Q4 2013 Press Release

“We continued our positive earnings trend and again achieved robust loan growth in the quarter” stated Scott Custer, CEO of the Company, commenting on the Company's financial performance in the fourth quarter of 2013. Mr. Custer continued, “our SBA lending group notched its highest quarterly revenue number in the history of our bank and continues to grow its government-guaranteed, small business loan production platform. We are proud of the reputation we've built in our communities by partnering with the SBA to provide financing solutions to small businesses throughout the Southeast and Mid-Atlantic regions. In fact, the SBA recently recognized our bank as the top small business lender in North Carolina. As we continue to grow our business by meeting the banking needs of our customers, we have also focused on cutting costs and improving our operating efficiency to the level of a high performing community bank. We improved our operating efficiency ratio in each successive quarter in 2013 and will continue this priority into 2014."

Net income was $3.3 million in the fourth quarter of 2013, which was an improvement from $1.5 million in the third quarter of 2013. After preferred stock dividends and accretion, net income available to common stockholders was $2.6 million, or $0.06 per common share, in the fourth quarter of 2013 compared to $776 thousand, or $0.02 per common share, in the third quarter of 2013. Net operating earnings, which excludes merger and conversion costs and a non-recurring income tax charge, improved to $3.8 million, or $0.07 per common share, in the fourth quarter of 2013 from $3.0 million, or $0.05 per common share, in the third quarter of 2013 as the Company cut costs and continued to improve its operating efficiency. Similarly, pre-tax, pre-provision earnings increased to $6.8 million in the fourth quarter of 2013 from $6.2 million in the third quarter of 2013.

Net interest income was $19.8 million in the fourth quarter of 2013 compared to $19.9 million in the third quarter of 2013. The decrease in net interest income was primarily due to the Company's net interest margin declining from 4.39 percent in the third quarter of 2013 to 4.31 percent in the fourth quarter of 2013. Partially offsetting the net interest margin reduction was an increase in earning assets from organic business and lending activity. Average earning assets increased from $1.80 billion in the third quarter of 2013 to $1.83 billion in the fourth quarter of 2013. Over this period, average loan balances increased by $18.7 million while average investment securities balances increased by $29.9 million. The lower net interest margin was largely due to higher costs on long-term debt following the Company's issuance of $38.1 million of subordinated debt in August 2013. Core net interest margin, which excludes the impact of acquisition accounting, was 3.46 percent in the fourth quarter of 2013 compared to 3.47 percent in the third quarter of 2013.

Income accretion on purchased loans totaled $5.2 million in the fourth quarter of 2013, which consisted of $3.2 million of accretion on purchased credit-impaired ("PCI") loans and $2.1 million of accretion income on purchased non-impaired loans. Income accretion on purchased loans in the third quarter of 2013 totaled $5.7 million, which included $3.1 million of accretion on PCI loans and $2.5 million of accretion income on purchased non-impaired loans. Accretion income on purchased non-impaired loans in the fourth quarter of 2013 included $573 thousand of accelerated accretion due to principal prepayments compared to $895 thousand of such income in the third quarter of 2013. Time deposit fair value amortization, which reduced interest expense, totaled $739 thousand in the fourth quarter of 2013 compared to $857 thousand in the third quarter of 2013.

Provision for loan losses was $757 thousand in the fourth quarter of 2013, which was a decline from $1.3 million in the third quarter of 2013. The reduction in provision for loan losses was primarily due to a $439 thousand decrease in provision expense on PCI loans from improvements in expected cash flows in the fourth quarter. Annualized net loan charge-offs were 0.22 percent of average loans in the fourth quarter of 2013 compared to 0.20 percent in the third quarter of 2013. The following table summarizes the changes in the Company's allowance for loan losses ("ALLL") in the third and fourth quarters of 2013.

Nonperforming loans as a percentage of total loans was 1.51 percent as of December 31, 2013, which was an increase from 1.40 percent as of September 30, 2013 and a decline from 1.67 percent as of December 31, 2012. Total nonperforming assets (which include nonaccrual loans, loans past due 90 days or more and still accruing, and foreclosed assets) as a percentage of total assets was 1.50 percent as of both December 31, 2013 and September 30, 2013 compared to 1.71 percent as of December 31, 2012. The decline in the nonperforming assets ratio over the past year was due to the Company's acquisition of ECB Bancorp, Inc. (the "ECB merger") as well as its continuing efforts to resolve legacy problem assets while maximizing value. These resolution efforts have included a combination of asset sales through various channels and successful loan workout plans.

Non-interest income totaled $4.6 million in the fourth quarter of 2013 compared to $4.5 million in the third quarter of 2013. Government-guaranteed, small business lending income, which includes gains on sales of the guaranteed portion of certain SBA loans originated by the Company as well as servicing fees on previously sold SBA loans, increased by $359 thousand due to increased production and loan sales. Mortgage banking income increased by $158 thousand from higher production volume and widening profit margins on loans sold to investors. These increases in income were partially offset by a reduction in other non-interest income of $469 thousand resulting primarily from a third quarter gain on a non-marketable investment and lower merchant income.

