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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549



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FORM 10-KSB



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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT
OF 1934



|                                             |  |                            
|-------------------------------------------- |  | ---------------------------
|For the Fiscal Year Ended December 31, 2003. |  | Commission File No. 1-14081



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YADKIN VALLEY COMPANY

(Name of small business issuer in its charter)



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|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|North Carolina                                                 |  | 56-1249566                       
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.)
|                                                               | 
|Post Office Box 18747 Raleigh, North Carolina 27619            |  | 27602                            
|(Address of Principal Executive Offices)                       |  | (Zip Code)                       



(919) 716-2266

(Registrants Telephone Number including area code)



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Securities registered under Section 12(b) of the Act : None



|                                                       |  |                                        
|------------------------------------------------------ |  | ---------------------------------------
|Securities registered under Section 12(b) of the Act : |  | Common stock, $1.00 par value per share
|                                                       |  | (Title of
Class)                       



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Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the past 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 ̈



Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and
no disclosure will 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-KSB or any amendment to this Form 10-KSB.    x



Registrants revenue for its most recent fiscal year was: $ 232,000.



On March 8, 2004, the aggregate market value of the voting and non-voting common equity held by nonaffiliates (computed by reference to the price at which the common equity was sold, or the average bid and asked price
of such common equity) was $ 3,771,362.



On March 5, 2004, the
number of outstanding shares of Registrants common stock was 181,130.



Documents Incorporated by Reference



Portions of Registrants Annual Report to Shareholders for the year ended December 31, 2003 are incorporated herein in Part II.



Portions of Registrants definitive Proxy Statement dated March 29, 2004, are incorporated herein in Part III.



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PART I



Item 1. Description of Business.



Yadkin Valley Company (the Registrant) was incorporated under the laws of North Carolina during 1979. Its primary activity is the ownership of
all the outstanding capital stock, and serving as the parent holding company, of Yadkin Valley Life Insurance Company (Yadkin Valley Life) which is incorporated under the laws of Arizona and is engaged in the business of reinsuring
credit life insurance policies.



Yadkin Valley Lifes
reinsurance activities currently are limited to assuming risks associated with credit life insurance policies (credit life policies), up to a maximum risk of $25,000 on any one insured, issued only by Triangle Life Insurance Company,
Raleigh, North Carolina (Triangle Life), and sold only in North Carolina by Southern Bank and Trust Company, Mount Olive, North Carolina (Southern), The Fidelity Bank, Fuquay-Varina, North Carolina (Fidelity) and
The Heritage Bank, Lucama, North Carolina (Heritage). Triangle Life is a wholly owned subsidiary of First-Citizens Bank & Trust Company, Raleigh, North Carolina (FCB). Registrant is affiliated with Southern, Fidelity,
Heritage and FCB through certain common control relationships. See Item 12. Certain Relationships and Related Transactions. In consideration of its assumption of risk, Yadkin Valley Life receives a portion of the premium income on
policies it reinsures, less the amount of claims paid.



Southern, Fidelity and Heritage sell credit life policies pursuant to insurance contracts between them and Triangle Life and pursuant to which they each receive commissions from Triangle Life on policies sold. These policies provide life
insurance coverage, subject to the amount, age and other limitations specified in the insurance contracts. The policies are written on the lives of customers of Southern, Fidelity and Heritage in connection with various extensions of credit to those
customers, including consumer and commercial loans (installment and term), overdraft and equity lines of credit, and credit card accounts. Yadkin Valley Life, pursuant to a Reinsurance Agreement between it and Triangle Life, reinsures certain of
these policies. The Reinsurance Agreement provides that Triangle Life will automatically cede to Yadkin Valley Life, and Yadkin Valley Life will accept from Triangle Life, 100% of the rights, obligations, liabilities and risks on credit life
policies up to a maximum of $25,000 of insurance in force on any one life. At December 31, 2003 and December 31, 2002, respectively, there were 2,573 and 2,819 policies in force which were reinsured by Yadkin Valley Life.



Yadkin Valley Lifes revenues are derived primarily from premium income
received in connection with the reinsurance of credit life insurance and income on its investments. On a monthly basis, Triangle Life pays to Yadkin Valley Life, on a net basis, 100% of the amount of premiums on reinsured credit life policies
written, less the amount of reinsurance commissions owed by Yadkin Valley Life pursuant to the Reinsurance Agreement. Reinsurance commissions are equal to 5% of the gross premiums received on the reinsured policies, plus the amount of
all (i) premium taxes and regulatory charges which Triangle Life is required to pay on such policies, (ii) all commissions or service fees, including any contingent compensation or other compensation, paid to creditors or agents with
respect to such policies, and (iii) all guaranty association assessments or payments attributable to such policies.



