---



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 September 30, 2003



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 incorporation or organization) |  | (IRS Employer Identification No.)



Post Office Box
18747

Raleigh, North Carolina 27619

(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 |  | 181,130                          
|------------ |  | ---------------------------------
|Class        |  | Outstanding at September 30, 2003



---



---

PART I  FINANCIAL INFORMATION



|Item 1. |  | Financial Statements
|------- |  | --------------------



YADKIN VALLEY COMPANY AND SUBSIDIARY



CONSOLIDATED BALANCE SHEETS



|                                                                                                                                   |  | September 30, 2003 |            | * December 31, 2002
|---------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ---------- | -------------------
|                                                                                                                                   |  | (Unaudited)        |            |                    
|ASSETS                                                                                                                             |  |                    |            |                    
|                                                                                                                                   |  |                   
|Cash                                                                                                                               |  | $                  | 95,058     |                    
|Investments in equity securities (cost of $2,276,744 at September 30, 2003 and December 31, 2002)                                  |  |                    | 18,051,069 |                    
|Certificates of deposit                                                                                                            |  |                    | 360,000    |                    
|Accrued investment income                                                                                                          |  |                    | 719        |                    
|Other assets                                                                                                                       |  |                    | 100        |                    
|                                                                                                                                   |  |                    |            |                    
|Total assets                                                                                                                       |  | $                  | 18,506,946 |                    
|                                                                                                                                   |  |                    |            |                    
|                                                                                                                                   |  |                   
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                               |  |                    |            |                    
|                                                                                                                                   |  |                   
|Liabilities :                                                                                                                      |  |                    |            |                    
|Life policy claims reserves                                                                                                        |  |                    | 7,903      |                    
|Deferred income taxes                                                                                                              |  |                    | 6,089,922  |                    
|Notes payable                                                                                                                      |  |                    | 899,205    |                    
|Accrued interest payable                                                                                                           |  |                    | 1,480      |                    
|Other liabilities                                                                                                                  |  |                    |           |                    
|                                                                                                                                   |  |                    |            |                    
|Total liabilities                                                                                                                  |  |                    | 6,998,510  |                    
|                                                                                                                                   |  |                    |            |                    
|                                                                                                                                   |  |                   
|Shareholders equity :                                                                                                             |  |                    |            |                    
|Common stock, par value $1 per share; authorized 500,000 shares, issued and outstanding 181,130 shares in 2003 and 181,295 in
2002 |  |                    | 181,130    |                    
|Retained earnings                                                                                                                  |  |                    | 1,701,925  |                    
|Accumulated other comprehensive income                                                                                             |  |                    | 9,625,381  |                    
|                                                                                                                                   |  |                    |            |                    
|Total shareholders equity                                                                                                         |  |                    | 11,508,436 |                    
|                                                                                                                                   |  |                    |            |                    
|                                                                                                                                   |  |                   
|Total liabilities and shareholders equity                                                                                         |  | $                  | 18,506,946 |                    
|                                                                                                                                   |  |                    |            |                    



* Derived from 2002 Annual Report on
Form 10KSB



See accompanying notes to consolidated financial statements.



---

YADKIN VALLEY COMPANY AND SUBSIDIARY



CONSOLIDATED STATEMENTS OF INCOME (LOSS)