Net income was $3.3 million in the fourth quarter of 2013 compared to $2.1 million in the fourth quarter of 2012. After preferred stock dividends and accretion, net income available to common stockholders was $2.6 million, or $0.06 per common share, in the fourth quarter of 2013 compared to net income of $1.7 million, or $0.05 per common share, in the fourth quarter of 2012. Net operating earnings, which exclude securities gains, merger and conversion costs, and the reversal of a deferred tax valuation allowance, improved to $3.8 million in fourth quarter of 2013 from $235 thousand in the fourth quarter of 2012 as the Company improved its financial performance following the ECB merger by increasing net interest income, lowering provision for loan losses, increasing non-interest income, and by improving its operating efficiency. Similarly, pre-tax, pre-provision operating earnings increased to $6.8 million in the fourth quarter of 2013 from $1.5 million in the fourth quarter of 2012.

Net interest income was $19.8 million in the fourth quarter of 2013 compared to $10.2 million in the fourth quarter of 2012. The increase in net interest income was the result of a significant increase in earning assets from organic business activity and the ECB merger. Average earning assets increased from $1.07 billion in the fourth quarter of 2012 to $2.06 billion in the fourth quarter of 2013. Over this period, average loan balances increased by $631.0 million, of which $466.5 million was from acquired ECB loans, and average investment securities balances increased by $264.4 million. In addition, average deposits increased by $778.1 million, including $736.1 million from the ECB merger.

The Company's net interest margin declined from 4.37 percent in the fourth quarter of 2012 to 4.31 percent in the fourth quarter of 2013. The margin reduction was primarily due to declining yields on interest-earning assets partially offset by lower costs on interest-bearing liabilities. The yield on earning assets declined from 5.05 percent in the fourth quarter of 2012 to 4.91 percent in the fourth quarter of 2013, which reflected lower loan yields and lower yields on investment securities. The decrease in loan yields was a product of lower prevailing market loan rates on new loan originations partially offset by a favorable impact from acquisition accounting fair value adjustments. Securities yields declined as the Company reinvested principal paydowns and proceeds from sales at lower current market rates.

The cost of interest-bearing liabilities declined from 0.80 percent in the fourth quarter of 2012 to 0.69 percent in the fourth quarter of 2013, which primarily reflected a lower cost of deposits as the Company adjusted interest rates it pays on certain checking and money market accounts in the second quarter of 2013 and incorporated the ECB deposit base. The Company also increased its level of short-term borrowings in the form of FHLB advances which lowered overall funding costs. These reductions were partially offset by an increase in the cost of long-term debt from the issuance of $38.1 million of subordinated debt in August 2013. These subordinated notes were issued to further strengthen and diversify the Company's regulatory capital position.

Provision for loan losses was $757 thousand in the fourth quarter of 2013 compared to $1.2 million in the fourth quarter of 2012. The reduction in provision for loan losses was primarily due improvements in expected cash flows on certain PCI loan pools in the fourth quarter of 2013 compared to PCI loan provision expense of $371 thousand in the prior year fourth quarter. Annualized net loan charge-offs were 0.22 percent of average loans in the fourth quarter of 2013 compared to 0.17 percent in the fourth quarter of 2012. The following table summarizes the changes in the ALLL in the fourth quarters of 2013 and 2012.

Service charges and fees increased by $899 thousand primarily due to the addition of deposit accounts acquired in the ECB merger. Government-guaranteed, small business lending income increased by $166 thousand. Bank-owned life insurance income increased by $189 thousand primarily due to the addition of life insurance policies acquired in the ECB merger. Mortgage banking income decreased by $303 thousand due to several factors, including an increase in long-term interest rates which significantly reduced refinancing activities as well as declining profit margins on loans sold to investors. The Company has taken certain steps to improve its mortgage banking performance in the future which included hiring a veteran mortgage production manager in the third quarter of 2013, hiring FHA and VA mortgage underwriters, which generally produce higher margin loans, and reducing headcount and cutting costs in the mortgage business.

Non-interest expense totaled $18.1 million in the fourth quarter of 2013, which was a significant increase from $14.4 million in the fourth quarter of 2012. The increase in expenses was primarily due to increases in salaries and employee benefits, occupancy and equipment, data processing, and other non-interest expense categories due to the ECB merger which added employees, branch and other facilities, and equipment to the Company's expense base. The Company's operating efficiency ratio, which excludes non-recurring merger and conversion costs, improved from 85.5 percent in the fourth quarter of 2012 to 71.9 percent in the fourth quarter of 2013. Much of the improvement in the operating efficiency ratio was due to increased scale and operating leverage provided by the ECB merger combined with cost cutting measures which will continue to benefit the Company going forward. For example, full time equivalent employees for the combined Company decreased from 520 at the ECB merger date to 455 as of December 31, 2013.

On January 27, 2014, the Company entered into an Agreement and Plan of Merger with Yadkin Financial Corporation (the “Yadkin Merger Agreement”). Pursuant to the Yadkin Merger Agreement, the Company will merge with and into Yadkin Financial (the “Merger”), which will be the surviving bank holding corporation. Immediately following the Merger, the Company's wholly-owned banking subsidiary, VantageSouth Bank, will be merged with and into Yadkin Bank. At the time of the Merger, all of the Company's outstanding shares of common stock will be converted into the right to receive 0.3125 shares of Yadkin Financial Corporation (“Yadkin”) common stock. The Merger is subject to customary closing conditions, including regulatory and stockholder approvals. The Company expects the Merger to close late in the second quarter of 2014.

On January 27, 2014, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with accredited investors and certain directors of the Company and their affiliates to purchase an aggregate of 9.2 million shares of the Company’s common stock for an aggregate purchase price of approximately $46.9 million (the “Private Placement”). The Private Placement is expected to close on or about January 31, 2014, subject to customary closing conditions. The net proceeds of the private placement will be used to redeem the Company's outstanding $42.8 million of preferred stock previously issued to the U.S. Department of Treasury ("Treasury") pursuant to the TARP Capital Purchase Program, to repurchase the warrants to purchase 1,348,398 shares of common stock from Treasury, and for general corporate purposes.

