updated 1/26/2011 7:16:50 AM ET 2011-01-26T12:16:50

CHARLOTTESVILLE, Va., Jan. 26, 2011 (GLOBE NEWSWIRE) -- StellarOne Corporation (Nasdaq:STEL) (StellarOne) today reported fourth quarter 2010 earnings of $2.8 million and net income available to common shareholders, which deducts from net income the dividends and discount accretion on preferred stock, of $2.4 million or $0.10 net income per diluted common share. Those results compare to net income available to common shareholders of $80 thousand or $0.00 income per diluted common share during the same quarter in the prior year. For the year, StellarOne earnings available to common shareholders were $7.9 million or $0.35 per common share, compared to a loss of $10.4 million or $0.46 per diluted common share in 2009.

"We are pleased with the continued improvement in our credit quality and earnings results, and believe our company is positioned well to see continued improvement in 2011," said O. R. Barham, Jr., President and Chief Executive Officer. "Loan activity is encouraging and there are certainly signs of an improving economy. High on our list of initiatives for 2011 will be to address repayment of our preferred stock associated with the Troubled Asset Relief Program (TARP). While there are many reasons for this, the single largest consideration is to regain the ability to increase dividends to our common shareholders as conditions improve and earnings will support."

Fourth quarter 2010 notable items include:

  • Net interest income increased $1.2 million for the quarter, as the net interest margin expanded twenty-four basis points on a sequential quarter basis.
  • Non-performing asset levels decreased $7.8 million on a sequential basis, lowering the ratio of non-performing assets as a percentage of total assets to 1.85% as of December 31, 2010, compared to 2.13% as of September 30, 2010.
  • The accelerated resolution of problem credits resulted in higher charge-offs for the quarter, with annualized net charge-offs as a percentage of average loans outstanding of 1.43% for the fourth quarter of 2010, compared to 0.94% for the third quarter of 2010.
  • Noninterest income on an operating basis decreased 10.8% due to increased write-downs of foreclosed assets and lower fee income from retail banking, while elevated mortgage banking revenues continue to be offset somewhat by losses from mortgage indemnifications. Approximately 80% of current mortgage indemnification claims were settled during the quarter.
  • Pre-tax, pre-provision earnings amounted to $8.6 million for the fourth quarter of 2010, an increase of $515 thousand or 6.4% compared to the third quarter of 2010, and an increase of $5.1 million or greater than 100% when compared to the same period in the prior year.

Net Interest Margin Expands for Fifth Consecutive Quarter

Net interest income on a tax-equivalent basis amounted to $25.4 million for the fourth quarter of 2010, which compares to $24.2 million for the third quarter of 2010, and $23.5 million for the same period in the prior year. The net interest margin was 3.87% for the fourth quarter of 2010, compared to 3.63% for the third quarter of 2010, and 3.45% for the fourth quarter of 2009. The average yield on earning assets for the current quarter increased 9 basis points to 4.93% as compared to 4.84% for the third quarter of 2010, which was complemented by a 17 basis point improvement in the cost of interest-bearing liabilities, moving from 1.43% during the third quarter of 2010 to 1.26% during the fourth quarter of 2010. The re-pricing sensitivity of interest-bearing liabilities outpaced interest earning assets during the fourth quarter as approximately $199.2 million or 22.4% of the CD portfolio re-priced resulting in a decrease of 21 basis points and 29 basis points for time deposits less than $100 thousand and greater than $100 thousand, respectively. Additionally, the cost of funds associated with FHLB advances decreased 17 basis points as three higher priced advances matured near the end of the prior quarter and the cost of money market accounts was reduced sequentially by 12 basis points.

