing at December 31, 2013
	3 months or Less			More than 3 to 12 Months			Over 1 Year Thru 3 Years			Over 3 Years Thru 5 Years			Over 5 Years			Total
INTEREST EARNING-ASSETS	(Dollars in thousands)
Loans:
Real estate- construction	$	21,611		$	31,193		$	38,517		$	31,839		$	7,875		$	131,035
Commercial real estate	71,010			78,445			118,511			223,864			87,862			579,692
Real estate- 1-4 family	13,697			26,108			37,737			54,884			41,646			174,072
Real estate- multifamily	5,047			5,485			4,109			19,121			7,951			41,713
Home equity lines of credit	113,820			522			10,713			185			68,905			194,145
Commercial (net deferred costs)	50,850			54,281			29,595			44,399			7,297			186,422
Consumer and other	6,533			15,850			14,185			12,423			2,676			51,667
Total Loans	282,568			211,884			253,367			386,715			224,212			1,358,746
Securities:
U.S. Treasuries and other agencies	440			878			—			15,000			74			16,392
State and municipal securities	963			2,850			9,180			13,085			72,626			98,704
Mortgage backed debt securities	71,361			15,166			29,095			17,635			37,418			170,675
Common and preferred stocks	—			—			—			—			3,151			3,151
Total Securities	72,764			18,894			38,275			45,720			113,269			288,922
Interest bearing due from banks and federal funds sold	8,769			—			—			—			—			8,769
TOTAL EARNING ASSETS	$	364,101		$	230,778		$	291,642		$	432,435		$	337,481		$	1,656,437
INTEREST-BEARING LIABILITIES
Deposits:
NOW accounts	$	224,195		$	—		$	—		$	—		$	—		$	224,195
Money market accounts	390,931			—			—			—			—			390,931
Savings	78,421			—			—			—			11			78,432
Certificates: (1)
Over $100,000	43,374			105,533			69,807			16,082			—			234,796
Other certificates	54,933			153,751			82,211			26,538			5,040			322,473
Total deposits	791,854			259,284			152,018			42,620			5,051			1,250,827
Repurchase Agreements/Fed Funds Purchased	28,260			—			—			—			—			28,260
FHLB borrowings	5,040			15,119			5,321			312			95			25,887
Junior Subordinated Debentures	35,067			—			—			—			—			35,067
TOTAL INTEREST BEARING LIABILITIES	$	860,221		$	274,403		$	157,339		$	42,932		$	5,146		$	1,340,041
GAP	(496,120		)	(43,625		)	134,303			389,503			332,335			316,396
CUMULATIVE GAP	(496,120		)	(539,745		)	(405,442		)	(15,939		)	316,396			316,396
GAP %	(29.95		)%	(2.63		)%	8.11		%	23.51		%	20.06		%	19.10		%
Additional information regarding loans with maturity dates that exceed one year (in millions)
Fixed rate loans with maturities that exceed one year													$	850.8
Variable rate loans with maturities that exceed one year													157.5
(1) For GAP analysis purposes, certificates of deposits related to public funds and brokered deposits are not broken down between certificates greater than $100,000 and other. As a result, classifications may vary from disclosures and presentations throughout the financial statements.

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Income Shock Summary

	January 1, 2014
			Rates UP (+200 bp)				Rates DN (-200 bp)
	Base Amount		Amount		% Change		Amount		% Change
	(dollars in thousands)
Short-term investments	$	48	$	462	857.58	%	$	—	—	%
Securities	6,637		8,640		30.17	%	4,818		(27.41	)%
Loans	65,185		76,394		17.20	%	57,441		(11.88	)%
Interest income	71,870		85,496		18.96	%	62,259		(13.37	)%
Non-maturing deposits	576		5,379		833.61	%	360		(37.57	)%
Certificates of deposits	4,864		8,789		80.69	%	4,314		(11.31	)%
Borrowed money	1,168		2,208		89.15	%	1,037		(11.15	)%
Interest expense	6,608		16,376		147.84	%	5,711		(13.57	)%
Net interest income	$	65,262	$	69,120	5.91	%	$	56,548	(13.35	)%

Liquidity Management

The primary goal of liquidity management is to provide for the availability of adequate funds to meet the needs of loan demand, deposit withdrawals, maturing liabilities, and to satisfy reserve requirements. This goal is achieved through a combination of deposits, borrowing through unpledged securities, federal funds purchased lines, FHLB line of credit, and availability at the Federal Reserve discount window. Liquidity needs have been met through federal funds purchased and the use of a line of credit at the FHLB. Deposits from consumer and business customers, both time and demand, are the primary source of funds for the Bank. The Bank has adopted a Brokered Funds Policy that allows the Bank to obtain brokered funds up to 20% of total deposits, and deposits obtained through a single broker are limited to 5% of total deposits. At December 31, 2013, brokered deposits totaled $35.1 million and accounted for approximately 2.3% of total deposits. The Bank maintains a brokered deposit NOW account to add municipal deposits which averaged $1.1 million during 2013 and totaled $1,300 at December 31, 2013. The custodian pools the funds from each public depositor and distributes a portion of those funds to the Bank up to $100,000 on behalf of each depositor. Since security pledges are not required and the accounts are non-maturing, these municipal deposits have enhanced the Bank’s liquidity.

The Bank contracted with Promontory Interfinancial Network ("Promontory")in 2008 for various services including wholesale CD funding. Promontory’s CDARS^® and One-Way Buy^SM products enable the Bank to bid on a weekly basis through a private auction for CD terms ranging from four weeks to 260 weeks (approximately five years) with settlement available each Thursday. At December 31, 2013, there were no outstanding funds acquired through the One-Way Buy product. Promontory also provides a product, CDARS^® Reciprocal, that allows the Bank’s customers to place funds in excess of the FDIC insurance limit with Promontory’s network of participating Banks so that the customer is fully insured for the amount deposited. Promontory provides reciprocating funds to the Bank from funds placed at other banks by their customers. The Bank sets its customers interest rates when they place deposits through the network and pays/receives the rate difference to/from the other banks whose reciprocal funds are held by the Bank. The overall impact of this process is that the Bank effectively pays the rate offered to its relationship customer. Therefore, the Bank does not consider these funds to be wholesale or brokered funds. In compliance with FDIC reporting requirements, the Bank reports these reciprocal deposits as brokered deposits in its quarterly Federal Financial Institutions Examination Council Call Report. CDARS^® reciprocal certificates of deposit totaled $167,000 at December 31, 2013 and $165,000 at December 31, 2012.

At December 31, 2013, total deposits reflected a 6.9% decrease of $113.2 million compared to December 31, 2012. Comparing 2013 to 2012, average total deposits decreased 9%, or $144.3 million. Commercial sweep accounts, a noninsured product invested in repurchase agreements were $28.3 million at year-end 2013 compared to $44.2 million at year-end 2012. Deposit sources are available to the Bank both within and outside its primary market area based on a function of price. Deposit competition comes from other banks, both regional and community institutions, as well as nonbank competition, including mutual funds, annuities, and other nondeposit investments. Subject to certain conditions, unused availability from the FHLB at December 31, 2013 was $117.5 million. Federal funds available for additional borrowings at year-end were $30.0 million.

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Loans

Net loans held for investment (total loans held-for-investment less allowance for loan losses) as of December 31, 2013 were $1,340.7 million as compared with $1,284.4 million as of December 31, 2012, an increase of $56.3 million, or 4.4%. In addition, the Bank’s residential mortgage loans classified as held-for-sale totaled $18.9 million and $27.7 million at December 31, 2013 and 2012, respectively, representing a decrease of $8.8 million, or 31.7%. The Bank focuses on commercial lending to small and medium-sized businesses within its market area, consumer based installment loans, and residential mortgage lending including equity lines of credit. The Bank adheres to regulatory guidelines that limit exposure to any one borrower. The commercial portfolio has concentrations in business loans secured by real estate and real estate development loans. Primary concentrations in the consumer portfolio include home equity lines and other types of residential real estate loans.

The following table presents amounts and types of loans outstanding for the past five years ended December 31.

	2013					2012					2011					2010					2009
	Amount			%		Amount			%		Amount			Percent		Amount			Percent		Amount			Percent
	(Dollars in Thousands)
Construction real estate	$	131,035		9.6	%	$	131,981		10.1	%	$	202,803		14.0	%	$	300,877		18.8	%	$	364,853		21.8	%
Commercial real estate	579,692			42.7	%	554,451			42.3	%	591,758			40.8	%	621,429			38.8	%	583,120			34.8	%
1-4 family 1st liens	174,072			12.8	%	168,611			12.9	%	179,047			12.3	%	174,536			10.9	%	169,790			10.1	%
Multifamily	41,713			3.1	%	35,337			2.7	%	39,881			2.8	%	29,268			1.8	%	36,031			2.2	%
Home equity lines	194,145			14.3	%	191,888			14.7	%	201,220			13.9	%	209,319			13.1	%	202,676			12.1	%
Total mortgage loans	409,930			30.2	%	395,836			30.3	%	420,148			29.0	%	413,123			25.8	%	408,497			24.4	%
Commercial (1)	186,422			13.7	%	175,572			13.4	%	177,932			13.8	%	200,107			13.9	%	223,132			16.2	%
Consumer, other*	51,667			3.8	%	51,664			3.9	%	58,283			2.4	%	65,003			2.7	%	98,847			2.9	%
Gross Loans	1,358,746			100.0	%	1,309,504			100.0	%	1,450,924			100.0	%	1,600,539			100.0	%	1,676,448			100.0	%
Allowance for loan losses	(18,063		)			(25,149		)			(32,848		)			(37,752		)			(48,625		)
Total	$	1,340,683				$	1,284,355				$	1,418,076				$	1,562,787				$	1,627,823
(1) includes deferred costs
*Certain "other" loan types for the years 2012-2009 have been reclassified from commercial to consumer loans to match financial statement disclosures.

The following table sets forth the contractual maturity of loans, including loans held for sale, at December 31, 2013:

	One Year or Less		Greater than One Year Through 5 Years		More Than 5 Years		Total
	(Dollars in Thousands)
Construction	$	47,908	$	75,892	$	7,235	$	131,035
Commercial real estate	125,237		373,865		80,590		579,692
1-4 family 1st liens	29,498		92,227		52,347		174,072
Multifamily	10,293		24,090		7,330		41,713
Home equity lines of credit	4,188		53,136		136,821		194,145
Commercial , other	98,342		84,139		3,941		186,422
Consumer	23,877		25,965		1,825		51,667
Total	$	339,343	$	729,314	$	290,089	1,358,746

The Bank requires documentation on its residential mortgage loans and does not have a program to make loans with minimal documentation requirements such as subprime loans without income verification. The Bank’s residential real estate loans are collateralized predominately by property in North Carolina where real estate values have been decreasing steadily over the past few years. While residential real estate values have declined across the state, the erosion has been more acute in the coastal and mountain regions where large vacation and second home exposures exist. The Bank’s total real estate loan exposure for the mountain region is 10.4% of the Bank’s total real estate loan portfolio and the total real estate loan exposure for the coastal region is 0.28% of the Bank’s total real estate loan portfolio. The mountain region real estate loans were concentrated in commercial real

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estate (28.4%), construction and land development (9.4%), home equity lines of credit (20.5%) and 1-4 family residential (6.4%). The coastal region real estate loans were concentrated in construction and land development (13.8%), 1-4 family residential (72.01%), and commercial real estate (11.5%).

The Bank’s residential mortgage loans do not have features such as teaser rates or negative amortization and are made at loan-to-value (“LTV”) ratios of 80% or lower, with the exception of HELOC’s which can have LTV of 90%. Since these loans do not have features that would create additional risk, net interest income after loan loss provision would not be affected unfavorably by unique loan features. Residential mortgage loans and home equity lines with risk grades that are either substandard or substandard impaired, totaled $8.8 million and $9.4 million on December 31, 2013 and 2012, respectively. Continuing high levels of classified loans is attributable to the weak economic and employment trends throughout the Bank’s market area. Management has determined the appropriate loss estimate for these loans, some of which are impaired, and recorded a provision expense to recognize the probable losses. Further weakness in the performance of these loans and in economic conditions may result in additional provision expense. While economic weakness may result in additional provision, improved performance may result in a credit to provision expense for this loan group.

The Bank’s policy regarding appraisals includes compliance with Financial Institutions Reform Recovery and Enforcement Act of 1989 ("FIRREA") guidelines. For long-term commercial real estate lending, all loans with outstanding balances of $500,000 or more require the account manager to prepare an annual review discussing the performance of the borrower and the property. The annual review is to be supported by an updated review of borrower and guarantor financial statements and operating information on the property. Credit reports are to be updated and reviewed. Account managers are required to perform a site visit as part of the annual review process. A discussion of compliance with loan agreement covenants is to be included in the review. If there has been a material adverse change in the property or market, a new appraisal may be required.

Construction loans extended by the Bank are to be supported by current appraisals in compliance with FIRREA requirements and the Bank’s appraisal policies as described in the loan policy. The borrower must obtain all appropriate building permits, and the project must comply with applicable zoning requirements for the site. Projects are to have controlled disbursements based upon satisfactory inspections indicating the project status merits the draw. Speculative units for home builders are to be limited to a level the home builder can support from sources in addition to the future sale of these units. The Bank requires that there be no secondary financing on projects for which it is providing financing. Exempted from this requirement are construction loans to be taken out by SBA 504 program financing, which by design, contemplates a secondary loan. During the construction phase; however, there is to be no secondary financing. Loans with interest reserves were $7.7 million at December 31, 2013 and $5.5 million at December 31, 2012. The Bank tracks loans with interest reserves and monitors these loans on a regular basis for any impairment and discontinuation of interest accruals.

     For residential construction revolving lines of credit to builders, valuation of collateral is based upon the appraised value of the basic floor plans (drawings of structure to be built) offered in the projects as determined in a master appraisal plus a value of lots based upon location, size, and appeal, as determined in the appraisal. The lender is to monitor sales prices and absorption throughout the loan to ensure the assumptions in the original appraisal remain valid. If there is a material change from original assumptions, a new appraisal is to be completed.  In general, appraisals are required for initial or refinanced real estate loans, especially if there have been changes in the original assumptions regarding value of the property or the market in general.

Over the past few years the Bank has reduced its concentration in construction and land development lending, decreasing balances by $946,000, or 0.7% in 2013 as compared to 2012 and $70.8 million, or 34.9% in 2012 as compared to 2011.  The economic conditions and their impact on the one-to-four family residential market has reduced both demand and increased the credit risk for this type of lending.  While the Bank continues to evaluate credit opportunities presented in this line of business, it is actively trying to diversify the loan portfolio by being selective and trying to create opportunities in other loan types.

The Bank originates and maintains a significant amount of commercial real estate loans.  This lending involves loans secured principally by commercial office buildings, both investment and owner occupied.  The Bank requires the personal guaranty of principals where prudent and a demonstrated cash flow capability sufficient to service the debt.  The real estate collateral is a secondary source of repayment.  Loans secured by commercial real estate may be in greater amount and involve a greater degree of risk than one to four family residential mortgage loans.  Payments on such loans are often dependent on successful operation or management of the properties.  The Bank also makes loans secured by commercial/investment properties provided the subject property is typically either pre-leased or pre-sold before the Bank commits to finance its construction.

Our real estate portfolio has $131.0 million of construction loans, $579.7 million of commercial real estate loans, $174.1 million in 1-4 family mortgage loans, $194.1 million in home equity lines of credit, and $41.7 million in multifamily mortgage loans as of December 31, 2013.  We consider our construction and junior lien mortgage loans our riskiest loans within our real estate portfolio and we are not actively lending option ARM products or subprime loans. Construction loans are typically comprised

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of loans to borrowers for real estate to be developed (into properties such as sub-divisions or spec houses).  Normally, these loans are repaid with the proceeds from the sale of the developed property.  The greater degree of strain on these real estate types of loans and the significance to our overall loan portfolio has caused us to apply a greater degree of scrutiny in analyzing the ultimate collectability of amounts due.  As of December 31, 2013, $7.7 million of our real estate loans had interest reserves including both borrower and bank funded. There is a risk that an interest reserve could mask problems with a borrower’s willingness and ability to repay the debt consistent with the terms and conditions of the loan obligation. Therefore, the Company has implemented review policies to identify and monitor all loans with interest reserves in order to identify potential impairments or discontinuation of interest accruals.

The Bank has an internal credit risk review department that reports to the Chief Credit Officer. The focus is on policy compliance and proper grading of higher credit risk loans as well as new and existing loans on a sample basis. Additional reporting for problem/criticized assets has been developed along with an after-the-fact loan review. Management also utilized a report of past due delinquency and set procedures to ensure delivery to regional executives in order that monitoring and grading can be achieved on a comprehensive basis.

The purpose of the credit risk management team, under the direct supervision of the Chief Credit Officer, is to develop a more intense credit risk approach by implementing the following procedures:

• Improved problem loan tracking and reporting

• Reporting by bank and region

• Improved and more defined commercial real estate reporting

• Coordination with lenders to ensure proper loan grading

• Enhanced staff including regional credit risk officers

• More communication and involvement with Regional Executives

As discussed below in the Provision and Allowance for Loan Losses section, loans over $20,000 are risk graded on a scale from 1 (highest quality) to 8 (loss). Acceptable loans at inception are grades 1 through 4, and these grades have underwriting requirements that at least meet the minimum requirements of a secondary market source, such as credit history requirements and other mitigating criteria such as substantial liquidity and low loan-to-value ratios. The Bank’s loan policy states that a guarantor may be necessary if reasonable doubt exists as to the borrower’s ability to repay. The Board of Directors has authorized the loan officers to have individual approval authority for risk grade 1 through 4 loans up to maximum exposure limits for each customer. New or renewed loans that are graded 5 (special mention) or more must have approval from a regional credit officer.

Nonperforming Assets

Nonperforming assets include loans classified as nonaccrual, foreclosed bank-owned property and loans past due 90 days or more on which interest is still being accrued. It is the general policy of the Bank to stop accruing interest when any loan is past due 90 days or when it is apparent that the collection of principal and/or interest is doubtful. Unsecured consumer loans are usually charged off when payments are more than 90 days delinquent. When a loan is placed on nonaccrual status, any interest previously accrued but not collected is reversed against interest income in the current period.

Nonaccrual loans as of December 31, 2013 totaled $15.4 million, or 1.12%, of total loans compared with $22.8 million, or 1.71% of total loans, in 2012. The Bank aggressively pursues the collection and repayment of all loans. The total number of loans on nonaccrual status has decreased from 315 to 195 since December 31, 2012. The significant decrease in nonperforming loans from December 31, 2012 to December 31, 2013 is primarily due continuing improvements in past dues and workouts by our special assets department. Approximately $6.2 million of nonaccrual loans are troubled debt restructured loans and continue to pay according to agreed upon terms as of December 31, 2013. Other nonperforming assets, such as repossessed and foreclosed collateral is aggressively liquidated by our special assets department.

The largest nonaccrual relationship to one customer totaled $1.7 million as of December 31, 2013.  This relationship consists of one loan that was originally used for working capital purposes and is secured by real estate, account receivables, inventory and equipment.   This loan does not have a specific reserve assigned to it as of December 31, 2013 as the fair value of collateral less disposal costs is in excess of the current balance. Nonaccrual loans also include three other large relationships each totaling $1.4 million, $1.3 million, and $1 million, respectively, as of December 31, 2013.   The first of these nonaccrual relationships consist of various loans, the proceeds of which were used for working capital purposes and utilized to purchase company stock.  The loans are secured by all business assets and a piece of residential real estate.  The relationship was charged down to fair market value during the fourth quarter of 2013. The second relationship consists of various loans, the proceeds of which were utilized for the purchase of two businesses and secured by the real estate.  This relationship does not have any specific reserve assigned to it as of December 31, 2013. The third relationship consists of various loans, the proceeds of which were utilized for the purchase

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and refinance of real estate, lease debt, and related operating expenses and secured by the real estate.  This loan does not have a specific reserve assigned to it as of December 31, 2013 as the fair value of collateral less disposal costs is in excess of the current balance.  All of these loans have been placed in nonaccrual status because of concerns for the customers' continued ability to pay, collateral deterioration and depressed future industry outlook.

A significant portion, or 83%, of nonperforming loans at December 31, 2013 are secured by real estate. We have evaluated the underlying collateral on these loans and believe that the collateral on these loans is sufficient to minimize future losses. However, the downturn in the real estate market over the past several years has resulted in increased loan delinquencies, defaults and foreclosures, and we believe that these trends are likely to continue. In some cases, this downturn has resulted in a significant impairment to the value of the collateral used to secure these loans and the ability to sell the collateral upon foreclosure. These conditions have adversely affected our loan portfolio. The real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower and may deteriorate in value during the time the credit is extended. If real estate values continue to decline, it is also more likely that we would be required to increase our allowance for loan losses. If during a period of reduced real estate values we are required to liquidate the property collateralizing a loan to satisfy the debt or to increase the allowance for loan losses, this could materially reduce our profitability and adversely affect our financial condition. The Bank has a general policy to stop accruing interest when any loan is past due 90 days as to principal or interest; however, some exceptions do apply. In addition, loans may be identified as nonaccrual on a case by case basis if it is probable that the borrower will not be able to repay according to the original terms. Nonperforming loans and other real estate owned (foreclosed real estate) comprise nonperforming assets. At December 31, 2013, certain additional loans were considered to be impaired, even though they were performing, where liquidation of collateral would be insufficient to repay the balance of the loan. The impairment was determined based on current economic conditions, the declines in the commercial borrowers’ industries, or specific credit or collateral characteristics of the loan. There were no loans past due 90 days or more accruing interest at December 31, 2013.

	At December 31,
	2013			2012			2011			2010			2009
	(Amounts in thousands)
Loans on nonaccrual status	$	15,393		$	22,817		$	70,355		$	65,400		$	36,255
Other real estate owned	3,267			8,738			24,966			25,582			14,345
Total nonperforming assets	$	18,660		$	31,555		$	95,321		$	90,982		$	50,600
Nonperforming assets to gross loans held for investment	1.37		%	2.41		%	6.57		%	5.68		%	3.02		%
Troubled debt restructured loans still accruing interest	$	15,299		$	17,667		$	17,173		$	17,153		$	5,544

	December 31, 2013
	Interest Recorded for the year ended		Interest Foregone for the year ended
Nonaccrual loans	$	873,473	$	414,073
Accruing Troubled Debt Restructured loans	$	825,094	$	—

At December 31, 2013, the allowance for loan losses represented 1.17 times the amount of nonperforming loans, compared to 1.10 times and 0.47 times at December 31, 2012 and 2011, respectively. The coverage level of the allowance at December 31, 2013 increased from the coverage level at December 31, 2012 due to the sale of nonaccrual loans as the Company remained conservative in reserve levels due to still uncertain economic conditions and high levels of unemployment. Nonperforming loans that have been written down to fair value will remain in nonaccrual status until consistent payment performance is evident. Nonperforming loans are individually reviewed for impairment based on probable cash flows and the value of collateral.

Impaired Loans

As discussed above, the Bank generally identifies loans 90 days past due as nonaccrual loans. Total impaired loans include $15.4 million in nonaccrual loans and $15.3 million in restructured loans, including those classified as troubled debt restructured loans, that are accruing and paying on agreed upon terms. Impaired loans under $250,000 are typically not individually evaluated for impairment and totaled $6.2 million as of December 31, 2013. During the fourth quarter of 2012, the Company embarked on an accelerated asset disposition plan in an effort to reduce nonperforming loans and improve credit metrics. As a result, the Company sold approximately $43 million in problem loans during the fourth quarter of 2012. Loans included in the sale represented higher risk construction and commercial real estate loans of which $36.3 million were on nonaccrual status.

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Collateral values were assessed for impaired residential mortgage and commercial mortgage loans. Five relationships with balances exceeding $1.0 million were identified as impaired. The impaired loans were analyzed to record specific allowances for loans with balances that exceeded discounted collateral values. Specific allowances were assigned for loan balances in excess of recent appraisals or discounted collateral values in cases where recent appraisals were not available. At December 31, 2013, most of the impaired loan balances in the commercial, financial, and agricultural category were collateralized by accounts receivable, inventory, and equipment with only one relationship exceeding $1.0 million.

At December 31, 2013, the outstanding balance of purchased impaired loans from American Community, which includes interest and fees due, was $90,741. At December 31, 2012, the outstanding balance of purchased impaired loans from American Community, which includes principal, interest and fees due, was $95,215. Because of the uncertainty of the expected cash flows, the Company is accounting for each purchased impaired loan under the cost recovery method, in which all cash payments are applied to principal. Thus, there is no accretable yield associated with the above loans. All purchased impaired loans from Cardinal State Bank have been paid or charged-off.

Provision and Allowance for Loan Losses

The primary risks inherent in the Bank’s loan portfolio, including the adequacy of the allowance or reserve for loan losses, are based on management’s assumptions regarding, among other factors, general and local economic conditions, which are difficult to predict and are beyond the Bank’s control. In estimating these risks, and the related loss reserve levels, management also considers the financial conditions of specific borrowers and credit concentrations with specific borrowers, groups of borrowers, and industries.

The allowance for loan losses is adjusted by direct charges to provision expense. Losses on loans are charged against the allowance for loan losses in the accounting period in which they are determined by management to be uncollectible. Recoveries during the period are credited to the allowance for loan losses. The provision for loan losses was $(2.7) million in 2013 compared to $40.4 million in 2012 and $20.8 million in 2011. The provision expense is determined by the Bank’s allowance for loan losses model and is based on management's judgments. The components of the model are specific reserves for impaired loans and a general allocation for unimpaired loans. The general allocation has two components, an estimate based on historical loss experience and an additional estimate based on internal and external environmental factors due to the uncertainty of historical loss experience in predicting current embedded losses in the portfolio that will be realized in the future. The decrease in provision for the year ended December 31, 2013 as compared to 2012 was due to a decrease in charge-offs in 2013 as compared to 2012 as well as improvements in classified loans. Significant charge-offs were taken on all loans included in the accelerate asset disposition based on the sale price of the loan at sale date. Classified loans (including special mention, substandard and impaired loans less than $250,000 that are not individually reviewed for impairment) also decreased $22.6 million from December 31, 2012 to December 31, 2013, and total past due loans were down from $29.3 million at December 31, 2012 to $15.4 million at December 31, 2013.

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Total loss on sale of loans recognized in the fourth quarter of 2012 was $21.7 million which represents the difference between the recorded investment of the loan at sale date and the sales price received.

Loan Sales	Recorded Investment of Loans Sold		Charge-offs (Losses) Recorded on the Sales		Additional Provisions Resulting from the Sale of Loans*
	Amounts in thousands
Construction	$	16,211	$	7,625	$	6,100
Commercial Real Estate
Owner Occupied	8,871		3,917		4,313
Non-owner Occupied	8,675		4,531		3,755
Commercial	2,291		1,329		1,290
Mortgages:
1-4 Family	4,557		2,825		2,380
Multifamily	249		113		86
Home Equity Line of Credit	2,204		1,284		746
Consumer and other	151		91		57
	$	43,209	$	21,715	$	18,727
*amounts included in provision expense for 2012

Additional charge-offs of $11.0 million were also taken during the fourth quarter 2012 on other problem loans that were not sold. The following table presents a summary of charge-offs on other problem loans.

Loan Sales	Additional Charge-offs on Other Problem Loans
	Amounts in thousands
Construction	$	1,601
Commercial Real Estate
Owner Occupied	1,599
Non-owner Occupied	2,267
Commercial	3,908
Mortgages:
1-4 Family	291
Multifamily	—
Home Equity Line of Credit	1,309
Consumer and other	24
	$	10,999

As part of the continual grading process, loans over $20,000 are assigned a credit risk grade based on their credit quality, which is subject to change as conditions warrant. Any changes in risk assessments as determined by loan officers, credit administrators, regulatory examiners and management are also considered. Management considers certain loans graded “impaired” (loans graded 7) or “loss” (loans graded 8) to be individually impaired and may consider “substandard” loans (loans graded 6) individually impaired depending on the borrower’s payment history. The Bank measures impairment based upon probable cash flows and the value of the collateral. Collateral value is assessed based on collateral value trends, liquidation value trends, and other liquidation expenses to determine logical and credible discounts that may be needed. Updated appraisals are required for all impaired loans and typically at renewal or modification of larger loans if the appraisal is more than 12 months old.

Impaired loans, for which management has determined that receiving payment in accordance with the terms of the original note is unlikely, are evaluated individually for specific allowances. Management considers certain loans graded “impaired” or

53

“loss” to be impaired and may consider “substandard” loans impaired depending on an evaluation of the probability of repayment of the loan and the strength of any collateral. The Bank measures impairment based on the value of the collateral and the carrying value of the loan or, alternatively, probable cash flows. Impaired loans are identified in a periodic analysis of the adequacy of the reserve.

In determining the general allowance allocation, the ratios from the actual loss history for the various categories are applied to the homogenous pools of loans in each category. In addition, to recognize the probability that loans in special mention, impaired, and substandard risk grades are more likely to have embedded losses, additional reserve factors based on the likelihood of loss are applied to the homogenous pools of weaker graded loans that have not yet been identified as impaired.

A portion of the general allocation is based on environmental factors including estimates of losses related to interest rate trends, unemployment trends, real estate characteristics, past due and nonaccrual trends, watch list trends, charge-off trends, and underwriting and servicing assessments. The factors with the largest impact on the allowance at December 31, 2013 were watch list trends, unemployment rate trends, and underwriting and servicing assessments. Markets served by the Bank experienced softening from the general economy and declines in real estate values over the past few years. The real estate characteristics component includes trends in real estate concentrations and exceptions to FDIC guidelines for loan-to-value ratios. The addition of a centralized team of credit spread analysts has improved the quality of credit underwriting and risk grade identification on new loans and modifications. Other related improvements, such as expanded use of global cash flows in the underwriting process, has contributed to the ability to better identify and quantify potential risks inherent in the portfolio.

The risk grades, normally assigned by the loan officers when the loan is originated and reviewed by the regional credit officers, are based on several factors including historical data, current economic factors, composition of the portfolio, and evaluations of the total loan portfolio and assessments of credit quality within specific loan types. In some cases the risk grades are assigned by regional executives, depending upon dollar exposure. Because these factors are dynamic, the provision for loan losses can fluctuate. Credit quality reviews are based primarily on analysis of borrowers’ cash flows, with asset values considered only as a second source of payment. Regional credit officers are working with lenders in underwriting, structuring and risk grading our credits. The Risk Review Officer focuses on lending policy compliance, credit risk grading, and credit risk reviews on larger dollar exposures. Management uses the information developed from the procedures above in evaluating and grading the loan portfolio. This continual grading process is used to monitor the credit quality of the loan portfolio and to assist management in determining the appropriate levels of the allowance for loan losses.

Management considers the allowance for loan losses adequate to cover the estimated losses inherent in the Bank’s loan portfolio as of December 31, 2013. Management believes it has established the allowance in accordance with GAAP and will consider future additions to the allowance that may be necessary based on changes in economic and other conditions. Additionally, various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for loan losses. Such agencies may require the recognition of adjustments to the allowances based on their judgments of information available to them at the time of their examinations.

Management realizes that general economic trends greatly affect loan losses. The downturn in the real estate market over the past few years resulted in increased loan delinquencies, defaults and foreclosures between 2008 and 2011. In some cases, this downturn has resulted in a significant impairment to the value of our collateral and our ability to sell the collateral upon foreclosure. The real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower and may deteriorate in value during the time the credit is extended. Although we believe real estate markets are improving, if real estate values begin to decline, it is likely that we would be required to increase our allowance for loan losses and our net charge-offs which could have a material adverse effect on our financial condition and results of operations. Assurances cannot be made either (1) that further charges to the allowance account will not be significant in relation to the normal activity or (2) that further evaluation of the loan portfolio based on prevailing conditions may not require sizable additions to the allowance and charges to provision expense.

The Bank’s allowance for loan losses was $18.1 million at December 31, 2013, or 1.33%, of loans held-for-investment, as compared to $25.1 million, or 1.92%, of loans held-for-investment, at December 31, 2012 based on the application of its model for the allowance calculation applied to the loan portfolio at each balance sheet date. Decreases in the allowance for loan losses were due primarily to a decrease in classified loans which resulted from the sale of approximately $43 million in problem loans in 2012, and improvements in past due loans. In addition, the Bank saw some improving trends in the Bank’s past dues and unemployment rates within the region during 2013. Overall the depressed real estate markets continue to take a toll on our real estate portfolio. This has resulted in impairment of the value of the collateral used to secure real estate loans and the ability to sell the collateral upon foreclosure. Collateral value is assessed based on collateral value trends, liquidation value trends, and other liquidation expenses to determine logical and credible discounts that may be needed. In response to this deterioration in real

54

estate loan quality, management is aggressively monitoring its classified loans and is continuing to monitor credits with material weaknesses.

The allowance model is applied to the loan portfolio quarterly to determine the specific allowance balance for impaired loans and the general allowance balance for performing loans grouped by loan type. Out of the $18.1 million in total allowance for loan losses at December 31, 2013, the specific allowance for impaired loans accounted for $556,685, down from $1.4 million at December 31, 2012. Decreases in specific allowances for impaired loans were due to a decrease in impaired loans as well as the charge-down of collateral dependent loans to fair market values. The remaining general allowance of $17.5 million, was attributed to performing loans and was down from $23.7 million at December 31, 2012.

The decrease in the general allowance was driven primarily by a decrease in classified loans and decreasing historical loss rates. Classified loans (including special mention, substandard and impaired loans less than $250,000 that are not individually reviewed for impairment) decreased $22.6 million from December 31, 2012 to December 31, 2013. This decrease resulted from loan sales, as well as a few significant payoffs and improvements in past dues and underlying credit exposures of previously classified loans. The general allowance on non-classified loans as a percent of non-classified loans was 0.90% as of December 31, 2013, as compared to 1.36% as of December 31, 2012.

The following table presents the allocation of the allowance for loan losses by category.

	At December 31,
	2013				2012				2011				2010				2009
	Amount		%		Amount		%		Amount		%		Amount		%		Amount		%
	(Dollars in thousands)
Real estate	$	13,799	76.4	%	$	20,185	80.3	%	$	26,515	80.7	%	$	32,550	86.2	%	$	41,044	84.4	%
Commercial, agricultural, other	3,733		20.7	%	4,291		17.1	%	5,712		17.4	%	4,335		11.5	%	6,244		12.8	%
Consumer	531		2.9	%	673		2.7	%	621		1.9	%	867		2.3	%	1,337		2.8	%
Total	$	18,063	100.0	%	$	25,149	100.0	%	$	32,848	100.0	%	$	37,752	100.0	%	$	48,625	100.0	%

Net loan charge-offs (recoveries) were $4.4 million, or 0.33% of average loans for the year ended December 31, 2013, compared to $48.1 million, or 3.43% of average loans for the year ended December 31, 2012. Net charge-offs for the year ended December 31, 2012 included $32.7 million in writedowns and charge-offs on loans included in the accelerated asset disposition plan.

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The following table presents a reconciliation of the allowance for loan losses and reflects charge-offs and recoveries by loan category.

	At or for the Years Ended December 31,
	2013			2012			2011			2010			2009
	(Dollars in thousands)
Balance at beginning of period	$	25,149		$	32,848		$	37,752		$	48,625		$	22,355
Charge-offs:
Real estate loans	4,619			43,208			24,686			31,846			15,009
Consumer loans	330			752			652			677			1,255
Credit card and related plans	—			—			—			71			107
Commercial and all other	2,923			7,796			3,494			4,226			6,432
Total charge-offs	7,872			51,756			28,832			36,820			22,803
Recoveries:
Real estate loans	2,082			2,368			2,479			889			204
Consumer loans	102			359			184			211			85
Credit card and related plans	—			—			—			7			2
Commercial and all other	1,287			956			423			491			343
Total recoveries	3,471			3,683			3,086			1,598			634
Net charge-offs (recoveries)	4,401			48,073			25,746			35,222			22,169
Provision for loan losses	(2,685		)	40,374			20,842			24,349			48,439
Balance at end of period	$	18,063		$	25,149		$	32,848		$	37,752		$	48,625
Ratio of net loan charge-offs to average loans	0.33		%	3.43		%	1.68		%	2.08		%	1.39		%

Investment Securities

At December 31, 2013, the securities classified as available-for-sale, carried at market value, totaled $288.9 million with an amortized cost of $288.9 million. Securities available-for-sale are securities that will be held for an indefinite period of time, including securities that management intends to use as a part of its asset/liability strategy. These securities may be sold in response to changes in interest rates, to changes in prepayment risk, or to the need to increase regulatory capital or liquidity. Securities available-for-sale consist of U.S. Government agencies with an average life of 3.33 years, municipal securities with an average life of 6.59 years, and mortgage-backed securities with an average life of 4.30 years. It is more likely than not that the Company will not have to sell the investments before recovery of their amortized cost basis. The proceeds from maturities and sales were reinvested in the investment portfolio. Refer to Note 2 to the Consolidated Financial Statements for additional information.

The following table presents the carrying value of investment securities as of December 31, 2013, 2012 and 2011:

	2013		2012		2011
Securities available-for-sale:	(Amounts in thousands)
U.S. government agencies	$	16,392	$	27,527	$	23,726
Government sponsored agencies:
Residential mortgage-backed securities	103,441		107,257		65,210
Collateralized mortgage obligations	52,743		122,593		166,028
Private label collateralized mortgage obligations	14,491		1,045		1,256
State and municipal securities	98,704		84,565		73,118
Common and preferred stocks and other	3,151		133		1,084
Total securities available-for-sale	$	288,922	$	343,120	$	330,422

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The following tables present maturities and yield of debt securities outstanding as of December 31, 2013:

	Maturities and Yields of Debt Securities as of December 31, 2013
	Within 1 Year				1 to 5 Years				5 to 10 Years					After 10 Years
	Amount		Yield		Amount		Yield		Amount			Yield		Amount		Yield		Total
	(Amounts in thousands)
Available-for-sale securities:
U.S Government agencies	$	1,552	1.23	%	$	14,840	0.8	%	$	—		—	%	$	—	—	%	$	16,392
Mortgage-backed securities	—		—	%	674		5.04	%	18,113			1.8	%	84,654		1.83	%	103,441
Collateralized mortgage
obligations	—		—	%	3,132		0.81	%	5,233			2.85	%	44,378		2.57	%	52,743
Private label collateralized
mortgage obligations	—		—	%	—		—	%	142		178	5.36	%	14,349		2.25	%	14,491
Municipals	920		3.28	%	7,380		3.45	%	44,827			2.85	%	45,577		3.07	%	98,704
Other	—		—	%	—		—	%	—			—	%	3,151		—	%	3,151
Total available-for-sale securities	$	2,472			$	26,026			$	68,315				$	192,109			$	288,922

Time Deposits

The following table presents time deposits in two categories, (1) time deposits of $100,000 or more, and (2) other time deposits.

	Maturities of Time Deposits As of December 31, 2013
	Within Three Months		Three to Six Months		Six to Twelve Months		One to Five Years		After Five Years		Total
	(dollars in thousands)
Time deposits of $100,000 or more	$	41,888	$	43,131	$	61,002	$	81,898	$	—	$	227,919
Other time deposits	56,459		63,925		91,227		112,739		5,000		329,350
	$	98,347	$	107,056	$	152,229	$	194,637	$	5,000	$	557,269

Other Borrowed Funds

See Note 8 to the Consolidated Financial Statements.

Capital Adequacy

Shareholders’ equity at December 31, 2013, totaled $184.5 million, an increase of 8.0% from 2012 year-end shareholders’ equity of $170.8 million. The 2013 shareholders’ equity total includes an unrealized net gain of $5,000 compared to an unrealized net gainof $4.2 million at December 31, 2012. The Company’s internal capital generation rate (net income /(loss) less cash dividends declared, as a percentage of average equity) was 9.7% in 2013 and (8.0)% in 2012. The dividend payout rate on common shares was 0.0% in 2013, 2012, and 2011. In 2009, the Board of Directors suspended the payment of common dividends in order to preserve capital.

On January 16, 2009, pursuant to the CPP established by the Treasury under the EESA, the Company entered into a Letter Agreement with Treasury dated January 16, 2009 pursuant to which the Company issued and sold to Treasury (i) 36,000 shares of the Company’s Series T Preferred Stock, having a liquidation preference of $1,000 per share, and (ii) a ten-year warrant to purchase up to 385,990 shares of the Company’s common stock, par value $1.00 per share, at an initial exercise price of $13.99 per share, for an aggregate purchase price of $36.0 million in cash.

On July 24, 2009, again pursuant to the CPP, the Company issued and sold to Treasury (i) 13,312 shares of the Company's Series T-ACB Preferred Stock, having a liquidation preference of $1,000 per share, and (ii) a ten-year warrant to purchase up to 273,534 shares of the Company's common stock at an initial exercise price of $7.30 per share, for an aggregate purchase price of

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$13.3 million in cash.  The terms of the Series T-ACB Preferred Stock are the same as the Series T Preferred Stock issued to Treasury on January 16, 2009. 

On May 6, 2011, the Company completed a private placement of 3,081,867 shares of common stock to accredited investors, including certain of the Company's officers and directors, for total cash proceeds of $6.4 million. The purchase price per share for investors was at a 10% discount to the weighted average closing sale price of the Company's common stock on Nasdaq for the 10-day period ending five business days prior to the closing of the private placement. On June 23, 2011, the Company's shareholders approved the private placement which permitted the Company, pursuant to Nasdaq Rule 5635(c), to issue to the Company's directors and executive officers, for no additional consideration, 151,681 additional shares of common stock, enabling the directors and executive officers to invest on the same terms as other investors that participated in the private placement. Including this additional issuance, the Company issued a total 3,233,548 shares of common stock as a result of the private placement. Proceeds received from the private placement are being kept at the holding company level for general corporate purposes.

On September 12, 2012, the U.S. Treasury completed the sale of its $36 million of Series T Preferred Stock and $13.3 million of its Series T-ACB Preferred Stock investment in the Company to private investors through a registered public offering. There was no impact to the Company's financial condition or operating results due to the transaction.

On October 23, 2012, the Company entered into the Purchase Agreement with certain accredited investors and directors and executive officers of the Company , pursuant to which the Investors purchased 45,000 shares of the Company's Series A Preferred Stock, at a price of $1,000 per share in a private placement transaction. The Series A Preferred Stock converted into 16,071,300 shares of the Company's common stock at a price of $2.80 per share on December 26, 2012. The Company raised approximately $41.8 million in net proceeds from the sale of the Series A Preferred Stock.

As part of the 2012 private placement, contemporaneously with the execution of the Purchase Agreement, the Company entered into the Exchange Agreement with the Preferred Shareholders, pursuant to which the Preferred Shareholders agreed to exchange shares of the Preferred Stock for shares of the Company's common stock and shares of a new class of non-voting common stock, par value $1.00 per share, of the Company's non-voting common stock. The total amount of Preferred Stock exchanged for common stock and non-voting common stock was $20.9 million. The non-voting common stock will convert into shares of the Company's common stock under certain conditions in accordance with the terms of the Articles of Amendment creating the class of the non-voting common stock.

The table below presents the plans and number of common shares repurchased, and the activity from inception through December 31, 2011. Common shares repurchased must, by North Carolina law, be cancelled and the number of shares outstanding reduced. The 2002 through 2005 plans were approved by a vote of the Company’s shareholders. Following reorganization as a holding company on July 1, 2006, the Board of Directors of the Company approved stock repurchases of up to 100,000 shares for the 2006 and 2007 plans. There was no 2013, 2012 or 2011 repurchase plan or repurchases in 2013, 2012 or 2011.

Approved by Shareholders	Shares Repurchased & Cancelled	Average Cost		Total Reduction of Capital
2004 and prior plans - 1,150,000 shares approved	589,571	$	12.61	$	7,432,590
2005 Plan - 300,000 shares approved	54,648	14.35		784,107
2006 Plan - 100,000 shares approved	100,000	17.42		1,741,886
2007 Plan - 100,000 shares approved	71,281	17.10		1,219,251
Total Repurchased	815,500	$	13.71	$	11,177,834

There were no executive stock options exercised during the year.

The Company's tangible equity ratio was 10.12%, 8.75% and 6.88% at end of year 2013, 2012 and 2011, respectively. Management believes that these non-GAAP tangible measures provide additional useful information, particularly since these measures are widely used by industry analysts for companies with prior merger and acquisition activities. Non-GAAP measures have inherent limitations as analytic tools, are not required to be uniformly applied and are not audited. To mitigate these limitations, we have procedures in place to ensure that these measures are calculated using the appropriate GAAP or regulatory components in their entirety and to ensure that its performance is properly reflected to facilitate consistent period to period comparisons. Although we believe the above non-GAAP measures enhance investors' and management's ability to evaluate and compare our operating results from period to period, non-GAAP measures should not be considered in isolation or as an alternative to any measure of performance as promulgated under GAAP. Investors should consider the Company's performance and financial

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condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company.

The following table presents the calculations of these ratios:

Capital Adequacy Ratios December 31,
	2013			2012			2011
	(Amounts in thousands)
Total assets	$	1,806,027		$	1,923,438		$	1,993,188
Goodwill	—			—			—
Core deposit intangibles	(1,974		)	(2,653		)	(3,733		)
Tangible assets	$	1,804,053		$	1,920,785		$	1,989,455
Total equity	$	184,470		$	170,794		$	140,586
Goodwill	—			—			—
Core deposit intangible	(1,974		)	(2,653		)	(3,733		)
Tangible equity* (Non-GAAP)	$	182,496		$	168,141		$	136,853
Tangible equity ratio* (Non-GAAP)	10.12		%	8.75		%	6.88		%
Equity ratio	10.22		%	8.88		%	7.05		%
*Note: Tangible assets and tangible equity exclude goodwill and core deposit intangibles.

Although the Company and Bank are well capitalized as of December 31, 2013 and criticized assets appear to be showing signs of improvement, the Company remains diligently focused on monitoring capital. 

Noninterest Income

Noninterest income is derived primarily from activities such as service fees on deposit and loan accounts, commissions earned from the sale of insurance and investment products, income from the mortgage banking operations, gains or losses sustained from the sale or impairment of investment securities or mortgage loans and income earned from bank-owned life insurance (BOLI).

Noninterest income increased 35.7% or $4.8 million in 2013 as compared to 2012. Prior year noninterest income included losses on the sale of loans of $3.0 million and a $1.0 million loss on the sale of a mortgage reinsurance subsidiary leading to the majority of the increase. Losses recorded on the sale of loans were related to other fees and estimated liabilities recorded as part of the loan sale, including liabilities established for property taxes and fees payable to third parties as part of the sale. In addition, mortgage banking income increased $2.8 million as volume continued to remain high due to historically low rates and the fair value of mortgage servicing rights increased. These increases were partially offset by a decrease of $4.1 million in gains on sale of securities as the Company sold several investments at a loss during the year in an effort to reposition the portfolio to higher yielding securities.

Other increases in noninterest income include increases in other service fees of $1.0 million, or 28.1%. The increase in other service fees was due primarily to increases in ATM and merchant credit card fees as the Company changed third party servicers and an increase in commissions on investment services. In addition, a gain on the sale of our Creedmoor branch was recognized in the amount of $310,000. Partially offsetting the increases was a decrease in service charges of $99,000, or 1.9%, and a decrease in income related to bank owned life insurance of $33,000, or 5.2%, as the cost of benefits was updated based on current employee and insurance information. Service charges on deposit accounts were down 1.9% primarily due to a $414,000 decrease in non-sufficient funds ("NSF") (a major component of service charges) and overdraft privilege charges which was offset by a $309,000 increase in service charges on accounts as checking and savings accounts increased $63 million from 2012 to 2013.

Noninterest income decreased 25.4% or $4.6 million in 2012 as compared to 2011. Losses on the sale of loans of $3.0 million and a $1.0 million loss on the sale of a mortgage reinsurance subsidiary made up the majority of the decrease. Losses recorded on the sale of loans were related to other fees and liabilities recorded as part of the loan sale, including liabilities established for property taxes and fees payable to third parties as part of the sale, and are not representative of credit risk. In the fourth quarter of 2012, a decision was made by management to sale a reinsurance subsidiary held by Sidus. As a result of this decision, Sidus reclassified its investment in the reinsurance subsidiary to held for sale and wrote down its investment by $1.0 million to the estimated fair value at December 31, 2012. The sale of the subsidiary closed in the first quarter of 2013. Other decreases in 2012

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included a decrease in service charges of $57,664, or 1.1%, and a decrease in income related to bank owned life insurance of $24,454, or 3.7%, as the cost of benefits was updated based on current employee and insurance information. Service charges on deposit accounts were down 1.1% primarily due to a $50,000 decrease in NSF and overdraft privilege charges. Partially offsetting the decreases in noninterest income were increases in other service fees of $267,745, or 8.0%. The increase in other service fees was due primarily to increases in ATM and merchant credit card fees as the Company changed third party servicers. Gains on sale of available-for-sale securities were $2.4 million for the year ended December 31, 2012 as compared to $2.8 million for the year ended December 31, 2011. Income from mortgage banking activities also increased $156,213, or 2.7%, in 2012 as compared to 2011 as mortgage activity remained high due to the historically low rates.

Noninterest Expense

Noninterest expense includes salaries and employee benefits, occupancy and equipment expenses, and all other operating costs. Total noninterest expenses decreased $10.9 million, or 16.3%, from 2012 to 2013 as noninterest expenses in 2012 included $13.4 million in other real estate costs including $7.9 million in writedowns to estimated exit prices in preparation for public auction. Noninterest expense to average assets was 3.07%, and 3.43% for 2013 and 2012, respectively. The efficiency ratio for 2013 and 2012 was 64.85% and 68.98%, respectively. The efficiency ratio is the ratio of noninterest expenses less amortization of intangibles, goodwill impairment, and losses on sale of other real estate loans and fixed assets to the total of the taxable equivalent net interest income and noninterest income excluding gains (losses) on sale of securities.

Salaries and employee benefits constitute the largest component of noninterest expense. Comparing 2013 to 2012, salaries and benefits increased by $4.7 million, or 17.7%. The major components of this increase are summarized as follows:  Salaries and wages increased by $864,000 due to personnel additions and annual increases.  Related payroll taxes increased $196,000 and the employer 401k match increased $252,000. Commissions also increased $330,000 as investment activity continued to increase. Incentive compensation increased $3.4 million due to the new Company wide incentive program implemented in 2013.

Comparing 2012 to 2011, salaries and benefits decreased by $1.2 million, or 4.4%. These decreases were due primarily to employee reductions as part of the restructuring and dissolution of Sidus which led to decreased salaries and employee benefit costs. Offsetting this decrease was a $721,000 increase in miscellaneous personnel expenses which included recruiter fees, a $300,000 adjustment to liabilities related to our BOLI policies, as well as compensation expense related to restricted stock.

Occupancy expense increased $777,000, or 11.0%, comparing 2013 to 2012 due to increased maintenance costs and property taxes in 2013. Occupancy expense decreased $1.2 million, or 15.1%, comparing 2012 to 2011 due to the closure of several Sidus offices in 2012 as part of a reorganization of our mortgage banking divisions.

Data processing expense decreased by 14.3% in 2013 as compared to 2012 due to the implementation of live branch capture in 2013 which reduces daily courier service costs and provides additional efficiencies. Other professional fees also decreased $345,000, or 17.1%, due primarily to professional fees incurred as part of the 2012 capital raise and accelerated asset disposition plan in late 2012. FDIC assessment expenses were down 23.9% due to changes in the calculation of assessments and prepayments. Loan collection costs decreased $340,000, or 31.5% as credit quality improved during the year, including a decrease in past due loans. As noted above, net cost of operation of other real estate owned decreased $14.0 million, or 104.5%, due to writedowns in 2012 that occurred as part of the accelerated asset disposition plan in 2012.

Data processing expense increased by 13.5% in 2012 as compared to 2011 as core deposit accounts continued to increase. Other professional fees also increased $632,122, or 45.8%, due primarily to professional fees incurred as part of the 2012 capital raise and accelerated asset disposition plan. Communication expense decreased by 17.2% in 2012 when compared to 2011 primarily due to the branch closures in 2011 and 2012, as well as efficiencies gained with new technologies. FDIC assessment expenses were also down 23.2% due to changes in the calculation of assessments and prepayments. Loan collection costs decreased $492,716, or 31.4% as credit quality improved during the year, including a decrease in past due loans. Net cost of operation of other real estate owned increased $8.4 million, or 165.0%, due to $7.0 million in writedowns that occurred as part of the accelerated asset disposition plan and continued workout efforts and foreclosures of impaired loans.

    Other operating expenses decreased $326,000, or 2.8%, when comparing 2013 to 2012. The largest decreases in the categories under other operating expenses were attorney fees down $501,000, other outside service fees down $654,000, and appraisal fees down $123,000 all due to the execution of the accelerated asset disposition plan in late 2012. Training expense was also down $668,000 as the Bank implemented a specialized training program in 2012 for all employees. Offsetting the decreases were increases including $377,000 in expenses related to the rebranding project and a $233,000 increase in transfer agent fees related to the recent 1-for-3 reverse stock split and additional filings required in connection with the recent capital raise. Increases also include a $174,000 increase in check losses and a $115,000 increase in software related expenses.

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Other operating expenses increased $519,589, or 5.5%, when comparing 2012 to 2011. The largest decreases in the categories under other operating expenses was franchise and privilege taxes down $302,000, advertising expense down $212,000, other supplies expense down $88,000, postage expense down $72,000, insurance expenses down $76,000, directors fees down $44,000 and charge-offs of checking accounts was down $152,000. Decreases in advertising, printing and supplies, travel, postage and other miscellaneous expenses were due to concerted efforts by management to reduce expenses across the Bank. These decreases were offset by increases in training expense up $655,000 as the Bank implemented a training program in 2012 for all employees.

Income Taxes

Income tax expense for the year ended December 31, 2013 was $10.4 million compared to income tax benefit of $24.0 million for the year ended December 31, 2012, an increase of 143.4%. The increase in income tax expense was due to net income in 2013 and net losses sustained in 2012, as well as a $11.0 million reversal of a deferred tax asset valuation allowance in 2012. The effective tax rate for the year ended December 31, 2013 was 35.6% compared to (73.4)% for the same period of 2012. See Note 9 in the consolidated financial statements for further discussion of income taxes. Income tax benefit for the year ended December 31, 2012 was $24.0 million compared to income tax expense of $6.7 million for the year ended December 31, 2011, a decrease of 457.9%. The decrease in income tax expense was due to losses sustained in 2012, as well as a $11.0 million deferred tax asset valuation allowance recorded at December 31, 2011.

Our net deferred tax asset was $23.4 million at December 31, 2013 and $31.4 million at December 31, 2012. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not (a likelihood of more than 50 percent) that some portion or all of the deferred tax assets will not be realized. All available evidence, both positive and negative, is used in the consideration to determine whether, based on the weight of that evidence, a valuation allowance is required.

As of June 30, 2012, the Company reversed a previously recorded $11.0 million valuation allowance which had been established in 2011. After review of all available evidence at June 30, 2012 and based on the weight of such evidence, the Company believed the realization of the deferred tax asset was more likely than not and reversed the previously recorded $11.0 million valuation allowance. The reversal of the allowance was based primarily on a return to profitability as the Company had reported four consecutive quarters of net income.

At December 31, 2013, the Company has failed the three-year cumulative loss test again due to losses incurred in the fourth quarter of 2012. The Company considered the following negative and positive evidence in its evaluation of deferred tax assets:

Negative Evidence

• The Company is in a cumulative tax loss position for the three-year period ending December 31, 2013 of $6.2 million. Significance: High

	December 31, 2013 Cumulative Loss Test
	2011			2012			2013		Total
Income (loss) before income taxes	$	(7,701	)	$	(32,635	)	$	29,227	$	(11,109	)
Goodwill impairment	4,944			—			—		4,944
Total	$	(2,757	)	$	(32,635	)	$	29,227	$	(6,165	)

Positive Evidence

• The Company reported $29.2 million in net income before taxes for the year 2013. Excluding losses of $49 million sustained in the fourth quarter of 2012 related to the accelerated asset disposition plan, the Company has recorded $43.9 million in pre-tax income for nine previous consecutive quarters as credit quality has improved and net interest margin has increased over the past year. Significance: High

• The Company is projecting income on a pretax basis, as well as taxable income, for the future periods 2014 through 2016. The budgeted provision for loan losses is a key driver of the resulting income. Also, as discussed below, credit quality metrics have significantly improved. While management believes the 2010, 2011 and 2012 levels of provision are

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indicative of the worst economic downturn in recent history and will not be repeated, it is important to understand why future losses are not projected at these levels, which is discussed in the following paragraphs. Significance: Moderate

• In 2012, the Company completed a $45 million private placement offering pursuant to which several institutional investors and members of the Board and management purchased shares of preferred stock. In connection with this private placement, the Company converted approximately $21 million of its outstanding Series T and Series T-ACB preferred shares to common shares. As of December 31, 2013, the Company's leverage ratio, Tier 1 risk-based capital ratio, and total risk-based capital ratio were 11.5%, 13.5%, and 14.6%. Significance: Moderate

• Credit quality has improved over the past twelve months, including significant decreases in classified loans and nonperforming loans. Credit losses have shown a dramatic reduction in 2013 and overall nonperforming loans are down $7.4 million since December 31, 2012. Nonperforming assets to total assets were 1.03% as of December 31, 2013 as compared to 1.64% as of December 31, 2012, and 4.78% as of December 31, 2011. In addition, allowance for loan losses to nonperforming loans increased from 110.22% at December 31, 2012 to 117.34% at December 31, 2013. Significance: High

• Management is not aware of any unsettled circumstances that, if resolved, would adversely affect future operations or earnings. Significance: Low

• Federal net operating losses can be deducted over the twenty year carryforward period. Currently, management is projecting full utilization of these tax benefits within three years from December 31, 2013. The Company's loss carryforwards for the tax period ending December 31, 2013 include net operating loss carryforwards generated in the acquisition of Cardinal State Bank in 2008 and American Community Bank in 2009, as well as net operating loss carryforwards for the Company. Significance: Moderate

After review of all available evidence and based on the weight of such evidence, the Company believes the realization of the deferred tax asset is, more likely than not and no valuation allowance is deemed necessary at December 31, 2013 based primarily on a return to profitability, as the Company has reported five consecutive quarters of net income (excluding losses related to management's accelerated asset disposition plan), net income trends, projected net income for the years 2014 through 2016 and improving credit quality metrics.

Deferred tax assets that are dependent upon future taxable income do not qualify for inclusion in Tier 1 capital based on the capital guidelines of the Company's primary federal supervisory authority.  The disallowed portion of deferred tax assets for December 31, 2013 was $12.3 million for the Company.

Contractual Obligations, Commitments and Off-Balance Sheet Arrangements

In the normal course of business, the Bank has various outstanding contractual obligations that will require future cash outflows. The Bank’s contractual obligations for maturities of deposits and borrowings are presented in the Gap Analysis included herein under Item 7. In addition, in the normal course of business, the Bank enters into purchase obligations for goods or services. The dollar amount of such purchase obligations at December 31, 2013 was not material.

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The following table presents contractual obligations of the Bank as of December 31, 2013.

	Payments Due by Period
	On Demand or Less than 1 Year		1-3 Years		4-5 Years		After 5 Years		Total
	(Dollars in thousands)
Short-term borrowings	$	43,260	$	—	$	—	$	—	$	43,260
Long-term borrowings*	185		10,125		672		36,209		47,191
Capital lease obligation	49		141		164		1,927		2,281
Operating leases	1,905		2,488		1,202		5,310		10,905
Other contractual obligations	1,552		—		—		—		1,552
Total contractual cash obligations, excluding deposits	46,951		12,754		2,038		43,446		105,189
Deposits	1,318,785		152,018		42,620		5,000		1,518,423
Total contractual obligations	$	1,365,736	$	164,772	$	44,658	$	48,446	$	1,623,612
*Payments due on borrowings exclude interest due on variable rate obligations.

In addition to the contractual obligations described above, the Bank, in the normal course of business, issues various financial instruments, such as loan commitments, guarantees and standby letters of credit, to meet the financing needs of its customers. Such commitments for the Bank, as of December 31, 2013, are presented in Note 14 to the Consolidated Financial Statements.

As part of its ongoing business, the Bank does not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as special purpose entities (SPEs), which generally are established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Inflation

Since the assets and liabilities of a bank are primarily monetary in nature (payable in fixed, determinable amounts), the performance of a bank is affected more by changes in interest rates than by inflation. Interest rates generally increase as the rate of inflation increases, but the magnitude of the change in rates may not be the same.

While the effect of inflation is normally not as significant on banks as it is on those businesses that have large investments in plant and inventories, it does have an effect. There are normally corresponding increases in the money supply, and banks will normally experience above average growth in assets, loans, and deposits. Also, general increases in the prices of goods and services will result in increased operating expenses.

New Accounting Standards

See Note 1 to the consolidated financial statements for a discussion of new accounting standards and management’s assessment of the potential impact on the Bank’s Consolidated Financial Statements.

Fourth Quarter Summary

In the fourth quarter of 2013, the Company reported net income to common shareholders of $4.2 million, compared with net loss of $25.3 million in the fourth quarter of 2012, and net income of $2.2 million in the fourth quarter of 2011. Diluted earnings per common share were $0.30 for the fourth quarter of 2013, compared with diluted losses per common share of $3.63 and diluted earnings per common share of $0.33 for the same 2012 and 2011 periods, respectively.

Net interest income was $16.7 million for the quarter-ended December 31, 2013, up $2.0 million, or 13.6%, from the quarter-ended December 31, 2012. The increase was attributable to an increase in interest income on securities which resulted from an increase in yields on the portfolio. In addition, interest expense on deposits decreased 50% from the quarter ended December 31, 2013 due to a decrease in higher cost time deposits, as well as a decrease in overall rates. The net interest margin was 4.04% and 3.28% for the fourth quarter of 2013 and 2012, respectively.

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Provision for loan losses decreased from $31.6 million in the fourth quarter of 2012 to $(3.0) million for the fourth quarter of 2013. This decrease in the provision was driven primarily by a decrease in charge-offs as the fourth quarter of 2012 included charge-offs related to the accelerated asset disposition plan and loan sale.  For the fourth quarter of 2013, net loan recoveries were $(66,000) or (0.02)% of average loans (annualized), compared with net loan charge-offs of $33.6 million, or 9.74% of average loans during the fourth quarter of 2012.

     Noninterest income in the fourth quarter of 2013 was $1.2 million, compared with $985,414 in the fourth quarter of 2012. The increase in non-interest income was primarily due to a loss on sale of loans of $2.1 million, as well as a loss on sale of subsidiary of $1.0 million recorded in the fourth quarter of 2012. Offsetting this increase was a $2.9 million loss on sale of securities recorded in the fourth quarter of 2013, as compared to a $96,000 gain of sale of securities in 2012.

Non-interest expense totaled $13.7 million for the fourth quarter of 2013, a decrease of $9.0 million, or 39.6%, from $22.7 million for the fourth quarter of 2012. Net cost of operation of other real estate decreased $7.8 million due to $7.0 million in writedowns that occurred as part of the accelerated asset disposition plan in the fourth quarter of 2012 and continued workout efforts and foreclosures of impaired loans.

Item 7A — Quantitative and Qualitative Disclosures About Market Risk

See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations –“Market Risk, Asset/Liability Management and Interest Rate Sensitivity”.

64

Item 8 — Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

Yadkin Financial Corporation

Elkin, North Carolina

We have audited the accompanying consolidated balance sheets of Yadkin Financial Corporation (the “Company”) as of December 31, 2013 and 2012 and the related consolidated statements of income (loss), comprehensive income (loss), shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 2013. 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 at December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2013, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Yadkin Financial Corporation's internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 28, 2014 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

/s/ Dixon Hughes Goodman LLP

Charlotte, North Carolina

February 28, 2014

65

YADKIN FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS

December 31, 2013 and 2012

	December 31,			December 31,
	2013			2012
	(Amounts in thousands, except share data)
ASSETS
Cash and due from banks	$	32,226		$	36,125
Federal funds sold	10			50
Interest-bearing deposits	8,759			102,221
Securities available-for-sale at fair value (amortized cost $288,914 in 2013 and $336,349 in 2012)	288,922			343,120
Gross loans	1,358,746			1,309,504
Less: allowance for loan losses	18,063			25,149
Net loans	1,340,683			1,284,355
Loans held-for-sale	18,913			27,679
Accrued interest receivable	6,219			6,376
Premises and equipment, net	40,698			41,849
Other real estate owned	3,267			8,738
Federal Home Loan Bank stock, at cost	3,473			4,154
Investment in bank-owned life insurance	27,032			26,433
Core deposit intangible (net of accumulated amortization of $10,546 in 2013 and $9,869 in 2012)	1,974			2,653
Deferred tax assets	23,425			31,358
Other assets	10,426			8,327
Total Assets	$	1,806,027		$	1,923,438
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing demand deposits	$	267,596		$	273,912
Interest-bearing deposits:
NOW, savings and money market accounts	693,558			624,460
Time certificates:
$100 or more	227,919			316,146
Other	329,350			417,144
Total Deposits	1,518,423			1,631,662
Short-term borrowings	43,260			39,192
Long-term borrowings	45,954			65,944
Capital lease obligations	2,281			2,325
Accrued interest payable	852			1,629
Other liabilities	10,787			11,892
Total Liabilities	$	1,621,557		$	1,752,644
Shareholders' Equity
Preferred stock, no par value, 1,000,000 shares authorized; and 28,405 issued and outstanding in 2013 and 2012	28,405			27,942
Common stock, $1 par value, 33,333,333 shares authorized; 14,383,986 issued and outstanding in 2013 and 14,383,750 issued and outstanding in 2012	14,384			43,152
Warrants	1,850			3,581
Surplus	187,118			156,176
Accumulated deficit	(47,292		)	(64,241		)
Accumulated other comprehensive income	5			4,184
Total Shareholders' Equity	184,470			170,794
Total Liabilities and Shareholders' Equity	$	1,806,027		$	1,923,438

See notes to consolidated financial statements

66

YADKIN FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

For the years ended December 31, 2013, 2012 and 2011

		Year Ended December 31,
		2013			2012			2011
	(Amounts in thousands, except per share data)
INTEREST INCOME:
Interest and fees on loans		$	67,604		$	71,956		$	79,952
Interest on federal funds sold		9			32			28
Interest and dividends on securities:
Taxable		3,556			4,683			5,946
Non-taxable		3,067			2,132			2,272
Interest-bearing deposits		63			169			348
TOTAL INTEREST INCOME		74,299			78,972			88,546
INTEREST EXPENSE
Time deposits of $100 or more		4,041			7,013			10,075
Other time and savings deposits		4,507			8,713			13,800
Borrowed funds		1,693			2,262			2,166
TOTAL INTEREST EXPENSE		10,241			17,988			26,041
NET INTEREST INCOME		64,058			60,984			62,505
PROVISION FOR (RECOVERY OF) LOAN LOSSES		(2,685		)	40,374			20,843
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		66,743			20,610			41,662
NON-INTEREST INCOME:
Service charges on deposit accounts		5,186			5,285			5,342
Other service fees		4,653			3,631			3,363
Net gain (loss) on sale of securities		(2,355		)	1,744			2,756
Income on investment in bank-owned life insurance		599			632			657
Mortgage banking activities		7,272			6,252			6,345
Recovery of (provision for) sold mortgage losses		1,437			(392		)	(641		)
Other than temporary impairment of equity securities		(39		)	(50		)	(116		)
Gain (loss) on sale of loans		575			(3,032		)	—
Gain on sale of branch		310			—			—
Write-down of subsidiary held-for-sale		—			(1,019		)	—
Other income		766			515			474
TOTAL NON-INTEREST INCOME		18,404			13,566			18,180
NON-INTEREST EXPENSES:
Salaries and employee benefits		30,976			26,313			27,537
Occupancy and equipment expense		7,816			7,039			8,242
Data processing		1,494			1,743			1,536
Amortization of core deposit intangible		680			1,080			1,174
Communications		1,389			1,373			1,658
FDIC assessment		2,030			2,668			3,475
Loan collection fees		739			1,079			1,571
Other professional fees		1,667			2,012			1,380
Net cost of operation of other real estate owned		(602		)	13,431			5,068
Loss on sale of premises and equipment		142			131			1,494
Goodwill impairment		—			—			4,944
Other		9,589			9,942			9,464
TOTAL NON-INTEREST EXPENSES		55,920			66,811			67,543
INCOME (LOSS) BEFORE INCOME TAXES		29,227			(32,635		)	(7,701		)
INCOME TAX EXPENSE (BENEFIT)		10,401			(23,961		)	6,694
NET INCOME (LOSS)		18,826			(8,674		)	(14,395		)
Preferred stock dividend and accretion of preferred stock discount		1,877			3,911			2,987
NET INCOME (LOSS) TO COMMON SHAREHOLDERS		$	16,949		$	(12,585	)	$	(17,382	)
NET INCOME (LOSS) PER COMMON SHARE:
Basic		$	1.19		$	(1.91	)	$	(2.86	)
Diluted		$	1.19		$	(1.91	)	$	(2.86	)
CASH DIVIDENDS PER COMMON SHARE		$	—		$	—		$	—

See notes to condensed consolidated financial statements

67

YADKIN FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPRENHENSIVE INCOME (LOSS)

For the years ended December 31, 2013, 2012 and 2011

	Year ended December 31,
	2013			2012			2011
	(Amounts in thousands)
NET INCOME (LOSS)	$	18,826		$	(8,674	)	$	(14,395	)
OTHER COMPREHENSIVE INCOME:
Unrealized holding gains (losses) on securities available-for-sale	(9,117		)	2,127			8,170
Tax effect	3,489			(819		)	(3,145		)
Unrealized holding gains (losses) on securities available-for-sale, net of tax amount	(5,628		)	1,308			5,025
Reclassification adjustment for realized (gains) and losses	2,355			(1,605		)	(2,836		)
Tax effect	(906		)	618			1,092
Reclassification adjustment for realized gains and losses, net of tax amount	1,449			(987		)	(1,744		)
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX	(4,179		)	321			3,281
COMPREHENSIVE INCOME (LOSS)	$	14,647		$	(8,353	)	$	(11,114	)

See notes to consolidated financial statements

68

YADKIN FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Years ended December 31, 2013, 2012 and 2011

																		Accumulated
																		Other			Total
	Common Stock					Preferred									Accumulated			Comprehensive			Shareholders'
	Shares		Amount			Stock			Warrants			Surplus			Deficit			Income (Loss)			Equity
	(Amounts in thousands, except share data)
BALANCE, DECEMBER 31, 2010	16,147,640		$	16,148		$	46,771		$	3,581		$	114,649		$	(34,274	)	$	582		$	147,457
Net loss	—		—			—			—			—			(14,395		)	—			(14,395		)
Issuance of common stock	3,233,548		3,233			—			—			3,169			—			—			6,402
Issuance of restricted stock	145,000		145			—			—			(145		)	—			—			—
Discount accretion on preferred stock	—		—			618			—			—			(618		)	—			—
Share based compensation:
stock options	—		—			—			—			77			—			—			77
restricted stock	—		—			—			—			133			—			—			133
Preferred stock dividends	—		—			—			—			—			(2,369		)	—			(2,369		)
Other comprehensive income	—		—			—			—			—			—			3,281			3,281
BALANCE, DECEMBER 31, 2011	19,526,188		$	19,526		$	47,389		$	3,581		$	117,883		$	(51,656	)	$	3,863		$	140,586
Net loss	—		—			—			—			—			(8,674		)	—			(8,674		)
Issuance of common stock	—		—			45,000			—			(2,528		)	—			—			42,472
Conversion of preferred stock into common stock	23,164,676		23,165			(65,907		)	—			40,862			—			—			(1,880		)
Issuance of restricted stock	507,450		508			—			—			(508		)	—			—			—
Restricted stock issued (forfeited)	(46,668	)	(47		)	—			—			47			—			—			—
Discount accretion on preferred stock	—		—			1,460			—			—			(1,460		)	—			—
Share based compensation:
stock options	—		—			—			—			32			—			—			32
restricted stock	—		—			—			—			388			—			—			388
Preferred stock dividends	—		—			—			—			—			(2,451		)	—			(2,451		)
Other comprehensive income	—		—			—			—			—			—			321			321
BALANCE, DECEMBER 31, 2012	43,151,646		$	43,152		$	27,942		$	3,581		$	156,176		$	(64,241	)	$	4,184		$	170,794
Net income	—		—			—			—			—			18,826			—			18,826
Issuance of restricted stock	3,242		3			—			—			(3		)	—			—			—
1-for-3 reverse stock split	(28,767,896	)	(28,768		)	—			—			28,768			—			—			—
Repurchase fractional shares	(3,006	)	(3		)	—						(36		)	—						(39		)
Repurchase and cancellation of warrants	—		—			—			(1,731		)	1,711			—			—			(20		)
Discount accretion on preferred stock	—		—			463			—			—			(463		)	—			—
Share based compensation:
stock options	—		—			—			—			22			—			—			22
restricted stock	—		—			—			—			480			—			—			480
Preferred stock dividends	—		—			—			—			—			(1,414		)	—			(1,414		)
Other comprehensive loss	—		—			—			—			—			—			(4,179		)	(4,179		)
BALANCE, DECEMBER 31, 2013	14,383,986		$	14,384		$	28,405		$	1,850		$	187,118		$	(47,292	)	$	5		$	184,470

See notes to consolidated financial statements

69

YADKIN FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2013, 2012 and 2011

	2013			2012			2011
	(Amounts in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	18,826		$	(8,674	)	$	(14,395	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Net amortization of premiums on investment securities	6,499			7,313			4,979
Provision for (recovery of) loan losses	(2,685		)	40,374			20,843
(Recovery of) losses for mortgage loans sold	(1,437		)	392			641
(Gain) loss on sales of loans	(575		)	3,032			—
Net gain on sale of mortgage loans	(7,133		)	(1,955		)	(4,488		)
Write-down of subsidiary held-for-sale	—			1,019			—
Other than temporary impairment of investments	39			50			116
Impairment of goodwill	—			—			4,944
Increase in cash surrender value of life insurance	(599		)	(632		)	(657		)
Depreciation and amortization	2,820			2,878			2,897
Loss on sales and impairment of premises and equipment	142			131			1,494
Gain on sale of branch	(310		)	—			—
Net (gains) losses on sale and write downs of other real estate owned	(875		)	12,383			3,756
(Gain) loss on sale of securities	2,355			(1,744		)	(2,756		)
Amortization of core deposit intangible	680			1,080			1,174
Deferred tax provision (benefit)	10,513			(23,751		)	5,983
Stock based compensation expense	502			420			210
Originations of mortgage loans held-for-sale	(266,031		)	(329,451		)	(471,607		)
Proceeds from sales of mortgage loans	281,930			323,261			506,980
Decrease in capital lease obligations	(44		)	(41		)	(37		)
Decrease in accrued interest receivable	157			369			1,202
(Increase) decrease in other assets	(3,916		)	5,526			6,648
Decrease in accrued interest payable	(778		)	(990		)	(683		)
Increase (decrease) in other liabilities	907			2,742			(1,913		)
NET CASH PROVIDED BY OPERATING ACTIVITIES	40,987			33,732			65,331
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale securities	(123,839		)	(142,589		)	(172,438		)
Proceeds from sales of available-for-sale securities	80,147			36,428			103,138
Proceeds from maturities and paydowns of available-for-sale securities	84,054			88,278			40,071
Net (increase) decrease in loans	(57,876		)	76,419			106,363
Proceeds from the redemption of Federal Home Loan Bank stock	682			1,976			3,286
Purchases of premises and equipment	(2,899		)	(2,624		)	(3,618		)
Proceeds from the sale of premises and equipment	1,397			38			1,149
Proceeds from the sale of other real estate owned	10,579			17,741			14,365
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	(7,755		)	75,667			92,316
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in checking, NOW, money market and savings accounts	62,783			42,916			49,503
Net decrease in time certificates	(176,021		)	(142,595		)	(338,569		)
Net decrease in short-term borrowings	(15,886		)	631			804
Proceeds from long-term borrowings	—			—			15,000
Repayment of long-term borrowings	(36		)	(1,034		)	(27,033		)
Proceeds from the issuance of common stock	—			—			6,402

70

YADKIN FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED

Years ended December 31, 2013, 2012 and 2011

	2013			2012			2011
	(Amounts in thousands)
Net proceeds from the issuance of preferred stock	$	—		$	40,592		$	—
Repurchase and cancellation of warrants	(20		)	—			—
Payment of fractional shares for the 1-for-3 stock split	(39		)	—			—
Preferred dividends paid	(1,414		)	(4,431		)	(616		)
NET CASH USED IN FINANCING ACTIVITIES	(130,633		)	(63,921		)	(294,509		)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	$	(97,401	)	$	45,478		$	(136,862	)
CASH AND CASH EQUIVALENTS:
Beginning of year	138,396			92,918			229,780
End of year	$	40,995		$	138,396		$	92,918
SUPPLEMENTARY CASH FLOW INFORMATION:
Cash paid for interest	$	11,056		$	19,032		$	27,029
Cash paid for income taxes	$	600		$	—		$	26
SUPPLEMENT DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Transfer from loans to foreclosed real estate	$	4,233		$	13,896		$	17,505
Transfer from gross loans to loans held-for-sale	$	—		$	31,464		$	—
Change in unrealized gain on investment securities available-for-sale, net of tax effect	$	(4,179	)	$	321		$	3,281

See notes to consolidated financial statements

71

Notes to Consolidated Financial Statements

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization – Yadkin Financial Corporation (the “Company”) was formed July 1, 2006 as a holding company for Yadkin Bank (the “Bank”). The Bank has six wholly owned subsidiaries Green Street I, LLC, Green Street II, LLC, Green Street III, LLC, Green Street IV, LLC, Green Street V, LLC, all of which hold other real estate owned by the Bank, and PBRE, Inc. PBRE, Inc. is a shell company that serves as a trustee on real estate loans. The Bank was incorporated in North Carolina on September 16, 1968, and is a member of the Federal Deposit Insurance Corporation ("FDIC"). As a result, the Bank is regulated by the state and the FDIC. The Bank is also a member of the Federal Home Loan Bank of Atlanta. The Company is headquartered in Elkin, North Carolina and the Bank provides consumer and commercial banking services in North Carolina and South Carolina through 34 full-service banking offices. The Company and its subsidiaries are collectively referred to herein as the "Company." The Company formed Yadkin Valley Statutory Trust I (the “Trust”) during November 2007 in order to facilitate the issuance of trust preferred securities. The Trust is a statutory business trust formed under the laws of the state of Delaware. As part of the American Community Bancshares, Inc. acquisition, the Company also acquired American Community Bank Capital Trust ("American Community Trust") which facilitated the issuance of trust preferred shares. The American Community Trust is a statutory business trust formed under the laws of the state of Delaware. All of the common securities of the Trusts are owned by the Company.