In connection with the ECB merger, the Company applied the acquisition method of accounting to ECB's balance sheet. Therefore, all acquired assets and liabilities were adjusted to fair value, and the historical allowance for loan losses was eliminated. The Company recorded a one-time acquisition gain of $7.8 million in the second quarter of 2013, which reflects the amount by which the fair value of acquired net assets exceeded the combined purchase price and fair value of other equity interests. The Company has a one-year measurement period from the acquisition date to finalize the recorded fair values of net assets acquired. The acquisition gain may change if initial fair value estimates are revised within the measurement period and any changes are reported retrospectively as of the date of acquisition.

Statements included in this press release include non-GAAP financial measures and should be read along with the accompanying tables which provide a reconciliation of non-GAAP financial measures to GAAP financial measures. The Company's management uses these non-GAAP financial measures, including: (i) net operating earnings (loss); (ii) pre-tax, pre-provision operating earnings; (iii) operating non-interest income; (iv) operating non-interest expense; (v) operating efficiency ratio; (vi) adjusted allowance for loan losses to loans; and (vii) tangible common equity, in their analysis of the Company's performance. Net operating earnings (loss) excludes the following from net income (loss): securities gains, a one-time acquisition gain, merger and conversion costs, income tax expense from the change in future state tax rates, and the income tax effect of adjustments. Pre-tax, pre-provision operating earnings excludes the following from net income (loss): provision for loan losses, income tax expense (benefit), securities gains, a one-time acquisition gain, and merger and conversion costs. Operating non-interest income excludes a one-time acquisition gain from non-interest income. Operating non-interest expense excludes merger and conversion costs from non-interest expense. The operating efficiency ratio excludes a one-time acquisition gain and merger and conversion costs from the efficiency ratio. Adjusted allowance for loan losses adds net acquisition accounting fair value discounts to the allowance for loan losses. Tangible common equity excludes preferred stock as well as goodwill and other intangible assets, net, from total stockholders' equity.

Management believes that non-GAAP financial measures provide additional useful information that allows readers to evaluate the ongoing performance of the Company. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the Company's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Company's results or financial condition as reported under GAAP.

Information in this press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause actual results to differ materially, including without limitation, risks associated with the ownership by Piedmont of a majority of the Company’s voting power, including the possibility of the interests of Piedmont differing from other Company stockholders or any change in management, strategic direction, business plan, or operations, the ability of our management to successfully integrate the Company’s business and execute its business plan across several geographic areas, local economic conditions affecting retail and commercial real estate, disruptions in the credit markets, changes in interest rates, adverse developments in the real estate market affecting the value and marketability of collateral securing loans made by the Bank, the failure of assumptions underlying loan loss and other reserves, competition, our ability to successfully integrate any businesses that we acquire, and the risk of new and changing regulation. Additional factors that could cause actual results to differ materially are discussed in the Company’s filings with the Securities and Exchange Commission, including without limitation its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, and its Current Reports on Form 8-K. Information in this press release also contains forward-looking statements with respect to the expected Merger and the Private Placement. These statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated by such forward-looking statements, including without limitation: delays in obtaining or failure to receive required regulatory approvals; the possibility that fewer than the required number of Company or Yadkin stockholders vote to approve the Merger; the occurrence of events that would have a material adverse effect on us or Yadkin (as defined in the Merger Agreement); potential delays in the closing of the Merger, potential deposit attrition, higher than expected costs, customer loss and business disruption associated with business integration, including, without limitation, potential difficulties in maintaining relationships with key personnel, technological integration, and other integration related-matters; other uncertainties arising in connection with the Merger; the ability to meet the closing conditions under the Purchase Agreement and risk factors that are discussed in Yadkin’s filings with the Securities and Exchange Commission (“SEC”), including without limitation its Annual Reports on Form 10-K, its Quarterly Reports on Form 10-Q and its Current Reports on Form 8-K. The forward-looking statements in this press release speak only as of the date of the press release, and the Company does not assume any obligation to update such forward-looking statements.

In connection with the proposed Merger, Yadkin will file with the Securities and Exchange Commission ("SEC") a Registration Statement on Form S-4 that will include a joint proxy statement of Yadkin and the Company and a prospectus of Yadkin, as well as other relevant documents concerning the proposed transaction. Both the Company and Yadkin will mail the joint proxy statement/prospectus to their respective stockholders. SHAREHOLDERS OF YADKIN AND the Company ARE URGED TO READ THE REGISTRATION STATEMENT AND JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE PROPOSED MERGER WHEN IT BECOMES AVAILABLE AND ANY OTHER RELEVANT DOCUMENTS FILED WITH SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Investors and security holders may obtain a free copy of the proxy statement/prospectus (when available) and other filings containing information about Yadkin and the Company at the SEC's website at www.sec.gov. The joint proxy statement/prospectus (when available) and the other filings may also be obtained free of charge at Yadkin's website at www.YadkinBank.com, or at the Company’s website at www.VantageSouth.com.