|                                             |  | For the threemonths endedSept. 30, 2003 |         |   | For the threemonths endedSept. 30, 2002 |   | For the ninemonths endedSept. 30, 2003 |  |          | For the ninemonths endedSept. 30, 2002 | 
|-------------------------------------------- |  | --------------------------------------- | ------- | - | --------------------------------------- | - | -------------------------------------- |  | -------- | -------------------------------------- | 
|                                             |  | UNAUDITED                               |         |   | UNAUDITED                               |   | UNAUDITED                              |  |          | UNAUDITED                              | 
|Premiums and other revenue:                  |  |                                         |         |   |                                         |   |                                        |  |          |                                        | 
|Life premium                                 |  | $                                       | 39,550  |   |                                         | $ | 47,716                                 |  | 124,530  |                                        | 
|Dividend income                              |  |                                         | 17,955  |   |                                         |   | 15,046                                 |  | 47,456   |                                        | 
|Interest income                              |  |                                         | 929     |   |                                         |   | 1,980                                  |  | 3,232    |                                        | 
|                                             |  |                                         |         |   |                                         |   |                                        |  |          |                                        | 
|                                             |  |                                         | 58,434  |   |                                         |   | 64,742                                 |  | 175,218  |                                        | 
|                                             |  |                                         |         |   |                                         |   |                                        |  |          |                                        | 
|                                             |  |                                         |         |  
|Benefits and expenses:                       |  |                                         |         |   |                                         |   |                                        |  |          |                                        | 
|Death benefits                               |  |                                         | 42,230  |   |                                         |   | 2,103                                  |  | 113,000  |                                        | 
|Increase in liability for life policy claims |  |                                         |        |   |                                         |   |                                       |  | 61       |                                        | 
|Operating expenses:                          |  |                                         |         |   |                                         |   |                                        |  |          |                                        | 
|Commissions                                  |  |                                         | 17,807  |   |                                         |   | 21,445                                 |  | 56,068   |                                        | 
|Interest                                     |  |                                         | 5,380   |   |                                         |   | 9,438                                  |  | 16,649   |                                        | 
|Professional fees                            |  |                                         | 2,989   |   |                                         |   | 2,400                                  |  | 36,274   |                                        | 
|Management fees                              |  |                                         | 2,503   |   |                                         |   | 2,430                                  |  | 15,419   |                                        | 
|General, administrative and other            |  |                                         | 2,027   |   |                                         |   | 1,746                                  |  | 38,627   |                                        | 
|                                             |  |                                         |         |   |                                         |   |                                        |  |          |                                        | 
|                                             |  |                                         | 72,936  |   |                                         |   | 39,562                                 |  | 276,098  |                                        | 
|                                             |  |                                         |         |   |                                         |   |                                        |  |          |                                        | 
|                                             |  |                                         |         |  
|Income (loss) before income taxes            |  |                                         | (14,502 | ) |                                         |   | 25,180                                 |  | (100,880 | )                                      | 
|                                             |  |                                         |         |  
|Income tax expense (benefit)                 |  |                                         | (5,656  | ) |                                         |   | 1,695                                  |  | (39,343  | )                                      | 
|                                             |  |                                         |         |   |                                         |   |                                        |  |          |                                        | 
|                                             |  |                                         |         |  
|Net income (loss)                            |  |                                         | (8,846  | ) |                                         | $ | 23,485                                 |  | (61,537  | )                                      | 
|                                             |  |                                         |         |   |                                         |   |                                        |  |          |                                        | 
|                                             |  |                                         |         |  
|Net income (loss) per share                  |  | $                                       | (0.05   | ) |                                         | $ | 0.13                                   |  | (0.34    | )                                      | 
|                                             |  |                                         |         |   |                                         |   |                                        |  |          |                                        | 
|                                             |  |                                         |         |  
|Weighted average shares outstanding          |  |                                         | 181,209 |   |                                         |   | 182,198                                |  | 181,213  |                                        | 
|                                             |  |                                         |         |   |                                         |   |                                        |  |          |                                        | 



See accompanying notes to consolidated
financial statements.



---

YADKIN VALLEY COMPANY AND SUBSIDIARY



CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY

FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2003

UNAUDITED



|                                             |  | Common stock |         |   | Retained earnings |           |   | Accumulated other comprehensive income |           | Total shareholders equity |           
|-------------------------------------------- |  | ------------ | ------- | - | ----------------- | --------- | - | -------------------------------------- | --------- | -------------------------- | ----------
|Balance at December 31, 2002                 |  | $            | 181,295 |   |                   | 1,770,197 |   |                                        | 8,515,434 |                            | 10,466,926
|                                             |  |              |         |  
|Comprehensive income:                        |  |              |         |   |                   |           |   |                                        |           |                            |           
|Net loss                                     |  |              |        |   |                   | (61,537   | ) |                                        |          |                            | (61,537   
|Net unrealized gains on securities available |  |              |         |   |                   |           |   |                                        |           |                            |           
|For sale, net of income taxes of $709,639    |  |              |        |   |                   |          |   |                                        | 1,109,947 |                            | 1 109,947 
|                                             |  |              |         |   |                   |           |   |                                        |           |                            |           
|Comprehensive income                         |  |              |         |   |                   |           |   |                                        |           |                            | 1,048,410 
|Redemption of 165 shares of common stock     |  |              | (165    | ) |                   | (6,735    | ) |                                        |          |                            | (6,900    
|                                             |  |              |         |   |                   |           |   |                                        |           |                            |           
|                                             |  |              |         |  
|Balance at September 30, 2003                |  | $            | 181,130 |   |                   | 1,701,925 |   |                                        | 9,625,381 |                            | 11,508,436
|                                             |  |              |         |   |                   |           |   |                                        |           |                            |           