In 2013, the Company executed a one-for-three reverse stock split and an amendment to the Company and Bank's Articles of Incorporation changing its name to Yadkin Financial Corporation and Yadkin Bank, respectively. Both of these events, along with the Company's new NASDAQ ticker symbol, YDKN, were effective on May 28, 2013.

Basis of Presentation ‑The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, the Bank. All significant intercompany accounts and transactions have been eliminated in consolidation.

Cash and Cash Equivalents ‑Cash and cash equivalents include cash on hand, amounts due from banks, interest-bearing deposits, and federal funds sold. Generally, federal funds are purchased and sold for one‑day periods. Restricted cash as of December 31, 2012 was $1,724,948. There were no cash restrictions as of December 31, 2013.

Investment Securities ‑ Debt securities that the Bank has the positive intent and ability to hold to maturity are classified as “held-to-maturity” securities and reported at amortized cost. Debt and equity securities that are bought and held principally for the purpose of selling in the near term are classified as "trading" securities and reported at fair value with unrealized gains and losses included in earnings. Debt and equity securities not classified as either held-to-maturity or trading securities are classified as "available-for-sale" securities and reported at fair value with unrealized gains and losses excluded from earnings and reported, net of related tax effects, as a separate component of equity and as an item of other comprehensive income. Gains and losses on the sale of available-for-sale securities are determined using the trade date basis. Declines in the fair value of individual held-to-maturity and available-for-sale securities below their cost that are other-than-temporary (“OTTI”) result in write-downs of the individual securities to their fair value. The related write downs are included in earnings as realized losses. Premiums and discounts are recognized in interest income using the effective interest method over the period to maturity. Transfers of securities between classifications are accounted for at fair value. All securities held at December 31, 2013 and 2012 are classified as available-for-sale.

Loans and Allowance for Loan Losses‑ Loans that management has the intent and ability to hold for the foreseeable future are stated at their outstanding principal balances adjusted for any deferred fees and costs. Interest on loans is calculated by using the simple interest method on daily balances of the principal amount outstanding. Loan origination and other fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.

All loans over $20,000 are risk graded on a scale from 1 (highest quality) to 8 (loss). Management considers certain loans graded “doubtful” or “loss” to be impaired and may consider “substandard” loans impaired depending on an evaluation of the probability of repayment of the loan. All classes of loans are considered impaired when all or a portion of the loan is determined to be uncollectable. Loans that are deemed to be impaired (i.e., probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan) are evaluated based on fair value of the collateral if the loan is collateral dependent, the fair value of the loan or, alternatively, discounted expected cash flows. A specific reserve is established as part of the allowance for loan losses to record the difference between the stated principal amount and the present value or market value of the impaired loan. Impaired loans are evaluated on a loan-by-loan basis (e.g., loans with risk characteristics unique to an individual borrower). For all classes of loans the Company discontinues the accrual of interest income when the loans are either at least 90 days past due or less than 90 days past due but the collectability of such interest and principal becomes doubtful. Subsequent payments received on nonaccrual loans are recorded as a reduction of principal. Interest income is recorded only after principal recovery

72

is reasonably assured. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current, the loan has performed for six months, and future payments are probable.

The provision for loan losses charged to operations is an amount sufficient to bring the allowance for loan losses to an estimated balance considered adequate to absorb potential losses in the portfolio resulting from known and expected losses as of the balance sheet date. Management's determination of the adequacy of the allowance is based on an evaluation of the portfolio, current economic conditions, historical loan loss experience and other risk factors. Recovery of the carrying value of loans is dependent to some extent on future economic, operating and other conditions that may be beyond the control of the Bank. Unanticipated future adverse changes in such conditions could result in material adjustments to the allowance for loan losses. In addition, regulatory examiners may require the Bank to recognize changes to the allowance for loan losses based on their judgments about information available to them at the time of their examination.

Loans Held-for-Sale‑ Loans held-for-sale primarily consist of one to four family residential loans originated for sale in the secondary market and are carried at the lower of cost or market determined on an aggregate basis. Gains and losses on sales of loans held-for-sale are included in other non-interest income in the consolidated statements of loss. Gains and losses on loan sales are determined by the difference between the selling price and the carrying value of the loans sold.

Foreclosed Real Estate- Foreclosed real estate is recognized at fair value of foreclosure, and then subsequently at the lower of carrying amount or market value less estimated cost to sell. Any initial losses at the time of foreclosure are charged against the allowance for loan losses with any subsequent losses or write-downs included in the consolidated statements of loss as a component of noninterest expenses.

Business Combinations ‑ TheCompany accounts for all business combinations after January 1, 2009 by the acquisition method of accounting whereby acquired assets and liabilities are recorded at fair value on the date of acquisition with the remainder of the purchase price allocated to identified intangible assets and goodwill.

Purchased Impaired Loans - Purchased loans acquired in a business combination are recorded at estimated fair value on the date of acquisition without the carryover of the related allowance for loan losses, which include loans purchased in the American Community acquisition. Purchased impaired loans are accounted for under the Receivables topic (ASC 310-30) of the FASB Accounting Standards Codification ("ASC") when the loans have evidence of credit deterioration since origination and it is probable at the date of acquisition that the Company will not collect all contractually required principal and interest payments. Evidence of credit quality deterioration as of the date of acquisition may include statistics such as past due and nonaccural status. Purchased impaired loans generally meet the Company’s definition for nonaccrual status. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable difference which is included in the carrying amount of the loans. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent significant increases in cash flows result in a reversal of the provision for loan losses to the extent of prior charges, or the nonaccretable difference to accretable yield with a positive impact on future interest income. Further, any excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows.

Purchased Performing Loans – The Company accounts for performing loans acquired in business combinations using the contractual cash flows method of recognizing discount accretion based on the acquired loans’ contractual cash flows. Purchased performing loans are recorded at fair value, including a credit discount. The fair value discount is accreted as an adjustment to yield over the estimated lives of the loans. There is no allowance for loan losses established at the acquisition date for purchased performing loans in the American Community acquisition. A provision for loan losses is recorded for any further deterioration in these loans subsequent to the merger.

Mortgage Banking Activities – When the Bank retains the rightto service a sold mortgage loan, the previous carrying amount is allocated between the loan sold and the retained mortgage servicing right based on their relative fair values on the date of transfer. The Bank uses the fair value method of accounting for mortgage servicing rights.

Servicing assets are recognized as separate assets when rights are acquired through purchase or through sale of financial assets.

A valuation of the fair value of the mortgage servicing rights is performed using a pooling methodology. Similar loans are “pooled” together and evaluated on a discounted earnings basis to determine the present value of future earnings. The present value of future earnings is the estimated market value for the pool, calculated using consensus assumptions that a third party purchaser would utilize in evaluating potential acquisition of the servicing.

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Premises and Equipment‑ Premises and equipment are stated at cost less accumulated depreciation and amortization. Additions and major replacements or betterments, which extend the useful lives of premises and equipment, are capitalized. Maintenance, repairs and minor improvements are expensed as incurred. Depreciation and amortization is provided based on the estimated useful lives of the assets using both straight‑line methods for buildings and land improvements and accelerated methods for furniture and fixtures. The estimated useful lives for computing depreciation and amortization are 10 years for land improvements, 30 to 40 years for buildings, and 3 to 10 years for furniture and equipment. Gains or losses on dispositions of premises and equipment are reflected in income.

The Company reviews long‑lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. If the sum of the expected future cash flows is less than the carrying amount of the asset, an impairment loss is recognized.

Goodwill and Other Intangibles– The Company performed an annual goodwill impairment assessment for the Sidus segment as of October 1st. At June 30, 2011, it was determined that impairment existed in the mortgage reporting unit and a goodwill impairment charge of $4.9 million was recorded. See Note 22 for further discussion of goodwill impairment.

Intangible assets with finite lives include core deposits and a non-compete agreement with a former employee of American Community. Intangible assets are subject to impairment testing whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Core deposit intangibles are amortized on the sum-of-years digits method (intangibles acquired in 2002 and 2009), straight-line method (intangibles acquired in 2004) and an accelerated method (intangibles acquired in 2008) over a period not to exceed 20 years. The non-compete agreement as part of the American Community acquisition and is amortized over five years.

The following table shows carrying amounts and accumulated amortization of all intangible assets as of December 31, 2013 and 2012:

	December 31, 2013					December 31, 2012
	Carrying Amount		Accumulated Amortization			Carrying Amount		Accumulated Amortization
	(Amounts in thousands)
Amortized intangible assets:
Core deposit intangible	$	12,520	$	(10,546	)	$	12,522	$	(9,869	)
Non-compete agreement	880		(838		)	880		(698		)
	$	13,400	$	(11,384	)	$	13,402	$	(10,567	)

The Bank’s projected amortization expense for the core deposit intangible for the years ending December 31, 2014, 2015, 2016, 2017, 2018 and thereafter is $589,813, $502,350, $414,885, $250,095, $112,956, and $103,436, respectively. The remaining weighted average amortization period is 6.1 years. The Bank’s projected amortization expense for the non-compete agreement for the year ending December 31, 2014 is $41,660.

Income Taxes ‑ Provisions for income taxes are based on amounts reported in the statements of loss and include changes in deferred taxes. Deferred taxes are computed using the asset and liability approach. The tax effects of differences between the tax and financial accounting basis of assets and liabilities are reflected in the balance sheets at the tax rates expected to be in effect when the differences reverse.

Valuation allowances are recorded to reduce deferred tax assets to the amounts management concludes are more-likely-than-not to be realized. Under ASC Topic 740 on Income Taxes, income tax benefits are recognized and measured based upon a two-step model: 1) a tax position must be more-likely-than-not to be sustained based solely on its technical merits in order to be recognized, and 2) the benefit is measured as the largest dollar amount of that position that is more-likely-than-not to be sustained upon settlement. The difference between the benefit recognized for a position in accordance with the Income Tax topic 740 model and the tax benefit claimed on a tax return is referred to as an unrecognized tax benefit.

Earnings Per Share ‑ Basicearnings per share is calculated on the basis of the weighted average number of shares outstanding. Potentially dilutive common stock arising from stock options and restricted stock awards are included in diluted earnings per share, with the exception of restricted stock issued with performance and service conditions that have not been met. These conditions include performance requirements based on achieving certain earnings and credit performance standards and a minimum of 2-years of service requirement.

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Share-Based Payment‑ The Company recognizes the cost of employee services received in exchange for an award of equity instruments in the financial statements over the period the employee is required to perform the services in exchange for the award (presumptively the vesting period) in accordance with Share-based Payment accounting guidance. This guidance also requires measurement of the cost of employee services received in exchange for an award based on the grant-date fair value of the award.

Non-marketable equity securities - As a requirement for membership, the Bank invests in stock of Federal Home Loan Bank of Atlanta (“FHLB”). In addition, the Company also invests in other equity investments for which stock is not publicly traded. Due to the redemption provisions of FHLB stock, the estimated fair value of the stock is equivalent to its respective cost. Other equity investments are reviewed for impairment on a quarterly basis. These investments are discussed further in Note 3.

Comprehensive Income (Loss)- Comprehensive income (loss) is defined as “the change in equity [net assets] of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners”. The term comprehensive income includes components of comprehensive income including net income. Other comprehensive income refers to revenues, expenses, gains and losses that under generally accepted accounting principles in the United States (“GAAP”) are included in comprehensive income but excluded from net income. Currently, the Company’s other comprehensive income consists of unrealized gains and losses, net of deferred income taxes, on available-for-sale securities.

Use of Estimates ‑ Thepreparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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. Such estimates include, for example, assets acquired and liabilities assumed from business combinations, the allowance for loan losses, valuation of deferred tax assets, valuation of certain level 2 and level 3 investment securities, valuation of mortgage servicing rights, valuation of other real estate owned, evaluation of securities for other-than-temporary, valuation of interest rate lock commitments and derivatives and goodwill impairment. Actual results could differ from those estimates.

New Accounting Standards

Recently Adopted Accounting Standards

In February 2013, the FASB issued Accounting Standards Update No. 2013-02, "Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income" ("ASU 2013-02"). This guidance is the culmination of the FASB's deliberation on reporting reclassification adjustments from accumulated other comprehensive income ("AOCI"). The amendments in ASU 2013-02 do not change the current requirements for reporting net income or other comprehensive income. However, the amendments require disclosure of amounts reclassified out of AOCI in its entirety, by component, on the face of the statement of operations or in the notes thereto. Amounts that are not required to be reclassified in their entirety to net income must be cross-referenced to other disclosures that provide additional detail. This standard is effective prospectively for annual and interim reporting periods beginning after December 15, 2012. The Company has adopted the standard and the adoption of ASU 2013-02 did not have an impact on the Company's financial condition, results of operations, or cash flows.

In 2013, the FASB issued Accounting Standards Update No. 2014-04, "Receivables (Topic 310): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure" ("ASU 2014-04"). The ASU clarifies that an in substance repossession or foreclosure occurs upon either the creditor obtaining legal title to the residential real estate property or 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 asimilar legal agreement. The amendments are effective for annual periods, and interim reporting periods within those annual periods, beginning after December 15, 2014. The amendments may be adopted using either a modified retrospective transition method or a prospective transition method. Early adoption is permitted. Management does not believe the amendments will have a material impact on the Company's financial condition, results of operations, or cash flows.

Reclassifications - Certain income and expenses reported in 2011 and 2012 have been reclassified to conform to the 2013 presentation of mortgage banking activity income. Reclassifications include interest income which was previously presented in other income, commission expenses recorded in salaries both of which are now recorded as a reduction in mortgage banking activity income, and other miscellaneous expenses previously recorded in other expenses that have been reclassified as a reduction to mortgage banking activity income. In addition, gains on sale of mortgage loans has been reclassified to be reported with mortgage banking income to provide a combined overview of the mortgage banking activity segment.

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Effective May 28, 2013, the Company executed a one-for-three reverse stock split. All outstanding options and restricted shares and earnings per share calculations have been adjusted for the effect of this reverse stock split. The reclassifications had no effect on net loss or shareholders' equity, as previously reported.

2. INVESTMENT SECURITIES

Investment securities at December 31, 2013 and December 31, 2012 are summarized as follows:

	December 31, 2013
	Amortized Cost		Unrealized  Gains		Unrealized  Losses		Fair Value
	(Amounts in thousands)
Available-for-sale securities:
Securities of U.S. government agencies due:
Within 1 year	$	1,560	$	—	$	8	$	1,552
After 1 but within 5 years	15,039		—		199		14,840
	16,599		—		207		16,392
Government sponsored agencies:
Residential mortgage-backed securities due:
Within 1 year	—		—		—		—
After 1 but within 5 years	632		42		—		674
After 5 but within 10 years	17,829		284		—		18,113
After 10 years	85,277		624		1,247		84,654
	103,738		950		1,247		103,441
Collateralized mortgage obligations due:
After 1 but within 5 years	3,139		—		7		3,132
After 5 but within 10 years	5,093		140		—		5,233
After 10 years	43,813		660		95		44,378
	52,045		800		102		52,743
Private label collateralized mortgage obligations due:
After 5 but within 10 years	143		—		1		142
After 10 years	14,530		13		194		14,349
	14,673		13		195		14,491
State and municipal securities due:
Within 1 year	910		10		—		920
After 1 but within 5 years	7,069		311		—		7,380
After 5 but within 10 years	44,590		1,064		827		44,827
After 10 years	47,422		282		2,127		45,577
	99,991		1,667		2,954		98,704
Common and preferred stocks:	1,868		1,283		—		3,151
Total available-for-sale securities	$	288,914	$	4,713	$	4,705	$	288,922

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	December 31, 2012
	Amortized Cost		Unrealized  Gains		Unrealized  Losses		Fair Value
	(Amounts in thousands)
Available-for-sale securities:
Securities of U.S. government agencies due:
Within 1 year	$	10,005	$	15	$	—	$	10,020
After 1 but within 5 years	17,479		29		1		17,507
	27,484		44		1		27,527
Government sponsored agencies:
Residential mortgage-backed securities due:
Within 1 year	119		2		—		121
After 1 but within 5 years	315		26		—		341
After 5 but within 10 years	10,371		341		—		10,712
After 10 years	94,319		2,089		325		96,083
	105,124		2,458		325		107,257
Collateralized mortgage obligations due:
After 1 but within 5 years	648		2		—		650
After 5 but within 10 years	9,975		206		3		10,178
After 10 years	111,155		902		292		111,765
	121,778		1,110		295		122,593
Private label collateralized mortgage obligations due:
After 5 but within 10 years	178		—		—		178
After 10 years	848		19		—		867
	1,026		19		—		1,045
State and municipal securities due:
Within 1 year	620		6		—		626
After 1 but within 5 years	5,734		321		—		6,055
After 5 but within 10 years	24,464		1,698		12		26,150
After 10 years	50,031		2,064		361		51,734
	80,849		4,089		373		84,565
Common and preferred stocks:	88		46		1		133
Total available-for-sale securities	$	336,349	$	7,766	$	995	$	343,120

Mortgage-backed securities are included in maturity groups based upon stated maturity date. At December 31, 2013, $103.4 million of the Bank's mortgage-backed securities were pass-through securities and $67.2 million were collateralized mortgage obligations. At December 31, 2012, $107.3 million of the Bank's mortgage-backed securities were pass-through securities and $123.6 million were collateralized mortgage obligations. Actual maturity will vary based onrepayment of the underlying mortgage loans.

Gross realized gains on the sale of securities for the year ended December 31, 2013 was $576,169. Gross realized gains on the sale of securities for the years ended December 31, 2012 were $1.7 million. Gross realized losses on the sale of securities for the year ended December 31, 2013 was $2.9 million. There were no losses on the sale of securities available-for-sale for the years ended December 31, 2012 or 2011. Gross realized gains on sales of available-for-sale securities in 2011 were $2.8 million.

Investment securities with carrying values of approximately $107.4 million and $88.7 million at December 31, 2013 and December 31, 2012, respectively, were pledged as collateral for public deposits and for borrowing from Federal Reserve or other purposes as required or permitted by law.

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If management determines that an investment has experienced an other than temporary impairment ("OTTI"), the loss is recognized in the income statement. There were no OTTI charges recorded for securities available-for-sale for the year ended December 31, 2013. The Company's investment in a financial institution classified as available-for-sale was considered to be OTTI and approximately $50,000 was charged off in 2012. Management believed that the market prices of these equity securities would not recover in the immediate future due to the economic environment at such time. All OTTI losses were deemed to be credit related losses. There were no OTTI charges recorded for securities available-for-sale for the year ended December 31, 2011.

The following table presents the gross unrealized losses and fair value of investment securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2013 and December 31, 2012. Securities that have been in a loss position for twelve months or more at December 31, 2013 include one U.S. government agency, one collateralized mortgage obligation, one private label collateralized mortgage obligation and nine state and municipal securities. The key factors considered in evaluating the collateralized mortgage obligations, private label collateralized mortgage obligations, and municipal securities were cash flows of the investment and the assessment of other relative economic factors. Securities that have been in a loss position for twelve months or more at December 31, 2012 include three collateralized mortgage obligations, one private label collateralized mortgage obligation and two other securities. The unrealized losses relate to securities that have incurred fair value reductions due to a shift in demand from non-governmental securities and municipals to U.S. Treasury bonds and governmental agencies due to credit market concerns. The unrealized losses are not likely to reverse until market interest rates decline to the levels that existed when the securities were purchased. None of the unrealized losses relate to the marketability of the securities or the issuer's ability to honor redemption obligations. It is not more likely than not that the Company will have to sell the investments before recovery of their amortized cost bases.

	Less Than 12 Months				12 Months or More				Total
December 31, 2013	Fair value		Unrealized  losses		Fair value		Unrealized  losses		Fair value		Unrealized  losses
	(Amounts in thousands)
Securities available-for-sale:
U.S. government agencies	$	14,840	$	199	$	1,552	$	8	$	16,392	$	207
Government sponsored agencies:
Residential mortgage-backed securities	49,954		1,247		—		—		49,954		1,247
Collateralized mortgage obligations	11,372		64		2,121		38		13,493		102
Private label collateralized mortgage obligations	9,941		194		142		1		10,083		195
State and municipal securities	31,218		1,950		14,280		1,004		45,498		2,954
Common and preferred stocks	—		—		—		—		—		—
Total temporarily impaired securities	$	117,325	$	3,654	$	18,095	$	1,051	$	135,420	$	4,705

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	Less Than 12 Months				12 Months or More				Total
December 31, 2012	Fair value		Unrealized  losses		Fair value		Unrealized  losses		Fair value		Unrealized  losses
	(Amounts in thousands)
Securities available-for-sale:
U.S. government agencies	$	2,429	$	1	$	—	$	—	$	2,429	$	1
Government sponsored agencies:
Residential mortgage-backed securities	12,021		325		$	—	—		12,021		325
Collateralized mortgage obligation	27,417		127		7,626		168		35,043		295
Private label collateralized mortgage obligations	—		—		178		—		178		—
State and municipal securities	22,899		373		—		—		22,899		373
Common and preferred stocks, and other	—		—		60		1		60		1
Total temporarily impaired securities	$	64,766	$	826	$	7,864	$	169	$	72,630	$	995

3. NON-MARKETABLE EQUITY SECURITIES

The aggregate cost of the Company's cost method investments totals $5,283,254 at December 31, 2013 and $6,706,012 at December 31, 2012. Cost method investments at December 31, 2013 include $3,472,500 in Federal Home Loan Bank ("FHLB") stock and $1,810,754 of investments in various trust and financial companies, which are included in other assets. All cost method investments were evaluated for impairment at December 31, 2013 and December 31, 2012. The following factors have been considered in determining the carrying amount of FHLB stock: 1) the recoverability of the par value, 2) the Company has sufficient liquidity to meet all operational needs in the foreseeable future and would not need to dispose of the stock below recorded amounts, 3) redemptions and purchases of the stock are at the discretion of the FHLB, and 4) the Company believes the FHLB has the ability to absorb economic losses given the expectation that the various FHLBs' have a high degree of government support. The Company estimated that the fair value equaled or exceeded the cost of these investments (that is, the investments were not impaired) with the following exceptions. During 2013, the Company's investment in a financial services company was considered to be other than temporarily impaired and approximately $39,185 was charged-off. The remaining value of the investment after the charge-off was $62,815 at December 31, 2013. During the year ended December 31, 2011, the Company's investment in a financial services company and a local community bank were considered to be other than temporarily impaired and approximately $116,003 was charged-off. In addition to the impairment charges recorded, the Company sold one of its investments in a financial services company for a loss of $79,910 for the year ended December 31, 2011. There were no other than temporary impairments of non-marketable equity securities recorded for the year ended December 31, 2012.

The following tables present non-marketable securities at December 31, 2013 and December 31, 2012:

		December 31, 2013
Investment	Investment Type	Original Cost		Cumulative OTTI Charge		Current Balance
Federal Home Loan Bank of Atlanta	Common Stock	$	3,472,500	$	—	$	3,472,500
Yadkin Valley Statutory Trust I	Common Stock	774,000		—		774,000
American Community Capital Trust II	Common Stock	310,000		—		310,000
Limited partnerships providing lending
services to middle-market companies	Limited Partner	629,073		—		629,073
Other	Common Stock	136,866		39,185		97,681
Total		$	5,322,439	$	39,185	$	5,283,254

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		December 31, 2012
Investment	Investment Type	Original Cost		Cumulative OTTI Charge		Current Balance
Federal Home Loan Bank of Atlanta	Common Stock	$	4,154,300	$	—	$	4,154,300
Yadkin Valley Statutory Trust I	Common Stock	774,000		—		774,000
American Community Capital Trust II	Common Stock	310,000		—		310,000
Limited partnerships providing lending
services to middle-market companies	Limited Partner	1,330,846		—		1,330,846
Other	Common Stock	138,780		1,914		136,866
Total		$	6,707,926	$	1,914	$	6,706,012

4. LOANS AND ALLOWANCE FOR LOAN LOSSES

General. The Bank provides to its customers a full range of short- to medium-term commercial, agricultural, Small Business Administration guaranteed, mortgage, home equity, and personal loans, both secured and unsecured. The Bank also makes real estate mortgage and construction loans.

The following table presents loans at December 31, 2013 and December 31, 2012 by class:

	December 31,			December 31,
	2013			2012
	(Amounts in thousands)
Construction and land development	$	131,035		$	131,981
Commercial real estate:
Owner occupied	382,766			342,962
Non-owner occupied	196,926			211,489
Residential mortgages:
1-4 family	174,072			168,611
Multifamily	41,713			35,337
Home equity lines of credit	194,145			191,888
Commercial	185,443			174,440
Consumer and other	51,667			51,664
Total	1,357,767			1,308,372
Less: Net deferred loan costs	979			1,132
Allowance for loan losses	(18,063		)	(25,149		)
Loans, net	$	1,340,683		$	1,284,355

Real Estate Loans. Real estate loans include construction and land development loans, commercial real estate loans, home equity lines of credit, and residential mortgages.

Commercial real estate loans totaled $579.7 million and $554.5 million at December 31, 2013 and December 31, 2012, respectively. This lending has involved loans secured by owner-occupied commercial buildings for office, storage and warehouse space, as well as non-owner occupied commercial buildings. The Bank generally requires the personal guaranty of borrowers and a demonstrated cash flow capability sufficient to service the debt. Loans secured by commercial real estate may be larger in size and may involve a greater degree of risk than one-to-four family residential mortgage loans. Payments on such loans are often dependent on successful operation or management of the properties.

Construction/development lending totaled $131.0 million and $132.0 million at December 31, 2013 and December 31, 2012, respectively. The Bank originates one-to-four family residential construction loans for the construction of custom homes (where the home buyer is the borrower) and provides financing to builders and consumers for the construction of pre-sold homes. The Bank generally receives a pre-arranged permanent financing commitment from an outside banking entity prior to financing the

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construction of pre-sold homes. The Bank also makes commercial real estate construction loans, primarily for owner-occupied properties. The Bank limits its construction lending risk through adherence to established underwriting procedures.

Residential one-to-four family loans amounted to $174.1 million and $168.6 million at December 31, 2013 and December 31, 2012, respectively. The Bank's residential mortgage loans are typically construction loans that convert into permanent financing and are secured by properties located within the Bank's market areas.

Home equity lines of credit totaled $194.1 million and $191.9 million at December 31, 2013 and December 31, 2012, respectively. The Bank's home equity lines of credit generally are variable rate lines of credit secured by junior liens on 1-4 family residential properties.

Commercial Loans. At December 31, 2013 and December 31, 2012, the Bank's commercial loan portfolio totaled $185.4 million and $174.4 million, respectively. Commercial loans include both secured and unsecured loans for working capital, expansion, and other business purposes. Short-term working capital loans are secured by accounts receivable, inventory and/or equipment. The Bank also makes term commercial loans secured by equipment and real estate. Lending decisions are based on an evaluation of the financial strength, cash flow, management and credit history of the borrower, and the quality of the collateral securing the loan. With few exceptions, the Bank requires personal guarantees and secondary sources of repayment. Commercial loans generally provide greater yields and reprice more frequently than other types of loans, such as real estate loans.

Consumer Loans. Loans to individuals (consumer loans) include automobile loans, boat and recreational vehicle financing, and miscellaneous secured and unsecured personal loans and totaled $51.7 million at December 31, 2013 and December 31, 2012, respectively. Consumer loans generally can carry significantly greater risks than other loans, even if secured, if the collateral consists of rapidly depreciating assets such as automobiles, boats, recreational vehicles, and equipment. Repossessed collateral securing a defaulted consumer loan may not provide an adequate source of repayment of the loan. Consumer loan collections are sensitive to job loss, illness and other personal factors. The Bank manages the risks inherent in consumer lending by following established credit guidelines and underwriting practices designed to minimize risk of loss.

In 2012, the Company embarked on an accelerated asset disposition plan (the “disposition plan”) in an effort to reduce nonperforming assets and problem loans that continued to be a strain on the Company's resources and capital. As a result, the Company sold $43 million in loans during the fourth quarter of 2012, and charged down another $11 million in other problem loans, resulting in approximately $35 million in total losses. The sale included $36 million in nonperforming loans consisting primarily of construction and commercial real estate loans. This sale was an effort to reduce overall credit risk within the Bank.

The following table presents loss information related to the sale and charge-off of problem loans as part of the accelerated asset disposition plan. The disposition plan was a strategy that was created and implemented in the fourth quarter 2012 to reduce levels of problem assets. The disposition plan consisted of the sale of three separate pools of loans (which were pooled based on similar size, classification and risk characteristics), and the sale of other individual classified loans.

Actual loss on the sale of impaired loans recognized in the fourth quarter of 2012 was $21.7 million which represents the difference between the recorded investment of the loan at sale date and the sales price received.

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Loan Sales	Recorded Investment of Loans Sold		Charge-offs (Losses) Recorded on the Sales		Additional Provisions Resulting from the Sale of Loans
	(Amounts in thousands)
Construction	$	16,211	$	7,625	$	6,100
Commercial Real Estate:
Owner Occupied	8,871		3,917		4,313
Non-owner Occupied	8,675		4,531		3,755
Mortgages:
1-4 Family	4,557		2,825		2,380
Multifamily	249		113		86
Home Equity Line of Credit	2,204		1,284		746
Commercial	2,291		1,329		1,290
Consumer and other	151		91		57
	$	43,209	$	21,715	$	18,727

Additional charge-offs of $11.0 million were also taken during the fourth quarter 2012 on other problem loans that were not sold. The following table presents a summary of charge-offs on other problem loans.

Loan Sales	Additional Charge-offs on Other Problem Loans
	(Amounts in thousands)
Construction	$	1,601
Commercial Real Estate:
Owner Occupied	1,599
Non-owner Occupied	2,267
Mortgages:
1-4 Family	291
Multifamily	—
Home Equity Line of Credit	1,309
Commercial	3,908
Consumer and other	24
	$	10,999

Other losses related to contingencies for warranties on loans sold and property taxes owed for 2012 (per the terms of the loan purchase agreement) were also recorded in the amount of $2.1 million. No purchase credit impaired loans were included in the sale of loans.

Loan Approvals. The Bank's loan policies and procedures establish the basic guidelines governing its lending operations. The guidelines address the type of loans that the Bank seeks, target markets, underwriting and collateral requirements, terms, interest rate and yield considerations and compliance with laws and regulations. All loans or credit lines are subject to approval procedures and amount limitations. These limitations apply to the borrower's total outstanding indebtedness to the Bank, including any indebtedness as a guarantor. The policies are reviewed and approved at least annually by the Board of Directors of the Bank. The Bank supplements its own supervision of the loan underwriting and approval process with periodic loan reviews by independent, outside professionals experienced in loan review. Responsibility for loan review, loan underwriting, and approval resides with the Chief Credit Officer position. On an annual basis, the Board of Directors of the Bank determines officers lending authority. Authorities may include loans, letters of credit, overdrafts, uncollected funds and such other authorities as determined by the Board of Directors.

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Substantially all of the Company's loans have been granted to customers in the Piedmont, foothills, northwestern mountains, and the Research Triangle regions of North Carolina and the upstate region of South Carolina.

In the normal course of business, the Company makes loans to directors and officers of the Company and its subsidiaries. All loans and commitments made to such officers and directors and to companies in which they are officers, or have significant ownership interest, have been made on substantially the same terms and conditions, including interest rates and collateral, as those prevailing at the same time for comparable transactions with other customers. Loans to directors, officers and related parties are subject to comparable loan features and present the same credit risk as those of non-related parties. An analysis of these related party loans for the year ended December 31, 2013 and 2012 is as follows:

	2013			2012
	(Amounts in thousands)
Balance, beginning of year	$	15,550		$	15,783
New loans	3,233			2,436
Repayments	(2,824		)	(2,669		)
Balance, end of year	$	15,959		$	15,550

Credit Review and Evaluation. The Bank has a credit risk review department that reports to the Chief Credit Officer. The focus of the department is on policy compliance and proper grading of higher credit risk loans as well as new and existing loans on a sample basis. Additional reporting for problem/criticized assets has been developed along with an after-the-fact loan review.

The Bank uses a risk grading program to facilitate the evaluation of probable inherent loan losses and the adequacy of the allowance for loan losses for real estate, commercial and consumer loans. In this program, risk grades are initially assigned by loan officers, reviewed by regional credit officers, and further reviewed by internal credit review analysts on a test basis. The Bank strives to maintain the loan portfolio in accordance with conservative loan underwriting policies that result in loans specifically tailored to the needs of the Bank's market area. Every effort is made to identify and minimize the credit risks associated with such lending strategies.

Loans over $20,000 are risk graded on a scale from 1 (highest quality) to 8 (loss). Acceptable loans at inception are grades 1 through 4, and these grades have underwriting requirements that at least meet the minimum requirements of a secondary market source. If borrowers do not meet credit history requirements, other mitigating criteria such as substantial liquidity and low loan-to-value ratios could be considered and would generally have to be met in order to make the loan. The Bank's loan policy states that a guarantor may be necessary if reasonable doubt exists as to the borrower's ability to repay. The Board of Directors has authorized the loan officers to have individual approval authority for risk grade 1 through 4 loans up to maximum exposure limits for each customer. New or renewed loans that are graded 5 (special mention) or lower must have approval from a regional credit officer. Any changes in risk assessments as determined by loan officers, credit administrators, regulatory examiners and management are also considered.

The risk grades, normally assigned by the loan officers when the loan is originated and reviewed by the regional credit officers, are based on several factors including historical data, current economic factors, composition of the portfolio, and evaluations of the total loan portfolio and assessments of credit quality within specific loan types. In some cases, the risk grades are assigned by regional executives, depending upon dollar exposure. Because these factors are dynamic, the provision for loan losses can fluctuate. Credit quality reviews are based primarily on analysis of borrowers' cash flows, with asset values considered only as a second source of payment. Regional credit officers work with lenders in underwriting, structuring and risk grading the Bank's credits. The Risk Review Officer focuses on lending policy compliance, credit risk grading, and credit risk reviews on larger dollar exposures. Management uses the information developed from the procedures above in evaluating and grading the loan portfolio. This continual grading process is used to monitor the credit quality of the loan portfolio and to assist management in determining the appropriate levels of the allowance for loan losses.

The following is a summary of the credit risk grade definitions for all loan types:

“1” - High Quality- These loans represent a credit extension of the highest quality. The borrower's historic (at least five years) cash flows manifest extremely large and stable margins of coverage. Balance sheets are conservative, well capitalized, and liquid. After considering debt service for proposed and existing debt, projected cash flows continue to be strong and provide ample

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coverage. The borrower typically reflects broad geographic and product diversification and has access to alternative financial markets.

“2” - Good Quality- These loans have a sound primary and secondary source of repayment. The borrower may have access to alternative sources of financing, but sources are not as widely available as they are to a higher graded borrower. This loan carries a normal level of risk, with minimal loss exposure. The borrower has the ability to perform according to the terms of the credit facility. The margins of cash flow coverage are satisfactory but vulnerable to more rapid deterioration than the highest quality loans.

“3” - Satisfactory- The borrowers are a reasonable credit risk and demonstrate the ability to repay the debt from normal business operations. Risk factors may include reliability of margins and cash flows, liquidity, dependence on a single product or industry, cyclical trends, depth of management, or limited access to alternative financing sources. Historic financial information may indicate erratic performance, but current trends are positive. Quality of financial information is adequate, but is not as detailed and sophisticated as information found on higher graded loans. If adverse circumstances arise, the impact on the borrower may be significant.

“4” - Satisfactory - Merits Attention- These credit facilities have potential developing weaknesses that deserve extra attention from the account manager and other management personnel. If the developing weakness is not corrected or mitigated, there may be deterioration in the ability of the borrower to repay the bank's debt in the future.

“5” - Watch or Special Mention - These loans are typically existing loans, made using the passing grades outlined above, that have deteriorated to the point that cash flow is not consistently adequate to meet debt service or current debt service coverage is based on projections. Secondary sources of repayment may include specialized collateral or real estate that is not readily marketable or undeveloped, making timely collection in doubt.

“6” - Substandard- Loans and other credit extensions bearing this grade are considered inadequately protected by the current sound worth and debt service capacity of the borrower or of any pledged collateral. These obligations, even if apparently protected by collateral value, have well-defined weaknesses related to adverse financial, managerial, economic, market, or political conditions jeopardizing repayment of principal and interest as originally intended. Clear loss potential, however, does not have to exist in any individual assets classified as substandard.

“7” - Substandard Impaired (also includes any loans over 90 days past due, excluding sold mortgages )- Loans and other credit extensions graded “7” have all the weaknesses inherent in those graded “6,” with the added characteristic that the severity of the weaknesses makes collection or liquidation in full highly questionable or improbable based upon currently existing facts, conditions, and values. The probability of some loss is extremely high, but because of certain important and reasonably specific factors, the amount of loss cannot be determined. All loans in this category are considered impaired and all material loans are evaluated for a specific reserve in accordance with FAS 114 and the bank's ALLL methodology and specific reserve guidelines.

"7B"- Doubtful- Loans and other credit extensions graded “7b” have all the weaknesses inherent in those graded “7,” with the added characteristic that the severity of the weaknesses makes collection or liquidation in full highly questionable or improbable based upon currently existing facts, conditions, and values. The probability of some loss is extremely high, but because of certain important and reasonably specific factors, the amount of loss cannot be determined. Such pending factors could include merger or liquidation, additional capital injection, refinancing plans, or perfection of liens on additional collateral. Loans in this classification are placed in non-accrual status, with collections applied to principal on the bank's books and evaluated for impairment. All loans in this category are considered impaired and all material loans are evaluated for a specific reserve in accordance with FAS 114 and the bank's ALLL methodology and specific reserve guidelines.

“8” - Loss- Loans in this classification are considered uncollectible and cannot be justified as a viable asset of the Bank. Such loans are to be charged-off or charged-down. This classification does not mean the loan has absolutely no recovery value, but that it is neither practical nor desirable to defer writing off this loan even though partial recovery may be obtained in the future.

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The following is a summary of credit quality indicators by class at December 31, 2013 and December 31, 2012:

Real Estate Credit Exposure as of December 31, 2013
			Commercial Real Estate
	Construction		Owner occupied		Non-owner occupied		1-4 Family		Multifamily		Home Equity
	(in thousands)
High Quality	$	—	$	—	$	—	$	90	$	—	$	161
Good Quality	356		—		1,587		982		957		6,627
Satisfactory	22,403		125,560		47,453		99,578		7,691		118,339
Merits Attention	90,343		226,320		133,072		62,242		31,686		61,026
Special Mention	14,434		20,284		7,392		5,307		551		5,075
Substandard	1,168		4,244		2,624		3,005		572		1,632
Substandard impaired	2,331		6,358		4,798		2,868		256		1,285
Doubtful	—		—		—		—		—		—
Loss	—		—		—		—		—		—
	$	131,035	$	382,766	$	196,926	$	174,072	$	41,713	$	194,145

Other Credit Exposures as of December 31, 2013
	Commercial		Consumer and other		Total Loans
	(in thousands)
High Quality	$	2,640	$	2,162	$	5,053
Good Quality	5,084		1,160		16,753
Satisfactory	63,674		21,221		505,919
Merits Attention	94,313		26,126		725,128
Special Mention	7,874		676		61,593
Substandard	9,553		32		22,830
Substandard impaired	2,305		290		20,491
Doubtful	—		—		—
Loss	—		—		—
	$	185,443	$	51,667	$	1,357,767

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Real Estate Credit Exposure as of December 31, 2012
			Commercial Real Estate
	Construction		Owner  occupied		Non-owner  occupied		1-4 Family		Multifamily		Home Equity
	(in thousands)
High Quality	$	—	$	119	$	—	$	375	$	—	$	111
Good Quality	464		—		—		1,301		—		6,756
Satisfactory	22,284		115,347		58,577		95,727		7,945		118,497
Merits Attention	78,668		191,958		129,283		56,629		25,681		59,568
Special Mention	16,797		23,396		16,084		7,862		571		4,228
Substandard	3,939		4,286		2,136		2,850		601		1,687
Substandard impaired	9,829		7,856		5,409		3,867		539		1,041
Doubtful	—		—		—		—		—		—
Loss	—		—		—		—		—		—
	$	131,981	$	342,962	$	211,489	$	168,611	$	35,337	$	191,888

Other Credit Exposures as of December 31, 2012
	Commercial		Consumer and other		Total Loans
	(in thousands)
High Quality	$	2,430	$	2,289	$	5,324
Good Quality	5,738		1,316		15,575
Satisfactory	62,071		22,459		502,907
Merits Attention	82,243		24,425		648,455
Special Mention	16,809		551		86,298
Substandard	1,009		122		16,630
Substandard impaired	4,140		502		33,183
Doubtful	—		—		—
Loss	—		—		—
	$	174,440	$	51,664	$	1,308,372

Nonaccrual loans and past due loans. Nonperforming assets include loans classified as nonaccrual, foreclosed bank-owned property and loans past due 90 days or more on which interest is still being accrued. It is the general policy of the Bank to stop accruing interest for all classes of loans past due 90 days or when it is apparent that the collection of principal and/or interest is doubtful. In addition, certain restructured loans are placed on nonaccrual status until sufficient evidence of timely payment is obtained. When a loan is placed on nonaccrual status, any interest previously accrued but not collected is reversed against interest income in the current period. Amounts received on nonaccrual loans generally are applied first to principal and then to interest only after all principal has been collected. There were no financing receivables past due over 90 days accruing interest as of December 31, 2013 and December 31, 2012.

Nonperforming loans as of December 31, 2013 totaled $15.4 million, or 1.12% of total loans, compared with $22.8 million, or 1.71% of total loans, as of December 31, 2012. The Bank aggressively pursues the collection and repayment of all loans. Other nonperforming assets, such as repossessed and foreclosed collateral is aggressively liquidated by the Bank's collection department. The total number of loans on nonaccrual status has decreased from 315 at December 31, 2012 to 195 at December 31, 2013.

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The following is a breakdown of nonaccrual loans as of December 31, 2013 and December 31, 2012:

	December 31, 2013		December 31, 2012
	(in thousands)
Financing Receivables on Nonaccrual status
Construction	$	2,331	$	7,385
Commercial Real Estate:
Owner occupied	4,417		5,787
Non-owner occupied	1,806		1,697
Mortgages:
1-4 Family first lien	2,734		3,123
Multifamily	256		539
Home Equity lines of credit	1,285		1,041
Commercial	2,306		2,790
Consumer and other	258		455
Total	$	15,393	$	22,817

Past due loans reported in the following table do not include loans granted forbearance terms since payments terms have been modified or extended, although the loans are past due based on original contract terms. All loans with forbearance terms are included and reported as impaired loans. Loans are considered past due if the required principal and interest income have not been received as of the date such payments were due.

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The following table presents the Bank's aged analysis of past due loans:

	30-59 Days  Past Due		60-89 Days  Past Due		Greater Than  90 Days		Total Past  Due		Current		Total Loans
December 31, 2013	(in thousands)
Construction	$	855	$	207	$	541	$	1,603	$	129,432	$	131,035
Commercial real estate:
Owner occupied	1,973		—		58		2,031		380,735		382,766
Non-owner occupied	1,172		129		432		1,733		195,193		196,926
Commercial	2,029		742		142		2,913		182,530		185,443
Mortgages:
Secured 1-4 family- first lien	2,738		1,190		1,186		5,114		168,958		174,072
Multifamily	—		249		—		249		41,464		41,713
Home equity lines of credit	909		341		75		1,325		192,820		194,145
Consumer and other	322		62		52		436		51,231		51,667
Total	$	9,998	$	2,920	$	2,486	$	15,404	$	1,342,363	$	1,357,767
December 31, 2012
Construction	$	4,395	$	345	$	1,865	$	6,605	$	125,376	$	131,981
Commercial real estate:
Owner occupied	838		114		4,237		5,189		337,773		342,962
Non-owner occupied	1,688		500		1,098		3,286		208,203		211,489
Commercial	2,027		34		2,660		4,721		169,719		174,440
Mortgages:
Secured 1-4 family- first lien	2,767		910		2,226		5,903		162,708		168,611
Multifamily	12		—		10		22		35,315		35,337
Home equity lines of credit	1,980		52		924		2,956		188,932		191,888
Consumer and other	236		45		342		623		51,041		51,664
Total	$	13,943	$	2,000	$	13,362	$	29,305	$	1,279,067	$	1,308,372

Impaired Loans. Management considers certain loans graded “substandard impaired” (loans graded 7), "doubtful" (loans graded 7B) or “loss” (loans graded 8) to be individually impaired and may consider “substandard” loans (loans graded 6) individually impaired depending on the borrower's payment history. The Bank measures impairment based upon probable cash flows or the value of the collateral. Collateral value is assessed based on collateral value trends, liquidation value trends, and other liquidation expenses to determine logical and credible discounts that may be needed. Updated appraisals are required for all impaired loans and typically at renewal or modification of larger loans if the appraisal is more than 12 months old.

Impaired loans for all classes of loans typically include nonaccrual loans, loans over 90 days past due still accruing, troubled debt restructured loans and other potential problem loans considered impaired based on other underlying factors. Troubled debt restructured loans are those for which concessions, including the reduction of interest rates below a rate otherwise available to that borrower or the deferral of interest or principal have been granted due to the borrower's weakened financial condition. Interest on troubled debt restructured loans is accrued at the restructured rates when it is anticipated that no loss of remaining principal will occur and a sustained payment performance period is obtained. Due to the borrowers' inability to make the payments required under the original loan terms, the Bank modifies the terms by granting a longer amortized repayment structure or reduced interest rates.  Potential problem loans are loans which are currently performing and are not included in nonaccrual or restructured loans above, but about which we have serious doubts as to the borrower's ability to comply with present repayment terms. These loans are likely to be included later in nonaccrual, past due or troubled debt restructured loans, so they are considered by management in assessing the adequacy of the allowance for loan losses.

Impaired loans under $250,000 are collectively reviewed for impairment based on homogeneous pools established for each class of impaired loans with similar risk characteristics in accordance with ASC 310-10-35-21 and are not included with non-impaired

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loans. Separate loss given probability of default rates are calculated for each impaired pool representing the risk associated with impaired loans less than $250,000 for that pool of loans. Total impaired loans under $250,000 collectively evaluated were $6.2 million and $7.8 million, respectively, as of December 31, 2013 and December 31, 2012. Reserves on impaired loans collectively evaluated were $2.1 million and $2.2 million as of December 31, 2013 and December 31, 2012, respectively. The following table presents the Bank's investment in loans individually reviewed for impairment and related information on those impaired loans as of December 31, 2013 and December 31, 2012:

	As of December 31, 2013						Year to Date December 31, 2013
	Recorded  Investment		Unpaid  Principal  Balance		Related  Allowance		Average  Recorded  Investment		Interest Income Recognized
	(in thousands)
Impaired loans without a related allowance for loan losses
Construction	$	2,816	$	2,997	$	—	$	4,764	$	107
Commercial real estate:
Owner occupied	5,445		5,981		—		4,449		117
Non-owner occupied	4,469		4,537		—		5,202		210
Commercial	4,095		4,502		—		4,416		171
Mortgages:
Secured 1-4 family real estate	661		731		—		692		29
Multifamily	—		—		—		197		—
Home equity lines of credit	425		477		—		454		—
Consumer and other	—		—		—		—		—
Impaired loans with a related allowance for loan losses
Construction	$	200	$	215	$	40	$	915	$	25
Commercial real estate:
Owner occupied	5,131		5,172		201		6,380		237
Non-owner occupied	645		645		50		399		10
Commercial	308		313		105		715		2
Mortgages:
Secured 1-4 family real estate	331		341		161		442		4
Multifamily	—		—		—		—		—
Home equity lines of credit	—		—		—		400		2
Consumer and other	—		—		—		—		—
Total impaired loans
Construction	$	3,016	$	3,212	$	40	$	5,679	$	132
Commercial real estate:
Owner occupied	10,576		11,153		201		10,829		354
Non-owner occupied	5,114		5,182		50		5,601		220
Commercial	4,403		4,815		105		5,131		173
Mortgages:
Secured 1-4 family real estate	992		1,072		161		1,134		33
Multifamily	—		—		—		197		—
Home equity lines of credit	425		477		—		854		2
Consumer and other	—		—		—		—		—
Total impaired loans individually reviewed for impairment	$	24,526	$	25,911	$	557	$	29,425	$	914

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	As of December 31, 2012						Year to Date December 31, 2012
	Recorded Investment		Unpaid  Principal  Balance		Related  Allowance		Average Recorded Investment		Interest Income Recognized
	(in thousands)
Impaired loans without a related allowance for loan losses
Construction	$	6,212	$	7,676	$	—	$	18,748	$	307
Commercial real estate:
Owner occupied	6,563		7,071		—		15,175		228
Non-owner occupied	4,976		5,358		—		7,399		254
Commercial	4,460		4,482		—		6,350		143
Mortgages:
Secured 1-4 family real estate	1,435		1,503		—		2,364		42
Multifamily	530		565		—		701		—
Home equity lines of credit	705		800		—		1,424		13
Consumer and other	—		—		—		—		—
Impaired loans with a related allowance for loan losses
Construction	$	1,958	$	2,136	$	191	$	2,929	$	4
Commercial real estate:
Owner occupied	4,961		5,082		189		5,163		326
Non-owner occupied	561		643		89		2,212		63
Commercial	1,193		1,245		928		2,249		8
Mortgages:
Secured 1-4 family real estate	—		—		—		347		10
Multifamily	—		—		—		—		2
Home equity lines of credit	—		—		—		36		—
Consumer and other	—		—		—		51		—
Total impaired loans
Construction	$	8,170	$	9,812	$	191	$	21,677	$	311
Commercial real estate:
Owner occupied	11,524		12,153		189		20,338		554
Non-owner occupied	5,537		6,001		89		9,611		317
Commercial	5,653		5,727		928		8,599		151
Mortgages:
Secured 1-4 family real estate	1,435		1,503		—		2,711		52
Multifamily	530		565		—		701		2
Home equity lines of credit	705		800		—		1,460		13
Consumer and other	—		—		—		51		—
Total impaired loan individually reviewed for impairment	$	33,554	$	36,561	$	1,397	$	65,148	$	1,400

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Impaired loans acquired in business combinations without a related allowance for loan losses includes loans for which no additional reserves have been recorded in excess of credit discounts for purchased impaired loans. Impaired loans acquired with subsequent deterioration and related allowance for loan losses are loans in which additional impairment has been identified in excess of credit discounts resulting in additional reserves. These additional reserves are included in the allowance for loan losses related to purchased impaired loans and were $3,567 and $6,672 as of December 31, 2013 and December 31, 2012, respectively.

At December 31, 2013, the outstanding balance of purchased impaired loans from American Community Bancshares, Inc. ("American Community"), which includes principal, interest and fees due, was $90,741. Because of the uncertainty of the expected cash flows, the Company is accounting for each purchased impaired loan under the cost recovery method, in which all cash payments are applied to principal. Thus, there is no accretable yield associated with the above loans.

Troubled Debt Restructured Loans. Total amount of troubled debt restructured loans outstanding as of December 31, 2013 was $21.5 million with related reserves of $1.2 million. Approximately $15.3 million of troubled debt restructured loans are accruing interest as of December 31, 2013, as these loans have sufficient evidence of paying according to the new restructured terms to warrant a return to accrual status. Total amount of troubled debt restructured loans outstanding as of December 31, 2012 was $23.7 million with related reserves of $746,581. Approximately $17.7 million of troubled debt restructured loans are accruing interest as of December 31, 2012, as these loans have sufficient evidence of paying according to the new restructured terms.

The following tables include the recorded investment and number of modifications for troubled debt restructured loans for the year ended December 31, 2013 and December 31, 2012. The Company reports the recorded investment in the loans prior to a modification and also the recorded investment in the loans after the loans were restructured. Reductions in the recorded investment are primarily due to the partial charge-off of the principal balance prior to modification.

	Year ended December 31, 2013					Year ended December 31, 2012
	Number of Loans	Recorded Investment Prior to Modification		Recorded Investment After Modification		Number of Loans	Recorded Investment Prior to Modification		Recorded Investment After Modification
		(in thousands)					(in thousands)
Below market interest rate
Construction	1	$	215	$	200	—	$	—	$	—
Commercial real estate:
Non-owner occupied	2	1,220		1,139		—	—		—
Total	3	1,435		1,339		—	—		—
Extended payment terms
Construction	—	—		—		5	1,231		872
Commercial real estate:
Non-owner occupied	1	167		165		6	5,329		4,990
Owner occupied	4	1,319		1,316		9	2,443		2,379
Commercial	—	—		—		7	2,676		2,286
1-4 Family Residential	—	—		—		4	1,259		1,130
Consumer	—	—		—		1	27		24
Total	5	1,486		1,481		32	12,965		11,681
Principal payment reduction
Commercial real estate:
Owner occupied	—	—		—		2	571		571
Consumer	—	—		—		1	165		9
Total	—	—		—		3	736		580
Total	8	$	2,921	$	2,820	35	$	13,701	$	12,261

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The following tables present loans that were modified as troubled debt restructurings during the previous twelve months and for which there was a payment default during the year ended December 31, 2012. There were no loans modified as troubled debt restructurings during the previous twelve months and for which there was a payment default during the year ended December 31, 2013.

	Year ended December 31, 2013			Year ended December 31, 2012
	Number of loans	Recorded investment		Number of loans	Recorded investment
Extended payment terms
Commercial real estate:
Non-owner occupied	—	$	—	1	$	—
Owner occupied	—	—		1	93
Secured 1-4 family mortgages	—	—		1	170
Consumer	—	—		1	24
Total	—	—		4	287
Total	—	$	—	4	$	287

Allowance for Loan Losses. The allowance for loan losses is a reserve established through a provision for loan losses charged to expense, which represents management's best estimate for probable losses that have been incurred within the existing portfolio of loans. The primary risks inherent in the Bank's loan portfolio, including the adequacy of the allowance or reserve for loan losses, are based on management's assumptions regarding, among other factors, general and local economic conditions, which are difficult to predict and are beyond the Bank's control. In estimating these risks, and the related loss reserve levels, management also considers the financial conditions of specific borrowers and credit concentrations with specific borrowers, groups of borrowers, and industries.

The allowance for loan losses is adjusted by direct charges to provision expense. Losses on loans are charged against the allowance for loan losses in the accounting period in which they are determined by management to be uncollectible. Recoveries during the period are credited to the allowance for loan losses. The provision for loan losses was a recovery of losses of $(2.7) million for the year ended December 31, 2013 as compared to a provision of $40.4 million for the year ended December 31, 2012 and $20.8 million for the year ended December 31, 2011. The provision expense is determined by management with the use of the Bank's allowance for loan losses model. The components of the model are specific reserves for impaired loans and a general allocation for unimpaired loans. The general allocation has two components, an estimate based on historical loss experience and an additional estimate based on internal and external environmental factors due to the uncertainty of historical loss experience in predicting current embedded losses in the portfolio that will be realized in the future.

The portion of the general allocation on environmental factors includes estimates of losses related to interest rate trends, unemployment trends, real estate characteristics, past due and nonaccrual trends, watch list trends, charge-off trends, and underwriting and servicing assessments. Markets served by the Bank continue to experience softening from the general economy and declines in real estate values. The real estate characteristics component includes trends in real estate concentrations, exceptions to FDIC guidelines for loan-to-value ratios, and changes in real estate market values. Other factors impacting the allowance at December 31, 2013 were watch list trends, unemployment rate trends, and underwriting and servicing assessments.

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The following table presents changes in the allowance for loan losses for the years ended December 31, 2013 and 2012:

	December 31, 2012		Charge-offs		Recoveries		Provision (Recovery)			December 31, 2013
	(Amounts in thousands)
Construction	$	4,269	$	2,104	$	1,007	$	(3	)	$	3,169
Commercial real estate:
Owner occupied	4,374		383		120		(1,022		)	3,089
Non-owner occupied	3,935		224		134		(1,764		)	2,081
Commercial	4,291		2,923		1,287		1,078			3,733
Mortgages:
Secured 1-4 family- first lien	3,191		871		253		(205		)	2,368
Multifamily	594		—		—		(158		)	436
Home equity lines of credit	3,822		1,037		568		(697		)	2,656
Consumer and other	673		330		102		86			531
	$	25,149	$	7,872	$	3,471	$	(2,685	)	$	18,063
	December 31, 2011		Charge-offs		Recoveries		Provision			December 31, 2012
	(Amounts in thousands)
Construction	$	8,214	$	17,825	$	1,138	$	12,742		$	4,269
Commercial real estate:
Owner occupied	5,792		7,334		165		5,751			4,374
Non-owner occupied	4,668		9,830		664		8,433			3,935
Commercial	5,712		7,796		956		5,419			4,291
Mortgages:
Secured 1-4 family- first lien	3,726		3,512		215		2,762			3,191
Multifamily	805		347		—		136			594
Home equity lines of credit	3,310		4,360		186		4,686			3,822
Consumer and other	621		752		359		445			673
	$	32,848	$	51,756	$	3,683	$	40,374		$	25,149

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The following tables provide the breakdown of allowance for loan losses for collectively evaluated and individually evaluated loans by type as of December 31, 2013 and December 31, 2012.

	Reserves for  loans  individually  evaluated for  impairment		Loans  individually  evaluated for  impairment		Reserves for  loans  collectively  evaluated for  impairment		Loans  collectively  evaluated for  impairment
As of December 31, 2013	(Amounts in thousands)
Construction	$	40	$	3,016	$	3,129	$	128,019
Commercial real estate:
Owner occupied	201		10,576		2,888		372,190
Non-owner occupied	50		5,114		2,031		191,812
Commercial	105		4,403		3,628		181,040
Mortgages:
Secured 1-4 family- first lien	161		992		2,207		173,080
Multifamily	—		—		436		41,713
Home equity lines of credit	—		425		2,656		193,720
Consumer and other	—		—		531		51,667
	$	557	$	24,526	$	17,506	$	1,333,241
	Reserves for  loans  individually  evaluated for  impairment		Loans  individually  evaluated for  impairment		Reserves for  loans  collectively  evaluated for  impairment		Loans  collectively  evaluated for  impairment
As of December 31, 2012	(Amounts in thousands)
Construction	$	191	$	8,170	$	4,078	$	123,811
Commercial real estate:
Owner occupied	189		11,524		4,185		331,438
Non-owner occupied	89		5,537		3,846		205,952
Commercial	928		5,653		3,363		168,787
Mortgages:
Secured 1-4 family- first lien	—		1,435		3,191		167,176
Multifamily	—		530		594		34,807
Home equity lines of credit	—		705		3,822		191,183
Consumer and other	—		—		673		51,664
	$	1,397	$	33,554	$	23,752	$	1,274,818

The allowance model is applied to determine the specific allowance balance for impaired loans and the general allowance balance for unimpaired loans grouped by loan type.

The Company's loan charge-off policy for all loan classes is to charge down loans to net realizable value once a portion of the loan is determined to be uncollectable, and the underlying collateral shortfall is assessed. Unsecured loans (primarily consumer loans) are charged off against the reserve once the loan becomes 90 days past due or it is determined that a portion of the loan is uncollectable. Secured loans (primarily construction, real estate, commercial and other loans) are moved to nonaccrual status when the loan becomes 90 days delinquent or a portion of the loan is determined to be uncollectable and supporting collateral is not considered to be sufficient to cover potential losses. Nonaccrual loans are reviewed at least quarterly to determine if all or a portion of the loan is uncollectable. Nonaccrual loans that are determined to be solely collateral dependent are promptly charged down to net realizable value upon determination that they are impaired.

In addition to the allowance for loan losses, the Company also estimates probable losses related to unfunded lending commitments, such as letters of credit, financial guarantees and unfunded loan commitments. Unfunded lending commitments are analyzed and segregated by loan classification. These classifications, in conjunction with an analysis of historical loss experience, current

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economic conditions, performance trends within specific portfolio segments and any other pertinent information, result in the estimation of the reserve for unfunded lending commitments. The reserve for credit losses related to unfunded lending commitments was $116,309 and $182,489 as of December 31, 2013 and December 31, 2012, respectively.

The Company maintains reserves for mortgage loans sold to agencies and investors in the event that, either through error or disagreement between the parties, the Company is required to indemnify the purchase.  The reserves take into consideration risks associated with underwriting, key factors in the mortgage industry, loans with specific reserve requirements, past due loans and potential indemnification by the Company.  Reserves are estimated based on consideration of factors in the mortgage industry such as declining collateral values and rising levels of delinquency, default and foreclosure, coupled with increased incidents of quality reviews at all levels of the mortgage industry seeking justification for pushing back losses to loan originators and wholesalers.  As of December 31, 2013, the Company had reserves for mortgage loans sold of $216,687, and charges against reserves for the year ended December 31, 2013 were $83,198. For the year ended December 31, 2013, the Company recorded $1.4 million in negative provision expense related to potential repurchase and warranties exposure on the $254.5 million in loan sales that occurred during that period, respectively.  Reduction in provisions for the year ended December 31, 2013 were primarily the result of decreased mortgage activity as Sidus Financial, LLC ("Sidus") started to significantly scale back its wholesale operations and completely exited the wholesale market in 2012. The Company also saw improvements in historical loss experience, and declines in specific reserves as claims were paid and settled from previously established reserves. The historical loss factor decreased from 1.37%% in 2011 to 1.16%% in 2012.  Further, the historical loss factor was adjusted to take into account lower exposure to loss by Sidus due to limitations on loss events included in the purchase agreement pursuant to which the loans were sold.  The adjustment factor also is weighted to take into account the greater likelihood of loan “put-backs” originated in the years most recently preceding the current year.  Given both the decrease in the historical loss factor and the reduction in volume of Sidus’ wholesale operations in the most recent years of 2011 and 2012, the general component of the reserve correspondingly was reduced.  In early 2013, three of the largest claims were settled and paid out of the specific reserves, which resulted in a reduction of the specific component of the reserves by approximately $125,000. In addition, Sidus Financial discontinued its business and was dissolved in 2013 in accordance with the provisions of the North Carolina Limited Liability Company Act which limited future liability for loans previously sold by Sidus Financial. As of December 31, 2012, the Company had reserves for mortgage loans sold of $1.7 million, and charges against the reserves for the year ended December 31, 2012 were $488,012. For the year ended December 31, 2012, the Company recorded $392,103 in provision expense related to potential repurchase and warranties exposure. For the years ended December 31, 2013 and 2012, the Company did not repurchase any mortgage loans sold. As of December 31, 2011, the Company had reserves for mortgage loans sold of $1.8 million, and charges against the reserves for the year ended December 31, 2011 were $809,282. For the year ended December 31, 2011, the Company recorded $640,893 in provision expense related to potential repurchase and warranties exposure.

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5. PREMISES AND EQUIPMENT

The following table presents premises and equipment and related accumulated depreciation and amortization at December 31, 2013 and 2012:

	Cost		Accumulated depreciation and amortization		Net Book Value
December 31, 2013	(Amounts in thousands)
Land	$	11,601	$	—	$	11,601
Land and leasehold improvements	5,460		2,607		2,853
Buildings	28,638		8,491		20,147
Furniture and equipment	18,510		12,478		6,032
Construction in process	65		—		65
Total	$	64,274	$	23,576	$	40,698
	Cost		Accumulated depreciation and amortization		Net Book Value
December 31, 2012	(Amounts in thousands)
Land	$	11,626	$	—	$	11,626
Land and leasehold improvements	8,199		3,154		5,045
Buildings	26,588		7,079		19,509
Furniture and equipment	24,177		19,023		5,154
Construction in process	515		—		515
Total	$	71,105	$	29,256	$	41,849

Depreciation and amortization expense for the years ended December 31, 2013, 2012 and 2011 were $2,820,284, $2,878,237, and $2,896,688, respectively.

6. LOAN SERVICING

Mortgage loans serviced for others, consisting of loans sold to Fannie Mae and Freddie Mac, are not included in the accompanying consolidated balance sheets. Mortgage loan portfolios serviced for Fannie Mae and Freddie Mac were $406,966,111 and $330,818,219 at December 31, 2013 and 2012, respectively. Servicing loans for others generally consists of collecting mortgage payments, maintaining escrow accounts, disbursing payments to investors and foreclosure processing. Total servicing fees received were $943,408, $713,881 and $608,513 during 2013, 2012 and 2011, respectively, and were included in mortgage banking activities. At December 31, 2013 and 2012, mortgage servicing rights were $4.5 million and $2.5 million respectively and are included in other assets on the consolidated balance sheets. Servicing rights recorded on loans originated and sold by the Bank and the changes in the fair value were recorded in the consolidated statements of income (loss) under the caption, mortgage banking activities. Amortization/market value adjustments related to mortgage servicing rights were $624,143, $(447,403) and $(559,394) for the years ended 2013, 2012 and 2011, respectively and recorded as a reduction to the mortgage banking activities.

	2013		2012
	(Amounts in thousands)
Mortgage servicing assets, beginning of year	$	2,525	$	1,871
Capitalized	1,387		1,101
Change in fair value	624		(447		)
Mortgage servicing assets, end of year	$	4,536	$	2,525

Custodial escrow balances maintained in connection with the loan servicing were $259,209 and $318,649 at December 31, 2013 and 2012, respectively.

7. DEPOSITS

The following table presents the scheduled maturities of time certificates at December 31, 2013:

	(in thousands)
2014	$	357,631
2015	93,694
2016	58,324
2017	26,683
2018	15,937
2019	5,000
Total	$	557,269

Total related party deposits were $15.2 million and $16.8 million as of December 31, 2013 and 2012, respectively.

8.BORROWED FUNDS

Short-term borrowings at December 31, 2013 and 2012 are presented in the following tables. Borrowings from the Federal Reserve are payable on demand and are collateralized by state, county and municipal securities (refer to Note 2). Interest under this arrangement is payable at 50 basis points above the target federal funds rate as quoted by the Federal Reserve Board. Unused lines of credit from various correspondent banks totaled $152.1 million at December 31, 2013.

Short-Term Borrowings Excluding Federal Home Loan Bank ("FHLB") Advances
	Balance at year end		Weighted average interest rate at year end		Maximum amount outstanding at any month-end		Average Daily balance outstanding during year		Average annual interest rate paid
December 31, 2013
Overnight borrowings from the Federal Reserve Bank	$	—	—	%	$	—	$	—	—
Securities sold under agreement to repurchase	28,260,325		0.25	%	39,891,850		34,870,805		0.25	%
Federal funds purchased	—		—	%	2,866,667		267,567		0.65	%
Total short-term borrowings excluding FHLB advances	$	28,260,325
December 31, 2012
Overnight borrowings from the Federal Reserve Bank	$	—	—	%	$	—	$	6,225	—	%
Securities sold under agreement to repurchase	39,191,902		0.84	%	39,191,903		36,449,509		0.79	%
Federal funds purchased	—		—	%	—		13,790		0.61	%
Total short-term borrowings excluding FHLB advances	$	39,191,902

The principal balance of short term advances from the FHLB consist of the following at December 31, 2013. There were no short term advances from the FHLB at December 31, 2012.

Maturity	Interest Rate		2013		2012
7/21/2014	2.31	%	$	10,000,000	$	—
7/21/2014	2.62	%	5,000,000		—
			$	15,000,000	$	—

Long-term Borrowings

Long-term borrowings at December 31, 2013 consisted of junior subordinated debentures of $36,084,000 with an average annual interest rate of 2.05% and an average daily balance of $36,084,000. The long-term FHLB advances are presented below. Also

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included in long-term borrowings is the fair market value adjustment associated with the junior subordinated debentures acquired in the American Community acquisition of $(1,041,193) at December 31, 2013.

Long-term borrowings at December 31, 2012 consisted of junior subordinated debentures of $36,084,000 with an average annual interest rate of 2.24% and an average daily balance of $36,084,000. The long-term FHLB advances are presented below. Also, included in long-term borrowings at December 31, 2012 is a structured wholesale repurchase agreement with a balance of $5,000,000 at year end, an average daily balance of $5,000,000, an average interest rate of 2.64%, and a year-end interest rate of 2.60%. Also included in long-term borrowings is the fair market value adjustment associated with the borrowings acquired in the American Community acquisition of $(1,086,542) at December 31, 2012.

Pursuant to a collateral agreement with the FHLB, advances are collateralized by all of the Bank's FHLB stock and qualifying first mortgage, commercial, and home equity line loans. The balance of the lendable collateral value of all loans as of December 31, 2013 was approximately $143.4 million with $117.5 million remaining available. This agreement with the FHLB provides for a line of credit up to 20% of the Bank's assets.

The following table presents long-term advances from the FHLB at December 31, 2013 and 2012:

Maturity	Interest Rate		2013		2012
7/21/2014	2.31	%	$	—	$	10,000,000
7/21/2014	2.62	%	—		5,000,000
1/11/2015	2.99	%	5,000,000		5,000,000
4/27/2015	2.97	%	5,000,000		5,000,000
10/29/2018	0.25	%	685,104		702,678
12/19/2023	2.00	%	225,967		243,809
			$	10,911,071	$	25,946,487

FHLB advances, both short and long-term, had average annual interest rate paid during the year of 2.07% and 2.61% for 2013 and 2012, respectively. The weighted average interest rate for all FHLB advances outstanding at December 31, 2013 and December 31, 2012 was 2.57%. Maximum amount of FHLB advances outstanding at any month-end during the years 2013 and 2012 was $65,923,019 and $26,977,842 respectively.

On November 1, 2007, the Company created Yadkin Valley Statutory Trust I (“the Trust”) to issue trust preferred securities in conjunction with the Company issuing junior subordinated debentures to the Trust. The terms of the junior subordinated debentures are substantially the same as the terms of the trust preferred securities. The interest rate in effect is the three-month LIBOR plus 1.32%. The effective interest rate was 1.56% and 1.63% at December 31, 2013 and 2012, respectively. The Company’s obligations under the debentures and a separate guarantee agreement constitute a full and unconditional guarantee by the Company of the obligations of the Trust.

On November 1, 2007, the Trust completed the sale of $25.0 million of trust preferred securities. The trust preferred securities mature in 30 years and can be called by the Trust without penalty after five years.   The Trust used the proceeds from the sale of the securities to purchase the Company’s junior subordinated deferrable interest notes due 2037. The net proceeds from the offering were used by the Company in connection with the acquisition of Cardinal, and for general corporate purposes. Currently, regulatory capital rules allow trust preferred securities to be included as a component of regulatory capital for the Company up to certain limits. This treatment has continued despite the deconsolidation of these instruments for financial reporting purposes.

The Company assumed junior subordinated debt in the amount of $10.0 million in the American Community acquisition. American Community had a trust that issued trust preferred securities which pay cumulative cash distributions quarterly at a rate priced off 90-day LIBOR plus 280 basis points. The interest rate at December 31, 2013 and December 31, 2012 was 3.05% and 3.11%, respectively. The preferred securities are redeemable on December 15, 2033. The Company’s obligations under the debentures and a separate guarantee agreement constitute a full and unconditional guarantee by the Company of the obligations of the Trust.

Under the accounting for variable interest entities, the Company’s $774,000 and $310,000 investment in the common equity of the Trusts are included in the consolidated balance sheets as other assets. The income and interest expense received from and paid to the Trust, respectively, is included in the consolidated statements of income (loss) and comprehensive income (loss) as other noninterest income and interest expense.