Yadkin and certain of their respective Directors and executive officers, under the SEC's rules, may be deemed to be participants in the solicitation of proxies of Yadkin and the Company’s stockholders in connection with the proposed Merger. Information about the Directors and executive officers of Yadkin and their ownership of Yadkin common stock is set forth in the proxy statement for Yadkin's 2013 Annual Meeting of Shareholders, as filed with the SEC on Schedule 14A on April 4, 2013. Information about the Directors and executive officers of the Company and their ownership of the Company common stock is set forth in the proxy statement for the Company's 2013 Annual Meeting of Stockholders, as filed with the SEC on a Schedule 14A on April 23, 2013. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the joint proxy statement/prospectus regarding the proposed Merger when it becomes available. Free copies of this document may be obtained as described in the preceding paragraph.



	Three Months Ended
	December 31,		September 30,		June 30,			March 31,			December 31,
(Dollars in thousands, except per share data)	2013		2013		2013			2013			2012

Interest income
Loans	$	20,206	$	20,348	$	20,376		$	10,697		$	10,898
Investment securities	2,360		1,846		2,005			815			855
Federal funds sold and interest-earning deposits	19		33		21			16			20
Total interest income	22,585		22,227		22,402			11,528			11,773
Interest expense
Deposits	1,661		1,621		1,619			1,302			1,309
Short-term borrowings	65		46		42			12			10
Long-term debt	1,048		654		313			270			279
Total interest expense	2,774		2,321		1,974			1,584			1,598
Net interest income	19,811		19,906		20,428			9,944			10,175
Provision for loan losses	757		1,280		1,492			1,940			1,167
Net interest income after provision for loan losses	19,054		18,626		18,936			8,004			9,008
Non-interest income
Service charges and fees on deposit accounts	1,407		1,512		1,525			515			508
Mortgage banking	468		310		1,096			391			771
Government-guaranteed lending	1,884		1,525		1,058			1,119			1,718
Bank-owned life insurance	397		324		310			195			208
Gain on sales of available for sale securities	—		—		123			1,092			603
Gain on acquisition	—		—		7,773			—			—
Other	397		866		743			150			325
Total non-interest income	4,553		4,537		12,628			3,462			4,133
Non-interest expense
Salaries and employee benefits	9,452		10,034		11,009			5,991			6,588
Occupancy and equipment	2,600		2,497		2,408			1,547			1,321
Data processing	1,096		1,105		1,075			644			698
FDIC insurance premiums	436		423		400			227			216
Professional services	780		598		914			497			684
Foreclosed asset expense	10		201		79			183			662
Loan, collection, and repossession expense	802		909		792			461			352
Advertising and business development	300		268		349			268			300
Printing, postage, and supplies	285		329		288			210			172
Merger and conversion costs	599		477		11,961			1,601			2,114
Other	1,763		1,841		1,865			1,038			1,247
Total non-interest expense	18,123		18,682		31,140			12,667			14,354
Income (loss) before income taxes	5,484		4,481		424			(1,201		)	(1,213		)
Income tax expense (benefit)	2,220		2,997		(2,808		)	(395		)	(3,326		)
Net income (loss)	3,264		1,484		3,232			(806		)	2,113
Dividends and accretion on preferred stock	711		708		705			369			368
Net income available (loss attributable) to common stockholders	$	2,553	$	776	$	2,527		$	(1,175	)	$	1,745

NET INCOME (LOSS) PER COMMON SHARE
Basic	$	0.06	$	0.02	$	0.06		$	(0.03	)	$	0.05
Diluted	$	0.06	$	0.02	$	0.06		$	(0.03	)	$	0.05

WEIGHTED AVERAGE COMMON SHARES
Weighted average common shares outstanding - basic	46,022,892		46,021,308		45,916,707			35,758,033			35,728,359
Weighted average common shares outstanding - diluted	46,213,391		46,213,216		45,935,330			35,758,033			35,806,191



	Three Months Ended
	December 31,			September 30,			June 30,			March 31,			December 31,
(Dollars in thousands, except per share data)	2013			2013			2013			2013			2012

PERFORMANCE RATIOS
Return on average assets	0.63		%	0.29		%	0.75		%	(0.30		)%	0.79		%
Return on average equity	5.54		%	2.55		%	6.27		%	(1.88		)%	4.84		%
Yield on earning assets, tax equivalent	4.91		%	4.90		%	5.12		%	4.91		%	5.05		%
Cost of interest-bearing liabilities	0.69		%	0.59		%	0.51		%	0.76		%	0.80		%
Net interest margin, tax equivalent	4.31		%	4.39		%	4.67		%	4.24		%	4.37		%
Efficiency ratio	74.38		%	76.43		%	94.10		%	94.49		%	100.32		%
Net loan charge-offs	0.22		%	0.20		%	0.18		%	0.21		%	0.17		%

Reconciliation of GAAP to Non-GAAP

NET OPERATING EARNINGS
Net income (loss) (GAAP)	$	3,264		$	1,484		$	3,232		$	(806	)	$	2,113
Securities gains	—			—			(123		)	(1,092		)	(603		)
Gain on acquisition	—			—			(7,773		)	—			—
Merger and conversion costs	599			477			11,961			1,601			2,114
Income tax effect of adjustments	(24		)	(172		)	(4,484		)	(125		)	(89		)
Deferred tax asset valuation allowance reversal	—			—			—			—			(3,300		)
Deferred tax asset revaluation from reduction in state income tax rates	—			1,218			—			—			—
Net operating earnings (loss) (Non-GAAP)	3,839			3,007			2,813			(422		)	235
Dividends and accretion on preferred stock	711			708			705			369			368
Net operating earnings available (loss attributable) to common stockholders (Non-GAAP)	$	3,128		$	2,299		$	2,108		$	(791	)	$	(133	)