Southern, Fidelity and Heritage report claims on policies reinsured by Yadkin Valley Life to Triangle Life as they arise and those claims are investigated
and paid by the claims department of Triangle Life. Yadkin Valley Life reimburses Triangle Life monthly for claims paid up to the limits of its risk. Yadkin Valley Life maintains a reserve for claims, the amount of which is set and changed from time
to time by management. The reserve is reviewed annually by a certified consulting actuary and adjusted based on industry standard methodologies.



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Neither Registrant nor Yadkin Valley Life employs any personnel. Subject to the supervision and control
of Registrants Board of Directors, all managerial, administrative and operational services necessary in carrying on Registrants insurance holding company business and Yadkin Valley Lifes reinsurance business are provided to
Registrant and Yadkin Valley Life by American Guaranty Insurance Company, Raleigh, North Carolina (American Guaranty), pursuant to Administration Agreements (the Agreements). American Guaranty is a wholly owned subsidiary of
First Citizens BancShares Inc. (BancShares), Raleigh, North Carolina. See Item 12. Certain Relationships and Related Transactions.



Registrant is not significantly affected by competition in that Yadkin Valley Life does not seek to reinsure policies issued by any insurer other than
Triangle Life or sold by any other creditors. Also, premium rates for credit life insurance sold in North Carolina are the prima facie rates promulgated by the North Carolina Department of Insurance, and regulation of the terms of credit life
insurance policies results in the policies offered by various issuers being substantially the same. The volume of Yadkin Valley Lifes business does vary from year to year based on the volume of loans originated by the banks that are eligible
for credit life insurance and the amount of those loans on which the banks are able to write insurance. However, historically, Yadkin Valley Lifes reinsurance business has not demonstrated any seasonality nor dependency on a few purchasers of
policies. Yadkin Valley Life does depend on sales of credit life policies by Fidelity, Heritage and Southern for all of its business.



In addition to its investment in its subsidiary, Yadkin Valley Life, a substantial amount of Registrants assets are represented by investments it
holds in equity securities of (i) BancShares; (ii) First Citizens Bancorporation, Inc. (Bancorporation, a bank holding company headquartered in Columbia, South Carolina); and (iii) Heritage BancShares, Inc. See
Item 12. Certain Relationships and Related Transactions. These investments were made by Registrant beginning in 1986 and are deemed by Registrants management and directors to be prudent and sound investments for Registrant. The
following table lists the aggregate amounts of each of these investments, and the percentages of Registrants total consolidated assets represented by each such amount, at the dates indicated.



|                         |  |             |            |   |             |   |        |   |            |  |      |  
|------------------------ |  | ----------- | ---------- | - | ----------- | - | ------ | - | ---------- |  | ---- | -
|                         |  | At 12/31/03 |            |   | At 12/31/02 |  
|                         |  | Amount      |            | % |             |   | Amount |   | %          | 
|BancShares               |  | $           | 2,502,623  |   | 11.7        | % |        | $ | 1,998,078  |  | 12.3 | %
|Bancorporation           |  |             | 18,467,473 |   | 86.2        |   |        |   | 13,777,473 |  | 84.9 |  
|Heritage BancShares, Inc |  |             | 455,932    |   | 2.1         |   |        |   | 455,932    |  | 2.8  |  



Registrant and Yadkin
Valley Life have three officers, none of whom are compensated for their services as such. See Item 9. Directors, Executive Officers, Promoters and Control Persons.



Item 2. Description of Property.



Registrant and Yadkin Valley Life own no properties. Their offices are located at the offices of American Guaranty Insurance Company, Raleigh, North
Carolina, which is a wholly owned subsidiary of BancShares and which provides Registrant with certain managerial, administrative and operational services. See Item 12. Certain Relationships and Related Transactions below.



Item 3. Legal Proceedings



At December 31, 2003, Registrant was not a party to any legal
proceedings that are expected to have a material effect on its financial condition or results of operation.



Item 4. Submission of Matters to a Vote of Security Holders.



Not applicable.



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PART II



Item 5. Market for Common Equity, Related Shareholder Matters and Small Business Issuer Purchases of Equity Securities



This information is incorporated herein by reference to page 6 (under the
Caption Market for Common Equity and Related Stockholder Matters) of Registrants 2003 Annual Report to Shareholders.



Item 6. Managements Discussion and Analysis or Plan of Operation.



This information is incorporated herein by reference to pages 4 through 6 of Registrants 2003 Annual Report to
Shareholders.



Item 7. Financial Statements.



Registrants audited financial statements are incorporated herein by
reference to pages 8 through 20 of Registrants 2003 Annual Report to Shareholders.



Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures.



Not applicable.