Operating Noninterest Income Decreases Sequentially

On an operating basis, which excludes gains and losses from sales and impairments of securities and other assets, total noninterest income amounted to $7.1 million for the fourth quarter of 2010, down $863 thousand or 10.8% on a sequential basis compared to $8.0 million for the third quarter of 2010, and up $1.0 million or 16.9% from $6.1 million for the same period in the prior year. The sequential quarter decrease on a consolidated basis is largely attributable to a $670 thousand increase in write-downs of foreclosed assets and a $225 thousand contraction in retail banking fees. The increase on a company-wide basis compared to the same period in the prior year was driven by a combination of a $635 thousand increase in mortgage banking fees, $325 thousand decrease in write-downs of foreclosed assets, $275 thousand increase in other operating revenues associated with pass through investments, and a $99 thousand increase in wealth management related revenues that was partially offset by a $315 thousand contraction in retail banking fees.

Mortgage banking revenue totaled $2.8 million for the fourth quarter of 2010, up $167 thousand or 6.4% compared to $2.6 million for the third quarter of 2010, and up $762 thousand or 38.0% when compared to the same quarter in 2009. The mortgage revenue increase for the fourth quarter was offset by $854 thousand in indemnification losses recognized. Approximately $504 thousand of the current quarter expense was associated with a settlement totaling $1.45 million, which extinguished all outstanding and potential mortgage repurchase and make-whole claims arising out of alleged representations and warranties breaches related to loans sold by StellarOne or its legacy companies to a primary investor prior to January 1, 2009. This settlement resolved approximately 80% of current claims outstanding with all investors and is anticipated to mitigate future off-balance sheet risk associated with repurchase and indemnifications. The business segment remained modestly profitable for both the quarter and the year despite the impact of indemnifications.

Retail banking fee income amounted to $3.9 million for the fourth quarter of 2010, a decrease of $226 thousand or 5.5% compared to $4.1 million for the third quarter of 2010. This sequential quarter decrease was attributable to a decrease of $198 thousand in consumer NSF and interchange fee income, which resulted from implementing the modifications to Regulation E that became effective during the previous quarter.

Wealth management revenues from trust and brokerage fees for the fourth quarter of 2010 were $1.2 million or up $21 thousand or 1.8% when compared to the $1.1 million realized during the third quarter of 2010, and up $99 thousand or 9.4% when compared to the fourth quarter of 2009. Higher fee realizations attributed to the revenue increase. Fiduciary assets increased sequentially to $489.7 million, compared to $457.9 million at September 30, 2010. This business segment was profitable for both the current quarter and the year.

Non-performing Asset Levels Continue Positive Trend

StellarOne's non-performing assets totaled $54.4 million at December 31, 2010, down $7.7 million or 12.4% from $62.1 million at September 30, 2010 and down $10.3 million or 15.9% compared to $64.7 million at December 31, 2009. The ratio of non-performing assets as a percentage of total assets decreased sequentially to 1.85% as of December 31, 2010, compared to 2.13% at both September 30, 2010 and December 31, 2009. Non-performing loans totaled $43.0 million at December 31, 2010, down $8.1 million or 15.9% when compared to $51.1 million at September 30, 2010 and down $16.3 million or 27.5% compared to $59.3 million at December 31, 2009. Foreclosed assets totaled $10.9 million, up $359 thousand or 3.4% compared to $10.5 million at September 30, 2010 and up $6.4 million or greater than 100% compared to December 31, 2009. Past due and matured loans between 30 and 89 days totaled $52.8 million at December 31, 2010, up $3.5 million or 7.1% compared to $49.3 million at September 30, 2010.

Annualized net charge-offs as a percentage of average loans receivable amounted to 1.43% for the fourth quarter of 2010, up compared to 0.78% for the full-year 2009 results and up sequentially from 0.94% for the third quarter of 2010. Net charge-offs for the fourth quarter of 2010 totaled $7.6 million, up $2.63 million compared to the $5.1 million realized during the third quarter of 2010 and up $3.3 million when compared to $4.4 million during the fourth quarter of 2009.

The mix of non-performing loans continues to be weighted to the residential development and construction loan segment of our portfolio. Of the total nonaccrual loans of $43.0 million at December 31, 2010, approximately $15.4 million are residential development and construction loans.