OPERATING EARNINGS (LOSS) PER COMMON SHARE
Basic (Non-GAAP)	$	0.07		$	0.05		$	0.05		$	(0.02	)	$	—
Diluted (Non-GAAP)	$	0.07		$	0.05		$	0.05		$	(0.02	)	$	—

PRE-TAX, PRE-PROVISION OPERATING EARNINGS
Net income (loss) (GAAP)	$	3,264		$	1,484		$	3,232		$	(806	)	$	2,113
Provision for loan losses	757			1,280			1,492			1,940			1,167
Income tax expense (benefit)	2,220			2,997			(2,808		)	(395		)	(3,326		)
Pre-tax, pre-provision income (loss)	6,241			5,761			1,916			739			(46		)
Securities gains	—			—			(123		)	(1,092		)	(603		)
Gain on acquisition	—			—			(7,773		)	—			—
Merger and conversion costs	599			477			11,961			1,601			2,114
Pre-tax, pre-provision operating earnings (Non-GAAP)	$	6,840		$	6,238		$	5,981		$	1,248		$	1,465

OPERATING NON-INTEREST INCOME
Non-interest income (GAAP)	$	4,553		$	4,537		$	12,628		$	3,462		$	4,133
Gain on acquisition	—			—			(7,773		)	—			—
Operating non-interest income (Non-GAAP)	$	4,553		$	4,537		$	4,855		$	3,462		$	4,133

OPERATING NON-INTEREST EXPENSE
Non-interest expense (GAAP)	$	18,123		$	18,682		$	31,140		$	12,667		$	14,354
Merger and conversion costs	(599		)	(477		)	(11,961		)	(1,601		)	(2,114		)
Operating non-interest expense (Non-GAAP)	$	17,524		$	18,205		$	19,179		$	11,066		$	12,240

OPERATING EFFICIENCY RATIO
Efficiency ratio (GAAP)	74.38		%	76.43		%	94.10		%	94.49		%	100.32		%
Effect to adjust for gain on acquisition	—		%	—		%	29.07		%	—		%	—		%
Effect to adjust for merger and conversion costs	(2.45		)%	(1.95		)%	(47.31		)%	(11.94		)%	(14.77		)%
Operating efficiency ratio (Non-GAAP)	71.93		%	74.48		%	75.86		%	82.55		%	85.55		%



	Successor Company					Predecessor Company
(Dollars in thousands, except per share data)	Year Ended December 31, 2013		Period from February 1 to December 31, 2012			Period from January 1 to January 31, 2012

Interest income
Loans	$	71,627	$	39,717		$	3,807
Investment securities	7,026		3,717			395
Federal funds sold and interest-earning deposits	89		85			4
Total interest income	78,742		43,519			4,206
Interest expense
Non-maturity deposits	2,008		1,873			205
Time deposits	4,195		3,213			325
Short-term borrowings	165		19			—
Long-term debt	2,285		1,065			103
Total interest expense	8,653		6,170			633
Net interest income	70,089		37,349			3,573
Provision for loan losses	5,469		5,159			195
Net interest income after provision for loan losses	64,620		32,190			3,378
Non-interest income
Service charges and fees on deposit accounts	4,959		1,937			194
Mortgage banking	2,265		3,164			225
Government-guaranteed lending	5,586		3,061			98
Bank-owned life insurance	1,226		760			70
Gain on sales of available for sale securities	1,215		1,251			—
Gain on acquisition	7,773		—			—
Other	2,156		1,154			70
Total non-interest income	25,180		11,327			657
Non-interest expense
Salaries and employee benefits	36,486		21,249			1,737
Occupancy and equipment	9,052		4,868			396
Data processing	3,920		2,381			212
FDIC insurance premiums	1,486		927			141
Professional services	2,789		2,609			144
Foreclosed asset expense	473		1,303			11
Loan, collection, and repossession expense	2,964		1,523			162
Advertising and business development	1,185		1,083			73
Printing, postage, and supplies	1,111		786			47
Merger and conversion costs	14,638		3,164			78
Other	6,508		3,317			235
Total non-interest expense	80,612		43,210			3,236
Income before income taxes	9,188		307			799
Income tax expense (benefit)	2,014		(3,486		)	270
Net income	7,174		3,793			529
Dividends and accretion on preferred stock	2,493		1,346			122
Net income available to common stockholders	$	4,681	$	2,447		$	407

NET INCOME PER COMMON SHARE
Basic	$	0.11	$	0.07		$	0.01
Diluted	$	0.11	$	0.07		$	0.01

WEIGHTED AVERAGE COMMON SHARES
Weighted average common shares outstanding - basic	43,578,793		35,724,513			35,511,770
Weighted average common shares outstanding - diluted	43,742,195		35,796,731			35,534,050



	Successor Company						Predecessor Company
(Dollars in thousands, except per share data)	Year Ended December 31, 2013			Period from February 1 to December 31, 2012			Period from January 1 to January 31, 2012

PERFORMANCE RATIOS
Return on average assets	0.40		%	0.39		%	0.58		%
Return on average equity	3.28		%	2.41		%	3.67		%
Tax equivalent yield on earning assets	4.98		%	5.12		%	5.35		%
Cost of interest-bearing liabilities	0.62		%	0.86		%	0.95		%
Tax equivalent net interest margin	4.43		%	4.40		%	4.55		%
Efficiency ratio	84.62		%	88.77		%	76.50		%
Net loan charge-offs	0.20		%	0.37		%	—		%