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9. INCOME TAXES

The following table presents the provision for income taxes for the years ended December 31, 2013, 2012 and 2011:

	2013			2012			2011
	(in thousands)
Current:
Federal	$	(93	)	$	(210	)	$	712
State	—			—			—
	(93		)	(210		)	712
Deferred:
Federal	8,027			(10,755		)	(4,600		)
State	2,467			(1,996		)	(418		)
	10,494			(12,751		)	(5,018		)
Increase (decrease) in valuation allowance for deferred tax assets	—			(11,000		)	11,000
Total income taxes	$	10,401		$	(23,961	)	$	6,694

The following table presents the tax effects of significant components of the Company's net deferred tax assets as of December 31, 2013 and December 31, 2012:

	December 31,			December 31,
	2013			2012
	(in thousands)
Deferred tax assets:
Allowance for loan losses	$	6,956		$	9,853
Other than temporary impairment	829			827
Accrued liabilities	55			220
OREO property	178			3,767
Net operating loss	14,375			19,627
Mortgage banking goodwill	779			921
Other	3,243			2,160
	26,415			37,375
Less: Valuation Allowance	—			—
	$	26,415		$	37,375
Deferred tax liabilities:
Unrealized gain on available-for-sale securities	$	(3	)	$	(2,583	)
FMV adjustment related to mergers	(97		)	(181		)
Depreciation	(1,753		)	(1,561		)
Prepaid expenses	(342		)	(358		)
Core deposit intangible	(765		)	(1,043		)
Noncompete intangible	(24		)	(149		)
Other	(6		)	(142		)
	(2,990		)	(6,017		)
Net deferred tax asset	$	23,425		$	31,358

Our net deferred tax asset was $23.4 million at December 31, 2013 and $31.4 million at December 31, 2012. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not (a likelihood of more than 50 percent) that

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some portion or all of the deferred tax assets will not be realized. All available evidence, both positive and negative, is used in the consideration to determine whether, based on the weight of that evidence, a valuation allowance is required.

As of June 30, 2012, the Company reversed a previously recorded $11 million valuation allowance which had been established in 2011. After review of all available evidence at June 30, 2012 and based on the weight of such evidence, the Company believed the realization of the deferred tax asset was more likely than not and reversed the previously recorded $11.0 million valuation allowance. The reversal of the allowance was based primarily on a return to profitability as the Company had reported four consecutive quarters of net income and the Company come out of a 3-year cumulative loss position. Based on net income trends, projected net income over the next 36 months and improving credit quality metrics, no valuation allowance was deemed necessary as of June 30, 2012.

At December 31, 2013, the Company has failed the three-year cumulative loss test, after recording a $38.5 million loss before income taxes in the fourth quarter of 2012 as part of the accelerated asset disposition plan. The Company considered the following negative and positive evidence in its evaluation of deferred tax assets:

Negative Evidence

• The Company is in a cumulative tax loss position for the 3-year period ending December 31, 2013 of $6.2 million. Significance: High

	December 31, 2013 Cumulative Loss Test
	2011			2012			2013		Total
	(in thousands)
Income (loss) before income taxes	$	(7,701	)	$	(32,635	)	$	29,227	$	(11,109	)
Goodwill impairment	4,944			—			—		$	4,944
	$	(2,757	)	$	(32,635	)	$	29,227	$	(6,165	)

Positive Evidence

• The Company reported $29.2 million in net income before taxes for the year 2013. Excluding losses of $49 million sustained in the fourth quarter of 2012 related to the accelerated asset disposition plan, the Company has recorded $43.9 million in pre-tax income for nine previous consecutive quarters as credit quality has improved and net interest margin has increased over the past year. Significance: High

• The Company is projecting income on a pretax basis, as well as taxable income, for the future periods 2014 through 2016. The budgeted provision for loan losses is a key driver of the resulting income. Also, as discussed below, credit quality metrics have significantly improved. While management believes the 2010, 2011 and 2012 levels of provision are indicative of the worst economic downturn in recent history and will not be repeated, it is important to understand why future losses are not projected at these levels which is discussed in the following paragraphs. Significance: Moderate

• In 2012, the Company completed a $45 million private placement offering pursuant to which several institutional investors and members of the Board and management purchased shares of preferred stock. In connection with this private placement, the Company converted approximately $21 million of its outstanding Series T and Series T-ACB preferred shares to common shares. As of December 31, 2013, the Company's leverage ratio, Tier 1 risk-based capital ratio, and total risk-based capital ratio were 11.5%, 13.5%, and 14.6%. Significance: Moderate

• Credit quality has improved over the past twelve months, including significant decreases in classified loans and nonperforming loans. Credit losses have shown a dramatic reduction in 2013 as net loan charge-offs (recoveries) were $4.4 million, or 0.33% of average loans for the year ended December 31, 2013, as compared to $48.1 million, or 3.43% of average loans for the year ended December 31, 2012. Nonperforming loans were also down $7.4 million since December 31, 2012. Nonperforming assets to total assets were 1.03%% as of December 31, 2013 as compared to 1.64% as of December 31, 2012 and 4.78% as of December 31, 2011 . In addition, allowance for loan losses to nonperforming loans increased from 110.22%% at December 31, 2012 to 117.34%% at December 31, 2013. Significance: High

• Management is not aware of any unsettled circumstances that, if resolved, would adversely affect future operations or earnings. Significance: Low

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• Federal net operating losses can be deducted over the twenty year carryforward period. Currently, management is projecting full utilization of these tax benefits within 3 years from December 31, 2013. The Company's loss carryforwards for the tax period ending December 31, 2013 include net operating loss carryforwards generated in the acquisition of Cardinal State Bank in 2008 and American Community Bank in 2009, as well as net operating loss carryforwards for the Company. Significance: Moderate

	Net Operating Loss  Carryforward at December 31, 2013		Expiration
	(in thousands)
Cardinal State Bank acquisition	$	2,424	2029
American Community Bank acquisition	345		2030
Yadkin Valley Federal Tax	35,582		2031
Yadkin Valley State Tax	28,623		2031
Total Loss Carryforwards	$	66,974

After review of all available evidence and based on the weight of such evidence, the Company believes the realization of the deferred tax asset is, more likely than not and no valuation allowance is deemed necessary at December 31, 2013 based primarily on a return to profitability as the Company has reported nine consecutive quarters of net income (excluding losses in the fourth quarter of 2012 related to management's accelerated asset disposition plan), net income trends, projected net income for the years 2014 through 2016 and improving credit quality metrics.

The following table presents a reconciliation of applicable income taxes for the years ended December 31, 2013 and 2012 to the amount of tax expense computed at the statutory federal income tax rate of 35%:

	2013			2012
	(in thousands)
Tax benefit at statutory rate on income before income taxes	$	10,230		$	(11,422	)
Increases (decreases) resulting from:
Tax-exempt interest on investments	(1,055		)	(737		)
State income tax, net of federal benefits	1,604			(1,298		)
Income from bank-owned life insurance	(210		)	(221		)
Valuation allowance on deferred tax assets	—			(11,000		)
Other	(168		)	717
Total income taxes	$	10,401		$	(23,961	)

10. EARNINGS PER SHARE

Basic net income per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding for the reporting periods. Diluted net income available to common shareholders per common share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. The numerators of the basic net income per common share computations are the same as the numerators of the diluted net income per common share computations for all the periods presented. Weighted average shares outstanding for the year ended December 31, 2013 excludes 176,843 shares of unvested restricted stock. Weighted average shares outstanding for the years ended December 31, 2012 and 2011 excludes 193,373 and 53,778 shares of unvested restricted stock, respectively. A reconciliation of the denominator of the basic net income per common share computations to the denominator of the diluted net income per common share computations is as follows:

	2013		2012			2011
Basic earnings per share:
Net income (loss) to common shareholders	$	16,949,000	$	(12,585,000	)	$	(17,382,000	)
Weighted average number of common shares outstanding	14,203,099		6,589,971			6,079,668
Basic earnings (loss) per share	$	1.19	$	(1.91	)	$	(2.86	)
Diluted earnings per share:
Net income (loss) to common shareholders	$	16,949,000	$	(12,585,000	)	$	(17,382,000	)
Weighted average number of common shares outstanding	14,203,099		6,589,971			6,079,668
Dilutive potential common shares	21,621		—			—
Weighted-average shares as adjusted	14,224,720		6,589,971			6,079,668
Diluted earnings (loss) per share	$	1.19	$	(1.91	)	$	(2.86	)

For the year ended December 31, 2013, 2012, and 2011 net income (loss) for determining net earnings (loss) per common share was reported as net income (loss) less the dividend on preferred stock. During the year ended December 31, 2013, there were 51,673 warrants and stock options that were not considered dilutive because the exercise prices exceeded the average market price per share and 156,329 shares of restricted stock not considered dilutive because they were antidilutive under the treasury stock method or because performance and service criteria had not been met. Unvested shares of restricted stock and all other common stock equivalents were excluded from the determination of earnings (losses) per share for the year-to-date periods ended December 31, 2012 and December 31, 2011 due to the Company's loss position for that period.

For 2013, 2012 and 2011, net income (loss) to common shareholders is net income (loss) less the preferred stock dividends and accretion of discount.

11. BENEFIT PLANS

401(K) PLAN

The Company maintains profit‑sharing and 401(k) plans for substantially all employees. Contributions to the profit‑sharing plan are at the discretion of the Board of Directors but are limited to amounts deductible in accordance with the Internal Revenue Code. Under the Company's 401(k) plan, employees are permitted to contribute up to 60% of pre‑tax compensation. The Company will match 50% of an employee's contribution, up to a maximum of 3% of pre-tax employee compensation. The Company's policy is to fund the profit‑sharing/401(k) costs as incurred. Employer contributions in 2013, 2012 and 2011 to the 401(k) plan were $619,758, $367,939, and $521,963 respectively. There were no discretionary contributions to the profit-sharing plan for the years ended December 31, 2013, 2012 and 2011.

BANK-OWNED LIFE INSURANCE

During 2001 and 2000, the Company created an Officer Supplemental Insurance Plan (“OSIP”) and entered into Life Insurance Endorsement Method Split Dollar Agreements with certain officers. Under the plan, upon death of the officer, the Company first recovers the cash surrender value of the contract and then shares the remaining death benefits from insurance contracts, which are written with different carriers, with the designated beneficiaries of the officers. The death benefit to the officer's beneficiaries is a multiple of base salary at the time of the agreements. During 2010, the OSIP was amended and the death benefit to the officer’s

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beneficiaries is now subject to the limit of total death proceeds less cash surrender value. The Company, as owner of the policies, retains an interest in the life insurance proceeds and a 100% interest in the cash surrender value of the policies. The OSIP contains a five‑year vesting requirement and certain provisions relating to change of control and termination of service. The Company funded the OSIP through the purchase of bank‑owned life insurance (“BOLI”) during the first quarter of 2000 and the second quarter of 2001 with initial investments of $4.8 million and $5.0 million, respectively. Additional investments in BOLI were made in August of 2006 in the amount of $5.5 million. The corresponding cash surrender values of BOLI policies as of December 31, 2013 and 2012 was $27,032,000 and $26,433,000 respectively.

During 2007 the Company created the 2007 Group Term Carve Out Plan and entered into Life Insurance Endorsement Method Split Dollar Agreements with certain officers who did not participate in the 2001 Plan discussed in the previous paragraph. Under the plan, upon death of the officer, the Company first recovers the cash surrender value of the contract and then shares the remaining death benefits from the insurance contracts which are written with New York Life Insurance and Annuity Corporation, with the designated beneficiaries of the officers. The death benefit to the officer’s beneficiaries is a multiple of base salary at the time of the agreements, subject to the limit of total death proceeds less cash surrender value. The Company, as owner of the policies, retains an interest in the life insurance proceeds and a 100% interest in the cash surrender value of the policies. The 2007 plan contains a five-year vesting requirement and certain provisions related to change of control and termination of service.

The Company uses the cost of insurance method for determining liabilities related to the plan and used a discount rate of 4.00% at December 31, 2013 and December 31, 2012 based on the Citigroup Pension Liability Yield Curve. As of December 31, 2013 and 2012, the liability accrued for the plan was $1.9 million. In 2011, the Company decided to terminate split dollar benefits for all active employees. The only remaining participants in the OSIP are retired and terminated employees who are still eligible for benefits based on the original agreements. The result of this change to the plan was a $500,000 decrease in liabilities related to the plan. The net periodic benefit costs of the plan are recorded to non-interest expense and were approximately $(5,702), $376,000, and $334,000 for the years ended December 31, 2013, 2012, and 2011, respectively.

NON-EQUITY INCENTIVE PLAN

Incentive compensation is provided for employees of the Bank based on defined levels of earnings performance. The Company accrued $3.4 million in total incentive compensation for the year 2013. All incentive compensation will be paid out in the first quarter of 2014. Based on Company performance, there were no expenses related to incentive compensation during 2012 and 2011.

12. STOCK OPTIONS AND RESTRICTED STOCK

The Company has stock option plans for directors, selected executive officers and other key employees. The plans provide for the granting of options to purchase shares of the Company’s common stock at a price not less than the fair market value at the date of grant of the option. Option exercise prices are established at market value on the grant date. Vesting schedules are determined by the Board of Directors. Upon termination, unexercised options held by employees are forfeited and made available for future grants.

During the year ended December 31, 2013, 3,411 stock options were vested and 1,666 options were granted resulting in 2,757 unvested options at December 31, 2013. There was no intrinsic value of option grants in 2013 since options are granted at the market price of the stock on date of grant. The weighted average fair value of the options granted in 2013 was $7.55 and was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions: dividend yield of 0.00%; expected volatility of 101.70%; risk-free interest rate of 1.00%; and expected life of 7 years. There were no options exercised during the year ended December 31, 2013. During the year ended December 31, 2012, 4,033 stock options were vested and 1,166 options were granted resulting in 4,500 unvested options at December 31, 2012. There was no intrinsic value of option grants in 2012 since options are granted at the market price of the stock on date of grant. The weighted average fair value of the options granted in 2012 were $8.07 and was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions: dividend yield of 0.00%; expected volatility of 100.62%; risk-free interest rate of 1.26%; and expected life of seven years. There were no options exercised during the year ended December 31, 2012. There were no options granted or exercised during the year ended December 31, 2011. Total options outstanding at December 31, 2013 and 2012 were 51,673 and 83,203, respectively.

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The following table presents certain option information for the year ended December 31, 2013:

	Outstanding Options				Exercisable Options
	Number of options		Weighted-average exercise price		Number of options		Weighted-average exercise price
At December 31, 2012	83,203		$	40.47	78,701		$	41.40
Options authorized	—		—		—		—
Options granted/vested	1,666		9.12		3,411		27.14
Options exercised	—		—		—		—
Options expired	(22,486	)	43.78		(22,486	)	43.78
Options forfeited	(10,710	)	40.55		(10,710	)	40.55
At December 31, 2013	51,673				48,916

At December 31, 2013, the weighted-average remaining contractual life of outstanding and exercisable options was 3.3 years and 3.1 years, respectively. At December 31, 2012, the weighted average remaining contractual life of outstanding and exercisable options was 2.9 years and 2.6 years, respectively.

The following table segregates the shares outstanding at December 31, 2013 into meaningful ranges:

Shares	Option Price per share ($)	Weighted-average remaining contractual life (years)	Weighted-average exercise price ($)	Shares excercisable December 31, 2013
4,498	9.12-11.52	7.81	10.18	2,275
2,666	20.37-20.70	5.52	20.49	2,132
6,384	28.20-31.38	4.05	29.90	6,384
1,015	34.68-35.97	3.05	35.07	1,015
12,482	38.37-41.73	2.14	41.42	12,482
23,795	42.00-46.95	2.67	45.00	23,795
833	57.21	3.05	57.21	833
51,673				48,916

All options expire ten years after date of grant and are made available for future grants at expiration.

As of December 31, 2013, there are 211,159 restricted shares outstanding, of which 34,316 shares of restricted stock are vested and 176,843 shares are nonvested. There were 3,242 shares of restricted stock issued during the year ended December 31, 2013 at an average fair value of $12.65, and no restricted shares were forfeited.

As of December 31, 2012, there were 207,917 restricted shares outstanding, of which 14,549 shares of restricted stock were vested and 235,118 shares were nonvested. There were 169,143 shares of restricted stock issued during the year ended December 31, 2012 at an average fair value of $6.96, and 15,554 restricted shares were forfeited. Of the restricted shares issued in 2012, 163,328 were issued with performance and service conditions. Vesting of these shares are based on achieving certain earnings per share and credit performance standards and require a minimum of 2-years of service. Shares issued with performance conditions are granted at-the-money, and contingently vest over a period of 1 to 3 years. The fair value of the shares granted with performance conditions was estimated on the date of grant and assumes that performance goals will be achieved. Restricted shares with performance and service conditions have been recognized based on the assumption that performance thresholds will be met. Year one performance conditions were met in 2012, and it is highly probable that year two performance conditions will also be met; although service conditions still need to be completed for the shares to be fully vested. Compensation cost is recognized only for those awards that ultimately vest.

During the year ended December 31, 2011, there were 48,329 shares of restricted stock granted at an average fair value of $7.02 per share. The fair value of each share grant is based on the closing market price of the stock on the date of issuance.

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There are 315,998 shares of common stock available for future grant of restricted stock and stock options under the Company's 2008 Omnibus Stock Ownership and Long Term Incentive Plan (the "Omnibus Plan") and the 2013 Equity Incentive Plan (the "2013 Equity Plan").

The compensation expense related to options and restricted shares was $21,882 and $480,249, respectively, for the year ended December 31, 2013, respectively. The compensation expense related to options and restricted shares was $31,621 and $388,187 for the year period ended December 31, 2012, respectively. Compensation expense related to options and restricted shares was $76,903 and $133,071 for the year ended December 31, 2011, respectively. As of December 31, 2013, there was $544,896 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under all of the Company's stock benefit plans. This cost is expected to be recognized over an average vesting period of 1.3 years.

13. LEASES

Operating Leases

The Company has entered into non-cancelable operating leases for branch facilities and equipment. These leases have terms from five to thirty years. Rental expense was approximately $1.9 million in 2013, $1.9 million in 2012 and $2.2 million in 2011 and primarily represents rentals of real estate.

The following table presents the future minimum lease payments for the next five years:

	(Amounts in thousands)
2014	$	1,905
2015	1,456
2016	1,032
2017	642
2018	560
Thereafter	5,310
Total	$	10,905

Capital Lease Obligation

The Company leases its Monroe Main office facility, which was acquired from American Community, under a capital lease. Leases that meet the criteria for capitalization are recorded as assets and the related obligations are reflected on the accompanying balance sheets. Amortization of property under capital lease is included in depreciation expense. Included in premises and equipment at December 31, 2013 is $2.5 million as the capitalized cost of the Company’s Monroe Main office and accumulated amortization of approximately $168,876 at December 31, 2013.

The following table presents aggregate future minimum lease payments due under this capital lease obligation as of December 31, 2013:

	(Amounts in thousands)
2014	$	227
2015	241
2016	241
2017	241
2018	242
2019-2029	2,917
Total minimum lease payments	4,109
Less amount representing interest	(1,828		)
Present value of net minimum lease payments	$	2,281

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14. OFF-BALANCE SHEET RISK, COMMITMENTS AND CONTINGENCIES

The Bank 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 sheets. The contract or notional amounts of those instruments reflect the extent of involvement the Bank has in particular classes of financial instruments. The Bank 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 Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank, upon extension of credit is based on management’s credit evaluation of the borrower. Collateral obtained varies but may include real estate, stocks, bonds, and certificates of deposit.

The following table presents a summary by type of contract and amount the Bank’s exposure to off-balance sheet risk as of December 31, 2013 and 2012:

	2013		2012
Financial instruments whose contract amounts represent credit risk:
Loan commitments and undisbursed lines of credit	$	284,345,741	$	255,356,370
Undisbursed standby letters of credit	6,463,019		7,395,059
Undisbursed portion of construction loans	25,452,178		17,500,855
Commitments to close first mortgages	13,359,442		46,725,883
Commitments to sell first mortgages	31,895,650		71,491,707

15. DERIVATIVES

The Company currently has derivative instrument contracts consisting of interest rate swaps and interest rate lock commitments and commitments to sell mortgages.  The primary objective for each of these contracts is to minimize interest rate risk.  The Company's strategy is to use derivative contracts to stabilize and improve net interest margin and net interest income currently and in future periods. The Company does not enter into derivative financial instruments for speculative or trading purposes.  For derivatives that are economic hedges, but are not designated as hedging instruments or otherwise do not qualify for hedge accounting treatment, all changes in fair value are recognized in non-interest income during the period of change.  

As part of interest rate risk management, the Company has entered into two interest rate swap agreements to convert certain fixed-rate receivables to floating rates and certain fixed-rate obligations to floating rates.  The interest rate swaps are used to provide fixed rate financing while managing interest rate risk and were not designated as hedges. The interest rate swaps pay and receive interest based on a floating rate based on one month LIBOR, with payments being calculated on the notional amount. The interest rate swaps are settled quarterly and mature on June 15, 2016. The interest rate swaps each had a notional amount of $1.8 million at December 31, 2013, representing the amount of fixed-rate receivables outstanding and liabilities outstanding, and are included in other assets and other liabilities at their fair value of $132,438. The Company had a gain of $63,568 on the interest rate swap asset and a loss of $63,568 on the interest rate swap liability for the year ended December 31, 2013. The Company had a gain of $20,973 on the interest rate swap asset and a loss of $20,973 on the interest rate swap liability for the year ended December 31, 2012. The interest rate swaps had a notional amount of $2.0 million outstanding as of December 31, 2012 and was included in other assets and other liabilities at their fair market value of $196,006. All changes in fair value are recorded as other income within non-interest income. Fair values for interest rate swap agreements are based upon the amounts required to settle the contracts.  

The Company is exposed to certain risks relating to its ongoing mortgage origination business. The Bank's mortgage lending subsidiary, enters into interest rate lock commitments and commitments to sell mortgages. The primary risks managed by derivative instruments are these interest rate lock commitments and forward-loan-sale commitments. Interest rate lock commitments are entered into to manage interest rate risk associated with the Company's fixed rate loan commitments. 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. Such interest rate lock commitments and forward-loan-sale commitments represent derivative instruments which are required to be carried at fair

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value. These derivative instruments do not qualify as hedges under the Derivatives and Hedging topic of the FASB Accounting Standards Codification. The fair value of the Company's 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 balance sheet in other assets and on the income statement in mortgage banking income (loss). The fair value of the Company's forward sales commitments is based on changes in the value of the commitment, principally because of changes in interest rates, and is included on the balance sheet in other assets or other liabilities and on the income statement in mortgage banking income (loss).

At December 31, 2013, the Bank had $13.4 million of commitments outstanding to originate mortgage loans held-for-sale at fixed prices and $31.9 million of forward commitments outstanding for original commitments and outstanding mortgage loans held-for-sale under best efforts contracts to sell mortgages to agencies and other investors. The fair value of forward sales commitments recorded in other assets was $147,232 at December 31, 2013. The fair value of the interest rate lock commitments recorded in other liabilities was $(23,222) at December 31, 2013. Recognition of gains related to the change in fair value of forward sales commitments was $628,038 for the year ended December 31, 2013, and is included in mortgage banking activities income. Recognition of losses related to the change in fair value of the interest rate lock commitments was $(896,066) for the year ended December 31, 2013, and is included in mortgage banking activities income. Recognition of gains related to the change in fair value of the interest rate lock commitments were $204,856 and gains related to forward sales commitments were $743,025, respectively, for the year ended December 31, 2012, and are included in other income. At December 31, 2012, the Bank had $46.7 million of commitments outstanding to originate mortgage loans held-for-sale at fixed prices and $71.5 million of forward commitments outstanding under best efforts contracts to sell mortgages to agencies and other investors. The fair value of forward sales commitments recorded in other liabilities was $(480,806) at December 31, 2012. The fair value of the interest rate lock commitments recorded in other assets was $872,844 at December 31, 2012.

16. FAIR VALUE

The Company utilizes fair value measurements to record fair value adjustments for certain assets and liabilities and to determine fair value disclosures. Available-for-sale securities, interest rate swaps, mortgage servicing rights, interest rate lock commitments and forward sale loan commitments are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record other assets at fair value, such as loans held-for-investment and certain other assets. These nonrecurring fair value adjustments usually involve writing the asset down to fair value or the lower of cost or market value.

Fair Value Hierarchy

The Company groups assets and liabilities at fair value 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, under the Fair Market Value Measurements and Disclosures topic of the FASB Accounting Standards Codification. These levels are:

Level 1	Valuation is based upon quoted prices for identical instruments traded in active markets.
Level 2	Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
Level 3	Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

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The following is a description of valuation methodologies used for assets and liabilities recorded at fair value.

Available-for-Sale Investment Securities

Available-for-sale investment securities are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities and private label entities, municipal bonds and corporate debt securities. There have been no changes in valuation techniques for the year ended December 31, 2013. Valuation techniques are consistent with techniques used in prior periods.

Interest Rate Swaps

Interest rate swaps are recorded at fair value on a recurring basis. Fair value measurement is based on discounted cash flow models run by a third-party on a monthly basis. All future floating cash flows are projected and both floating and fixed cash flows are discounted to the valuation date. As a result, the Company classifies interest rate swaps as Level 3.

The following tables present a rollforward of interest rate swaps for the years ended December 31, 2013 and 2012:

	Level 3
	Fair Value- Assets			Fair Value- Liabilities
	(Amounts in thousands)
Balance, December 31, 2011	$	216		$	216
Purchases, sales, issuances and settlements	—			—
Gains (losses) included in other income	(20		)	(20		)
Balance, December 31, 2012	$	196		$	196
Balance, December 31, 2012	$	196		$	196
Purchases, sales, issuances and settlements	—			—
Gains (losses) included in other income	(64		)	(64		)
Balance, December 31, 2013	$	132		$	132

Interest Rate Locks and Forward Loan Sale Commitments

The Company's mortgage lending division enters into interest rate lock commitments and commitments to sell mortgages. At December 31, 2013, the amount of fair value associated with these interest rate lock commitments and sale commitments was $(23,000) and $147,000, respectively. At December 31, 2012, the amount of fair value associated with these interest rate lock commitments and sale commitments was $873,000 and $(481,000), respectively. The fair value of interest rate lock commitments 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, typically month end.

The Company classifies interest rate lock commitments as Level 3. The fair value of forward sales commitments is based on changes in loan pricing between the commitment date and period end. The Company classified forward sale commitments as Level 2. There have been no changes in valuation techniques for the year ended December 31, 2013. Valuation techniques are consistent with techniques used in prior periods.

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The following table presents a rollforward of interest rate lock commitments for the years ended December 31, 2013 and 2012, respectively.

	Interest Rate Lock Commitments
	Level 3
	Fair Value			Fair Value
	(In thousands)
Balance, December 31, 2012 and 2011	$	873		$	130
Gains (losses) included in other income	(896		)	743
Transfer in and out	—			—
Balance, December 31, 2013 and 2012	$	(23	)	$	873

Mortgage Servicing Rights

A valuation of mortgage servicing rights is performed using a pooling methodology. Similar loans are pooled together and evaluated on a discounted earnings basis to determine the present value of future earnings. The present value of the future earnings is the estimated market value for the pool, calculated by a third party at least semi-annually, using assumptions that a third party purchaser would utilize in evaluating a potential acquisition of the servicing. As such, the Company classifies loan servicing rights as a Level 3 asset. There have been no changes in valuation techniques for the year ended December 31, 2013. Valuation techniques are consistent with techniques used in prior periods.

The following table presents a rollforward of mortgage servicing rights for the years ended December 31, 2013 and 2012 and shows that the mortgage servicing rights are classified as Level 3 as discussed above.

	Level 3
	Fair Value		Fair Value
	(In thousands)
Balance, December 31, 2012 and 2011	$	2,525	$	1,871
Capitalized	1,387		1,101
Gains (losses) included in other income	624		(447		)
Balance, December 31, 2013 and 2012	$	4,536	$	2,525

Mortgage Loans Held-for-Sale

Loans held-for-sale are carried at lower of cost or market value. The fair value of loans held-for-sale is based on what secondary markets are currently offering for portfolios with similar characteristics. The changes in fair value of the assets are largely driven by changes in interest rates subsequent to loan funding and changes in the fair value of servicing associated with the mortgage loan held for sale. As such, the Company classifies loans held for sale as a Level 2 asset. At December 31, 2013 and 2012, the cost of the Company's mortgage loans held-for-sale was less than the market value. Accordingly, the Company's loans held-for-sale are carried at cost. There have been no changes in valuation techniques for the year ended December 31, 2013. Valuation techniques are consistent with techniques used in prior periods.

Impaired Loans

The Company does not record loans held-for-investment at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment in accordance with the Receivables topic of the FASB Accounting Standards Codification. The fair value of impaired loans is estimated using one of several methods, including collateral value (through appraisal processes and applying liquidity discounts and deducting expected selling costs), market value of similar debt, enterprise value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At December 31, 2013, the majority of impaired loans were evaluated based on discounted cash flows or the fair value of the collateral

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by obtaining third-party appraisals and applying liquidity discounts. Third party appraisals are obtained at least annually for all impaired loans greater than $250,000. The Company records impaired loans as nonrecurring Level 3. There have been no changes in valuation techniques for the year ended December 31, 2013. Valuation techniques are consistent with techniques used in prior periods.

Other Real Estate Owned

Other real estate owned (“OREO”) is adjusted to fair value upon transfer of the loans to OREO. Subsequently, OREO is carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management's estimation of the value of the collateral (through appraisal processes and applying liquidity discounts and deducting expected selling costs). When the fair value of the collateral is measured due to further deterioration in the value of the OREO since initial recognition, the Company records the foreclosed asset as nonrecurring Level 3. The current carrying value of OREO at December 31, 2013 is $3.3 million. At December 31, 2012 the carrying value of OREO was $8.7 million. There have been no changes in valuation techniques for the year ended December 31, 2013. Valuation techniques are consistent with techniques used in prior periods.

The following table presents assets and (liabilities) measured at fair value on a recurring basis:

December 31, 2013 (in thousands)	Fair Value			Level 1		Level 2		Level 3
Available-for-sale securities:
U.S. government agencies	$	16,392		$	—	$	16,392	$	—
Government sponsored agencies:
Residential mortgage-backed securities	103,441			—		103,441		—
Collateralized mortgage obligations	52,743			—		52,743		—
Private label collateralized mortgage obligations	14,491			—		14,491		—
State and municipal securities	98,704			—		98,704		—
Common and preferred stocks	3,151			3,151		—		—
Interest rate swap agreements	132			—		—		132
Interest rate swap agreements	(132		)	—		—		(132		)
Interest rate lock commitments	(23		)	—		—		(23		)
Forward loan sale commitments	147			—		147		—
Mortgage servicing rights	4,536			—		—		4,536

December 31, 2012 (in thousands)	Fair Value			Level 1		Level 2			Level 3
Available-for-sale securities:
U.S. government agencies	$	27,527		$	—	$	27,527		$	—
Government sponsored agencies:
Residential mortgage-backed securities	107,257			—		107,257			—
Collateralized mortgage obligations	122,593			—		122,593			—
Private label collateralized mortgage obligations	1,045			—		1,045			—
State and municipal securities	84,564			—		84,564			—
Common and preferred stocks	133			133		—			—
Interest rate swap agreements	196			—		—			196
Interest rate swap agreements	(196		)	—		—			(196		)
Interest rate lock commitments	873			—		—			873
Forward loan sale commitments	(481		)	—		(481		)	—
Mortgage servicing rights	2,525			—		—			2,525

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Quantitative Information about Level 3 Fair Value Measurements

	Fair Value at December 31, 2013 (in thousands)			Valuation Technique	Unobservable Input	Range (Weighted Avg)
Recurring measurements:
Interest Rate Swaps	$	132		Discounted cash flow	Discount rate	0.5	%
Interest Rate Lock Commitments	(23		)	Pricing model	Pull through rates	86.4	%
Mortgage Servicing Rights	4,536			Discounted cash flow	Constant prepayment rate	9.72	%
					Cost of service	$50
					Discount rate	8	%
Nonrecurring measurements:
Impaired loans	$	6,058		Discounted appraisals	Collateral discounts and discounted cash flows	15-50%
Other real estate owned	1,034			Discounted appraisals	Collateral discounts	15	%

	Fair Value at December 31, 2012 (in thousands)		Valuation Technique	Unobservable Input	Range (Weighted Avg)
Recurring measurements:
Interest Rate Swaps	$	196	Discounted cash flow	Discount rate	1.0	%
Interest Rate Lock Commitments	873		Pricing model	Pull through rates	83.9	%
Mortgage Servicing Rights	2,525		Discounted cash flow	Constant prepayment rate	17.96	%
				Cost of service	$50
				Discount rate	8	%
Nonrecurring measurements:
Impaired loans	$	7,276	Discounted appraisals	Collateral discounts and discounted cash flows	10-50%
Other real estate owned	5,281		Discounted appraisals	Collateral discounts	15	%

The unobservable input used in the fair value measurement of the Company's interest rate swap agreements is the discount rate.  A significant increase (decrease) in the discount rate could result in a significantly lower (higher) fair value measurement.  The discount rate is determined by the third-party by obtaining third party market quotes from Reuters, which handle up to 30 year swap maturities. The Company's asset liability management team periodically reviews the discount rates utilized in determining the fair value of the interest rate swap agreements.

The significant unobservable input used in the fair value measurement of the Company's interest rate lock commitments is the 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 are estimated to close) will result in the fair value of the interest rate lock commitments to increase if in a gain position, or decrease if 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 by our secondary marketing system using historical data and the ratio is periodically reviewed by the Company's mortgage banking division.

The significant unobservable inputs used in the fair value measurement and the Company's loss to mortgage servicing rights are the weighted average constant prepayment rate and weighted average discount rate and cost to service. Significant increases (decreases) in any of those inputs in isolation could result in a significantly lower (higher) fair value measurement.  Although the constant prepayment rate and the discount rate are not directly interrelated, they will generally move in opposite directions. The Company utilizes an independent third-party to estimate the fair value of mortgage servicing rights through use of a discounted

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cash flow model to calculate the present value of estimated future net servicing income based on observable and unobservable inputs into the model to arrive at an estimated fair value.  To assess the reasonableness of the fair value measurement, the fair value and constant prepayment rates are compared to forward-looking estimates by the Company. 

The following table presents assets measured at fair value on a nonrecurring basis:

	Fair Value		Level 1		Level 2		Level 3
December 31, 2013	(Amounts in thousands)
Other real estate owned	$	1,034	$	—	$	—	$	1,034
Impaired loans:
Construction	160		—		—		160
Commercial real estate:
Owner occupied	4,930		—		—		4,930
Non-owner occupied	595		—		—		595
Commercial	203		—		—		203
Mortgages:
Secured 1-4 family real estate	170		—		—		170
Multifamily	—		—		—		—
Home equity lines of credit	—		—		—		—
Consumer and other	—		—		—		—

	Fair Value		Level 1		Level 2		Level 3
December 31, 2012	(Amounts in thousands)
Other real estate owned	$	5,281	$	—	$	—	$	5,281
Impaired loans:
Construction	1,767		—		—		1,767
Commercial real estate:
Owner occupied	4,772		—		—		4,772
Non-owner occupied	472		—		—		472
Commercial	265		—		—		265
Mortgages:
Secured 1-4 family real estate	—		—		—		—
Multifamily	—		—		—		—
Home equity lines of credit	—		—		—		—
Consumer and other	—		—		—		—

There were no transfers between valuation levels for any assets during the year ended December 31, 2013 or the year ended December 31, 2012. If different valuation techniques are deemed necessary, we would consider those transfers to occur at the end of the period when the assets are valued.

17. REGULATORY REQUIREMENTS

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly, additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off‑balance sheet items calculated under regulatory accounting practices. The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

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Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk‑weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). Management believes that, as of December 31, 2013, the Company meets all capital adequacy requirements to which it is subject.

The Company and the Bank exceeded the minimum regulatory capital ratios as of December 31, 2013, as well as the ratios to be considered "well capitalized." The Company completed a private placement offering during the second quarter of 2011 for proceeds of $6.4 million. Proceeds received from the Private Placement are being kept at the holding company level for general corporate purposes. The Company completed a second private placement offering during the fourth quarter of 2012 for proceeds of $41.8 million. The private placement included the issuance of $45.0 million in the Company's Mandatorily Convertible Cumulative Non-Voting Perpetual Preferred Stock, Series A (the "Series A Preferred Stock") which was subsequently converted over to common stock at $2.80 per share. On September 12, 2012, the U.S. Treasury completed the sale of its $36 million of Series T Preferred Stock and $13.3 million of its Series T-ACB Preferred Stock investment in the Company to private investors through a registered public offering. There was no impact to the Company's financial condition or operating results due to the transaction. In addition, the Company converted 20,907 shares of Series T and Series T-ACB preferred shares to common stock. Although this helped improve capital ratios at the holding company, management continues to monitor capital levels closely and evaluate options which would improve the Bank's capital position.

	Actual				For capital adequacy purposes				To be well capitalized under prompt corrective action provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Amounts in thousands)
Yadkin Bank
As of December 31, 2013:
Total Capital (to risk-weighted assets)	$	219,071	14.4	%	$	121,635	8.0	%	$	152,043	10.0	%
Tier 1 Capital (to risk-weighted assets)	200,891		13.2	%	60,817		4.0	%	91,226		6.0	%
Tier 1 Capital (to average assets)	200,891		11.2	%	71,495		4.0	%	89,369		5.0	%
As of December 31, 2012:
Total Capital (to risk-weighted assets)	$	189,961	13.0	%	$	116,923	8.0	%	$	146,154	10.0	%
Tier 1 Capital (to risk-weighted assets)	171,505		11.7	%	58,462		4.0	%	87,692		6.0	%
Tier 1 Capital (to average assets)	171,505		8.9	%	76,912		4.0	%	96,139		5.0	%
Yadkin Financial Corporation
As of December 31, 2013:
Total Capital (to risk-weighted assets)	$	221,858	14.6	%	$	121,702	8.0	%	$	152,128	10.0	%
Tier 1 Capital (to risk-weighted assets)	204,763		13.5	%	60,851		4.0	%	91,277		6.0	%
Tier 1 Capital (to average assets)	204,763		11.5	%	71,556		4.0	%	89,445		5.0	%
As of December 31, 2012:
Total Capital (to risk-weighted assets)	$	194,932	13.3	%	$	116,960	8.0	%	$	146,200	10.0	%
Tier 1 Capital (to risk-weighted assets)	177,656		12.2	%	58,480		4.0	%	87,720		6.0	%
Tier 1 Capital (to average assets)	177,656		9.2	%	76,998		4.0	%	96,247		5.0	%

Deferred tax assets that are dependent upon future taxable income do not qualify for inclusion in Tier 1 capital based on the capital guidelines of the Company's primary federal supervisory authority.  The disallowed portion of deferred tax assets for December 31, 2013 was $12.3 million for the Company. The disallowed portion of deferred tax assets for December 31, 2012 was $21.1 million for the Company.

The Bank, as a North Carolina banking corporation, may pay dividends only out of undivided profits as determined pursuant to North Carolina General Statutes Section 53‑87. At December 31, 2013, 2012, and 2011 there were no undivided profits available

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for dividend payments. At December 31, 2013, the Bank was prohibited from paying dividends to the holding company without prior FDIC and Commissioner approval. This restriction was lifted in 2014. Beginning in 2011, the Company was required to defer dividendpayments on the Series T and Series T-ACB Preferred Stock and interest payments on the trust preferred securities given liquidity levels at the holding company. However, in August 2012, the Company received regulatory approval and paid in full all of the outstanding deferred dividends on the TARP Preferred Stock and all accrued but unpaid interest on the trust preferred securities payments. The Company is now current on its payment obligations on its Series T and Series T-ACB Preferred Stock and on the trust preferred securities.

For the reserve maintenance period in effect at December 31, 2013, the Bank was required by the Federal Reserve Bank to maintain average daily reserves of $250,000 on deposit.

The mortgage banking segment qualifies as a HUD-approved Title II Supervised Mortgagee and issues mortgages insured by the US Department of Housing and Urban Development (HUD). A Title II Supervised mortgagee must maintain an adjusted net worth equal to a minimum of $1 million plus 1% of FHA single family insurance mortgages originated, underwritten, purchased or serviced in excess of $25 million, up to a maximum net worth of $2.5 million. As of December 31, 2013 and 2012, the Bank’s adjusted net worth exceeded the required minimum net worth requirements.

Possible penalties related to noncompliance with this minimum net worth requirement includes the revocation of the Bank’s license to issue HUD insured mortgages, which may have a material adverse affect on the Bank’s financial condition and results of operations.

18. FINANCIAL INSTRUMENTS

The following is a summary of the carrying amounts and fair values of the Company's financial assets and liabilities at December 31, 2013 and December 31, 2012:    

	December 31, 2013
	Carrying  amount		Estimated fair value		Level 1		Level 2		Level 3
	(Amounts in thousands)
Financial assets:
Cash and cash equivalents	$	40,995	$	40,995	$	40,995	$	—	$	—
Investment securities	288,922		288,922		3,151		285,771		—
Loans and loans held-for-sale, net	1,359,596		1,294,654		—		18,913		1,275,741
Accrued interest receivable	6,219		6,219		—		1,705		4,514
Federal Home Loan Bank stock	3,473		3,473		3,473		—		—
Forward sales commitments	147		147		—		147		—
Interest rate swap agreements	132		132		—		—		132
Financial liabilities:
Demand deposits, NOW, savings
and money market accounts	961,154		911,457		—		911,457		—
Time deposits	557,269		560,008		—		560,008		—
Borrowed funds	89,214		66,690		—		66,690		—
Accrued interest payable	852		852		—		852		—
Interest rate swap agreements	132		132		—		—		132
Interest rate lock commitments	23		23		—		—		23

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	December 31, 2012
	Carrying  amount		Estimated fair value		Level 1		Level 2		Level 3
	(Amounts in thousands)
Financial assets:
Cash and cash equivalents	$	138,396	$	138,396	$	138,396	$	—	$	—
Investment securities	343,120		343,120		133		342,987		—
Loans and loans held-for-sale, net	1,312,034		1,187,663		—		27,679		1,159,984
Accrued interest receivable	6,376		6,376		—		1,760		4,616
Federal Home Loan Bank stock	4,154		4,154		4,154		—		—
Interest rate swap agreements	196		196		—		—		196
Interest rate lock commitments	873		873		—		—		873
Financial liabilities:
Demand deposits, NOW, savings
and money market accounts	898,372		898,372		—		898,372		—
Time deposits	733,290		742,552		—		742,552		—
Borrowed funds	105,136		105,926		—		105,926		—
Accrued interest payable	1,629		1,629		—		1,629		—
Interest rate swap agreements	196		196		—		—		196
Forward sales commitments	481		481		—		481		—

The carrying amounts of cash and cash equivalents approximate their fair value.

The fair value of marketable securities is based on quoted market prices, prices quoted for similar instruments, and prices obtained from independent pricing services.

For certain categories of loans, such as installment and commercial loans, the fair value is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. The cost of fixed rate mortgage loans held-for-sale approximates the lower of cost or market as these loans are typically sold within 60 days of origination. Fair values for adjustable-rate mortgages are based on quoted market prices of similar loans adjusted for differences in loan characteristics. The Company applied an additional illiquidity discount in the amount of 5.0%.

The carrying value of FHLB stock approximates fair value based on the redemption provisions of the FHLB stock.

The fair value of demand deposits and savings accounts is the amount payable on demand at December 31, 2013 and December 31, 2012, respectively. The fair value of fixed-maturity certificates of deposit and individual retirement accounts is estimated using the present value of the projected cash flows using rates currently offered for similar deposits with similar maturities.

The fair values of borrowings are based on discounting expected cash flows at the interest rate for debt with the same or similar remaining maturities and collateral requirements. The carrying values of short-term borrowings, including overnight, securities sold under agreements to repurchase, federal funds purchased and FHLB advances, approximates the fair values due to the short maturities of those instruments. The Company's credit risk is not material to calculation of fair value because these borrowings are collateralized.

The carrying values of accrued interest receivable and accrued interest payable approximates fair values due to the short-term duration.

Interest rate swaps are recorded at fair value on a recurring basis. Fair value measurement is based on discounted cash flow models. All future floating cash flows are projected and both floating and fixed cash flows are discounted to the valuation date.

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Interest rate locks and forward loan sale commitments are recorded at fair value on a recurring basis. The fair value of forward sales commitments is based on changes in loan pricing between the commitment date and period end, typically month end. The fair value of interest rate lock commitments is based on servicing release premium, origination income net of origination costs, and changes in loan pricing between the commitment date and period end, typically month end.

19. PARENT COMPANY CONDENSED FINANCIAL INFORMATION

During the May 24, 2006 annual meeting, the shareholders approved the formation of the Company whereby each share of the Bank was automatically converted to one share of the Company. The Company’s authorized capital consists of 33,333,333 shares of common stock, par value $1.00 per share, and 1,000,000 shares of preferred stock, no par value, whose rights, privileges, and preferences will be established by the Board of Directors on issuance. The following table presents condensed financial data for the parent company only:

Condensed Balance Sheets
	2013		2012
Assets:	(Amounts in thousands)
Cash on deposit with bank subsidiary	$	1,889	$	5,212
Investment in subsidiary	215,562		199,680
Other investments	2,451		1,765
Other assets	108		351
Total	$	220,010	$	207,008
Liabilities and Shareholders' Equity:
Dividends payable	$	177	$	183
Other liabilities	35,363		36,031
Shareholders' equity	184,470		170,794
Total	$	220,010	$	207,008

Condensed Results of Operations
	2013			2012			2011
Equity in earnings of subsidiary bank:	(Amounts in thousands)
Undistributed earnings (loss)	$	19,840		$	(7,684	)	$	(13,511	)
Income (expenses), net	(1,014		)	(990		)	(884		)
Net income (loss)	18,826			(8,674		)	(14,395		)
Preferred stock dividend and accretion of preferred stock discount	1,877			3,911			2,987
Net income (loss) to common shareholders	$	16,949		$	(12,585	)	$	(17,382	)

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Condensed Statements of Cash Flows
	2013			2012			2011
Cash flows from operating activities:	(Amounts in thousands)
Net loss from continuing operations	$	18,826		$	(8,674	)	$	(14,395	)
Adjustments to reconcile net loss to net cash from operating activities:
Equity (loss) in undistributed earnings of subsidiaries	(19,840		)	7,684			13,511
Other-than-temporary impairment of investments	39			50			116
Loss on sale of other investments	—			—			80
Change in other assets	243			(18		)	315
Change in other liabilities	(851		)	113			270
Net cash used in operating activities	(1,583		)	(845		)	(103		)
Cash flows from investing activities:
Purchase of investments	(267		)	—			(250		)
Maturities, call and repayments of investments	—			99			55
Proceeds from sale of other investments	—			—			460
Additional investment in bank subsidiary	—			(37,000		)	—
Net cash provided by (used in) investing activities	(267		)	(36,901		)	265
Cash flows from financing activities:
Issuance of preferred stock	—			40,592			—
Issuance of common stock	—			—			6,402
Dividends paid	(1,414		)	(4,431		)	(616		)
Payment of fractional shares in the 1-for-3 stock split	(39		)	—			—
Repurchase and cancellations of warrants	(20		)	—			—
Net cash provided by (used in) financing activities	(1,473		)	36,161			5,786
Net increase (decrease) in cash	(3,323		)	(1,585		)	5,948
Cash at beginning of year	5,212			6,797			849
Cash at end of year	$	1,889		$	5,212		$	6,797

20. BUSINESS SEGMENT INFORMATION

The Company has two reportable segments, including banking activities and mortgage banking activities.

In the fourth quarter of 2012, a decision was made by management to sell a reinsurance subsidiary held by Sidus. As a result of this decision, Sidus reclassified its investment in the reinsurance subsidiary to held for sale and wrote down its investment by $1.0 million to the estimated fair value at December 31, 2012. The sale of the subsidiary closed in the first quarter of 2013. In addition, at the beginning of 2013, the Company dissolved Sidus and is no longer doing business as Sidus. All mortgage banking activity beginning in 2013 is at the Bank.

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The following table details the results of operations for the year ended December 31, 2013, 2012 and 2011 for bank activities and mortgage activities.

	Bank Activities			Mortgage Activities		Other (1)			Total
	(Amounts in thousands)
For Year Ended December 31, 2013
Interest income	$	70,633		$	3,666	$	—		$	74,299
Interest expense	9,494			—		747			10,241
Net interest income	61,139			3,666		(747		)	64,058
Provision for loan losses	(2,685		)	—		—			(2,685		)
Net interest income (loss) after provision for loan losses	63,824			3,666		(747		)	66,743
Other income	9,587			8,709		108			18,404
Other expense	50,045			5,500		375			55,920
Income (loss) before income taxes	23,366			6,875		(1,014		)	29,227
Income taxes	10,401			—		—			10,401
Net income (loss)	$	12,965		$	6,875	$	(1,014	)	$	18,826
Total assets	$	1,779,473		$	24,172	$	2,382		$	1,806,027
Net loans	1,340,683			—		—			1,340,683
Loans held for sale	—			18,913		—			18,913

(1) Note: The “Other” column includes Holding Company assets and Holding Company income and expenses.

	Bank Activities			Mortgage Activities			Other (2)			Total
	(Amounts in thousands)
For the year ended December 31, 2012
Interest income	$	75,104		$	3,868		$	—		$	78,972
Interest expense	16,998			143			847			17,988
Net interest income	58,106			3,725			(847		)	60,984
Provision for loan losses	40,538			(164		)	—			40,374
Net interest income (loss) after provision for loan losses	17,568			3,889			(847		)	20,610
Other income	7,677			5,860			29			13,566
Other expense	60,070			6,569			172			66,811
Income (loss) before income tax expense	(34,825		)	3,180			(990		)	(32,635		)
Income tax expense (1)	(23,961		)	—			—			(23,961		)
Net income (loss)	$	(10,864	)	$	3,180		$	(990	)	$	(8,674	)
Total assets	$	1,890,906		$	31,500		$	1,032		$	1,923,438
Net loans	1,284,355			—			—			1,284,355
Loans held for sale	—			27,679			—			27,679

________________________

(1) As an LLC, Sidus passes its pre-tax income through to its single member, the Bank, which is taxed on that income.

(2) Note: The “Other” column includes Holding Company assets and Holding Company income and expenses.

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	Bank Activities			Mortgage Activities			Other (2)			Total
	(Amounts in thousands)
For Year Ended December 31, 2011
Interest income	$	88,156		$	390		$	—		$	88,546
Interest expense	25,016			239			786			26,041
Net interest income	63,140			151			(786		)	62,505
Provision for loan losses	20,828			15			—			20,843
Net interest income (loss) after provision for loan losses	42,312			136			(786		)	41,662
Other income	12,901			5,408			(129		)	18,180
Other expense	54,253			13,244			46			67,543
Loss before income tax expense	960			(7,700		)	(961		)	(7,701		)
Income tax expense (1)	6,694			—			—			6,694
Net loss	$	(5,734	)	$	(7,700	)	$	(961	)	$	(14,395	)
Total assets	$	1,973,848		$	24,209		$	(4,869	)	$	1,993,188
Net loans	1,418,076			—			—			1,418,076
Loans held for sale	3,628			15,906			—			19,534

(1) As an LLC, Sidus passes its pre-tax income through to its single member, the Bank, which is taxed on that income.

(2) Note: The “Other” column includes Holding Company assets and Holding Company income and expenses.

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21. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table presents unaudited, summarized quarterly data for the years ended December 31, 2013 and 2012:    

	Three Months Ended
2013	December 31			September 30			June 30			March 31
	(Amounts in thousands)
Interest income	$	18,903		$	18,470		$	18,651		$	18,275
Interest expense	2,154			2,334			2,530			3,223
Net interest income	16,749			16,136			16,121			15,052
Provision for (recovery of) loan losses	(3,017		)	40			55			237
Net interest income after provision for loan losses	19,766			16,096			16,066			14,815
Other income	1,182			5,381			6,184			5,657
Other expense	13,712			14,150			14,843			13,215
Income before income taxes	7,236			7,327			7,407			7,257
Income taxes	2,579			2,616			2,598			2,608
Net income	4,657			4,711			4,809			4,649
Preferred stock dividend and accretion of preferred stock discount	421			421			590			445
Net income to common shareholders	$	4,236		$	4,290		$	4,219		$	4,204
Net income per common share- basic	$	0.30		$	0.30		$	0.30		$	0.30
Net income per common share- diluted	0.30			0.30			0.30			0.30
2012
Interest income	$	18,793		$	19,446		$	19,744		$	20,989
Interest expense	4,048			4,257			4,586			5,097
Net interest income	14,745			15,189			15,158			15,892
Provision for loan losses	31,554			4,251			2,218			2,351
Net interest income after provision for loan losses	(16,809		)	10,938			12,940			13,541
Other income	986			4,665			4,406			3,509
Other expense	22,708			14,792			15,732			13,579
Income (loss) before income taxes (benefit)	(38,531		)	811			1,614			3,471
Income taxes (benefit)	(14,632		)	54			(9,383		)	—
Net income (loss)	(23,899		)	757			10,997			3,471
Preferred stock dividend and accretion of preferred stock discount	1,419			838			833			821
Net income (loss) to common shareholders	$	(25,318	)	$	(81	)	$	10,164		$	2,650
Net income (loss) per common share- basic	$	(3.63	)	$	—		$	1.56		$	0.42
Net income (loss) per common share- diluted	(3.63		)	—			1.56			0.42

22. GOODWILL

Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired.  Goodwill impairment testing is performed annually or more frequently if events or circumstances indicate possible impairment.  An impairment loss is recorded to the extent that the carrying value of goodwill exceeds its implied fair value.

Goodwill relating to the Sidus acquisition was evaluated by management on an annual basis at October 1st or more frequently if circumstances indicate possible impairment for the Sidus reporting unit. For the first six months of 2011, Sidus had experienced losses of $2.6 million due to declines in revenues and one-time expenses for severance and termination costs. During the second quarter of 2011, management made the strategic decision to exit out of the wholesale market and concentrate the focus on retail

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mortgage sales. As a result of these triggering events, goodwill related to the Sidus acquisition was evaluated for impairment as of June 30, 2011.

In performing the first step (“Step 1”) of the goodwill impairment testing and measurement process to identify possible impairment, the estimated fair value of the Sidus reporting unit was developed using the income and market approaches to value Sidus.  The income approach consisted of discounting projected long-term future cash flows, which are derived from internal forecasts and economic expectations for Sidus.   Significant inputs to the income approach included the multiple of earnings derived from recent acquisitions, an annual discount rate of 25% representing investors’ estimated long-term required rate of return, and projected long-term earnings for the reporting units. A significant discount rate was applied to the projections due to the fact that Sidus had sustained losses for the first six months of 2011 and had recently exited its wholesale business. The market valuation approach utilized price-to-book value multiple and EBITDA multiples. Significant inputs to the price-to-book value multiple approach included a weighted-average multiple of long-term book value of 0.84 derived from southeast industry data, and long-term tangible book values of 1.06 for the reporting units.

The valuation had declined over the last twelve months as investors have demanded a higher return for equity investments in the mortgage business due to sustained weakness in the industry. Earnings multiples had declined and discount rates increased as discussed in the paragraph above. These industry trends coupled with losses for the first six months of 2011, changes in the regulatory environment and additional costs associated with those changes, and risks associated with recourse decreased expected future earnings and resulted in management reducing its internal valuations. The lower valuations resulted in goodwill impairment.  

The results of this Step 1 process indicated that the estimated fair value of Sidus was less than book value, thus requiring a second step (“Step 2”) of the goodwill impairment test in accordance with accounting for Intangibles- Goodwill and other.  The Step 2 analysis included an allocation of estimated fair value of the entity and allocated that value to identifiable tangible and intangible assets and liabilities as determined in Step 1. Assumptions included in the fair value of net assets included current market rates for loans. Based on the Step 2 analysis, it was determined that Sidus’ fair value did not support the goodwill recorded; therefore, Sidus recorded a $4.9 million goodwill impairment charge to write-off all of its goodwill.   This non-cash goodwill impairment charge to earnings was recorded as a component of non-interest expense on the consolidated statement of loss.

23. ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table presents changes in accumulated other comprehensive income for the year ended December 31, 2013 and 2012.

		2013			2012
	(Amounts in thousands)
Beginning balance		$	4,184		$	3,863
Other comprehensive income (loss) before reclassifications		(5,628		)	1,308
Amounts reclassified from accumulated comprehensive income:
Realized (gain) loss on sale of securities		2,355			(1,605		)
Impairment expense		—			—
Reclassified amounts before tax		2,355			(1,605		)
Tax expense		(906		)	618
Total reclassifications net of tax		1,449			(987		)
Net current period other comprehensive income (loss)		(4,179		)	321
Ending balance		$	5		$	4,184

The income statement line items impacted by the reclassifications of realized gains on the sale of securities are the net gain on sale of securities and income tax expense line items in the condensed consolidated statements of income.

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24. PARTICIPATION IN U.S. TREASURY CAPITAL PURCHASE PROGRAM

On January 16, 2009, the Company issued 36,000 shares of senior preferred stock, each with a liquidation preference of $1,000 per share, to the Treasury for $36 million pursuant to the Capital Purchase Program (“CPP”). Additionally, the Company issued warrants to purchase up to 385,990 shares of common stock to the U.S. Treasury as a condition to its participation in the CPP. The warrant has an exercise price of $13.99 per share, is immediately exercisable and expires 10 years from the date of issuance. Proceeds from this sale of preferred stock were used for general corporate purposes, including supporting the continued growth and lending in the communities served by the Bank. The CPP preferred stock is non-voting, other than having class voting rights on certain matters, and pays cumulative dividends quarterly at a rate of 5% per annum for the first five years and 9% thereafter. The preferred shares are redeemable at the option of the Company under certain circumstances during the first three years and only thereafter without restriction.

These common stock warrants have been assigned a fair value of $2.38 per share, or $900,000 in aggregate as of January 16, 2009. Using a relative fair value allocation approach, $1.7 million was recorded as a discount on the preferred stock and was accreted as a reduction in the net income available for common shareholders over five years at $300,000 to $400,000 per year. In July of 2013, the Company repurchased the outstanding warrants for $20,000 in an auction held by the Treasury. The warrants were then immediately canceled by the Company.

Under the CPP, the Company issued an additional $13.3 million in Cumulative Perpetual Preferred Stock, Series T-ACB, on July 24, 2009.  In addition, the Company issued warrants to the Treasury to purchase 273,534 shares of the Company’s common stock at an exercise price of $7.30 per share.  These warrants are immediately exercisable and expire 10 years from the date of issuance.  The preferred stock is non-voting, other than having class voting rights on certain matters, and pays cumulative dividends quarterly at a rate of 5% per annum for the first five years and 9% per annum thereafter.  The preferred shares are redeemable at the option of the Company under certain circumstances during the first three years and only thereafter without restriction.

As part of the private placement transaction in October 2012, the Company entered into a Share Exchange Agreement (the "Exchange Agreement") with certain holders (the “Preferred Shareholders”) of the Company's Series T Preferred Stock and Series T-ACB Preferred Stock, pursuant to which the Preferred Shareholders agreed to exchange shares of the Preferred Stock for shares of the Company's common stock and shares of a new class of non-voting common stock, par value $1.00 per share, of the Company (the “non-voting common stock”). The total amount of Preferred Stock exchanged for common stock and non-voting common stock was $20.9 million. The non-voting common stock will convert into shares of the Company's common stock under certain conditions in accordance with the terms of the Articles of Amendment creating the class of the non-voting common stock. As a result of the exchange, an additional $856,000 of discount was accreted in 2012.

25. PRIVATE PLACEMENTS

On May 6, 2011, the Company completed the private placement of 3,081,867 shares of common stock (the "2011 Private Placement") to accredited investors, including certain of the Company's officers and directors, for total cash proceeds of $6.4 million. The purchase price per share for investors was at a 10% discount to the weighted average closing sale price of the Company's common stock on Nasdaq for the 10-day period ending five business days prior to the closing of the 2011 Private Placement. Per Nasdaq Listing Rule 5635(c) pertains to shareholder approval of equity compensation plans, and under interpretive rulings issued by Nasdaq, a private placement of equity securities is treated as an equity compensation plan for purposes of this rule if any employees or directors of the issuer participate and the price per share is below the market value of the issuer's common stock. In order to comply with the Nasdaq Listing Rule, the directors and officers purchased shares of common stock in the 2011 Private Placement at a purchase price per share without the 10% discount. On June 23, 2011, the Company's shareholders approved the 2011 Private Placement which permitted the Company pursuant to Nasdaq Rule 5635(c) to issue the Company's directors and executive officers additional shares of common stock in the amount of 151,681 shares so that the directors and executive officers were able to invest on the same terms as other investors that participated in the 2011 Private Placement. The Company issued 3,233,548 shares of common stock in total as a result of the 2011 Private Placement. Proceeds received from the 2011 Private Placement are being kept at the holding company level for general corporate purposes.

On October 23, 2012, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain accredited investors and directors and executive officers of the Company (collectively, the “Investors”), pursuant to which the Investors purchased 45,000 shares of the Company's Series A Preferred Stock, at a price of $1,000 per share in a private placement (the “2012 Private Placement”). The Series A Preferred Stock converted into shares of the Company's common stock at a price of $2.80. The Company raised approximately $42.5 million in net proceeds from the sale of the Series A Preferred Stock.

As part of the 2012 Private Placement, contemporaneously with the execution of the Purchase Agreement, the Company entered into the Exchange Agreement with the Preferred Shareholders, pursuant to which the Preferred Shareholders agreed to exchange

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shares of the Series T Preferred Stock and Series T-ACB Preferred Stock for shares of the Company's common stock and shares of the Company's non-voting common stock. The total amount of Preferred Stock to be exchanged for common stock and non-voting common stock was $20.9 million. The non-voting common stock will convert into shares of the Company's common stock under certain conditions in accordance with the terms of the Articles of Amendment creating the class of the non-voting common stock.

26. LEGAL PROCEEDINGS

In the course of ordinary business, the Company may, from time to time, be named a party to legal actions and proceedings. In accordance with GAAP, the Company establishes reserves for litigation and regulatory matters when those matters present loss contingencies that are both probable and estimable. When loss contingencies are not both probable and estimable, the Company does not establish reserves. There are no material pending legal proceedings to which we are a party or of which any of our properties are the subject.

27. SUBSEQUENT EVENT (unaudited)

On January 27, 2014, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with VantageSouth Bancshares, Inc., a Delaware corporation (“VantageSouth”), and Piedmont Community Bank Holdings, Inc., a Delaware corporation and majority stockholder of VantageSouth (“Piedmont”). The Merger Agreement provides that, subject to the terms and conditions set forth therein, VantageSouth and Piedmont will merge with and into the Company, with the Company continuing as the surviving corporation. The Merger Agreement also provides that, immediately following the effective time of the mergers, VantageSouth Bank, a North Carolina banking corporation and wholly owned subsidiary of VantageSouth, will merge with and into the Bank, with Yadkin Bank continuing as the surviving bank in the bank merger. The Merger Agreement was approved by each of the boards of directors of the Company, VantageSouth, and Piedmont.

Subject to the terms and conditions of the Merger Agreement, at the closing of the mergers, each outstanding share of VantageSouth common stock will be converted into the right to receive 0.3125 shares of voting common stock of the Company, subject to the payment of cash in lieu of fractional shares. Each outstanding share of Piedmont common stock will be converted into the right to receive, for each share, (i) 6.28597 shares of the Company’s common stock; (ii) a pro rata portion of cash in an amount estimated to be $4.0 million based on Piedmont's deferred tax asset of $4.8 million; (iii) a pro rata portion of cash in an amount equal to the aggregate amount of any cash held by Piedmont at the closing, and (iv) a right to receive a pro rata share of the “Contingent Shares” (as defined in the Merger Agreement). Under the terms of the Merger Agreement, the Company will assume the Piedmont Phantom Equity Plan, and approximately 8.5% of the Company’s voting common stock that would otherwise have been issued to Piedmont stockholders will be placed in a trust to fund the Piedmont Phantom Equity Plan.

Pursuant to the Merger Agreement, at the effective time of the mergers, seven current members of the Company's Board of Directors and seven current members of the VantageSouth Board of Directors will be appointed to the Board of Directors of the surviving company and surviving bank for a period of 24 months following the mergers. The surviving company will also adopt certain amendments to the Company's bylaws related to board composition of the surviving company as previously described and which will require that for 36 months after the effective time of the mergers that Joseph H. Towell serve as Executive Chairman and that Scott M. Custer serve as Chief Executive Officer and President. The Merger Agreement also provides that the following executives will enter into employment agreements with the surviving company and surviving bank prior to the effective time of the mergers: Joseph H. Towell as the Executive Chairman; Scott M. Custer as the Chief Executive Officer and President; Terry S. Earley as the Chief Financial Officer; Wm. Mark DeMarcus as the Chief Operating Officer; Steven M. Jones as the Chief Banking Officer; and Edwin W. Shuford as the Chief Credit Officer.

The Articles of Incorporation of the Company will be the Articles of Incorporation of the surviving company. In connection with the mergers, and in addition to asking its shareholders to approve the Merger Agreement, the Company will be seeking shareholder approval of an amendment to its Articles of Incorporation to increase the number of authorized shares of common stock from 33,333,333 to 75,000,000 shares.

The Merger Agreement contains customary representations and warranties from the Company, VantageSouth, and Piedmont, as applicable, and each party has agreed to customary covenants, including, among others, covenants relating to (1) the conduct of each party's business during the interim period between the execution of the Merger Agreement and the closing; (2) each party’s obligations to facilitate its respective shareholders’ consideration of, and voting upon, the Merger Agreement and the mergers; (3) the recommendation by the board of directors of each party in favor of approval of the Merger Agreement and the mergers by its respective shareholders; and (4) the Company's and VantageSouth's non-solicitation obligations relating to alternative business combination transactions.

Completion of the mergers is subject to certain customary conditions, including, among others, (1) approval of the Merger Agreement by each of the parties' shareholders; (2) receipt of required regulatory approvals without the imposition of any condition that would have or be reasonably likely to have a material burdensome effect on the parties; (3) the absence of any law or order prohibiting the consummation of the mergers; (4) approval of the listing on the New York Stock Exchange of the Company’s common stock to be issued in the mergers; (5) the effectiveness of the registration statement on Form S-4 for the Company’s common stock to be issued in the mergers; (6) subject to certain exceptions, the accuracy of the representations and warranties of the other party; (7) performance in all material respects by each party of its obligations under the Merger Agreement; and (8) the receipt by each party from its counsel of a tax opinion that the mergers will be treated as a reorganization within Section 368(a) of the Internal Revenue Code. The Company will use its commercially reasonable efforts to list the Company’s common stock on the New York Stock Exchange prior to the closing of the mergers.

The Merger Agreement provides termination rights for the Company, VantageSouth and Piedmont, and further provides that upon termination of the Merger Agreement under certain circumstances, VantageSouth or the Company, as applicable, will be obligated to pay the other party a termination fee of $10 million.

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

At the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-14.

Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective (1) to provide reasonable assurance that information required to be disclosed by the Company in the reports filed or submitted by it under the Securities Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) to provide reasonable assurance that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow for timely decisions regarding required disclosure.

Management's Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. The Company's internal control over financial reporting is a process designed under the supervision of the Company's Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. Management has made a comprehensive review, evaluation and assessment of the Company's internal control over financial reporting as of December 31, 2013. In making its assessment of internal control over financial reporting, management used the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control−−Integrated Framework (1992). Based on this assessment, management believes that, as of December 31, 2013, the Company’s internal control over financial reporting is effective. In accordance with Section 404 of the Sarbanes−Oxley Act of 2002, management makes the following assertions:

• Management has implemented a process to monitor and assess both the design and operating effectiveness of internal control over financial reporting.

• 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.

The Company’s independent registered public accounting firm that audited the Company’s consolidated financial statements included in this annual report has issued an attestation report on the effectiveness of the Company’s internal control over financial reporting.

Changes in Internal Control over Financial Reporting

Management of the Company has evaluated, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, changes in the Company's internal controls over financial reporting (as defined in Rule 13a−15(f) and 15d−15(f) of the Exchange Act) during the year ended 2013. In connection with such evaluation, the Company has determined that there have been no changes in internal control over financial reporting during the year that have materially affected or are reasonably likely to materially affect, the Company's internal control over financial reporting.

February 28, 2014

/s/Joseph H. Towell	/s/ Jan H. Hollar
Joseph H. Towell	Jan H. Hollar
President and Chief Executive Officer	Executive Vice President & Chief Financial Officer

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders

Yadkin Financial Corporation

Elkin, North Carolina

We have audited Yadkin Financial Corporation’s (the “Company”) internal control overfinancial reporting as of December 31, 2013, based on criteria established in Internal Control-Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control overfinancial reporting and for its assessment of the effectiveness of internal control overfinancial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control overfinancial 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.

In our opinion, Yadkin Financial Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control-Integrated Framework (1992) 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 balance sheets of Yadkin Financial Corporation as of December 31, 2013 and 2012 and related consolidated statements of income (loss), comprehensive income (loss), shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 2013, and our report dated February 28, 2014 expressed an unqualified opinion on those consolidated financial statements.

/s/ Dixon Hughes Goodman LLP

Charlotte, North Carolina

February 28, 2014

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Item 9B -–Other Information

None.

PART III

Item 10 — Directors and Executive Officers and Corporate Governance

Board of Directors

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 Company's Annual Meeting of Shareholders (the "Annual Meeting"). The Board of Directors has currently established the number of directors at 10.

Set forth below is certain information about our current Board of Directors, including business experience for the past five years and qualifications and attributes considered by our Board of Directors which led to the director's nomination. “Year first elected” refers to the year in which each individual first took office as a director and does not necessarily indicate a continuous term. Each of the directors is also a director of the Bank.

Nolan G. Brown, 73, was first elected to our Board of Directors in 2004. Mr. Brown is the owner and President of the health care company Triad Group, Inc. and its affiliates, which are located in Yadkinville, North Carolina. Additionally, Mr. Brown is a Certified Public Accountant and former audit committee financial expert for Southern Community Financial Corporation, Winston-Salem, North Carolina (Nasdaq: SCMF). His leadership experience, knowledge of financial reporting requirements of public companies, and substantial experience with business administration and accounting enhance his ability to contribute as a director.

Harry M. Davis, 66, was first elected to our Board of Directors in 2004. Dr. Davis is a Professor of Finance, Appalachian State University, Boone, N.C. Dr. Davis has been a consultant to the banking industry on financial statements for over twenty years and is an instructor at the North Carolina School of Banking (where he also serves as dean), the South Carolina School of Banking and the Bank 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.

Thomas J. Hall, 66, was appointed to the Board of Directors upon the completion of the merger between the Company and American Community Bancshares, Inc. on April 17, 2009 and was subsequently elected by our shareholders at the 2009 Annual Meeting. Mr. Hall has served as President of Hall Group, Inc., a real estate holding company located in Charlotte, North Carolina, since 2000. He has substantial experience with internal operations of large companies having 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.

James A. Harrell, Jr., 67, was first elected to our Board of Directors in 1999. Dr. Harrell is a self-employed dentist in Elkin, North Carolina, former President of the North Carolina Dental Society, and current delegate of the American Dental Association. He has substantial experience with community banking having previously served as a local director of United Savings and Loan Corporation for 12 years, BB&T for one year, and 1st Financial Corporation for five years. In addition, Mr. Harrell has been a Surry County Commissioner for twenty years.His industry knowledge gained through his experience as a director of financial institutions and his community service enhances his ability to contribute as a director.

Larry S. Helms, 68, was appointed to the Board of Directors upon the completion of the merger between the Company and American Community Bancshares, Inc. on April 17, 2009 and was subsequently elected by our shareholders at the 2009 Annual Meeting. Mr. Helms is the owner of Larry S. Helms and Associates, an insurance company located in Monroe, North Carolina, and has served as its chief executive since 1999. Mr. Helms has also served as a mayor, a county commissioner, on the N. C. Board of Transportation, and as a past Chairman of a local Chamber of Commerce.  Mr. Helms' work experience and community service provide a valuable perspective to our Board of Directors.

Dan W. Hill, III, 69, was first elected to our Board of Directors in 2008. Mr. Hill is the founding member of Hill, Chesson and Woody, which is an association of independently owned insurance brokerage firms. Mr. Hill is also President of HCW University Medical Insurance Plans, Inc. located in Durham, North Carolina. He has substantial experience with both insurance and community banking, having previously served as a board member of Home Savings and Loan for eight years and of Cardinal State Bank for eight years, which enhances his ability to contribute as a director.

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James L. Poindexter, 75, was first elected to our Board of Directors in 1968. Mr. Poindexter serves as the President of Surry Hardware & Building Supply Co., Inc. In addition, he is the owner of Wakefield Farm, Poindexter Enterprises, and Wakefield Woods, all located in Elkin, North Carolina. During his long tenure as a board member, Mr. Poindexter has developed knowledge of the Company's business, history, organization, and executive management which, together with his personal understanding of one of the key markets that we serve, has enhanced his ability as a director.

Alison J. Smith, 60, was appointed to the Board of Directors upon the completion of the merger between the Company and American Community Bancshares, Inc. on April 17, 2009 and was subsequently elected by our shareholders at the 2009 Annual Meeting. Ms. Smith has served as the President of Smith Capital Inc., a financial advisory and investment banking firm, in Charlotte, North Carolina, since 1995. She has substantial experience advising, evaluating and structuring bank acquisitions, valuing bank securities and writing bank strategic plans.

Harry C. Spell, 66, was first elected to our Board of Directors in 2002. Mr. Spell is the Vice President and Secretary of MoCaro Dyeing & Finishing, Inc., a textile company in Statesville, North Carolina. His business and personal experience in certain of the communities that the Bank serves provides him with a useful appreciation of markets that we serve. He also has experience in the context of bank mergers and acquisitions from the serving with the Company through four bank acquisitions.

Joseph H. Towell, 62, was first elected to our Board of Directors in February 2011 at the same time he was appointed as Chief Executive Officer and President of the Company. He has served in various executive roles at the Company since May 2008. Mr. Towell served as Portfolio Manager and Team Leader for leveraged loan investing with Putnam Investments in Boston, MA from 2001 to 2008. Mr. Towell was employed with First Union National Bank in various roles from 1983 through 2001. He brings to the Board an understanding of the Company's business and organization, as well as substantial leadership ability, banking industry expertise, and management experience. 

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Executive Officers

The table below sets forth each of our current executive officer's name, age, position, and business experience for the past five years.

Principal Executive Officers	Age	Position	Business Experience for Past Five Years
Joseph H. Towell	62	President & Chief Executive Officer	President and Chief Executive Officer of Yadkin Financial Corporation since February 2011; prior to that Executive Vice President & Chief Operating Officer of Yadkin Financial Corporation since August 2010; prior to that Executive Vice President, Chief Credit Officer & Chief Administrative Officer, Yadkin Financial Corporation and Yadkin Bank since March 2009; prior to that Executive Vice President, Yadkin Bank since May 2008; prior to that Mr. Towell served as Portfolio Manager and Team Leader for leveraged loan investing with Putnam Investments in Boston, MA since 2001; prior to that he worked with First Union National Bank in various roles from 1983 through 2001.
Jan H. Hollar	58	Executive Vice President & Chief Financial Officer	Executive Vice President and Chief Financial Officer, Yadkin Financial Corporation since September 2009; October 2008 to present as President of Jan H. Hollar, CPA, PC an accounting services company; Senior Vice President and Chief Financial Officer of Blueharbor Bank in Mooresville, NC from November 2007 until October 2008; prior to that Executive Vice President and Chief Financial Officer of The Scottish Bank in Charlotte, NC; prior to that Executive Vice President and Director of Finance of First Charter in Charlotte, NC.
W. Mark DeMarcus	49	Executive Vice President & Chief Operating Officer	Executive Vice President and Chief Operating Officer of Yadkin Financial Corporation since August 2011; prior to that Executive Vice President and Chief Banking Officer since August 2010; prior to that Regional President of Yadkin Bank since April 2009; prior to that Executive Vice President and Chief Banking Officer of American Community Bank since March 2008; prior to that Senior Vice President and Retail/Small Business Executive for NC, SC, and VA at Wachovia Bank since June 2007; prior to that Senior Vice President and General Banking Group Recruiting Manager for Wachovia since 2005.