StellarOne recorded a provision for loan losses of $5.3 million for the fourth quarter of 2010, an increase of $1.8 million compared both sequentially and to the same period in the prior year. The fourth quarter 2010 provision compares to net charge-offs of $7.6 million, resulting in an allowance as a percentage of total loans of 1.79%, down thirteen basis points when compared to 1.92% as of September 30, 2010. Specific reserves within the allowance dropped $2.2 million from third quarter 2010 to fourth quarter due to the resolution of problem loans and related charge-offs taken during the current quarter. This resulted in a decrease to the allowance as a percentage of total loans while the coverage of non-performing loans increased. The allowance represents 87.6% of non-performing loans at December 31, 2010, up 9.3% when compared to 78.3% at September 30, 2010.

Efficiency Ratio Decreases Sequentially

StellarOne's efficiency ratio was 71.5% for the fourth quarter of 2010, compared to 81.3% for the fourth quarter of 2009 and 71.8% for the third quarter of 2010. The sequential quarter stability in the efficiency ratio reflects a slight increase in both noninterest expense and total revenue. Noninterest expense for the fourth quarter amounted to $24.0 million, up $291 thousand or 1.2% when compared to $23.7 million for the third quarter of 2010 and down $822 thousand or 3.3% when compared to the fourth quarter in 2009. The sequential increase was driven by increases of $116 thousand in compensation and employee benefits associated with higher mortgage production levels, $174 thousand in net occupancy costs related to more maintenance and repairs, and $143 thousand in supplies and equipment. These increases were offset by decreases in professional fees and FDIC insurance expense of $126 thousand and $147 thousand, respectively.

Capital Levels Remain Robust

StellarOne's risk-based capital ratios remain well above regulatory standards for well-capitalized banks. The period-end tangible common equity ratio was 9.79% at December 31, 2010 compared to 9.96% at September 30, 2010. Tier 1 risk-based and total risk-based capital ratios were 14.19% and 15.44%, respectively, at December 31, 2010 compared to 14.49% and 15.74% at September 30, 2010. Excluding the $30 million in preferred stock issued in connection with participation in the TARP program, StellarOne's Tier 1 risk-based common ratio was 12.83% compared to 13.19% at September 30, 2010. Shareholders' equity, excluding the preferred stock, represented 13.48% of total assets at December 31, 2010, while book value per common share was $17.43 per share.

Loan Activity Improves While Balance Sheet Remains Stable

Period end loans increased $16.1 million as compared to the third quarter, while average loans for the fourth quarter of 2010 were $2.13 billion, down approximately 0.7% when compared to $2.14 billion for the third quarter of 2010. Average securities were $367.1 million for the fourth quarter, down $30.8 million or 7.7% from $397.9 million for the third quarter of 2010. Average deposits for the fourth quarter of 2010 were $2.38 billion or flat on a sequential quarter basis. Average interest-bearing deposits decreased sequentially by approximately $7.9 million, while average non-interest-bearing deposits increased approximately $10.2 million. At December 31, 2010, total assets were $2.94 billion, compared to $2.92 billion at September 30, 2010. Cash and cash equivalents were $139.9 million at December 31, 2010, an increase of $31.0 million or 28.5% compared to $108.9 million at September 30, 2010.

About StellarOne

StellarOne Corporation is a traditional community bank, offering a full range of business and consumer banking services, including trust and wealth management services. StellarOne's sole banking affiliate, StellarOne Bank, operates 56 full-service financial centers, one loan production office, and a suite of ATMs serving the New River Valley, Roanoke Valley, Shenandoah Valley, and Central and North Central Virginia.

Earnings Webcast

To hear a live webcast of StellarOne's fourth quarter 2010 earnings conference call at 11:00 a.m. (ET) today, please visit our website at www.StellarOne.com and click on the Investor Relations section for detailed instructions on how to participate. Replays of the conference call will be available from 2:00 p.m. (ET) on Wednesday, January 26, 2011 through 11:59 p.m. (ET) on Wednesday, February 2, 2011, by dialing toll free (800) 642-1687 and using passcode #38005629.