Reconciliation of GAAP to Non-GAAP

NET OPERATING EARNINGS
Net income (GAAP)	$	7,174		$	3,793		$	529
Securities gains	(1,215		)	(1,251		)	—
Gain on acquisition	(7,773		)	—			—
Merger and conversion costs	14,638			3,164			78
Income tax effect of adjustments	(5,175		)	(185		)	(30		)
Deferred tax asset valuation allowance reversal	—			(3,300		)	—
Deferred tax asset revaluation from reduction in state income tax rates	1,218			—			—
Net operating earnings (Non-GAAP)	8,867			2,221			577
Dividends and accretion on preferred stock	2,493			1,346			122
Net operating earnings available to common stockholders (Non-GAAP)	$	6,374		$	875		$	455

OPERATING EARNINGS PER COMMON SHARE
Basic (Non-GAAP)	$	0.15		$	0.02		$	0.01
Diluted (Non-GAAP)	$	0.15		$	0.02		$	0.01

PRE-TAX, PRE-PROVISION OPERATING EARNINGS
Net income (GAAP)	$	7,174		$	3,793		$	529
Provision for loan losses	5,469			5,159			195
Income tax expense (benefit)	2,014			(3,486		)	270
Pre-tax, pre-provision income	14,657			5,466			994
Securities gains	(1,215		)	(1,251		)	—
Gain on acquisition	(7,773		)	—			—
Merger and conversion costs	14,638			3,164			78
Pre-tax, pre-provision operating earnings (Non-GAAP)	$	20,307		$	7,379		$	1,072

OPERATING NON-INTEREST INCOME
Non-interest income (GAAP)	$	25,180		$	11,327		$	657
Gain on acquisition	(7,773		)	—			—
Operating non-interest income (Non-GAAP)	$	17,407		$	11,327		$	657

OPERATING NON-INTEREST EXPENSE
Non-interest expense (GAAP)	$	80,612		$	43,210		$	3,236
Merger and conversion costs	(14,638		)	(3,164		)	(78		)
Operating non-interest expense (Non-GAAP)	$	65,974		$	40,046		$	3,158

OPERATING EFFICIENCY RATIO
Efficiency ratio (GAAP)	84.62		%	88.77		%	76.50		%
Effect to adjust for gain on acquisition	7.51		%	—		%	—		%
Effect to adjust for merger and conversion costs	(16.73		)%	(6.50		)%	(1.84		)%
Operating efficiency ratio (Non-GAAP)	75.40		%	82.27		%	74.66		%



	Ending Balances
(Dollars in thousands, except per share data)	December 31,			September 30,			June 30,			March 31,			December 31,
	2013			2013			2013			2013			2012
Assets
Cash and due from banks	$	29,080		$	37,681		$	29,264		$	11,020		$	15,735
Interest-earning deposits with banks	71,699			47,954			57,689			4,092			7,978
Federal funds sold	—			—			855			29,125			26,750
Investment securities available for sale	404,388			403,900			376,536			154,634			136,311
Investment securities held to maturity	500			208			200			194			180
Loans held for sale	8,663			7,216			21,009			8,671			16,439
Loans	1,389,666			1,353,550			1,324,171			794,623			763,416
Allowance for loan losses	(7,043		)	(7,034		)	(6,425		)	(5,527		)	(3,998		)
Net loans	1,382,623			1,346,516			1,317,746			789,096			759,418
Federal Home Loan Bank stock	8,929			8,029			6,904			2,382			2,307
Premises and equipment, net	44,875			42,306			43,052			17,885			17,351
Bank-owned life insurance	33,148			32,896			32,642			20,138			19,976
Foreclosed assets	10,823			11,806			11,632			4,752			5,837
Deferred tax asset, net	54,622			55,715			58,854			37,525			36,659
Goodwill	26,254			26,254			26,254			26,254			26,254
Other intangible assets, net	5,883			6,113			6,343			2,266			2,376
Accrued interest receivable and other assets	38,461			19,557			20,088			8,008			11,654
Total assets	$	2,119,948		$	2,046,151		$	2,009,068		$	1,116,042		$	1,085,225

Liabilities
Deposits:
Non-interest demand	$	220,659		$	208,736		$	197,229		$	73,756		$	71,613
Interest-bearing demand	351,921			339,973			344,515			188,463			188,843
Money market and savings	467,814			458,214			482,672			270,994			260,966
Time	634,915			615,616			630,283			370,710			351,800
Total deposits	1,675,309			1,622,539			1,654,699			903,923			873,222
Short-term borrowings	126,500			100,500			68,002			6,000			7,500
Long-term debt	72,921			75,880			45,341			28,902			19,864
Accrued interest payable and other liabilities	12,919			16,259			11,621			4,818			10,698
Total liabilities	1,887,649			1,815,178			1,779,663			943,643			911,284

Stockholders’ equity
Preferred stock, series A, no par value	24,894			24,833			24,774			24,715			24,657
Preferred stock, series B, no par value	17,891			17,776			17,663			—			—
Common stock, $0.001 par value	46			46			46			36			36
Common stock warrant	1,457			1,457			1,457			1,325			1,325
Additional paid-in capital	188,908			188,658			188,408			147,738			147,510
Retained earnings (accumulated deficit)	3,276			724			(52		)	(2,578		)	(1,405		)
Accumulated other comprehensive income (loss)	(4,173		)	(2,521		)	(2,891		)	1,163			1,818
Total stockholders' equity	232,299			230,973			229,405			172,399			173,941
Total liabilities and stockholders' equity	$	2,119,948		$	2,046,151		$	2,009,068		$	1,116,042		$	1,085,225

