U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-KSB

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

 For the Fiscal Year Ended December 31, 1998.    Commission File No. 1-14081

                              YADKIN VALLEY COMPANY
--------------------------------------------------------------------------------
                 (Name of small business issurer in its charter)

            North Carolina                             56-1249566             
         (State or other jurisdiction of            (IRS Employer
          incorporation or organization)           Identification No.)

          Post Office Box 1729
        Raleigh, North Carolina 27602                          27602         
--------------------------------------------       -----------------------------
    (Address of Principal Executive Offices)                 (Zip Code)

                                 (919) 716-2266
               (Registrant's Telephone Number including area code)

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

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

                                (Title of Class)
      Check whether the issued (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 not 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.
        Yes    X             No             

        Registrant's revenues for its most recent fiscal year were :  $ 333,815.
                                                                        --------

      On March 19, 1999, 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 $ 1,535,393.

      On March 19, 1999, the number of outstanding shares of Registrant's common
stock was 183,692.

                       DOCUMENTS INCORPORATED BY REFERENCE

      Portions of Registrant's Annual Report to Shareholders for the year ended
December 31, 1998 are incorporated herein in Part II.

      Portions of Registrant's definitive Proxy Statement dated March 19,1999,
are incorporated herein in Part III.

<PAGE>

                                     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.

        Credit life policies are sold by Southern, Fidelity and Heritage
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, and 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. Policies are reinsured by Yadkin Valley Life pursuant to a Reinsurance
Agreement between it and Triangle Life which 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, 1998 and December 31, 1997, respectively, there were 4,808
and 4,217 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, 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.

        Claims on policies reinsured by Yadkin Valley Life are reported to
Triangle Life by Southern, Fidelity and Heritage as they arise and 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 standard
industry methodologies.

        Neither Registrant nor Yadkin Valley Life employ 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"), another wholly-owned subsidiary of FCB, pursuant to Administration
Agreements (the "Agreements"). (See "Item 12. Certain Relationships and Related
Transactions.")

<PAGE>

        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, and, historically, Yadkin
Valley Life's reinsurance business has not demonstrated any seasonality nor
dependency on a few customers.

        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) First Citizens BancShares, Inc. ("BancShares,"
a bank holding company headquartered in Raleigh, North Carolina); (II) First
Citizens Bancorporation of South Carolina, Inc. ("Bancorporation," a bank
holding company headquartered in Columbia, South Carolina); and (III) Heritage.
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 12/31/98                 AT 12/31/97
                             -----------                 -----------
                           AMOUNT     %                 AMOUNT     %
                           ------     -                 ------     -
BancShares            $ 1,780,641   11.0%          $ 2,117,858   14.6%
Bancorporation         13,392,473   82.8            11,467,473   78.9
Heritage                  455,932    2.8               455,932    3.1

        Registrant and Yadkin Valley Life have three officers, none of whom are
compensated for their services as such, and no other employees. See " Item 5.
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, like Triangle Life, is a wholly-owned subsidiary of FCB 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, 1998, Registrant was not a party to any legal
proceeding that is 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.

                                       2

<PAGE>

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND SHAREHOLDER MATTERS

        Incorporated herein by reference from page 5 of Registrant's 1998 Annual
        Report to Shareholders.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

        Incorporated herein by reference to pages 2 through 4 of Registrant's
        1998 Annual Report to Shareholders.

ITEM 7. FINANCIAL STATEMENTS.

        Incorporated herein by reference to pages 6 through 18 of Registrant's
        1998 Annual Report to Shareholders.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.

        Not applicable.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.

        Incorporated herein by reference from pages 3 and 4 (under the captions
"Proposal 1: Election of Directors" and "Management Compensation") of
Registrant's definitive Proxy Statement dated March 19, 1999.

ITEM 10. EXECUTIVE COMPENSATION

        Incorporated herein by reference from page 4 (under the caption
"Management Compensation") of Registrant's definitive Proxy Statement dated
March 19, 1999.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

        Incorporated herein by reference to pages 2 and 3 (under the caption
"Beneficial Ownership of Securities") of Registrant's definitive Proxy Statement
dated March 19, 1999.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

        Incorporated herein by reference to page 4 and 5 (under the caption
"Certain Relationships and Transactions") of Registrant's definitive Proxy
Statement dated March 19, 1999.

                                       3
<PAGE>


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.

<TABLE>
<CAPTION>
        EXHIBIT
        NUMBER                                       DESCRIPTION                              
        ------                                       -----------                              
<S>                   <C>                                                                                  
         3.1          Registrant's Restated Articles of Incorporation  (incorporated herein by
                      reference to Registrant's Registration Statement on Form 10-SB)

         3.2          Registrant's Bylaws (incorporated herein by reference to
                      Registrant's Registration Statement on Form 10-SB)

         10.1         Administration Agreement between Registrant and American
                      Guaranty Insurance Company (incorporated herein by
                      reference to Registrant's Registration Statement on Form
                      10-SB)

         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-SB)

         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-SB)

         13           Registrant's 1998 Annual Report to Shareholders (filed
                      herewith)

         22           Subsidiaries of Registrant (incorporated herein by
                      reference to Registrant's Registration Statement on Form
                      10-SB)

         27           Financial Data Schedule (filed herewith)

         99           Registrant's definitive Proxy Statement dated March 19,
                      1999, as filed with the Securities and Exchange Commission
                      (not being refiled)
</TABLE>

        (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.

                                       4
<PAGE>

                                   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    23      , 1999          BY:                            
            -----------                    ------------------------------
                                              David S. Perry, President


        In accordance with Section13 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 
             ---------                   -----                        ---- 

______________________________    President, Treasurer and       March 23, 1999
        David S. Perry            Director (chief executive
                                  and chief financial officer)


______________________________    Vice President, Secretary      March 23, 1999
        E. Thomas Lucas           and Director



______________________________    Director                       March 23, 1999
        Hope Holding Connell


                                       5
<PAGE>


                                  EXHIBIT INDEX

        EXHIBIT
        NUMBER                            DESCRIPTION                       
        ------                            -----------                       

         3.1          Registrant's Restated Articles of Incorporation
                      (incorporated herein by reference to Registrant's
                      Registration Statement on Form 10-SB)

         3.2          Registrant's Bylaws (incorporated herein by reference to
                      Registrant's Registration Statement on Form 10-SB)

         10.1         Administration Agreement between Registrant and American
                      Guaranty Insurance Company (incorporated herein by
                      reference Registrant's Registration Statement on Form
                      10-SB)

         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-SB)

         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-SB)

         13           Registrant's 1998 Annual Report to Shareholders (filed
                      herewith)

         22           Subsidiaries of Registrant (incorporated herein by
                      reference to Registrant's Registration Statement on Form
                      10-SB)

         27           Financial Data Schedule (filed herewith)

         99           Registrant's definitive Proxy Statement dated March 19,
                      1999, as filed with the Securities and Exchange Commission
                      (not being refiled)


                                       6