Non-GAAP Financial Measures

This report refers to the efficiency ratio, which is computed by dividing noninterest expense less amortization of intangibles, foreclosed property expense, and goodwill impairments as a percent of the sum of net interest income on a tax equivalent basis and noninterest income excluding only gains on securities. Comparison of our efficiency ratio or operating earnings with those of other companies may not be possible because other companies may calculate them differently. It also refers to operating earnings, which reflects net income adjusted for nonrecurring expenses associated with mergers, asset gains and losses or expenses that are unusual in nature. Pre-tax, pre-provision earnings, which adds back provision and tax expense to net income, is used to demonstrate a more representative comparison of operational performance without the volatility of credit quality that is typically present in times of economic stress. The tangible common equity and Tier 1 common equity ratios are used by management to assess the quality of capital, and management believes that investors may find them useful in their analysis of the company. These capital measures are not necessarily comparable to similar capital measures that may be presented by other companies. Such information is not in accordance with generally accepted accounting principles in the United States (GAAP) and should not be construed as such. These are non-GAAP financial measures that we believe provide investors with important information regarding our operational efficiency. Management believes such financial information is meaningful to the reader in understanding operating performance but cautions that such information should not be viewed as a substitute for GAAP. StellarOne, in referring to its net income, is referring to income under GAAP.

Forward-Looking Statements

In addition to historical information, this press release contains forward-looking statements. The forward-looking statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from historical results, or those anticipated. When we use words such as "believes," "expects," "anticipates" or similar expressions, we are making forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date thereof. StellarOne wishes to caution the reader that factors, such as those listed below, in some cases have affected and could affect StellarOne's actual results, causing actual results to differ materially from those in any forward-looking statement. These factors include: (i) expected cost savings from StellarOne's acquisitions and dispositions, (ii) competitive pressure in the banking industry or in StellarOne's markets may increase significantly, (iii) changes in the interest rate environment may reduce margins, (iv) general economic conditions, either nationally or regionally, may be less favorable than expected, resulting in, among other things, credit quality deterioration, (v) changes may occur in banking legislation and regulation, (vi) changes may occur in general business conditions, (vii) changes may occur in the securities markets, and (viii) the impact of governmental restrictions on entities participating in the US Treasury Department Capital Purchase Program. Please refer to StellarOne's filings with the Securities and Exchange Commission for additional information, which may be accessed at www.StellarOne.com .

NOTE: Risk-based capital ratios are preliminary.

SELECTED FINANCIAL DATA (UNAUDITED)
STELLARONE CORPORATION (Nasdaq:STEL)
(Dollars in thousands, except per share data)
         
         
SUMMARY INCOME STATEMENT Three Months Ended December Twelve Months Ended December
  2010 2009 2010 2009
Interest income - taxable equivalent  $ 32,373  $ 34,740  $ 130,471  $ 142,243
Interest expense  6,950  11,200  33,912  50,642
Net interest income - taxable equivalent  25,423  23,540  96,559  91,601
Less: taxable equivalent adjustment  663  641  2,549  2,404
Net interest income  24,760  22,899  94,010  89,197
Provision for loan and lease losses  5,300  3,500  22,850  37,800
Net interest income after provision for loan and lease losses  19,460  19,399  71,160  51,397
Noninterest income  7,827  5,451  33,269  26,140
Noninterest expense  23,956  24,778  92,959  93,661
Income tax expense (benefit)   502  (474)  1,705  (7,594)
Net income (loss)  2,829  546  9,765  (8,530)
Dividends and accretion on preferred stock  (378)  (378)  (1,500)  (1,500)
Accretion of preferred stock discount  (94)  (88)  (365)  (334)
Net income (loss) available to common shareholders  $ 2,357  $ 80  $ 7,900  $ (10,364)
         