Family Relationships

There are no family relationships among any of the directors and principal executive officers of the Company.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equity securities, to 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 the copies of such reports furnished to us and written representations that no other reports were required, during the fiscal year ended December 31, 2013, all Section 16(a) forms were filed in a timely manner.

Code of Ethics

The Company has adopted a Code of Ethics for all employees to resolve ethical issues in an increasingly complex business environment. The Code of Ethics applies to all 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 of Ethics covers topics including, but not limited to, conflicts of interest, confidentiality of information, and compliance with laws and regulations. The Code of Ethics is available on the Company's corporate website located at www.yadkinbank.com.

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The Company may post amendments to or waivers of the provisions of the Code of Ethics, 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 report.

Audit Committee Financial Expert

As outlined in the Audit Committee Charter, which is available on the Company's website located at 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 engages a qualified firm of certified public accountants to conduct such audit work as is necessary for this purpose. The Audit Committee held four meetings during 2013. The Board of Directors has determined that Nolan G. Brown, Alison J. Smith, and Dr. Harry Davis are Audit Committee financial experts, and has designated each of them as such. Each person's qualifications to serve as an Audit Committee financial expert are listed under "Board of Directors" above. All of the other members of the Audit Committee satisfy the audit committee independence requirements stated in the rules of The Nasdaq Stock Market.

Item 11 — Executive Compensation

EXECUTIVE COMPENSATION AND OTHER INFORMATION

Executive Compensation

The following table summarizes for the fiscal years ended December 31, 2013, 2012 and 2011, the current and long-term compensation for the CEO and the most highly compensated executive officers other than the CEO (sometimes collectively referred to herein as the "named executive officers") for the year ended December 31, 2013. Each component of compensation is discussed in further detail in the footnotes following the table.

Summary Compensation Table

The following table summarizes for the fiscal years ended December 31, 2013 and 2012, the current and long-term compensation for the CEO, the CFO and the most highly compensated executive officers other than the CEO and CFO. Each component of compensation is discussed in further detail in the footnotes following the table.

Name and Principal Position	Year	Salary ($)	Bonus ($)(1)	Stock Awards ($)	Option Awards ($) (2)	Non-Equity Incentive Plan Compensation ($)	Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)	All Other Compensation ($) (3)	Total ($)
Joseph H. Towell	2013	425,000	300,000	—	—		—	78,473	803,473
President and Chief	2012	425,000	250,000	345,000	—	—	—	36,281	1,056,281
Executive Officer	2011	325,000	—	85,400	—	—	—	36,490	446,890
Jan H. Hollar	2013	240,000	80,000	—	—		—	27,686	347,686
Executive Vice President	2012	240,000	70,000	138,000	—	—	—	26,143	474,143
& Chief Financial Officer	2011	205,000	—	24,400	—	—	—	13,128	242,528
W. Mark DeMarcus	2013	300,000	90,000	—	—		—	52,003	442,003
Executive Vice President	2012	300,000	70,000	184,000	—	—	—	40,609	594,609
& Chief Operating Officer	2011	220,000	—	48,800	—	—	—	40,206	309,006

(1) These amounts represent bonuses paid as a result of accomplishment of strategic plan goals related to credit, capital, and other performance metrics during 2013 as approved by the Compensation Committee of the Board of Directors.

(2) Please refer to Footnote 12 in the Consolidated Financial Statements in the Company's Form 10-K for the year ended December 31, 2012 for a discussion of the assumptions made in the valuation of the option awards.

(3) Details on the amounts reported for “All Other Compensation” in 2013 are set forth in the following supplementary table:

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Details on All Other Compensation Reported in the Summary Compensation Table for 2013

Named Executive Officer (1)	Auto Provision ($)	Country Club/ Membership and Dues ($)	Medical Insurances ($)	Employer 401(k) Match ($)	Total ($)
Joseph H. Towell	23,889	33,682	13,378	7,524	78,473
Jan H. Hollar	11,757	—	10,114	5,815	27,686
W. Mark DeMarcus	21,508	7,577	16,969	5,949	52,003

(1) None of the above listed individuals received director's fees for 2013.

Outstanding Equity Awards at Fiscal Year-End

The Outstanding Equity Awards at Fiscal Year-End Table below reflects each named executive officer's equity award holdings at December 31, 2013 on an individual award basis.

Option Awards					Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable (1)	Number of Securities Underlying Unexercised Options (#) Unexercisable	Options 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 (#)	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
Joseph H. Towell	3,333	—	44.73	2/19/2018	53,889	918,269	—	—
Jan H. Hollar	1,332	334	11.52	12/8/2019	21,111	359,731	—	—
W. Mark DeMarcus	2,839	—	30.63	3/18/2018	28,889	492,269	—	—

(1) These options vest at 20% each year, beginning on the first anniversary of the grant date.

(2) Restricted shares not vested includes shares issued with performance and service conditions. Vesting of these shares is based on achieving certain earnings per share and credit performance standards and requires a minimum of two years of service with the Company. Performance based restricted shares not vested are as follows: Towell: 50,000; Hollar: 20,000; and DeMarcus: 26,666.

Terms of Named Executive Officer Employment Agreements

The Company has employment agreements with most of its senior executive officers. In November 2010, the Bank and Joseph H. Towell, President and CEO of the Bank, entered into an amendment to the amended and restated employment contract entered into in December 2008 (the “Towell Agreement”) to extend the term to three years. In June 2010, the Company and the Bank entered into an employment contract with Jan H. Hollar, CFO of the Company and the Bank (the “Hollar Agreement”), for a term of one year. The Hollar Agreement was amended in November 2010 to extend the term of the employment contract from one year to three years. In November 2010, the Company and the Bank entered into an employment contract with W. Mark DeMarcus, the Chief Operating Officer of the Bank (the “DeMarcus Agreement”, together with the Towell Agreement and the Hollar Agreement, the "Employment Agreement"), for a term of three years.

On each anniversary of the effective date of the Employment Agreement, the term of the Employment Agreement is automatically extended for an additional one year period beyond the then effective expiration date unless written notice from the Bank or the officer is received 90 days prior to the anniversary date advising the other that the Employment Agreement shall not be further extended. The officers have the option to terminate the Employment Agreement upon 60 days' written notice to the Bank. While each officer is employed by the Bank and for one year following termination of employment for Messrs. Towell,

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and DeMarcus, and for two years following termination of employment for Ms. Hollar, the Employment Agreement prohibits each officer from competing with the Bank.

The Company participated in the Troubled Asset Relief Program Capital Purchase Program (the "CPP"), which limited certain types of executive compensation that could be provided to executives until the U.S. Treasury sold all of its Fixed Rate Cumulative Preferred Stock, Series T and Series T-ACB to private investors through a registered public offering on September 18, 2012. As of September 18, 2012, the CPP constraints on executive compensation ceased to be applicable to the Company.

Under the Employment Agreement, the officers receive an annual cash salary, with annual adjustments and discretionary bonuses, which were subject to the CPP constraints until September 28, 2012, as determined by the Board of Directors. Under the Employment Agreement, each officer is also entitled to all fringe benefits generally provided by the Bank to its employees and its executive officers.

Under the terms of the Employment Agreement, each officer has the right to terminate his employment if he determines, in his sole discretion, that within 24 months after a “change in control,” there has been a material diminution in (i) his base compensation, (ii) his authority, duties, or responsibilities, (iii) the authority, duties, or responsibilities of the person to whom he is required to report, (iv) the budget over which he retains authority or either a (v) material change in the geographic location at which he must perform the services or (vi) any other action or inaction that constitutes a material breach by the Company or Bank of the Employment Agreement. A “change of control” is defined to mean as defined by Treasury Regulation § 1.409A-3(i)(5) as to the Company or the Bank.

The Bank has the right, under the Employment Agreement, to reduce any such payments as necessary under the Internal Revenue Code to avoid the imposition of excise taxes on the officer or the disallowance of a deduction to the Bank.See Post-Employment Benefits - Potential Payments Upon Termination following a Change in Control below for a further discussion of these payments.

As discussed above, the Company participated in the CPP established under TARP until September 18, 2012. As required by the terms of the CPP, our senior executive officers entered into agreements with the Company that amended the executive compensation programs that such officers participate in. These agreements ceased to be effective as of September 18, 2012.

Post-Employment Benefits

If a named executive officer exercises any vested stock options held by the officer on or before the final date of employment, they may realize gain on the difference between the exercise price and the fair market value of the stock options. See Outstanding Equity Awards at Fiscal Year-End above for a listing of each officer's stock option holdings. Using the fair market value of the Company's common stock as of December 31, 2013, there would have been a $7,352 gain due to an increase in the stock price. Pursuant to the terms of their employment agreements, in the event a named executive officer's employment is terminated by the Company for any reason other than for cause, or in the event of certain events following a change in control, the officers will continue to receive certain payments, as described below.

Potential Payments Upon Termination following a Change in Control

Under the terms of the Employment Agreements with Mr. Towell, Ms. Hollar, or Mr. DeMarcus upon the occurrence of the events constituting termination of employment described above under Terms of the Employment Agreements, the Bank has agreed to pay each officer an amount equal to 2.99 times his or her “base amount” as defined in Section 280G(b)(3) of theInternal Revenue Code. This compensation is payable in a single lump sum payment due 15 days following his or her termination.

Upon the effective date of a reorganization, merger, or consolidation of the Company with one or more other corporations in which the Company is not the surviving corporation, or the transfer of all or substantially all of the assets or shares of the Company to another person or entity, or the acquisition of stock representing more than 25% of the voting power of the capital stock of the Company then outstanding by another corporation, bank, other entity or person, other than pursuant to a merger in which the Company is the surviving entity (any such transaction being hereinafter referred to as a “Change in Control Transaction”), the Nominating and Compensation Committee may, in its absolute discretion, declare all or any part of the options granted under the Company's 2008 Plan immediately exercisable in full, and they may thereafter be exercised at any time before the date of consummation of the Change in Control Transaction.

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Potential Payments Upon Termination Without Cause

In the event the employment of Towell, Hollar, or DeMarcus is terminated by the Bank for any reason other than for Cause, their employment agreements provide that the Bank will pay their base annual salary for the remaining term of the Employment Agreement, subject to a potential six-month delay for tax compliance. Termination for Cause is defined to include termination because of the officer's personal dishonesty or moral turpitude, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule, or regulation (other than traffic violations or similar offenses) or final cease-and-desist order, or material breach of any provision of the employment agreement.

Potential Payments Upon Death

In the event the employment of Towell, Hollar, or DeMarcus are terminated upon their death, their employment agreements provide that the Bank will pay the officer's estate within 30 days of the officer's death compensation due through the last day of the calendar month in which the officer's death occurred and for a period of one month thereafter.

Directors Compensation

The following table sets forth certain information regarding the compensation paid by the Bank to our directors during the fiscal year ended December 31, 2013.

2013 Director Compensation
Name	Fees earned or Paid In Cash ($)	Non-qualified Deferred Compensation ($)	Total ($)
Nolan G. Brown	55,738	—	55,738
Harry M. Davis	39,262	—	39,262
Thomas J. Hall	46,700	—	46,700
James A. Harrell, Jr.	40,925	—	40,925
Larry S. Helms	46,350	—	46,350
Dan W. Hill, III	42,744	—	42,744
James L. Poindexter	46,375	—	46,375
Alison J. Smith	35,493	—	35,493
James N. Smoak (1)	43,025	—	43,025
Harry C. Spell	45,913	—	45,913
Joseph H. Towell	—	—	—

(1) As previously disclosed in the Company’s Current Report on Form 8-K filed with the SEC on December 27, 2013, Mr. James N. Smoak resigned from his position as a director of the Company and the Bank effective December 20, 2013. At the time of his resignation, Mr. Smoak also served on the Company’s Audit Committee. Mr. Smoak also served on the Bank’s ALCO Committee, Directors Loan Committee, and Capital Committee.

The annual retainer fee for service on the Board of Directors is $12,000 for each board member and $15,000 for the Chairman of the board. The board meeting attendance fee is $1,200. The amount for committee meetings is $350 per hour.

The Company offers a Directors Deferred Compensation Plan which allows each director to make an annual election to defer receipt of all or any portion of their directors' fees in the form of cash or stock. If the deferral is in cash, it earns interest at a rate equal to the 10 Year T-Bill Rate. If the deferral is in stock, it is invested by the trustee in the Company's common stock purchased on the open market. No director is currently participating in the plan.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of the Nominating and Compensation Committee during fiscal 2013 were: Nolan G. Brown (Ex-Officio), Thomas J. Hall, James A. Harrell, Jr., Larry S. Helms, Dan W. Hill, III and James L. Poindexter. No member of this committee was at any time during 2013 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 the Nominating and Compensation Committee during 2013.

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Item 12 — Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

SECURITY OWNERSHIP OF CERTAIN

BENEFICIAL OWNERS AND MANAGEMENT

The following tables set forth certain information as of December 31, 2013, unless otherwise specified, with respect to shares of our voting common stock beneficially owned by: (1) each person known to us to be the beneficial owner of more than 5% of our voting common stock; (2) each director, each director nominee and each executive officer named in the Summary Compensation Table and (3) all directors and executive officers as a group. This information has been provided by each of the directors and executive officers at our request or derived from statements filed with the SEC pursuant to Section 13(d) or 13(g) of the Exchange Act. Beneficial ownership of securities means the possession, directly or indirectly, through any formal or informal arrangement, either individually or in a group, of voting power (which includes the power to vote, or to direct the voting of, such security) and/or investment power (which includes the power to dispose of, or to direct the disposition of, such security). Unless otherwise indicated, to the Corporation's knowledge the beneficial owner has sole voting and dispositive power over the shares.

Beneficial Owners of More Than 5% of our Voting Common Stock:

Name	Shares Beneficially Owned	Percent
Ithan Creek Master Investors (Cayman) L.P. (1)	975,413	7.1	%
Wellington Management Company, LLP (2)	1,359,181	9.9	%
BancFunds Co. LLC	713,066	5.2	%
Manufacturers Life Insurance Company	705,056	5.1	%

(1) The above information is based on a Schedule 13G filed with the SEC on February 14, 2014. The shares include the shares held by Ithan Creek Master Investors (Cayman) L.P., as Wellington Management Company, LLP is its investment adviser.

(2) The above information is based on a Schedule 13G filed with the SEC on January 14, 2014.

Beneficial Ownership of Directors, Director Nominees and Executive Officers:

Name	Shares Beneficially Owned (1)	Percent (2)
Nolan G. Brown (director)	90,041	*	%
Harry M. Davis (director)	17,141	*	%
W. Mark DeMarcus (Executive Vice President & Chief Banking Officer) (3)	44,747	*	%
Thomas J. Hall (director)	18,664	*	%
James A. Harrell, Jr. (director) (4)	27,929	*	%
Larry S. Helms (director)	9,626	*	%
Dan W. Hill, III (director)	54,470	*	%
Jan H. Hollar (Executive Vice President & CFO) (5)	47,984	*	%
James L. Poindexter (director)	47,273	*	%
Alison J. Smith (director)	37,899	*	%
Harry C. Spell (director)	126,255	*	%
Joseph H. Towell (President & CEO) (6)	119,631	*	%
All directors & executive officers as a group (12 persons)	641,660	4.7	%

* Indicates less than 1% ownership

(1) For each individual listed above, the beneficial ownership includes the following options to acquire the indicated number of shares that are exercisable within 60 days of December 31, 2012: DeMarcus - 2,839; Hall - 1,419; Helms - 1,419; Hollar - 1,000; Smith - 1,419; Towell - 3,333; directors and principal officers as a group 11,429 shares. To the Company's knowledge, each person has sole voting and investment power over the securities shown as beneficially owned by such

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person, except for the following shares, which the individual indicates that he or she shares voting and/or investment power: Harrell - 9,491; Poindexter - 17,627; Spell - 18,996; directors and principal officers as a group - 46,114 shares.

(2) The ownership percentage of each individual is calculated based on the total of 13,728,989 shares issued and outstanding as of December 31, 2013, plus the number of shares that can be issued to that individual within 60 days of December 31, 2013, upon the exercise of stock options held by the individual. The ownership percentage of the group is based on the total shares outstanding plus the number of shares that can be issued to the entire group within 60 days of December 31, 2013, upon the exercise of all stock options held by the group.

(3) Includes 2,222 shares of unvested restricted stock awarded on February 17, 2011 to vest over a three-year period and 26,667 unvested shares of restricted stock awarded March 15, 2012.

(4) Stock held by our Amended and Restated Director Deferred Compensation Plan (the "DDCP") is beneficially owned by its plan administrator. For Mr. Harrell, the table includes the number of shares held for his account, being all the shares held in the DDCP, which equals 4,061 shares as of December 31, 2013.

(5) Includes 1,111 shares of unvested restricted stock awarded on February 17, 2011 to vest over a three-year period and 2,000 unvested shares of restricted stock awarded March 15, 2012.

(6) Includes 3,889 shares of unvested restricted stock awarded on February 17, 2011 to vest over a three-year period and 50,000 unvested shares of restricted stock awarded March 15, 2012.

The following table sets forth equity compensation plan information at December 31, 2013.

	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available be for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)		(c)
Equity compensation plans approved by shareholders	51,673	$	37.98	315,998
Equity compensation plans not approved by shareholders	NA	NA		NA
Total	51,673	$	37.98	315,998

A description of Yadkin’s equity compensation plans is presented in Note 12 to the accompanying consolidated financial statements.

Item 13 — Certain Relationships and Related Transactions, and Director Independence

Related Persons Transactions

The Company has had, and expects to have in the future, transactions in the ordinary course of the Company's business with directors, principal officers and their associates. All transactions with directors, principal 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 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 NASDAQ Stock Market, the Company conducts an appropriate review of all related party 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 party transactions include all transactions that are required to be disclosed pursuant to SEC regulations. In addition to the rules of The NASDAQ Stock Market and the related 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 that elicits information about related person transactions and uses this information to make a formal determination regarding each director's independence under The NASDAQ Stock Market 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 director and officer questionnaires.

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    In addition, the Bank is subject to the provisions of Section 23A of the Federal Reserve Act, which places limits on the amount of loans or extensions of credit to, or investments in, or certain other transactions with, affiliates and on the amount of advances to third parties collateralized by the securities or obligations of affiliates. The 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.

Director Independence

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 all of our directors, except our CEO, are independent under the listing requirements of The NASDAQ Stock Market. In addition, all of the members of our Board of Directors' Executive, Audit, and Nominating and Compensation Committees, except our CEO who is a member of the Executive meeting, are independent under the listing requirements of The NASDAQ Stock Market. In determining the independence of its directors, the Board considered transactions, relationships and arrangements between the Company and its directors, including those not otherwise required to be disclosed in this report under the heading “Related Persons Transactions,” and including loans or lines of credit that the Bank has directly or indirectly made to each of its directors.

Item 14 — Principal Accounting Fees and Services

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Company's independent certified public accountant for the year ended December 31, 2013 was Dixon Hughes Goodman LLP (“Dixon Hughes”).  The Audit Committee of the Board of Directors has also selected Dixon Hughes to serve as the independent certified public accountant for the year ending December 31, 2014.  Representatives of Dixon Hughes will be present at the annual meeting with the opportunity to make a statement if they desire, and will be available to respond to appropriate questions.

Audit fees. Audit fees include fees billed to the Company by Dixon Hughes in connection with the annual audit of the Company's financial statements, review of the Company's interim financial statements, attest services provided pursuant to Section 404 of the Sarbanes-Oxley Act, FIDICIA attest services, and services provided in connection with the Company's filing of various registration statements.  The aggregate fees billed and expected to be billed to the Company by Dixon Hughes for audit services rendered to the Company for the fiscal years ended December 31, 2013 and 2012 were $405,230 and $488,214 respectively.

Audit-Related fees. Audit-related services include audits of the Company's employee benefit plans, other attest services and accounting consultations.  The aggregate fees billed to the Company by Dixon Hughes for audit-related services during the fiscal years ended December 31, 2013 and 2012 were $17,000 and $18,000, respectively. 

Tax fees. Tax fees include corporate tax compliance, as well as counsel and advisory services.  The aggregate fees billed to the Company by Dixon Hughes for tax related services during the fiscal years ended December 31, 2013 and 2012 were $29,895 and $59,935, respectively. 

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.

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PART IV

Item 15 — Exhibits, Financial Statement Schedules

(a)(1) Financial Statements. The following financial statements and supplementary data are included in Item 8 of this report.

Financial Statements	Form 10-K Page
Report of Independent Registered Public Accounting Firm	65
Consolidated Balance Sheets as of December 31, 2013 and 2012	66
Consolidated Statements of Income (Loss) for the years ended December 31, 2013, 2012 and 2011	67
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2013, 2012, and 2011	68
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2013, 2012 and 2011	69
Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011	70
Notes to Consolidated Financial Statements	72

(a)(2) Financial Statement Schedules. All applicable financial statement schedules required under Regulation S-X have been included in the Notes to the Consolidated Financial Statements.

(a)(3)     Exhibits. The exhibits required by Item 601 of Regulation S-K are listed below.

Exhibit No.Description

Exhibit 2.1 Agreement and Plan of Merger, by and among Yadkin Financial Corporation, VantageSouth Bancshares, Inc., and Piedmont Community Bank Holdings, Inc., dated January 27, 2014 (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K dated January 29, 2014)

Exhibit 3.1    Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3(i) to the

Current Report on Form 8K dated July 1, 2006)

Exhibit 3.2 Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 of the Form 8-K filed on December 19, 2008)

Exhibit 3.3 Articles of Amendment to the Company’s Restated Articles of Incorporation establishing the terms of the Series T Preferred Stock (incorporated by reference to Exhibit 3.1 to the Form 8-K filed on January 20, 2009)

Exhibit 3.4 Articles of Amendment to the Company’s Restated Articles of Incorporation establishing the terms of the Series T-ACB Preferred Stock (incorporated by reference to Exhibit 3.1 to the Form 8-K filed on July 27, 2009)

Exhibit 3.5 Articles of Amendment to Designate the Terms of the Mandatorily Convertible Cumulative Non-Voting Perpetual Preferred Stock, Series A (incorporated by reference to Exhibit 3.1 to the Form 8-K filed on October 25, 2012)

Exhibit 3.6 Articles of Amendment to the Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Form 8-K filed on December 21, 2012)

Exhibit 3.7 Articles of Amendment to the Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Form 8-K filed on May 23, 2013)

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Exhibit 3.8 Articles of Amendment to the Articles of Incorporation (incorporated by reference to Exhibit 3.2 to the Form 8-K filed on May 23, 2013)

Exhibit 4.1 Form of certificate for the Common Stock (incorporated by reference to Exhibit 4.1 to the Quarterly Report on Form 10Q for the quarter ended June 30, 2013)

Exhibit 4.2 Form of Series T Preferred Stock Certificate issued to The United States Department of the Treasury (incorporated by reference to Exhibit 4.2 to the Form 8-K filed January 20, 2009)

Exhibit 4.3 Form of Series T-ACB Preferred Stock Certificate issued to The United States Department of the Treasury (incorporated by reference to Exhibit 4.2 to the Form 8-K filed July 27, 2009)

Exhibit 4.4 Form of Certificate for the Non-Voting Common Stock (incorporated by reference to Exhibit 4.4 to the Annual Report on Form 10-K for the year ended December 31, 2012)

Exhibit 4.5 Warrant to Purchase up to 13,312 shares of Common Stock (incorporated by reference to Exhibit 4.1 to the Form 8-K filed on July 27, 2009)

Exhibit 10.1 Yadkin Valley Financial Corporation 1998 Employees Incentive Stock Option Plan (incorporated by reference to Exhibit 4 to Registration Statement on Form S-8 filed August 8, 2006*

Exhibit 10.2 Yadkin Valley Financial Corporation 1999 Stock Option Plan (incorporated by reference to Exhibit 4 to Registration Statement on Form S-8 filed August 8, 2006)*

Exhibit 10.3 Yadkin Valley Financial Corporation 1998 Non-Statutory Stock Option Plan (incorporated by reference to Exhibit 4 to Registration Statement on Form S-8 filed August 8, 2006)*

Exhibit 10.4 Yadkin Valley Financial Corporation 1998 Incentive Stock Option Plan (incorporated by reference to Exhibit 4 to Registration Statement on Form S-8 filed August 8, 2006)*

Exhibit 10.5 Amended and Restated Employment Agreement with Joseph H. Towell (incorporated by reference to Exhibit 10.2 of Form 8-K filed on November 24, 2010)*

Exhibit 10.6 Amendment to Amended and Restated Employment Agreement with Joseph H. Towell (incorporated by reference to Exhibit 10.3 of Form 8-K filed on November 24, 2010)*

Exhibit 10.7 Employment Agreement with Jan H. Hollar (incorporated by reference to Exhibit 10.1 to Form 8-K filed June 22, 2010)*

Exhibit 10.8 Amendment to Employment Agreement with Jan H. Hollar (incorporated by reference to Exhibit 10.1 filed November 24, 2010)*

Exhibit 10.9 Employment Agreement with William M. DeMarcus (incorporated by reference to Exhibit 10.5 of Form 8-K filed on November 24, 2010)*

Exhibit 10.10 2007 Group Term Carve Out Plan (incorporated by reference to Exhibit 10.7 to the Annual Report on Form 10-K for the year ended December 31, 2007)*

Exhibit 10.11 2008 Omnibus Stock Ownership and Long-Term Incentive Plan (incorporated by reference to Exhibit 4 to the Form S-8 filed on September 5, 2008)*

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Exhibit 10.12 Employment Agreement with J. Ricky Patterson, dated January 4, 2012 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on January 9, 2012)*

Exhibit 10.14 Securities Purchase Agreement dated as of October 23, 2012, by and among Yadkin Valley Financial Corporation and the Purchasers thereto (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on October 25, 2012)

Exhibit 10.15 Share Exchange Agreement, dated as of October 23, 2012, by and among Yadkin Valley Financial Corporation and the Purchasers thereto (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on October 25, 2012)

Exhibit 10.16 Registration Rights Agreement, dated as of October 23, 2012, by and among Yadkin Valley Financial Corporation and the Purchasers thereto (incorporated by reference to Exhibit 10.3 to the Form 8-K filed on October 25, 2012)*

Exhibit 10.17 Registration Rights Agreement, dated as of October 23, 2012, by and among Yadkin Valley Financial Corporation and the Purchasers thereto (incorporated by reference to Exhibit 10.4 to the Form 8-K filed on October 25, 2012)*

Exhibit 21 Subsidiaries of the Registrant 

Exhibit 23 Consent of Independent Registered Public Accounting Firm

Exhibit 31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

Exhibit 31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

Exhibit 32 Section 1350 Certification

Exhibit 101 The following financial statements from the Annual Report on Form 10-K of Yadkin Financial Corporation, formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets as of December 31, 2013 and 2012, (ii) Consolidated Statements of Income for the years ended December 31, 2013, 2012 and 2011, (iii) Consolidated Statements of Changes in Shareholders' Equity and Comprehensive Income (Loss) for the years ended December 31, 2013, 2012 and 2011, (iv) Consolidated Statement of Cash Flows for the years ended December 31, 2013, 2012 and 2011 and (v) Notes to Consolidated Financial Statements**

* Management contract or compensatory plan or arrangement

Copies of exhibits are available upon written request to Corporate Secretary, Yadkin Financial Corporation, P.O. Drawer 888, Elkin, North Carolina 28621.

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Signatures

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

YADKIN FINANCIAL CORPORATION

By:	/s/Joseph H. Towell	Date: February 28, 2014
	Joseph H. Towell
	President and Chief Executive Officer
By:	/s/ Jan H. Hollar	Date: February 28, 2014
	Jan H. Hollar
	Executive Vice President & Chief Financial Officer

139

In accordance with the Exchange Act, 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/Joseph H. Towell	Date: February 28, 2014
Joseph H. Towell
President and Chief Executive Officer
Director
/s/ Nolan G. Brown	Date: February 28, 2014
Nolan G. Brown
Director
/s/ Harry M. Davis	Date: February 28, 2014
Harry M. Davis
Director
/s/ Thomas J. Hall	Date: February 28, 2014
Thomas J. Hall
Director
/s/ James A. Harrell, Jr.	Date: February 28, 2014
James A. Harrell, Jr.
Director
/s/ Larry S. Helms	Date: February 28, 2014
Larry S. Helms
Director
/s/ Dan W. Hill, III	Date: February 28, 2014
Dan W. Hill, III
Director
/s/ Jan H. Hollar	Date: February 28, 2014
Jan H. Hollar
Executive Vice President and Chief Financial Officer
"Principal Accounting Officer"
/s/ Alison J. Smith	Date: February 28, 2014
Alison J. Smith
Director
/s/ Harry C. Spell	Date: February 28, 2014
Harry C. Spell
Director

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141

EX-21

EXHIBIT 21

SUBSIDIARIES

Name	State of Incorporation
Yadkin Bank	North Carolina
Yadkin Valley Statutory Trust I	Delaware
American Community Capital Trust II, Ltd	Delaware

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

Yadkin Financial Corporation

Elkin, NC

We consent to the incorporation by reference in the Form S-8 Registration Statements Nos. 333-190790, 333-167861, 333-158982, 333-153339, 333-150190, 333-136970, 333-136969, 333-136968, and 333-136967 and the Form S-3D Registration Statement No. 333-136050 of Yadkin Financial Corporation of our reports dated February 28, 2014 with respect to the consolidated financial statements of Yadkin Financial Corporation and the effectiveness of internal control over financial reporting, which reports appear in the December 31, 2013 annual report on Form 10-K of Yadkin Financial Corporation.

/s/ Dixon Hughes Goodman LLP

Charlotte, North Carolina

February 28, 2014

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

Pursuant to Rule 13a-14(d)/15d-14(d)

I, Joseph H. Towell, Chief Executive Officer, certify that:

1. I have reviewed this Annual Report on Form 10-K of Yadkin Financial Corporation

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c)    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)    All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: February 28, 2014	/s/ Joseph H. Towell
	Joseph H. Towell
	Principal Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL ACCOUNTING OFFICER

Pursuant to Rule 13a-14(d)/15d-14(d)

I, Jan H. Hollar, Principal Accounting Officer and Chief Financial Officer, certify that:

1. I have reviewed this Annual Report on Form 10-K of Yadkin Financial Corporation

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c)    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)    All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: February 28, 2014	/s/ Jan H. Hollar
	Jan H. Hollar,
	Principal Accounting Officer and Chief Financial Officer

EX-32

Exhibit 32

Section 1350 Certifications

In connection with the Annual Report of Yadkin Financial Corporation (the “Company”) on Form 10-K for the annual period ended December 31, 2013 as filed with the U. S. Securities and Exchange Commission on the date hereof (the “Report”), I, Joseph H. Towell, Chief Executive Officer of the Company, and I, Jan H. Hollar, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that, to the best of my knowledge:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and the results of operations of the Company.

/s/Joseph H. Towell	/s/ Jan H. Hollar
Joseph H. Towell	Jan H. Hollar
President and Chief Executive Officer	Executive Vice President & Chief Financial Officer
Date: February 28, 2014	Date: February 28, 2014

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Premises and Equipment (Tables)

12 Months Ended

Dec. 31, 2013

Property, Plant and Equipment [Abstract]

Schedule of Premises and Equipment

The following table presents premises and equipment and related accumulated depreciation and amortization at December 31, 2013 and 2012:

	Cost		Accumulated depreciation and amortization		Net Book Value
December 31, 2013	(Amounts in thousands)
Land	$	11,601	$	—	$	11,601
Land and leasehold improvements	5,460		2,607		2,853
Buildings	28,638		8,491		20,147
Furniture and equipment	18,510		12,478		6,032
Construction in process	65		—		65
Total	$	64,274	$	23,576	$	40,698
	Cost		Accumulated depreciation and amortization		Net Book Value
December 31, 2012	(Amounts in thousands)
Land	$	11,626	$	—	$	11,626
Land and leasehold improvements	8,199		3,154		5,045
Buildings	26,588		7,079		19,509
Furniture and equipment	24,177		19,023		5,154
Construction in process	515		—		515
Total	$	71,105	$	29,256	$	41,849

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Accumulated Other Comprehensive Income (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Accumulated Other Comprehensive Income [Abstract]
Beginning balance	$ 4,184	$ 3,863
Other Comprehensive Income (Loss), before Reclassifications, before Tax	(5,628)	1,308
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, before Tax	2,355	(1,605)
Other Comprehensive (Income) Loss, Reclassification Adjustment from AOCI for Write-down of Securities, before Tax	0	0
Reclassification from Accumulated Other Comprehensive Income, Current Period, before Tax	2,355	(1,605)
Reclassification from Accumulated Other Comprehensive Income, Current Period, Tax	(906)	618
Reclassification from Accumulated Other Comprehensive Income, Current Period, Net of Tax	1,449	(987)
Net current period other comprehensive income (loss)	(4,179)	321	3,281
Ending balance	$ 5	$ 4,184	$ 3,863

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Accumulated Other Comprehensive Income (Tables)

12 Months Ended

Dec. 31, 2013

Accumulated Other Comprehensive Income [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

The following table presents changes in accumulated other comprehensive income for the year ended December 31, 2013 and 2012.

		2013			2012
	(Amounts in thousands)
Beginning balance		$	4,184		$	3,863
Other comprehensive income (loss) before reclassifications		(5,628		)	1,308
Amounts reclassified from accumulated comprehensive income:
Realized (gain) loss on sale of securities		2,355			(1,605		)
Impairment expense		—			—
Reclassified amounts before tax		2,355			(1,605		)
Tax expense		(906		)	618
Total reclassifications net of tax		1,449			(987		)
Net current period other comprehensive income (loss)		(4,179		)	321
Ending balance		$	5		$	4,184

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Fair Value (Tables)

12 Months Ended

Dec. 31, 2013

Fair Value Disclosures [Abstract]

Rollforward of interest rate swaps and interest rate lock commitments

The following tables present a rollforward of interest rate swaps for the years ended December 31, 2013 and 2012:

	Level 3
	Fair Value- Assets			Fair Value- Liabilities
	(Amounts in thousands)
Balance, December 31, 2011	$	216		$	216
Purchases, sales, issuances and settlements	—			—
Gains (losses) included in other income	(20		)	(20		)
Balance, December 31, 2012	$	196		$	196
Balance, December 31, 2012	$	196		$	196
Purchases, sales, issuances and settlements	—			—
Gains (losses) included in other income	(64		)	(64		)
Balance, December 31, 2013	$	132		$	132

The following table presents a rollforward of interest rate lock commitments for the years ended December 31, 2013 and 2012, respectively.

	Interest Rate Lock Commitments
	Level 3
	Fair Value			Fair Value
	(In thousands)
Balance, December 31, 2012 and 2011	$	873		$	130
Gains (losses) included in other income	(896		)	743
Transfer in and out	—			—
Balance, December 31, 2013 and 2012	$	(23	)	$	873

Rollforward of mortgage servicing rights

The following table presents a rollforward of mortgage servicing rights for the years ended December 31, 2013 and 2012 and shows that the mortgage servicing rights are classified as Level 3 as discussed above.

	Level 3
	Fair Value		Fair Value
	(In thousands)
Balance, December 31, 2012 and 2011	$	2,525	$	1,871
Capitalized	1,387		1,101
Gains (losses) included in other income	624		(447		)
Balance, December 31, 2013 and 2012	$	4,536	$	2,525

Assets and (liabilities) measured at fair value on a recurring basis

The following table presents assets and (liabilities) measured at fair value on a recurring basis:

December 31, 2013 (in thousands)	Fair Value			Level 1		Level 2		Level 3
Available-for-sale securities:
U.S. government agencies	$	16,392		$	—	$	16,392	$	—
Government sponsored agencies:
Residential mortgage-backed securities	103,441			—		103,441		—
Collateralized mortgage obligations	52,743			—		52,743		—
Private label collateralized mortgage obligations	14,491			—		14,491		—
State and municipal securities	98,704			—		98,704		—
Common and preferred stocks	3,151			3,151		—		—
Interest rate swap agreements	132			—		—		132
Interest rate swap agreements	(132		)	—		—		(132		)
Interest rate lock commitments	(23		)	—		—		(23		)
Forward loan sale commitments	147			—		147		—
Mortgage servicing rights	4,536			—		—		4,536

December 31, 2012 (in thousands)	Fair Value			Level 1		Level 2			Level 3
Available-for-sale securities:
U.S. government agencies	$	27,527		$	—	$	27,527		$	—
Government sponsored agencies:
Residential mortgage-backed securities	107,257			—		107,257			—
Collateralized mortgage obligations	122,593			—		122,593			—
Private label collateralized mortgage obligations	1,045			—		1,045			—
State and municipal securities	84,564			—		84,564			—
Common and preferred stocks	133			133		—			—
Interest rate swap agreements	196			—		—			196
Interest rate swap agreements	(196		)	—		—			(196		)
Interest rate lock commitments	873			—		—			873
Forward loan sale commitments	(481		)	—		(481		)	—
Mortgage servicing rights	2,525			—		—			2,525

Level 3 quantitative information

	Fair Value at December 31, 2013 (in thousands)			Valuation Technique	Unobservable Input	Range (Weighted Avg)
Recurring measurements:
Interest Rate Swaps	$	132		Discounted cash flow	Discount rate	0.5	%
Interest Rate Lock Commitments	(23		)	Pricing model	Pull through rates	86.4	%
Mortgage Servicing Rights	4,536			Discounted cash flow	Constant prepayment rate	9.72	%
					Cost of service	$50
					Discount rate	8	%
Nonrecurring measurements:
Impaired loans	$	6,058		Discounted appraisals	Collateral discounts and discounted cash flows	15-50%
Other real estate owned	1,034			Discounted appraisals	Collateral discounts	15	%

	Fair Value at December 31, 2012 (in thousands)		Valuation Technique	Unobservable Input	Range (Weighted Avg)
Recurring measurements:
Interest Rate Swaps	$	196	Discounted cash flow	Discount rate	1.0	%
Interest Rate Lock Commitments	873		Pricing model	Pull through rates	83.9	%
Mortgage Servicing Rights	2,525		Discounted cash flow	Constant prepayment rate	17.96	%
				Cost of service	$50
				Discount rate	8	%
Nonrecurring measurements:
Impaired loans	$	7,276	Discounted appraisals	Collateral discounts and discounted cash flows	10-50%
Other real estate owned	5,281		Discounted appraisals	Collateral discounts	15	%

Assets measured at fair value on a nonrecurring basis

The following table presents assets measured at fair value on a nonrecurring basis:

	Fair Value		Level 1		Level 2		Level 3
December 31, 2013	(Amounts in thousands)
Other real estate owned	$	1,034	$	—	$	—	$	1,034
Impaired loans:
Construction	160		—		—		160
Commercial real estate:
Owner occupied	4,930		—		—		4,930
Non-owner occupied	595		—		—		595
Commercial	203		—		—		203
Mortgages:
Secured 1-4 family real estate	170		—		—		170
Multifamily	—		—		—		—
Home equity lines of credit	—		—		—		—
Consumer and other	—		—		—		—

	Fair Value		Level 1		Level 2		Level 3
December 31, 2012	(Amounts in thousands)
Other real estate owned	$	5,281	$	—	$	—	$	5,281
Impaired loans:
Construction	1,767		—		—		1,767
Commercial real estate:
Owner occupied	4,772		—		—		4,772
Non-owner occupied	472		—		—		472
Commercial	265		—		—		265
Mortgages:
Secured 1-4 family real estate	—		—		—		—
Multifamily	—		—		—		—
Home equity lines of credit	—		—		—		—
Consumer and other	—		—		—		—

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Loans and Allowance for Loan Losses - Troubled Debt Restructured Loans (Details) (USD $)	12 Months Ended
	Dec. 31, 2013 Loans	Dec. 31, 2012 Loans
Troubled Debt Restructurings
Total amount of troubled debt restructured loans outstanding	$ 21,500,000	$ 23,700,000
Allowance for troubled debt restructed loans	1,200,000	746,581
Number of Loans	8	35
Recorded Investment Prior to Modification	2,921,000	13,701,000
Recorded Investment After Modification	2,820,000	12,261,000
Number of troubled debt restructured loans with a payment default during the period	0	4
Recorded investment of troubled debt restructured loans with payment default during period	0	287,000
Financing Receivable, Modifications, Record Investment, Amount Accruing Interest	15,300,000	17,700,000
Below Market Rate
Troubled Debt Restructurings
Number of Loans	3	0
Recorded Investment Prior to Modification	1,435,000	0
Recorded Investment After Modification	1,339,000	0
Extended Payment Terms
Troubled Debt Restructurings
Number of Loans	5	32
Recorded Investment Prior to Modification	1,486,000	12,965,000
Recorded Investment After Modification	1,481,000	11,681,000
Number of troubled debt restructured loans with a payment default during the period	0	4
Recorded investment of troubled debt restructured loans with payment default during period	0	287,000
Principal Payment Reducation
Troubled Debt Restructurings
Number of Loans	0	3
Recorded Investment Prior to Modification	0	736,000
Recorded Investment After Modification	0	580,000
Real Estate Loans | Below Market Rate | Construction Loans
Troubled Debt Restructurings
Number of Loans	1	0
Recorded Investment Prior to Modification	215,000	0
Recorded Investment After Modification	200,000	0
Real Estate Loans | Below Market Rate | Non-owner Occupied
Troubled Debt Restructurings
Number of Loans	2	0
Recorded Investment Prior to Modification	1,220,000	0
Recorded Investment After Modification	1,139,000	0
Real Estate Loans | Extended Payment Terms | Construction Loans
Troubled Debt Restructurings
Number of Loans	0	5
Recorded Investment Prior to Modification	0	1,231,000
Recorded Investment After Modification	0	872,000
Real Estate Loans | Extended Payment Terms | Owner Occupied Commercial
Troubled Debt Restructurings
Number of Loans	4	9
Recorded Investment Prior to Modification	1,319,000	2,443,000
Recorded Investment After Modification	1,316,000	2,379,000
Number of troubled debt restructured loans with a payment default during the period	0	1
Recorded investment of troubled debt restructured loans with payment default during period	0	93,000
Real Estate Loans | Extended Payment Terms | Non-owner Occupied
Troubled Debt Restructurings
Number of Loans	1	6
Recorded Investment Prior to Modification	167,000	5,329,000
Recorded Investment After Modification	165,000	4,990,000
Number of troubled debt restructured loans with a payment default during the period	0	1
Recorded investment of troubled debt restructured loans with payment default during period	0	0
Real Estate Loans | Extended Payment Terms | One to Four Family
Troubled Debt Restructurings
Number of Loans	0	4
Recorded Investment Prior to Modification	0	1,259,000
Recorded Investment After Modification	0	1,130,000
Number of troubled debt restructured loans with a payment default during the period	0	1
Recorded investment of troubled debt restructured loans with payment default during period	0	170,000
Real Estate Loans | Principal Payment Reducation | Owner Occupied Commercial
Troubled Debt Restructurings
Number of Loans	0	2
Recorded Investment Prior to Modification	0	571,000
Recorded Investment After Modification	0	571,000
Commercial | Extended Payment Terms
Troubled Debt Restructurings
Number of Loans	0	7
Recorded Investment Prior to Modification	0	2,676,000
Recorded Investment After Modification	0	2,286,000
Consumer and other | Extended Payment Terms
Troubled Debt Restructurings
Number of Loans	0	1
Recorded Investment Prior to Modification	0	27,000
Recorded Investment After Modification	0	24,000
Number of troubled debt restructured loans with a payment default during the period	0	1
Recorded investment of troubled debt restructured loans with payment default during period	0	24,000
Consumer and other | Principal Payment Reducation
Troubled Debt Restructurings
Number of Loans	0	1
Recorded Investment Prior to Modification	0	165,000
Recorded Investment After Modification	$ 0	$ 9,000

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Summary of Significant Accounting Policies - Premises and Equipment (Details)	12 Months Ended
	Dec. 31, 2013
Land Improvements
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	10 years
Buildings | Minimum
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	30 years
Buildings | Maximum
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	40 years
Furniture and equipment | Minimum
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	3 years
Furniture and equipment | Maximum
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	10 years

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Borrowed Funds - FHLB Advances, Trust Preferred Securities (Narrative) (Details) (USD $)	0 Months Ended	12 Months Ended
	Nov. 01, 2007	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013 American Community	Dec. 31, 2012 American Community	Apr. 16, 2009 American Community	Dec. 31, 2013 3-Month LIBOR	Apr. 16, 2009 3-Month LIBOR American Community
Debt Disclosure [Abstract]
Lendable collateral value, collateralizing Federal Home Loan Bank advances		$ 143,400,000
Lendable collateral value, collateralizing Federal Home Loan Bank advances, remaining available		117,500,000.0
Federal Home Loan Bank, advances, Maximum available, as a percent of bank assets		20.00%
Federal Home Loan Bank, advances, activity for year, average interest rate for year		2.07%	2.61%
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Weighted Average Interest Rate			2.57%
Federal Home Loan Bank, advances, maximum outstanding at any month end		65,923,019	26,977,842
Debt instrument, interest rate, effective percentage		1.56%	1.63%
Proceeds from issuance of trust preferred securities	25,000,000
Trust preferred securities, maturity	30 years
Trust preferred securities, called by the Trust without penalty, term	5 years
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate							1.32%
Liabilities assumed, noncurrent liabilities, long-term debt						$ 10,000,000
Preferred securities cumulative cash distributions quarterly, spread on variable rate								2.80%
Interest rate at period end				3.05%	3.11%

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Financial Instruments - Carrying Amount and Fair Value of Assets and Liabilities (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Level 1
Financial assets:
Cash and cash equivalents	$ 40,995	$ 138,396
Investment securities	3,151	133
Loans and loans held-for-sale, net	0	0
Accrued interest receivable	0	0
Federal Home Loan Bank stock	3,473	4,154
Financial liabilities:
Demand deposits, NOW, savings and money market accounts	0	0
Time deposits	0	0
Borrowed funds	0	0
Accrued interest payable	0	0
Level 1 | Forward Sales Commitments
Financial assets:
Derivative assets	0
Level 1 | Interest Rate Swap Agreements
Financial assets:
Derivative assets	0	0
Financial liabilities:
Derivative liabilities	0	0
Level 1 | Interest Rate Lock Commitments
Financial liabilities:
Derivative liabilities	0
Level 2
Financial assets:
Cash and cash equivalents	0	0
Investment securities	285,771	342,987
Loans and loans held-for-sale, net	18,913	27,679
Accrued interest receivable	1,705	1,760
Federal Home Loan Bank stock	0	0
Financial liabilities:
Demand deposits, NOW, savings and money market accounts	911,457	898,372
Time deposits	560,008	742,552
Borrowed funds	66,690	105,926
Accrued interest payable	852	1,629
Level 2 | Forward Sales Commitments
Financial assets:
Derivative assets	147
Level 2 | Interest Rate Swap Agreements
Financial assets:
Derivative assets	0	0
Financial liabilities:
Derivative liabilities	0	0
Level 2 | Interest Rate Lock Commitments
Financial liabilities:
Derivative liabilities	0	481
Level 3
Financial assets:
Cash and cash equivalents	0	0
Investment securities	0	0
Loans and loans held-for-sale, net	1,275,741	1,159,984
Accrued interest receivable	4,514	4,616
Federal Home Loan Bank stock	0	0
Financial liabilities:
Demand deposits, NOW, savings and money market accounts	0	0
Time deposits	0	0
Borrowed funds	0	0
Accrued interest payable	0	0
Level 3 | Forward Sales Commitments
Financial assets:
Derivative assets	0
Level 3 | Interest Rate Swap Agreements
Financial assets:
Derivative assets	132	196
Financial liabilities:
Derivative liabilities	132	196
Level 3 | Interest Rate Lock Commitments
Financial liabilities:
Derivative liabilities	23
Carrying Amount
Financial assets:
Cash and cash equivalents	40,995	138,396
Investment securities	288,922	343,120
Loans and loans held-for-sale, net	1,359,596	1,312,034
Accrued interest receivable	6,219	6,376
Federal Home Loan Bank stock	3,473	4,154
Financial liabilities:
Demand deposits, NOW, savings and money market accounts	961,154	898,372
Time deposits	557,269	733,290
Borrowed funds	89,214	105,136
Accrued interest payable	852	1,629
Carrying Amount | Forward Sales Commitments
Financial assets:
Derivative assets	147
Carrying Amount | Interest Rate Swap Agreements
Financial assets:
Derivative assets	132	196
Financial liabilities:
Derivative liabilities	132	196
Carrying Amount | Interest Rate Lock Commitments
Financial liabilities:
Derivative liabilities	23
Estimated Fair Value
Financial assets:
Cash and cash equivalents	40,995	138,396
Investment securities	288,922	343,120
Loans and loans held-for-sale, net	1,294,654	1,187,663
Accrued interest receivable	6,219	6,376
Federal Home Loan Bank stock	3,473	4,154
Financial liabilities:
Demand deposits, NOW, savings and money market accounts	911,457	898,372
Time deposits	560,008	742,552
Borrowed funds	66,690	105,926
Accrued interest payable	852	1,629
Estimated Fair Value | Forward Sales Commitments
Financial assets:
Derivative assets	147
Estimated Fair Value | Interest Rate Swap Agreements
Financial assets:
Derivative assets	132	196
Financial liabilities:
Derivative liabilities	132	196
Estimated Fair Value | Interest Rate Lock Commitments
Financial liabilities:
Derivative liabilities	$ 23

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Leases (Tables)

12 Months Ended

Dec. 31, 2013

Leases [Abstract]

Schedule of Future Minimum Payments, Operating Leases

The following table presents the future minimum lease payments for the next five years:

	(Amounts in thousands)
2014	$	1,905
2015	1,456
2016	1,032
2017	642
2018	560
Thereafter	5,310
Total	$	10,905

Schedule of Future Minimum Payments, Capital Leases

The following table presents aggregate future minimum lease payments due under this capital lease obligation as of December 31, 2013:

	(Amounts in thousands)
2014	$	227
2015	241
2016	241
2017	241
2018	242
2019-2029	2,917
Total minimum lease payments	4,109
Less amount representing interest	(1,828		)
Present value of net minimum lease payments	$	2,281

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Subsequent Events (Notes)

12 Months Ended

Dec. 31, 2013

Subsequent Event [Line Items]

Subsequent Events [Text Block]

27. SUBSEQUENT EVENT (unaudited)

On January 27, 2014, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with VantageSouth Bancshares, Inc., a Delaware corporation (“VantageSouth”), and Piedmont Community Bank Holdings, Inc., a Delaware corporation and majority stockholder of VantageSouth (“Piedmont”). The Merger Agreement provides that, subject to the terms and conditions set forth therein, VantageSouth and Piedmont will merge with and into the Company, with the Company continuing as the surviving corporation. The Merger Agreement also provides that, immediately following the effective time of the mergers, VantageSouth Bank, a North Carolina banking corporation and wholly owned subsidiary of VantageSouth, will merge with and into the Bank, with Yadkin Bank continuing as the surviving bank in the bank merger. The Merger Agreement was approved by each of the boards of directors of the Company, VantageSouth, and Piedmont.

Subject to the terms and conditions of the Merger Agreement, at the closing of the mergers, each outstanding share of VantageSouth common stock will be converted into the right to receive 0.3125 shares of voting common stock of the Company, subject to the payment of cash in lieu of fractional shares. Each outstanding share of Piedmont common stock will be converted into the right to receive, for each share, (i) 6.28597 shares of the Company’s common stock; (ii) a pro rata portion of cash in an amount estimated to be $4.0 million based on Piedmont's deferred tax asset of $4.8 million; (iii) a pro rata portion of cash in an amount equal to the aggregate amount of any cash held by Piedmont at the closing, and (iv) a right to receive a pro rata share of the “Contingent Shares” (as defined in the Merger Agreement). Under the terms of the Merger Agreement, the Company will assume the Piedmont Phantom Equity Plan, and approximately 8.5% of the Company’s voting common stock that would otherwise have been issued to Piedmont stockholders will be placed in a trust to fund the Piedmont Phantom Equity Plan.

Pursuant to the Merger Agreement, at the effective time of the mergers, seven current members of the Company's Board of Directors and seven current members of the VantageSouth Board of Directors will be appointed to the Board of Directors of the surviving company and surviving bank for a period of 24 months following the mergers. The surviving company will also adopt certain amendments to the Company's bylaws related to board composition of the surviving company as previously described and which will require that for 36 months after the effective time of the mergers that Joseph H. Towell serve as Executive Chairman and that Scott M. Custer serve as Chief Executive Officer and President. The Merger Agreement also provides that the following executives will enter into employment agreements with the surviving company and surviving bank prior to the effective time of the mergers: Joseph H. Towell as the Executive Chairman; Scott M. Custer as the Chief Executive Officer and President; Terry S. Earley as the Chief Financial Officer; Wm. Mark DeMarcus as the Chief Operating Officer; Steven M. Jones as the Chief Banking Officer; and Edwin W. Shuford as the Chief Credit Officer.

The Articles of Incorporation of the Company will be the Articles of Incorporation of the surviving company. In connection with the mergers, and in addition to asking its shareholders to approve the Merger Agreement, the Company will be seeking shareholder approval of an amendment to its Articles of Incorporation to increase the number of authorized shares of common stock from 33,333,333 to 75,000,000 shares.

The Merger Agreement contains customary representations and warranties from the Company, VantageSouth, and Piedmont, as applicable, and each party has agreed to customary covenants, including, among others, covenants relating to (1) the conduct of each party's business during the interim period between the execution of the Merger Agreement and the closing; (2) each party’s obligations to facilitate its respective shareholders’ consideration of, and voting upon, the Merger Agreement and the mergers; (3) the recommendation by the board of directors of each party in favor of approval of the Merger Agreement and the mergers by its respective shareholders; and (4) the Company's and VantageSouth's non-solicitation obligations relating to alternative business combination transactions.

Completion of the mergers is subject to certain customary conditions, including, among others, (1) approval of the Merger Agreement by each of the parties' shareholders; (2) receipt of required regulatory approvals without the imposition of any condition that would have or be reasonably likely to have a material burdensome effect on the parties; (3) the absence of any law or order prohibiting the consummation of the mergers; (4) approval of the listing on the New York Stock Exchange of the Company’s common stock to be issued in the mergers; (5) the effectiveness of the registration statement on Form S-4 for the Company’s common stock to be issued in the mergers; (6) subject to certain exceptions, the accuracy of the representations and warranties of the other party; (7) performance in all material respects by each party of its obligations under the Merger Agreement; and (8) the receipt by each party from its counsel of a tax opinion that the mergers will be treated as a reorganization within Section 368(a) of the Internal Revenue Code. The Company will use its commercially reasonable efforts to list the Company’s common stock on the New York Stock Exchange prior to the closing of the mergers.

The Merger Agreement provides termination rights for the Company, VantageSouth and Piedmont, and further provides that upon termination of the Merger Agreement under certain circumstances, VantageSouth or the Company, as applicable, will be obligated to pay the other party a termination fee of $10 million.

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Borrowed Funds - Common Equity of Trusts (Narrative) (Details) (USD $)	Dec. 31, 2013
Yadkin Valley Statutory Trust I
Variable Interest Entity [Line Items]
Common stock held in trust	$ 774,000
American Community Capital Trust II
Variable Interest Entity [Line Items]
Common stock held in trust	$ 310,000

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Loan Servicing - Schedule of Servicing Assets at Fair Value (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Transfers and Servicing [Abstract]
Mortgage loan portfolios serviced for others, value	$ 406,966,111	$ 330,818,219
Servicing fees, net	943,408	713,881	608,513
Servicing Asset at Fair Value, Amount [Roll Forward]
Mortgage servicing assets, beginning of year	2,525,000		1,871,000
Capitalized	1,387,000	1,101,000
Change in fair value	624,143	(447,403)	(559,394)
Mortgage servicing assets, end of year	4,536,000	2,525,000
Custodial escrow balances maintained in connection with the loan servicing	$ 259,209	$ 318,649

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Stock Options and Restricted Stock - Schedule of Outstanding Options, Rollforward (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Unvested options	2,757	4,500
Intrinsic value of option grants	$ 0
Weighted average fair value of the options granted	$ 7.55	$ 8.07
Fair value assumptions, expected dividend rate	0.00%	0.00%
Fair value assumptions, expected volatility rate	101.70%	10062.00%
Fair value assumptions, risk free interest rate	1.00%	1.26%
Fair value assumptions, expected term	7 years	7 years
Shares Available for Future Grants
Options granted	(1,666)	(1,166)	0
Options exercised	0
Options expired	(22,486)
Options forfeited	10,710
Outstanding Options - Number of Options
Beginning balance, number of options	83,203
Options granted	1,666	1,166	0
Options exercised	0
Options expired	(22,486)
Options forfeited	(10,710)
Ending balance, number of options	51,673	83,203
Outstanding Options - Weighted-Average Exercise Price
Beginning balance, options, weighted-average exercise price	$ 40.47
Options granted	$ 9.12
Options exercised	$ 0.00
Options expired	$ 43.78
Options forfeited	$ 40.55
Ending balance, options, weighted-average exercise price		$ 40.47
Exercisable Options
Beginning balance, number of exercisable options	78,701
Options vested	3,411	4,033
Options exercised	0
Options expired	(22,486)
Options forfeited	(10,710)
Ending balance, number of exercisable options	48,916.000	78,701
Beginning balance, exercisable options, weighted-average exercise price	$ 41.40
Options vested	$ 27.14
Options exercised	$ 0.00
Options expired	$ 43.78
Options forfeited	$ 40.55
Ending balance, exercisable options, weighted-average exercise price		$ 41.40
Outstanding options, weighted average remaining contractual term	3 years 3 months 2 days	2 years 10 months 13 days
Exercisable options, weighted average remaining contractual term	3 years 1 month 7 days	2 years 7 months 17 days
Expiration period	10 years
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expense related to options and restricted shares	$ 21,882	$ 31,621	$ 76,903
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding, Number	211,159	207,917
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested, Number	34,316	14,549
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	3,242	169,143	48,329
Compensation expense related to options and restricted shares	$ 480,249	$ 388,187	$ 133,071
Ending balance, shares available for future grants	315,998
Performance and Service Shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period		163,328
Minimum | Performance and Service Shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		1 year

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Summary of Significant Accounting Policies - Narrative (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Accounting Policies [Abstract]
Restricted cash and cash equivalents, current	$ 0	$ 1,724,948
Loans and leases receivable, allowance, basis for determination	$ 20,000
Performance and Service Shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Years of service required	2 years	2 years

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Business Segment Information (Details) (USD $)	3 Months Ended												9 Months Ended	12 Months Ended						30 Months Ended		36 Months Ended
	Dec. 31, 2013		Dec. 31, 2012		Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011		Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Sep. 30, 2013 Segments	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2011		Dec. 31, 2013		Dec. 31, 2013		Dec. 31, 2010
Segment Reporting Information
Number of Reportable Segments													2
Equity Method Investment, Other than Temporary Impairment														$ 39,185
Segment Reporting Information, Profit (Loss)
Interest income	18,903,000				18,470,000	18,651,000	18,275,000	18,793,000		19,446,000	19,744,000	20,989,000		74,299,000		78,972,000		88,546,000
Interest expense	2,154,000				2,334,000	2,530,000	3,223,000	4,048,000		4,257,000	4,586,000	5,097,000		10,241,000		17,988,000		26,041,000
NET INTEREST INCOME	16,749,000				16,136,000	16,121,000	15,052,000	14,745,000		15,189,000	15,158,000	15,892,000		64,058,000		60,984,000		62,505,000
Provision for loan losses	(3,017,000)				40,000	55,000	237,000	31,554,000		4,251,000	2,218,000	2,351,000		(2,685,000)		40,374,000		20,843,000
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	19,766,000				16,096,000	16,066,000	14,815,000	(16,809,000)		10,938,000	12,940,000	13,541,000		66,743,000		20,610,000		41,662,000
Other income	1,182,000				5,381,000	6,184,000	5,657,000	986,000		4,665,000	4,406,000	3,509,000		18,404,000		13,566,000		18,180,000
Other expense	13,712,000				14,150,000	14,843,000	13,215,000	22,708,000		14,792,000	15,732,000	13,579,000		55,920,000		66,811,000		67,543,000
INCOME (LOSS) BEFORE INCOME TAXES	7,236,000		38,500,000		7,327,000	7,407,000	7,257,000	(38,531,000)		811,000	1,614,000	3,471,000		29,227,000		(32,635,000)		(7,701,000)		43,900,000		(11,109,000)
Income taxes	2,579,000				2,616,000	2,598,000	2,608,000	(14,632,000)		54,000	(9,383,000)	0		10,401,000		(23,961,000)		6,694,000
NET INCOME (LOSS)	4,657,000				4,711,000	4,809,000	4,649,000	(23,899,000)		757,000	10,997,000	3,471,000		18,826,000		(8,674,000)		(14,395,000)
Segment Reporting Information, Balance Sheet Data
Total assets	1,806,027,000		1,923,438,000											1,806,027,000		1,923,438,000				1,806,027,000		1,806,027,000		1,993,188,000
Net loans	1,340,683,000		1,284,355,000											1,340,683,000		1,284,355,000				1,340,683,000		1,340,683,000		1,418,076,000
Loans held for sale	18,913,000		27,679,000											18,913,000		27,679,000				18,913,000		18,913,000		19,534,000
Bank Activities
Segment Reporting Information, Profit (Loss)
Interest income														70,633,000		75,104,000		88,156,000
Interest expense														9,494,000		16,998,000		25,016,000
NET INTEREST INCOME														61,139,000		58,106,000		63,140,000
Provision for loan losses														(2,685,000)		40,538,000		20,828,000
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES														63,824,000		17,568,000		42,312,000
Other income														9,587,000		7,677,000		12,901,000
Other expense														50,045,000		60,070,000		54,253,000
INCOME (LOSS) BEFORE INCOME TAXES														23,366,000		(34,825,000)		960,000
Income taxes														10,401,000		(23,961,000)		6,694,000
NET INCOME (LOSS)														12,965,000		(10,864,000)		(5,734,000)
Segment Reporting Information, Balance Sheet Data
Total assets	1,779,473,000		1,890,906,000											1,779,473,000		1,890,906,000				1,779,473,000		1,779,473,000		1,973,848,000
Net loans	1,340,683,000		1,284,355,000											1,340,683,000		1,284,355,000				1,340,683,000		1,340,683,000		1,418,076,000
Loans held for sale	0		0											0		0				0		0		3,628,000
Mortgage Activities
Segment Reporting Information, Profit (Loss)
Interest income														3,666,000		3,868,000		390,000
Interest expense														0		143,000		239,000
NET INTEREST INCOME														3,666,000		3,725,000		151,000
Provision for loan losses														0		(164,000)		15,000
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES														3,666,000		3,889,000		136,000
Other income														8,709,000		5,860,000		5,408,000
Other expense														5,500,000		6,569,000		13,244,000
INCOME (LOSS) BEFORE INCOME TAXES														6,875,000		3,180,000		(7,700,000)
Income taxes														0		0		0	[1]
NET INCOME (LOSS)														6,875,000		3,180,000		(7,700,000)
Segment Reporting Information, Balance Sheet Data
Total assets	24,172,000		31,500,000											24,172,000		31,500,000				24,172,000		24,172,000		24,209,000
Net loans	0		0											0		0				0		0		0
Loans held for sale	18,913,000		27,679,000											18,913,000		27,679,000				18,913,000		18,913,000		15,906,000
Other
Segment Reporting Information, Profit (Loss)
Interest income														0	[2]	0		0	[3]
Interest expense														747,000	[2]	847,000	[3]	786,000	[3]
NET INTEREST INCOME														(747,000)	[2]	(847,000)	[3]	(786,000)	[3]
Provision for loan losses														0	[2]	0	[3]	0	[3]
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES														(747,000)	[2]	(847,000)	[3]	(786,000)	[3]
Other income														108,000	[2]	29,000	[3]	(129,000)	[3]
Other expense														375,000	[2]	172,000	[3]	46,000	[3]
INCOME (LOSS) BEFORE INCOME TAXES														(1,014,000)	[2]	(990,000)	[3]	(961,000)	[3]
Income taxes														0	[2]	0	[3]	0	[3]
NET INCOME (LOSS)														(1,014,000)	[2]	(990,000)	[3]	(961,000)	[3]
Segment Reporting Information, Balance Sheet Data
Total assets	2,382,000	[2]	1,032,000	[3]				(4,869,000)	[3]					2,382,000	[2]	1,032,000	[3]	(4,869,000)	[3]	2,382,000	[2]	2,382,000	[2]
Net loans	0	[2]	0	[3]				0	[3]					0	[2]	0	[3]	0	[3]	0	[2]	0	[2]
Loans held for sale	0	[2]	0	[3]				0	[3]					0	[2]	0	[3]	0	[3]	0	[2]	0	[2]
Sidus
Segment Reporting Information
Equity Method Investment, Other than Temporary Impairment			$ 1,000,000

[1] As an LLC, Sidus passes its pre-tax income through to its single member, the Bank, which is taxed on that income.

[2] Note: The “Other” column includes Holding Company assets and Holding Company income and expenses.

[3] {F|ahBzfndlYmZpbGluZ3MtaHJkcmoLEgZYTUxEb2MiXlhCUkxEb2NHZW5JbmZvOjc0ZDg4MWEyY2NhZjQyZjRiNDdmMjZkYzdkZDhmMmFjfFRleHRTZWxlY3Rpb246RDFDMjU0NjAxMjI3QjI2MkE5OTFCOEUxNThDRTA3M0YM}

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Borrowed Funds - Junior Subordinated Debentures, Structured Wholesale Repurchases (Narrative) (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Debt Instrument [Line Items]
Long-term borrowings	$ 45,954,000	$ 65,944,000
American Community
Debt Instrument [Line Items]
Interest rate at period end	3.05%	3.11%
Borrowings | American Community
Debt Instrument [Line Items]
Liabilities, fair value adjustment	(1,041,193)	(1,086,542)
Junior Subordinated Debt
Debt Instrument [Line Items]
Long-term borrowings	36,084,000	36,084,000
Average annual interest rate	2.05%	2.24%
Average daily outstanding amount	36,084,000	36,084,000
Structured Wholesale Repurchase Agreement
Debt Instrument [Line Items]
Long-term borrowings		5,000,000
Average annual interest rate		2.64%
Average daily outstanding amount		$ 5,000,000
Interest rate at period end		2.60%

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Earnings Per Share - Reconciliation of Denominator of Basic and Diluted Net Income Per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Basic earnings per share:
Net income (loss) to common shareholders	$ 4,236	$ 4,290	$ 4,219	$ 4,204	$ (25,318)	$ (81)	$ 10,164	$ 2,650	$ 16,949	$ (12,585)	$ (17,382)
Weighted average number of common shares outstanding									14,203,099	6,589,971	6,079,668
Earnings per share, basic	$ 0.30	$ 0.30	$ 0.30	$ 0.30	$ (3.63)	$ 0.00	$ 1.56	$ 0.42	$ 1.19	$ (1.91)	$ (2.86)
Diluted earnings per share:
Net income (loss) to common shareholders	$ 4,236	$ 4,290	$ 4,219	$ 4,204	$ (25,318)	$ (81)	$ 10,164	$ 2,650	$ 16,949	$ (12,585)	$ (17,382)
Weighted average number of common shares outstanding									14,203,099	6,589,971	6,079,668
Dilutive potential common shares									21,621	0	0
Weighted average number of shares outstanding, diluted									14,224,720	6,589,971	6,079,668
Earnings per share, diluted	$ 0.30	$ 0.30	$ 0.30	$ 0.30	$ (3.63)	$ 0.00	$ 1.56	$ 0.42	$ 1.19	$ (1.91)	$ (2.86)
Restricted Stock
Antidilutive Securities Excluded from Computation of Earnings Per Share
Antidilutive securities excluded from weighted average shares outstanding									176,843	193,373	53,778
Warrants and Stock Options
Antidilutive Securities Excluded from Computation of Earnings Per Share
Antidilutive securities excluded from weighted average shares outstanding									51,673
Performance and Service Criteria Not Met | Restricted Stock
Antidilutive Securities Excluded from Computation of Earnings Per Share
Antidilutive securities excluded from weighted average shares outstanding									156,329

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Income Taxes - Deferred Tax Assets, Net (Details) (USD $)	0 Months Ended	3 Months Ended									6 Months Ended	12 Months Ended			30 Months Ended	36 Months Ended
	Oct. 23, 2012	Dec. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Jun. 30, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2013	Dec. 31, 2013
Components of Deferred Tax Assets and Liabilities
Income (loss) before income taxes		$ 7,236,000	$ 38,500,000	$ 7,327,000	$ 7,407,000	$ 7,257,000	$ (38,531,000)	$ 811,000	$ 1,614,000	$ 3,471,000		$ 29,227,000	$ (32,635,000)	$ (7,701,000)	$ 43,900,000	$ (11,109,000)
Financing Receivable, Allowance for Credit Losses, Write-downs			49,000,000									7,872,000	51,756,000
Proceeds from issuance of mandatorily convertible cumulative non-voting perpetual preferred stock	45,000,000
Deferred tax assets:
Allowance for loan losses		6,956,000	9,853,000									6,956,000	9,853,000		6,956,000	6,956,000
Other than temporary impairment		829,000	827,000									829,000	827,000		829,000	829,000
Accrued liabilities		55,000	220,000									55,000	220,000		55,000	55,000
OREO property		178,000	3,767,000									178,000	3,767,000		178,000	178,000
Net operating loss		14,375,000	19,627,000									14,375,000	19,627,000		14,375,000	14,375,000
Sidus goodwill		779,000	921,000									779,000	921,000		779,000	779,000
Other		3,243,000	2,160,000									3,243,000	2,160,000		3,243,000	3,243,000
Deferred tax assets, gross		26,415,000	37,375,000									26,415,000	37,375,000		26,415,000	26,415,000
Less: Valuation Allowance		0	0									0	0		0	0
Deferred tax assets, net of valuation allowance		26,415,000	37,375,000									26,415,000	37,375,000		26,415,000	26,415,000
Deferred tax liabilities:
Unrealized gain on available-for-sale securities		(3,000)	(2,583,000)									(3,000)	(2,583,000)		(3,000)	(3,000)
FMV adjustment related to mergers		(97,000)	(181,000)									(97,000)	(181,000)		(97,000)	(97,000)
Depreciation		(1,753,000)	(1,561,000)									(1,753,000)	(1,561,000)		(1,753,000)	(1,753,000)
Prepaid expenses		(342,000)	(358,000)									(342,000)	(358,000)		(342,000)	(342,000)
Other		(6,000)	(142,000)									(6,000)	(142,000)		(6,000)	(6,000)
Deferred tax liabilities		(2,990,000)	(6,017,000)									(2,990,000)	(6,017,000)		(2,990,000)	(2,990,000)
Net deferred tax asset		23,425,000	31,358,000									23,425,000	31,358,000		23,425,000	23,425,000
Valuation allowance, deferred tax asset, change in amount											11,000,000
Core deposit intangible
Deferred tax liabilities:
Intangibles		(765,000)	(1,043,000)									(765,000)	(1,043,000)		(765,000)	(765,000)
Noncompete intangible
Deferred tax liabilities:
Intangibles		$ (24,000)	$ (149,000)									$ (24,000)	$ (149,000)		$ (24,000)	$ (24,000)

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Benefit Plans - 401(K) Plan (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Compensation and Retirement Disclosure [Abstract]
Incentive Compensation Expense	$ 3,371,992	$ 0	$ 0
Defined contribution plan, maximum annual contribution per employee, percent	60.00%
Defined contribution plan, employer matching contribution, percent of match	50.00%
Defined contribution plan, employer matching contribution, percent	3.00%
Defined contribution plan, cost recognized	$ 619,758	$ 367,939	$ 521,963

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Borrowed Funds - Long-term Debt Maturities (Details) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Debt Instrument [Line Items]
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Weighted Average Interest Rate		2.57%
Long-term advances from the FHLB	$ 45,954,000	$ 65,944,000
Federal Home Loan Bank Advances
Debt Instrument [Line Items]
Long-term advances from the FHLB	10,911,071,000	25,946,487,000
Federal Home Loan Bank Advances | Federal Home Loan Bank Advances, July 21, 2014 Maturity, One [Member]
Debt Instrument [Line Items]
Interest Rate	2.31%	2.31%
Long-term advances from the FHLB	0	10,000,000,000
Federal Home Loan Bank Advances | Federal Home Loan Bank Advances, July 21, 2014 Maturity, Two [Member]
Debt Instrument [Line Items]
Interest Rate	2.62%	2.62%
Long-term advances from the FHLB	0	5,000,000,000
Federal Home Loan Bank Advances | Long-term Advances from the FHLB, 1/11/2015 Maturity
Debt Instrument [Line Items]
Interest Rate	2.99%	2.99%
Long-term advances from the FHLB	5,000,000,000	5,000,000,000
Federal Home Loan Bank Advances | Long-term Advances from the FHLB, 4/27/2015 Maturity
Debt Instrument [Line Items]
Interest Rate	2.97%	2.97%
Long-term advances from the FHLB	5,000,000,000	5,000,000,000
Federal Home Loan Bank Advances | Long-term Advances from the FHLB, 10/29/2018 Maturity
Debt Instrument [Line Items]
Interest Rate	0.25%	0.25%
Long-term advances from the FHLB	685,104,000	702,678,000
Federal Home Loan Bank Advances | Long-term Advances from the FHLB, 12/19/2023 Maturity
Debt Instrument [Line Items]
Interest Rate	2.00%	2.00%
Long-term advances from the FHLB	$ 225,967,000	$ 243,809,000

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Loans and Allowance for Loan Losses - Allowance for Loan Losses (Details) (USD $)	3 Months Ended									12 Months Ended					12 Months Ended			3 Months Ended	12 Months Ended			3 Months Ended	12 Months Ended			3 Months Ended	12 Months Ended			3 Months Ended	12 Months Ended			3 Months Ended	12 Months Ended			3 Months Ended	12 Months Ended			3 Months Ended	12 Months Ended			3 Months Ended	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2013 Reserve for Off-balance Sheet Activities	Dec. 31, 2012 Reserve for Off-balance Sheet Activities	Dec. 31, 2013 Reserve for Losses on Mortgage Loans Sold	Dec. 31, 2012 Reserve for Losses on Mortgage Loans Sold	Dec. 31, 2011 Reserve for Losses on Mortgage Loans Sold	Dec. 31, 2012 Real Estate Loans Construction Loans	Dec. 31, 2013 Real Estate Loans Construction Loans	Dec. 31, 2012 Real Estate Loans Construction Loans	Dec. 31, 2010 Real Estate Loans Construction Loans	Dec. 31, 2012 Real Estate Loans Owner Occupied Commercial	Dec. 31, 2013 Real Estate Loans Owner Occupied Commercial	Dec. 31, 2012 Real Estate Loans Owner Occupied Commercial	Dec. 31, 2010 Real Estate Loans Owner Occupied Commercial	Dec. 31, 2012 Real Estate Loans Non-owner Occupied	Dec. 31, 2013 Real Estate Loans Non-owner Occupied	Dec. 31, 2012 Real Estate Loans Non-owner Occupied	Dec. 31, 2010 Real Estate Loans Non-owner Occupied	Dec. 31, 2012 Real Estate Loans One to Four Family	Dec. 31, 2013 Real Estate Loans One to Four Family	Dec. 31, 2012 Real Estate Loans One to Four Family	Dec. 31, 2010 Real Estate Loans One to Four Family	Dec. 31, 2012 Real Estate Loans Multifamily	Dec. 31, 2013 Real Estate Loans Multifamily	Dec. 31, 2012 Real Estate Loans Multifamily	Dec. 31, 2010 Real Estate Loans Multifamily	Dec. 31, 2012 Real Estate Loans Home Equity Lines of Credit	Dec. 31, 2013 Real Estate Loans Home Equity Lines of Credit	Dec. 31, 2012 Real Estate Loans Home Equity Lines of Credit	Dec. 31, 2010 Real Estate Loans Home Equity Lines of Credit	Dec. 31, 2012 Commercial	Dec. 31, 2013 Commercial	Dec. 31, 2012 Commercial	Dec. 31, 2010 Commercial	Dec. 31, 2012 Consumer and other	Dec. 31, 2013 Consumer and other	Dec. 31, 2012 Consumer and other	Dec. 31, 2010 Consumer and other
Receivables [Abstract]
Provision for loan losses	$ (3,017,000)		$ 40,000	$ 55,000	$ 237,000	$ 31,554,000	$ 4,251,000	$ 2,218,000	$ 2,351,000	$ (2,685,000)	$ 40,374,000	$ 20,843,000
Financing Receivable, Allowance for Credit Losses
Financing Receivable, Allowance for Credit Losses, Write-downs		49,000,000								7,872,000	51,756,000								2,104,000	17,825,000			383,000	7,334,000			224,000	9,830,000			871,000	3,512,000			0	347,000			1,037,000	4,360,000			2,923,000	7,796,000			330,000	752,000
Financing Receivable, Allowance for Credit Losses, Writedowns, Other Problem Loans		10,999,000																1,601,000				1,599,000				2,267,000				291,000				0				1,309,000				3,908,000				24,000
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Allowance for loan losses, beginning balance									32,848,000	25,149,000		32,848,000							4,269,000		8,214,000		4,374,000		5,792,000		3,935,000		4,668,000		3,191,000		3,726,000		594,000		805,000		3,822,000		3,310,000		4,291,000		5,712,000		673,000		621,000
Recoveries										3,471,000	3,683,000								1,007,000	1,138,000			120,000	165,000			134,000	664,000			253,000	215,000			0	0			568,000	186,000			1,287,000	956,000			102,000	359,000
Provision		11,000,000								(2,685,000)	40,374,000								(3,000)	12,742,000			(1,022,000)	5,751,000			(1,764,000)	8,433,000			(205,000)	2,762,000			(158,000)	136,000			(697,000)	4,686,000			1,078,000	5,419,000			86,000	445,000
Allowance for loan losses, ending balance	18,063,000	25,149,000								18,063,000	25,149,000							4,269,000	3,169,000	4,269,000	8,214,000	4,374,000	3,089,000	4,374,000	5,792,000	3,935,000	2,081,000	3,935,000	4,668,000	3,191,000	2,368,000	3,191,000	3,726,000	594,000	436,000	594,000	805,000	3,822,000	2,656,000	3,822,000	3,310,000	4,291,000	3,733,000	4,291,000	5,712,000	673,000	531,000	673,000	621,000
Financing Receivable, Allowance for Credit Loss, Additional Information
Reserves for loans individually evaluated for impairment	557,000	1,397,000								557,000	1,397,000							191,000	40,000	191,000		189,000	201,000	189,000		89,000	50,000	89,000		0	161,000	0		0	0	0		0	0	0		928,000	105,000	928,000		0	0	0
Loans individually evaluated for impairment	24,526,000	33,554,000								24,526,000	33,554,000							8,170,000	3,016,000	8,170,000		11,524,000	10,576,000	11,524,000		5,537,000	5,114,000	5,537,000		1,435,000	992,000	1,435,000		530,000	0	530,000		705,000	425,000	705,000		5,653,000	4,403,000	5,653,000		0	0	0
Reserves for loans collectively evaluated for impairment	17,506,000	23,752,000								17,506,000	23,752,000							4,078,000	3,129,000	4,078,000		4,185,000	2,888,000	4,185,000		3,846,000	2,031,000	3,846,000		3,191,000	2,207,000	3,191,000		594,000	436,000	594,000		3,822,000	2,656,000	3,822,000		3,363,000	3,628,000	3,363,000		673,000	531,000	673,000
Loans collectively evaluated for impairment	1,333,241,000	1,274,818,000								1,333,241,000	1,274,818,000							123,811,000	128,019,000	123,811,000		331,438,000	372,190,000	331,438,000		205,952,000	191,812,000	205,952,000		167,176,000	173,080,000	167,176,000		34,807,000	41,713,000	34,807,000		191,183,000	193,720,000	191,183,000		168,787,000	181,040,000	168,787,000		51,664,000	51,667,000	51,664,000
Reserves													116,309	182,489	216,687	1,700,000	1,800,000
Charges against reserves															83,198	488,012	809,282
Provision expense															1,400,000	392,103	640,893
Loans sold during period		43,000,000								254,500,000
Valuation Allowance and Reserves, Factors Changing Estimate																1.16%	1.37%
Valuation Allowances and Reserves, Adjustments															$ 125,000

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Financial Instruments

12 Months Ended

Dec. 31, 2013

Financial Instruments [Abstract]

Financial Instruments

FINANCIAL INSTRUMENTS

The following is a summary of the carrying amounts and fair values of the Company's financial assets and liabilities at December 31, 2013 and December 31, 2012:    

	December 31, 2013
	Carrying  amount		Estimated fair value		Level 1		Level 2		Level 3
	(Amounts in thousands)
Financial assets:
Cash and cash equivalents	$	40,995	$	40,995	$	40,995	$	—	$	—
Investment securities	288,922		288,922		3,151		285,771		—
Loans and loans held-for-sale, net	1,359,596		1,294,654		—		18,913		1,275,741
Accrued interest receivable	6,219		6,219		—		1,705		4,514
Federal Home Loan Bank stock	3,473		3,473		3,473		—		—
Forward sales commitments	147		147		—		147		—
Interest rate swap agreements	132		132		—		—		132
Financial liabilities:
Demand deposits, NOW, savings
and money market accounts	961,154		911,457		—		911,457		—
Time deposits	557,269		560,008		—		560,008		—
Borrowed funds	89,214		66,690		—		66,690		—
Accrued interest payable	852		852		—		852		—
Interest rate swap agreements	132		132		—		—		132
Interest rate lock commitments	23		23		—		—		23

	December 31, 2012
	Carrying  amount		Estimated fair value		Level 1		Level 2		Level 3
	(Amounts in thousands)
Financial assets:
Cash and cash equivalents	$	138,396	$	138,396	$	138,396	$	—	$	—
Investment securities	343,120		343,120		133		342,987		—
Loans and loans held-for-sale, net	1,312,034		1,187,663		—		27,679		1,159,984
Accrued interest receivable	6,376		6,376		—		1,760		4,616
Federal Home Loan Bank stock	4,154		4,154		4,154		—		—
Interest rate swap agreements	196		196		—		—		196
Interest rate lock commitments	873		873		—		—		873
Financial liabilities:
Demand deposits, NOW, savings
and money market accounts	898,372		898,372		—		898,372		—
Time deposits	733,290		742,552		—		742,552		—
Borrowed funds	105,136		105,926		—		105,926		—
Accrued interest payable	1,629		1,629		—		1,629		—
Interest rate swap agreements	196		196		—		—		196
Forward sales commitments	481		481		—		481		—

The carrying amounts of cash and cash equivalents approximate their fair value.

