U.S. SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549

                                   FORM 10-QSB

                   QUARTERLY REPORT PURSUANT TO SECTION 12 (g)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the quarterly period ended June 30,1998



                         Commission file number- 1-14081


                              YADKIN VALLEY COMPANY
             (Exact name of registrant as specified 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
                         (address of principal executive offices)

                                Telephone: (919) 716-2266
                             (Registrant's telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 12 (g) of the Securities Exchange Act of 1934 during the
preceding 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  [ ]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

        Common Stock                                   183.732
        ------------                                   -------
            Class                        Outstanding at August 14, 1998
<PAGE>
                         PART I - FINANCIAL INFORMATION
Item 1.     Financial Statements

                      YADKIN VALLEY COMPANY AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                 JUNE 30, 1998      DECEMBER 31, 1997
                                              -----------------     -----------------

                   ASSETS                          (UNAUDITED)
                  --------  
<S>                                                    <C>                    <C>   
CASH                                                   $68,347                45,061
INVESTMENTS IN SECURITIES AVAILABLE FOR
SALE  (COST OF $2,318,640 AT JUNE 30, 1998
  AND AT DECEMBER 31, 1998)                         15,900,199            14,041,263
CERTIFICATES OF DEPOSIT                                400,714               425,854
ACCRUED INVESTMENT INCOME                                2,877                 3,148
FEDERAL INCOME TAXES RECOVERABLE                        41,315                 6,029
STATE INCOME TAXES RECOVERABLE                           4,003                 4,003
OTHER ASSETS                                               100                   100
                                              =================     =================
         TOTAL ASSETS                              $16,417,555            14,525,458
                                              =================     =================


    LIABILITIES AND SHAREHOLDER'S EQUITY
   --------------------------------------
LIABILITIES:
   LIFE POLICY CLAIM RESERVE                            25,385                30,121
   NOTES PAYABLE                                       832,343               745,069
   DEFERRED INCOME TAXES                             5,296,808             4,569,027
   OTHER LIABILITIES                                    12,628                 5,582
                                              -----------------     -----------------
             TOTAL LIABILITIES                       6,167,164             5,349,799
                                              -----------------     -----------------

SHAREHOLDERS' EQUITY:
COMMON STOCK, PAR VALUE $1 PER SHARE;
  AUTHORIZED 500,000 SHARES; ISSUED AND
  OUTSTANDING 183,732 IN 1998 AND 184,180 IN
  1997                                                 183,732               184,180
RETAINED EARNINGS                                    1,781,908             1,837,884
NET UNREALIZED GAIN ON INVESTMENT SECURITIES
  AVAILABLE FOR SALE                                 8,284,751             7,153,595
                                              -----------------     -----------------
                 TOTAL SHAREHOLDERS' EQUITY         10,250,391             9,175,659
                                              -----------------     -----------------

                  TOTAL LIABILITIES AND
                    SHAREHOLDERS' EQUITY           $16,417,555            14,525,458
                                              =================     =================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
                      YADKIN VALLEY COMPANY AND SUBSIDIARY
                        CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
                                 FOR THE THREE   FOR THE THREE   FOR THE SIX      FOR THE SIX
                                 MONTHS ENDED    MONTHS ENDED    MONTHS ENDED     MONTHS ENDED
                                 JUNE 30, 1998   JUNE 30, 1997   JUNE 30, 1998    JUNE 30, 1997
                                  -----------    ------------     ------------    -----------
                                                           (UNAUDITED)
<S>                                  <C>              <C>             <C>            <C>    
PREMIUMS AND OTHER REVENUES:
   LIFE PREMIUM                      $69,459          82,618          140,928        169,118
   DIVIDEND INCOME                     6,202           5,362           12,943         11,883
   INTEREST INCOME                     5,111           5,999           10,622         13,152
   GAIN ON SALE OF INVESTMENT
     SECURITIES AVAILABLE FOR SALE         -               -                -        162,246
                                  -----------    ------------     ------------    -----------
                                      80,772          93,979          164,493        356,399
                                  -----------    ------------     ------------    -----------