Item 8(A). Controls and Procedures



Registrants Chief Executive Officer, who also serves as Registrants Chief Financial Officer, has evaluated the effectiveness of the design and operation of Registrants disclosure controls and
procedures in accordance with Rule 13a-14 of the Securities Exchange Act of 1934 (the Exchange Act). Based on his evaluation, he concluded that, as of the end of the period conferred by this report, Registrants disclosure, controls
and procedures were effective in enabling Registrant to record, process, summarize and report in a timely manner the information required to be disclosed in reports Registrant files under the Exchange Act.



No changes in Registrants internal control over financial reporting
occurred during the fourth quarter of 2003 that has materially affected, or is reasonably likely to materially affect, Registrants internal control over financial reporting.



PART III



Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act.



Directors and Executive Officers: Information regarding
Registrants directors and executive officers is incorporated herein by reference from page 3 (under the caption, Proposal 1: Election of Directors) and page 5 (under the caption Executive Officers) of Registrants
definitive Proxy Statement dated March 29, 2004.



Audit
Committee Financial Expert:Rules recently adopted by the Securities and Exchange Commission (the SEC) require that Registrant disclose whether its Board of Directors has determined that its Audit Committee includes a member who
qualifies as an audit committee financial expert as that term is defined in the SECs rules. To qualify as an audit committee expert under the SECs rules, a person must have a relatively high level of accounting and financial
knowledge or expertise which he or she has acquired through specialized education or training or through experience in certain types of positions. Because



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Registrants Board of Directors includes only three directors, the Board itself performs the functions that would be
performed by an audit committee, and the Board has not appointed a separate audit committee. Registrant currently does not have a director who the Board believes could be considered an audit committee financial expert. The Board believes that a
small companies such as Registrant will find it difficult to locate persons with the specialized knowledge and experience needed to qualify as an audit committee financial expert who are willing to serve as directors without being compensated at
relatively high levels. Moreover, the Board believes that, because Registrant does not pay any compensation to its directors, it will be especially difficult for Registrant to have a director who qualifies as an audit committee financial expert.
Registrants current directors have a level of financial knowledge and experience that the Board believes is sufficient for a company the size of Registrant that, like Registrant, does not engage in a wide variety of business activities and,
for that reason, the ability to qualify as an audit committee financial will not be the primary criteria in the Boards selection of candidates to become new directors.



Compliance with Section 16(a) of the Securities Exchange Act of 1934: Information regarding compliance by
Registrants directors, executive officers and principal shareholders with the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934 is incorporated by reference to page 3 (under the caption Section 16(a)
Beneficial Ownership Reporting Compliance) of Registrants definitive Proxy Statement dated March 29, 2004.



Code of Ethics: Registrants Board of Directors has adopted a Code of Ethics that applies to its directors and to all its officers, including
without limitation its principal executive officer and principal financial officer. A copy of Registrants Code of Ethics will be provided without charge to any person upon request. Requests for copies should be directed by mail to Corporate
Secretary, Yadkin Valley Company, Post Office 18747, Raleigh, North Carolina 27619.



Item 10. Executive Compensation



Director Compensation: Registrants directors receive no fees or other compensation for their services as directors.



ExecutiveCompensation: Registrant has no employees, and its officers receive no salary or other compensation or benefits for their services
as officers.



Item 11. Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters



Information regarding the beneficial ownership of Registrants common stock by its directors, executive officers and principal shareholders is incorporated herein by reference to pages 2 and 3 (under the caption Beneficial
Ownership of Securities) of Registrants definitive Proxy Statement dated March 29, 2004.



Item 12. Certain Relationships and Related Transactions.



Information regarding transactions between Registrant and its directors, executive officers, principal shareholders and their related interest is
incorporated herein by reference to page 5 and 6 (under the caption Transactions with Related Parties) of Registrants definitive Proxy Statement dated March 29, 2004.



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|Item 13. |  | Exhibits and Reports on Form 8-K.
|-------- |  | ---------------------------------



(a) Exhibits. The following exhibits are filed herewith or incorporated herein by reference as part of this Report.