The fair value of marketable securities is based on quoted market prices, prices quoted for similar instruments, and prices obtained from independent pricing services.

For certain categories of loans, such as installment and commercial loans, the fair value is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. The cost of fixed rate mortgage loans held-for-sale approximates the lower of cost or market as these loans are typically sold within 60 days of origination. Fair values for adjustable-rate mortgages are based on quoted market prices of similar loans adjusted for differences in loan characteristics. The Company applied an additional illiquidity discount in the amount of 5.0%.

The carrying value of FHLB stock approximates fair value based on the redemption provisions of the FHLB stock.

The fair value of demand deposits and savings accounts is the amount payable on demand at December 31, 2013 and December 31, 2012, respectively. The fair value of fixed-maturity certificates of deposit and individual retirement accounts is estimated using the present value of the projected cash flows using rates currently offered for similar deposits with similar maturities.

The fair values of borrowings are based on discounting expected cash flows at the interest rate for debt with the same or similar remaining maturities and collateral requirements. The carrying values of short-term borrowings, including overnight, securities sold under agreements to repurchase, federal funds purchased and FHLB advances, approximates the fair values due to the short maturities of those instruments. The Company's credit risk is not material to calculation of fair value because these borrowings are collateralized.

The carrying values of accrued interest receivable and accrued interest payable approximates fair values due to the short-term duration.

Interest rate swaps are recorded at fair value on a recurring basis. Fair value measurement is based on discounted cash flow models. All future floating cash flows are projected and both floating and fixed cash flows are discounted to the valuation date.

Interest rate locks and forward loan sale commitments are recorded at fair value on a recurring basis. The fair value of forward sales commitments is based on changes in loan pricing between the commitment date and period end, typically month end. The fair value of interest rate lock commitments is based on servicing release premium, origination income net of origination costs, and changes in loan pricing between the commitment date and period end, typically month end.

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Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2013

Financial Instruments [Abstract]

Fair Value, by Balance Sheet Grouping

The following is a summary of the carrying amounts and fair values of the Company's financial assets and liabilities at December 31, 2013 and December 31, 2012:    

	December 31, 2013
	Carrying  amount		Estimated fair value		Level 1		Level 2		Level 3
	(Amounts in thousands)
Financial assets:
Cash and cash equivalents	$	40,995	$	40,995	$	40,995	$	—	$	—
Investment securities	288,922		288,922		3,151		285,771		—
Loans and loans held-for-sale, net	1,359,596		1,294,654		—		18,913		1,275,741
Accrued interest receivable	6,219		6,219		—		1,705		4,514
Federal Home Loan Bank stock	3,473		3,473		3,473		—		—
Forward sales commitments	147		147		—		147		—
Interest rate swap agreements	132		132		—		—		132
Financial liabilities:
Demand deposits, NOW, savings
and money market accounts	961,154		911,457		—		911,457		—
Time deposits	557,269		560,008		—		560,008		—
Borrowed funds	89,214		66,690		—		66,690		—
Accrued interest payable	852		852		—		852		—
Interest rate swap agreements	132		132		—		—		132
Interest rate lock commitments	23		23		—		—		23

	December 31, 2012
	Carrying  amount		Estimated fair value		Level 1		Level 2		Level 3
	(Amounts in thousands)
Financial assets:
Cash and cash equivalents	$	138,396	$	138,396	$	138,396	$	—	$	—
Investment securities	343,120		343,120		133		342,987		—
Loans and loans held-for-sale, net	1,312,034		1,187,663		—		27,679		1,159,984
Accrued interest receivable	6,376		6,376		—		1,760		4,616
Federal Home Loan Bank stock	4,154		4,154		4,154		—		—
Interest rate swap agreements	196		196		—		—		196
Interest rate lock commitments	873		873		—		—		873
Financial liabilities:
Demand deposits, NOW, savings
and money market accounts	898,372		898,372		—		898,372		—
Time deposits	733,290		742,552		—		742,552		—
Borrowed funds	105,136		105,926		—		105,926		—
Accrued interest payable	1,629		1,629		—		1,629		—
Interest rate swap agreements	196		196		—		—		196
Forward sales commitments	481		481		—		481		—

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Borrowed Funds (Tables)

12 Months Ended

Dec. 31, 2013

Debt Disclosure [Abstract]

Schedule of Short-term Borrowings

Short-Term Borrowings Excluding Federal Home Loan Bank ("FHLB") Advances
	Balance at year end		Weighted average interest rate at year end		Maximum amount outstanding at any month-end		Average Daily balance outstanding during year		Average annual interest rate paid
December 31, 2013
Overnight borrowings from the Federal Reserve Bank	$	—	—	%	$	—	$	—	—
Securities sold under agreement to repurchase	28,260,325		0.25	%	39,891,850		34,870,805		0.25	%
Federal funds purchased	—		—	%	2,866,667		267,567		0.65	%
Total short-term borrowings excluding FHLB advances	$	28,260,325
December 31, 2012
Overnight borrowings from the Federal Reserve Bank	$	—	—	%	$	—	$	6,225	—	%
Securities sold under agreement to repurchase	39,191,902		0.84	%	39,191,903		36,449,509		0.79	%
Federal funds purchased	—		—	%	—		13,790		0.61	%
Total short-term borrowings excluding FHLB advances	$	39,191,902

The principal balance of short term advances from the FHLB consist of the following at December 31, 2013. There were no short term advances from the FHLB at December 31, 2012.

Maturity	Interest Rate		2013		2012
7/21/2014	2.31	%	$	10,000,000	$	—
7/21/2014	2.62	%	5,000,000		—
			$	15,000,000	$	—

Long-term Debt Maturities

The following table presents long-term advances from the FHLB at December 31, 2013 and 2012:

Maturity	Interest Rate		2013		2012
7/21/2014	2.31	%	$	—	$	10,000,000
7/21/2014	2.62	%	—		5,000,000
1/11/2015	2.99	%	5,000,000		5,000,000
4/27/2015	2.97	%	5,000,000		5,000,000
10/29/2018	0.25	%	685,104		702,678
12/19/2023	2.00	%	225,967		243,809
			$	10,911,071	$	25,946,487

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Borrowed Funds - Schedule of Short-Term Borrowings (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Short-term Debt [Line Items]
Balance at year end	$ 43,260,000	$ 39,192,000
Various Correspondent Banks
Short-term Debt [Line Items]
Unused lines of credit	152,100,000
Short-term borrowings excluding FHLB advances
Short-term Debt [Line Items]
Balance at year end	28,260,325	39,191,902
Overnight borrowings from the Federal Reserve Bank
Short-term Debt [Line Items]
Balance at year end	0	0
Weight average interest rate at year end	0.00%	0.00%
Maximum amount outstanding at any month-end	0	0
Average Daily balance outstanding during year	0	6,225
Average annual interest rate paid	0.00%	0.00%
Overnight borrowings from the Federal Reserve Bank | Federal Funds Rate
Short-term Debt [Line Items]
Debt instrument, basis spread on variable rate	0.50%
Securities sold under agreement to repurchase
Short-term Debt [Line Items]
Balance at year end	28,260,325	39,191,902
Weight average interest rate at year end	0.25%	0.84%
Maximum amount outstanding at any month-end	39,891,850	39,191,903
Average Daily balance outstanding during year	34,870,805	36,449,509
Average annual interest rate paid	0.25%	0.79%
Federal funds purchased
Short-term Debt [Line Items]
Balance at year end	0	0
Weight average interest rate at year end	0.00%	0.00%
Maximum amount outstanding at any month-end	2,866,667	0
Average Daily balance outstanding during year	267,567	13,790
Average annual interest rate paid	0.65%	0.61%
Federal Home Loan Bank Advances
Short-term Debt [Line Items]
Balance at year end	15,000,000	0
Federal Home Loan Bank Advances | Federal Home Loan Bank Advances, July 21, 2014 Maturity, One [Member]
Short-term Debt [Line Items]
Balance at year end	10,000,000	0
Interest Rate	2.31%
Federal Home Loan Bank Advances | Federal Home Loan Bank Advances, July 21, 2014 Maturity, Two [Member]
Short-term Debt [Line Items]
Balance at year end	$ 5,000,000	$ 0
Federal Home Loan Bank Advances | Federal Home Loan Bank Advances, July 21, 2014 Maturity, One [Member]
Short-term Debt [Line Items]
Interest Rate	2.31%	2.31%
Federal Home Loan Bank Advances | Federal Home Loan Bank Advances, July 21, 2014 Maturity, Two [Member]
Short-term Debt [Line Items]
Interest Rate	2.62%	2.62%

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Derivatives (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Minimum
Derivatives
Time period between issuance of loan commitment and closing and sale of loan	10 days
Maximum
Derivatives
Time period between issuance of loan commitment and closing and sale of loan	60 days
Interest Rate Lock Commitments
Derivatives
Derivative Asset, Notional Amount	$ 13,400,000	$ 46,700,000
Interest Rate Lock Commitments | Other Assets
Derivatives
Derivative Asset, Fair Value, Gross Asset	23,222	(480,806)
Interest Rate Lock Commitments | Mortgage Banking Activities
Derivatives
Gain on derivative	(896,066)
Interest Rate Lock Commitments | Other Income
Derivatives
Gain on derivative		204,856
Forward Sales Commitments
Derivatives
Derivative Asset, Notional Amount	31,900,000	71,500,000
Forward Sales Commitments | Other Assets
Derivatives
Derivative Asset, Fair Value, Gross Asset		872,844
Forward Sales Commitments | Other Liabilities
Derivatives
Derivative Liability, Fair Value, Gross Liability	(147,232)
Forward Sales Commitments | Mortgage Banking Activities
Derivatives
Gain on derivative	628,038
Forward Sales Commitments | Other Income
Derivatives
Loss on derivative		743,025
Interest Rate Swap Agreements | Not Designated as Hedging Instrument
Derivatives
Number of derivative agreements	2
Derivative, Term of Variable Rate Basis	1 month
Derivative Asset, Notional Amount	1,800,000	2,000,000
Derivative Liability, Notional Amount	1,800,000	2,000,000
Interest Rate Swap Agreements | Not Designated as Hedging Instrument | Other Assets
Derivatives
Derivative Asset, Fair Value, Gross Asset	132,438	196,006
Interest Rate Swap Agreements | Not Designated as Hedging Instrument | Other Liabilities
Derivatives
Derivative Liability, Fair Value, Gross Liability	132,438	196,006
Interest Rate Swap Asset [Member] | Non-interest Income [Member] | Not Designated as Hedging Instrument
Derivatives
Gain on derivative	$ 63,568	$ 20,973

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Non-marketable Equity Securities (Tables)

12 Months Ended

Dec. 31, 2013

Investments, All Other Investments [Abstract]

Non-marketable securities

The following tables present non-marketable securities at December 31, 2013 and December 31, 2012:

		December 31, 2013
Investment	Investment Type	Original Cost		Cumulative OTTI Charge		Current Balance
Federal Home Loan Bank of Atlanta	Common Stock	$	3,472,500	$	—	$	3,472,500
Yadkin Valley Statutory Trust I	Common Stock	774,000		—		774,000
American Community Capital Trust II	Common Stock	310,000		—		310,000
Limited partnerships providing lending
services to middle-market companies	Limited Partner	629,073		—		629,073
Other	Common Stock	136,866		39,185		97,681
Total		$	5,322,439	$	39,185	$	5,283,254

		December 31, 2012
Investment	Investment Type	Original Cost		Cumulative OTTI Charge		Current Balance
Federal Home Loan Bank of Atlanta	Common Stock	$	4,154,300	$	—	$	4,154,300
Yadkin Valley Statutory Trust I	Common Stock	774,000		—		774,000
American Community Capital Trust II	Common Stock	310,000		—		310,000
Limited partnerships providing lending
services to middle-market companies	Limited Partner	1,330,846		—		1,330,846
Other	Common Stock	138,780		1,914		136,866
Total		$	6,707,926	$	1,914	$	6,706,012

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Business Segment Information (Tables)

12 Months Ended

Dec. 31, 2013

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment

The Company has two reportable segments, including banking activities and mortgage banking activities.

In the fourth quarter of 2012, a decision was made by management to sell a reinsurance subsidiary held by Sidus. As a result of this decision, Sidus reclassified its investment in the reinsurance subsidiary to held for sale and wrote down its investment by $1.0 million to the estimated fair value at December 31, 2012. The sale of the subsidiary closed in the first quarter of 2013. In addition, at the beginning of 2013, the Company dissolved Sidus and is no longer doing business as Sidus. All mortgage banking activity beginning in 2013 is at the Bank.

The following table details the results of operations for the year ended December 31, 2013, 2012 and 2011 for bank activities and mortgage activities.

	Bank Activities			Mortgage Activities		Other (1)			Total
	(Amounts in thousands)
For Year Ended December 31, 2013
Interest income	$	70,633		$	3,666	$	—		$	74,299
Interest expense	9,494			—		747			10,241
Net interest income	61,139			3,666		(747		)	64,058
Provision for loan losses	(2,685		)	—		—			(2,685		)
Net interest income (loss) after provision for loan losses	63,824			3,666		(747		)	66,743
Other income	9,587			8,709		108			18,404
Other expense	50,045			5,500		375			55,920
Income (loss) before income taxes	23,366			6,875		(1,014		)	29,227
Income taxes	10,401			—		—			10,401
Net income (loss)	$	12,965		$	6,875	$	(1,014	)	$	18,826
Total assets	$	1,779,473		$	24,172	$	2,382		$	1,806,027
Net loans	1,340,683			—		—			1,340,683
Loans held for sale	—			18,913		—			18,913

(1) Note: The “Other” column includes Holding Company assets and Holding Company income and expenses.

	Bank Activities			Mortgage Activities			Other (2)			Total
	(Amounts in thousands)
For the year ended December 31, 2012
Interest income	$	75,104		$	3,868		$	—		$	78,972
Interest expense	16,998			143			847			17,988
Net interest income	58,106			3,725			(847		)	60,984
Provision for loan losses	40,538			(164		)	—			40,374
Net interest income (loss) after provision for loan losses	17,568			3,889			(847		)	20,610
Other income	7,677			5,860			29			13,566
Other expense	60,070			6,569			172			66,811
Income (loss) before income tax expense	(34,825		)	3,180			(990		)	(32,635		)
Income tax expense (1)	(23,961		)	—			—			(23,961		)
Net income (loss)	$	(10,864	)	$	3,180		$	(990	)	$	(8,674	)
Total assets	$	1,890,906		$	31,500		$	1,032		$	1,923,438
Net loans	1,284,355			—			—			1,284,355
Loans held for sale	—			27,679			—			27,679

________________________

(1) As an LLC, Sidus passes its pre-tax income through to its single member, the Bank, which is taxed on that income.

(2) Note: The “Other” column includes Holding Company assets and Holding Company income and expenses.

	Bank Activities			Mortgage Activities			Other (2)			Total
	(Amounts in thousands)
For Year Ended December 31, 2011
Interest income	$	88,156		$	390		$	—		$	88,546
Interest expense	25,016			239			786			26,041
Net interest income	63,140			151			(786		)	62,505
Provision for loan losses	20,828			15			—			20,843
Net interest income (loss) after provision for loan losses	42,312			136			(786		)	41,662
Other income	12,901			5,408			(129		)	18,180
Other expense	54,253			13,244			46			67,543
Loss before income tax expense	960			(7,700		)	(961		)	(7,701		)
Income tax expense (1)	6,694			—			—			6,694
Net loss	$	(5,734	)	$	(7,700	)	$	(961	)	$	(14,395	)
Total assets	$	1,973,848		$	24,209		$	(4,869	)	$	1,993,188
Net loans	1,418,076			—			—			1,418,076
Loans held for sale	3,628			15,906			—			19,534

(1) As an LLC, Sidus passes its pre-tax income through to its single member, the Bank, which is taxed on that income.

(2) Note: The “Other” column includes Holding Company assets and Holding Company income and expenses.

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Loans and Allowance for Loan Losses - Credit Quality Indicators (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Credit Quality Indicators
Risk review threshold	$ 20,000
Loans	1,357,767,000	1,308,372,000
Real Estate Loans | Construction Loans
Credit Quality Indicators
Loans	131,035,000	131,981,000
Real Estate Loans | Construction Loans | High Quality
Credit Quality Indicators
Loans	0	0
Real Estate Loans | Construction Loans | Good Quality
Credit Quality Indicators
Loans	356,000	464,000
Real Estate Loans | Construction Loans | Satisfactory
Credit Quality Indicators
Loans	22,403,000	22,284,000
Real Estate Loans | Construction Loans | Merits Attention
Credit Quality Indicators
Loans	90,343,000	78,668,000
Real Estate Loans | Construction Loans | Special Mention
Credit Quality Indicators
Loans	14,434,000	16,797,000
Real Estate Loans | Construction Loans | Substandard
Credit Quality Indicators
Loans	1,168,000	3,939,000
Real Estate Loans | Construction Loans | Substandard Impaired
Credit Quality Indicators
Loans	2,331,000	9,829,000
Real Estate Loans | Construction Loans | Doubtful
Credit Quality Indicators
Loans	0	0
Real Estate Loans | Construction Loans | Loss
Credit Quality Indicators
Loans	0	0
Real Estate Loans | Owner Occupied Commercial
Credit Quality Indicators
Loans	382,766,000	342,962,000
Real Estate Loans | Owner Occupied Commercial | High Quality
Credit Quality Indicators
Loans	0	119,000
Real Estate Loans | Owner Occupied Commercial | Good Quality
Credit Quality Indicators
Loans	0	0
Real Estate Loans | Owner Occupied Commercial | Satisfactory
Credit Quality Indicators
Loans	125,560,000	115,347,000
Real Estate Loans | Owner Occupied Commercial | Merits Attention
Credit Quality Indicators
Loans	226,320,000	191,958,000
Real Estate Loans | Owner Occupied Commercial | Special Mention
Credit Quality Indicators
Loans	20,284,000	23,396,000
Real Estate Loans | Owner Occupied Commercial | Substandard
Credit Quality Indicators
Loans	4,244,000	4,286,000
Real Estate Loans | Owner Occupied Commercial | Substandard Impaired
Credit Quality Indicators
Loans	6,358,000	7,856,000
Real Estate Loans | Owner Occupied Commercial | Doubtful
Credit Quality Indicators
Loans	0	0
Real Estate Loans | Owner Occupied Commercial | Loss
Credit Quality Indicators
Loans	0	0
Real Estate Loans | Non-owner Occupied
Credit Quality Indicators
Loans	196,926,000	211,489,000
Real Estate Loans | Non-owner Occupied | High Quality
Credit Quality Indicators
Loans	0	0
Real Estate Loans | Non-owner Occupied | Good Quality
Credit Quality Indicators
Loans	1,587,000	0
Real Estate Loans | Non-owner Occupied | Satisfactory
Credit Quality Indicators
Loans	47,453,000	58,577,000
Real Estate Loans | Non-owner Occupied | Merits Attention
Credit Quality Indicators
Loans	133,072,000	129,283,000
Real Estate Loans | Non-owner Occupied | Special Mention
Credit Quality Indicators
Loans	7,392,000	16,084,000
Real Estate Loans | Non-owner Occupied | Substandard
Credit Quality Indicators
Loans	2,624,000	2,136,000
Real Estate Loans | Non-owner Occupied | Substandard Impaired
Credit Quality Indicators
Loans	4,798,000	5,409,000
Real Estate Loans | Non-owner Occupied | Doubtful
Credit Quality Indicators
Loans	0	0
Real Estate Loans | Non-owner Occupied | Loss
Credit Quality Indicators
Loans	0	0
Real Estate Loans | One to Four Family
Credit Quality Indicators
Loans	174,072,000	168,611,000
Real Estate Loans | One to Four Family | High Quality
Credit Quality Indicators
Loans	90,000	375,000
Real Estate Loans | One to Four Family | Good Quality
Credit Quality Indicators
Loans	982,000	1,301,000
Real Estate Loans | One to Four Family | Satisfactory
Credit Quality Indicators
Loans	99,578,000	95,727,000
Real Estate Loans | One to Four Family | Merits Attention
Credit Quality Indicators
Loans	62,242,000	56,629,000
Real Estate Loans | One to Four Family | Special Mention
Credit Quality Indicators
Loans	5,307,000	7,862,000
Real Estate Loans | One to Four Family | Substandard
Credit Quality Indicators
Loans	3,005,000	2,850,000
Real Estate Loans | One to Four Family | Substandard Impaired
Credit Quality Indicators
Loans	2,868,000	3,867,000
Real Estate Loans | One to Four Family | Doubtful
Credit Quality Indicators
Loans	0	0
Real Estate Loans | One to Four Family | Loss
Credit Quality Indicators
Loans	0	0
Real Estate Loans | Multifamily
Credit Quality Indicators
Loans	41,713,000	35,337,000
Real Estate Loans | Multifamily | High Quality
Credit Quality Indicators
Loans	0	0
Real Estate Loans | Multifamily | Good Quality
Credit Quality Indicators
Loans	957,000	0
Real Estate Loans | Multifamily | Satisfactory
Credit Quality Indicators
Loans	7,691,000	7,945,000
Real Estate Loans | Multifamily | Merits Attention
Credit Quality Indicators
Loans	31,686,000	25,681,000
Real Estate Loans | Multifamily | Special Mention
Credit Quality Indicators
Loans	551,000	571,000
Real Estate Loans | Multifamily | Substandard
Credit Quality Indicators
Loans	572,000	601,000
Real Estate Loans | Multifamily | Substandard Impaired
Credit Quality Indicators
Loans	256,000	539,000
Real Estate Loans | Multifamily | Doubtful
Credit Quality Indicators
Loans	0	0
Real Estate Loans | Multifamily | Loss
Credit Quality Indicators
Loans	0	0
Real Estate Loans | Home Equity Lines of Credit
Credit Quality Indicators
Loans	194,145,000	191,888,000
Real Estate Loans | Home Equity Lines of Credit | High Quality
Credit Quality Indicators
Loans	161,000	111,000
Real Estate Loans | Home Equity Lines of Credit | Good Quality
Credit Quality Indicators
Loans	6,627,000	6,756,000
Real Estate Loans | Home Equity Lines of Credit | Satisfactory
Credit Quality Indicators
Loans	118,339,000	118,497,000
Real Estate Loans | Home Equity Lines of Credit | Merits Attention
Credit Quality Indicators
Loans	61,026,000	59,568,000
Real Estate Loans | Home Equity Lines of Credit | Special Mention
Credit Quality Indicators
Loans	5,075,000	4,228,000
Real Estate Loans | Home Equity Lines of Credit | Substandard
Credit Quality Indicators
Loans	1,632,000	1,687,000
Real Estate Loans | Home Equity Lines of Credit | Substandard Impaired
Credit Quality Indicators
Loans	1,285,000	1,041,000
Real Estate Loans | Home Equity Lines of Credit | Doubtful
Credit Quality Indicators
Loans	0	0
Real Estate Loans | Home Equity Lines of Credit | Loss
Credit Quality Indicators
Loans	0	0
Commercial
Credit Quality Indicators
Loans	185,443,000	174,440,000
Commercial | High Quality
Credit Quality Indicators
Loans	2,640,000	2,430,000
Commercial | Good Quality
Credit Quality Indicators
Loans	5,084,000	5,738,000
Commercial | Satisfactory
Credit Quality Indicators
Loans	63,674,000	62,071,000
Commercial | Merits Attention
Credit Quality Indicators
Loans	94,313,000	82,243,000
Commercial | Special Mention
Credit Quality Indicators
Loans	7,874,000	16,809,000
Commercial | Substandard
Credit Quality Indicators
Loans	9,553,000	1,009,000
Commercial | Substandard Impaired
Credit Quality Indicators
Loans	2,305,000	4,140,000
Commercial | Doubtful
Credit Quality Indicators
Loans	0	0
Commercial | Loss
Credit Quality Indicators
Loans	0	0
Consumer and other
Credit Quality Indicators
Loans	51,667,000	51,664,000
Consumer and other | High Quality
Credit Quality Indicators
Loans	2,162,000	2,289,000
Consumer and other | Good Quality
Credit Quality Indicators
Loans	1,160,000	1,316,000
Consumer and other | Satisfactory
Credit Quality Indicators
Loans	21,221,000	22,459,000
Consumer and other | Merits Attention
Credit Quality Indicators
Loans	26,126,000	24,425,000
Consumer and other | Special Mention
Credit Quality Indicators
Loans	676,000	551,000
Consumer and other | Substandard
Credit Quality Indicators
Loans	32,000	122,000
Consumer and other | Substandard Impaired
Credit Quality Indicators
Loans	290,000	502,000
Consumer and other | Doubtful
Credit Quality Indicators
Loans	0	0
Consumer and other | Loss
Credit Quality Indicators
Loans	0	0
Total Loans
Credit Quality Indicators
Loans	1,357,767,000	1,308,372,000
Total Loans | High Quality
Credit Quality Indicators
Loans	5,053,000	5,324,000
Total Loans | Good Quality
Credit Quality Indicators
Loans	16,753,000	15,575,000
Total Loans | Satisfactory
Credit Quality Indicators
Loans	505,919,000	502,907,000
Total Loans | Merits Attention
Credit Quality Indicators
Loans	725,128,000	648,455,000
Total Loans | Special Mention
Credit Quality Indicators
Loans	61,593,000	86,298,000
Total Loans | Substandard
Credit Quality Indicators
Loans	22,830,000	16,630,000
Total Loans | Substandard Impaired
Credit Quality Indicators
Loans	20,491,000	33,183,000
Total Loans | Doubtful
Credit Quality Indicators
Loans	0	0
Total Loans | Loss
Credit Quality Indicators
Loans	$ 0	$ 0

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Goodwill (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended			36 Months Ended		6 Months Ended	12 Months Ended
	Dec. 31, 2013	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2013	Dec. 31, 2013 Mortgage Banking Activities	Jun. 30, 2011 Sidus	Dec. 31, 2011 Sidus	Dec. 31, 2013 Sidus
Goodwill [Line Items]
Net losses	$ (4,657)	$ (4,711)	$ (4,809)	$ (4,649)	$ 23,899	$ (757)	$ (10,997)	$ (3,471)	$ (18,826)	$ 8,674	$ 14,395			$ 2,600
Goodwill, Impairment Test, Discount Rate														25.00%
Goodwill, Impairment Test, Weighted-average Multiple of Long-term Book Value														0.84
Goodwill, Impairment Test, Weighted-average Multiple of Long-term Tangible Book Value														1.06
Goodwill [Roll Forward]
Goodwill, beginning of period													0			0
Goodwill impairment							4,900		0	0	4,944	4,944			4,900
Goodwill, end of period	0								0			0	0			0
Accumulated impairment losses	$ (66,509,640)								$ (66,509,640)			$ (66,509,640)	$ (61,565,768)			$ (61,565,768)

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Non-marketable Equity Securities - Schedule of Cost Method Invesments (Details) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Schedule of Cost-method Investments [Line Items]
Cost method investments, original cost	$ 5,322,439	$ 6,707,926
Cost-method investments, cummulative OTTI charge	39,185	1,914
Cost method investments	5,283,254	6,706,012
Federal Home Loan Bank of Atlanta
Schedule of Cost-method Investments [Line Items]
Cost method investments, original cost	3,472,500	4,154,300
Cost-method investments, cummulative OTTI charge	0	0
Cost method investments	3,472,500	4,154,300
Yadkin Valley Statutory Trust I
Schedule of Cost-method Investments [Line Items]
Cost method investments, original cost	774,000	774,000
Cost-method investments, cummulative OTTI charge	0	0
Cost method investments	774,000	774,000
American Community Capital Trust II
Schedule of Cost-method Investments [Line Items]
Cost method investments, original cost	310,000	310,000
Cost-method investments, cummulative OTTI charge	0	0
Cost method investments	310,000	310,000
Limited Partnerships
Schedule of Cost-method Investments [Line Items]
Cost method investments, original cost	629,073	1,330,846
Cost-method investments, cummulative OTTI charge	0	0
Cost method investments	629,073	1,330,846
Other Investments
Schedule of Cost-method Investments [Line Items]
Cost method investments, original cost	136,866	138,780
Cost-method investments, cummulative OTTI charge	39,185	1,914
Cost method investments	$ 97,681	$ 136,866

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Off-Balance Sheet Risk, Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2013

Commitments and Contingencies Disclosure [Abstract]

Off-balance Sheet Risk, By Type of Contract

The following table presents a summary by type of contract and amount the Bank’s exposure to off-balance sheet risk as of December 31, 2013 and 2012:

	2013		2012
Financial instruments whose contract amounts represent credit risk:
Loan commitments and undisbursed lines of credit	$	284,345,741	$	255,356,370
Undisbursed standby letters of credit	6,463,019		7,395,059
Undisbursed portion of construction loans	25,452,178		17,500,855
Commitments to close first mortgages	13,359,442		46,725,883
Commitments to sell first mortgages	31,895,650		71,491,707

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Investment Securities

12 Months Ended

Dec. 31, 2013

Available-for-sale Securities [Abstract]

Investment Securities

INVESTMENT SECURITIES

Investment securities at December 31, 2013 and December 31, 2012 are summarized as follows:

	December 31, 2013
	Amortized Cost		Unrealized  Gains		Unrealized  Losses		Fair Value
	(Amounts in thousands)
Available-for-sale securities:
Securities of U.S. government agencies due:
Within 1 year	$	1,560	$	—	$	8	$	1,552
After 1 but within 5 years	15,039		—		199		14,840
	16,599		—		207		16,392
Government sponsored agencies:
Residential mortgage-backed securities due:
Within 1 year	—		—		—		—
After 1 but within 5 years	632		42		—		674
After 5 but within 10 years	17,829		284		—		18,113
After 10 years	85,277		624		1,247		84,654
	103,738		950		1,247		103,441
Collateralized mortgage obligations due:
After 1 but within 5 years	3,139		—		7		3,132
After 5 but within 10 years	5,093		140		—		5,233
After 10 years	43,813		660		95		44,378
	52,045		800		102		52,743
Private label collateralized mortgage obligations due:
After 5 but within 10 years	143		—		1		142
After 10 years	14,530		13		194		14,349
	14,673		13		195		14,491
State and municipal securities due:
Within 1 year	910		10		—		920
After 1 but within 5 years	7,069		311		—		7,380
After 5 but within 10 years	44,590		1,064		827		44,827
After 10 years	47,422		282		2,127		45,577
	99,991		1,667		2,954		98,704
Common and preferred stocks:	1,868		1,283		—		3,151
Total available-for-sale securities	$	288,914	$	4,713	$	4,705	$	288,922

	December 31, 2012
	Amortized Cost		Unrealized  Gains		Unrealized  Losses		Fair Value
	(Amounts in thousands)
Available-for-sale securities:
Securities of U.S. government agencies due:
Within 1 year	$	10,005	$	15	$	—	$	10,020
After 1 but within 5 years	17,479		29		1		17,507
	27,484		44		1		27,527
Government sponsored agencies:
Residential mortgage-backed securities due:
Within 1 year	119		2		—		121
After 1 but within 5 years	315		26		—		341
After 5 but within 10 years	10,371		341		—		10,712
After 10 years	94,319		2,089		325		96,083
	105,124		2,458		325		107,257
Collateralized mortgage obligations due:
After 1 but within 5 years	648		2		—		650
After 5 but within 10 years	9,975		206		3		10,178
After 10 years	111,155		902		292		111,765
	121,778		1,110		295		122,593
Private label collateralized mortgage obligations due:
After 5 but within 10 years	178		—		—		178
After 10 years	848		19		—		867
	1,026		19		—		1,045
State and municipal securities due:
Within 1 year	620		6		—		626
After 1 but within 5 years	5,734		321		—		6,055
After 5 but within 10 years	24,464		1,698		12		26,150
After 10 years	50,031		2,064		361		51,734
	80,849		4,089		373		84,565
Common and preferred stocks:	88		46		1		133
Total available-for-sale securities	$	336,349	$	7,766	$	995	$	343,120

Mortgage-backed securities are included in maturity groups based upon stated maturity date. At December 31, 2013, $103.4 million of the Bank's mortgage-backed securities were pass-through securities and $67.2 million were collateralized mortgage obligations. At December 31, 2012, $107.3 million of the Bank's mortgage-backed securities were pass-through securities and $123.6 million were collateralized mortgage obligations. Actual maturity will vary based onrepayment of the underlying mortgage loans.

Gross realized gains on the sale of securities for the year ended December 31, 2013 was $576,169. Gross realized gains on the sale of securities for the years ended December 31, 2012 were $1.7 million. Gross realized losses on the sale of securities for the year ended December 31, 2013 was $2.9 million. There were no losses on the sale of securities available-for-sale for the years ended December 31, 2012 or 2011. Gross realized gains on sales of available-for-sale securities in 2011 were $2.8 million.

Investment securities with carrying values of approximately $107.4 million and $88.7 million at December 31, 2013 and December 31, 2012, respectively, were pledged as collateral for public deposits and for borrowing from Federal Reserve or other purposes as required or permitted by law.

If management determines that an investment has experienced an other than temporary impairment ("OTTI"), the loss is recognized in the income statement. There were no OTTI charges recorded for securities available-for-sale for the year ended December 31, 2013. The Company's investment in a financial institution classified as available-for-sale was considered to be OTTI and approximately $50,000 was charged off in 2012. Management believed that the market prices of these equity securities would not recover in the immediate future due to the economic environment at such time. All OTTI losses were deemed to be credit related losses. There were no OTTI charges recorded for securities available-for-sale for the year ended December 31, 2011.

The following table presents the gross unrealized losses and fair value of investment securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2013 and December 31, 2012. Securities that have been in a loss position for twelve months or more at December 31, 2013 include one U.S. government agency, one collateralized mortgage obligation, one private label collateralized mortgage obligation and nine state and municipal securities. The key factors considered in evaluating the collateralized mortgage obligations, private label collateralized mortgage obligations, and municipal securities were cash flows of the investment and the assessment of other relative economic factors. Securities that have been in a loss position for twelve months or more at December 31, 2012 include three collateralized mortgage obligations, one private label collateralized mortgage obligation and two other securities. The unrealized losses relate to securities that have incurred fair value reductions due to a shift in demand from non-governmental securities and municipals to U.S. Treasury bonds and governmental agencies due to credit market concerns. The unrealized losses are not likely to reverse until market interest rates decline to the levels that existed when the securities were purchased. None of the unrealized losses relate to the marketability of the securities or the issuer's ability to honor redemption obligations. It is not more likely than not that the Company will have to sell the investments before recovery of their amortized cost bases.

	Less Than 12 Months				12 Months or More				Total
December 31, 2013	Fair value		Unrealized  losses		Fair value		Unrealized  losses		Fair value		Unrealized  losses
	(Amounts in thousands)
Securities available-for-sale:
U.S. government agencies	$	14,840	$	199	$	1,552	$	8	$	16,392	$	207
Government sponsored agencies:
Residential mortgage-backed securities	49,954		1,247		—		—		49,954		1,247
Collateralized mortgage obligations	11,372		64		2,121		38		13,493		102
Private label collateralized mortgage obligations	9,941		194		142		1		10,083		195
State and municipal securities	31,218		1,950		14,280		1,004		45,498		2,954
Common and preferred stocks	—		—		—		—		—		—
Total temporarily impaired securities	$	117,325	$	3,654	$	18,095	$	1,051	$	135,420	$	4,705

	Less Than 12 Months				12 Months or More				Total
December 31, 2012	Fair value		Unrealized  losses		Fair value		Unrealized  losses		Fair value		Unrealized  losses
	(Amounts in thousands)
Securities available-for-sale:
U.S. government agencies	$	2,429	$	1	$	—	$	—	$	2,429	$	1
Government sponsored agencies:
Residential mortgage-backed securities	12,021		325		$	—	—		12,021		325
Collateralized mortgage obligation	27,417		127		7,626		168		35,043		295
Private label collateralized mortgage obligations	—		—		178		—		178		—
State and municipal securities	22,899		373		—		—		22,899		373
Common and preferred stocks, and other	—		—		60		1		60		1
Total temporarily impaired securities	$	64,766	$	826	$	7,864	$	169	$	72,630	$	995

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Non-marketable Equity Securities - Narrative (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011 SecuritiesPositions
Schedule of Cost-method Investments [Line Items]
Cost-method investments	$ 5,283,254	$ 6,706,012
Equity Method Investment, Other than Temporary Impairment	39,185
Equity Method Investments	62,815
Other than temporary impairment		0	116,003
Cost-method investments, number of investments sold			1
Realized losses from sale of investments			79,910
FHLB Stock
Schedule of Cost-method Investments [Line Items]
Cost-method investments	3,472,500
Investments in Various Trust and Financial Companies
Schedule of Cost-method Investments [Line Items]
Cost-method investments	$ 1,810,754

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Provision for Income Taxes

The following table presents the provision for income taxes for the years ended December 31, 2013, 2012 and 2011:

	2013			2012			2011
	(in thousands)
Current:
Federal	$	(93	)	$	(210	)	$	712
State	—			—			—
	(93		)	(210		)	712
Deferred:
Federal	8,027			(10,755		)	(4,600		)
State	2,467			(1,996		)	(418		)
	10,494			(12,751		)	(5,018		)
Increase (decrease) in valuation allowance for deferred tax assets	—			(11,000		)	11,000
Total income taxes	$	10,401		$	(23,961	)	$	6,694

Deferred Tax Assets, Net

The following table presents the tax effects of significant components of the Company's net deferred tax assets as of December 31, 2013 and December 31, 2012:

	December 31,			December 31,
	2013			2012
	(in thousands)
Deferred tax assets:
Allowance for loan losses	$	6,956		$	9,853
Other than temporary impairment	829			827
Accrued liabilities	55			220
OREO property	178			3,767
Net operating loss	14,375			19,627
Mortgage banking goodwill	779			921
Other	3,243			2,160
	26,415			37,375
Less: Valuation Allowance	—			—
	$	26,415		$	37,375
Deferred tax liabilities:
Unrealized gain on available-for-sale securities	$	(3	)	$	(2,583	)
FMV adjustment related to mergers	(97		)	(181		)
Depreciation	(1,753		)	(1,561		)
Prepaid expenses	(342		)	(358		)
Core deposit intangible	(765		)	(1,043		)
Noncompete intangible	(24		)	(149		)
Other	(6		)	(142		)
	(2,990		)	(6,017		)
Net deferred tax asset	$	23,425		$	31,358

Schedule of Cumulative Loss Position

The Company is in a cumulative tax loss position for the 3-year period ending December 31, 2013 of $6.2 million. Significance: High

	December 31, 2013 Cumulative Loss Test
	2011			2012			2013		Total
	(in thousands)
Income (loss) before income taxes	$	(7,701	)	$	(32,635	)	$	29,227	$	(11,109	)
Goodwill impairment	4,944			—			—		$	4,944
	$	(2,757	)	$	(32,635	)	$	29,227	$	(6,165	)

Net Operating Loss Carryforwards

	Net Operating Loss  Carryforward at December 31, 2013		Expiration
	(in thousands)
Cardinal State Bank acquisition	$	2,424	2029
American Community Bank acquisition	345		2030
Yadkin Valley Federal Tax	35,582		2031
Yadkin Valley State Tax	28,623		2031
Total Loss Carryforwards	$	66,974

Income Tax Reconciliation

The following table presents a reconciliation of applicable income taxes for the years ended December 31, 2013 and 2012 to the amount of tax expense computed at the statutory federal income tax rate of 35%:

	2013			2012
	(in thousands)
Tax benefit at statutory rate on income before income taxes	$	10,230		$	(11,422	)
Increases (decreases) resulting from:
Tax-exempt interest on investments	(1,055		)	(737		)
State income tax, net of federal benefits	1,604			(1,298		)
Income from bank-owned life insurance	(210		)	(221		)
Valuation allowance on deferred tax assets	—			(11,000		)
Other	(168		)	717
Total income taxes	$	10,401		$	(23,961	)

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Goodwill

12 Months Ended

Dec. 31, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

GOODWILL

Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired.  Goodwill impairment testing is performed annually or more frequently if events or circumstances indicate possible impairment.  An impairment loss is recorded to the extent that the carrying value of goodwill exceeds its implied fair value.

Goodwill relating to the Sidus acquisition was evaluated by management on an annual basis at October 1st or more frequently if circumstances indicate possible impairment for the Sidus reporting unit. For the first six months of 2011, Sidus had experienced losses of $2.6 million due to declines in revenues and one-time expenses for severance and termination costs. During the second quarter of 2011, management made the strategic decision to exit out of the wholesale market and concentrate the focus on retail mortgage sales. As a result of these triggering events, goodwill related to the Sidus acquisition was evaluated for impairment as of June 30, 2011.

In performing the first step (“Step 1”) of the goodwill impairment testing and measurement process to identify possible impairment, the estimated fair value of the Sidus reporting unit was developed using the income and market approaches to value Sidus.  The income approach consisted of discounting projected long-term future cash flows, which are derived from internal forecasts and economic expectations for Sidus.   Significant inputs to the income approach included the multiple of earnings derived from recent acquisitions, an annual discount rate of 25% representing investors’ estimated long-term required rate of return, and projected long-term earnings for the reporting units. A significant discount rate was applied to the projections due to the fact that Sidus had sustained losses for the first six months of 2011 and had recently exited its wholesale business. The market valuation approach utilized price-to-book value multiple and EBITDA multiples. Significant inputs to the price-to-book value multiple approach included a weighted-average multiple of long-term book value of 0.84 derived from southeast industry data, and long-term tangible book values of 1.06 for the reporting units.

The valuation had declined over the last twelve months as investors have demanded a higher return for equity investments in the mortgage business due to sustained weakness in the industry. Earnings multiples had declined and discount rates increased as discussed in the paragraph above. These industry trends coupled with losses for the first six months of 2011, changes in the regulatory environment and additional costs associated with those changes, and risks associated with recourse decreased expected future earnings and resulted in management reducing its internal valuations. The lower valuations resulted in goodwill impairment.  

The results of this Step 1 process indicated that the estimated fair value of Sidus was less than book value, thus requiring a second step (“Step 2”) of the goodwill impairment test in accordance with accounting for Intangibles- Goodwill and other.  The Step 2 analysis included an allocation of estimated fair value of the entity and allocated that value to identifiable tangible and intangible assets and liabilities as determined in Step 1. Assumptions included in the fair value of net assets included current market rates for loans. Based on the Step 2 analysis, it was determined that Sidus’ fair value did not support the goodwill recorded; therefore, Sidus recorded a $4.9 million goodwill impairment charge to write-off all of its goodwill.   This non-cash goodwill impairment charge to earnings was recorded as a component of non-interest expense on the consolidated statement of loss.

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Selected Quarterly Financial Data (Unaudited)

12 Months Ended

Dec. 31, 2013

Quarterly Financial Information Disclosure [Abstract]

Selected Quarterly Financial Data

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table presents unaudited, summarized quarterly data for the years ended December 31, 2013 and 2012:    

	Three Months Ended
2013	December 31			September 30			June 30			March 31
	(Amounts in thousands)
Interest income	$	18,903		$	18,470		$	18,651		$	18,275
Interest expense	2,154			2,334			2,530			3,223
Net interest income	16,749			16,136			16,121			15,052
Provision for (recovery of) loan losses	(3,017		)	40			55			237
Net interest income after provision for loan losses	19,766			16,096			16,066			14,815
Other income	1,182			5,381			6,184			5,657
Other expense	13,712			14,150			14,843			13,215
Income before income taxes	7,236			7,327			7,407			7,257
Income taxes	2,579			2,616			2,598			2,608
Net income	4,657			4,711			4,809			4,649
Preferred stock dividend and accretion of preferred stock discount	421			421			590			445
Net income to common shareholders	$	4,236		$	4,290		$	4,219		$	4,204
Net income per common share- basic	$	0.30		$	0.30		$	0.30		$	0.30
Net income per common share- diluted	0.30			0.30			0.30			0.30
2012
Interest income	$	18,793		$	19,446		$	19,744		$	20,989
Interest expense	4,048			4,257			4,586			5,097
Net interest income	14,745			15,189			15,158			15,892
Provision for loan losses	31,554			4,251			2,218			2,351
Net interest income after provision for loan losses	(16,809		)	10,938			12,940			13,541
Other income	986			4,665			4,406			3,509
Other expense	22,708			14,792			15,732			13,579
Income (loss) before income taxes (benefit)	(38,531		)	811			1,614			3,471
Income taxes (benefit)	(14,632		)	54			(9,383		)	—
Net income (loss)	(23,899		)	757			10,997			3,471
Preferred stock dividend and accretion of preferred stock discount	1,419			838			833			821
Net income (loss) to common shareholders	$	(25,318	)	$	(81	)	$	10,164		$	2,650
Net income (loss) per common share- basic	$	(3.63	)	$	—		$	1.56		$	0.42
Net income (loss) per common share- diluted	(3.63		)	—			1.56			0.42

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Fair Value - Level 3 Quantitative Information (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Recurring | Interest Rate Swaps | Derivative Financial Instruments, Assets | Weighted Average
Fair Value Inputs
Fair Value Inputs, Discount Rate	0.50%	1.00%
Recurring | Interest Rate Lock Commitments | Derivative Financial Instruments, Liabilities | Weighted Average
Fair Value Inputs
Fair Value Inputs, Pull Through Rates	86.43%	83.90%
Recurring | Mortgage Servicing Rights | Derivative Financial Instruments, Assets | Weighted Average
Fair Value Inputs
Fair Value Inputs, Discount Rate	8.00%	8.00%
Fair Value Inputs, Prepayment Rate	9.72%	17.96%
Fair Value Inputs, Cost of Service	$ 50	$ 50
Nonrecurring | Impaired Loans Receivable | Minimum
Fair Value Inputs
Fair Value Inputs, Collateral Discounts	15.00%	10.00%
Nonrecurring | Impaired Loans Receivable | Maximum
Fair Value Inputs
Fair Value Inputs, Collateral Discounts	50.00%	50.00%
Nonrecurring | Other Real Estate Owned | Weighted Average
Fair Value Inputs
Fair Value Inputs, Collateral Discounts		15.00%
Level 3 | Recurring | Interest Rate Swaps
Quantitative Information
Assets, Fair Value Disclosure	132,000	0
Level 3 | Recurring | Interest Rate Lock Commitments
Quantitative Information
Liabilities, Fair Value Disclosure	(23,000)	1,000
Level 3 | Recurring | Mortgage Servicing Rights
Quantitative Information
Assets, Fair Value Disclosure	4,536,000	3,000
Level 3 | Nonrecurring | Impaired Loans Receivable
Quantitative Information
Assets, Fair Value Disclosure	6,058,000	7,000
Level 3 | Nonrecurring | Other Real Estate Owned
Quantitative Information
Assets, Fair Value Disclosure	$ 1,034,000	$ 5,000

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Summary of Significant Accounting Policies - Goodwill and Other Intangibles (Details) (USD $)	3 Months Ended	12 Months Ended			36 Months Ended
	Jun. 30, 2011	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2013
Accounting Policies [Abstract]
Goodwill impairment	$ 4,900,000	$ 0	$ 0	$ 4,944,000	$ 4,944,000
Finite-Lived Intangible Assets [Line Items]
Carrying Amount		13,400,000	13,402,000		13,400,000
Accumulated Amortization		(11,384,000)	(10,567,000)		(11,384,000)
Finite-Lived Intangible Assets, Amortization Expense, Maturity Schedule [Abstract]
Remaining weighted average amortization period		6 years 1 month
Core Deposits
Finite-Lived Intangible Assets [Line Items]
Useful life		20 years
Carrying Amount		12,520,000			12,520,000
Accumulated Amortization		(10,546,000)			(10,546,000)
Finite-Lived Intangible Assets, Amortization Expense, Maturity Schedule [Abstract]
2013		589,813			589,813
2014		502,350			502,350
2015		414,885			414,885
2016		250,095			250,095
2017		112,956			112,956
Thereafter		103,436			103,436
Noncompete Agreements
Finite-Lived Intangible Assets [Line Items]
Useful life		5 years
Carrying Amount		880,000			880,000
Accumulated Amortization		(838,000)			(838,000)
Finite-Lived Intangible Assets, Amortization Expense, Maturity Schedule [Abstract]
2014		$ 41,660			$ 41,660

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Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2013

Earnings Per Share [Abstract]

Reconciliation of Basic and Diluted Net Income Per Share

A reconciliation of the denominator of the basic net income per common share computations to the denominator of the diluted net income per common share computations is as follows:

	2013		2012			2011
Basic earnings per share:
Net income (loss) to common shareholders	$	16,949,000	$	(12,585,000	)	$	(17,382,000	)
Weighted average number of common shares outstanding	14,203,099		6,589,971			6,079,668
Basic earnings (loss) per share	$	1.19	$	(1.91	)	$	(2.86	)
Diluted earnings per share:
Net income (loss) to common shareholders	$	16,949,000	$	(12,585,000	)	$	(17,382,000	)
Weighted average number of common shares outstanding	14,203,099		6,589,971			6,079,668
Dilutive potential common shares	21,621		—			—
Weighted-average shares as adjusted	14,224,720		6,589,971			6,079,668
Diluted earnings (loss) per share	$	1.19	$	(1.91	)	$	(2.86	)

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Participation in U.S. Treasury Capital Purchase Program

12 Months Ended

Dec. 31, 2013

Equity [Abstract]

Participation in U.S. Treasury Capital Purchase Program

PARTICIPATION IN U.S. TREASURY CAPITAL PURCHASE PROGRAM

On January 16, 2009, the Company issued 36,000 shares of senior preferred stock, each with a liquidation preference of $1,000 per share, to the Treasury for $36 million pursuant to the Capital Purchase Program (“CPP”). Additionally, the Company issued warrants to purchase up to 385,990 shares of common stock to the U.S. Treasury as a condition to its participation in the CPP. The warrant has an exercise price of $13.99 per share, is immediately exercisable and expires 10 years from the date of issuance. Proceeds from this sale of preferred stock were used for general corporate purposes, including supporting the continued growth and lending in the communities served by the Bank. The CPP preferred stock is non-voting, other than having class voting rights on certain matters, and pays cumulative dividends quarterly at a rate of 5% per annum for the first five years and 9% thereafter. The preferred shares are redeemable at the option of the Company under certain circumstances during the first three years and only thereafter without restriction.

These common stock warrants have been assigned a fair value of $2.38 per share, or $900,000 in aggregate as of January 16, 2009. Using a relative fair value allocation approach, $1.7 million was recorded as a discount on the preferred stock and was accreted as a reduction in the net income available for common shareholders over five years at $300,000 to $400,000 per year. In July of 2013, the Company repurchased the outstanding warrants for $20,000 in an auction held by the Treasury. The warrants were then immediately canceled by the Company.

Under the CPP, the Company issued an additional $13.3 million in Cumulative Perpetual Preferred Stock, Series T-ACB, on July 24, 2009.  In addition, the Company issued warrants to the Treasury to purchase 273,534 shares of the Company’s common stock at an exercise price of $7.30 per share.  These warrants are immediately exercisable and expire 10 years from the date of issuance.  The preferred stock is non-voting, other than having class voting rights on certain matters, and pays cumulative dividends quarterly at a rate of 5% per annum for the first five years and 9% per annum thereafter.  The preferred shares are redeemable at the option of the Company under certain circumstances during the first three years and only thereafter without restriction.

As part of the private placement transaction in October 2012, the Company entered into a Share Exchange Agreement (the "Exchange Agreement") with certain holders (the “Preferred Shareholders”) of the Company's Series T Preferred Stock and Series T-ACB Preferred Stock, pursuant to which the Preferred Shareholders agreed to exchange shares of the Preferred Stock for shares of the Company's common stock and shares of a new class of non-voting common stock, par value $1.00 per share, of the Company (the “non-voting common stock”). The total amount of Preferred Stock exchanged for common stock and non-voting common stock was $20.9 million. The non-voting common stock will convert into shares of the Company's common stock under certain conditions in accordance with the terms of the Articles of Amendment creating the class of the non-voting common stock. As a result of the exchange, an additional $856,000 of discount was accreted in 2012.

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Private Placement Private Placements

12 Months Ended

Dec. 31, 2013

Private Placement [Abstract]

Private Placements

On May 6, 2011, the Company completed the private placement of 3,081,867 shares of common stock (the "2011 Private Placement") to accredited investors, including certain of the Company's officers and directors, for total cash proceeds of $6.4 million. The purchase price per share for investors was at a 10% discount to the weighted average closing sale price of the Company's common stock on Nasdaq for the 10-day period ending five business days prior to the closing of the 2011 Private Placement. Per Nasdaq Listing Rule 5635(c) pertains to shareholder approval of equity compensation plans, and under interpretive rulings issued by Nasdaq, a private placement of equity securities is treated as an equity compensation plan for purposes of this rule if any employees or directors of the issuer participate and the price per share is below the market value of the issuer's common stock. In order to comply with the Nasdaq Listing Rule, the directors and officers purchased shares of common stock in the 2011 Private Placement at a purchase price per share without the 10% discount. On June 23, 2011, the Company's shareholders approved the 2011 Private Placement which permitted the Company pursuant to Nasdaq Rule 5635(c) to issue the Company's directors and executive officers additional shares of common stock in the amount of 151,681 shares so that the directors and executive officers were able to invest on the same terms as other investors that participated in the 2011 Private Placement. The Company issued 3,233,548 shares of common stock in total as a result of the 2011 Private Placement. Proceeds received from the 2011 Private Placement are being kept at the holding company level for general corporate purposes.

On October 23, 2012, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain accredited investors and directors and executive officers of the Company (collectively, the “Investors”), pursuant to which the Investors purchased 45,000 shares of the Company's Series A Preferred Stock, at a price of $1,000 per share in a private placement (the “2012 Private Placement”). The Series A Preferred Stock converted into shares of the Company's common stock at a price of $2.80. The Company raised approximately $42.5 million in net proceeds from the sale of the Series A Preferred Stock.

As part of the 2012 Private Placement, contemporaneously with the execution of the Purchase Agreement, the Company entered into the Exchange Agreement with the Preferred Shareholders, pursuant to which the Preferred Shareholders agreed to exchange shares of the Series T Preferred Stock and Series T-ACB Preferred Stock for shares of the Company's common stock and shares of the Company's non-voting common stock. The total amount of Preferred Stock to be exchanged for common stock and non-voting common stock was $20.9 million. The non-voting common stock will convert into shares of the Company's common stock under certain conditions in accordance with the terms of the Articles of Amendment creating the class of the non-voting common stock.

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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization – Yadkin Financial Corporation (the “Company”) was formed July 1, 2006 as a holding company for Yadkin Bank (the “Bank”). The Bank has six wholly owned subsidiaries Green Street I, LLC, Green Street II, LLC, Green Street III, LLC, Green Street IV, LLC, Green Street V, LLC, all of which hold other real estate owned by the Bank, and PBRE, Inc. PBRE, Inc. is a shell company that serves as a trustee on real estate loans. The Bank was incorporated in North Carolina on September 16, 1968, and is a member of the Federal Deposit Insurance Corporation ("FDIC"). As a result, the Bank is regulated by the state and the FDIC. The Bank is also a member of the Federal Home Loan Bank of Atlanta. The Company is headquartered in Elkin, North Carolina and the Bank provides consumer and commercial banking services in North Carolina and South Carolina through 34 full-service banking offices. The Company and its subsidiaries are collectively referred to herein as the "Company." The Company formed Yadkin Valley Statutory Trust I (the “Trust”) during November 2007 in order to facilitate the issuance of trust preferred securities. The Trust is a statutory business trust formed under the laws of the state of Delaware. As part of the American Community Bancshares, Inc. acquisition, the Company also acquired American Community Bank Capital Trust ("American Community Trust") which facilitated the issuance of trust preferred shares. The American Community Trust is a statutory business trust formed under the laws of the state of Delaware. All of the common securities of the Trusts are owned by the Company.

In 2013, the Company executed a one-for-three reverse stock split and an amendment to the Company and Bank's Articles of Incorporation changing its name to Yadkin Financial Corporation and Yadkin Bank, respectively. Both of these events, along with the Company's new NASDAQ ticker symbol, YDKN, were effective on May 28, 2013.

Basis of Presentation ‑The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, the Bank. All significant intercompany accounts and transactions have been eliminated in consolidation.

Cash and Cash Equivalents ‑Cash and cash equivalents include cash on hand, amounts due from banks, interest-bearing deposits, and federal funds sold. Generally, federal funds are purchased and sold for one‑day periods. Restricted cash as of December 31, 2012 was $1,724,948. There were no cash restrictions as of December 31, 2013.

Investment Securities ‑ Debt securities that the Bank has the positive intent and ability to hold to maturity are classified as “held-to-maturity” securities and reported at amortized cost. Debt and equity securities that are bought and held principally for the purpose of selling in the near term are classified as "trading" securities and reported at fair value with unrealized gains and losses included in earnings. Debt and equity securities not classified as either held-to-maturity or trading securities are classified as "available-for-sale" securities and reported at fair value with unrealized gains and losses excluded from earnings and reported, net of related tax effects, as a separate component of equity and as an item of other comprehensive income. Gains and losses on the sale of available-for-sale securities are determined using the trade date basis. Declines in the fair value of individual held-to-maturity and available-for-sale securities below their cost that are other-than-temporary (“OTTI”) result in write-downs of the individual securities to their fair value. The related write downs are included in earnings as realized losses. Premiums and discounts are recognized in interest income using the effective interest method over the period to maturity. Transfers of securities between classifications are accounted for at fair value. All securities held at December 31, 2013 and 2012 are classified as available-for-sale.

Loans and Allowance for Loan Losses‑ Loans that management has the intent and ability to hold for the foreseeable future are stated at their outstanding principal balances adjusted for any deferred fees and costs. Interest on loans is calculated by using the simple interest method on daily balances of the principal amount outstanding. Loan origination and other fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.

All loans over $20,000 are risk graded on a scale from 1 (highest quality) to 8 (loss). Management considers certain loans graded “doubtful” or “loss” to be impaired and may consider “substandard” loans impaired depending on an evaluation of the probability of repayment of the loan. All classes of loans are considered impaired when all or a portion of the loan is determined to be uncollectable. Loans that are deemed to be impaired (i.e., probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan) are evaluated based on fair value of the collateral if the loan is collateral dependent, the fair value of the loan or, alternatively, discounted expected cash flows. A specific reserve is established as part of the allowance for loan losses to record the difference between the stated principal amount and the present value or market value of the impaired loan. Impaired loans are evaluated on a loan-by-loan basis (e.g., loans with risk characteristics unique to an individual borrower). For all classes of loans the Company discontinues the accrual of interest income when the loans are either at least 90 days past due or less than 90 days past due but the collectability of such interest and principal becomes doubtful. Subsequent payments received on nonaccrual loans are recorded as a reduction of principal. Interest income is recorded only after principal recovery is reasonably assured. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current, the loan has performed for six months, and future payments are probable.

The provision for loan losses charged to operations is an amount sufficient to bring the allowance for loan losses to an estimated balance considered adequate to absorb potential losses in the portfolio resulting from known and expected losses as of the balance sheet date. Management's determination of the adequacy of the allowance is based on an evaluation of the portfolio, current economic conditions, historical loan loss experience and other risk factors. Recovery of the carrying value of loans is dependent to some extent on future economic, operating and other conditions that may be beyond the control of the Bank. Unanticipated future adverse changes in such conditions could result in material adjustments to the allowance for loan losses. In addition, regulatory examiners may require the Bank to recognize changes to the allowance for loan losses based on their judgments about information available to them at the time of their examination.

Loans Held-for-Sale‑ Loans held-for-sale primarily consist of one to four family residential loans originated for sale in the secondary market and are carried at the lower of cost or market determined on an aggregate basis. Gains and losses on sales of loans held-for-sale are included in other non-interest income in the consolidated statements of loss. Gains and losses on loan sales are determined by the difference between the selling price and the carrying value of the loans sold.

Foreclosed Real Estate- Foreclosed real estate is recognized at fair value of foreclosure, and then subsequently at the lower of carrying amount or market value less estimated cost to sell. Any initial losses at the time of foreclosure are charged against the allowance for loan losses with any subsequent losses or write-downs included in the consolidated statements of loss as a component of noninterest expenses.

Business Combinations ‑ TheCompany accounts for all business combinations after January 1, 2009 by the acquisition method of accounting whereby acquired assets and liabilities are recorded at fair value on the date of acquisition with the remainder of the purchase price allocated to identified intangible assets and goodwill.

Purchased Impaired Loans - Purchased loans acquired in a business combination are recorded at estimated fair value on the date of acquisition without the carryover of the related allowance for loan losses, which include loans purchased in the American Community acquisition. Purchased impaired loans are accounted for under the Receivables topic (ASC 310-30) of the FASB Accounting Standards Codification ("ASC") when the loans have evidence of credit deterioration since origination and it is probable at the date of acquisition that the Company will not collect all contractually required principal and interest payments. Evidence of credit quality deterioration as of the date of acquisition may include statistics such as past due and nonaccural status. Purchased impaired loans generally meet the Company’s definition for nonaccrual status. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable difference which is included in the carrying amount of the loans. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent significant increases in cash flows result in a reversal of the provision for loan losses to the extent of prior charges, or the nonaccretable difference to accretable yield with a positive impact on future interest income. Further, any excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows.

Purchased Performing Loans – The Company accounts for performing loans acquired in business combinations using the contractual cash flows method of recognizing discount accretion based on the acquired loans’ contractual cash flows. Purchased performing loans are recorded at fair value, including a credit discount. The fair value discount is accreted as an adjustment to yield over the estimated lives of the loans. There is no allowance for loan losses established at the acquisition date for purchased performing loans in the American Community acquisition. A provision for loan losses is recorded for any further deterioration in these loans subsequent to the merger.

Mortgage Banking Activities – When the Bank retains the rightto service a sold mortgage loan, the previous carrying amount is allocated between the loan sold and the retained mortgage servicing right based on their relative fair values on the date of transfer. The Bank uses the fair value method of accounting for mortgage servicing rights.

Servicing assets are recognized as separate assets when rights are acquired through purchase or through sale of financial assets.

A valuation of the fair value of the mortgage servicing rights is performed using a pooling methodology. Similar loans are “pooled” together and evaluated on a discounted earnings basis to determine the present value of future earnings. The present value of future earnings is the estimated market value for the pool, calculated using consensus assumptions that a third party purchaser would utilize in evaluating potential acquisition of the servicing.

Premises and Equipment‑ Premises and equipment are stated at cost less accumulated depreciation and amortization. Additions and major replacements or betterments, which extend the useful lives of premises and equipment, are capitalized. Maintenance, repairs and minor improvements are expensed as incurred. Depreciation and amortization is provided based on the estimated useful lives of the assets using both straight‑line methods for buildings and land improvements and accelerated methods for furniture and fixtures. The estimated useful lives for computing depreciation and amortization are 10 years for land improvements, 30 to 40 years for buildings, and 3 to 10 years for furniture and equipment. Gains or losses on dispositions of premises and equipment are reflected in income.

The Company reviews long‑lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. If the sum of the expected future cash flows is less than the carrying amount of the asset, an impairment loss is recognized.

Goodwill and Other Intangibles– The Company performed an annual goodwill impairment assessment for the Sidus segment as of October 1st. At June 30, 2011, it was determined that impairment existed in the mortgage reporting unit and a goodwill impairment charge of $4.9 million was recorded. See Note 22 for further discussion of goodwill impairment.

Intangible assets with finite lives include core deposits and a non-compete agreement with a former employee of American Community. Intangible assets are subject to impairment testing whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Core deposit intangibles are amortized on the sum-of-years digits method (intangibles acquired in 2002 and 2009), straight-line method (intangibles acquired in 2004) and an accelerated method (intangibles acquired in 2008) over a period not to exceed 20 years. The non-compete agreement as part of the American Community acquisition and is amortized over five years.

The following table shows carrying amounts and accumulated amortization of all intangible assets as of December 31, 2013 and 2012:

	December 31, 2013					December 31, 2012
	Carrying Amount		Accumulated Amortization			Carrying Amount		Accumulated Amortization
	(Amounts in thousands)
Amortized intangible assets:
Core deposit intangible	$	12,520	$	(10,546	)	$	12,522	$	(9,869	)
Non-compete agreement	880		(838		)	880		(698		)
	$	13,400	$	(11,384	)	$	13,402	$	(10,567	)

The Bank’s projected amortization expense for the core deposit intangible for the years ending December 31, 2014, 2015, 2016, 2017, 2018 and thereafter is $589,813, $502,350, $414,885, $250,095, $112,956, and $103,436, respectively. The remaining weighted average amortization period is 6.1 years. The Bank’s projected amortization expense for the non-compete agreement for the year ending December 31, 2014 is $41,660.

Income Taxes ‑ Provisions for income taxes are based on amounts reported in the statements of loss and include changes in deferred taxes. Deferred taxes are computed using the asset and liability approach. The tax effects of differences between the tax and financial accounting basis of assets and liabilities are reflected in the balance sheets at the tax rates expected to be in effect when the differences reverse.

Valuation allowances are recorded to reduce deferred tax assets to the amounts management concludes are more-likely-than-not to be realized. Under ASC Topic 740 on Income Taxes, income tax benefits are recognized and measured based upon a two-step model: 1) a tax position must be more-likely-than-not to be sustained based solely on its technical merits in order to be recognized, and 2) the benefit is measured as the largest dollar amount of that position that is more-likely-than-not to be sustained upon settlement. The difference between the benefit recognized for a position in accordance with the Income Tax topic 740 model and the tax benefit claimed on a tax return is referred to as an unrecognized tax benefit.

Earnings Per Share ‑ Basicearnings per share is calculated on the basis of the weighted average number of shares outstanding. Potentially dilutive common stock arising from stock options and restricted stock awards are included in diluted earnings per share, with the exception of restricted stock issued with performance and service conditions that have not been met. These conditions include performance requirements based on achieving certain earnings and credit performance standards and a minimum of 2-years of service requirement.

Share-Based Payment‑ The Company recognizes the cost of employee services received in exchange for an award of equity instruments in the financial statements over the period the employee is required to perform the services in exchange for the award (presumptively the vesting period) in accordance with Share-based Payment accounting guidance. This guidance also requires measurement of the cost of employee services received in exchange for an award based on the grant-date fair value of the award.

Non-marketable equity securities - As a requirement for membership, the Bank invests in stock of Federal Home Loan Bank of Atlanta (“FHLB”). In addition, the Company also invests in other equity investments for which stock is not publicly traded. Due to the redemption provisions of FHLB stock, the estimated fair value of the stock is equivalent to its respective cost. Other equity investments are reviewed for impairment on a quarterly basis. These investments are discussed further in Note 3.

Comprehensive Income (Loss)- Comprehensive income (loss) is defined as “the change in equity [net assets] of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners”. The term comprehensive income includes components of comprehensive income including net income. Other comprehensive income refers to revenues, expenses, gains and losses that under generally accepted accounting principles in the United States (“GAAP”) are included in comprehensive income but excluded from net income. Currently, the Company’s other comprehensive income consists of unrealized gains and losses, net of deferred income taxes, on available-for-sale securities.

Use of Estimates ‑ Thepreparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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. Such estimates include, for example, assets acquired and liabilities assumed from business combinations, the allowance for loan losses, valuation of deferred tax assets, valuation of certain level 2 and level 3 investment securities, valuation of mortgage servicing rights, valuation of other real estate owned, evaluation of securities for other-than-temporary, valuation of interest rate lock commitments and derivatives and goodwill impairment. Actual results could differ from those estimates.

New Accounting Standards

Recently Adopted Accounting Standards

In February 2013, the FASB issued Accounting Standards Update No. 2013-02, "Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income" ("ASU 2013-02"). This guidance is the culmination of the FASB's deliberation on reporting reclassification adjustments from accumulated other comprehensive income ("AOCI"). The amendments in ASU 2013-02 do not change the current requirements for reporting net income or other comprehensive income. However, the amendments require disclosure of amounts reclassified out of AOCI in its entirety, by component, on the face of the statement of operations or in the notes thereto. Amounts that are not required to be reclassified in their entirety to net income must be cross-referenced to other disclosures that provide additional detail. This standard is effective prospectively for annual and interim reporting periods beginning after December 15, 2012. The Company has adopted the standard and the adoption of ASU 2013-02 did not have an impact on the Company's financial condition, results of operations, or cash flows.