See
accompanying notes to consolidated financial statements.



---

YADKIN VALLEY COMPANY AND SUBSIDIARY



CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2003 AND 2002

UNAUDITED



|                                                                                                                       |  | 2003        |            |   | 2002        |           
|---------------------------------------------------------------------------------------------------------------------- |  | ----------- | ---------- | - | ----------- | ----------
|                                                                                                                       |  | (Unaudited) |            |   | (Unaudited) |           
|Operating activities :                                                                                                 |  |             |            |   |             |           
|Net income (loss)                                                                                                      |  | $           | (61,537    | ) |             | 7,271     
|Adjustments to reconcile net income (loss) to net                                                                      |  |             |            |   |             |           
|Cash used by operating activities:                                                                                     |  |             |            |   |             |           
|Net tax benefit                                                                                                        |  |             | (32,683    | ) |             | 763       
|Increase (decrease) in reserve for life policy claims                                                                  |  |             | 61         |   |             | (120      
|Decrease in accrued investment income                                                                                  |  |             | (123       | ) |             | (328      
|Decrease in accrued interest payable                                                                                   |  |             | (592       | ) |             | (565      
|Increase (decrease) in other liabilities                                                                               |  |             | (1,028     | ) |             |          
|                                                                                                                       |  |             |            |   |             |           
|Net cash provided (used) by operating activities                                                                       |  |             | (95,902    | ) |             | 7,021     
|                                                                                                                       |  |             |            |   |             |           
|Investing activities :                                                                                                 |  |             |            |   |             |           
|Purchases of certificates of deposit                                                                                   |  |             | (1,524,192 | ) |             | (1,197,970
|Maturities of certificates of deposit                                                                                  |  |             | 1,614,800  |   |             | 1,225,537 
|                                                                                                                       |  |             |            |   |             |           
|Net cash used by investing activities                                                                                  |  |             | 90,608     |   |             | 27,567    
|                                                                                                                       |  |             |            |   |             |           
|Financing activities:                                                                                                  |  |             |            |   |             |           
|Purchases and retirement of common stock                                                                               |  |             | (6,900     | ) |             | (2,692    
|                                                                                                                       |  |             |            |   |             |           
|Net cash used by financing activities                                                                                  |  |             | (6,900     | ) |             | (2,692    
|Net decrease in cash                                                                                                   |  |             | (12,194    | ) |             | 31,896    
|Cash at beginning of reporting period                                                                                  |  |             | 107,252    |   |             | 83,442    
|                                                                                                                       |  |             |            |   |             |           
|Cash at end of reporting period                                                                                        |  | $           | 95,058     |   |             | 115,338   
|                                                                                                                       |  |             |            |   |             |           
|Cash payments for :                                                                                                    |  |             |            |   |             |           
|Interest                                                                                                               |  | $           | 17,241     |   |             | 21,220    
|                                                                                                                       |  |             |            |   |             |           
|Income taxes                                                                                                           |  |             |           |   |             |          
|                                                                                                                       |  |             |            |   |             |           
|Non-cash investing and financing activities :                                                                          |  |             |            |   |             |           
|Increase in unrealized gain on marketable equity securities, net of applicable income taxes of $709,639 and
$1,431,273 |  | $           | 1,109,947  |   |             | 2,130,889 
|                                                                                                                       |  |             |            |   |             |           



See
accompanying notes to consolidated financial statements.