Supplemental information on components of accumulated other comprehensive income (loss):
Investment securities available for sale, net of tax	$	(6,553	)	$	(4,430	)	$	(5,115	)	$	1,374		$	2,085
Cash flow hedges, net of tax	2,380			1,909			2,224			(211		)	(267		)
Total accumulated other comprehensive income (loss)	$	(4,173	)	$	(2,521	)	$	(2,891	)	$	1,163		$	1,818



	Ending Balances
	December 31,			September 30,			June 30,			March 31,			December 31,
(Dollars in thousands, except per share data)	2013			2013			2013			2013			2012

COMMON SHARE DATA
Book value per common share	$	4.12		$	4.09		$	4.06		$	4.13		$	4.18
Tangible book value per common share	$	3.42		$	3.39		$	3.35		$	3.33		$	3.37
Ending shares outstanding	46,037,685			46,037,808			46,038,808			35,779,127			35,754,247

CAPITAL RATIOS
Tangible equity to tangible assets	9.59		%	9.86		%	9.96		%	13.23		%	13.75		%
Tangible common equity to tangible assets	7.54		%	7.75		%	7.81		%	10.96		%	11.42		%
VantageSouth Bank:
Tier 1 leverage ratio	10.16		%	9.95		%	8.26		%	11.08		%	11.45		%
Tier 1 risk-based capital ratio	11.85		%	11.78		%	10.22		%	13.13		%	13.66		%
Total risk-based capital ratio	12.70		%	12.66		%	11.11		%	14.58		%	14.96		%

ASSET QUALITY DATA
Non-performing loans	$	20,925		$	18,911		$	15,116		$	11,792		$	12,770
Foreclosed assets	10,823			11,806			11,632			4,752			5,837
Total non-performing assets	$	31,748		$	30,717		$	26,748		$	16,544		$	18,607

Allowance for loan losses to loans	0.51		%	0.52		%	0.49		%	0.70		%	0.52		%
Non-performing loans to total loans	1.51		%	1.40		%	1.14		%	1.48		%	1.67		%
Non-performing assets to total assets	1.50		%	1.50		%	1.33		%	1.48		%	1.71		%
Restructured loans not included in categories above	$	534		$	542		$	550		$	558		$	104

Reconciliation of GAAP to Non-GAAP

ADJUSTED ALLOWANCE FOR LOAN LOSSES
Allowance for loan losses (GAAP)	$	7,043		$	7,034		$	6,425		$	5,527		$	3,998
Net acquisition accounting fair value discounts to loans	31,152			34,264			42,783			14,688			16,633
Adjusted allowance for loan losses	38,195			41,298			49,208			20,215			20,631
Loans	$	1,389,666		$	1,353,550		$	1,324,171		$	794,623		$	763,416
Adjusted allowance for loan losses to loans (Non-GAAP)	2.75		%	3.05		%	3.72		%	2.54		%	2.70		%

TANGIBLE COMMON EQUITY
Total stockholders' equity (GAAP)	$	232,299		$	230,973		$	229,405		$	172,399		$	173,941
Less: Preferred stock	42,785			42,609			42,437			24,715			24,657
Less: Goodwill and other intangible assets, net	32,137			32,367			32,597			28,520			28,630
Tangible common equity (Non-GAAP)	$	157,377		$	155,997		$	154,371		$	119,164		$	120,654



	Three months ended December 31, 2013						Three months ended September 30, 2013						Three months ended December 31, 2012
(Dollars in thousands)	Average Balance		Interest*		Yield/Cost*		Average Balance		Interest*		Yield/Cost*		Average Balance		Interest*		Yield/Cost*

Assets
Loans	$	1,380,008	$	20,206	5.81	%	$	1,361,340	$	20,348	5.93	%	$	749,053	$	10,898	5.79	%
Investment securities	411,598		2,363		2.28		381,684		1,849		1.92		147,188		923		2.49
Federal funds and other interest-earning assets	34,317		19		0.22		55,984		33		0.23		36,791		20		0.22
Total interest-earning assets	1,825,923		22,588		4.91	%	1,799,008		22,230		4.90	%	933,032		11,841		5.05	%
Non-interest-earning assets	232,167						220,220						132,629
Total assets	$	2,058,090					$	2,019,228					$	1,065,661

Liabilities and Equity
Interest-bearing demand	$	340,635	167		0.19	%	$	335,653	156		0.18	%	$	159,071	$	120	0.30	%
Money market and savings	464,586		342		0.29		475,985		332		0.28		250,625		343		0.54
Time deposits	619,849		1,152		0.74		627,874		1,133		0.72		361,557		846		0.93
Total interest-bearing deposits	1,425,070		1,661		0.46		1,439,512		1,621		0.45		771,253		1,309		0.68
Short-term borrowings	102,823		65		0.25		72,068		46		0.25		4,511		10		0.88
Long-term debt	73,840		1,048		5.63		62,347		654		4.16		22,517		279		4.93
Total interest-bearing liabilities	1,601,733		2,774		0.69	%	1,573,927		2,321		0.59	%	798,281		1,598		0.80	%
Non-interest-bearing deposits	210,530						203,427						86,266
Other liabilities	12,051						10,714						7,459
Total liabilities	1,824,314						1,788,068						892,006
Stockholders’ equity	233,776						231,160						173,655
Total liabilities and stockholders’ equity	$	2,058,090					$	2,019,228					$	1,065,661