Earnings (Loss) per share available to common shareholders        
Basic  $ 0.10  $ 0.00  $ 0.35  $ (0.46)
Diluted  $ 0.10  $ 0.00  $ 0.35  $ (0.46)
         
SUMMARY AVERAGE BALANCE SHEET Three Months Ended December Twelve Months Ended December
  2010 2009 2010 2009
Total loans  $ 2,129,457  $ 2,246,934  $ 2,161,387  $ 2,270,754
Total securities  367,079  350,171  375,928  333,737
Total earning assets  2,604,363  2,707,923  2,644,417  2,707,714
Total assets  2,946,014  3,029,485  2,976,744  3,031,637
Total deposits  2,378,594  2,413,767  2,386,730  2,394,933
Shareholders' equity  428,478  422,788  425,638  428,373
         
PERFORMANCE RATIOS Three Months Ended December Twelve Months Ended December
  2010 2009 2010 2009
Return on average assets 0.38% 0.07% 0.33% -0.28%
Return on average equity 2.62% 0.52% 2.29% -1.99%
Return on average realized equity (A) 2.66% 0.52% 2.33% -2.01%
Net interest margin (taxable equivalent) 3.87% 3.45% 3.65% 3.38%
Efficiency (taxable equivalent) (B) 71.47% 81.28% 70.47% 76.79%
         
CAPITAL MANAGEMENT December 31,    
  2010 2009    
         
Tier 1 risk-based capital ratio 14.19% 13.21%    
Tangible equity ratio 10.85% 10.26%    
Tangible common equity ratio 9.79% 9.23%    
Period end shares issued and outstanding  22,748,062  22,661,125    
Book value per common share  17.43  17.24    
Tangible book value per common share  12.14  11.86    
         
  Three Months Ended December Twelve Months Ended December
  2010 2009 2010 2009
Shares issued  --   --   86,937  56,062
Average common shares issued and outstanding  22,747,546  22,661,125  22,721,246  22,644,931
Average diluted common shares issued and outstanding  22,816,864  22,700,405  22,779,584  22,692,423
Cash dividends paid per common share  $ 0.04  $ 0.04  $ 0.16  $ 0.28
         
SUMMARY ENDING BALANCE SHEET December 31,    
  2010 2009    
Total loans  $ 2,098,896  $ 2,185,538    
Total securities  381,231  378,961    
Total earning assets  2,637,179  2,710,439    
Total assets  2,940,442  3,033,101    
Total deposits  2,386,102  2,436,120    
Shareholders' equity  426,437  420,785    
         
OTHER DATA        
End of period full time equivalent employees 838 827    
         
NOTES:         
(A) Excludes the effect on average stockholders' equity of unrealized gains (losses) that result from changes in market values of securities and other comprehensive pension expense.
(B) Computed by dividing non-interest expense less amortization of intangibles, foreclosed asset expense and goodwill impairments by the sum of net interest income on a fully tax equivalent basis and non-interest income excluding only gains on securities. This is a non-GAAP financial measure, which we believe provides investors with important information regarding our operational efficiency. Comparison of our efficiency ratio with those of other companies may not be possible, because other companies may calculate the efficiency ratio differently.
(C) Individual amounts shown above are calculated from actual, not rounded amounts in the thousands, which appear above.
 
QUARTERLY PERFORMANCE SUMMARY (UNAUDITED)
STELLARONE CORPORATION (Nasdaq:STEL)
(Dollars in thousands)
           
CREDIT QUALITY Three Months Ended December   Twelve Months Ended December
  2010 2009   2010 2009
Allowance for loan losses:          
Beginning of period  $ 39,973  $ 41,040    $ 40,172  $ 30,464
Provision for loan losses  5,300  3,500    22,850  37,800
Charge-offs  (8,192)  (5,151)    (27,577)  (30,947)
Recoveries  568  783    2,204  2,855
Net charge-offs  (7,624)  (4,368)    (25,373)  (28,092)
           