In 2013, the FASB issued Accounting Standards Update No. 2014-04, "Receivables (Topic 310): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure" ("ASU 2014-04"). The ASU clarifies that an in substance repossession or foreclosure occurs upon either the creditor obtaining legal title to the residential real estate property or 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 asimilar legal agreement. The amendments are effective for annual periods, and interim reporting periods within those annual periods, beginning after December 15, 2014. The amendments may be adopted using either a modified retrospective transition method or a prospective transition method. Early adoption is permitted. Management does not believe the amendments will have a material impact on the Company's financial condition, results of operations, or cash flows.

Reclassifications - Certain income and expenses reported in 2011 and 2012 have been reclassified to conform to the 2013 presentation of mortgage banking activity income. Reclassifications include interest income which was previously presented in other income, commission expenses recorded in salaries both of which are now recorded as a reduction in mortgage banking activity income, and other miscellaneous expenses previously recorded in other expenses that have been reclassified as a reduction to mortgage banking activity income. In addition, gains on sale of mortgage loans has been reclassified to be reported with mortgage banking income to provide a combined overview of the mortgage banking activity segment.

Effective May 28, 2013, the Company executed a one-for-three reverse stock split. All outstanding options and restricted shares and earnings per share calculations have been adjusted for the effect of this reverse stock split. The reclassifications had no effect on net loss or shareholders' equity, as previously reported.

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Legal Proceedings

12 Months Ended

Dec. 31, 2013

Commitments and Contingencies Disclosure [Abstract]

Legal Proceedings

LEGAL PROCEEDINGS

In the course of ordinary business, the Company may, from time to time, be named a party to legal actions and proceedings. In accordance with GAAP, the Company establishes reserves for litigation and regulatory matters when those matters present loss contingencies that are both probable and estimable. When loss contingencies are not both probable and estimable, the Company does not establish reserves. There are no material pending legal proceedings to which we are a party or of which any of our properties are the subject.

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Income Taxes - Positive Evidence (Details) (USD $)	0 Months Ended	3 Months Ended									12 Months Ended			30 Months Ended	36 Months Ended	0 Months Ended
	Oct. 23, 2012	Dec. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2013	Dec. 31, 2013	Sep. 12, 2012 Preferred Stock	Dec. 31, 2013 Yadkin Valley Financial Corporation	Dec. 31, 2012 Yadkin Valley Financial Corporation
Income Tax Disclosure [Abstract]
Financing receivable, allowance for credit losses, write-downs			$ 49,000,000								$ 7,872,000	$ 51,756,000
Pre-tax income		7,236,000	38,500,000	7,327,000	7,407,000	7,257,000	(38,531,000)	811,000	1,614,000	3,471,000	29,227,000	(32,635,000)	(7,701,000)	43,900,000	(11,109,000)
Proceeds from issuance of mandatorily convertible cumulative non-voting perpetual preferred stock	45,000,000
Allowance for Loan and Lease Losses, Net Charge-offs and Recoveries											4,400,000	48,100,000
Ratio of Net Charge-offs and Recoveries to Average Loans											0.33%	3.43%
Decrease in nonperforming loans											7,400,000
Nonperforming loans to total assets		1.03%	1.64%				4.78%				1.03%	1.64%	4.78%	1.03%	1.03%
Loans and Leases Receivable, Allowance for Loan Losses to Nonperforming Loans		117.34%	110.22%								117.34%	110.22%		117.34%	117.34%
Conversion of Stock [Line Items]
Value of stock converted																$ 21,000,000
Tier One Leverage Capital to Average Assets																	11.50%	9.20%
Tier One Risk Based Capital to Risk Weighted Assets																	13.50%	12.20%
Total risk-based capital ratio																	14.60%	13.30%

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Private Placement (Details) (USD $) In Millions, except Share data, unless otherwise specified	0 Months Ended			12 Months Ended
	Oct. 23, 2012	Jun. 23, 2011	May 06, 2011	Dec. 31, 2011
Class of Stock [Line Items]
Number of shares issued in Private Placement (in shares)		151,681	3,081,867	3,233,548
Proceeds from the issuance of private placement	$ 41.8		$ 6.4
Stock issued during period, discount on price per share, percent		10.00%	10.00%
Conversion price of convertible stock (in dollars per share)	$ 2.80
Proceeds from issuance of mandatorily convertible cumulative non-voting perpetual preferred stock	45.0
Series A Preferred Stock | Issuance of Equity
Class of Stock [Line Items]
Number of shares issued in Private Placement (in shares)	45,000
Value per share of shares sold in Private Placement (in dollars per share)	$ 1,000
Conversion price of convertible stock (in dollars per share)	$ 2.80
Proceeds from issuance of mandatorily convertible cumulative non-voting perpetual preferred stock	42.5
Series T Preferred Stock and Series T-ACB Preferred Stock | Exchange of Equity
Class of Stock [Line Items]
Value of stock converted	$ 20.9

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Loan Servicing (Tables)

12 Months Ended

Dec. 31, 2013

Transfers and Servicing [Abstract]

Schedule of Servicing Assets at Fair Value

	2013		2012
	(Amounts in thousands)
Mortgage servicing assets, beginning of year	$	2,525	$	1,871
Capitalized	1,387		1,101
Change in fair value	624		(447		)
Mortgage servicing assets, end of year	$	4,536	$	2,525

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Selected Quarterly Financial Data (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2013

Quarterly Financial Information Disclosure [Abstract]

Schedule of Quarterly Financial Information

The following table presents unaudited, summarized quarterly data for the years ended December 31, 2013 and 2012:    

	Three Months Ended
2013	December 31			September 30			June 30			March 31
	(Amounts in thousands)
Interest income	$	18,903		$	18,470		$	18,651		$	18,275
Interest expense	2,154			2,334			2,530			3,223
Net interest income	16,749			16,136			16,121			15,052
Provision for (recovery of) loan losses	(3,017		)	40			55			237
Net interest income after provision for loan losses	19,766			16,096			16,066			14,815
Other income	1,182			5,381			6,184			5,657
Other expense	13,712			14,150			14,843			13,215
Income before income taxes	7,236			7,327			7,407			7,257
Income taxes	2,579			2,616			2,598			2,608
Net income	4,657			4,711			4,809			4,649
Preferred stock dividend and accretion of preferred stock discount	421			421			590			445
Net income to common shareholders	$	4,236		$	4,290		$	4,219		$	4,204
Net income per common share- basic	$	0.30		$	0.30		$	0.30		$	0.30
Net income per common share- diluted	0.30			0.30			0.30			0.30
2012
Interest income	$	18,793		$	19,446		$	19,744		$	20,989
Interest expense	4,048			4,257			4,586			5,097
Net interest income	14,745			15,189			15,158			15,892
Provision for loan losses	31,554			4,251			2,218			2,351
Net interest income after provision for loan losses	(16,809		)	10,938			12,940			13,541
Other income	986			4,665			4,406			3,509
Other expense	22,708			14,792			15,732			13,579
Income (loss) before income taxes (benefit)	(38,531		)	811			1,614			3,471
Income taxes (benefit)	(14,632		)	54			(9,383		)	—
Net income (loss)	(23,899		)	757			10,997			3,471
Preferred stock dividend and accretion of preferred stock discount	1,419			838			833			821
Net income (loss) to common shareholders	$	(25,318	)	$	(81	)	$	10,164		$	2,650
Net income (loss) per common share- basic	$	(3.63	)	$	—		$	1.56		$	0.42
Net income (loss) per common share- diluted	(3.63		)	—			1.56			0.42

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Premises and Equipment - Schedule of Premises and Equipment (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Property, Plant and Equipment [Line Items]
Cost	$ 64,274,000	$ 71,105,000
Accumulated depreciation and amortization	23,576,000	29,256,000
Net Book Value	40,698,000	41,849,000
Depreciation and amortization expense	2,820,284	2,878,237	2,896,688
Land
Property, Plant and Equipment [Line Items]
Cost	11,601,000	11,626,000
Accumulated depreciation and amortization	0	0
Net Book Value	11,601,000	11,626,000
Land and leasehold improvements
Property, Plant and Equipment [Line Items]
Cost	5,460,000	8,199,000
Accumulated depreciation and amortization	2,607,000	3,154,000
Net Book Value	2,853,000	5,045,000
Buildings
Property, Plant and Equipment [Line Items]
Cost	28,638,000	26,588,000
Accumulated depreciation and amortization	8,491,000	7,079,000
Net Book Value	20,147,000	19,509,000
Furniture and equipment
Property, Plant and Equipment [Line Items]
Cost	18,510,000	24,177,000
Accumulated depreciation and amortization	12,478,000	19,023,000
Net Book Value	6,032,000	5,154,000
Construction in progress
Property, Plant and Equipment [Line Items]
Cost	65,000	515,000
Accumulated depreciation and amortization	0	0
Net Book Value	$ 65,000	$ 515,000

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Consolidated Balance Sheets (USD $)	Dec. 31, 2013	Dec. 31, 2012
ASSETS
Cash and due from banks	$ 32,226,000	$ 36,125,000
Federal funds sold	10,000	50,000
Interest-bearing deposits	8,759,000	102,221,000
Securities available-for-sale at fair value (amortized cost $288,914 in 2013 and $336,349 in 2012)	288,922,000	343,120,000
Gross loans	1,358,746,000	1,309,504,000
Less: allowance for loan losses	18,063,000	25,149,000
Net loans	1,340,683,000	1,284,355,000
Loans held-for-sale	18,913,000	27,679,000
Accrued interest receivable	6,219,000	6,376,000
Premises and equipment, net	40,698,000	41,849,000
Other real estate owned	3,267,000	8,738,000
Federal Home Loan Bank stock, at cost	3,473,000	4,154,000
Investment in bank-owned life insurance	27,032,000	26,433,000
Core deposit intangible (net of accumulated amortization of $10,546 in 2013 and $9,869 in 2012)	1,974,000	2,653,000
Deferred tax assets	23,425,000	31,358,000
Other assets	10,426,000	8,327,000
Total Assets	1,806,027,000	1,923,438,000
Deposits
Noninterest-bearing demand deposits	267,596,000	273,912,000
Interest-bearing deposits:
NOW, savings and money market accounts	693,558,000	624,460,000
Time certificates:
$100 or more	227,919,000	316,146,000
Other	329,350,000	417,144,000
Total Deposits	1,518,423,000	1,631,662,000
Short-term borrowings	43,260,000	39,192,000
Long-term borrowings	45,954,000	65,944,000
Capital lease obligations	2,281,000	2,325,000
Accrued interest payable	852,000	1,629,000
Other liabilities	10,787,000	11,892,000
Total Liabilities	1,621,557,000	1,752,644,000
Shareholders' Equity
Preferred stock, no par value, 1,000,000 shares authorized; and 28,405 issued and outstanding in 2013 and 2012	28,405,000	27,942,000
Common stock, $1 par value, 33,333,333 shares authorized; 14,383,986 issued and outstanding in 2013 and 14,383,750 issued and outstanding in 2012	14,384,000	43,152,000
Warrants	1,850,000	3,581,000
Surplus	187,118,000	156,176,000
Accumulated deficit	(47,292,000)	(64,241,000)
Accumulated other comprehensive income	5,000	4,184,000
Total Shareholders' Equity	184,470,000	170,794,000
Total	$ 1,806,027,000	$ 1,923,438,000

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Stock Options and Restricted Stock - Schedule of Stock Options (Tables)

12 Months Ended

Dec. 31, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock options, rollforward

The following table presents certain option information for the year ended December 31, 2013:

	Outstanding Options				Exercisable Options
	Number of options		Weighted-average exercise price		Number of options		Weighted-average exercise price
At December 31, 2012	83,203		$	40.47	78,701		$	41.40
Options authorized	—		—		—		—
Options granted/vested	1,666		9.12		3,411		27.14
Options exercised	—		—		—		—
Options expired	(22,486	)	43.78		(22,486	)	43.78
Options forfeited	(10,710	)	40.55		(10,710	)	40.55
At December 31, 2013	51,673				48,916

Stock options, shares outstanding by exercise price range

he following table segregates the shares outstanding at December 31, 2013 into meaningful ranges:

Shares	Option Price per share ($)	Weighted-average remaining contractual life (years)	Weighted-average exercise price ($)	Shares excercisable December 31, 2013
4,498	9.12-11.52	7.81	10.18	2,275
2,666	20.37-20.70	5.52	20.49	2,132
6,384	28.20-31.38	4.05	29.90	6,384
1,015	34.68-35.97	3.05	35.07	1,015
12,482	38.37-41.73	2.14	41.42	12,482
23,795	42.00-46.95	2.67	45.00	23,795
833	57.21	3.05	57.21	833
51,673				48,916

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Off-Balance Sheet Risk, Commitments and Contingencies (Details) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Loan commitments and undisbursed lines of credit
Commitments and Contingencies
Fair value disclosure, off-balance sheet risks, amount, liability	$ 284,345,741	$ 255,356,370
Undisbursed standby letters of credit
Commitments and Contingencies
Fair value disclosure, off-balance sheet risks, amount, liability	6,463,019	7,395,059
Undisbursed portion of construction loans
Commitments and Contingencies
Fair value disclosure, off-balance sheet risks, amount, liability	25,452,178	17,500,855
Commitments to close first mortgages
Commitments and Contingencies
Fair value disclosure, off-balance sheet risks, amount, liability	13,359,442	46,725,883
Commitments to sell first mortgages
Commitments and Contingencies
Fair value disclosure, off-balance sheet risks, amount, liability	$ 31,895,650	$ 71,491,707

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Participation in U.S. Treasury Capital Purchase Program (Details) (USD $)	0 Months Ended		1 Months Ended	3 Months Ended	12 Months Ended		0 Months Ended	12 Months Ended			0 Months Ended	12 Months Ended
	Jun. 23, 2011	May 06, 2011	Oct. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Jan. 16, 2009 Series T Preferred Stock	Dec. 31, 2013 Series T Preferred Stock	Dec. 31, 2013 Series T Preferred Stock Minimum	Dec. 31, 2013 Series T Preferred Stock Maximum	Jul. 24, 2009 Series T-ACB Preferred Stock	Dec. 31, 2013 Series T-ACB Preferred Stock
Class of Stock [Line Items]
Number of shares issued in Private Placement (in shares)	151,681	3,081,867				3,233,548	36,000
Preferred stock, liquidation preference per share							$ 1,000
Issuance of common stock					$ 42,472,000	$ 6,402,000	$ 36,000,000				$ 13,300,000
Warrants, number of securities called by warrants							385,990				273,534
Warrants, exercise price of warrants							13.99				7.30
Warrants, duration for which warrants exercisable							10 years				10 years
Dividends, preferred stock, cumulative quarterly dividends, percent per annum, first five years								5.00%				5.00%
Dividends, preferred stock, cumulative quarterly dividends, percent per annum, after five years								9.00%				9.00%
Warrants, fair value per share							$ 2.38
Fair Value of warrants (Black Scholes), Fair Value							900,000
Relative value, warrants, measured using relative fair value approach							1,700,000
Preferred stock, accretion of discount on shares									300,000	400,000
Common stock, par value				$ 1.00	$ 1.00
Preferred stock converted to common shares			20,900,000
Discount accreted in period				$ 856,000

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Consolidated Statements of Shareholders' Equity (USD $)	Total	Common Stock	Preferred Stock	Warrants	Surplus	Accumulated Deficit	Accumulated Other Comprehensive Income
Balance at Dec. 31, 2010	$ 140,586,000	$ 19,526,000	$ 47,389,000	$ 3,581,000	$ 117,883,000	$ (51,656,000)	$ 3,863,000
Balance, shares at Dec. 31, 2010		19,526,188
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	(14,395,000)	0	0	0	0	(14,395,000)	0
Issuance of common stock, shares	3,233,548	3,233,548
Issuance of stock	6,402,000	3,233,000			3,169,000
Restricted stock issued, shares		145,000
Restricted stock issued		145,000	0	0	(145,000)	0	0
Discount accretion on preferred stock	0	0	618,000	0	0	(618,000)	0
Share based compensation:
stock options	77,000	0		0	77,000	0	0
restricted stock	133,000	0	0	0	133,000	0	0
Preferred stock dividends	(2,369,000)	0	0	0	0	(2,369,000)	0
Other comprehensive income	3,281,000	0	0	0	0	0	3,281,000
Balance at Dec. 31, 2011
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	(8,674,000)	0	0	0	0	(8,674,000)	0
Issuance of common stock, shares		0
Issuance of stock	42,472,000	0	45,000,000	0	(2,528,000)	0	0
Conversion of preferred stock into common stock, shares		23,164,676
Conversion of preferred stock into common stock	(1,880,000)	23,165,000	(65,907,000)	0	40,862,000	0	0
Restricted stock issued, shares		507,450
Restricted stock issued	0	508,000	0	0	(508,000)	0	0
Stock Issued During Period, Shares, Restricted Stock Award, Forfeited		(46,668)
Restricted stock forfeited	0	(47,000)	0	0	47,000	0	0
Discount accretion on preferred stock	0	0	1,460,000	0	0	(1,460,000)	0
Share based compensation:
stock options	32,000	0	0	0	32,000	0	0
restricted stock	388,000	0	0	0	388,000	0	0
Preferred stock dividends	(2,451,000)	0	0	0	0	(2,451,000)	0
Other comprehensive income	321,000	0	0	0	0	0	321,000
Balance at Dec. 31, 2012	170,794,000	43,152,000	27,942,000	3,581,000	156,176,000	(64,241,000)	4,184,000
Balance, shares at Dec. 31, 2012		43,151,646
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	18,826,000	0	0	0	0	18,826,000	0
Restricted stock issued, shares		3,242
Restricted stock issued	0	3,000	0	0	(3,000)	0	0
Restricted stock forfeited, shares		(28,767,896)
Stock Issued During Period, Value, Other	0	(28,768,000)			28,768,000
Stock Repurchased During Period, Shares		(3,006)
Stock Repurchased During Period, Value	(39,000)	(3,000)			(36,000)
Repurchase and cancellation of Warrants	(20,000)			(1,731,000)	1,711,000
Discount accretion on preferred stock	0	0	463,000	0	0	(463,000)	0
Share based compensation:
stock options	22,000	0	0	0	22,000	0	0
restricted stock	480,000	0	0	0	480,000	0	0
Preferred stock dividends	(1,414,000)	0	0	0	0	(1,414,000)	0
Other comprehensive income	(4,179,000)	0	0	0	0	0	(4,179,000)
Balance at Dec. 31, 2013	$ 184,470,000	$ 14,384,000	$ 28,405,000	$ 1,850,000	$ 187,118,000	$ (47,292,000)	$ 5,000
Balance, shares at Dec. 31, 2013		14,383,986.000

XML

Leases - Schedule of Future Minimum Payments, Capital Leases (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013
Capital Leases, Future Minimum Payments, Net Present Value [Abstract]
2013	$ 227
2014	241
2015	241
2016	241
2017	242
2018-2029	2,917
Total minimum lease payments	4,109
Less amount respresenting interest	(1,828)
Present value of net minimum lease payments	$ 2,281

XML

Investment Securities - Narrative (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Schedule of Available-for-sale Securities
Gross realized gains	$ 576,169	$ 1,700,000	$ 2,800,000
Gross realized losses	2,900,000	0	0
Investment securities pledged as collateral	107,400,000	88,700,000
Other than temporary impairment losses, available-for-sale securities	0	50,000	0
US States and Political Subdivisions Debt Securities [Member]
Schedule of Available-for-sale Securities
Fair value	98,704,000	84,565,000
Continuous unrealized loss investments, number of positions	9
Mortgage-backed, pass-through securities
Schedule of Available-for-sale Securities
Fair value	103,441,000	107,257,000
Collateralized Mortgage Obligations
Schedule of Available-for-sale Securities
Fair value	67,200,000	123,600,000
US Government Agencies Debt Securities [Member]
Schedule of Available-for-sale Securities
Fair value	$ 16,392,000	$ 27,527,000
Continuous unrealized loss investments, number of positions	1

XML

Fair Value - Fair Value of Assets and Liabilities on Recurring Basis (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available-for-sale securities	$ 3,151	$ 133
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available-for-sale securities	285,771	342,987
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available-for-sale securities	0	0
Recurring | Estimated Fair Value | Interest Rate Swap Agreements
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Derivative assets	132	196
Derivative liabilities	(132)	(196)
Recurring | Estimated Fair Value | Interest Rate Lock Commitments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Derivative assets	(23)	873
Recurring | Estimated Fair Value | Forward Sales Commitments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Derivative assets		(481)
Derivative liabilities	147
Recurring | Estimated Fair Value | Mortgage servicing rights
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Derivative assets	4,536	2,525
Recurring | Estimated Fair Value | US Government Agencies Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available-for-sale securities	16,392	27,527
Recurring | Estimated Fair Value | Government sponsored agencies: Residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available-for-sale securities	103,441	107,257
Recurring | Estimated Fair Value | Government sponsored agencies - Collateralized mortgage obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available-for-sale securities	52,743	122,593
Recurring | Estimated Fair Value | Government sponsored agencies: Private label collateralized mortgage obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available-for-sale securities	14,491	1,045
Recurring | Estimated Fair Value | US States and Political Subdivisions Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available-for-sale securities	98,704	84,564
Recurring | Estimated Fair Value | Common and preferred stocks
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available-for-sale securities	3,151	133
Recurring | Level 1 | Interest Rate Swap Agreements
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Derivative assets	0	0
Derivative liabilities	0	0
Recurring | Level 1 | Interest Rate Lock Commitments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Derivative assets	0	0
Recurring | Level 1 | Forward Sales Commitments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Derivative assets		0
Derivative liabilities	0
Recurring | Level 1 | Mortgage servicing rights
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Derivative assets	0	0
Recurring | Level 1 | US Government Agencies Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available-for-sale securities	0	0
Recurring | Level 1 | Government sponsored agencies: Residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available-for-sale securities	0	0
Recurring | Level 1 | Government sponsored agencies - Collateralized mortgage obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available-for-sale securities	0	0
Recurring | Level 1 | Government sponsored agencies: Private label collateralized mortgage obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available-for-sale securities	0	0
Recurring | Level 1 | US States and Political Subdivisions Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available-for-sale securities	0	0
Recurring | Level 1 | Common and preferred stocks
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available-for-sale securities	3,151	133
Recurring | Level 2 | Interest Rate Swap Agreements
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Derivative assets	0	0
Derivative liabilities	0	0
Recurring | Level 2 | Interest Rate Lock Commitments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Derivative assets	0	0
Recurring | Level 2 | Forward Sales Commitments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Derivative assets		(481)
Derivative liabilities	147
Recurring | Level 2 | Mortgage servicing rights
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Derivative assets	0	0
Recurring | Level 2 | US Government Agencies Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available-for-sale securities	16,392	27,527
Recurring | Level 2 | Government sponsored agencies: Residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available-for-sale securities	103,441	107,257
Recurring | Level 2 | Government sponsored agencies - Collateralized mortgage obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available-for-sale securities	52,743	122,593
Recurring | Level 2 | Government sponsored agencies: Private label collateralized mortgage obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available-for-sale securities	14,491	1,045
Recurring | Level 2 | US States and Political Subdivisions Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available-for-sale securities	98,704	84,564
Recurring | Level 2 | Common and preferred stocks
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available-for-sale securities	0	0
Recurring | Level 3 | Interest Rate Swap Agreements
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Derivative assets	132	196
Derivative liabilities	(132)	(196)
Recurring | Level 3 | Interest Rate Lock Commitments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Derivative assets	(23)	873
Recurring | Level 3 | Forward Sales Commitments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Derivative assets		0
Derivative liabilities	0
Recurring | Level 3 | Mortgage servicing rights
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Derivative assets	4,536	2,525
Recurring | Level 3 | US Government Agencies Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available-for-sale securities	0	0
Recurring | Level 3 | Government sponsored agencies: Residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available-for-sale securities	0	0
Recurring | Level 3 | Government sponsored agencies - Collateralized mortgage obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available-for-sale securities	0	0
Recurring | Level 3 | Government sponsored agencies: Private label collateralized mortgage obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available-for-sale securities	0	0
Recurring | Level 3 | US States and Political Subdivisions Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available-for-sale securities	0	0
Recurring | Level 3 | Common and preferred stocks
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Available-for-sale securities	$ 0	$ 0

XML

Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Carrying Amounts and Accumulated Amortization of Intangible Assets

The following table shows carrying amounts and accumulated amortization of all intangible assets as of December 31, 2013 and 2012:

	December 31, 2013					December 31, 2012
	Carrying Amount		Accumulated Amortization			Carrying Amount		Accumulated Amortization
	(Amounts in thousands)
Amortized intangible assets:
Core deposit intangible	$	12,520	$	(10,546	)	$	12,522	$	(9,869	)
Non-compete agreement	880		(838		)	880		(698		)
	$	13,400	$	(11,384	)	$	13,402	$	(10,567	)

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Loans and Allowance for Loan Losses - Additional Charge-offs of Problem Loans (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Financing Receivable, Allowance for Credit Losses, Writedowns, Other Problem Loans [Line Items]
Financing Receivable, Allowance for Credit Losses, Writedowns, Other Problem Loans	$ 10,999
Provision	11,000	(2,685)	40,374
Commercial
Financing Receivable, Allowance for Credit Losses, Writedowns, Other Problem Loans [Line Items]
Financing Receivable, Allowance for Credit Losses, Writedowns, Other Problem Loans	3,908
Provision		1,078	5,419
Consumer and other
Financing Receivable, Allowance for Credit Losses, Writedowns, Other Problem Loans [Line Items]
Financing Receivable, Allowance for Credit Losses, Writedowns, Other Problem Loans	24
Provision		86	445
Construction Loans | Real Estate Loans
Financing Receivable, Allowance for Credit Losses, Writedowns, Other Problem Loans [Line Items]
Financing Receivable, Allowance for Credit Losses, Writedowns, Other Problem Loans	1,601
Provision		(3)	12,742
Owner Occupied Commercial | Real Estate Loans
Financing Receivable, Allowance for Credit Losses, Writedowns, Other Problem Loans [Line Items]
Financing Receivable, Allowance for Credit Losses, Writedowns, Other Problem Loans	1,599
Provision		(1,022)	5,751
Non-owner Occupied | Real Estate Loans
Financing Receivable, Allowance for Credit Losses, Writedowns, Other Problem Loans [Line Items]
Financing Receivable, Allowance for Credit Losses, Writedowns, Other Problem Loans	2,267
Provision		(1,764)	8,433
One to Four Family | Real Estate Loans
Financing Receivable, Allowance for Credit Losses, Writedowns, Other Problem Loans [Line Items]
Financing Receivable, Allowance for Credit Losses, Writedowns, Other Problem Loans	291
Provision		(205)	2,762
Multifamily | Real Estate Loans
Financing Receivable, Allowance for Credit Losses, Writedowns, Other Problem Loans [Line Items]
Financing Receivable, Allowance for Credit Losses, Writedowns, Other Problem Loans	0
Provision		(158)	136
Home Equity Lines of Credit | Real Estate Loans
Financing Receivable, Allowance for Credit Losses, Writedowns, Other Problem Loans [Line Items]
Financing Receivable, Allowance for Credit Losses, Writedowns, Other Problem Loans	1,309
Provision		$ (697)	$ 4,686

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Derivatives

12 Months Ended

Dec. 31, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

The Company currently has derivative instrument contracts consisting of interest rate swaps and interest rate lock commitments and commitments to sell mortgages.  The primary objective for each of these contracts is to minimize interest rate risk.  The Company's strategy is to use derivative contracts to stabilize and improve net interest margin and net interest income currently and in future periods. The Company does not enter into derivative financial instruments for speculative or trading purposes.  For derivatives that are economic hedges, but are not designated as hedging instruments or otherwise do not qualify for hedge accounting treatment, all changes in fair value are recognized in non-interest income during the period of change.  

As part of interest rate risk management, the Company has entered into two interest rate swap agreements to convert certain fixed-rate receivables to floating rates and certain fixed-rate obligations to floating rates.  The interest rate swaps are used to provide fixed rate financing while managing interest rate risk and were not designated as hedges. The interest rate swaps pay and receive interest based on a floating rate based on one month LIBOR, with payments being calculated on the notional amount. The interest rate swaps are settled quarterly and mature on June 15, 2016. The interest rate swaps each had a notional amount of $1.8 million at December 31, 2013, representing the amount of fixed-rate receivables outstanding and liabilities outstanding, and are included in other assets and other liabilities at their fair value of $132,438. The Company had a gain of $63,568 on the interest rate swap asset and a loss of $63,568 on the interest rate swap liability for the year ended December 31, 2013. The Company had a gain of $20,973 on the interest rate swap asset and a loss of $20,973 on the interest rate swap liability for the year ended December 31, 2012. The interest rate swaps had a notional amount of $2.0 million outstanding as of December 31, 2012 and was included in other assets and other liabilities at their fair market value of $196,006. All changes in fair value are recorded as other income within non-interest income. Fair values for interest rate swap agreements are based upon the amounts required to settle the contracts.  

The Company is exposed to certain risks relating to its ongoing mortgage origination business. The Bank's mortgage lending subsidiary, enters into interest rate lock commitments and commitments to sell mortgages. The primary risks managed by derivative instruments are these interest rate lock commitments and forward-loan-sale commitments. Interest rate lock commitments are entered into to manage interest rate risk associated with the Company's fixed rate loan commitments. 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. Such interest rate lock commitments and forward-loan-sale commitments represent derivative instruments which are required to be carried at fair value. These derivative instruments do not qualify as hedges under the Derivatives and Hedging topic of the FASB Accounting Standards Codification. The fair value of the Company's 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 balance sheet in other assets and on the income statement in mortgage banking income (loss). The fair value of the Company's forward sales commitments is based on changes in the value of the commitment, principally because of changes in interest rates, and is included on the balance sheet in other assets or other liabilities and on the income statement in mortgage banking income (loss).

At December 31, 2013, the Bank had $13.4 million of commitments outstanding to originate mortgage loans held-for-sale at fixed prices and $31.9 million of forward commitments outstanding for original commitments and outstanding mortgage loans held-for-sale under best efforts contracts to sell mortgages to agencies and other investors. The fair value of forward sales commitments recorded in other assets was $147,232 at December 31, 2013. The fair value of the interest rate lock commitments recorded in other liabilities was $(23,222) at December 31, 2013. Recognition of gains related to the change in fair value of forward sales commitments was $628,038 for the year ended December 31, 2013, and is included in mortgage banking activities income. Recognition of losses related to the change in fair value of the interest rate lock commitments was $(896,066) for the year ended December 31, 2013, and is included in mortgage banking activities income. Recognition of gains related to the change in fair value of the interest rate lock commitments were $204,856 and gains related to forward sales commitments were $743,025, respectively, for the year ended December 31, 2012, and are included in other income. At December 31, 2012, the Bank had $46.7 million of commitments outstanding to originate mortgage loans held-for-sale at fixed prices and $71.5 million of forward commitments outstanding under best efforts contracts to sell mortgages to agencies and other investors. The fair value of forward sales commitments recorded in other liabilities was $(480,806) at December 31, 2012. The fair value of the interest rate lock commitments recorded in other assets was $872,844 at December 31, 2012.

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Investment Securities (Tables)

12 Months Ended

Dec. 31, 2013

Investments, Debt and Equity Securities [Abstract]

Amortized Cost and Fair Value

Investment securities at December 31, 2013 and December 31, 2012 are summarized as follows:

	December 31, 2013
	Amortized Cost		Unrealized  Gains		Unrealized  Losses		Fair Value
	(Amounts in thousands)
Available-for-sale securities:
Securities of U.S. government agencies due:
Within 1 year	$	1,560	$	—	$	8	$	1,552
After 1 but within 5 years	15,039		—		199		14,840
	16,599		—		207		16,392
Government sponsored agencies:
Residential mortgage-backed securities due:
Within 1 year	—		—		—		—
After 1 but within 5 years	632		42		—		674
After 5 but within 10 years	17,829		284		—		18,113
After 10 years	85,277		624		1,247		84,654
	103,738		950		1,247		103,441
Collateralized mortgage obligations due:
After 1 but within 5 years	3,139		—		7		3,132
After 5 but within 10 years	5,093		140		—		5,233
After 10 years	43,813		660		95		44,378
	52,045		800		102		52,743
Private label collateralized mortgage obligations due:
After 5 but within 10 years	143		—		1		142
After 10 years	14,530		13		194		14,349
	14,673		13		195		14,491
State and municipal securities due:
Within 1 year	910		10		—		920
After 1 but within 5 years	7,069		311		—		7,380
After 5 but within 10 years	44,590		1,064		827		44,827
After 10 years	47,422		282		2,127		45,577
	99,991		1,667		2,954		98,704
Common and preferred stocks:	1,868		1,283		—		3,151
Total available-for-sale securities	$	288,914	$	4,713	$	4,705	$	288,922

	December 31, 2012
	Amortized Cost		Unrealized  Gains		Unrealized  Losses		Fair Value
	(Amounts in thousands)
Available-for-sale securities:
Securities of U.S. government agencies due:
Within 1 year	$	10,005	$	15	$	—	$	10,020
After 1 but within 5 years	17,479		29		1		17,507
	27,484		44		1		27,527
Government sponsored agencies:
Residential mortgage-backed securities due:
Within 1 year	119		2		—		121
After 1 but within 5 years	315		26		—		341
After 5 but within 10 years	10,371		341		—		10,712
After 10 years	94,319		2,089		325		96,083
	105,124		2,458		325		107,257
Collateralized mortgage obligations due:
After 1 but within 5 years	648		2		—		650
After 5 but within 10 years	9,975		206		3		10,178
After 10 years	111,155		902		292		111,765
	121,778		1,110		295		122,593
Private label collateralized mortgage obligations due:
After 5 but within 10 years	178		—		—		178
After 10 years	848		19		—		867
	1,026		19		—		1,045
State and municipal securities due:
Within 1 year	620		6		—		626
After 1 but within 5 years	5,734		321		—		6,055
After 5 but within 10 years	24,464		1,698		12		26,150
After 10 years	50,031		2,064		361		51,734
	80,849		4,089		373		84,565
Common and preferred stocks:	88		46		1		133
Total available-for-sale securities	$	336,349	$	7,766	$	995	$	343,120

Investments in Continuous Unrealized Loss Position

	Less Than 12 Months				12 Months or More				Total
December 31, 2013	Fair value		Unrealized  losses		Fair value		Unrealized  losses		Fair value		Unrealized  losses
	(Amounts in thousands)
Securities available-for-sale:
U.S. government agencies	$	14,840	$	199	$	1,552	$	8	$	16,392	$	207
Government sponsored agencies:
Residential mortgage-backed securities	49,954		1,247		—		—		49,954		1,247
Collateralized mortgage obligations	11,372		64		2,121		38		13,493		102
Private label collateralized mortgage obligations	9,941		194		142		1		10,083		195
State and municipal securities	31,218		1,950		14,280		1,004		45,498		2,954
Common and preferred stocks	—		—		—		—		—		—
Total temporarily impaired securities	$	117,325	$	3,654	$	18,095	$	1,051	$	135,420	$	4,705

	Less Than 12 Months				12 Months or More				Total
December 31, 2012	Fair value		Unrealized  losses		Fair value		Unrealized  losses		Fair value		Unrealized  losses
	(Amounts in thousands)
Securities available-for-sale:
U.S. government agencies	$	2,429	$	1	$	—	$	—	$	2,429	$	1
Government sponsored agencies:
Residential mortgage-backed securities	12,021		325		$	—	—		12,021		325
Collateralized mortgage obligation	27,417		127		7,626		168		35,043		295
Private label collateralized mortgage obligations	—		—		178		—		178		—
State and municipal securities	22,899		373		—		—		22,899		373
Common and preferred stocks, and other	—		—		60		1		60		1
Total temporarily impaired securities	$	64,766	$	826	$	7,864	$	169	$	72,630	$	995

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Fair Value - Level 3 Instruments (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2010
Rollforward of Level 3 Liabilities [Rollforward]
Theshold for individual impairment evaluation	$ 250,000
Other real estate owned	3,267,000	8,738,000
Interest Rate Lock Commitments | Derivative Financial Instruments, Assets
Rollforward of Level 3 Assets [Rollforward]
Ending balance	(23,000)	873,000
Forward loan sale commitments | Derivative Financial Instruments, Assets
Rollforward of Level 3 Assets [Rollforward]
Ending balance	147,000	(481,000)
Level 3 | Interest Rate Swap Agreements | Derivative Financial Instruments, Assets
Rollforward of Level 3 Assets [Rollforward]
Beginning balance	196,000		216,000
Purchases, sales, issuances and settlements	0	0
Gains/losses included in other income	(64,000)	(20,000)
Ending balance	132,000	196,000	216,000
Level 3 | Interest Rate Swap Agreements | Derivative Financial Instruments, Liabilities
Rollforward of Level 3 Liabilities [Rollforward]
Beginning balance	196,000		216,000
Purchases, sales, issuances and settlements	0	0
Gains/lossses included in other income	(64,000)	(20,000)
Ending balance	132,000	196,000	216,000
Level 3 | Interest Rate Lock Commitments | Derivative Financial Instruments, Assets
Rollforward of Level 3 Assets [Rollforward]
Beginning balance	873,000		130,000
Gains/losses included in other income	(896,000)	743,000
Transfer in and out	0	0
Ending balance	(23,000)	873,000	130,000
Level 3 | Mortgage Servicing Rights | Derivative Financial Instruments, Assets
Rollforward of Level 3 Assets [Rollforward]
Beginning balance	2,525,000		1,871,000
Capitalized	1,387,000	1,101,000
Gains/losses included in other income	624,000	(447,000)
Ending balance	$ 4,536,000	$ 2,525,000	$ 1,871,000

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Regulatory Requirements

12 Months Ended

Dec. 31, 2013

Banking and Thrift [Abstract]

Regulatory Requirements

REGULATORY REQUIREMENTS

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly, additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off‑balance sheet items calculated under regulatory accounting practices. The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk‑weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). Management believes that, as of December 31, 2013, the Company meets all capital adequacy requirements to which it is subject.

The Company and the Bank exceeded the minimum regulatory capital ratios as of December 31, 2013, as well as the ratios to be considered "well capitalized." The Company completed a private placement offering during the second quarter of 2011 for proceeds of $6.4 million. Proceeds received from the Private Placement are being kept at the holding company level for general corporate purposes. The Company completed a second private placement offering during the fourth quarter of 2012 for proceeds of $41.8 million. The private placement included the issuance of $45.0 million in the Company's Mandatorily Convertible Cumulative Non-Voting Perpetual Preferred Stock, Series A (the "Series A Preferred Stock") which was subsequently converted over to common stock at $2.80 per share. On September 12, 2012, the U.S. Treasury completed the sale of its $36 million of Series T Preferred Stock and $13.3 million of its Series T-ACB Preferred Stock investment in the Company to private investors through a registered public offering. There was no impact to the Company's financial condition or operating results due to the transaction. In addition, the Company converted 20,907 shares of Series T and Series T-ACB preferred shares to common stock. Although this helped improve capital ratios at the holding company, management continues to monitor capital levels closely and evaluate options which would improve the Bank's capital position.

	Actual				For capital adequacy purposes				To be well capitalized under prompt corrective action provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Amounts in thousands)
Yadkin Bank
As of December 31, 2013:
Total Capital (to risk-weighted assets)	$	219,071	14.4	%	$	121,635	8.0	%	$	152,043	10.0	%
Tier 1 Capital (to risk-weighted assets)	200,891		13.2	%	60,817		4.0	%	91,226		6.0	%
Tier 1 Capital (to average assets)	200,891		11.2	%	71,495		4.0	%	89,369		5.0	%
As of December 31, 2012:
Total Capital (to risk-weighted assets)	$	189,961	13.0	%	$	116,923	8.0	%	$	146,154	10.0	%
Tier 1 Capital (to risk-weighted assets)	171,505		11.7	%	58,462		4.0	%	87,692		6.0	%
Tier 1 Capital (to average assets)	171,505		8.9	%	76,912		4.0	%	96,139		5.0	%
Yadkin Financial Corporation
As of December 31, 2013:
Total Capital (to risk-weighted assets)	$	221,858	14.6	%	$	121,702	8.0	%	$	152,128	10.0	%
Tier 1 Capital (to risk-weighted assets)	204,763		13.5	%	60,851		4.0	%	91,277		6.0	%
Tier 1 Capital (to average assets)	204,763		11.5	%	71,556		4.0	%	89,445		5.0	%
As of December 31, 2012:
Total Capital (to risk-weighted assets)	$	194,932	13.3	%	$	116,960	8.0	%	$	146,200	10.0	%
Tier 1 Capital (to risk-weighted assets)	177,656		12.2	%	58,480		4.0	%	87,720		6.0	%
Tier 1 Capital (to average assets)	177,656		9.2	%	76,998		4.0	%	96,247		5.0	%

Deferred tax assets that are dependent upon future taxable income do not qualify for inclusion in Tier 1 capital based on the capital guidelines of the Company's primary federal supervisory authority.  The disallowed portion of deferred tax assets for December 31, 2013 was $12.3 million for the Company. The disallowed portion of deferred tax assets for December 31, 2012 was $21.1 million for the Company.

The Bank, as a North Carolina banking corporation, may pay dividends only out of undivided profits as determined pursuant to North Carolina General Statutes Section 53‑87. At December 31, 2013, 2012, and 2011 there were no undivided profits available for dividend payments. At December 31, 2013, the Bank was prohibited from paying dividends to the holding company without prior FDIC and Commissioner approval. This restriction was lifted in 2014. Beginning in 2011, the Company was required to defer dividendpayments on the Series T and Series T-ACB Preferred Stock and interest payments on the trust preferred securities given liquidity levels at the holding company. However, in August 2012, the Company received regulatory approval and paid in full all of the outstanding deferred dividends on the TARP Preferred Stock and all accrued but unpaid interest on the trust preferred securities payments. The Company is now current on its payment obligations on its Series T and Series T-ACB Preferred Stock and on the trust preferred securities.

For the reserve maintenance period in effect at December 31, 2013, the Bank was required by the Federal Reserve Bank to maintain average daily reserves of $250,000 on deposit.

The mortgage banking segment qualifies as a HUD-approved Title II Supervised Mortgagee and issues mortgages insured by the US Department of Housing and Urban Development (HUD). A Title II Supervised mortgagee must maintain an adjusted net worth equal to a minimum of $1 million plus 1% of FHA single family insurance mortgages originated, underwritten, purchased or serviced in excess of $25 million, up to a maximum net worth of $2.5 million. As of December 31, 2013 and 2012, the Bank’s adjusted net worth exceeded the required minimum net worth requirements.

Possible penalties related to noncompliance with this minimum net worth requirement includes the revocation of the Bank’s license to issue HUD insured mortgages, which may have a material adverse affect on the Bank’s financial condition and results of operations.

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Loans and Allowance for Loan Losses - Nonaccrual and Past Due Loans (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013 Loans	Dec. 31, 2012 Loans
Financing Receivable, Recorded Investment, Past Due
Financing receivables on nonaccrual status	$ 15,393	$ 22,817
Ratio of nonperforming loans to all loans	1.12%	1.71%
Total number of loans on nonaccrual status	195	315
Past due Loans, Aging Analysis
30 to 59 Days Past Due	9,998	13,943
60 to 89 Days Past Due	2,920	2,000
Greater Than 90 Days	2,486	13,362
Total Past Due	15,404	29,305
Current	1,342,363	1,279,067
Loans	1,357,767	1,308,372
Real Estate Loans | Construction Loans
Financing Receivable, Recorded Investment, Past Due
Financing receivables on nonaccrual status	2,331	7,385
Past due Loans, Aging Analysis
30 to 59 Days Past Due	855	4,395
60 to 89 Days Past Due	207	345
Greater Than 90 Days	541	1,865
Total Past Due	1,603	6,605
Current	129,432	125,376
Loans	131,035	131,981
Real Estate Loans | Owner Occupied Commercial
Financing Receivable, Recorded Investment, Past Due
Financing receivables on nonaccrual status	4,417	5,787
Past due Loans, Aging Analysis
30 to 59 Days Past Due	1,973	838
60 to 89 Days Past Due	0	114
Greater Than 90 Days	58	4,237
Total Past Due	2,031	5,189
Current	380,735	337,773
Loans	382,766	342,962
Real Estate Loans | Non-owner Occupied
Financing Receivable, Recorded Investment, Past Due
Financing receivables on nonaccrual status	1,806	1,697
Past due Loans, Aging Analysis
30 to 59 Days Past Due	1,172	1,688
60 to 89 Days Past Due	129	500
Greater Than 90 Days	432	1,098
Total Past Due	1,733	3,286
Current	195,193	208,203
Loans	196,926	211,489
Real Estate Loans | One to Four Family
Financing Receivable, Recorded Investment, Past Due
Financing receivables on nonaccrual status	2,734	3,123
Past due Loans, Aging Analysis
30 to 59 Days Past Due	2,738	2,767
60 to 89 Days Past Due	1,190	910
Greater Than 90 Days	1,186	2,226
Total Past Due	5,114	5,903
Current	168,958	162,708
Loans	174,072	168,611
Real Estate Loans | Multifamily
Financing Receivable, Recorded Investment, Past Due
Financing receivables on nonaccrual status	256	539
Past due Loans, Aging Analysis
30 to 59 Days Past Due	0	12
60 to 89 Days Past Due	249	0
Greater Than 90 Days	0	10
Total Past Due	249	22
Current	41,464	35,315
Loans	41,713	35,337
Real Estate Loans | Home Equity Lines of Credit
Financing Receivable, Recorded Investment, Past Due
Financing receivables on nonaccrual status	1,285	1,041
Past due Loans, Aging Analysis
30 to 59 Days Past Due	909	1,980
60 to 89 Days Past Due	341	52
Greater Than 90 Days	75	924
Total Past Due	1,325	2,956
Current	192,820	188,932
Loans	194,145	191,888
Commercial
Financing Receivable, Recorded Investment, Past Due
Financing receivables on nonaccrual status	2,306	2,790
Past due Loans, Aging Analysis
30 to 59 Days Past Due	2,029	2,027
60 to 89 Days Past Due	742	34
Greater Than 90 Days	142	2,660
Total Past Due	2,913	4,721
Current	182,530	169,719
Loans	185,443	174,440
Consumer and other
Financing Receivable, Recorded Investment, Past Due
Financing receivables on nonaccrual status	258	455
Past due Loans, Aging Analysis
30 to 59 Days Past Due	322	236
60 to 89 Days Past Due	62	45
Greater Than 90 Days	52	342
Total Past Due	436	623
Current	51,231	51,041
Loans	$ 51,667	$ 51,664

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Parent Company Condensed Financial Information - Condensed Statements of Cash Flows (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Cash flows from operating activities:
Net income (loss)	$ 18,826	$ (8,674)	$ (14,395)
Adjustments to reconcile net loss to net cash provided by operating activities:
Other-than-temporary impairment of investments	39	50	116
Change in other assets	(3,916)	5,526	6,648
Change in other liabilities	907	2,742	(1,913)
NET CASH PROVIDED BY OPERATING ACTIVITIES	40,987	33,732	65,331
Cash flows from investing activities:
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	(7,755)	75,667	92,316
Cash flows from financing activities:
Issuance of preferred stock	0	40,592	0
Issuance of common stock	0	0	6,402
Dividends paid	(1,414)	(4,431)	(616)
Payment of fractional shares for the 1-for-3 stock split	(39)	0	0
Repurchase and cancellation of warrants	(20)	0	0
Net cash provided by (used in) financing activities	(130,633)	(63,921)	(294,509)
Net increase (decrease) in cash	(97,401)	45,478	(136,862)
Beginning of year	138,396		92,918
End of year	40,995	138,396
Parent Company
Cash flows from operating activities:
Net income (loss)	18,826	(8,674)	(14,395)
Adjustments to reconcile net loss to net cash provided by operating activities:
Equity (loss) in undistributed earnings of subsidiaries	(19,840)	7,684	13,511
Other-than-temporary impairment of investments	39	50	116
Loss on sale of other investments	0	0	80
Change in other assets	243	(18)	315
Change in other liabilities	(851)	113	270
NET CASH PROVIDED BY OPERATING ACTIVITIES	(1,583)	(845)	(103)
Cash flows from investing activities:
Purchase of investments	(267)	0	(250)
Maturities, call and repayments of investments	0	99	55
Proceeds from sale of other investments	0	0	460
Additional investment in bank subsidiary	0	(37,000)	0
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	(267)	(36,901)	265
Cash flows from financing activities:
Issuance of preferred stock	0	40,592	0
Issuance of common stock	0	0	6,402
Dividends paid	(1,414)	(4,431)	(616)
Payment of fractional shares for the 1-for-3 stock split	(39)	0	0
Repurchase and cancellation of warrants	(20)	0	0
Net cash provided by (used in) financing activities	(1,473)	36,161	5,786
Net increase (decrease) in cash	(3,323)	(1,585)	5,948
Beginning of year	5,212		6,797
End of year	$ 1,889	$ 5,212

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Consolidated Statements of Cash Flows (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$ 18,826,000	$ (8,674,000)	$ (14,395,000)
Adjustments to reconcile net loss to net cash provided by operating activities:
Net amortization of premiums on investment securities	6,499,000	7,313,000	4,979,000
Provision for (recovery of) loan losses	(2,685,000)	40,374,000	20,843,000
(Recovery of) losses for mortgage loans sold	(1,437,000)	392,000	641,000
(Gain) loss on sales of loans	(575,000)	3,032,000	0
Net gain on sale of mortgage loans	(7,133,000)	(1,955,000)	(4,488,000)
Write-down of subsidiary held-for-sale	0	1,019,000	0
Other than temporary impairment of investments	39,000	50,000	116,000
Impairment of goodwill	0	0	4,944,000
Increase in cash surrender value of life insurance	(599,000)	(632,000)	(657,000)
Depreciation and amortization	2,820,284	2,878,237	2,896,688
Loss on sales and impairment of premises and equipment	142,000	131,000	1,494,000
Gain on sale of branch	(310,000)	0	0
Net (gains) losses on sale and write downs of other real estate owned	(875,000)	12,383,000	3,756,000
(Gain) loss on sale of securities	2,355,000	(1,744,000)	(2,756,000)
Amortization of core deposit intangible	680,000	1,080,000	1,174,000
Deferred tax provision (benefit)	10,513,000	(23,751,000)	5,983,000
Stock based compensation expense	502,000	420,000	210,000
Originations of mortgage loans held-for-sale	(266,031,000)	(329,451,000)	(471,607,000)
Proceeds from sales of mortgage loans	281,930,000	323,261,000	506,980,000
Decrease in capital lease obligations	(44,000)	(41,000)	(37,000)
Decrease in accrued interest receivable	157,000	369,000	1,202,000
(Increase) decrease in other assets	(3,916,000)	5,526,000	6,648,000
Decrease in accrued interest payable	(778,000)	(990,000)	(683,000)
Increase (decrease) in other liabilities	907,000	2,742,000	(1,913,000)
NET CASH PROVIDED BY OPERATING ACTIVITIES	40,987,000	33,732,000	65,331,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale securities	(123,839,000)	(142,589,000)	(172,438,000)
Proceeds from sales of available-for-sale securities	80,147,000	36,428,000	103,138,000
Proceeds from maturities and paydowns of available-for-sale securities	84,054,000	88,278,000	40,071,000
Net (increase) decrease in loans	(57,876,000)	76,419,000	106,363,000
Proceeds from the redemption of Federal Home Loan Bank stock	682,000	1,976,000	3,286,000
Purchases of premises and equipment	(2,899,000)	(2,624,000)	(3,618,000)
Proceeds from the sale of premises and equipment	1,397,000	38,000	1,149,000
Proceeds from the sale of other real estate owned	10,579,000	17,741,000	14,365,000
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	(7,755,000)	75,667,000	92,316,000
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in checking, NOW, money market and savings accounts	62,783,000	42,916,000	49,503,000
Net decrease in time certificates	(176,021,000)	(142,595,000)	(338,569,000)
Net decrease in short-term borrowings	(15,886,000)	631,000	804,000
Proceeds from long-term borrowings	0	0	15,000,000
Repayment of long-term borrowings	(36,000)	(1,034,000)	(27,033,000)
Proceeds from the issuance of common stock	0	0	6,402,000
Net proceeds from the issuance of preferred stock	0	40,592,000	0
Repurchase and cancellation of warrants	(20,000)	0	0
Payment of fractional shares for the 1-for-3 stock split	(39,000)	0	0
Preferred dividends paid	(1,414,000)	(4,431,000)	(616,000)
NET CASH USED IN FINANCING ACTIVITIES	(130,633,000)	(63,921,000)	(294,509,000)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(97,401,000)	45,478,000	(136,862,000)
CASH AND CASH EQUIVALENTS:
Beginning of year	138,396,000		92,918,000
End of year	40,995,000	138,396,000
SUPPLEMENTARY CASH FLOW INFORMATION:
Cash paid for interest	11,056,000	19,032,000	27,029,000
Cash paid for income taxes	600,000	0	26,000
SUPPLEMENT DISCLOSURE OF NONCASH INVESTING AND
Transfer from loans to foreclosed real estate	4,233,000	13,896,000	17,505,000
Transfer from gross loans to loans held-for-sale	0	31,464,000	0
Change in unrealized gain on investment securities available-for-sale, net of tax effect	$ (4,179,000)	$ 321,000	$ 3,281,000

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Consolidated Balance Sheets (Parentheticals) (USD $) In Thousands, except Share data, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Current Assets:
Securities available-for-sale at amortized cost	$ 288,914	$ 336,349
Accumulated amortization on core deposit intangible	$ 10,546	$ 9,869
Stockholders' Equity:
Preferred stock, par value	$ 0	$ 0
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued	28,405	28,405
Preferred stock, shares outstanding	28,405	28,405
Common stock, par value	$ 1.00	$ 1.00
Common Stock, Shares Authorized	33,333,333	33,333,333
Common stock, shares issued	14,383,986	14,383,750
Common stock, shares outstanding	14,383,986	14,383,750

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Earnings Per Common Share

12 Months Ended

Dec. 31, 2013

Earnings Per Share [Abstract]

Earnings Per Common Share

EARNINGS PER SHARE

Basic net income per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding for the reporting periods. Diluted net income available to common shareholders per common share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. The numerators of the basic net income per common share computations are the same as the numerators of the diluted net income per common share computations for all the periods presented. Weighted average shares outstanding for the year ended December 31, 2013 excludes 176,843 shares of unvested restricted stock. Weighted average shares outstanding for the years ended December 31, 2012 and 2011 excludes 193,373 and 53,778 shares of unvested restricted stock, respectively. A reconciliation of the denominator of the basic net income per common share computations to the denominator of the diluted net income per common share computations is as follows:

	2013		2012			2011
Basic earnings per share:
Net income (loss) to common shareholders	$	16,949,000	$	(12,585,000	)	$	(17,382,000	)
Weighted average number of common shares outstanding	14,203,099		6,589,971			6,079,668
Basic earnings (loss) per share	$	1.19	$	(1.91	)	$	(2.86	)
Diluted earnings per share:
Net income (loss) to common shareholders	$	16,949,000	$	(12,585,000	)	$	(17,382,000	)
Weighted average number of common shares outstanding	14,203,099		6,589,971			6,079,668
Dilutive potential common shares	21,621		—			—
Weighted-average shares as adjusted	14,224,720		6,589,971			6,079,668
Diluted earnings (loss) per share	$	1.19	$	(1.91	)	$	(2.86	)

For the year ended December 31, 2013, 2012, and 2011 net income (loss) for determining net earnings (loss) per common share was reported as net income (loss) less the dividend on preferred stock. During the year ended December 31, 2013, there were 51,673 warrants and stock options that were not considered dilutive because the exercise prices exceeded the average market price per share and 156,329 shares of restricted stock not considered dilutive because they were antidilutive under the treasury stock method or because performance and service criteria had not been met. Unvested shares of restricted stock and all other common stock equivalents were excluded from the determination of earnings (losses) per share for the year-to-date periods ended December 31, 2012 and December 31, 2011 due to the Company's loss position for that period.

For 2013, 2012 and 2011, net income (loss) to common shareholders is net income (loss) less the preferred stock dividends and accretion of discount.

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Regulatory Requirements - Narrative (Details) (USD $)	0 Months Ended			0 Months Ended
	Oct. 23, 2012	May 06, 2011	Dec. 31, 2013	Sep. 12, 2012 Preferred Stock	Sep. 12, 2012 US Treasury Series T Preferred Stock	Sep. 12, 2012 US Treasury Series T-ACB Preferred Stock
Banking and Thrift [Abstract]
Proceeds from the issuance of private placement	$ 41,800,000	$ 6,400,000
Proceeds from issuance of mandatorily convertible cumulative non-voting perpetual preferred stock	45,000,000
Conversion price of convertible stock (in dollars per share)	$ 2.80
Disallowed portion of deferred tax assets, Tier 1 Capital			12,300,000
Federal Reserve Bank, average daily reserves			250,000
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Preferred Stock Sold in Public Offering					$ 36,000,000	$ 13,300,000
Conversion of Stock, Shares Converted				20,907

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Leases - Schedule of Future Minimum Payments, Operating Leases (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
2013	$ 1,905
2014	1,456
2015	1,032
2016	642
2017	560
Thereafter	5,310
Total	$ 10,905

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Stock Options and Restricted Stock - Restricted Stock, Summary (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding, Number	211,159	207,917
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested, Number	34,316	14,549
Restricted shares outstanding, unvested	176,843	235,118
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	3,242	169,143	48,329
Average fair value of restricted stock granted (in dollars per share)	$ 12.65	$ 6.96	$ 7.02
Restricted shares forfeited	0	15,554
Shares available for future issuance	315,998
Performance and Service Shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period		163,328
Years of service required	2 years	2 years
Performance and Service Shares | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		1 year
Performance and Service Shares | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		3 years

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Document and Entity Information Document (USD $)	12 Months Ended
	Dec. 31, 2013	Feb. 28, 2014	Jun. 30, 2013
Document Information [Line Items]
Entity Registrant Name	YADKIN FINANCIAL CORPORATION
Entity Central Index Key	0001366367
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Document Type	10-K
Document Period End Date	Dec. 31, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY
Amendment Flag	false
Entity Common Stock, Shares Outstanding		14,384,541
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Public Float			$ 182,000,000

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Benefit Plans

12 Months Ended

Dec. 31, 2013

Compensation and Retirement Disclosure [Abstract]

Benefit Plans

BENEFIT PLANS

401(K) PLAN

The Company maintains profit‑sharing and 401(k) plans for substantially all employees. Contributions to the profit‑sharing plan are at the discretion of the Board of Directors but are limited to amounts deductible in accordance with the Internal Revenue Code. Under the Company's 401(k) plan, employees are permitted to contribute up to 60% of pre‑tax compensation. The Company will match 50% of an employee's contribution, up to a maximum of 3% of pre-tax employee compensation. The Company's policy is to fund the profit‑sharing/401(k) costs as incurred. Employer contributions in 2013, 2012 and 2011 to the 401(k) plan were $619,758, $367,939, and $521,963 respectively. There were no discretionary contributions to the profit-sharing plan for the years ended December 31, 2013, 2012 and 2011.

BANK-OWNED LIFE INSURANCE

During 2001 and 2000, the Company created an Officer Supplemental Insurance Plan (“OSIP”) and entered into Life Insurance Endorsement Method Split Dollar Agreements with certain officers. Under the plan, upon death of the officer, the Company first recovers the cash surrender value of the contract and then shares the remaining death benefits from insurance contracts, which are written with different carriers, with the designated beneficiaries of the officers. The death benefit to the officer's beneficiaries is a multiple of base salary at the time of the agreements. During 2010, the OSIP was amended and the death benefit to the officer’s beneficiaries is now subject to the limit of total death proceeds less cash surrender value. The Company, as owner of the policies, retains an interest in the life insurance proceeds and a 100% interest in the cash surrender value of the policies. The OSIP contains a five‑year vesting requirement and certain provisions relating to change of control and termination of service. The Company funded the OSIP through the purchase of bank‑owned life insurance (“BOLI”) during the first quarter of 2000 and the second quarter of 2001 with initial investments of $4.8 million and $5.0 million, respectively. Additional investments in BOLI were made in August of 2006 in the amount of $5.5 million. The corresponding cash surrender values of BOLI policies as of December 31, 2013 and 2012 was $27,032,000 and $26,433,000 respectively.

During 2007 the Company created the 2007 Group Term Carve Out Plan and entered into Life Insurance Endorsement Method Split Dollar Agreements with certain officers who did not participate in the 2001 Plan discussed in the previous paragraph. Under the plan, upon death of the officer, the Company first recovers the cash surrender value of the contract and then shares the remaining death benefits from the insurance contracts which are written with New York Life Insurance and Annuity Corporation, with the designated beneficiaries of the officers. The death benefit to the officer’s beneficiaries is a multiple of base salary at the time of the agreements, subject to the limit of total death proceeds less cash surrender value. The Company, as owner of the policies, retains an interest in the life insurance proceeds and a 100% interest in the cash surrender value of the policies. The 2007 plan contains a five-year vesting requirement and certain provisions related to change of control and termination of service.

The Company uses the cost of insurance method for determining liabilities related to the plan and used a discount rate of 4.00% at December 31, 2013 and December 31, 2012 based on the Citigroup Pension Liability Yield Curve. As of December 31, 2013 and 2012, the liability accrued for the plan was $1.9 million. In 2011, the Company decided to terminate split dollar benefits for all active employees. The only remaining participants in the OSIP are retired and terminated employees who are still eligible for benefits based on the original agreements. The result of this change to the plan was a $500,000 decrease in liabilities related to the plan. The net periodic benefit costs of the plan are recorded to non-interest expense and were approximately $(5,702), $376,000, and $334,000 for the years ended December 31, 2013, 2012, and 2011, respectively.

NON-EQUITY INCENTIVE PLAN

Incentive compensation is provided for employees of the Bank based on defined levels of earnings performance. The Company accrued $3.4 million in total incentive compensation for the year 2013. All incentive compensation will be paid out in the first quarter of 2014. Based on Company performance, there were no expenses related to incentive compensation during 2012 and 2011.

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Income Taxes - Provision for Income Taxes (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Current:
Federal	$ (93)	$ (210)	$ 712
State	0	0	0
Total current	(93)	(210)	712
Deferred:
Federal	8,027	(10,755)	(4,600)
State	2,467	(1,996)	(418)
Total deferred	10,494	(12,751)	(5,018)
Increase (decrease) in valuation allowance for deferred tax assets	0	(11,000)	11,000
Total income taxes	$ 10,401	$ (23,961)	$ 6,694

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Stock Options and Restricted Stock - Schedule of Stock Options, By Exercise Price Range (Details) (USD $)	12 Months Ended
	Dec. 31, 2013
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Shares	51,673.000
Shares exercisable	48,916.000
9.12-11.52
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Shares	4,498
Option Price per share, lower range limit	$ 9.12
Option Price per share, upper range per limit	$ 11.52
Weighted-average remaining contractual life (years)	7 years 9 months 21 days
Weighted-average exercise price	$ 10.18
Shares exercisable	2,275
20.37-20.70
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Shares	2,666
Option Price per share, lower range limit	$ 20.37
Option Price per share, upper range per limit	$ 20.70
Weighted-average remaining contractual life (years)	5 years 6 months 7 days
Weighted-average exercise price	$ 20.49
Shares exercisable	2,132
28.20-31.38
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Shares	6,384
Option Price per share, lower range limit	$ 28.20
Option Price per share, upper range per limit	$ 31.38
Weighted-average remaining contractual life (years)	4 years 0 months 20 days
Weighted-average exercise price	$ 29.90
Shares exercisable	6,384
34.68-35.97
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Shares	1,015
Option Price per share, lower range limit	$ 34.68
Option Price per share, upper range per limit	$ 35.97
Weighted-average remaining contractual life (years)	3 years 0 months 20 days
Weighted-average exercise price	$ 35.07
Shares exercisable	1,015
38.37-41.73
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Shares	12,482
Option Price per share, lower range limit	$ 38.37
Option Price per share, upper range per limit	$ 41.73
Weighted-average remaining contractual life (years)	2 years 1 month 20 days
Weighted-average exercise price	$ 41.42
Shares exercisable	12,482
42.00-46.95
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Shares	23,795
Option Price per share, lower range limit	$ 42.00
Option Price per share, upper range per limit	$ 46.95
Weighted-average remaining contractual life (years)	2 years 8 months 2 days
Weighted-average exercise price	$ 45.00
Shares exercisable	23,795
57.21
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Shares	833
Option Price per share	$ 57.21
Weighted-average remaining contractual life (years)	3 years 0 months 20 days
Weighted-average exercise price	$ 57.21
Shares exercisable	833

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Consolidated Statements of Income (Loss) (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
INTEREST INCOME:
Interest and fees on loans	$ 67,604	$ 71,956	$ 79,952
Interest on federal funds sold	9	32	28
Interest and dividends on securities:
Taxable	3,556	4,683	5,946
Non-taxable	3,067	2,132	2,272
Interest-bearing deposits	63	169	348
TOTAL INTEREST INCOME	74,299	78,972	88,546
INTEREST EXPENSE
Time deposits of $100 or more	4,041	7,013	10,075
Other time and savings deposits	4,507	8,713	13,800
Borrowed funds	1,693	2,262	2,166
TOTAL INTEREST EXPENSE	10,241	17,988	26,041
NET INTEREST INCOME	64,058	60,984	62,505
PROVISION FOR (RECOVERY OF) LOAN LOSSES	(2,685)	40,374	20,843
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	66,743	20,610	41,662
NON-INTEREST INCOME:
Service charges on deposit accounts	5,186	5,285	5,342
Other service fees	4,653	3,631	3,363
Net gain (loss) on sale of securities	(2,355)	1,744	2,756
Income on investment in bank-owned life insurance	599	632	657
Mortgage banking activities	7,272	6,252	6,345
(Recovery of) losses for mortgage loans sold	1,437	(392)	(641)
Other than temporary impairment of equity securities	(39)	(50)	(116)
Gain (loss) on sale of loans	575	(3,032)	0
Gain on sale of branch	310	0	0
Write-down of subsidiary held-for-sale	0	(1,019)	0
Other income	766	515	474
TOTAL NON-INTEREST INCOME	18,404	13,566	18,180
NON-INTEREST EXPENSES:
Salaries and employee benefits	30,976	26,313	27,537
Occupancy and equipment expense	7,816	7,039	8,242
Data processing	1,494	1,743	1,536
Amortization of core deposit intangible	680	1,080	1,174
Communications	1,389	1,373	1,658
FDIC assessment	2,030	2,668	3,475
Loan collection fees	739	1,079	1,571
Other professional fees	1,667	2,012	1,380
Net cost of operation of other real estate owned	(602)	13,431	5,068
Loss on sale of premises and equipment	142	131	1,494
Goodwill impairment	0	0	4,944
Other	9,589	9,942	9,464
TOTAL NON-INTEREST EXPENSES	55,920	66,811	67,543
INCOME (LOSS) BEFORE INCOME TAXES	29,227	(32,635)	(7,701)
INCOME TAX EXPENSE (BENEFIT)	10,401	(23,961)	6,694
NET INCOME (LOSS)	18,826	(8,674)	(14,395)
Preferred stock dividend and accretion of preferred stock discount	1,877	3,911	2,987
NET INCOME (LOSS) TO COMMON SHAREHOLDERS	$ 16,949	$ (12,585)	$ (17,382)
NET INCOME (LOSS) PER COMMON SHARE:
Basic	$ 1.19	$ (1.91)	$ (2.86)
Diluted	$ 1.19	$ (1.91)	$ (2.86)
CASH DIVIDENDS PER COMMON SHARE	$ 0.00	$ 0.00	$ 0.00

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Premises and Equipment

12 Months Ended

Dec. 31, 2013

Property, Plant and Equipment [Abstract]

Premises and Equipment

PREMISES AND EQUIPMENT

The following table presents premises and equipment and related accumulated depreciation and amortization at December 31, 2013 and 2012:

	Cost		Accumulated depreciation and amortization		Net Book Value
December 31, 2013	(Amounts in thousands)
Land	$	11,601	$	—	$	11,601
Land and leasehold improvements	5,460		2,607		2,853
Buildings	28,638		8,491		20,147
Furniture and equipment	18,510		12,478		6,032
Construction in process	65		—		65
Total	$	64,274	$	23,576	$	40,698
	Cost		Accumulated depreciation and amortization		Net Book Value
December 31, 2012	(Amounts in thousands)
Land	$	11,626	$	—	$	11,626
Land and leasehold improvements	8,199		3,154		5,045
Buildings	26,588		7,079		19,509
Furniture and equipment	24,177		19,023		5,154
Construction in process	515		—		515
Total	$	71,105	$	29,256	$	41,849

Depreciation and amortization expense for the years ended December 31, 2013, 2012 and 2011 were $2,820,284, $2,878,237, and $2,896,688, respectively.

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Loans and Allowance for Loan Losses

12 Months Ended

Dec. 31, 2013

Receivables [Abstract]

Loans and Allowance for Loan Losses

General. The Bank provides to its customers a full range of short- to medium-term commercial, agricultural, Small Business Administration guaranteed, mortgage, home equity, and personal loans, both secured and unsecured. The Bank also makes real estate mortgage and construction loans.

The following table presents loans at December 31, 2013 and December 31, 2012 by class:

	December 31,			December 31,
	2013			2012
	(Amounts in thousands)
Construction and land development	$	131,035		$	131,981
Commercial real estate:
Owner occupied	382,766			342,962
Non-owner occupied	196,926			211,489
Residential mortgages:
1-4 family	174,072			168,611
Multifamily	41,713			35,337
Home equity lines of credit	194,145			191,888
Commercial	185,443			174,440
Consumer and other	51,667			51,664
Total	1,357,767			1,308,372
Less: Net deferred loan costs	979			1,132
Allowance for loan losses	(18,063		)	(25,149		)
Loans, net	$	1,340,683		$	1,284,355

Real Estate Loans. Real estate loans include construction and land development loans, commercial real estate loans, home equity lines of credit, and residential mortgages.

Commercial real estate loans totaled $579.7 million and $554.5 million at December 31, 2013 and December 31, 2012, respectively. This lending has involved loans secured by owner-occupied commercial buildings for office, storage and warehouse space, as well as non-owner occupied commercial buildings. The Bank generally requires the personal guaranty of borrowers and a demonstrated cash flow capability sufficient to service the debt. Loans secured by commercial real estate may be larger in size and may involve a greater degree of risk than one-to-four family residential mortgage loans. Payments on such loans are often dependent on successful operation or management of the properties.

Construction/development lending totaled $131.0 million and $132.0 million at December 31, 2013 and December 31, 2012, respectively. The Bank originates one-to-four family residential construction loans for the construction of custom homes (where the home buyer is the borrower) and provides financing to builders and consumers for the construction of pre-sold homes. The Bank generally receives a pre-arranged permanent financing commitment from an outside banking entity prior to financing the construction of pre-sold homes. The Bank also makes commercial real estate construction loans, primarily for owner-occupied properties. The Bank limits its construction lending risk through adherence to established underwriting procedures.

Residential one-to-four family loans amounted to $174.1 million and $168.6 million at December 31, 2013 and December 31, 2012, respectively. The Bank's residential mortgage loans are typically construction loans that convert into permanent financing and are secured by properties located within the Bank's market areas.

Home equity lines of credit totaled $194.1 million and $191.9 million at December 31, 2013 and December 31, 2012, respectively. The Bank's home equity lines of credit generally are variable rate lines of credit secured by junior liens on 1-4 family residential properties.

Commercial Loans. At December 31, 2013 and December 31, 2012, the Bank's commercial loan portfolio totaled $185.4 million and $174.4 million, respectively. Commercial loans include both secured and unsecured loans for working capital, expansion, and other business purposes. Short-term working capital loans are secured by accounts receivable, inventory and/or equipment. The Bank also makes term commercial loans secured by equipment and real estate. Lending decisions are based on an evaluation of the financial strength, cash flow, management and credit history of the borrower, and the quality of the collateral securing the loan. With few exceptions, the Bank requires personal guarantees and secondary sources of repayment. Commercial loans generally provide greater yields and reprice more frequently than other types of loans, such as real estate loans.

Consumer Loans. Loans to individuals (consumer loans) include automobile loans, boat and recreational vehicle financing, and miscellaneous secured and unsecured personal loans and totaled $51.7 million at December 31, 2013 and December 31, 2012, respectively. Consumer loans generally can carry significantly greater risks than other loans, even if secured, if the collateral consists of rapidly depreciating assets such as automobiles, boats, recreational vehicles, and equipment. Repossessed collateral securing a defaulted consumer loan may not provide an adequate source of repayment of the loan. Consumer loan collections are sensitive to job loss, illness and other personal factors. The Bank manages the risks inherent in consumer lending by following established credit guidelines and underwriting practices designed to minimize risk of loss.

In 2012, the Company embarked on an accelerated asset disposition plan (the “disposition plan”) in an effort to reduce nonperforming assets and problem loans that continued to be a strain on the Company's resources and capital. As a result, the Company sold $43 million in loans during the fourth quarter of 2012, and charged down another $11 million in other problem loans, resulting in approximately $35 million in total losses. The sale included $36 million in nonperforming loans consisting primarily of construction and commercial real estate loans. This sale was an effort to reduce overall credit risk within the Bank.

The following table presents loss information related to the sale and charge-off of problem loans as part of the accelerated asset disposition plan. The disposition plan was a strategy that was created and implemented in the fourth quarter 2012 to reduce levels of problem assets. The disposition plan consisted of the sale of three separate pools of loans (which were pooled based on similar size, classification and risk characteristics), and the sale of other individual classified loans.

Actual loss on the sale of impaired loans recognized in the fourth quarter of 2012 was $21.7 million which represents the difference between the recorded investment of the loan at sale date and the sales price received.

Loan Sales	Recorded Investment of Loans Sold		Charge-offs (Losses) Recorded on the Sales		Additional Provisions Resulting from the Sale of Loans
	(Amounts in thousands)
Construction	$	16,211	$	7,625	$	6,100
Commercial Real Estate:
Owner Occupied	8,871		3,917		4,313
Non-owner Occupied	8,675		4,531		3,755
Mortgages:
1-4 Family	4,557		2,825		2,380
Multifamily	249		113		86
Home Equity Line of Credit	2,204		1,284		746
Commercial	2,291		1,329		1,290
Consumer and other	151		91		57
	$	43,209	$	21,715	$	18,727

Additional charge-offs of $11.0 million were also taken during the fourth quarter 2012 on other problem loans that were not sold. The following table presents a summary of charge-offs on other problem loans.

Loan Sales	Additional Charge-offs on Other Problem Loans
	(Amounts in thousands)
Construction	$	1,601
Commercial Real Estate:
Owner Occupied	1,599
Non-owner Occupied	2,267
Mortgages:
1-4 Family	291
Multifamily	—
Home Equity Line of Credit	1,309
Commercial	3,908
Consumer and other	24
	$	10,999

Other losses related to contingencies for warranties on loans sold and property taxes owed for 2012 (per the terms of the loan purchase agreement) were also recorded in the amount of $2.1 million. No purchase credit impaired loans were included in the sale of loans.