BENEFITS AND EXPENSES:
   DEATH BENEFITS                     40,767           8,943           76,261         28,182
   INCREASE (DECREASE) IN
      LIABILITY FOR
      LIFE POLICY CLAIMS             (4,258)               -          (4,737)              -
   OPERATING EXPENSES:
      COMMISSIONS                     31,181          37,209           63,511         76,167
      INTEREST                        17,227          16,007           32,418         31,698
      PROFESSIONAL FEES               25,096           1,037           32,909          8,828
      MANAGEMENT FEES                  4,375           5,692           11,225         12,615
      GENERAL, ADMINISTRATIVE &
          OTHER                        4,771           6,277           24,589         22,451
                                  -----------    ------------     ------------    -----------
                                     119,159          75,165          236,176        179,941
                                  -----------    ------------     ------------    -----------

            INCOME (LOSS) BEFORE
               INCOME TAXES          (38,387)         18,814         (71,683)        176,458
                                  -----------    ------------     ------------    -----------

INCOME TAX EXPENSE                   (13,029)          8,409         (24,402)         60,752

             NET INCOME (LOSS)      $(25,358)         10,405         (47,281)        115,706
                                   =========          ======         ========        =======
NET INCOME PER SHARE                  $(0.13)           0.06           (0.26)           0.62
                                      ======            ====           =====            ====

WEIGHTED AVERAGE SHARES   
OUTSTANDING                          183,876         184,288         183,956         184,288
                                     =======         =======         =======         =======
</TABLE>




SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


<PAGE>



                           YADKIN VALLEY COMPANY AND SUBSIDIARY

                           CONSOLIDATED STATEMENTS OF CASH FLOW
                  FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1997

<TABLE>
<CAPTION>

                                                                                           1998          1997
                                                                                           ----          ----

                                                                                             (UNAUDITED)
<S>                                                                                      <C>      
Operating activities:
      Net income (loss)                                                               $   (47,281)       115,706
      Adjustments to reconcile net income to net cash
         cash provided by operating activities:
            Gain on sale of securities available for sale                                               (162,246)
            Increase (decrease) in reserve for policy and contract claims                  (4,737)          --
            Decrease (increase) in federal income taxes recoverable                       (35,286)          --
            Increase (decrease) in federal income taxes payable                              --         (191,725)
            Increase (decrease) in state income taxes payable                                --          (55,127)
            Decrease (increase) in accrued investment income                                  271         (1,265)
            Increase (decrease) in other liabilities                                        7,046          1,317
                                                                                      -----------    -----------
                  Net cash provided (used) by operating activities                        (79,987)      (293,340)


Investing activities:
      Proceeds from sale of investment securities available-for-sale                         --          184,919
      Purchases of certificates of deposit                                                (20,714)       (54,195)
      Maturities of certificates of deposit                                                45,854        125,000
                                                                                      -----------    -----------
                  Net cash provided (used) in investing activities                         25,140        255,724

Financing activities:
      Principal payments on notes payable                                                 745,069           (951)
      Proceeds from issuance of notes payable                                             832,343           --
      Purchase and retirement of common stock                                              (9,141)           (20)
                                                                                      -----------    -----------
                  Net cash provided (used) by financing activities                         78,133           (971)

                  Net increase (decrease) in cash                                          23,286        (38,587)

Cash at beginning of reporting period                                                      45,061         69,498

Cash at end of reporting period                                                       $    68,347         30,911
                                                                                      ===========         ======

Cash payments for:
      Interest                                                                        $    25,284    $    31,649
                                                                                      ===========    ===========

      Income taxes                                                                    $     5,000    $   268,063
                                                                                      ===========    ===========

Non-cash investing and financing activities:
       Increase in unrealized gain on investment securities available for sale,
         net of applicable income taxes of $724,985 and $700,651, respectively        $ 1,131,156    $ 1,095,850
                                                                                      ===========    ===========
</TABLE>

See accompanying notes to consolidated financial statements.