End of period  $ 37,649  $ 40,172    $ 37,649  $ 40,172
           
Accruing Troubled Debt Restructurings  $ 33,267  $ 20,680      
           
Loans greater than 90 days past due still accruing  $ --  $ 1,511      
           
    December 31,    
    2010 2009    
Non accrual loans    $ 37,534  $ 56,624    
Non accrual TDR's    5,426  2,678    
Total non-performing loans    42,960  59,302    
Loans held for sale    514  936    
Foreclosed assets    10,894  4,505    
Total non-performing assets    $ 54,368  $ 64,743    
Nonperforming assets as a % of total assets   1.85% 2.13%    
Nonperforming assets as a % of loans plus foreclosed assets 2.58% 2.96%    
Allowance for loan losses as a % of total loans   1.79% 1.84%    
Net charge-offs as a % of average loans outstanding - 3 months 1.43% 0.78%    
Net charge-offs as a % of average loans outstanding - 12 months 1.17% 1.24%    
           
  December 31, 2010    
 



Loans

Outstanding




Nonaccrual

Loans
Nonaccrual

Loans to

Loans

Outstanding
   
Commercial:          
Commercial & industrial  $ 176,411  $ 4,277 2.42%    
Agriculture  723  --  N/A    
Total commercial  177,134  4,277 2.41%    
           
Commercial real estate:          
Construction, land development & vacant land  180,502  15,443 8.56%    
Non-owner occupied  401,177  3,576 0.89%    
Owner occupied  356,769  2,840 0.80%    
Farmland  17,561  1,341 7.64%    
Total commercial real estate  956,009  23,200 2.43%    
           
Consumer  28,545  --  0.00%    
           
Residential real estate:          
Residential  560,544  13,941 1.69%    
Multi-family  103,642  303 0.29%    
Home equity lines  264,944  1,213 0.46%    
Total residential  929,130  15,457 1.66%    
           
All other loans  8,078  26 N/A    
           
Total loans  $ 2,098,896  $ 42,960 2.05%    
 
QUARTERLY PERFORMANCE SUMMARY (UNAUDITED)
STELLARONE CORPORATION (Nasdaq:STEL)
(Dollars in thousands, except per share data)
       
SELECTED BALANCE SHEET DATA



12/31/2010




12/31/2009
Percent

Increase

(Decrease)
       
Assets      
Cash and cash equivalents  $ 139,886  $ 152,926 -8.53%
       
Securities:      
Securities available for sale  381,231  378,514 0.72%
Securities held to maturity  --   447 -100.00%
Total securities  381,231  378,961 0.60%
       
Mortgage loans held for sale  51,722  44,165 17.11%
       
Loans:      
Real estate - construction  255,198  296,489 -13.93%
Real estate - 1-4 family residential  768,353  785,385 -2.17%
Real estate - commercial and multifamily  861,588  845,561 1.90%
Commercial, financial and agricultural  177,134  211,903 -16.41%
Consumer loans  28,545  39,173 -27.13%
All other loans  8,078  7,027 14.96%
Total loans  2,098,896  2,185,538 -3.96%
Deferred loan costs  588  969 -39.32%
Allowance for loan losses  (37,649)  (40,172) -6.28%
Net loans  2,061,835  2,146,335 -3.94%
       
Premises and equipment, net  79,033  83,546 -5.40%
Core deposit intangibles, net  6,662  8,408 -20.77%
Goodwill  113,652  113,652 0.00%
Bank owned life insurance  31,116  30,196 3.05%
Foreclosed assets  10,894  4,505 141.82%
Other assets  64,411  70,407 -8.52%
       
Total assets  2,940,442  3,033,101 -3.05%
       
Liabilities      
Deposits:      
Noninterest bearing deposits  322,924  302,009 6.93%
Money market & interest checking  989,426  961,857 2.87%
Savings  255,215  197,763 29.05%
CD's and other time deposits  818,537  974,491 -16.00%
Total deposits  2,386,102  2,436,120 -2.05%
       
