Yadkin Valley Financial Corp. reports third-quarter loss

By: Richard Craver | Winston-Salem Journal
Published: October 22, 2009

The decision by Yadkin Valley Financial Corp. to eliminate the bulk of the goodwill from its financial books contributed to a $68.7 million loss in the third quarter.

The bank took a $61.6 million charge related to its goodwill, which is defined as the difference between the purchase cost of a financial transaction and the fair-market value of the assets and liabilities of the company that is bought. A business also may build goodwill over time as loyalty builds among its customer base for its brands.

Eliminating most or all of goodwill is considered as a non-cash charge and typically does not affect a business' ability to conduct its operation or affect its cash flow and liquidity.

Other community banks serving the Triad, including NewBridge Bancorp in March, Southern Community Financial Corp. in April and FNB United Corp. earlier this month, have eliminated most or all of the goodwill from its books.

Yadkin chose to keep goodwill of $4.9 million related to its purchase of Sidus Financial LLC, its mortgage subsidiary.

Excluding the goodwill charge, Yadkin reported a $7.1 million loss in the quarter or an earnings loss of 44 cents. The bank reported a $7.1 million loss in the second quarter, but posted net income of $1.8 million in the third quarter of 2008.

Bill Long, the president and chief executive of Yadkin, said that the goodwill decision was taken because of concerns that the bank's share price "would not recover from this unprecedented economic environment as quickly as we had originally anticipated."

At the start of trading today, the share price of $3.77 is down 76 percent from the 52-week high of $15.90 on Nov. 5.