|              |  |                                                                                                                                                                                                        
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                            
|3.1           |  | Registrants Restated Articles of Incorporation (incorporated herein by reference to Registrants Registration Statement on Form 10-KSB)                                                               
|              | 
|3.2           |  | Registrants Bylaws (incorporated herein by reference to Registrants Registration Statement on Form 10-KSB)                                                                                           
|              | 
|10.1          |  | Administration Agreement between Registrant and American Guaranty Insurance Company (incorporated herein by reference to Registrants Registration Statement on Form
10-KSB)                           
|              | 
|10.2          |  | Administration Agreement between Yadkin Valley Life and American Guaranty Insurance Company (incorporated herein by reference to Amendment No. 1 to Registrants Registration Statement on
Form 10-KSB)
|              | 
|10.3          |  | Reinsurance Agreement between Yadkin Valley Life and Triangle Life Insurance Company (incorporated herein by reference to Amendment No. 1 to Registrants Registration Statement on Form
10-KSB)       
|              | 
|13            |  | Registrants 2003 Annual Report to Shareholders (filed herewith)                                                                                                                                       
|              | 
|21            |  | Subsidiaries of Registrant (incorporated herein by reference to Registrants Registration Statement on Form 10-KSB)                                                                                    
|              | 
|31.1          |  | Certification of Registrants Principal Executive Officer pursuant to Rule 13a-14(a) (filed herewith)                                                                                                  
|              | 
|31.2          |  | Certification of Registrants Chief Financial Officer pursuant to Rule 13a-14(a) (filed herewith)                                                                                                      
|              | 
|32            |  | Certification of Registrants Chief Financial Officer pursuant to 18 U. S. C. Section 1350 (filed herewith)                                                                                            
|              | 
|99            |  | Registrants definitive Proxy Statement dated March 29, 2004 as filed with the Securities and Exchange Commission (being filed separately)                                                             



(b) Reports on Form
8-K.No Reports on Form 8-K were filed by Registrant during the last quarter of the period covered by this Report on Form 10-KSB.



|Item 14. |  | Principal Accountant Fees and Services
|-------- |  | --------------------------------------



Information regarding services provided to Registrant by its independent accountants is incorporated by reference from pages 6 and 7 (under the caption
Services and fees During 2002 and 2003) of Registrants definitive Proxy Statement dated March 29, 2004.



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SIGNATURES



In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.



|                     |  |                       |  |                          
|-------------------- |  | --------------------- |  | -------------------------
|                     |  | YADKIN VALLEY COMPANY
|                     |  |                      
|Date: March 29, 2004 |  | By:                   |  | /S/ David S. Perry       
|                     |  |                       |  | David S. Perry, President



In accordance with
Section 13 or 15(d) of the Securities and Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.



|                                             |  |                                                                                 |  |               
|-------------------------------------------- |  | ------------------------------------------------------------------------------- |  | --------------
|Signature                                    |  | Title                                                                           |  | Date          
|/S/ David S. PerryDavid S. Perry             |  | President, Treasurer and Director (chief executive and chief financial officer) |  | March 29, 2004
|                                             |  |                                                                                
|/S/ Denton F. Lee, Jr.Denton F. Lee, Jr.     |  | Vice President, Secretary and Director                                          |  | March 29, 2004
|                                             |  |                                                                                
|/S/ Hope Holding ConnellHope Holding Connell |  | Director                                                                        |  | March 29, 2004



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EXHIBIT INDEX



|              |  |                                                                                                                                                                                                        
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                            
|3.1           |  | Registrants Restated Articles of Incorporation (incorporated herein by reference to Registrants Registration Statement on Form 10-KSB)                                                               
|              | 
|3.2           |  | Registrants Bylaws (incorporated herein by reference to Registrants Registration Statement on Form 10-KSB)                                                                                           
|              | 
|10.1          |  | Administration Agreement between Registrant and American Guaranty Insurance Company (incorporated herein by reference Registrants Registration Statement on Form 10-KSB)                              
|              | 
|10.2          |  | Administration Agreement between Yadkin Valley Life and American Guaranty Insurance Company (incorporated herein by reference to Amendment No. 1 to Registrants Registration Statement on
Form 10-KSB)
|              | 
|10.3          |  | Reinsurance Agreement between Yadkin Valley Life and Triangle Life Insurance Company (incorporated herein by reference to Amendment No. 1 to Registrants Registration Statement on Form
10-KSB)       
|              | 
|13            |  | Registrants 2003 Annual Report to Shareholders (filed herewith)                                                                                                                                       
|              | 
|21            |  | Subsidiaries of Registrant (incorporated herein by reference to Registrants Registration Statement on Form 10-KSB)                                                                                    
|              | 
|31.1          |  | Certification of Registrants Principal Executive Officer pursuant to Rule 13a-14(a) (filed herewith)                                                                                                  
|              | 
|31.2          |  | Certification of Registrants Chief Financial Officer pursuant to Rule 13a-14(a) (filed herewith)                                                                                                      
|              | 
|32            |  | Certification of Registrants Chief Financial Officer pursuant to 18 U. S. C. Section 1350 (filed herewith)                                                                                            
|              | 
|99            |  | Registrants definitive Proxy Statement dated March 29, 2004 as filed with the Securities and Exchange Commission (being filed separately)                                                             



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