Federal funds purchased and securities

sold under agreements to repurchase
 987  783 26.05%
Federal Home Loan Bank advances  85,000  130,000 -34.62%
Subordinated debt  32,991  32,991 0.00%
Other liabilities  8,925  12,422 -28.15%
       
Total liabilities  2,514,005  2,612,316 -3.76%
       
Stockholders' equity      
Preferred stock  28,763  28,398 1.29%
Common stock  22,748  22,661 0.38%
Additional paid-in capital  270,047  268,965 0.40%
Retained earnings  101,188  96,947 4.37%
Accumulated other comprehensive income, net  3,691  3,814 -3.22%
       
Total stockholders' equity  426,437  420,785 1.34%
       
Total liabilities and stockholders' equity  $ 2,940,442  $ 3,033,101 -3.05%
 
QUARTERLY PERFORMANCE SUMMARY (UNAUDITED)
STELLARONE CORPORATION (Nasdaq:STEL)
(Dollars in thousands)
      Percent
  For the Three Months Ended  Increase
  12/31/2010 12/31/2009  (Decrease)
Interest Income      
Loans, including fees  $ 28,666  $ 30,697 -6.62%
Federal funds sold and deposits in other banks  58  51 13.73%
Investment securities:      
Taxable  1,844  2,228 -17.24%
Tax-exempt  1,142  1,075 6.23%
Dividends   --   48 -100.00%
Total interest income  31,710  34,099 -7.01%
       
Interest Expense      
Deposits  5,990  9,615 -37.70%
Federal funds purchased and securities sold under

agreements to repurchase
 8  5 60.00%
Federal Home Loan Bank advances and other borrowings  687  1,315 -47.76%
Subordinated debt  265  265 0.00%
       
Total interest expense  6,950  11,200 -37.95%
       
Net interest income  24,760  22,899 8.13%
Provision for loan losses  5,300  3,500 51.43%
Net interest income after provision for loan losses  19,460  19,399 0.31%
       
Noninterest Income      
Retail banking fees  3,899  4,214 -7.48%
Commissions and fees from fiduciary activities  768  722 6.37%
Brokerage fee income  389  336 15.77%
Mortgage banking-related fees  2,769  2,007 37.97%
Losses on mortgage indemnifications and repurchases  (854)  (867) -1.50%
Gains on sale of premises and equipment  172  30 >100%
Impairments of securities available for sale  (58)  (655) -91.15%
Gains on securities available for sale  612  1 >100%
Losses / impairments on foreclosed assets  (688)  (1,013) -32.08%
Income from bank owned life insurance  324  330 -1.82%
Other operating income  494  346 42.77%
Total noninterest income  7,827  5,451 43.59%
       
Noninterest Expense      
Compensation and employee benefits  11,803  12,175 -3.06%
Net occupancy   2,170  2,203 -1.50%
Supplies and equipment   2,106  2,261 -6.86%
Amortization-intangible assets  413  425 -2.82%
Marketing  360  362 -0.55%
State franchise taxes  554  574 -3.48%
FDIC insurance   1,470  957 53.61%
Data processing  657  573 14.66%
Professional fees  530  1,254 -57.74%
Telecommunications  430  461 -6.72%
Other operating expenses  3,463  3,533 -1.98%
Total noninterest expense  23,956  24,778 -3.32%
       
Income before income taxes  3,331  72 >100%
Income tax expense (benefit)  502  (474) >100%
Net income  $ 2,829  $ 546 >100%
 
QUARTERLY PERFORMANCE SUMMARY (UNAUDITED)
STELLARONE CORPORATION (Nasdaq:STEL)
(Dollars in thousands)
      Percent
  For the Twelve Months Ended Increase
  12/31/2010 12/31/2009 (Decrease)
Interest Income      
Loans, including fees  $ 114,828  $ 125,837 -8.75%
Federal funds sold and deposits in other banks  251  209 20.10%
Investment securities:      
Taxable  8,408  9,491 -11.41%
Tax-exempt  4,368  4,008 8.98%
Dividends   67  164 -59.15%
Total interest income  127,922  139,709 -8.44%
       