<PAGE>


                           YADKIN VALLEY COMPANY AND SUBSIDIARY

                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1:     Basis of Presentation

The accompanying consolidated financial statements include the accounts of
Yadkin Valley Company (the "Company") and its wholly owned subsidiary Yadkin
Valley Life Insurance Company. All significant intercompany transactions are
eliminated in consolidation and all adjustments considered necessary for a fair
presentation of the results for the interim periods have been included (such
adjustments are normal and recurring in nature).

The information contained in the footnotes to the Company's consolidated
financial statements, included in the Company's Form 10-SB, should be referenced
when reading these unaudited interim financial statements. Operating results for
the interim periods presented herein are not necessarily indicative of the
results that may be expected for the year ending December 31, 1998.


Note 2:     Adoption of Statements of Financial Accounting Standards ("SFAS")

On January 1, 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income" ("SFAS No. 130") which establishes standards for the reporting and
display of comprehensive income and its components in a full set of financial
statements. Comprehensive income is defined as the change in equity during a
period for non-owner transactions and id divided into net income and other
comprehensive income. Other comprehensive income includes revenues, expenses,
gains, and losses that are excluded from earnings under current accounting
standards. This statement does not change or modify the reporting or display in
the income statement. SFAS No. 130 is effective for interim and annual periods
beginning after December 15, 1997. Comparative financial statements provided for
earlier periods are required to be reclassified to reflect the application of
this statement.

For the six months ended June 30, 1998 and 1997, total comprehensive income
consisting of net income (loss) and unrealized gains on securities available for
sale, net of taxes was $1,083,787 and $1,211,556 respectively.



Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.


      RESULTS OF OPERATIONS. Registrant's realized a decrease in consolidated
net income of $ 163,075 during the period reported compared to the corresponding
period in 1997. Consolidated net loss during the period was $(47,369) compared
to consolidated net income of $115,706 earned in the corresponding period of
1997. The decrease was due to a decrease in production of credit life insurance
premiums , an increase in general expenses and an increase in claims paid.
Additionally, during 1997, certain investments were sold and there were no sales
in 1998.
      The main source of operating funds for the period reported was from Yadkin
Valley Life Insurance Company's ("Yadkin Valley Life") operation. Revenue from
Yadkin Valley Life's operation continued to decline primarily as a result of a
decrease in sales of credit life insurance by producing banks. Premiums have
decreased $28,190 (16.7%) from the corresponding period in 1997 and management
expects the decline to continue for the remainder of the year. The premium
volume of Yadkin Valley Life does vary from year to year based on the volume and
eligibility of loans for credit life insurance in producing banks.
      The primary outflows of Registrant's funds are for claim payments,
commission payments and general expenses. Incurred claims increased $43,342
(154%) from the corresponding period in 1997. The increase is not specifically
attributable to any known events as there have been no change in operations,
underwriting or any other procedure. Management has reviewed all claims filed
and determined all of the claims to be proper and paid according to provisions
in the various policies issued. Based on historical trends, the trend of
abnormal claim payments is not expected to continue. While the abnormal
policyholder mortality experience represents the primary uncertainty of Yadkin
Valley Life's operations, claim reserves have proven to be adequate. The decline
in commission payments in 1998 versus 1997 is directly correlated to the decline
in assumed premium written. General expenses increased by $24,917 (56.7%) for
the 


<PAGE>

period reported from the corresponding period of 1997, primarily due to an
increase in legal and audit of $24,081 (273%) which is directly related to SEC
registration and filing.
      During 1998, Registrant's investment in marketable equity securities that
are accounted for in accordance with SFAS No. 115 experienced significant growth
in their fair values from the corresponding period of 1997. A substantial
portion of the unrealized gains arise from investments in marketable equity
securities issued by banking organizations. Valuations of banking enterprises
throughout the financial services industry have experienced substantial growth
during this period which contributed to the increase in the fair value of
Registrant's investments in these marketable equity securities. There can be no
assurances that these fair values will be sustained in future periods. Decreases
in the fair values of these investments in future periods will result in
reductions of shareholders' equity.