Loan Approvals. The Bank's loan policies and procedures establish the basic guidelines governing its lending operations. The guidelines address the type of loans that the Bank seeks, target markets, underwriting and collateral requirements, terms, interest rate and yield considerations and compliance with laws and regulations. All loans or credit lines are subject to approval procedures and amount limitations. These limitations apply to the borrower's total outstanding indebtedness to the Bank, including any indebtedness as a guarantor. The policies are reviewed and approved at least annually by the Board of Directors of the Bank. The Bank supplements its own supervision of the loan underwriting and approval process with periodic loan reviews by independent, outside professionals experienced in loan review. Responsibility for loan review, loan underwriting, and approval resides with the Chief Credit Officer position. On an annual basis, the Board of Directors of the Bank determines officers lending authority. Authorities may include loans, letters of credit, overdrafts, uncollected funds and such other authorities as determined by the Board of Directors.

Substantially all of the Company's loans have been granted to customers in the Piedmont, foothills, northwestern mountains, and the Research Triangle regions of North Carolina and the upstate region of South Carolina.

In the normal course of business, the Company makes loans to directors and officers of the Company and its subsidiaries. All loans and commitments made to such officers and directors and to companies in which they are officers, or have significant ownership interest, have been made on substantially the same terms and conditions, including interest rates and collateral, as those prevailing at the same time for comparable transactions with other customers. Loans to directors, officers and related parties are subject to comparable loan features and present the same credit risk as those of non-related parties. An analysis of these related party loans for the year ended December 31, 2013 and 2012 is as follows:

	2013			2012
	(Amounts in thousands)
Balance, beginning of year	$	15,550		$	15,783
New loans	3,233			2,436
Repayments	(2,824		)	(2,669		)
Balance, end of year	$	15,959		$	15,550

Credit Review and Evaluation. The Bank has a credit risk review department that reports to the Chief Credit Officer. The focus of the department is on policy compliance and proper grading of higher credit risk loans as well as new and existing loans on a sample basis. Additional reporting for problem/criticized assets has been developed along with an after-the-fact loan review.

The Bank uses a risk grading program to facilitate the evaluation of probable inherent loan losses and the adequacy of the allowance for loan losses for real estate, commercial and consumer loans. In this program, risk grades are initially assigned by loan officers, reviewed by regional credit officers, and further reviewed by internal credit review analysts on a test basis. The Bank strives to maintain the loan portfolio in accordance with conservative loan underwriting policies that result in loans specifically tailored to the needs of the Bank's market area. Every effort is made to identify and minimize the credit risks associated with such lending strategies.

Loans over $20,000 are risk graded on a scale from 1 (highest quality) to 8 (loss). Acceptable loans at inception are grades 1 through 4, and these grades have underwriting requirements that at least meet the minimum requirements of a secondary market source. If borrowers do not meet credit history requirements, other mitigating criteria such as substantial liquidity and low loan-to-value ratios could be considered and would generally have to be met in order to make the loan. The Bank's loan policy states that a guarantor may be necessary if reasonable doubt exists as to the borrower's ability to repay. The Board of Directors has authorized the loan officers to have individual approval authority for risk grade 1 through 4 loans up to maximum exposure limits for each customer. New or renewed loans that are graded 5 (special mention) or lower must have approval from a regional credit officer. Any changes in risk assessments as determined by loan officers, credit administrators, regulatory examiners and management are also considered.

The risk grades, normally assigned by the loan officers when the loan is originated and reviewed by the regional credit officers, are based on several factors including historical data, current economic factors, composition of the portfolio, and evaluations of the total loan portfolio and assessments of credit quality within specific loan types. In some cases, the risk grades are assigned by regional executives, depending upon dollar exposure. Because these factors are dynamic, the provision for loan losses can fluctuate. Credit quality reviews are based primarily on analysis of borrowers' cash flows, with asset values considered only as a second source of payment. Regional credit officers work with lenders in underwriting, structuring and risk grading the Bank's credits. The Risk Review Officer focuses on lending policy compliance, credit risk grading, and credit risk reviews on larger dollar exposures. Management uses the information developed from the procedures above in evaluating and grading the loan portfolio. This continual grading process is used to monitor the credit quality of the loan portfolio and to assist management in determining the appropriate levels of the allowance for loan losses.

The following is a summary of the credit risk grade definitions for all loan types:

“1” - High Quality- These loans represent a credit extension of the highest quality. The borrower's historic (at least five years) cash flows manifest extremely large and stable margins of coverage. Balance sheets are conservative, well capitalized, and liquid. After considering debt service for proposed and existing debt, projected cash flows continue to be strong and provide ample coverage. The borrower typically reflects broad geographic and product diversification and has access to alternative financial markets.

“2” - Good Quality- These loans have a sound primary and secondary source of repayment. The borrower may have access to alternative sources of financing, but sources are not as widely available as they are to a higher graded borrower. This loan carries a normal level of risk, with minimal loss exposure. The borrower has the ability to perform according to the terms of the credit facility. The margins of cash flow coverage are satisfactory but vulnerable to more rapid deterioration than the highest quality loans.

“3” - Satisfactory- The borrowers are a reasonable credit risk and demonstrate the ability to repay the debt from normal business operations. Risk factors may include reliability of margins and cash flows, liquidity, dependence on a single product or industry, cyclical trends, depth of management, or limited access to alternative financing sources. Historic financial information may indicate erratic performance, but current trends are positive. Quality of financial information is adequate, but is not as detailed and sophisticated as information found on higher graded loans. If adverse circumstances arise, the impact on the borrower may be significant.

“4” - Satisfactory - Merits Attention- These credit facilities have potential developing weaknesses that deserve extra attention from the account manager and other management personnel. If the developing weakness is not corrected or mitigated, there may be deterioration in the ability of the borrower to repay the bank's debt in the future.

“5” - Watch or Special Mention - These loans are typically existing loans, made using the passing grades outlined above, that have deteriorated to the point that cash flow is not consistently adequate to meet debt service or current debt service coverage is based on projections. Secondary sources of repayment may include specialized collateral or real estate that is not readily marketable or undeveloped, making timely collection in doubt.

“6” - Substandard- Loans and other credit extensions bearing this grade are considered inadequately protected by the current sound worth and debt service capacity of the borrower or of any pledged collateral. These obligations, even if apparently protected by collateral value, have well-defined weaknesses related to adverse financial, managerial, economic, market, or political conditions jeopardizing repayment of principal and interest as originally intended. Clear loss potential, however, does not have to exist in any individual assets classified as substandard.

“7” - Substandard Impaired (also includes any loans over 90 days past due, excluding sold mortgages )- Loans and other credit extensions graded “7” have all the weaknesses inherent in those graded “6,” with the added characteristic that the severity of the weaknesses makes collection or liquidation in full highly questionable or improbable based upon currently existing facts, conditions, and values. The probability of some loss is extremely high, but because of certain important and reasonably specific factors, the amount of loss cannot be determined. All loans in this category are considered impaired and all material loans are evaluated for a specific reserve in accordance with FAS 114 and the bank's ALLL methodology and specific reserve guidelines.

"7B"- Doubtful- Loans and other credit extensions graded “7b” have all the weaknesses inherent in those graded “7,” with the added characteristic that the severity of the weaknesses makes collection or liquidation in full highly questionable or improbable based upon currently existing facts, conditions, and values. The probability of some loss is extremely high, but because of certain important and reasonably specific factors, the amount of loss cannot be determined. Such pending factors could include merger or liquidation, additional capital injection, refinancing plans, or perfection of liens on additional collateral. Loans in this classification are placed in non-accrual status, with collections applied to principal on the bank's books and evaluated for impairment. All loans in this category are considered impaired and all material loans are evaluated for a specific reserve in accordance with FAS 114 and the bank's ALLL methodology and specific reserve guidelines.

“8” - Loss- Loans in this classification are considered uncollectible and cannot be justified as a viable asset of the Bank. Such loans are to be charged-off or charged-down. This classification does not mean the loan has absolutely no recovery value, but that it is neither practical nor desirable to defer writing off this loan even though partial recovery may be obtained in the future.

The following is a summary of credit quality indicators by class at December 31, 2013 and December 31, 2012:

Real Estate Credit Exposure as of December 31, 2013
			Commercial Real Estate
	Construction		Owner occupied		Non-owner occupied		1-4 Family		Multifamily		Home Equity
	(in thousands)
High Quality	$	—	$	—	$	—	$	90	$	—	$	161
Good Quality	356		—		1,587		982		957		6,627
Satisfactory	22,403		125,560		47,453		99,578		7,691		118,339
Merits Attention	90,343		226,320		133,072		62,242		31,686		61,026
Special Mention	14,434		20,284		7,392		5,307		551		5,075
Substandard	1,168		4,244		2,624		3,005		572		1,632
Substandard impaired	2,331		6,358		4,798		2,868		256		1,285
Doubtful	—		—		—		—		—		—
Loss	—		—		—		—		—		—
	$	131,035	$	382,766	$	196,926	$	174,072	$	41,713	$	194,145

Other Credit Exposures as of December 31, 2013
	Commercial		Consumer and other		Total Loans
	(in thousands)
High Quality	$	2,640	$	2,162	$	5,053
Good Quality	5,084		1,160		16,753
Satisfactory	63,674		21,221		505,919
Merits Attention	94,313		26,126		725,128
Special Mention	7,874		676		61,593
Substandard	9,553		32		22,830
Substandard impaired	2,305		290		20,491
Doubtful	—		—		—
Loss	—		—		—
	$	185,443	$	51,667	$	1,357,767

Real Estate Credit Exposure as of December 31, 2012
			Commercial Real Estate
	Construction		Owner  occupied		Non-owner  occupied		1-4 Family		Multifamily		Home Equity
	(in thousands)
High Quality	$	—	$	119	$	—	$	375	$	—	$	111
Good Quality	464		—		—		1,301		—		6,756
Satisfactory	22,284		115,347		58,577		95,727		7,945		118,497
Merits Attention	78,668		191,958		129,283		56,629		25,681		59,568
Special Mention	16,797		23,396		16,084		7,862		571		4,228
Substandard	3,939		4,286		2,136		2,850		601		1,687
Substandard impaired	9,829		7,856		5,409		3,867		539		1,041
Doubtful	—		—		—		—		—		—
Loss	—		—		—		—		—		—
	$	131,981	$	342,962	$	211,489	$	168,611	$	35,337	$	191,888

Other Credit Exposures as of December 31, 2012
	Commercial		Consumer and other		Total Loans
	(in thousands)
High Quality	$	2,430	$	2,289	$	5,324
Good Quality	5,738		1,316		15,575
Satisfactory	62,071		22,459		502,907
Merits Attention	82,243		24,425		648,455
Special Mention	16,809		551		86,298
Substandard	1,009		122		16,630
Substandard impaired	4,140		502		33,183
Doubtful	—		—		—
Loss	—		—		—
	$	174,440	$	51,664	$	1,308,372

Nonaccrual loans and past due loans. Nonperforming assets include loans classified as nonaccrual, foreclosed bank-owned property and loans past due 90 days or more on which interest is still being accrued. It is the general policy of the Bank to stop accruing interest for all classes of loans past due 90 days or when it is apparent that the collection of principal and/or interest is doubtful. In addition, certain restructured loans are placed on nonaccrual status until sufficient evidence of timely payment is obtained. When a loan is placed on nonaccrual status, any interest previously accrued but not collected is reversed against interest income in the current period. Amounts received on nonaccrual loans generally are applied first to principal and then to interest only after all principal has been collected. There were no financing receivables past due over 90 days accruing interest as of December 31, 2013 and December 31, 2012.

Nonperforming loans as of December 31, 2013 totaled $15.4 million, or 1.12% of total loans, compared with $22.8 million, or 1.71% of total loans, as of December 31, 2012. The Bank aggressively pursues the collection and repayment of all loans. Other nonperforming assets, such as repossessed and foreclosed collateral is aggressively liquidated by the Bank's collection department. The total number of loans on nonaccrual status has decreased from 315 at December 31, 2012 to 195 at December 31, 2013.

The following is a breakdown of nonaccrual loans as of December 31, 2013 and December 31, 2012:

	December 31, 2013		December 31, 2012
	(in thousands)
Financing Receivables on Nonaccrual status
Construction	$	2,331	$	7,385
Commercial Real Estate:
Owner occupied	4,417		5,787
Non-owner occupied	1,806		1,697
Mortgages:
1-4 Family first lien	2,734		3,123
Multifamily	256		539
Home Equity lines of credit	1,285		1,041
Commercial	2,306		2,790
Consumer and other	258		455
Total	$	15,393	$	22,817

Past due loans reported in the following table do not include loans granted forbearance terms since payments terms have been modified or extended, although the loans are past due based on original contract terms. All loans with forbearance terms are included and reported as impaired loans. Loans are considered past due if the required principal and interest income have not been received as of the date such payments were due.

The following table presents the Bank's aged analysis of past due loans:

	30-59 Days  Past Due		60-89 Days  Past Due		Greater Than  90 Days		Total Past  Due		Current		Total Loans
December 31, 2013	(in thousands)
Construction	$	855	$	207	$	541	$	1,603	$	129,432	$	131,035
Commercial real estate:
Owner occupied	1,973		—		58		2,031		380,735		382,766
Non-owner occupied	1,172		129		432		1,733		195,193		196,926
Commercial	2,029		742		142		2,913		182,530		185,443
Mortgages:
Secured 1-4 family- first lien	2,738		1,190		1,186		5,114		168,958		174,072
Multifamily	—		249		—		249		41,464		41,713
Home equity lines of credit	909		341		75		1,325		192,820		194,145
Consumer and other	322		62		52		436		51,231		51,667
Total	$	9,998	$	2,920	$	2,486	$	15,404	$	1,342,363	$	1,357,767
December 31, 2012
Construction	$	4,395	$	345	$	1,865	$	6,605	$	125,376	$	131,981
Commercial real estate:
Owner occupied	838		114		4,237		5,189		337,773		342,962
Non-owner occupied	1,688		500		1,098		3,286		208,203		211,489
Commercial	2,027		34		2,660		4,721		169,719		174,440
Mortgages:
Secured 1-4 family- first lien	2,767		910		2,226		5,903		162,708		168,611
Multifamily	12		—		10		22		35,315		35,337
Home equity lines of credit	1,980		52		924		2,956		188,932		191,888
Consumer and other	236		45		342		623		51,041		51,664
Total	$	13,943	$	2,000	$	13,362	$	29,305	$	1,279,067	$	1,308,372

Impaired Loans. Management considers certain loans graded “substandard impaired” (loans graded 7), "doubtful" (loans graded 7B) or “loss” (loans graded 8) to be individually impaired and may consider “substandard” loans (loans graded 6) individually impaired depending on the borrower's payment history. The Bank measures impairment based upon probable cash flows or the value of the collateral. Collateral value is assessed based on collateral value trends, liquidation value trends, and other liquidation expenses to determine logical and credible discounts that may be needed. Updated appraisals are required for all impaired loans and typically at renewal or modification of larger loans if the appraisal is more than 12 months old.

Impaired loans for all classes of loans typically include nonaccrual loans, loans over 90 days past due still accruing, troubled debt restructured loans and other potential problem loans considered impaired based on other underlying factors. Troubled debt restructured loans are those for which concessions, including the reduction of interest rates below a rate otherwise available to that borrower or the deferral of interest or principal have been granted due to the borrower's weakened financial condition. Interest on troubled debt restructured loans is accrued at the restructured rates when it is anticipated that no loss of remaining principal will occur and a sustained payment performance period is obtained. Due to the borrowers' inability to make the payments required under the original loan terms, the Bank modifies the terms by granting a longer amortized repayment structure or reduced interest rates.  Potential problem loans are loans which are currently performing and are not included in nonaccrual or restructured loans above, but about which we have serious doubts as to the borrower's ability to comply with present repayment terms. These loans are likely to be included later in nonaccrual, past due or troubled debt restructured loans, so they are considered by management in assessing the adequacy of the allowance for loan losses.

Impaired loans under $250,000 are collectively reviewed for impairment based on homogeneous pools established for each class of impaired loans with similar risk characteristics in accordance with ASC 310-10-35-21 and are not included with non-impaired loans. Separate loss given probability of default rates are calculated for each impaired pool representing the risk associated with impaired loans less than $250,000 for that pool of loans. Total impaired loans under $250,000 collectively evaluated were $6.2 million and $7.8 million, respectively, as of December 31, 2013 and December 31, 2012. Reserves on impaired loans collectively evaluated were $2.1 million and $2.2 million as of December 31, 2013 and December 31, 2012, respectively. The following table presents the Bank's investment in loans individually reviewed for impairment and related information on those impaired loans as of December 31, 2013 and December 31, 2012:

	As of December 31, 2013						Year to Date December 31, 2013
	Recorded  Investment		Unpaid  Principal  Balance		Related  Allowance		Average  Recorded  Investment		Interest Income Recognized
	(in thousands)
Impaired loans without a related allowance for loan losses
Construction	$	2,816	$	2,997	$	—	$	4,764	$	107
Commercial real estate:
Owner occupied	5,445		5,981		—		4,449		117
Non-owner occupied	4,469		4,537		—		5,202		210
Commercial	4,095		4,502		—		4,416		171
Mortgages:
Secured 1-4 family real estate	661		731		—		692		29
Multifamily	—		—		—		197		—
Home equity lines of credit	425		477		—		454		—
Consumer and other	—		—		—		—		—
Impaired loans with a related allowance for loan losses
Construction	$	200	$	215	$	40	$	915	$	25
Commercial real estate:
Owner occupied	5,131		5,172		201		6,380		237
Non-owner occupied	645		645		50		399		10
Commercial	308		313		105		715		2
Mortgages:
Secured 1-4 family real estate	331		341		161		442		4
Multifamily	—		—		—		—		—
Home equity lines of credit	—		—		—		400		2
Consumer and other	—		—		—		—		—
Total impaired loans
Construction	$	3,016	$	3,212	$	40	$	5,679	$	132
Commercial real estate:
Owner occupied	10,576		11,153		201		10,829		354
Non-owner occupied	5,114		5,182		50		5,601		220
Commercial	4,403		4,815		105		5,131		173
Mortgages:
Secured 1-4 family real estate	992		1,072		161		1,134		33
Multifamily	—		—		—		197		—
Home equity lines of credit	425		477		—		854		2
Consumer and other	—		—		—		—		—
Total impaired loans individually reviewed for impairment	$	24,526	$	25,911	$	557	$	29,425	$	914

	As of December 31, 2012						Year to Date December 31, 2012
	Recorded Investment		Unpaid  Principal  Balance		Related  Allowance		Average Recorded Investment		Interest Income Recognized
	(in thousands)
Impaired loans without a related allowance for loan losses
Construction	$	6,212	$	7,676	$	—	$	18,748	$	307
Commercial real estate:
Owner occupied	6,563		7,071		—		15,175		228
Non-owner occupied	4,976		5,358		—		7,399		254
Commercial	4,460		4,482		—		6,350		143
Mortgages:
Secured 1-4 family real estate	1,435		1,503		—		2,364		42
Multifamily	530		565		—		701		—
Home equity lines of credit	705		800		—		1,424		13
Consumer and other	—		—		—		—		—
Impaired loans with a related allowance for loan losses
Construction	$	1,958	$	2,136	$	191	$	2,929	$	4
Commercial real estate:
Owner occupied	4,961		5,082		189		5,163		326
Non-owner occupied	561		643		89		2,212		63
Commercial	1,193		1,245		928		2,249		8
Mortgages:
Secured 1-4 family real estate	—		—		—		347		10
Multifamily	—		—		—		—		2
Home equity lines of credit	—		—		—		36		—
Consumer and other	—		—		—		51		—
Total impaired loans
Construction	$	8,170	$	9,812	$	191	$	21,677	$	311
Commercial real estate:
Owner occupied	11,524		12,153		189		20,338		554
Non-owner occupied	5,537		6,001		89		9,611		317
Commercial	5,653		5,727		928		8,599		151
Mortgages:
Secured 1-4 family real estate	1,435		1,503		—		2,711		52
Multifamily	530		565		—		701		2
Home equity lines of credit	705		800		—		1,460		13
Consumer and other	—		—		—		51		—
Total impaired loan individually reviewed for impairment	$	33,554	$	36,561	$	1,397	$	65,148	$	1,400

Impaired loans acquired in business combinations without a related allowance for loan losses includes loans for which no additional reserves have been recorded in excess of credit discounts for purchased impaired loans. Impaired loans acquired with subsequent deterioration and related allowance for loan losses are loans in which additional impairment has been identified in excess of credit discounts resulting in additional reserves. These additional reserves are included in the allowance for loan losses related to purchased impaired loans and were $3,567 and $6,672 as of December 31, 2013 and December 31, 2012, respectively.

At December 31, 2013, the outstanding balance of purchased impaired loans from American Community Bancshares, Inc. ("American Community"), which includes principal, interest and fees due, was $90,741. Because of the uncertainty of the expected cash flows, the Company is accounting for each purchased impaired loan under the cost recovery method, in which all cash payments are applied to principal. Thus, there is no accretable yield associated with the above loans.

Troubled Debt Restructured Loans. Total amount of troubled debt restructured loans outstanding as of December 31, 2013 was $21.5 million with related reserves of $1.2 million. Approximately $15.3 million of troubled debt restructured loans are accruing interest as of December 31, 2013, as these loans have sufficient evidence of paying according to the new restructured terms to warrant a return to accrual status. Total amount of troubled debt restructured loans outstanding as of December 31, 2012 was $23.7 million with related reserves of $746,581. Approximately $17.7 million of troubled debt restructured loans are accruing interest as of December 31, 2012, as these loans have sufficient evidence of paying according to the new restructured terms.

The following tables include the recorded investment and number of modifications for troubled debt restructured loans for the year ended December 31, 2013 and December 31, 2012. The Company reports the recorded investment in the loans prior to a modification and also the recorded investment in the loans after the loans were restructured. Reductions in the recorded investment are primarily due to the partial charge-off of the principal balance prior to modification.

	Year ended December 31, 2013					Year ended December 31, 2012
	Number of Loans	Recorded Investment Prior to Modification		Recorded Investment After Modification		Number of Loans	Recorded Investment Prior to Modification		Recorded Investment After Modification
		(in thousands)					(in thousands)
Below market interest rate
Construction	1	$	215	$	200	—	$	—	$	—
Commercial real estate:
Non-owner occupied	2	1,220		1,139		—	—		—
Total	3	1,435		1,339		—	—		—
Extended payment terms
Construction	—	—		—		5	1,231		872
Commercial real estate:
Non-owner occupied	1	167		165		6	5,329		4,990
Owner occupied	4	1,319		1,316		9	2,443		2,379
Commercial	—	—		—		7	2,676		2,286
1-4 Family Residential	—	—		—		4	1,259		1,130
Consumer	—	—		—		1	27		24
Total	5	1,486		1,481		32	12,965		11,681
Principal payment reduction
Commercial real estate:
Owner occupied	—	—		—		2	571		571
Consumer	—	—		—		1	165		9
Total	—	—		—		3	736		580
Total	8	$	2,921	$	2,820	35	$	13,701	$	12,261

The following tables present loans that were modified as troubled debt restructurings during the previous twelve months and for which there was a payment default during the year ended December 31, 2012. There were no loans modified as troubled debt restructurings during the previous twelve months and for which there was a payment default during the year ended December 31, 2013.

	Year ended December 31, 2013			Year ended December 31, 2012
	Number of loans	Recorded investment		Number of loans	Recorded investment
Extended payment terms
Commercial real estate:
Non-owner occupied	—	$	—	1	$	—
Owner occupied	—	—		1	93
Secured 1-4 family mortgages	—	—		1	170
Consumer	—	—		1	24
Total	—	—		4	287
Total	—	$	—	4	$	287

Allowance for Loan Losses. The allowance for loan losses is a reserve established through a provision for loan losses charged to expense, which represents management's best estimate for probable losses that have been incurred within the existing portfolio of loans. The primary risks inherent in the Bank's loan portfolio, including the adequacy of the allowance or reserve for loan losses, are based on management's assumptions regarding, among other factors, general and local economic conditions, which are difficult to predict and are beyond the Bank's control. In estimating these risks, and the related loss reserve levels, management also considers the financial conditions of specific borrowers and credit concentrations with specific borrowers, groups of borrowers, and industries.

The allowance for loan losses is adjusted by direct charges to provision expense. Losses on loans are charged against the allowance for loan losses in the accounting period in which they are determined by management to be uncollectible. Recoveries during the period are credited to the allowance for loan losses. The provision for loan losses was a recovery of losses of $(2.7) million for the year ended December 31, 2013 as compared to a provision of $40.4 million for the year ended December 31, 2012 and $20.8 million for the year ended December 31, 2011. The provision expense is determined by management with the use of the Bank's allowance for loan losses model. The components of the model are specific reserves for impaired loans and a general allocation for unimpaired loans. The general allocation has two components, an estimate based on historical loss experience and an additional estimate based on internal and external environmental factors due to the uncertainty of historical loss experience in predicting current embedded losses in the portfolio that will be realized in the future.

The portion of the general allocation on environmental factors includes estimates of losses related to interest rate trends, unemployment trends, real estate characteristics, past due and nonaccrual trends, watch list trends, charge-off trends, and underwriting and servicing assessments. Markets served by the Bank continue to experience softening from the general economy and declines in real estate values. The real estate characteristics component includes trends in real estate concentrations, exceptions to FDIC guidelines for loan-to-value ratios, and changes in real estate market values. Other factors impacting the allowance at December 31, 2013 were watch list trends, unemployment rate trends, and underwriting and servicing assessments.

The following table presents changes in the allowance for loan losses for the years ended December 31, 2013 and 2012:

	December 31, 2012		Charge-offs		Recoveries		Provision (Recovery)			December 31, 2013
	(Amounts in thousands)
Construction	$	4,269	$	2,104	$	1,007	$	(3	)	$	3,169
Commercial real estate:
Owner occupied	4,374		383		120		(1,022		)	3,089
Non-owner occupied	3,935		224		134		(1,764		)	2,081
Commercial	4,291		2,923		1,287		1,078			3,733
Mortgages:
Secured 1-4 family- first lien	3,191		871		253		(205		)	2,368
Multifamily	594		—		—		(158		)	436
Home equity lines of credit	3,822		1,037		568		(697		)	2,656
Consumer and other	673		330		102		86			531
	$	25,149	$	7,872	$	3,471	$	(2,685	)	$	18,063
	December 31, 2011		Charge-offs		Recoveries		Provision			December 31, 2012
	(Amounts in thousands)
Construction	$	8,214	$	17,825	$	1,138	$	12,742		$	4,269
Commercial real estate:
Owner occupied	5,792		7,334		165		5,751			4,374
Non-owner occupied	4,668		9,830		664		8,433			3,935
Commercial	5,712		7,796		956		5,419			4,291
Mortgages:
Secured 1-4 family- first lien	3,726		3,512		215		2,762			3,191
Multifamily	805		347		—		136			594
Home equity lines of credit	3,310		4,360		186		4,686			3,822
Consumer and other	621		752		359		445			673
	$	32,848	$	51,756	$	3,683	$	40,374		$	25,149

The following tables provide the breakdown of allowance for loan losses for collectively evaluated and individually evaluated loans by type as of December 31, 2013 and December 31, 2012.

	Reserves for  loans  individually  evaluated for  impairment		Loans  individually  evaluated for  impairment		Reserves for  loans  collectively  evaluated for  impairment		Loans  collectively  evaluated for  impairment
As of December 31, 2013	(Amounts in thousands)
Construction	$	40	$	3,016	$	3,129	$	128,019
Commercial real estate:
Owner occupied	201		10,576		2,888		372,190
Non-owner occupied	50		5,114		2,031		191,812
Commercial	105		4,403		3,628		181,040
Mortgages:
Secured 1-4 family- first lien	161		992		2,207		173,080
Multifamily	—		—		436		41,713
Home equity lines of credit	—		425		2,656		193,720
Consumer and other	—		—		531		51,667
	$	557	$	24,526	$	17,506	$	1,333,241
	Reserves for  loans  individually  evaluated for  impairment		Loans  individually  evaluated for  impairment		Reserves for  loans  collectively  evaluated for  impairment		Loans  collectively  evaluated for  impairment
As of December 31, 2012	(Amounts in thousands)
Construction	$	191	$	8,170	$	4,078	$	123,811
Commercial real estate:
Owner occupied	189		11,524		4,185		331,438
Non-owner occupied	89		5,537		3,846		205,952
Commercial	928		5,653		3,363		168,787
Mortgages:
Secured 1-4 family- first lien	—		1,435		3,191		167,176
Multifamily	—		530		594		34,807
Home equity lines of credit	—		705		3,822		191,183
Consumer and other	—		—		673		51,664
	$	1,397	$	33,554	$	23,752	$	1,274,818

The allowance model is applied to determine the specific allowance balance for impaired loans and the general allowance balance for unimpaired loans grouped by loan type.

The Company's loan charge-off policy for all loan classes is to charge down loans to net realizable value once a portion of the loan is determined to be uncollectable, and the underlying collateral shortfall is assessed. Unsecured loans (primarily consumer loans) are charged off against the reserve once the loan becomes 90 days past due or it is determined that a portion of the loan is uncollectable. Secured loans (primarily construction, real estate, commercial and other loans) are moved to nonaccrual status when the loan becomes 90 days delinquent or a portion of the loan is determined to be uncollectable and supporting collateral is not considered to be sufficient to cover potential losses. Nonaccrual loans are reviewed at least quarterly to determine if all or a portion of the loan is uncollectable. Nonaccrual loans that are determined to be solely collateral dependent are promptly charged down to net realizable value upon determination that they are impaired.

In addition to the allowance for loan losses, the Company also estimates probable losses related to unfunded lending commitments, such as letters of credit, financial guarantees and unfunded loan commitments. Unfunded lending commitments are analyzed and segregated by loan classification. These classifications, in conjunction with an analysis of historical loss experience, current economic conditions, performance trends within specific portfolio segments and any other pertinent information, result in the estimation of the reserve for unfunded lending commitments. The reserve for credit losses related to unfunded lending commitments was $116,309 and $182,489 as of December 31, 2013 and December 31, 2012, respectively.

The Company maintains reserves for mortgage loans sold to agencies and investors in the event that, either through error or disagreement between the parties, the Company is required to indemnify the purchase.  The reserves take into consideration risks associated with underwriting, key factors in the mortgage industry, loans with specific reserve requirements, past due loans and potential indemnification by the Company.  Reserves are estimated based on consideration of factors in the mortgage industry such as declining collateral values and rising levels of delinquency, default and foreclosure, coupled with increased incidents of quality reviews at all levels of the mortgage industry seeking justification for pushing back losses to loan originators and wholesalers.  As of December 31, 2013, the Company had reserves for mortgage loans sold of $216,687, and charges against reserves for the year ended December 31, 2013 were $83,198. For the year ended December 31, 2013, the Company recorded $1.4 million in negative provision expense related to potential repurchase and warranties exposure on the $254.5 million in loan sales that occurred during that period, respectively.  Reduction in provisions for the year ended December 31, 2013 were primarily the result of decreased mortgage activity as Sidus Financial, LLC ("Sidus") started to significantly scale back its wholesale operations and completely exited the wholesale market in 2012. The Company also saw improvements in historical loss experience, and declines in specific reserves as claims were paid and settled from previously established reserves. The historical loss factor decreased from 1.37%% in 2011 to 1.16%% in 2012.  Further, the historical loss factor was adjusted to take into account lower exposure to loss by Sidus due to limitations on loss events included in the purchase agreement pursuant to which the loans were sold.  The adjustment factor also is weighted to take into account the greater likelihood of loan “put-backs” originated in the years most recently preceding the current year.  Given both the decrease in the historical loss factor and the reduction in volume of Sidus’ wholesale operations in the most recent years of 2011 and 2012, the general component of the reserve correspondingly was reduced.  In early 2013, three of the largest claims were settled and paid out of the specific reserves, which resulted in a reduction of the specific component of the reserves by approximately $125,000. In addition, Sidus Financial discontinued its business and was dissolved in 2013 in accordance with the provisions of the North Carolina Limited Liability Company Act which limited future liability for loans previously sold by Sidus Financial. As of December 31, 2012, the Company had reserves for mortgage loans sold of $1.7 million, and charges against the reserves for the year ended December 31, 2012 were $488,012. For the year ended December 31, 2012, the Company recorded $392,103 in provision expense related to potential repurchase and warranties exposure. For the years ended December 31, 2013 and 2012, the Company did not repurchase any mortgage loans sold. As of December 31, 2011, the Company had reserves for mortgage loans sold of $1.8 million, and charges against the reserves for the year ended December 31, 2011 were $809,282. For the year ended December 31, 2011, the Company recorded $640,893 in provision expense related to potential repurchase and warranties exposure.

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Fair Value

12 Months Ended

Dec. 31, 2013

Fair Value Disclosures [Abstract]

Fair Value

FAIR VALUE

The Company utilizes fair value measurements to record fair value adjustments for certain assets and liabilities and to determine fair value disclosures. Available-for-sale securities, interest rate swaps, mortgage servicing rights, interest rate lock commitments and forward sale loan commitments are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record other assets at fair value, such as loans held-for-investment and certain other assets. These nonrecurring fair value adjustments usually involve writing the asset down to fair value or the lower of cost or market value.

Fair Value Hierarchy

The Company groups assets and liabilities at fair value 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, under the Fair Market Value Measurements and Disclosures topic of the FASB Accounting Standards Codification. These levels are:

Level 1	Valuation is based upon quoted prices for identical instruments traded in active markets.
Level 2	Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
Level 3	Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

The following is a description of valuation methodologies used for assets and liabilities recorded at fair value.

Available-for-Sale Investment Securities

Available-for-sale investment securities are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities and private label entities, municipal bonds and corporate debt securities. There have been no changes in valuation techniques for the year ended December 31, 2013. Valuation techniques are consistent with techniques used in prior periods.

Interest Rate Swaps

Interest rate swaps are recorded at fair value on a recurring basis. Fair value measurement is based on discounted cash flow models run by a third-party on a monthly basis. All future floating cash flows are projected and both floating and fixed cash flows are discounted to the valuation date. As a result, the Company classifies interest rate swaps as Level 3.

The following tables present a rollforward of interest rate swaps for the years ended December 31, 2013 and 2012:

	Level 3
	Fair Value- Assets			Fair Value- Liabilities
	(Amounts in thousands)
Balance, December 31, 2011	$	216		$	216
Purchases, sales, issuances and settlements	—			—
Gains (losses) included in other income	(20		)	(20		)
Balance, December 31, 2012	$	196		$	196
Balance, December 31, 2012	$	196		$	196
Purchases, sales, issuances and settlements	—			—
Gains (losses) included in other income	(64		)	(64		)
Balance, December 31, 2013	$	132		$	132

Interest Rate Locks and Forward Loan Sale Commitments

The Company's mortgage lending division enters into interest rate lock commitments and commitments to sell mortgages. At December 31, 2013, the amount of fair value associated with these interest rate lock commitments and sale commitments was $(23,000) and $147,000, respectively. At December 31, 2012, the amount of fair value associated with these interest rate lock commitments and sale commitments was $873,000 and $(481,000), respectively. The fair value of interest rate lock commitments 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, typically month end.

The Company classifies interest rate lock commitments as Level 3. The fair value of forward sales commitments is based on changes in loan pricing between the commitment date and period end. The Company classified forward sale commitments as Level 2. There have been no changes in valuation techniques for the year ended December 31, 2013. Valuation techniques are consistent with techniques used in prior periods.

The following table presents a rollforward of interest rate lock commitments for the years ended December 31, 2013 and 2012, respectively.

	Interest Rate Lock Commitments
	Level 3
	Fair Value			Fair Value
	(In thousands)
Balance, December 31, 2012 and 2011	$	873		$	130
Gains (losses) included in other income	(896		)	743
Transfer in and out	—			—
Balance, December 31, 2013 and 2012	$	(23	)	$	873

Mortgage Servicing Rights

A valuation of mortgage servicing rights is performed using a pooling methodology. Similar loans are pooled together and evaluated on a discounted earnings basis to determine the present value of future earnings. The present value of the future earnings is the estimated market value for the pool, calculated by a third party at least semi-annually, using assumptions that a third party purchaser would utilize in evaluating a potential acquisition of the servicing. As such, the Company classifies loan servicing rights as a Level 3 asset. There have been no changes in valuation techniques for the year ended December 31, 2013. Valuation techniques are consistent with techniques used in prior periods.

The following table presents a rollforward of mortgage servicing rights for the years ended December 31, 2013 and 2012 and shows that the mortgage servicing rights are classified as Level 3 as discussed above.

	Level 3
	Fair Value		Fair Value
	(In thousands)
Balance, December 31, 2012 and 2011	$	2,525	$	1,871
Capitalized	1,387		1,101
Gains (losses) included in other income	624		(447		)
Balance, December 31, 2013 and 2012	$	4,536	$	2,525

Mortgage Loans Held-for-Sale

Loans held-for-sale are carried at lower of cost or market value. The fair value of loans held-for-sale is based on what secondary markets are currently offering for portfolios with similar characteristics. The changes in fair value of the assets are largely driven by changes in interest rates subsequent to loan funding and changes in the fair value of servicing associated with the mortgage loan held for sale. As such, the Company classifies loans held for sale as a Level 2 asset. At December 31, 2013 and 2012, the cost of the Company's mortgage loans held-for-sale was less than the market value. Accordingly, the Company's loans held-for-sale are carried at cost. There have been no changes in valuation techniques for the year ended December 31, 2013. Valuation techniques are consistent with techniques used in prior periods.

Impaired Loans

The Company does not record loans held-for-investment at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment in accordance with the Receivables topic of the FASB Accounting Standards Codification. The fair value of impaired loans is estimated using one of several methods, including collateral value (through appraisal processes and applying liquidity discounts and deducting expected selling costs), market value of similar debt, enterprise value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At December 31, 2013, the majority of impaired loans were evaluated based on discounted cash flows or the fair value of the collateral by obtaining third-party appraisals and applying liquidity discounts. Third party appraisals are obtained at least annually for all impaired loans greater than $250,000. The Company records impaired loans as nonrecurring Level 3. There have been no changes in valuation techniques for the year ended December 31, 2013. Valuation techniques are consistent with techniques used in prior periods.

Other Real Estate Owned

Other real estate owned (“OREO”) is adjusted to fair value upon transfer of the loans to OREO. Subsequently, OREO is carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management's estimation of the value of the collateral (through appraisal processes and applying liquidity discounts and deducting expected selling costs). When the fair value of the collateral is measured due to further deterioration in the value of the OREO since initial recognition, the Company records the foreclosed asset as nonrecurring Level 3. The current carrying value of OREO at December 31, 2013 is $3.3 million. At December 31, 2012 the carrying value of OREO was $8.7 million. There have been no changes in valuation techniques for the year ended December 31, 2013. Valuation techniques are consistent with techniques used in prior periods.

The following table presents assets and (liabilities) measured at fair value on a recurring basis:

December 31, 2013 (in thousands)	Fair Value			Level 1		Level 2		Level 3
Available-for-sale securities:
U.S. government agencies	$	16,392		$	—	$	16,392	$	—
Government sponsored agencies:
Residential mortgage-backed securities	103,441			—		103,441		—
Collateralized mortgage obligations	52,743			—		52,743		—
Private label collateralized mortgage obligations	14,491			—		14,491		—
State and municipal securities	98,704			—		98,704		—
Common and preferred stocks	3,151			3,151		—		—
Interest rate swap agreements	132			—		—		132
Interest rate swap agreements	(132		)	—		—		(132		)
Interest rate lock commitments	(23		)	—		—		(23		)
Forward loan sale commitments	147			—		147		—
Mortgage servicing rights	4,536			—		—		4,536

December 31, 2012 (in thousands)	Fair Value			Level 1		Level 2			Level 3
Available-for-sale securities:
U.S. government agencies	$	27,527		$	—	$	27,527		$	—
Government sponsored agencies:
Residential mortgage-backed securities	107,257			—		107,257			—
Collateralized mortgage obligations	122,593			—		122,593			—
Private label collateralized mortgage obligations	1,045			—		1,045			—
State and municipal securities	84,564			—		84,564			—
Common and preferred stocks	133			133		—			—
Interest rate swap agreements	196			—		—			196
Interest rate swap agreements	(196		)	—		—			(196		)
Interest rate lock commitments	873			—		—			873
Forward loan sale commitments	(481		)	—		(481		)	—
Mortgage servicing rights	2,525			—		—			2,525

Quantitative Information about Level 3 Fair Value Measurements

	Fair Value at December 31, 2013 (in thousands)			Valuation Technique	Unobservable Input	Range (Weighted Avg)
Recurring measurements:
Interest Rate Swaps	$	132		Discounted cash flow	Discount rate	0.5	%
Interest Rate Lock Commitments	(23		)	Pricing model	Pull through rates	86.4	%
Mortgage Servicing Rights	4,536			Discounted cash flow	Constant prepayment rate	9.72	%
					Cost of service	$50
					Discount rate	8	%
Nonrecurring measurements:
Impaired loans	$	6,058		Discounted appraisals	Collateral discounts and discounted cash flows	15-50%
Other real estate owned	1,034			Discounted appraisals	Collateral discounts	15	%

	Fair Value at December 31, 2012 (in thousands)		Valuation Technique	Unobservable Input	Range (Weighted Avg)
Recurring measurements:
Interest Rate Swaps	$	196	Discounted cash flow	Discount rate	1.0	%
Interest Rate Lock Commitments	873		Pricing model	Pull through rates	83.9	%
Mortgage Servicing Rights	2,525		Discounted cash flow	Constant prepayment rate	17.96	%
				Cost of service	$50
				Discount rate	8	%
Nonrecurring measurements:
Impaired loans	$	7,276	Discounted appraisals	Collateral discounts and discounted cash flows	10-50%
Other real estate owned	5,281		Discounted appraisals	Collateral discounts	15	%

The unobservable input used in the fair value measurement of the Company's interest rate swap agreements is the discount rate.  A significant increase (decrease) in the discount rate could result in a significantly lower (higher) fair value measurement.  The discount rate is determined by the third-party by obtaining third party market quotes from Reuters, which handle up to 30 year swap maturities. The Company's asset liability management team periodically reviews the discount rates utilized in determining the fair value of the interest rate swap agreements.

The significant unobservable input used in the fair value measurement of the Company's interest rate lock commitments is the 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 are estimated to close) will result in the fair value of the interest rate lock commitments to increase if in a gain position, or decrease if 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 by our secondary marketing system using historical data and the ratio is periodically reviewed by the Company's mortgage banking division.

The significant unobservable inputs used in the fair value measurement and the Company's loss to mortgage servicing rights are the weighted average constant prepayment rate and weighted average discount rate and cost to service. Significant increases (decreases) in any of those inputs in isolation could result in a significantly lower (higher) fair value measurement.  Although the constant prepayment rate and the discount rate are not directly interrelated, they will generally move in opposite directions. The Company utilizes an independent third-party to estimate the fair value of mortgage servicing rights through use of a discounted cash flow model to calculate the present value of estimated future net servicing income based on observable and unobservable inputs into the model to arrive at an estimated fair value.  To assess the reasonableness of the fair value measurement, the fair value and constant prepayment rates are compared to forward-looking estimates by the Company. 

The following table presents assets measured at fair value on a nonrecurring basis:

	Fair Value		Level 1		Level 2		Level 3
December 31, 2013	(Amounts in thousands)
Other real estate owned	$	1,034	$	—	$	—	$	1,034
Impaired loans:
Construction	160		—		—		160
Commercial real estate:
Owner occupied	4,930		—		—		4,930
Non-owner occupied	595		—		—		595
Commercial	203		—		—		203
Mortgages:
Secured 1-4 family real estate	170		—		—		170
Multifamily	—		—		—		—
Home equity lines of credit	—		—		—		—
Consumer and other	—		—		—		—

	Fair Value		Level 1		Level 2		Level 3
December 31, 2012	(Amounts in thousands)
Other real estate owned	$	5,281	$	—	$	—	$	5,281
Impaired loans:
Construction	1,767		—		—		1,767
Commercial real estate:
Owner occupied	4,772		—		—		4,772
Non-owner occupied	472		—		—		472
Commercial	265		—		—		265
Mortgages:
Secured 1-4 family real estate	—		—		—		—
Multifamily	—		—		—		—
Home equity lines of credit	—		—		—		—
Consumer and other	—		—		—		—

There were no transfers between valuation levels for any assets during the year ended December 31, 2013 or the year ended December 31, 2012. If different valuation techniques are deemed necessary, we would consider those transfers to occur at the end of the period when the assets are valued.

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Stock Options and Restricted Stock

12 Months Ended

Dec. 31, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Options and Restricted Stock

STOCK OPTIONS AND RESTRICTED STOCK

The Company has stock option plans for directors, selected executive officers and other key employees. The plans provide for the granting of options to purchase shares of the Company’s common stock at a price not less than the fair market value at the date of grant of the option. Option exercise prices are established at market value on the grant date. Vesting schedules are determined by the Board of Directors. Upon termination, unexercised options held by employees are forfeited and made available for future grants.

During the year ended December 31, 2013, 3,411 stock options were vested and 1,666 options were granted resulting in 2,757 unvested options at December 31, 2013. There was no intrinsic value of option grants in 2013 since options are granted at the market price of the stock on date of grant. The weighted average fair value of the options granted in 2013 was $7.55 and was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions: dividend yield of 0.00%; expected volatility of 101.70%; risk-free interest rate of 1.00%; and expected life of 7 years. There were no options exercised during the year ended December 31, 2013. During the year ended December 31, 2012, 4,033 stock options were vested and 1,166 options were granted resulting in 4,500 unvested options at December 31, 2012. There was no intrinsic value of option grants in 2012 since options are granted at the market price of the stock on date of grant. The weighted average fair value of the options granted in 2012 were $8.07 and was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions: dividend yield of 0.00%; expected volatility of 100.62%; risk-free interest rate of 1.26%; and expected life of seven years. There were no options exercised during the year ended December 31, 2012. There were no options granted or exercised during the year ended December 31, 2011. Total options outstanding at December 31, 2013 and 2012 were 51,673 and 83,203, respectively.

The following table presents certain option information for the year ended December 31, 2013:

	Outstanding Options				Exercisable Options
	Number of options		Weighted-average exercise price		Number of options		Weighted-average exercise price
At December 31, 2012	83,203		$	40.47	78,701		$	41.40
Options authorized	—		—		—		—
Options granted/vested	1,666		9.12		3,411		27.14
Options exercised	—		—		—		—
Options expired	(22,486	)	43.78		(22,486	)	43.78
Options forfeited	(10,710	)	40.55		(10,710	)	40.55
At December 31, 2013	51,673				48,916

At December 31, 2013, the weighted-average remaining contractual life of outstanding and exercisable options was 3.3 years and 3.1 years, respectively. At December 31, 2012, the weighted average remaining contractual life of outstanding and exercisable options was 2.9 years and 2.6 years, respectively.

The following table segregates the shares outstanding at December 31, 2013 into meaningful ranges:

Shares	Option Price per share ($)	Weighted-average remaining contractual life (years)	Weighted-average exercise price ($)	Shares excercisable December 31, 2013
4,498	9.12-11.52	7.81	10.18	2,275
2,666	20.37-20.70	5.52	20.49	2,132
6,384	28.20-31.38	4.05	29.90	6,384
1,015	34.68-35.97	3.05	35.07	1,015
12,482	38.37-41.73	2.14	41.42	12,482
23,795	42.00-46.95	2.67	45.00	23,795
833	57.21	3.05	57.21	833
51,673				48,916

All options expire ten years after date of grant and are made available for future grants at expiration.

As of December 31, 2013, there are 211,159 restricted shares outstanding, of which 34,316 shares of restricted stock are vested and 176,843 shares are nonvested. There were 3,242 shares of restricted stock issued during the year ended December 31, 2013 at an average fair value of $12.65, and no restricted shares were forfeited.

As of December 31, 2012, there were 207,917 restricted shares outstanding, of which 14,549 shares of restricted stock were vested and 235,118 shares were nonvested. There were 169,143 shares of restricted stock issued during the year ended December 31, 2012 at an average fair value of $6.96, and 15,554 restricted shares were forfeited. Of the restricted shares issued in 2012, 163,328 were issued with performance and service conditions. Vesting of these shares are based on achieving certain earnings per share and credit performance standards and require a minimum of 2-years of service. Shares issued with performance conditions are granted at-the-money, and contingently vest over a period of 1 to 3 years. The fair value of the shares granted with performance conditions was estimated on the date of grant and assumes that performance goals will be achieved. Restricted shares with performance and service conditions have been recognized based on the assumption that performance thresholds will be met. Year one performance conditions were met in 2012, and it is highly probable that year two performance conditions will also be met; although service conditions still need to be completed for the shares to be fully vested. Compensation cost is recognized only for those awards that ultimately vest.

During the year ended December 31, 2011, there were 48,329 shares of restricted stock granted at an average fair value of $7.02 per share. The fair value of each share grant is based on the closing market price of the stock on the date of issuance.

There are 315,998 shares of common stock available for future grant of restricted stock and stock options under the Company's 2008 Omnibus Stock Ownership and Long Term Incentive Plan (the "Omnibus Plan") and the 2013 Equity Incentive Plan (the "2013 Equity Plan").

The compensation expense related to options and restricted shares was $21,882 and $480,249, respectively, for the year ended December 31, 2013, respectively. The compensation expense related to options and restricted shares was $31,621 and $388,187 for the year period ended December 31, 2012, respectively. Compensation expense related to options and restricted shares was $76,903 and $133,071 for the year ended December 31, 2011, respectively. As of December 31, 2013, there was $544,896 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under all of the Company's stock benefit plans. This cost is expected to be recognized over an average vesting period of 1.3 years.

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Income Taxes - Net Operating Loss Carryforwards (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013
Operating Loss Carryforwards
Loss Carryforwards	$ 66,974
Yadkin Valley Federal Tax
Operating Loss Carryforwards
Loss Carryforwards	35,582
Yadkin Valley State Tax
Operating Loss Carryforwards
Loss Carryforwards	28,623
Cardinal State Bank acquisition
Operating Loss Carryforwards
Loss Carryforwards	2,424
American Community Bank acquisition
Operating Loss Carryforwards
Loss Carryforwards	$ 345

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Borrowed Funds

12 Months Ended

Dec. 31, 2013

Debt Disclosure [Abstract]

Borrowed Funds

BORROWED FUNDS

Short-term borrowings at December 31, 2013 and 2012 are presented in the following tables. Borrowings from the Federal Reserve are payable on demand and are collateralized by state, county and municipal securities (refer to Note 2). Interest under this arrangement is payable at 50 basis points above the target federal funds rate as quoted by the Federal Reserve Board. Unused lines of credit from various correspondent banks totaled $152.1 million at December 31, 2013.

Short-Term Borrowings Excluding Federal Home Loan Bank ("FHLB") Advances
	Balance at year end		Weighted average interest rate at year end		Maximum amount outstanding at any month-end		Average Daily balance outstanding during year		Average annual interest rate paid
December 31, 2013
Overnight borrowings from the Federal Reserve Bank	$	—	—	%	$	—	$	—	—
Securities sold under agreement to repurchase	28,260,325		0.25	%	39,891,850		34,870,805		0.25	%
Federal funds purchased	—		—	%	2,866,667		267,567		0.65	%
Total short-term borrowings excluding FHLB advances	$	28,260,325
December 31, 2012
Overnight borrowings from the Federal Reserve Bank	$	—	—	%	$	—	$	6,225	—	%
Securities sold under agreement to repurchase	39,191,902		0.84	%	39,191,903		36,449,509		0.79	%
Federal funds purchased	—		—	%	—		13,790		0.61	%
Total short-term borrowings excluding FHLB advances	$	39,191,902

The principal balance of short term advances from the FHLB consist of the following at December 31, 2013. There were no short term advances from the FHLB at December 31, 2012.

Maturity	Interest Rate		2013		2012
7/21/2014	2.31	%	$	10,000,000	$	—
7/21/2014	2.62	%	5,000,000		—
			$	15,000,000	$	—

Long-term Borrowings

Long-term borrowings at December 31, 2013 consisted of junior subordinated debentures of $36,084,000 with an average annual interest rate of 2.05% and an average daily balance of $36,084,000. The long-term FHLB advances are presented below. Also included in long-term borrowings is the fair market value adjustment associated with the junior subordinated debentures acquired in the American Community acquisition of $(1,041,193) at December 31, 2013.

Long-term borrowings at December 31, 2012 consisted of junior subordinated debentures of $36,084,000 with an average annual interest rate of 2.24% and an average daily balance of $36,084,000. The long-term FHLB advances are presented below. Also, included in long-term borrowings at December 31, 2012 is a structured wholesale repurchase agreement with a balance of $5,000,000 at year end, an average daily balance of $5,000,000, an average interest rate of 2.64%, and a year-end interest rate of 2.60%. Also included in long-term borrowings is the fair market value adjustment associated with the borrowings acquired in the American Community acquisition of $(1,086,542) at December 31, 2012.

Pursuant to a collateral agreement with the FHLB, advances are collateralized by all of the Bank's FHLB stock and qualifying first mortgage, commercial, and home equity line loans. The balance of the lendable collateral value of all loans as of December 31, 2013 was approximately $143.4 million with $117.5 million remaining available. This agreement with the FHLB provides for a line of credit up to 20% of the Bank's assets.

The following table presents long-term advances from the FHLB at December 31, 2013 and 2012:

Maturity	Interest Rate		2013		2012
7/21/2014	2.31	%	$	—	$	10,000,000
7/21/2014	2.62	%	—		5,000,000
1/11/2015	2.99	%	5,000,000		5,000,000
4/27/2015	2.97	%	5,000,000		5,000,000
10/29/2018	0.25	%	685,104		702,678
12/19/2023	2.00	%	225,967		243,809
			$	10,911,071	$	25,946,487

FHLB advances, both short and long-term, had average annual interest rate paid during the year of 2.07% and 2.61% for 2013 and 2012, respectively. The weighted average interest rate for all FHLB advances outstanding at December 31, 2013 and December 31, 2012 was 2.57%. Maximum amount of FHLB advances outstanding at any month-end during the years 2013 and 2012 was $65,923,019 and $26,977,842 respectively.

On November 1, 2007, the Company created Yadkin Valley Statutory Trust I (“the Trust”) to issue trust preferred securities in conjunction with the Company issuing junior subordinated debentures to the Trust. The terms of the junior subordinated debentures are substantially the same as the terms of the trust preferred securities. The interest rate in effect is the three-month LIBOR plus 1.32%. The effective interest rate was 1.56% and 1.63% at December 31, 2013 and 2012, respectively. The Company’s obligations under the debentures and a separate guarantee agreement constitute a full and unconditional guarantee by the Company of the obligations of the Trust.

On November 1, 2007, the Trust completed the sale of $25.0 million of trust preferred securities. The trust preferred securities mature in 30 years and can be called by the Trust without penalty after five years.   The Trust used the proceeds from the sale of the securities to purchase the Company’s junior subordinated deferrable interest notes due 2037. The net proceeds from the offering were used by the Company in connection with the acquisition of Cardinal, and for general corporate purposes. Currently, regulatory capital rules allow trust preferred securities to be included as a component of regulatory capital for the Company up to certain limits. This treatment has continued despite the deconsolidation of these instruments for financial reporting purposes.

The Company assumed junior subordinated debt in the amount of $10.0 million in the American Community acquisition. American Community had a trust that issued trust preferred securities which pay cumulative cash distributions quarterly at a rate priced off 90-day LIBOR plus 280 basis points. The interest rate at December 31, 2013 and December 31, 2012 was 3.05% and 3.11%, respectively. The preferred securities are redeemable on December 15, 2033. The Company’s obligations under the debentures and a separate guarantee agreement constitute a full and unconditional guarantee by the Company of the obligations of the Trust.

Under the accounting for variable interest entities, the Company’s $774,000 and $310,000 investment in the common equity of the Trusts are included in the consolidated balance sheets as other assets. The income and interest expense received from and paid to the Trust, respectively, is included in the consolidated statements of income (loss) and comprehensive income (loss) as other noninterest income and interest expense.

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Investment Securities - Investments in Continuous Loss Position (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Schedule of Available-for-sale Securities
Less Than 12 Months, Fair value	$ 117,325	$ 64,766
Less Than 12 Months, Unrealized losses	3,654	826
12 Months or More, Fair value	18,095	7,864
12 Months or More, Unrealized losses	1,051	169
Total, Fair value	135,420	72,630
Total, Unrealized losses	4,705	995
US Government Agencies Debt Securities [Member]
Schedule of Available-for-sale Securities
Continuous unrealized loss investments, number of positions	1
Less Than 12 Months, Fair value	14,840	2,429
Less Than 12 Months, Unrealized losses	199	1
12 Months or More, Fair value	1,552	0
12 Months or More, Unrealized losses	8	0
Total, Fair value	16,392	2,429
Total, Unrealized losses	207	1
Government sponsored agencies - Residential mortgage-backed securities
Schedule of Available-for-sale Securities
Less Than 12 Months, Fair value	49,954	12,021
Less Than 12 Months, Unrealized losses	1,247	325
12 Months or More, Fair value	0	0
12 Months or More, Unrealized losses	0	0
Total, Fair value	49,954	12,021
Total, Unrealized losses	1,247	325
Government sponsored agencies - Collateralized mortgage obligations
Schedule of Available-for-sale Securities
Continuous unrealized loss investments, number of positions	1	3
Less Than 12 Months, Fair value	11,372	27,417
Less Than 12 Months, Unrealized losses	64	127
12 Months or More, Fair value	2,121	7,626
12 Months or More, Unrealized losses	38	168
Total, Fair value	13,493	35,043
Total, Unrealized losses	102	295
Private label collateralized mortgage obligations
Schedule of Available-for-sale Securities
Continuous unrealized loss investments, number of positions	1	1
Less Than 12 Months, Fair value	9,941	0
Less Than 12 Months, Unrealized losses	194	0
12 Months or More, Fair value	142	178
12 Months or More, Unrealized losses	1	0
Total, Fair value	10,083	178
Total, Unrealized losses	195	0
US States and Political Subdivisions Debt Securities [Member]
Schedule of Available-for-sale Securities
Continuous unrealized loss investments, number of positions	9
Less Than 12 Months, Fair value	31,218	22,899
Less Than 12 Months, Unrealized losses	1,950	373
12 Months or More, Fair value	14,280	0
12 Months or More, Unrealized losses	1,004	0
Total, Fair value	45,498	22,899
Total, Unrealized losses	2,954	373
Common and preferred stocks
Schedule of Available-for-sale Securities
Continuous unrealized loss investments, number of positions		2
Less Than 12 Months, Fair value	0	0
Less Than 12 Months, Unrealized losses	0	0
12 Months or More, Fair value	0	60
12 Months or More, Unrealized losses	0	1
Total, Fair value	0	60
Total, Unrealized losses	$ 0	$ 1

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Selected Quarterly Financial Data (Unaudited) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended									12 Months Ended			30 Months Ended	36 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2013	Dec. 31, 2013
Quarterly Financial Information Disclosure [Abstract]
Interest income	$ 18,903		$ 18,470	$ 18,651	$ 18,275	$ 18,793	$ 19,446	$ 19,744	$ 20,989	$ 74,299	$ 78,972	$ 88,546
Interest expense	2,154		2,334	2,530	3,223	4,048	4,257	4,586	5,097	10,241	17,988	26,041
NET INTEREST INCOME	16,749		16,136	16,121	15,052	14,745	15,189	15,158	15,892	64,058	60,984	62,505
Provision for loan losses	(3,017)		40	55	237	31,554	4,251	2,218	2,351	(2,685)	40,374	20,843
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	19,766		16,096	16,066	14,815	(16,809)	10,938	12,940	13,541	66,743	20,610	41,662
Other income	1,182		5,381	6,184	5,657	986	4,665	4,406	3,509	18,404	13,566	18,180
Other expense	13,712		14,150	14,843	13,215	22,708	14,792	15,732	13,579	55,920	66,811	67,543
INCOME (LOSS) BEFORE INCOME TAXES	7,236	38,500	7,327	7,407	7,257	(38,531)	811	1,614	3,471	29,227	(32,635)	(7,701)	43,900	(11,109)
Income taxes	2,579		2,616	2,598	2,608	(14,632)	54	(9,383)	0	10,401	(23,961)	6,694
NET INCOME (LOSS)	4,657		4,711	4,809	4,649	(23,899)	757	10,997	3,471	18,826	(8,674)	(14,395)
Preferred stock dividend and accretion of preferred stock discount	421		421	590	445	1,419	838	833	821	1,877	3,911	2,987
NET INCOME (LOSS) TO COMMON SHAREHOLDERS	$ 4,236		$ 4,290	$ 4,219	$ 4,204	$ (25,318)	$ (81)	$ 10,164	$ 2,650	$ 16,949	$ (12,585)	$ (17,382)
Earnings per share, basic	$ 0.30		$ 0.30	$ 0.30	$ 0.30	$ (3.63)	$ 0.00	$ 1.56	$ 0.42	$ 1.19	$ (1.91)	$ (2.86)
Earnings per share, diluted	$ 0.30		$ 0.30	$ 0.30	$ 0.30	$ (3.63)	$ 0.00	$ 1.56	$ 0.42	$ 1.19	$ (1.91)	$ (2.86)

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Loan Servicing

12 Months Ended

Dec. 31, 2013

Transfers and Servicing [Abstract]

Loan Servicing

LOAN SERVICING

Mortgage loans serviced for others, consisting of loans sold to Fannie Mae and Freddie Mac, are not included in the accompanying consolidated balance sheets. Mortgage loan portfolios serviced for Fannie Mae and Freddie Mac were $406,966,111 and $330,818,219 at December 31, 2013 and 2012, respectively. Servicing loans for others generally consists of collecting mortgage payments, maintaining escrow accounts, disbursing payments to investors and foreclosure processing. Total servicing fees received were $943,408, $713,881 and $608,513 during 2013, 2012 and 2011, respectively, and were included in mortgage banking activities. At December 31, 2013 and 2012, mortgage servicing rights were $4.5 million and $2.5 million respectively and are included in other assets on the consolidated balance sheets. Servicing rights recorded on loans originated and sold by the Bank and the changes in the fair value were recorded in the consolidated statements of income (loss) under the caption, mortgage banking activities. Amortization/market value adjustments related to mortgage servicing rights were $624,143, $(447,403) and $(559,394) for the years ended 2013, 2012 and 2011, respectively and recorded as a reduction to the mortgage banking activities.

	2013		2012
	(Amounts in thousands)
Mortgage servicing assets, beginning of year	$	2,525	$	1,871
Capitalized	1,387		1,101
Change in fair value	624		(447		)
Mortgage servicing assets, end of year	$	4,536	$	2,525

Custodial escrow balances maintained in connection with the loan servicing were $259,209 and $318,649 at December 31, 2013 and 2012, respectively.

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Deposits

12 Months Ended

Dec. 31, 2013

Banking and Thrift [Abstract]

Deposits

DEPOSITS

The following table presents the scheduled maturities of time certificates at December 31, 2013:

	(in thousands)
2014	$	357,631
2015	93,694
2016	58,324
2017	26,683
2018	15,937
2019	5,000
Total	$	557,269

Total related party deposits were $15.2 million and $16.8 million as of December 31, 2013 and 2012, respectively.

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Income Taxes

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

The following table presents the provision for income taxes for the years ended December 31, 2013, 2012 and 2011:

	2013			2012			2011
	(in thousands)
Current:
Federal	$	(93	)	$	(210	)	$	712
State	—			—			—
	(93		)	(210		)	712
Deferred:
Federal	8,027			(10,755		)	(4,600		)
State	2,467			(1,996		)	(418		)
	10,494			(12,751		)	(5,018		)
Increase (decrease) in valuation allowance for deferred tax assets	—			(11,000		)	11,000
Total income taxes	$	10,401		$	(23,961	)	$	6,694

The following table presents the tax effects of significant components of the Company's net deferred tax assets as of December 31, 2013 and December 31, 2012:

	December 31,			December 31,
	2013			2012
	(in thousands)
Deferred tax assets:
Allowance for loan losses	$	6,956		$	9,853
Other than temporary impairment	829			827
Accrued liabilities	55			220
OREO property	178			3,767
Net operating loss	14,375			19,627
Mortgage banking goodwill	779			921
Other	3,243			2,160
	26,415			37,375
Less: Valuation Allowance	—			—
	$	26,415		$	37,375
Deferred tax liabilities:
Unrealized gain on available-for-sale securities	$	(3	)	$	(2,583	)
FMV adjustment related to mergers	(97		)	(181		)
Depreciation	(1,753		)	(1,561		)
Prepaid expenses	(342		)	(358		)
Core deposit intangible	(765		)	(1,043		)
Noncompete intangible	(24		)	(149		)
Other	(6		)	(142		)
	(2,990		)	(6,017		)
Net deferred tax asset	$	23,425		$	31,358

Our net deferred tax asset was $23.4 million at December 31, 2013 and $31.4 million at December 31, 2012. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not (a likelihood of more than 50 percent) that some portion or all of the deferred tax assets will not be realized. All available evidence, both positive and negative, is used in the consideration to determine whether, based on the weight of that evidence, a valuation allowance is required.

As of June 30, 2012, the Company reversed a previously recorded $11 million valuation allowance which had been established in 2011. After review of all available evidence at June 30, 2012 and based on the weight of such evidence, the Company believed the realization of the deferred tax asset was more likely than not and reversed the previously recorded $11.0 million valuation allowance. The reversal of the allowance was based primarily on a return to profitability as the Company had reported four consecutive quarters of net income and the Company come out of a 3-year cumulative loss position. Based on net income trends, projected net income over the next 36 months and improving credit quality metrics, no valuation allowance was deemed necessary as of June 30, 2012.

At December 31, 2013, the Company has failed the three-year cumulative loss test, after recording a $38.5 million loss before income taxes in the fourth quarter of 2012 as part of the accelerated asset disposition plan. The Company considered the following negative and positive evidence in its evaluation of deferred tax assets:

Negative Evidence

• The Company is in a cumulative tax loss position for the 3-year period ending December 31, 2013 of $6.2 million. Significance: High

	December 31, 2013 Cumulative Loss Test
	2011			2012			2013		Total
	(in thousands)
Income (loss) before income taxes	$	(7,701	)	$	(32,635	)	$	29,227	$	(11,109	)
Goodwill impairment	4,944			—			—		$	4,944
	$	(2,757	)	$	(32,635	)	$	29,227	$	(6,165	)

Positive Evidence

• The Company reported $29.2 million in net income before taxes for the year 2013. Excluding losses of $49 million sustained in the fourth quarter of 2012 related to the accelerated asset disposition plan, the Company has recorded $43.9 million in pre-tax income for nine previous consecutive quarters as credit quality has improved and net interest margin has increased over the past year. Significance: High

• The Company is projecting income on a pretax basis, as well as taxable income, for the future periods 2014 through 2016. The budgeted provision for loan losses is a key driver of the resulting income. Also, as discussed below, credit quality metrics have significantly improved. While management believes the 2010, 2011 and 2012 levels of provision are indicative of the worst economic downturn in recent history and will not be repeated, it is important to understand why future losses are not projected at these levels which is discussed in the following paragraphs. Significance: Moderate

• In 2012, the Company completed a $45 million private placement offering pursuant to which several institutional investors and members of the Board and management purchased shares of preferred stock. In connection with this private placement, the Company converted approximately $21 million of its outstanding Series T and Series T-ACB preferred shares to common shares. As of December 31, 2013, the Company's leverage ratio, Tier 1 risk-based capital ratio, and total risk-based capital ratio were 11.5%, 13.5%, and 14.6%. Significance: Moderate

• Credit quality has improved over the past twelve months, including significant decreases in classified loans and nonperforming loans. Credit losses have shown a dramatic reduction in 2013 as net loan charge-offs (recoveries) were $4.4 million, or 0.33% of average loans for the year ended December 31, 2013, as compared to $48.1 million, or 3.43% of average loans for the year ended December 31, 2012. Nonperforming loans were also down $7.4 million since December 31, 2012. Nonperforming assets to total assets were 1.03%% as of December 31, 2013 as compared to 1.64% as of December 31, 2012 and 4.78% as of December 31, 2011 . In addition, allowance for loan losses to nonperforming loans increased from 110.22%% at December 31, 2012 to 117.34%% at December 31, 2013. Significance: High

• Management is not aware of any unsettled circumstances that, if resolved, would adversely affect future operations or earnings. Significance: Low

• Federal net operating losses can be deducted over the twenty year carryforward period. Currently, management is projecting full utilization of these tax benefits within 3 years from December 31, 2013. The Company's loss carryforwards for the tax period ending December 31, 2013 include net operating loss carryforwards generated in the acquisition of Cardinal State Bank in 2008 and American Community Bank in 2009, as well as net operating loss carryforwards for the Company. Significance: Moderate

	Net Operating Loss  Carryforward at December 31, 2013		Expiration
	(in thousands)
Cardinal State Bank acquisition	$	2,424	2029
American Community Bank acquisition	345		2030
Yadkin Valley Federal Tax	35,582		2031
Yadkin Valley State Tax	28,623		2031
Total Loss Carryforwards	$	66,974

After review of all available evidence and based on the weight of such evidence, the Company believes the realization of the deferred tax asset is, more likely than not and no valuation allowance is deemed necessary at December 31, 2013 based primarily on a return to profitability as the Company has reported nine consecutive quarters of net income (excluding losses in the fourth quarter of 2012 related to management's accelerated asset disposition plan), net income trends, projected net income for the years 2014 through 2016 and improving credit quality metrics.

The following table presents a reconciliation of applicable income taxes for the years ended December 31, 2013 and 2012 to the amount of tax expense computed at the statutory federal income tax rate of 35%:

	2013			2012
	(in thousands)
Tax benefit at statutory rate on income before income taxes	$	10,230		$	(11,422	)
Increases (decreases) resulting from:
Tax-exempt interest on investments	(1,055		)	(737		)
State income tax, net of federal benefits	1,604			(1,298		)
Income from bank-owned life insurance	(210		)	(221		)
Valuation allowance on deferred tax assets	—			(11,000		)
Other	(168		)	717
Total income taxes	$	10,401		$	(23,961	)

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Loans and Allowance for Loan Losses - Sale of Loans Held-for-Investment (Details) (USD $)	3 Months Ended		12 Months Ended
	Dec. 31, 2012	Mar. 31, 2012	Dec. 31, 2012
Sale of loans held-for-investment [Line Items]
Gain (Loss) on Sale of Other Loans and Leases			$ 2,100,000
Financing Receivable, Recorded Investment, Loans Sold	43,209,000		43,209,000
Allowance for Doubtful Accounts Receivable, Write-offs, Loans Sold	21,715,000
Additional Provision for Loan, Lease and Other Losses, Loans Sold	18,727,000
Gain (Loss) on Sale of Loans and Leases		21,700,000
Financing Receivable, Allowance for Credit Losses, Writedowns, Other Problem Loans	10,999,000
Commercial
Sale of loans held-for-investment [Line Items]
Financing Receivable, Recorded Investment, Loans Sold	2,291,000		2,291,000
Allowance for Doubtful Accounts Receivable, Write-offs, Loans Sold	1,329,000
Additional Provision for Loan, Lease and Other Losses, Loans Sold	1,290,000
Financing Receivable, Allowance for Credit Losses, Writedowns, Other Problem Loans	3,908,000
Consumer and other
Sale of loans held-for-investment [Line Items]
Financing Receivable, Recorded Investment, Loans Sold	151,000		151,000
Allowance for Doubtful Accounts Receivable, Write-offs, Loans Sold	91,000
Additional Provision for Loan, Lease and Other Losses, Loans Sold	57,000
Financing Receivable, Allowance for Credit Losses, Writedowns, Other Problem Loans	24,000
Owner Occupied Commercial | Real Estate Loans
Sale of loans held-for-investment [Line Items]
Financing Receivable, Recorded Investment, Loans Sold	8,871,000		8,871,000
Allowance for Doubtful Accounts Receivable, Write-offs, Loans Sold	3,917,000
Additional Provision for Loan, Lease and Other Losses, Loans Sold	4,313,000
Financing Receivable, Allowance for Credit Losses, Writedowns, Other Problem Loans	1,599,000
Non-owner Occupied | Real Estate Loans
Sale of loans held-for-investment [Line Items]
Financing Receivable, Recorded Investment, Loans Sold	8,675,000		8,675,000
Allowance for Doubtful Accounts Receivable, Write-offs, Loans Sold	4,531,000
Additional Provision for Loan, Lease and Other Losses, Loans Sold	3,755,000
Financing Receivable, Allowance for Credit Losses, Writedowns, Other Problem Loans	2,267,000
One to Four Family | Real Estate Loans
Sale of loans held-for-investment [Line Items]
Financing Receivable, Recorded Investment, Loans Sold	4,557,000		4,557,000
Allowance for Doubtful Accounts Receivable, Write-offs, Loans Sold	2,825,000
Additional Provision for Loan, Lease and Other Losses, Loans Sold	2,380,000
Financing Receivable, Allowance for Credit Losses, Writedowns, Other Problem Loans	291,000
Multifamily | Real Estate Loans
Sale of loans held-for-investment [Line Items]
Financing Receivable, Recorded Investment, Loans Sold	249,000		249,000
Allowance for Doubtful Accounts Receivable, Write-offs, Loans Sold	113,000
Additional Provision for Loan, Lease and Other Losses, Loans Sold	86,000
Financing Receivable, Allowance for Credit Losses, Writedowns, Other Problem Loans	0
Home Equity Lines of Credit | Real Estate Loans
Sale of loans held-for-investment [Line Items]
Financing Receivable, Recorded Investment, Loans Sold	2,204,000		2,204,000
Allowance for Doubtful Accounts Receivable, Write-offs, Loans Sold	1,284,000
Additional Provision for Loan, Lease and Other Losses, Loans Sold	746,000
Financing Receivable, Allowance for Credit Losses, Writedowns, Other Problem Loans	1,309,000
Construction Loans | Real Estate Loans
Sale of loans held-for-investment [Line Items]
Financing Receivable, Recorded Investment, Loans Sold	16,211,000		16,211,000
Allowance for Doubtful Accounts Receivable, Write-offs, Loans Sold	7,625,000
Additional Provision for Loan, Lease and Other Losses, Loans Sold	6,100,000
Financing Receivable, Allowance for Credit Losses, Writedowns, Other Problem Loans	$ 1,601,000

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Income Taxes - Income Tax Reconciliation (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Income Tax Disclosure [Abstract]
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate	35.00%	35.00%
Tax benefit at statutory rate on income before income taxes	$ 10,230	$ (11,422)
Tax-exempt interest on investments	(1,055)	(737)
State income tax, net of federal benefits	1,604	(1,298)
Income from bank-owned life insurance	(210)	(221)
Valuation allowance on deferred tax assets	0	(11,000)
Other	(168)	717
Total income taxes	$ 10,401	$ (23,961)	$ 6,694

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Loans and Allowance for Loan Losses - Related Party Loans (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2010
Related Party Loans
Balance, beginning of year	$ 15,550		$ 15,783
New loans	3,233	2,436
Repayments	(2,824)	(2,669)
Balance, end of year	$ 15,959	$ 15,550	$ 15,783

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Regulatory Requirements - Regulatory Capital Required (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Yadkin Valley Bank and Trust
Total Capital (to risk-weighted assets)
Actual, amount	$ 219,071	$ 189,961
Total risk-based capital ratio	14.40%	13.00%
For capital adequacy purposes, amount	121,635	116,923
For capital adequacy purposes, ratio	8.00%	8.00%
To be well capitalized under prompt corrective action provisions, amount	152,043	146,154
To be well capitalized under prompt corrective action provisions, ratio	10.00%	10.00%
Tier 1 Capital (to risk-weighted assets)
Actual, amount	200,891	171,505
Tier One Risk Based Capital to Risk Weighted Assets	13.20%	11.70%
For capital adequacy purposes, amount	60,817	58,462
For capital adequacy purposes, ratio	4.00%	4.00%
To be well capitalized under prompt corrective action provisions, amount	91,226	87,692
To be well capitalized under prompt corrective action provisions, ratio	6.00%	6.00%
Tier 1 Capital (to average assets)
Actual, amount	200,891	171,505
Actual, ratio	11.20%	8.90%
For capital adequacy purposes, amount	71,495	76,912
For capital adequacy purposes, ratio	4.00%	4.00%
To be well capitalized under prompt corrective action provisions, amount	89,369	96,139
To be well capitalized under prompt corrective action provisions, ratio	5.00%	5.00%
Yadkin Valley Financial Corporation
Total Capital (to risk-weighted assets)
Actual, amount	221,858	194,932
Total risk-based capital ratio	14.60%	13.30%
For capital adequacy purposes, amount	121,702	116,960
For capital adequacy purposes, ratio	8.00%	8.00%
To be well capitalized under prompt corrective action provisions, amount	152,128	146,200
To be well capitalized under prompt corrective action provisions, ratio	10.00%	10.00%
Tier 1 Capital (to risk-weighted assets)
Actual, amount	204,763	177,656
Tier One Risk Based Capital to Risk Weighted Assets	13.50%	12.20%
For capital adequacy purposes, amount	60,851	58,480
For capital adequacy purposes, ratio	4.00%	4.00%
To be well capitalized under prompt corrective action provisions, amount	91,277	87,720
To be well capitalized under prompt corrective action provisions, ratio	6.00%	6.00%
Tier 1 Capital (to average assets)
Actual, amount	204,763	177,656
Actual, ratio	11.50%	9.20%
For capital adequacy purposes, amount	71,556	76,998
For capital adequacy purposes, ratio	4.00%	4.00%
To be well capitalized under prompt corrective action provisions, amount	$ 89,445	$ 96,247
To be well capitalized under prompt corrective action provisions, ratio	5.00%	5.00%

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Loans and Allowance for Loan Losses - Loans Receivable (Details) (USD $)	3 Months Ended									12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Loans Receivable
Provision for loan losses	$ (3,017,000)		$ 40,000	$ 55,000	$ 237,000	$ 31,554,000	$ 4,251,000	$ 2,218,000	$ 2,351,000	$ (2,685,000)	$ 40,374,000	$ 20,843,000
Loans	1,357,767,000	1,308,372,000								1,357,767,000	1,308,372,000
Less: Net deferred loan origination fees	979,000	1,132,000								979,000	1,132,000
Allowance for loan losses	(18,063,000)	(25,149,000)								(18,063,000)	(25,149,000)
Net loans	1,340,683,000	1,284,355,000								1,340,683,000	1,284,355,000		1,418,076,000
Loans sold during period		43,000,000								254,500,000
Provision		11,000,000								(2,685,000)	40,374,000
Gain (Loss) on Disposition of Assets		35,000,000
Nonperforming Loans
Loans Receivable
Loans sold during period		36,000,000
Real Estate Loans | Construction Loans
Loans Receivable
Loans	131,035,000	131,981,000								131,035,000	131,981,000
Provision										(3,000)	12,742,000
Real Estate Loans | Commercial Real Estate
Loans Receivable
Loans	579,700,000	554,500,000								579,700,000	554,500,000
Real Estate Loans | Owner Occupied Commercial
Loans Receivable
Loans	382,766,000	342,962,000								382,766,000	342,962,000
Provision										(1,022,000)	5,751,000
Real Estate Loans | Non-owner Occupied
Loans Receivable
Loans	196,926,000	211,489,000								196,926,000	211,489,000
Provision										(1,764,000)	8,433,000
Real Estate Loans | One to Four Family
Loans Receivable
Loans	174,072,000	168,611,000								174,072,000	168,611,000
Provision										(205,000)	2,762,000
Real Estate Loans | Multifamily
Loans Receivable
Loans	41,713,000	35,337,000								41,713,000	35,337,000
Provision										(158,000)	136,000
Real Estate Loans | Home Equity Lines of Credit
Loans Receivable
Loans	194,145,000	191,888,000								194,145,000	191,888,000
Provision										(697,000)	4,686,000
Commercial
Loans Receivable
Loans	185,443,000	174,440,000								185,443,000	174,440,000
Provision										1,078,000	5,419,000
Consumer and other
Loans Receivable
Loans	51,667,000	51,664,000								51,667,000	51,664,000
Provision										$ 86,000	$ 445,000

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Stock Options and Restricted Stock - Share-based Compensation Expense (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total unrecognized share-based compensation cost	$ 544,896
Period to recognize share-based compensation expense not yet recognized	1 year 4 months 3 days
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expense related to options and restricted shares	21,882	31,621	76,903
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expense related to options and restricted shares	$ 480,249	$ 388,187	$ 133,071

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation ‑The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, the Bank. All significant intercompany accounts and transactions have been eliminated in consolidation.

