Summary of YADKIN VALLEY FINANCIAL CORP

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On May 21, 2009, as part of the Capital Purchase Program established by the U.S. Department of the Treasury ("Treasury") under the Emergency Economic Stabilization Act of 2008 (the "EESA"), Yadkin Valley Financial Corporation (the "Company" or the "Registrant") received preliminary approval for an application for participation in the Capital Purchase Program which had been submitted by American Community Bancshares, Inc., prior to its merger with and into the Company on April 17. 2009. This investment by Treasury was for an amount of up to $13,312,000. The Company previously received a $36,000,000 investment from Treasury pursuant to the Capital Purchase Program on January 16, 2009.

On July 24, 2009, the Company entered into a Letter Agreement (including the Securities Purchase Agreement-Standard Terms incorporated by reference therein, the "Purchase Agreement") with Treasury dated July 24, 2009 pursuant to which the Company issued and sold to Treasury (i) 13,312 shares of the Company's Fixed Rate Cumulative Perpetual Preferred Stock, Series T-ACB, having a liquidation preference of $1,000 per share (the "Series T-ACB Preferred Stock"), and (ii) a ten-year warrant to purchase up to 273,534 shares of the Company's common stock, par value $1.00 per share ("Common Stock"), at an initial exercise price of $7.30 per share (the "Warrant"), for an aggregate purchase price of $13,312,000 in cash. In addition, on July 24, 2009, the Company entered into a letter agreement with the Treasury (the "ARRA Letter Agreement") confirming the applicability of the provisions of the American Recovery and Reinvestment Act of 2009 (the "ARRA") to the Company. A copy of the ARRA Letter Agreement is attached and incorporated into the Purchase Agreement.

Cumulative dividends on the Series T-ACB Preferred Stock will accrue on the liquidation preference at a rate of 5% per annum for the first five years, and at a rate of 9% per annum thereafter, but will be paid only if, as, and when declared by the Company's Board of Directors. The Series T-ACB Preferred Stock has no maturity date and ranks senior to the Common Stock with respect to the payment of dividends and distributions and amounts payable upon liquidation, dissolution and winding up of the Company. The Series T-ACB Preferred Stock generally is non-voting.

Pursuant to the terms of the certificate of designations creating the Series T-ACB Preferred Stock, the Company may only redeem the Series T-ACB Preferred Stock at par after August 15, 2012. Prior to this date, the Company may redeem the Series T-ACB Preferred Stock at par if (i) the Company has raised aggregate gross proceeds in one or more Qualified Equity Offerings (as defined in the Purchase Agreement) in excess of approximately $3,328,000, and (ii) the aggregate redemption price does not exceed the aggregate net proceeds from such Qualified Equity Offerings. Any redemption is subject to the consent of the Board of Governors of the Federal Reserve System. However, pursuant to the terms of ARRA and the ARRA Letter Agreement between the Company and Treasury, the Company may, upon consultation with its primary federal regulator, repay the amount received for the Series T-ACB Preferred Stock at any time, without regard to whether the Company has replaced such funds from any source or to any waiting period. Upon repayment of the amount received for the Series T-ACB Preferred Stock, the Treasury will also liquidate the associated Warrant in accordance with ARRA and any rules and regulations thereunder.

Prior to July 24, 2011, unless we have redeemed the Series T-ACB Preferred Stock or the Treasury has transferred the Series T-ACB Preferred Stock to a third party, the consent of the Treasury will be required for us to (1) declare or pay any dividend or make any distribution on our common stock or (2) redeem, purchase or

acquire any shares of our common stock or other equity or capital securities, other than in connection with benefit plans consistent with past practice and certain other circumstances specified in the Purchase Agreement.

The Series T-ACB Preferred Stock and the Warrant were issued in a private placement exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended. Upon the request of Treasury at any time, the Company has agreed to promptly enter into a deposit arrangement pursuant to which the Series T-ACB Preferred Stock may be deposited and depositary shares ("Depositary Shares"), representing fractional shares of Series T-ACB Preferred Stock, may be issued. The Company has agreed to register the resale of the Series T-ACB Preferred Stock and the Depositary Shares, if any, and the Warrant, and the issuance of shares of Common Stock upon exercise of the Warrant (the "Warrant Shares"), as soon as practicable after the date of the issuance of the Series T-ACB Preferred Stock and the Warrant. Neither the Series T-ACB Preferred Stock nor the Warrant are subject to any contractual restrictions on transfer, except that Treasury may only transfer or exercise an aggregate of one-half of the Warrant Shares prior to the earlier of (i) the date on which the Company has received aggregate gross proceeds of not less than $13,312,000 from one or more Qualified Equity Offerings and (ii) December 31, 2009.

The Warrant is immediately exercisable. In the event the Company completes one or more Qualified Equity Offerings on or prior to December 31, 2009 that result in the Company receiving aggregate gross proceeds of not less than $13,312,000, the number of the shares of Common Stock underlying the portion of the Warrant then held by Treasury will be reduced by one-half of the shares of Common Stock originally covered by the Warrant.

In the Purchase Agreement, the Company agreed that, until such time as Treasury ceases to own any debt or equity securities of the Company acquired pursuant to the Purchase Agreement, the Company will take all necessary action to ensure that its benefit plans with respect to its senior executive officers comply with
Section 111 of EESA as implemented by any guidance or regulation under the EESA that has been issued and is in effect as of the date of issuance of the Series T-ACB Preferred Stock and the Warrant, and has agreed to not adopt any benefit plans with respect to, or which covers, its senior executive officers that do not comply with the EESA. Additionally, each of Messrs. John M. Brubaker, Edwin E. Laws, William A. Long, John W. Mallard, Jr., and Steven S. Robinson, (the "Senior Executive Officers"), (i) executed a waiver (the "Waiver") voluntarily waiving any claim against Treasury or the Company for any changes to such Senior Executive Officer's compensation or benefits that are required to comply with the regulation issued by Treasury under the Capital Purchase Program as published in the Federal Register on June 15, 2009 and acknowledging that the regulation may require modification of the compensation, bonus, incentive and other benefit plans, arrangements and policies and agreements (including so-called "golden parachute" agreements) (collectively, "Benefit Plans") as they relate to the period Treasury holds any equity or debt securities of the Company acquired through the Capital Purchase Program; and
(ii) entered into a letter agreement (the "Letter Amendment") with the Company amending the Benefit Plans with respect to such Senior Executive Officer as may be necessary, during the period that Treasury owns any debt or equity securities of the Company acquired pursuant to the Purchase Agreement or the Warrant, to comply with Section 111 of the EESA.

Copies of the Purchase Agreement (including the ARRA Letter Agreement), the Warrant, the Certificate of Designations with respect to the Series T-ACB Preferred Stock, the form of Waiver executed by the Senior Executive Officers, and the form of Letter Amendment are included as exhibits to this Report on Form 8-K and are incorporated by reference into these Items 1.01, 3.02, 3.03, 5.02 and 5.03. The foregoing summary of certain provisions of these documents is qualified in its entirety by reference thereto.