      LIQUIDITY. Management views liquidity as a key financial objective.
Management relies on the operations of Yadkin Valley Life as the principal
source of liquidity. Further, limited borrowings have allowed Registrant to fund
asset growth and maintain liquidity. A factor which could impact Registrant's
financial position and liquidity are significant increases or decreases in the
market values of the securities held in the investment portfolio.
      Management believes the liquidity of the Registrant to be adequate as
evidenced by ratios of assets to liabilities of 2.70 at June 30, 1998 and 2.71
at December 31, 1997. Investments in equity securities had a carrying value at
June 30, 1998 and December 31, 1997 of $15,900,199 and $14,041,263 respectively.
While management considers these securities to be readily marketable,
Registrant's ability to sell a substantial portion of these investments may be
inhibited by the limited trading of most of these issuances, and may result in
Registrant realizing substantial losses on any such sales. Management of the
Registrant believes that Yadkin Valley Life maintains sufficient other sources
of liquidity such that sales of these investments would not appear necessary for
the foreseeable future.

      FINANCIAL CONDITION. The asset growth from December 31, 1997 was primarily
due to unrealized gains on marketable equity securities. There were no other
material changes in assets during 1998.
      During 1998, total liabilities increased from $5,349,799 at December 31,
1997 to $6,167,252 at June 30, 1998. The increase in deferred federal income
taxes on the unrealized gains on investments increased $700,781 while total
liabilities increased $817,453. Notes payable increased by $87,274 from December
31, 1997.

            CAPITAL RESOURCES. There are no material commitments for capital
expenditures and none are anticipated. At June 30, 1998, Registrant had
outstanding borrowings of $832,343 secured by 20,570 shares of First Citizens
BancShares Class A and Class B common stock with a fair market value of
approximately $1,964,446. Any funds needed to satisfy loan repayments will be
derived from the sale of or repositioning of investments and dividends from
Yadkin Valley Life.

            UPDATE ON YEAR 2000. As has been widely reported in the media, many
of the world's existing computer programs use only two digits to identify the
year in the date field of a program. These programs were designed and developed
without considering the impact of the upcoming change in the century and could
experience serious malfunctions when the last two digits of the year change to
"00" (Year 2000 Issue).
   The Company has evaluated the potential impact of the Year 2000 Issue on
operations. Management notes that the Company is not heavily dependent on
computer programs in the course of performing day-to-day operations, as a result
of the size of the Company and the fact that Yadkin Valley Life acts a reinsurer
and not a primary insurer. As a reinsurer, Yadkin Valley Life is not required to
maintain extensive policyholder information on record. In addition, the Company
is monitoring the Year 2000 remediation efforts of their significant vendors,
and of the entity from which Yadkin Valley Life assumes business. To date the
Company has not identified any processes that will require significant
expenditures to address the Year 2000 Issue. The Company estimates that the
total costs to address the Year 2000 Issue will not be material. Year 2000
project costs during the three and six month periods ended June 30, 1998 were
not material.


      FORWARD-LOOKING STATEMENTS: The foregoing discussion may contain
statements that could be deemed forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934 and the 

<PAGE>

Private Securities Litigation Reform Act, which statements are inherently
subject to risks and uncertainties. Forward-looking statements are statements
that include projections, predictions, expectations, or beliefs about future
events or results or otherwise are not statements of historical fact. Such
statements are often characterized by the use of qualifying words (and their
derivatives) such as "expect," "believe," "estimate," "plan," "project," or
other statements concerning opinions or judgment of the Company and its
management about future events. Factors that could influence the accuracy of
such forward looking statements include, but are not limited to, the financial
success or changing strategies of the Company's customers, actions of government
regulators, the level of market interest rates, and general economic conditions.


                               PART II - OTHER INFORMATION



Item 1.     Legal Proceedings

      There are no material pending legal proceedings involving the company.

Item 2.     Changes in Securities and Use of Proceeds

      There have been no changes in the rights of the holders of the common
stock of the Company.

Item 3.     Default Upon Senior Securities

      Not Applicable

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

      Not Applicable

Item 5.     Other Information

      Not Applicable

Item 6.     Exhibits and Reports on Form 8-K

      Not Applicable
<PAGE>
                                   SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
                                          YADKIN VALLEY COMPANY

Date: August 19, 1998                       By:
                                               -------------------------------
                                               David S. Perry, President and 
                                                  Principal Financial Officer