EMPLOYEE AND DIRECTOR BENEFIT PLANS

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

Stock Options

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

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



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

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

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

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



Range of Exercise Prices	Stock Options Outstanding	Stock Options Exercisable

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

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

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

Restricted Stock

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



	Shares	Weighted Average Grant Date Fair Value

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

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

Defined Contribution Plans

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

Piedmont Stock Warrant Plan and Phantom Equity Plan

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

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

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

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

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

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

Pension Plans

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

•A frozen pension plan

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

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

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

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



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

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

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



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

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



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

The following table provides amortization amounts for 2017:



Actuarial loss	$	—
Prior service cost	1
Total	$	1

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



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

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



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

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



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

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

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



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

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