---

YADKIN VALLEY COMPANY AND SUBSIDIARY



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 1: Basis of Presentation



The accompanying consolidated financial statements include the accounts and operations of Yadkin Valley Company (the Parent) and
its wholly owned subsidiary Yadkin Valley Life Insurance Company, hereinafter collectively referred to as the Company. Inter-company accounts and transactions have been eliminated. The consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of America which, as to the insurance subsidiary, may vary in some respects from statutory accounting practices, which are prescribed or permitted by the Insurance
Department of the State of Arizona. 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-KSB, 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, 2003.



For the nine months ended
September 30, 2003 and 2002, total comprehensive income consisting of net income (loss) and unrealized gains on securities available for sale, net of taxes, was $1,109,947 and $2,138,160, respectively.



Note 2: Related Parties



Certain significant shareholders of the Company are also significant shareholders of First
Citizens BancShares, Inc. (FCB), First Citizens Bancorporation of South Carolina, Inc. (FCB-SC), The Heritage Bank (Heritage), Southern Bank & Trust Company, Mount Olive, North Carolina (Southern),
and The Fidelity Bank, Fuquay-Varina, North Carolina (Fidelity). All of these entities are related through common ownership. American Guaranty Insurance Company (AGI) and First-Citizens Bank & Trust Company
(FCB&T) are wholly owned subsidiaries of FCB, and Triangle Life Insurance Company (TLIC) is wholly owned by FCB&T. The Company holds stock in FCB, FCB-SC and Heritage. At September 30, 2003 and December 31, 2002, the
Company had $260,000 and $346,483 respectively, invested in certificates of deposit in FCB&T.



The Company has no employees. AGI provides all managerial, administration and operational services necessary in carrying out the Companys business. AGI is a subsidiary of FCB and provides management services to
the Company. Management fees were $15,419 for the nine months ending September 30, 2003 and $15,009 for the corresponding period in 2002.



Yadkin Valley Life provides reinsurance to TLIC, a subsidiary of FCB&T. The policies reinsured are sold through Southern, Fidelity and Heritage. Amounts related to
business assumed from TLIC for the nine months ended September 30, 2003 and the corresponding period in 2002 are as follows:



|                                   |  | 2003 |         | 2002
|---------------------------------- |  | ---- | ------- | ----
|Premiums assumed                   |  | $    | 124,530 |     
|Death benefits assumed             |  |      | 113,061 |     
|Life policy claim reserves assumed |  |      | 7,903   |     
|Ceding commissions                 |  |      | 56,068  |     



---

|Item 2. |  | Managements Discussion and Analysis of Financial Condition and Results of Operations.
|------- |  | --------------------------------------------------------------------------------------



RESULTS OF OPERATIONS. The Company realized a consolidated loss before federal income tax of $61,537 during
the period reported versus consolidated net income before federal income tax of $7,271 during the corresponding period in 2002. The loss was primarily due to a $72,130 increase in death claims paid, a $12,683 increase in professional fees and a
$19,902 decrease in life premium income.



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 $19,902 (13.8%) from the corresponding period in 2002 and management expects the decline may continue for the remainder of the year, as the products being reinsured are not
being actively marketed. 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 the Companys funds are for claim payments, commission payments and general expenses. Incurred
claims increased $ 72,894 (181.5%) from the corresponding period in 2002. This is the second consecutive quarter claims have been larger than historical amounts; however, management has reviewed each claim presented and paid and has no information
that this is indicative of a trend. Management believes all claims filed and paid to be proper and paid according to provisions in the various policies issued. While the 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 2003 of $8,947 (13.8%) versus 2002 is directly correlated to the decline in assumed premium written. Operating expenses, excluding
commissions, increased by $16,856 (18.7%) for the period reported from the corresponding period of 2002, primarily due to an increase in professional fees of $12,683 and an increase in general, administrative and other expenses of $7,769.