Net interest income, taxable equivalent			$	19,814					$	19,909					$	10,243
Interest rate spread					4.22	%					4.31	%					4.25	%
Tax equivalent net interest margin					4.31	%					4.39	%					4.37	%

Percentage of average interest-earning assets to average interest-bearing liabilities					114.00	%					114.30	%					116.88	%
* Taxable equivalent basis



	Successor Company												Predecessor Company
	Year ended December 31, 2013						Period from February 1, 2012 to December 31, 2012						Period from January 1, 2012 to January 31, 2012
	Average Balance		Interest*		Yield/Cost*		Average Balance		Interest*		Yield/Cost*		Average Balance		Interest*		Yield/Cost*

Assets:
Loans	$	1,210,102	$	71,627	5.92	%	$	727,339	$	39,717	5.97	%	$	730,387	$	3,807	6.15	%
Investment securities	331,459		7,038		2.12	%	164,113		3,990		2.66	%	180,220		419		2.74	%
Federal funds and other interest-earning assets	40,911		89		0.22	%	42,603		85		0.22	%	23,719		4		0.20	%
Total interest-earning assets	1,582,472		78,754		4.98	%	934,055		43,792		5.12	%	934,326		4,230		5.35	%
Non-interest-earning assets	204,522						127,572						134,240
Total assets	$	1,786,994					$	1,061,627					$	1,068,566

Liabilities and Equity:
Interest-bearing demand	$	298,292	645		0.22	%	$	149,394	540		0.39	%	$	172,363	109		0.75	%
Money market and savings	422,543		1,362		0.32	%	236,735		1,333		0.62	%	184,716		96		0.61	%
Time deposits	557,853		4,195		0.75	%	373,337		3,213		0.94	%	404,999		325		0.95	%
Total interest-bearing deposits	1,278,688		6,202		0.49	%	759,466		5,086		0.73	%	762,078		530
Short-term borrowings	60,098		165		0.27	%	3,351		19		0.62	%	968		—		—	%
Long-term debt	51,239		2,285		4.46	%	22,966		1,065		5.07	%	24,217		103		5.02	%
Total interest-bearing liabilities	1,390,025		8,652		0.62	%	785,783		6,170		0.86	%	787,263		633		0.95	%
Non-interest-bearing deposits	168,597						97,250						107,156
Other liabilities	9,541						6,858						4,184
Total liabilities	1,568,163						889,891						898,603
Stockholders’ equity	218,831						171,736						169,963
Total liabilities and stockholders’ equity	$	1,786,994					$	1,061,627					$	1,068,566

Net interest income, taxable equivalent			$	70,102					$	37,622					$	3,597
Interest rate spread					4.36	%					4.26	%					4.40	%
Tax equivalent net interest margin					4.43	%					4.40	%					4.55	%

Percentage of average interest-earning assets to average interest-bearing liabilities					113.84	%					118.87	%					118.68	%
* Taxable equivalent basis



(Dollars in thousands)	Non-PCI Loans			PCI Loans			Total
Q4 2013:
Balance at October 1, 2013	$	4,591		$	2,443		$	7,034
Net charge-offs	(748		)	—			(748		)
Provision for loan losses	839			(82		)	757
Balance at December 31, 2013	$	4,682		$	2,361		$	7,043

Q3 2013:
Balance at July 1, 2013	$	4,339		$	2,086		$	6,425
Net charge-offs	(671		)	—			(671		)
Provision for loan losses	923			357			1,280
Balance at September 31, 2013	$	4,591		$	2,443		$	7,034



(Dollars in thousands)	Non-PCI Loans			PCI Loans			Total
Q4 2013:
Balance at October 1, 2013	$	4,591		$	2,443		$	7,034
Net charge-offs	(748		)	—			(748		)
Provision for loan losses	839			(82		)	757
Balance at December 31, 2013	$	4,682		$	2,361		$	7,043

Q4 2012:
Balance at October 1, 2012	$	2,239		$	907		$	3,146
Net charge-offs	(315		)	—			(315		)
Provision for loan losses	796			371			1,167
Balance at December 31, 2012	$	2,720		$	1,278		$	3,998


•	The Company recently announced a proposed merger with Yadkin Financial Corporation, which will create the largest community bank in North Carolina.


•	The Company also recently announced a private placement of $46.9 million of its common stock, which will be used to redeem its outstanding preferred stock and warrants previously issued to the U.S. Department of Treasury.


•	Net income in 4Q 2013 was $3.3 million, which was an improvement from $1.5 million in 3Q 2013 and $2.1 million in 4Q 2012.


•	Annualized net loan growth was 11 percent in 4Q 2013 while loan originations and commitments totaled $164.6 million in the quarter.


•	Net interest margin was 4.31 percent in 4Q 2013 compared to 4.39 percent 3Q 2013 and 4.37 percent in 4Q 2012.


•	Government-guaranteed, small business lending income increased to $1.9 million in 4Q 2013 from $1.5 million in 3Q 2013 and $1.7 million in 4Q 2012 while loan originations by this group totaled $21.5 million in the fourth quarter.


•	The Company was named the top small business lender in North Carolina by the U.S. Small Business Association ("SBA").


•	Operating efficiency ratio improved to 71.9 percent in 4Q 2013 from 74.5 percent in 3Q 2013 and 85.5 percent in 4Q 2012.