Cash and Cash Equivalents

Cash and Cash Equivalents ‑Cash and cash equivalents include cash on hand, amounts due from banks, interest-bearing deposits, and federal funds sold. Generally, federal funds are purchased and sold for one‑day periods.

Investment Securities

Investment Securities ‑ Debt securities that the Bank has the positive intent and ability to hold to maturity are classified as “held-to-maturity” securities and reported at amortized cost. Debt and equity securities that are bought and held principally for the purpose of selling in the near term are classified as "trading" securities and reported at fair value with unrealized gains and losses included in earnings. Debt and equity securities not classified as either held-to-maturity or trading securities are classified as "available-for-sale" securities and reported at fair value with unrealized gains and losses excluded from earnings and reported, net of related tax effects, as a separate component of equity and as an item of other comprehensive income. Gains and losses on the sale of available-for-sale securities are determined using the trade date basis. Declines in the fair value of individual held-to-maturity and available-for-sale securities below their cost that are other-than-temporary (“OTTI”) result in write-downs of the individual securities to their fair value. The related write downs are included in earnings as realized losses. Premiums and discounts are recognized in interest income using the effective interest method over the period to maturity. Transfers of securities between classifications are accounted for at fair value.

Loans and Allowance for Loan Losses, Loans Held-for-investment

Loans and Allowance for Loan Losses‑ Loans that management has the intent and ability to hold for the foreseeable future are stated at their outstanding principal balances adjusted for any deferred fees and costs. Interest on loans is calculated by using the simple interest method on daily balances of the principal amount outstanding. Loan origination and other fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.

All loans over $20,000 are risk graded on a scale from 1 (highest quality) to 8 (loss). Management considers certain loans graded “doubtful” or “loss” to be impaired and may consider “substandard” loans impaired depending on an evaluation of the probability of repayment of the loan. All classes of loans are considered impaired when all or a portion of the loan is determined to be uncollectable. Loans that are deemed to be impaired (i.e., probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan) are evaluated based on fair value of the collateral if the loan is collateral dependent, the fair value of the loan or, alternatively, discounted expected cash flows. A specific reserve is established as part of the allowance for loan losses to record the difference between the stated principal amount and the present value or market value of the impaired loan. Impaired loans are evaluated on a loan-by-loan basis (e.g., loans with risk characteristics unique to an individual borrower). For all classes of loans the Company discontinues the accrual of interest income when the loans are either at least 90 days past due or less than 90 days past due but the collectability of such interest and principal becomes doubtful. Subsequent payments received on nonaccrual loans are recorded as a reduction of principal. Interest income is recorded only after principal recovery is reasonably assured. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current, the loan has performed for six months, and future payments are probable.

The provision for loan losses charged to operations is an amount sufficient to bring the allowance for loan losses to an estimated balance considered adequate to absorb potential losses in the portfolio resulting from known and expected losses as of the balance sheet date. Management's determination of the adequacy of the allowance is based on an evaluation of the portfolio, current economic conditions, historical loan loss experience and other risk factors. Recovery of the carrying value of loans is dependent to some extent on future economic, operating and other conditions that may be beyond the control of the Bank. Unanticipated future adverse changes in such conditions could result in material adjustments to the allowance for loan losses. In addition, regulatory examiners may require the Bank to recognize changes to the allowance for loan losses based on their judgments about information available to them at the time of their examination.

Loans Held-for-Sale

Loans Held-for-Sale‑ Loans held-for-sale primarily consist of one to four family residential loans originated for sale in the secondary market and are carried at the lower of cost or market determined on an aggregate basis. Gains and losses on sales of loans held-for-sale are included in other non-interest income in the consolidated statements of loss. Gains and losses on loan sales are determined by the difference between the selling price and the carrying value of the loans sold.

Foreclosed Real Estate

Foreclosed Real Estate- Foreclosed real estate is recognized at fair value of foreclosure, and then subsequently at the lower of carrying amount or market value less estimated cost to sell. Any initial losses at the time of foreclosure are charged against the allowance for loan losses with any subsequent losses or write-downs included in the consolidated statements of loss as a component of noninterest expenses.

Business Combinations

Business Combinations ‑ TheCompany accounts for all business combinations after January 1, 2009 by the acquisition method of accounting whereby acquired assets and liabilities are recorded at fair value on the date of acquisition with the remainder of the purchase price allocated to identified intangible assets and goodwill.

Purchased Impaired Loans

Purchased Impaired Loans - Purchased loans acquired in a business combination are recorded at estimated fair value on the date of acquisition without the carryover of the related allowance for loan losses, which include loans purchased in the American Community acquisition. Purchased impaired loans are accounted for under the Receivables topic (ASC 310-30) of the FASB Accounting Standards Codification ("ASC") when the loans have evidence of credit deterioration since origination and it is probable at the date of acquisition that the Company will not collect all contractually required principal and interest payments. Evidence of credit quality deterioration as of the date of acquisition may include statistics such as past due and nonaccural status. Purchased impaired loans generally meet the Company’s definition for nonaccrual status. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable difference which is included in the carrying amount of the loans. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent significant increases in cash flows result in a reversal of the provision for loan losses to the extent of prior charges, or the nonaccretable difference to accretable yield with a positive impact on future interest income. Further, any excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows.

Purchased Performing Loans

Purchased Performing Loans – The Company accounts for performing loans acquired in business combinations using the contractual cash flows method of recognizing discount accretion based on the acquired loans’ contractual cash flows. Purchased performing loans are recorded at fair value, including a credit discount. The fair value discount is accreted as an adjustment to yield over the estimated lives of the loans. There is no allowance for loan losses established at the acquisition date for purchased performing loans in the American Community acquisition. A provision for loan losses is recorded for any further deterioration in these loans subsequent to the merger.

Mortgage Banking Activities

Mortgage Banking Activities – When the Bank retains the rightto service a sold mortgage loan, the previous carrying amount is allocated between the loan sold and the retained mortgage servicing right based on their relative fair values on the date of transfer. The Bank uses the fair value method of accounting for mortgage servicing rights.

Servicing assets are recognized as separate assets when rights are acquired through purchase or through sale of financial assets.

A valuation of the fair value of the mortgage servicing rights is performed using a pooling methodology. Similar loans are “pooled” together and evaluated on a discounted earnings basis to determine the present value of future earnings. The present value of future earnings is the estimated market value for the pool, calculated using consensus assumptions that a third party purchaser would utilize in evaluating potential acquisition of the servicing.

Premises and Equipment

Premises and Equipment‑ Premises and equipment are stated at cost less accumulated depreciation and amortization. Additions and major replacements or betterments, which extend the useful lives of premises and equipment, are capitalized. Maintenance, repairs and minor improvements are expensed as incurred. Depreciation and amortization is provided based on the estimated useful lives of the assets using both straight‑line methods for buildings and land improvements and accelerated methods for furniture and fixtures. The estimated useful lives for computing depreciation and amortization are 10 years for land improvements, 30 to 40 years for buildings, and 3 to 10 years for furniture and equipment. Gains or losses on dispositions of premises and equipment are reflected in income.

The Company reviews long‑lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. If the sum of the expected future cash flows is less than the carrying amount of the asset, an impairment loss is recognized.

Goodwill and Other Intangibles, Goodwill

The Company performed an annual goodwill impairment assessment for the Sidus segment as of October 1st.

Goodwill and Other Intangibles, Intangible Assets

Intangible assets with finite lives include core deposits and a non-compete agreement with a former employee of American Community. Intangible assets are subject to impairment testing whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Core deposit intangibles are amortized on the sum-of-years digits method (intangibles acquired in 2002 and 2009), straight-line method (intangibles acquired in 2004) and an accelerated method (intangibles acquired in 2008) over a period not to exceed 20 years. The non-compete agreement as part of the American Community acquisition and is amortized over five years.

Income Taxes

Income Taxes ‑ Provisions for income taxes are based on amounts reported in the statements of loss and include changes in deferred taxes. Deferred taxes are computed using the asset and liability approach. The tax effects of differences between the tax and financial accounting basis of assets and liabilities are reflected in the balance sheets at the tax rates expected to be in effect when the differences reverse.

Valuation allowances are recorded to reduce deferred tax assets to the amounts management concludes are more-likely-than-not to be realized. Under ASC Topic 740 on Income Taxes, income tax benefits are recognized and measured based upon a two-step model: 1) a tax position must be more-likely-than-not to be sustained based solely on its technical merits in order to be recognized, and 2) the benefit is measured as the largest dollar amount of that position that is more-likely-than-not to be sustained upon settlement. The difference between the benefit recognized for a position in accordance with the Income Tax topic 740 model and the tax benefit claimed on a tax return is referred to as an unrecognized tax benefit.

Earnings Per Share

Earnings Per Share ‑ Basicearnings per share is calculated on the basis of the weighted average number of shares outstanding. Potentially dilutive common stock arising from stock options and restricted stock awards are included in diluted earnings per share, with the exception of restricted stock issued with performance and service conditions that have not been met. These conditions include performance requirements based on achieving certain earnings and credit performance standards and a minimum of 2-years of service requirement.

Share-Based Payment

Share-Based Payment‑ The Company recognizes the cost of employee services received in exchange for an award of equity instruments in the financial statements over the period the employee is required to perform the services in exchange for the award (presumptively the vesting period) in accordance with Share-based Payment accounting guidance. This guidance also requires measurement of the cost of employee services received in exchange for an award based on the grant-date fair value of the award.

Non-marketable equity securities

Non-marketable equity securities - As a requirement for membership, the Bank invests in stock of Federal Home Loan Bank of Atlanta (“FHLB”). In addition, the Company also invests in other equity investments for which stock is not publicly traded. Due to the redemption provisions of FHLB stock, the estimated fair value of the stock is equivalent to its respective cost. Other equity investments are reviewed for impairment on a quarterly basis

Comprehensive Income (Loss)

Comprehensive Income (Loss)- Comprehensive income (loss) is defined as “the change in equity [net assets] of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners”. The term comprehensive income includes components of comprehensive income including net income. Other comprehensive income refers to revenues, expenses, gains and losses that under generally accepted accounting principles in the United States (“GAAP”) are included in comprehensive income but excluded from net income. Currently, the Company’s other comprehensive income consists of unrealized gains and losses, net of deferred income taxes, on available-for-sale securities.

Use of Estimates

Use of Estimates ‑ Thepreparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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. Such estimates include, for example, assets acquired and liabilities assumed from business combinations, the allowance for loan losses, valuation of deferred tax assets, valuation of certain level 2 and level 3 investment securities, valuation of mortgage servicing rights, valuation of other real estate owned, evaluation of securities for other-than-temporary, valuation of interest rate lock commitments and derivatives and goodwill impairment. Actual results could differ from those estimates.

Reclassifications

Reclassifications - Certain income and expenses reported in 2011 and 2012 have been reclassified to conform to the 2013 presentation of mortgage banking activity income. Reclassifications include interest income which was previously presented in other income, commission expenses recorded in salaries both of which are now recorded as a reduction in mortgage banking activity income, and other miscellaneous expenses previously recorded in other expenses that have been reclassified as a reduction to mortgage banking activity income. In addition, gains on sale of mortgage loans has been reclassified to be reported with mortgage banking income to provide a combined overview of the mortgage banking activity segment.

Effective May 28, 2013, the Company executed a one-for-three reverse stock split. All outstanding options and restricted shares and earnings per share calculations have been adjusted for the effect of this reverse stock split. The reclassifications had no effect on net loss or shareholders' equity, as previously reported.

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Parent Company Condensed Financial Information (Tables)

12 Months Ended

Dec. 31, 2013

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Balance Sheets

Condensed Balance Sheets
	2013		2012
Assets:	(Amounts in thousands)
Cash on deposit with bank subsidiary	$	1,889	$	5,212
Investment in subsidiary	215,562		199,680
Other investments	2,451		1,765
Other assets	108		351
Total	$	220,010	$	207,008
Liabilities and Shareholders' Equity:
Dividends payable	$	177	$	183
Other liabilities	35,363		36,031
Shareholders' equity	184,470		170,794
Total	$	220,010	$	207,008

Condensed Results of Operations

Condensed Results of Operations
	2013			2012			2011
Equity in earnings of subsidiary bank:	(Amounts in thousands)
Undistributed earnings (loss)	$	19,840		$	(7,684	)	$	(13,511	)
Income (expenses), net	(1,014		)	(990		)	(884		)
Net income (loss)	18,826			(8,674		)	(14,395		)
Preferred stock dividend and accretion of preferred stock discount	1,877			3,911			2,987
Net income (loss) to common shareholders	$	16,949		$	(12,585	)	$	(17,382	)

Condensed Statements of Cash Flows

Condensed Statements of Cash Flows
	2013			2012			2011
Cash flows from operating activities:	(Amounts in thousands)
Net loss from continuing operations	$	18,826		$	(8,674	)	$	(14,395	)
Adjustments to reconcile net loss to net cash from operating activities:
Equity (loss) in undistributed earnings of subsidiaries	(19,840		)	7,684			13,511
Other-than-temporary impairment of investments	39			50			116
Loss on sale of other investments	—			—			80
Change in other assets	243			(18		)	315
Change in other liabilities	(851		)	113			270
Net cash used in operating activities	(1,583		)	(845		)	(103		)
Cash flows from investing activities:
Purchase of investments	(267		)	—			(250		)
Maturities, call and repayments of investments	—			99			55
Proceeds from sale of other investments	—			—			460
Additional investment in bank subsidiary	—			(37,000		)	—
Net cash provided by (used in) investing activities	(267		)	(36,901		)	265
Cash flows from financing activities:
Issuance of preferred stock	—			40,592			—
Issuance of common stock	—			—			6,402
Dividends paid	(1,414		)	(4,431		)	(616		)
Payment of fractional shares in the 1-for-3 stock split	(39		)	—			—
Repurchase and cancellations of warrants	(20		)	—			—
Net cash provided by (used in) financing activities	(1,473		)	36,161			5,786
Net increase (decrease) in cash	(3,323		)	(1,585		)	5,948
Cash at beginning of year	5,212			6,797			849
Cash at end of year	$	1,889		$	5,212		$	6,797

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Off-Balance Sheet Risk, Commitments and Contingencies

12 Months Ended

Dec. 31, 2013

Commitments and Contingencies Disclosure [Abstract]

Off-Balance Sheet Risk, Commitments and Contingencies

OFF-BALANCE SHEET RISK, COMMITMENTS AND CONTINGENCIES

The Bank 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 sheets. The contract or notional amounts of those instruments reflect the extent of involvement the Bank has in particular classes of financial instruments. The Bank 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 Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank, upon extension of credit is based on management’s credit evaluation of the borrower. Collateral obtained varies but may include real estate, stocks, bonds, and certificates of deposit.

The following table presents a summary by type of contract and amount the Bank’s exposure to off-balance sheet risk as of December 31, 2013 and 2012:

	2013		2012
Financial instruments whose contract amounts represent credit risk:
Loan commitments and undisbursed lines of credit	$	284,345,741	$	255,356,370
Undisbursed standby letters of credit	6,463,019		7,395,059
Undisbursed portion of construction loans	25,452,178		17,500,855
Commitments to close first mortgages	13,359,442		46,725,883
Commitments to sell first mortgages	31,895,650		71,491,707

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Subsequent Events (Details) (USD $)				1 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Jan. 27, 2014 Subsequent Event [Member]	Jan. 27, 2014 Subsequent Event [Member] VantageSouth [Member]	Jan. 27, 2014 Subsequent Event [Member] Piedmont Community Bank Holdings [Member]
Subsequent Event [Line Items]
Business Acquisition, Equity Interest To be Issued, Number of Shares				0.3125	6.28597
Business Acquisition, Cash to be Paid					$ 4,000,000
Deferred tax assets	23,425,000	31,358,000			4,800,000
Common Stock, Shares Authorized	33,333,333	33,333,333	75,000,000
Gain (Loss) on Contract Termination				$ 10,000,000

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Parent Company Condensed Financial Information

12 Months Ended

Dec. 31, 2013

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Parent Company Condensed Financial Information

PARENT COMPANY CONDENSED FINANCIAL INFORMATION

During the May 24, 2006 annual meeting, the shareholders approved the formation of the Company whereby each share of the Bank was automatically converted to one share of the Company. The Company’s authorized capital consists of 33,333,333 shares of common stock, par value $1.00 per share, and 1,000,000 shares of preferred stock, no par value, whose rights, privileges, and preferences will be established by the Board of Directors on issuance. The following table presents condensed financial data for the parent company only:

Condensed Balance Sheets
	2013		2012
Assets:	(Amounts in thousands)
Cash on deposit with bank subsidiary	$	1,889	$	5,212
Investment in subsidiary	215,562		199,680
Other investments	2,451		1,765
Other assets	108		351
Total	$	220,010	$	207,008
Liabilities and Shareholders' Equity:
Dividends payable	$	177	$	183
Other liabilities	35,363		36,031
Shareholders' equity	184,470		170,794
Total	$	220,010	$	207,008

Condensed Results of Operations
	2013			2012			2011
Equity in earnings of subsidiary bank:	(Amounts in thousands)
Undistributed earnings (loss)	$	19,840		$	(7,684	)	$	(13,511	)
Income (expenses), net	(1,014		)	(990		)	(884		)
Net income (loss)	18,826			(8,674		)	(14,395		)
Preferred stock dividend and accretion of preferred stock discount	1,877			3,911			2,987
Net income (loss) to common shareholders	$	16,949		$	(12,585	)	$	(17,382	)

Condensed Statements of Cash Flows
	2013			2012			2011
Cash flows from operating activities:	(Amounts in thousands)
Net loss from continuing operations	$	18,826		$	(8,674	)	$	(14,395	)
Adjustments to reconcile net loss to net cash from operating activities:
Equity (loss) in undistributed earnings of subsidiaries	(19,840		)	7,684			13,511
Other-than-temporary impairment of investments	39			50			116
Loss on sale of other investments	—			—			80
Change in other assets	243			(18		)	315
Change in other liabilities	(851		)	113			270
Net cash used in operating activities	(1,583		)	(845		)	(103		)
Cash flows from investing activities:
Purchase of investments	(267		)	—			(250		)
Maturities, call and repayments of investments	—			99			55
Proceeds from sale of other investments	—			—			460
Additional investment in bank subsidiary	—			(37,000		)	—
Net cash provided by (used in) investing activities	(267		)	(36,901		)	265
Cash flows from financing activities:
Issuance of preferred stock	—			40,592			—
Issuance of common stock	—			—			6,402
Dividends paid	(1,414		)	(4,431		)	(616		)
Payment of fractional shares in the 1-for-3 stock split	(39		)	—			—
Repurchase and cancellations of warrants	(20		)	—			—
Net cash provided by (used in) financing activities	(1,473		)	36,161			5,786
Net increase (decrease) in cash	(3,323		)	(1,585		)	5,948
Cash at beginning of year	5,212			6,797			849
Cash at end of year	$	1,889		$	5,212		$	6,797

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Leases - Narrative (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Leases [Abstract]
Operating leases, rent expense	$ 1,900,000	$ 1,900,000	$ 2,200,000
Accumulated depreciation and amortization	$ 168,876

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Regulatory Requirements (Tables)

12 Months Ended

Dec. 31, 2013

Banking and Thrift [Abstract]

Regulatory capital requirements

	Actual				For capital adequacy purposes				To be well capitalized under prompt corrective action provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Amounts in thousands)
Yadkin Bank
As of December 31, 2013:
Total Capital (to risk-weighted assets)	$	219,071	14.4	%	$	121,635	8.0	%	$	152,043	10.0	%
Tier 1 Capital (to risk-weighted assets)	200,891		13.2	%	60,817		4.0	%	91,226		6.0	%
Tier 1 Capital (to average assets)	200,891		11.2	%	71,495		4.0	%	89,369		5.0	%
As of December 31, 2012:
Total Capital (to risk-weighted assets)	$	189,961	13.0	%	$	116,923	8.0	%	$	146,154	10.0	%
Tier 1 Capital (to risk-weighted assets)	171,505		11.7	%	58,462		4.0	%	87,692		6.0	%
Tier 1 Capital (to average assets)	171,505		8.9	%	76,912		4.0	%	96,139		5.0	%
Yadkin Financial Corporation
As of December 31, 2013:
Total Capital (to risk-weighted assets)	$	221,858	14.6	%	$	121,702	8.0	%	$	152,128	10.0	%
Tier 1 Capital (to risk-weighted assets)	204,763		13.5	%	60,851		4.0	%	91,277		6.0	%
Tier 1 Capital (to average assets)	204,763		11.5	%	71,556		4.0	%	89,445		5.0	%
As of December 31, 2012:
Total Capital (to risk-weighted assets)	$	194,932	13.3	%	$	116,960	8.0	%	$	146,200	10.0	%
Tier 1 Capital (to risk-weighted assets)	177,656		12.2	%	58,480		4.0	%	87,720		6.0	%
Tier 1 Capital (to average assets)	177,656		9.2	%	76,998		4.0	%	96,247		5.0	%

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Financial Instruments - Narrative (Details)	12 Months Ended
	Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Illiquidity discount	5.00%
Maximum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Time period between issuance of loan commitment and closing and sale of loan	60 days

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Deposits (Tables)

12 Months Ended

Dec. 31, 2013

Banking and Thrift [Abstract]

Deposit Liability Maturities

The following table presents the scheduled maturities of time certificates at December 31, 2013:

	(in thousands)
2014	$	357,631
2015	93,694
2016	58,324
2017	26,683
2018	15,937
2019	5,000
Total	$	557,269

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Parent Company Condensed Financial Information - Condensed Results of Operations (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Equity in earnings of subsidiary bank:
NET INCOME (LOSS)	$ 4,657	$ 4,711	$ 4,809	$ 4,649	$ (23,899)	$ 757	$ 10,997	$ 3,471	$ 18,826	$ (8,674)	$ (14,395)
Preferred stock dividend and accretion of preferred stock discount	421	421	590	445	1,419	838	833	821	1,877	3,911	2,987
Net income (loss) to common shareholders	4,236	4,290	4,219	4,204	(25,318)	(81)	10,164	2,650	16,949	(12,585)	(17,382)
Parent Company
Equity in earnings of subsidiary bank:
Undistributed earnings (loss)									19,840	(7,684)	(13,511)
Income (expenses), net									(1,014)	(990)	(884)
NET INCOME (LOSS)									18,826	(8,674)	(14,395)
Preferred stock dividend and accretion of preferred stock discount									1,877	3,911	2,987
Net income (loss) to common shareholders									$ 16,949	$ (12,585)	$ (17,382)

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Consolidated Statements of Comprehensive Loss (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Statement of Other Comprehensive Income [Abstract]
NET LOSS	$ 18,826	$ (8,674)	$ (14,395)
OTHER COMPREHENSIVE INCOME:
Unrealized holding gains (losses) on securities available-for-sale	(9,117)	2,127	8,170
Tax effect	3,489	(819)	(3,145)
Unrealized holding gains (losses) on securities available-for-sale, net of tax amount	(5,628)	1,308	5,025
Reclassification adjustment for realized (gains) and losses	2,355	(1,605)	(2,836)
Tax effect	(906)	618	1,092
Reclassification adjustment for realized gains and losses, net of tax amount	1,449	(987)	(1,744)
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX	(4,179)	321	3,281
COMPREHENSIVE INCOME (LOSS)	$ 14,647	$ (8,353)	$ (11,114)

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Benefit Plans - Bank-Owned Life Insurance, Non-Equity Incentive Plan (Details) (USD $)	1 Months Ended	3 Months Ended		12 Months Ended
	Aug. 31, 2006	Jun. 30, 2001	Mar. 31, 2000	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items]
Investment in bank-owned life insurance				$ 27,032,000	$ 26,433,000
Incentive Compensation Expense				3,371,992	0	0
Officers | Bank-Owned Life Insurance
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items]
Bank owned life insurance, percentage interest owned in cash surrender value				100.00%
Bank owned life insurance, employer contribution	5,500,000	5,000,000	4,800,000
Liability determination, cost of insurance method, discount rate				4.00%	4.00%
Bank owned life insurance, liability					1,900,000
Bank owned life insurance, net periodic benefit costs				(5,702)	376,000	334,000
Bank owned life insurance, plan termination, resultant decrease in liability					$ 500,000

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Non-marketable Equity Securities

12 Months Ended

Dec. 31, 2013

Investments, All Other Investments [Abstract]

Non-marketable Equity Securities

The aggregate cost of the Company's cost method investments totals $5,283,254 at December 31, 2013 and $6,706,012 at December 31, 2012. Cost method investments at December 31, 2013 include $3,472,500 in Federal Home Loan Bank ("FHLB") stock and $1,810,754 of investments in various trust and financial companies, which are included in other assets. All cost method investments were evaluated for impairment at December 31, 2013 and December 31, 2012. The following factors have been considered in determining the carrying amount of FHLB stock: 1) the recoverability of the par value, 2) the Company has sufficient liquidity to meet all operational needs in the foreseeable future and would not need to dispose of the stock below recorded amounts, 3) redemptions and purchases of the stock are at the discretion of the FHLB, and 4) the Company believes the FHLB has the ability to absorb economic losses given the expectation that the various FHLBs' have a high degree of government support. The Company estimated that the fair value equaled or exceeded the cost of these investments (that is, the investments were not impaired) with the following exceptions. During 2013, the Company's investment in a financial services company was considered to be other than temporarily impaired and approximately $39,185 was charged-off. The remaining value of the investment after the charge-off was $62,815 at December 31, 2013. During the year ended December 31, 2011, the Company's investment in a financial services company and a local community bank were considered to be other than temporarily impaired and approximately $116,003 was charged-off. In addition to the impairment charges recorded, the Company sold one of its investments in a financial services company for a loss of $79,910 for the year ended December 31, 2011. There were no other than temporary impairments of non-marketable equity securities recorded for the year ended December 31, 2012.

The following tables present non-marketable securities at December 31, 2013 and December 31, 2012:

		December 31, 2013
Investment	Investment Type	Original Cost		Cumulative OTTI Charge		Current Balance
Federal Home Loan Bank of Atlanta	Common Stock	$	3,472,500	$	—	$	3,472,500
Yadkin Valley Statutory Trust I	Common Stock	774,000		—		774,000
American Community Capital Trust II	Common Stock	310,000		—		310,000
Limited partnerships providing lending
services to middle-market companies	Limited Partner	629,073		—		629,073
Other	Common Stock	136,866		39,185		97,681
Total		$	5,322,439	$	39,185	$	5,283,254

		December 31, 2012
Investment	Investment Type	Original Cost		Cumulative OTTI Charge		Current Balance
Federal Home Loan Bank of Atlanta	Common Stock	$	4,154,300	$	—	$	4,154,300
Yadkin Valley Statutory Trust I	Common Stock	774,000		—		774,000
American Community Capital Trust II	Common Stock	310,000		—		310,000
Limited partnerships providing lending
services to middle-market companies	Limited Partner	1,330,846		—		1,330,846
Other	Common Stock	138,780		1,914		136,866
Total		$	6,707,926	$	1,914	$	6,706,012

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Investment Securities - Amortized Cost and Fair Value (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Schedule of Available-for-sale Securities
Amortized Cost, Total available-for-sale securities	$ 288,914	$ 336,349
Unrealized Gains	4,713	7,766
Unrealized Losses	4,705	995
Fair Value, Total available-for-sale securities	288,922	343,120
US Government Agencies Debt Securities [Member]
Schedule of Available-for-sale Securities
Amortized Cost, Within 1 year	1,560	10,005
Amortized Cost, After 1 but within 5 years	15,039	17,479
Amortized Cost	16,599	27,484
Unrealized Gains	0	44
Unrealized Losses	207	1
Fair Value, Within 1 year	1,552	10,020
Fair Value, After 1 but within 5 years	14,840	17,507
Fair Value	16,392	27,527
Government sponsored agencies - Residential mortgage-backed securities
Schedule of Available-for-sale Securities
Amortized Cost, Within 1 year	0	119
Amortized Cost, After 1 but within 5 years	632	315
Amortized Cost, After 5 but within 10 years	17,829	10,371
Amortized Cost, After 10 years	85,277	94,319
Amortized Cost	103,738	105,124
Unrealized Gains	950	2,458
Unrealized Losses	1,247	325
Fair Value, Within 1 year	0	121
Fair Value, After 1 but within 5 years	674	341
Fair Value, After 5 but within 10 years	18,113	10,712
Fair Value, After 10 years	84,654	96,083
Fair Value	103,441	107,257
Government sponsored agencies - Collateralized mortgage obligations
Schedule of Available-for-sale Securities
Amortized Cost, After 1 but within 5 years	3,139	648
Amortized Cost, After 5 but within 10 years	5,093	9,975
Amortized Cost, After 10 years	43,813	111,155
Amortized Cost	52,045	121,778
Unrealized Gains	800	1,110
Unrealized Losses	102	295
Fair Value, After 1 but within 5 years	3,132	650
Fair Value, After 5 but within 10 years	5,233	10,178
Fair Value, After 10 years	44,378	111,765
Fair Value	52,743	122,593
Private label collateralized mortgage obligations
Schedule of Available-for-sale Securities
Amortized Cost, After 5 but within 10 years	143	178
Amortized Cost, After 10 years	14,530	848
Amortized Cost	14,673	1,026
Unrealized Gains	13	19
Unrealized Losses	195	0
Fair Value, After 5 but within 10 years	142	178
Fair Value, After 10 years	14,349	867
Fair Value	14,491	1,045
US States and Political Subdivisions Debt Securities [Member]
Schedule of Available-for-sale Securities
Amortized Cost, Within 1 year	910	620
Amortized Cost, After 1 but within 5 years	7,069	5,734
Amortized Cost, After 5 but within 10 years	44,590	24,464
Amortized Cost, After 10 years	47,422	50,031
Amortized Cost	99,991	80,849
Unrealized Gains	1,667	4,089
Unrealized Losses	2,954	373
Fair Value, Within 1 year	920	626
Fair Value, After 1 but within 5 years	7,380	6,055
Fair Value, After 5 but within 10 years	44,827	26,150
Fair Value, After 10 years	45,577	51,734
Fair Value	98,704	84,565
Common and preferred stocks
Schedule of Available-for-sale Securities
Amortized Cost, Common and preferred stocks	1,868	88
Unrealized Gains	1,283	46
Unrealized Losses	0	1
Fair Value, Common and preferred stocks	3,151	133
Within 1 year | US Government Agencies Debt Securities [Member]
Schedule of Available-for-sale Securities
Unrealized Gains	0	15
Unrealized Losses	8	0
Within 1 year | Government sponsored agencies - Residential mortgage-backed securities
Schedule of Available-for-sale Securities
Unrealized Gains	0	2
Unrealized Losses	0	0
Within 1 year | US States and Political Subdivisions Debt Securities [Member]
Schedule of Available-for-sale Securities
Unrealized Gains	10	6
Unrealized Losses	0	0
After 1 but within 5 years | US Government Agencies Debt Securities [Member]
Schedule of Available-for-sale Securities
Unrealized Gains	0	29
Unrealized Losses	199	1
After 1 but within 5 years | Government sponsored agencies - Residential mortgage-backed securities
Schedule of Available-for-sale Securities
Unrealized Gains	42	26
Unrealized Losses	0	0
After 1 but within 5 years | Government sponsored agencies - Collateralized mortgage obligations
Schedule of Available-for-sale Securities
Unrealized Gains	0	2
Unrealized Losses	7	0
After 1 but within 5 years | US States and Political Subdivisions Debt Securities [Member]
Schedule of Available-for-sale Securities
Unrealized Gains	311	321
Unrealized Losses	0	0
After 5 but within 10 years | Government sponsored agencies - Residential mortgage-backed securities
Schedule of Available-for-sale Securities
Unrealized Gains	284	341
Unrealized Losses	0	0
After 5 but within 10 years | Government sponsored agencies - Collateralized mortgage obligations
Schedule of Available-for-sale Securities
Unrealized Gains	140	206
Unrealized Losses	0	3
After 5 but within 10 years | Private label collateralized mortgage obligations
Schedule of Available-for-sale Securities
Unrealized Gains	0	0
Unrealized Losses	1	0
After 5 but within 10 years | US States and Political Subdivisions Debt Securities [Member]
Schedule of Available-for-sale Securities
Unrealized Gains	1,064	1,698
Unrealized Losses	827	12
After 10 years | Government sponsored agencies - Residential mortgage-backed securities
Schedule of Available-for-sale Securities
Unrealized Gains	624	2,089
Unrealized Losses	1,247	325
After 10 years | Government sponsored agencies - Collateralized mortgage obligations
Schedule of Available-for-sale Securities
Unrealized Gains	660	902
Unrealized Losses	95	292
After 10 years | Private label collateralized mortgage obligations
Schedule of Available-for-sale Securities
Unrealized Gains	13	19
Unrealized Losses	194	0
After 10 years | US States and Political Subdivisions Debt Securities [Member]
Schedule of Available-for-sale Securities
Unrealized Gains	282	2,064
Unrealized Losses	$ 2,127	$ 361

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Income Taxes - Valuation Allowance (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended									12 Months Ended			30 Months Ended	36 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2013	Dec. 31, 2013
Income Tax Disclosure [Abstract]
Income (loss) before income taxes	$ 7,236	$ 38,500	$ 7,327	$ 7,407	$ 7,257	$ (38,531)	$ 811	$ 1,614	$ 3,471	$ 29,227	$ (32,635)	$ (7,701)	$ 43,900	$ (11,109)
Goodwill impairment								4,900		0	0	4,944		4,944
Tax loss position										$ 29,227	$ (32,635)	$ (2,757)		$ (6,165)
Cumulative tax loss position										3 years

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Parent Company Condensed Financial Information - Condensed Balance Sheets (Details) (USD $) In Thousands, except Share data, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2010	Dec. 31, 2009
Condensed Financial Information of Parent Company Only Disclosure [Abstract]
Common Stock, Shares Authorized	33,333,333	33,333,333
Common stock, par value	$ 1.00	$ 1.00
Preferred stock, shares authorized	1,000,000	1,000,000
Assets:
Cash on deposit with bank subsidiary	$ 32,226	$ 36,125
Other assets	10,426	8,327
Total Assets	1,806,027	1,923,438	1,993,188
Liabilities and Shareholders' Equity:
Other liabilities	10,787	11,892
Shareholders' equity	184,470	170,794	140,586	147,457
Total	1,806,027	1,923,438
Parent Company
Assets:
Cash on deposit with bank subsidiary	1,889	5,212
Investment in subsidiary	215,562	199,680
Other investments	2,451	1,765
Other assets	108	351
Total Assets	220,010	207,008
Liabilities and Shareholders' Equity:
Dividends payable	177	183
Other liabilities	35,363	36,031
Shareholders' equity	184,470	170,794
Total	$ 220,010	$ 207,008

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Loans and Allowance for Loan Losses - Impaired Loans (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Impaired Loans
Theshold for individual impairment evaluation	$ 250,000
Impaired loans with a related allowance for loan losses, related allowance	557,000	1,397,000
Total impaired loans, recorded investment	24,526,000	33,554,000
Total impaired loans, unpaid principal balance	25,911,000	36,561,000
Total impaired loans, average recorded investment	29,425,000	65,148,000
Total impaired loans, interest income recognized	914,000	1,400,000
Allowance for loan losses	18,063,000	25,149,000
Outstanding balance of purchased impaired loans	90,741
Impaired financing receivable collectively evaluated for impairment	6,200,000	7,800,000
Impaired Financing Receivables, Allowance For Credit Losses, Collectively Evaluated For Impairment	2,100,000	2,200,000
Allowance for Purchased Impaired Loans Excess Credit Discount
Impaired Loans
Allowance for loan losses	3,567	6,672
Real Estate Loans | Construction Loans
Impaired Loans
Impaired loans without a related allowance for loan losses, recorded investment	2,816,000	6,212,000
Impaired loans without a related allowance for loan losses, unpaid principal balance	2,997,000	7,676,000
Impaired loans without a related allowance for loan losses, average recorded investment	4,764,000	18,748,000
Impaired loans without a related allowance for loan losses, interest income recognized	107,000	307,000
Impaired loans with a related allowance for loan losses, recorded investment	200,000	1,958,000
Impaired loans with a related allowance for loan losses, unpaid principal balance	215,000	2,136,000
Impaired loans with a related allowance for loan losses, related allowance	40,000	191,000
Impaired loans with a related allowance for loan losses, average recorded investment	915,000	2,929,000
Impaired loans with a related allowance for loan losses, interest income recognized	25,000	4,000
Total impaired loans, recorded investment	3,016,000	8,170,000
Total impaired loans, unpaid principal balance	3,212,000	9,812,000
Total impaired loans, average recorded investment	5,679,000	21,677,000
Total impaired loans, interest income recognized	132,000	311,000
Real Estate Loans | Owner Occupied Commercial
Impaired Loans
Impaired loans without a related allowance for loan losses, recorded investment	5,445,000	6,563,000
Impaired loans without a related allowance for loan losses, unpaid principal balance	5,981,000	7,071,000
Impaired loans without a related allowance for loan losses, average recorded investment	4,449,000	15,175,000
Impaired loans without a related allowance for loan losses, interest income recognized	117,000	228,000
Impaired loans with a related allowance for loan losses, recorded investment	5,131,000	4,961,000
Impaired loans with a related allowance for loan losses, unpaid principal balance	5,172,000	5,082,000
Impaired loans with a related allowance for loan losses, related allowance	201,000	189,000
Impaired loans with a related allowance for loan losses, average recorded investment	6,380,000	5,163,000
Impaired loans with a related allowance for loan losses, interest income recognized	237,000	326,000
Total impaired loans, recorded investment	10,576,000	11,524,000
Total impaired loans, unpaid principal balance	11,153,000	12,153,000
Total impaired loans, average recorded investment	10,829,000	20,338,000
Total impaired loans, interest income recognized	354,000	554,000
Real Estate Loans | Non-owner Occupied
Impaired Loans
Impaired loans without a related allowance for loan losses, recorded investment	4,469,000	4,976,000
Impaired loans without a related allowance for loan losses, unpaid principal balance	4,537,000	5,358,000
Impaired loans without a related allowance for loan losses, average recorded investment	5,202,000	7,399,000
Impaired loans without a related allowance for loan losses, interest income recognized	210,000	254,000
Impaired loans with a related allowance for loan losses, recorded investment	645,000	561,000
Impaired loans with a related allowance for loan losses, unpaid principal balance	645,000	643,000
Impaired loans with a related allowance for loan losses, related allowance	50,000	89,000
Impaired loans with a related allowance for loan losses, average recorded investment	399,000	2,212,000
Impaired loans with a related allowance for loan losses, interest income recognized	10,000	63,000
Total impaired loans, recorded investment	5,114,000	5,537,000
Total impaired loans, unpaid principal balance	5,182,000	6,001,000
Total impaired loans, average recorded investment	5,601,000	9,611,000
Total impaired loans, interest income recognized	220,000	317,000
Real Estate Loans | One to Four Family
Impaired Loans
Impaired loans without a related allowance for loan losses, recorded investment	661,000	1,435,000
Impaired loans without a related allowance for loan losses, unpaid principal balance	731,000	1,503,000
Impaired loans without a related allowance for loan losses, average recorded investment	692,000	2,364,000
Impaired loans without a related allowance for loan losses, interest income recognized	29,000	42,000
Impaired loans with a related allowance for loan losses, recorded investment	331,000	0
Impaired loans with a related allowance for loan losses, unpaid principal balance	341,000	0
Impaired loans with a related allowance for loan losses, related allowance	161,000	0
Impaired loans with a related allowance for loan losses, average recorded investment	442,000	347,000
Impaired loans with a related allowance for loan losses, interest income recognized	4,000	10,000
Total impaired loans, recorded investment	992,000	1,435,000
Total impaired loans, unpaid principal balance	1,072,000	1,503,000
Total impaired loans, average recorded investment	1,134,000	2,711,000
Total impaired loans, interest income recognized	33,000	52,000
Real Estate Loans | Multifamily
Impaired Loans
Impaired loans without a related allowance for loan losses, recorded investment	0	530,000
Impaired loans without a related allowance for loan losses, unpaid principal balance	0	565,000
Impaired loans without a related allowance for loan losses, average recorded investment	197,000	701,000
Impaired loans without a related allowance for loan losses, interest income recognized	0	0
Impaired loans with a related allowance for loan losses, recorded investment	0	0
Impaired loans with a related allowance for loan losses, unpaid principal balance	0	0
Impaired loans with a related allowance for loan losses, related allowance	0	0
Impaired loans with a related allowance for loan losses, average recorded investment	0	0
Impaired loans with a related allowance for loan losses, interest income recognized	0	2,000
Total impaired loans, recorded investment	0	530,000
Total impaired loans, unpaid principal balance	0	565,000
Total impaired loans, average recorded investment	197,000	701,000
Total impaired loans, interest income recognized	0	2,000
Real Estate Loans | Home Equity Lines of Credit
Impaired Loans
Impaired loans without a related allowance for loan losses, recorded investment	425,000	705,000
Impaired loans without a related allowance for loan losses, unpaid principal balance	477,000	800,000
Impaired loans without a related allowance for loan losses, average recorded investment	454,000	1,424,000
Impaired loans without a related allowance for loan losses, interest income recognized	0	13,000
Impaired loans with a related allowance for loan losses, recorded investment	0	0
Impaired loans with a related allowance for loan losses, unpaid principal balance	0	0
Impaired loans with a related allowance for loan losses, related allowance	0	0
Impaired loans with a related allowance for loan losses, average recorded investment	400,000	36,000
Impaired loans with a related allowance for loan losses, interest income recognized	2,000	0
Total impaired loans, recorded investment	425,000	705,000
Total impaired loans, unpaid principal balance	477,000	800,000
Total impaired loans, average recorded investment	854,000	1,460,000
Total impaired loans, interest income recognized	2,000	13,000
Commercial
Impaired Loans
Impaired loans without a related allowance for loan losses, recorded investment	4,095,000	4,460,000
Impaired loans without a related allowance for loan losses, unpaid principal balance	4,502,000	4,482,000
Impaired loans without a related allowance for loan losses, average recorded investment	4,416,000	6,350,000
Impaired loans without a related allowance for loan losses, interest income recognized	171,000	143,000
Impaired loans with a related allowance for loan losses, recorded investment	308,000	1,193,000
Impaired loans with a related allowance for loan losses, unpaid principal balance	313,000	1,245,000
Impaired loans with a related allowance for loan losses, related allowance	105,000	928,000
Impaired loans with a related allowance for loan losses, average recorded investment	715,000	2,249,000
Impaired loans with a related allowance for loan losses, interest income recognized	2,000	8,000
Total impaired loans, recorded investment	4,403,000	5,653,000
Total impaired loans, unpaid principal balance	4,815,000	5,727,000
Total impaired loans, average recorded investment	5,131,000	8,599,000
Total impaired loans, interest income recognized	173,000	151,000
Consumer and other
Impaired Loans
Impaired loans without a related allowance for loan losses, recorded investment	0	0
Impaired loans without a related allowance for loan losses, unpaid principal balance	0	0
Impaired loans without a related allowance for loan losses, average recorded investment	0	0
Impaired loans without a related allowance for loan losses, interest income recognized	0	0
Impaired loans with a related allowance for loan losses, recorded investment	0	0
Impaired loans with a related allowance for loan losses, unpaid principal balance	0	0
Impaired loans with a related allowance for loan losses, related allowance	0	0
Impaired loans with a related allowance for loan losses, average recorded investment	0	51,000
Impaired loans with a related allowance for loan losses, interest income recognized	0	0
Total impaired loans, recorded investment	0	0
Total impaired loans, unpaid principal balance	0	0
Total impaired loans, average recorded investment	0	51,000
Total impaired loans, interest income recognized	$ 0	$ 0

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Business Segment Information

12 Months Ended

Dec. 31, 2013

Segment Reporting [Abstract]

Business Segment Information

The Company has two reportable segments, including banking activities and mortgage banking activities.

In the fourth quarter of 2012, a decision was made by management to sell a reinsurance subsidiary held by Sidus. As a result of this decision, Sidus reclassified its investment in the reinsurance subsidiary to held for sale and wrote down its investment by $1.0 million to the estimated fair value at December 31, 2012. The sale of the subsidiary closed in the first quarter of 2013. In addition, at the beginning of 2013, the Company dissolved Sidus and is no longer doing business as Sidus. All mortgage banking activity beginning in 2013 is at the Bank.

The following table details the results of operations for the year ended December 31, 2013, 2012 and 2011 for bank activities and mortgage activities.

	Bank Activities			Mortgage Activities		Other (1)			Total
	(Amounts in thousands)
For Year Ended December 31, 2013
Interest income	$	70,633		$	3,666	$	—		$	74,299
Interest expense	9,494			—		747			10,241
Net interest income	61,139			3,666		(747		)	64,058
Provision for loan losses	(2,685		)	—		—			(2,685		)
Net interest income (loss) after provision for loan losses	63,824			3,666		(747		)	66,743
Other income	9,587			8,709		108			18,404
Other expense	50,045			5,500		375			55,920
Income (loss) before income taxes	23,366			6,875		(1,014		)	29,227
Income taxes	10,401			—		—			10,401
Net income (loss)	$	12,965		$	6,875	$	(1,014	)	$	18,826
Total assets	$	1,779,473		$	24,172	$	2,382		$	1,806,027
Net loans	1,340,683			—		—			1,340,683
Loans held for sale	—			18,913		—			18,913

(1) Note: The “Other” column includes Holding Company assets and Holding Company income and expenses.

	Bank Activities			Mortgage Activities			Other (2)			Total
	(Amounts in thousands)
For the year ended December 31, 2012
Interest income	$	75,104		$	3,868		$	—		$	78,972
Interest expense	16,998			143			847			17,988
Net interest income	58,106			3,725			(847		)	60,984
Provision for loan losses	40,538			(164		)	—			40,374
Net interest income (loss) after provision for loan losses	17,568			3,889			(847		)	20,610
Other income	7,677			5,860			29			13,566
Other expense	60,070			6,569			172			66,811
Income (loss) before income tax expense	(34,825		)	3,180			(990		)	(32,635		)
Income tax expense (1)	(23,961		)	—			—			(23,961		)
Net income (loss)	$	(10,864	)	$	3,180		$	(990	)	$	(8,674	)
Total assets	$	1,890,906		$	31,500		$	1,032		$	1,923,438
Net loans	1,284,355			—			—			1,284,355
Loans held for sale	—			27,679			—			27,679

________________________

(1) As an LLC, Sidus passes its pre-tax income through to its single member, the Bank, which is taxed on that income.

(2) Note: The “Other” column includes Holding Company assets and Holding Company income and expenses.

	Bank Activities			Mortgage Activities			Other (2)			Total
	(Amounts in thousands)
For Year Ended December 31, 2011
Interest income	$	88,156		$	390		$	—		$	88,546
Interest expense	25,016			239			786			26,041
Net interest income	63,140			151			(786		)	62,505
Provision for loan losses	20,828			15			—			20,843
Net interest income (loss) after provision for loan losses	42,312			136			(786		)	41,662
Other income	12,901			5,408			(129		)	18,180
Other expense	54,253			13,244			46			67,543
Loss before income tax expense	960			(7,700		)	(961		)	(7,701		)
Income tax expense (1)	6,694			—			—			6,694
Net loss	$	(5,734	)	$	(7,700	)	$	(961	)	$	(14,395	)
Total assets	$	1,973,848		$	24,209		$	(4,869	)	$	1,993,188
Net loans	1,418,076			—			—			1,418,076
Loans held for sale	3,628			15,906			—			19,534

(1) As an LLC, Sidus passes its pre-tax income through to its single member, the Bank, which is taxed on that income.

(2) Note: The “Other” column includes Holding Company assets and Holding Company income and expenses.

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Deposits - Deposit Liability Maturities (Details) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Banking and Thrift [Abstract]
2013	$ 357,631,000
2014	93,694,000
2015	58,324,000
2016	26,683,000
2017	15,937,000
Time Deposit Maturities, after Year Five	5,000,000
Total	557,269,000
Related party deposits	$ 15,200,000	$ 16,800,000

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Loans and Allowance for Loan Losses (Tables)

12 Months Ended

Dec. 31, 2013

Receivables [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable

The following table presents loans at December 31, 2013 and December 31, 2012 by class:

	December 31,			December 31,
	2013			2012
	(Amounts in thousands)
Construction and land development	$	131,035		$	131,981
Commercial real estate:
Owner occupied	382,766			342,962
Non-owner occupied	196,926			211,489
Residential mortgages:
1-4 family	174,072			168,611
Multifamily	41,713			35,337
Home equity lines of credit	194,145			191,888
Commercial	185,443			174,440
Consumer and other	51,667			51,664
Total	1,357,767			1,308,372
Less: Net deferred loan costs	979			1,132
Allowance for loan losses	(18,063		)	(25,149		)
Loans, net	$	1,340,683		$	1,284,355

Sale of loans held-for-investment

Actual loss on the sale of impaired loans recognized in the fourth quarter of 2012 was $21.7 million which represents the difference between the recorded investment of the loan at sale date and the sales price received.

Loan Sales	Recorded Investment of Loans Sold		Charge-offs (Losses) Recorded on the Sales		Additional Provisions Resulting from the Sale of Loans
	(Amounts in thousands)
Construction	$	16,211	$	7,625	$	6,100
Commercial Real Estate:
Owner Occupied	8,871		3,917		4,313
Non-owner Occupied	8,675		4,531		3,755
Mortgages:
1-4 Family	4,557		2,825		2,380
Multifamily	249		113		86
Home Equity Line of Credit	2,204		1,284		746
Commercial	2,291		1,329		1,290
Consumer and other	151		91		57
	$	43,209	$	21,715	$	18,727

Financing Receivable, Allowance for Credit Losses, Writedowns, Other Problem Loans

The following table presents a summary of charge-offs on other problem loans.

Loan Sales	Additional Charge-offs on Other Problem Loans
	(Amounts in thousands)
Construction	$	1,601
Commercial Real Estate:
Owner Occupied	1,599
Non-owner Occupied	2,267
Mortgages:
1-4 Family	291
Multifamily	—
Home Equity Line of Credit	1,309
Commercial	3,908
Consumer and other	24
	$	10,999

Schedule of Related Party Transactions

An analysis of these related party loans for the year ended December 31, 2013 and 2012 is as follows:

	2013			2012
	(Amounts in thousands)
Balance, beginning of year	$	15,550		$	15,783
New loans	3,233			2,436
Repayments	(2,824		)	(2,669		)
Balance, end of year	$	15,959		$	15,550

Financing Receivable Credit Quality Indicators

The following is a summary of credit quality indicators by class at December 31, 2013 and December 31, 2012:

Real Estate Credit Exposure as of December 31, 2013
			Commercial Real Estate
	Construction		Owner occupied		Non-owner occupied		1-4 Family		Multifamily		Home Equity
	(in thousands)
High Quality	$	—	$	—	$	—	$	90	$	—	$	161
Good Quality	356		—		1,587		982		957		6,627
Satisfactory	22,403		125,560		47,453		99,578		7,691		118,339
Merits Attention	90,343		226,320		133,072		62,242		31,686		61,026
Special Mention	14,434		20,284		7,392		5,307		551		5,075
Substandard	1,168		4,244		2,624		3,005		572		1,632
Substandard impaired	2,331		6,358		4,798		2,868		256		1,285
Doubtful	—		—		—		—		—		—
Loss	—		—		—		—		—		—
	$	131,035	$	382,766	$	196,926	$	174,072	$	41,713	$	194,145

Other Credit Exposures as of December 31, 2013
	Commercial		Consumer and other		Total Loans
	(in thousands)
High Quality	$	2,640	$	2,162	$	5,053
Good Quality	5,084		1,160		16,753
Satisfactory	63,674		21,221		505,919
Merits Attention	94,313		26,126		725,128
Special Mention	7,874		676		61,593
Substandard	9,553		32		22,830
Substandard impaired	2,305		290		20,491
Doubtful	—		—		—
Loss	—		—		—
	$	185,443	$	51,667	$	1,357,767

Real Estate Credit Exposure as of December 31, 2012
			Commercial Real Estate
	Construction		Owner  occupied		Non-owner  occupied		1-4 Family		Multifamily		Home Equity
	(in thousands)
High Quality	$	—	$	119	$	—	$	375	$	—	$	111
Good Quality	464		—		—		1,301		—		6,756
Satisfactory	22,284		115,347		58,577		95,727		7,945		118,497
Merits Attention	78,668		191,958		129,283		56,629		25,681		59,568
Special Mention	16,797		23,396		16,084		7,862		571		4,228
Substandard	3,939		4,286		2,136		2,850		601		1,687
Substandard impaired	9,829		7,856		5,409		3,867		539		1,041
Doubtful	—		—		—		—		—		—
Loss	—		—		—		—		—		—
	$	131,981	$	342,962	$	211,489	$	168,611	$	35,337	$	191,888

Other Credit Exposures as of December 31, 2012
	Commercial		Consumer and other		Total Loans
	(in thousands)
High Quality	$	2,430	$	2,289	$	5,324
Good Quality	5,738		1,316		15,575
Satisfactory	62,071		22,459		502,907
Merits Attention	82,243		24,425		648,455
Special Mention	16,809		551		86,298
Substandard	1,009		122		16,630
Substandard impaired	4,140		502		33,183
Doubtful	—		—		—
Loss	—		—		—
	$	174,440	$	51,664	$	1,308,372

Schedule of Financing Receivables, Non Accrual Status

The following is a breakdown of nonaccrual loans as of December 31, 2013 and December 31, 2012:

	December 31, 2013		December 31, 2012
	(in thousands)
Financing Receivables on Nonaccrual status
Construction	$	2,331	$	7,385
Commercial Real Estate:
Owner occupied	4,417		5,787
Non-owner occupied	1,806		1,697
Mortgages:
1-4 Family first lien	2,734		3,123
Multifamily	256		539
Home Equity lines of credit	1,285		1,041
Commercial	2,306		2,790
Consumer and other	258		455
Total	$	15,393	$	22,817

Past Due Financing Receivables

The following table presents the Bank's aged analysis of past due loans:

	30-59 Days  Past Due		60-89 Days  Past Due		Greater Than  90 Days		Total Past  Due		Current		Total Loans
December 31, 2013	(in thousands)
Construction	$	855	$	207	$	541	$	1,603	$	129,432	$	131,035
Commercial real estate:
Owner occupied	1,973		—		58		2,031		380,735		382,766
Non-owner occupied	1,172		129		432		1,733		195,193		196,926
Commercial	2,029		742		142		2,913		182,530		185,443
Mortgages:
Secured 1-4 family- first lien	2,738		1,190		1,186		5,114		168,958		174,072
Multifamily	—		249		—		249		41,464		41,713
Home equity lines of credit	909		341		75		1,325		192,820		194,145
Consumer and other	322		62		52		436		51,231		51,667
Total	$	9,998	$	2,920	$	2,486	$	15,404	$	1,342,363	$	1,357,767
December 31, 2012
Construction	$	4,395	$	345	$	1,865	$	6,605	$	125,376	$	131,981
Commercial real estate:
Owner occupied	838		114		4,237		5,189		337,773		342,962
Non-owner occupied	1,688		500		1,098		3,286		208,203		211,489
Commercial	2,027		34		2,660		4,721		169,719		174,440
Mortgages:
Secured 1-4 family- first lien	2,767		910		2,226		5,903		162,708		168,611
Multifamily	12		—		10		22		35,315		35,337
Home equity lines of credit	1,980		52		924		2,956		188,932		191,888
Consumer and other	236		45		342		623		51,041		51,664
Total	$	13,943	$	2,000	$	13,362	$	29,305	$	1,279,067	$	1,308,372

Impaired Financing Receivables

The following table presents the Bank's investment in loans individually reviewed for impairment and related information on those impaired loans as of December 31, 2013 and December 31, 2012:

	As of December 31, 2013						Year to Date December 31, 2013
	Recorded  Investment		Unpaid  Principal  Balance		Related  Allowance		Average  Recorded  Investment		Interest Income Recognized
	(in thousands)
Impaired loans without a related allowance for loan losses
Construction	$	2,816	$	2,997	$	—	$	4,764	$	107
Commercial real estate:
Owner occupied	5,445		5,981		—		4,449		117
Non-owner occupied	4,469		4,537		—		5,202		210
Commercial	4,095		4,502		—		4,416		171
Mortgages:
Secured 1-4 family real estate	661		731		—		692		29
Multifamily	—		—		—		197		—
Home equity lines of credit	425		477		—		454		—
Consumer and other	—		—		—		—		—
Impaired loans with a related allowance for loan losses
Construction	$	200	$	215	$	40	$	915	$	25
Commercial real estate:
Owner occupied	5,131		5,172		201		6,380		237
Non-owner occupied	645		645		50		399		10
Commercial	308		313		105		715		2
Mortgages:
Secured 1-4 family real estate	331		341		161		442		4
Multifamily	—		—		—		—		—
Home equity lines of credit	—		—		—		400		2
Consumer and other	—		—		—		—		—
Total impaired loans
Construction	$	3,016	$	3,212	$	40	$	5,679	$	132
Commercial real estate:
Owner occupied	10,576		11,153		201		10,829		354
Non-owner occupied	5,114		5,182		50		5,601		220
Commercial	4,403		4,815		105		5,131		173
Mortgages:
Secured 1-4 family real estate	992		1,072		161		1,134		33
Multifamily	—		—		—		197		—
Home equity lines of credit	425		477		—		854		2
Consumer and other	—		—		—		—		—
Total impaired loans individually reviewed for impairment	$	24,526	$	25,911	$	557	$	29,425	$	914

	As of December 31, 2012						Year to Date December 31, 2012
	Recorded Investment		Unpaid  Principal  Balance		Related  Allowance		Average Recorded Investment		Interest Income Recognized
	(in thousands)
Impaired loans without a related allowance for loan losses
Construction	$	6,212	$	7,676	$	—	$	18,748	$	307
Commercial real estate:
Owner occupied	6,563		7,071		—		15,175		228
Non-owner occupied	4,976		5,358		—		7,399		254
Commercial	4,460		4,482		—		6,350		143
Mortgages:
Secured 1-4 family real estate	1,435		1,503		—		2,364		42
Multifamily	530		565		—		701		—
Home equity lines of credit	705		800		—		1,424		13
Consumer and other	—		—		—		—		—
Impaired loans with a related allowance for loan losses
Construction	$	1,958	$	2,136	$	191	$	2,929	$	4
Commercial real estate:
Owner occupied	4,961		5,082		189		5,163		326
Non-owner occupied	561		643		89		2,212		63
Commercial	1,193		1,245		928		2,249		8
Mortgages:
Secured 1-4 family real estate	—		—		—		347		10
Multifamily	—		—		—		—		2
Home equity lines of credit	—		—		—		36		—
Consumer and other	—		—		—		51		—
Total impaired loans
Construction	$	8,170	$	9,812	$	191	$	21,677	$	311
Commercial real estate:
Owner occupied	11,524		12,153		189		20,338		554
Non-owner occupied	5,537		6,001		89		9,611		317
Commercial	5,653		5,727		928		8,599		151
Mortgages:
Secured 1-4 family real estate	1,435		1,503		—		2,711		52
Multifamily	530		565		—		701		2
Home equity lines of credit	705		800		—		1,460		13
Consumer and other	—		—		—		51		—
Total impaired loan individually reviewed for impairment	$	33,554	$	36,561	$	1,397	$	65,148	$	1,400

Troubled Debt Restructurings on Financing Receivables

	Year ended December 31, 2013					Year ended December 31, 2012
	Number of Loans	Recorded Investment Prior to Modification		Recorded Investment After Modification		Number of Loans	Recorded Investment Prior to Modification		Recorded Investment After Modification
		(in thousands)					(in thousands)
Below market interest rate
Construction	1	$	215	$	200	—	$	—	$	—
Commercial real estate:
Non-owner occupied	2	1,220		1,139		—	—		—
Total	3	1,435		1,339		—	—		—
Extended payment terms
Construction	—	—		—		5	1,231		872
Commercial real estate:
Non-owner occupied	1	167		165		6	5,329		4,990
Owner occupied	4	1,319		1,316		9	2,443		2,379
Commercial	—	—		—		7	2,676		2,286
1-4 Family Residential	—	—		—		4	1,259		1,130
Consumer	—	—		—		1	27		24
Total	5	1,486		1,481		32	12,965		11,681
Principal payment reduction
Commercial real estate:
Owner occupied	—	—		—		2	571		571
Consumer	—	—		—		1	165		9
Total	—	—		—		3	736		580
Total	8	$	2,921	$	2,820	35	$	13,701	$	12,261

The following tables present loans that were modified as troubled debt restructurings during the previous twelve months and for which there was a payment default during the year ended December 31, 2012. There were no loans modified as troubled debt restructurings during the previous twelve months and for which there was a payment default during the year ended December 31, 2013.

	Year ended December 31, 2013			Year ended December 31, 2012
	Number of loans	Recorded investment		Number of loans	Recorded investment
Extended payment terms
Commercial real estate:
Non-owner occupied	—	$	—	1	$	—
Owner occupied	—	—		1	93
Secured 1-4 family mortgages	—	—		1	170
Consumer	—	—		1	24
Total	—	—		4	287
Total	—	$	—	4	$	287

Allowance for Credit Losses on Financing Receivables

The following table presents changes in the allowance for loan losses for the years ended December 31, 2013 and 2012:

	December 31, 2012		Charge-offs		Recoveries		Provision (Recovery)			December 31, 2013
	(Amounts in thousands)
Construction	$	4,269	$	2,104	$	1,007	$	(3	)	$	3,169
Commercial real estate:
Owner occupied	4,374		383		120		(1,022		)	3,089
Non-owner occupied	3,935		224		134		(1,764		)	2,081
Commercial	4,291		2,923		1,287		1,078			3,733
Mortgages:
Secured 1-4 family- first lien	3,191		871		253		(205		)	2,368
Multifamily	594		—		—		(158		)	436
Home equity lines of credit	3,822		1,037		568		(697		)	2,656
Consumer and other	673		330		102		86			531
	$	25,149	$	7,872	$	3,471	$	(2,685	)	$	18,063
	December 31, 2011		Charge-offs		Recoveries		Provision			December 31, 2012
	(Amounts in thousands)
Construction	$	8,214	$	17,825	$	1,138	$	12,742		$	4,269
Commercial real estate:
Owner occupied	5,792		7,334		165		5,751			4,374
Non-owner occupied	4,668		9,830		664		8,433			3,935
Commercial	5,712		7,796		956		5,419			4,291
Mortgages:
Secured 1-4 family- first lien	3,726		3,512		215		2,762			3,191
Multifamily	805		347		—		136			594
Home equity lines of credit	3,310		4,360		186		4,686			3,822
Consumer and other	621		752		359		445			673
	$	32,848	$	51,756	$	3,683	$	40,374		$	25,149

The following tables provide the breakdown of allowance for loan losses for collectively evaluated and individually evaluated loans by type as of December 31, 2013 and December 31, 2012.

	Reserves for  loans  individually  evaluated for  impairment		Loans  individually  evaluated for  impairment		Reserves for  loans  collectively  evaluated for  impairment		Loans  collectively  evaluated for  impairment
As of December 31, 2013	(Amounts in thousands)
Construction	$	40	$	3,016	$	3,129	$	128,019
Commercial real estate:
Owner occupied	201		10,576		2,888		372,190
Non-owner occupied	50		5,114		2,031		191,812
Commercial	105		4,403		3,628		181,040
Mortgages:
Secured 1-4 family- first lien	161		992		2,207		173,080
Multifamily	—		—		436		41,713
Home equity lines of credit	—		425		2,656		193,720
Consumer and other	—		—		531		51,667
	$	557	$	24,526	$	17,506	$	1,333,241
	Reserves for  loans  individually  evaluated for  impairment		Loans  individually  evaluated for  impairment		Reserves for  loans  collectively  evaluated for  impairment		Loans  collectively  evaluated for  impairment
As of December 31, 2012	(Amounts in thousands)
Construction	$	191	$	8,170	$	4,078	$	123,811
Commercial real estate:
Owner occupied	189		11,524		4,185		331,438
Non-owner occupied	89		5,537		3,846		205,952
Commercial	928		5,653		3,363		168,787
Mortgages:
Secured 1-4 family- first lien	—		1,435		3,191		167,176
Multifamily	—		530		594		34,807
Home equity lines of credit	—		705		3,822		191,183
Consumer and other	—		—		673		51,664
	$	1,397	$	33,554	$	23,752	$	1,274,818

XML

Leases

12 Months Ended

Dec. 31, 2013

Leases [Abstract]

Leases

LEASES

Operating Leases

The Company has entered into non-cancelable operating leases for branch facilities and equipment. These leases have terms from five to thirty years. Rental expense was approximately $1.9 million in 2013, $1.9 million in 2012 and $2.2 million in 2011 and primarily represents rentals of real estate.

The following table presents the future minimum lease payments for the next five years:

	(Amounts in thousands)
2014	$	1,905
2015	1,456
2016	1,032
2017	642
2018	560
Thereafter	5,310
Total	$	10,905

Capital Lease Obligation

The Company leases its Monroe Main office facility, which was acquired from American Community, under a capital lease. Leases that meet the criteria for capitalization are recorded as assets and the related obligations are reflected on the accompanying balance sheets. Amortization of property under capital lease is included in depreciation expense. Included in premises and equipment at December 31, 2013 is $2.5 million as the capitalized cost of the Company’s Monroe Main office and accumulated amortization of approximately $168,876 at December 31, 2013.

The following table presents aggregate future minimum lease payments due under this capital lease obligation as of December 31, 2013:

	(Amounts in thousands)
2014	$	227
2015	241
2016	241
2017	241
2018	242
2019-2029	2,917
Total minimum lease payments	4,109
Less amount representing interest	(1,828		)
Present value of net minimum lease payments	$	2,281

XML

Fair Value - Nonrecurring Measurements (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Nonrecurring | Estimated Fair Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Other real estate owned	$ 1,034,000	$ 5,281,000
Nonrecurring | Estimated Fair Value | Impaired Loans Receivable | Construction Loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impaired loans	160,000	1,767,000
Nonrecurring | Estimated Fair Value | Impaired Loans Receivable | Owner Occupied Commercial
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impaired loans	4,930,000	4,772,000
Nonrecurring | Estimated Fair Value | Impaired Loans Receivable | Non-owner Occupied
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impaired loans	595,000	472,000
Nonrecurring | Estimated Fair Value | Impaired Loans Receivable | Commercial Loan
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impaired loans	203,000	265,000
Nonrecurring | Estimated Fair Value | Impaired Loans Receivable | One to Four Family
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impaired loans	170,000	0
Nonrecurring | Estimated Fair Value | Impaired Loans Receivable | Multifamily
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impaired loans	0	0
Nonrecurring | Estimated Fair Value | Impaired Loans Receivable | Home Equity Lines of Credit
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impaired loans	0	0
Nonrecurring | Estimated Fair Value | Impaired Loans Receivable | Consumer and Other
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impaired loans	0	0
Nonrecurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Other real estate owned	0	0
Nonrecurring | Level 1 | Impaired Loans Receivable | Construction Loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impaired loans	0	0
Nonrecurring | Level 1 | Impaired Loans Receivable | Owner Occupied Commercial
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impaired loans	0	0
Nonrecurring | Level 1 | Impaired Loans Receivable | Non-owner Occupied
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impaired loans	0	0
Nonrecurring | Level 1 | Impaired Loans Receivable | Commercial Loan
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impaired loans	0	0
Nonrecurring | Level 1 | Impaired Loans Receivable | One to Four Family
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impaired loans	0	0
Nonrecurring | Level 1 | Impaired Loans Receivable | Multifamily
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impaired loans	0	0
Nonrecurring | Level 1 | Impaired Loans Receivable | Home Equity Lines of Credit
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impaired loans	0	0
Nonrecurring | Level 1 | Impaired Loans Receivable | Consumer and Other
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impaired loans	0	0
Nonrecurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Other real estate owned	0	0
Nonrecurring | Level 2 | Impaired Loans Receivable | Construction Loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impaired loans	0	0
Nonrecurring | Level 2 | Impaired Loans Receivable | Owner Occupied Commercial
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impaired loans	0	0
Nonrecurring | Level 2 | Impaired Loans Receivable | Non-owner Occupied
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impaired loans	0	0
Nonrecurring | Level 2 | Impaired Loans Receivable | Commercial Loan
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impaired loans	0	0
Nonrecurring | Level 2 | Impaired Loans Receivable | One to Four Family
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impaired loans	0	0
Nonrecurring | Level 2 | Impaired Loans Receivable | Multifamily
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impaired loans	0	0
Nonrecurring | Level 2 | Impaired Loans Receivable | Home Equity Lines of Credit
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impaired loans	0	0
Nonrecurring | Level 2 | Impaired Loans Receivable | Consumer and Other
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impaired loans	0	0
Nonrecurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Other real estate owned	1,034,000	5,281,000
Nonrecurring | Level 3 | Impaired Loans Receivable | Construction Loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impaired loans	160,000	1,767,000
Nonrecurring | Level 3 | Impaired Loans Receivable | Owner Occupied Commercial
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impaired loans	4,930,000	4,772,000
Nonrecurring | Level 3 | Impaired Loans Receivable | Non-owner Occupied
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impaired loans	595,000	472,000
Nonrecurring | Level 3 | Impaired Loans Receivable | Commercial Loan
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impaired loans	203,000	265,000
Nonrecurring | Level 3 | Impaired Loans Receivable | One to Four Family
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impaired loans	170,000	0
Nonrecurring | Level 3 | Impaired Loans Receivable | Multifamily
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impaired loans	0	0
Nonrecurring | Level 3 | Impaired Loans Receivable | Home Equity Lines of Credit
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impaired loans	0	0
Nonrecurring | Level 3 | Impaired Loans Receivable | Consumer and Other
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impaired loans	0	0
Weighted Average | Nonrecurring | Other Real Estate Owned
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair Value Inputs, Collateral Discounts		15.00%
Maximum | Nonrecurring | Impaired Loans Receivable
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair Value Inputs, Collateral Discounts	50.00%	50.00%
Minimum | Nonrecurring | Impaired Loans Receivable
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair Value Inputs, Collateral Discounts	15.00%	10.00%
Mortgage Servicing Rights | Weighted Average | Recurring | Derivative Financial Instruments, Assets
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair Value Inputs, Discount Rate	8.00%	8.00%
Fair Value Inputs, Prepayment Rate	9.72%	17.96%
Fair Value Inputs, Cost of Service	$ 50	$ 50
Interest Rate Swap Agreements | Weighted Average | Recurring | Derivative Financial Instruments, Assets
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair Value Inputs, Discount Rate	0.50%	1.00%
Derivative Financial Instruments, Liabilities | Interest Rate Lock Commitments | Weighted Average | Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair Value Inputs, Pull Through Rates	86.43%	83.90%