During 2003, the Companys investment in marketable
equity securities that are accounted for in accordance with SFAS No. 115 experienced an increase in their fair values of $1,819,586 (11.21%) from December 31, 2002. The increase in fair values of the Companys investments as of September 30,
2003 is driven by the fact that the Companys largest individual holding is in a banking organization (FCB-SC) whose equity securities are not widely traded and thus are subject to fluctuation. There can be no assurances that the current fair
values will be sustained in future periods and continued fluctuations in the fair values of these investments in future periods will result in fluctuations 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 the Company to fund asset growth and maintain liquidity. A factor which could impact the Companys financial position and liquidity is a significant
increase or decrease in the market values of the securities held in the investment portfolio.



Management believes the liquidity of the Company to be adequate as evidenced by ratios of assets to liabilities of 2.63 at September 30, 2003 and 2.66 at December 31, 2002. This ratio continues to remain constant.
Investments in equity securities had a carrying value at September 30, 2003 and December 31, 2002 of $18,051,069 and $16,231,483 respectively. While management considers these securities to be readily marketable, the Companys ability to sell a
substantial portion of these investments may be inhibited by the limited trading of most of these securities, and may result in the Company realizing substantial losses on any such sales. Management of the Company believes that Yadkin Valley Life
maintains sufficient other sources of liquidity such as certificates of deposit and borrowings and that sales of these investments would not appear necessary for the foreseeable future.



FINANCIAL CONDITION.The increase in total assets from December 31, 2002 was primarily due to an increase in
unrealized gains on marketable equity securities. There were no other material changes in assets during 2003.



---

CAPITAL RESOURCES. There are no material commitments for capital expenditures and none are
anticipated. At September 30, 2003, Registrant had outstanding borrowings, which is with an unrelated bank, of $899,205 secured by 18,139 shares of First Citizens BancShares, Inc. Class A Common Stock, which have a carrying value of $1,917,292; and
1,725 shares of First Citizens BancShares, Inc. Class B Common Stock, which have a carrying value of $164,099; and 10,000 voting common shares of First Citizens Bancorporation of South Carolina, Inc, which have a carrying value of $4,330,000. Any
funds needed to satisfy loan repayments would be derived from the sale of or repositioning of investments and dividends from Yadkin Valley Life.



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 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.



|Item 3. |  | Controls and Procedures
|------- |  | -----------------------



An evaluation of the effectiveness of the Companys disclosure controls and procedures as of the end of the period covered by this report has been
performed under the supervision and with the participation of the Companys President, who serves as both principal executive officer and principal financial officer. Based on that evaluation, the President concluded that the Companys
disclosure controls and procedures were effective as of the end of the period covered by this report.



There has been no change in the Companys internal controls over financial reporting that occurred during the most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.



PART IIOTHER INFORMATION



|Item 1. |  | Legal Proceedings
|------- |  | -----------------



| |  | Not Applicable
| |  | --------------



|Item 2. |  | Changes in Securities and Use of Proceeds
|------- |  | -----------------------------------------



| |  | Not Applicable
| |  | --------------



|Item 3. |  | Default Upon Senior Securities
|------- |  | ------------------------------



| |  | Not Applicable
| |  | --------------



---

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



| |  | None
| |  | ----



|Item 5. |  | Other Information
|------- |  | -----------------



| |  | Not Applicable
| |  | --------------



|Item 6. |  | Exhibits and Reports on Form 8-K
|------- |  | --------------------------------



(a) The following exhibits are filed with this report:



|Exhibit Number |  | Description                                        |  | 
|-------------- |  | -------------------------------------------------- |  | 
|               |  |                                                   
|31             |  | Certification Pursuant to Rule 13a-14(a)           |  | 
|               |  |                                                   
|32             |  | Certification pursuant to 18 U. S. C. Section 1350 |  | 



(b) Registrant filed
no reports on Form 8-K during the quarter covered by this Report.



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: November 10, 2003 |  |  |  | By:                  
|                        |  |  |  |                      
|                        |  |  |  |                      



---

EXHIBIT INDEX



|Exhibit Number |  | Description                                      |  | 
|-------------- |  | ------------------------------------------------ |  | 
|               |  |                                                 
|31             |  | Certification Pursuant to Rule 13a-14(a)         |  | 
|               |  |                                                 
|32             |  | Certification pursuant to 18 U.S.C. Section 1350 |  |