Interest Expense      
Deposits  28,943  43,483 -33.44%
Federal funds purchased and securities sold under

agreements to repurchase
 29  16 81.25%
Federal Home Loan Bank advances and other borrowings  3,866  5,756 -32.84%
Subordinated debt  1,074  1,257 -14.56%
       
Total interest expense  33,912  50,512 -32.86%
       
Net interest income  94,010  89,197 5.40%
Provision for loan losses  22,850  37,800 -39.55%
Net interest income after provision for loan losses  71,160  51,397 38.45%
       
Noninterest Income      
Retail banking fees  16,237  16,367 -0.79%
Commissions and fees from fiduciary activities  3,264  2,960 10.27%
Brokerage fee income  1,492  1,203 24.02%
Mortgage banking-related fees  9,388  7,382 27.17%
Losses on mortgage indemnifications and repurchases  (2,265)  (1,098) >100%
Gain on sale of financial center  748  --  >100%
Gains (losses) on sale of premises and equipment  199  (76) >100%
Impairments of securities available for sale  (110)  (2,525) -95.64%
Gains on securities available for sale  1,268  45 >100%
Losses / impairments on foreclosed assets  (1,147)  (1,810) -36.63%
Income from bank owned life insurance  1,296  1,292 0.31%
Other operating income  2,899  2,400 20.79%
Total noninterest income  33,269  26,140 27.27%
       
Noninterest Expense      
Compensation and employee benefits  45,898  44,564 2.99%
Net occupancy   8,389  8,578 -2.20%
Supplies and equipment   8,401  8,735 -3.82%
Amortization-intangible assets  1,651  1,730 -4.57%
Marketing  1,146  1,276 -10.19%
State franchise taxes  2,216  2,318 -4.40%
FDIC insurance   5,518  5,309 3.94%
Data processing  2,398  2,466 -2.76%
Professional fees  2,600  2,856 -8.96%
Telecommunications  1,686  1,857 -9.21%
Other operating expenses  13,056  13,972 -6.56%
Total noninterest expense  92,959  93,661 -0.75%
       
Income (loss) before income taxes  11,470  (16,124) >100%
Income tax expense (benefit)  1,705  (7,594) >100%
Net income (loss)  $ 9,765  $ (8,530) >100%
 
STELLARONE CORPORATION (Nasdaq:STEL)
CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES (UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, 2010 AND 2009
(Dollars in thousands)
             
  For the Three Months Ended December 31,
  2010 2009
Dollars in thousands Average

Balance
Interest

Inc/Exp
Average

Rates
Average

Balance
Interest

Inc/Exp
Average

Rates
             
Assets            
Loans receivable, net (1)  $ 2,129,457  $ 28,714 5.35%  $ 2,246,934  $ 30,759 5.43%
Investment securities            
Taxable  249,848  1,844 2.89%  241,856  2,276 3.68%
Tax exempt (1)  117,231  1,757 5.86%  108,315  1,654 5.98%
Total investments  367,079  3,601 3.84%  350,171  3,930 4.39%
             
Interest bearing deposits  53,739  29 0.21%  44,411  14 0.12%
Federal funds sold  54,088  29 0.21%  66,407  37 0.22%
   474,906  3,659 3.02%  460,989  3,981 3.38%
             
Total earning assets  2,604,363  $ 32,373 4.93%  2,707,923  $ 34,740 5.09%
             
Total nonearning assets  341,651      321,562    
             
Total assets  $ 2,946,014      $ 3,029,485    
             
Liabilities and Stockholders' Equity            
Interest-bearing deposits            
Interest checking  $ 552,735  $ 546 0.39%  $ 549,036  $ 1,315 0.95%
Money market  419,603  1,048 0.99%  348,225  1,331 1.52%
Savings  248,643  471 0.75%  197,889  448 0.90%
Time deposits:            
Less than $100,000  567,053  2,508 1.75%  673,076  4,228 2.49%
$100,000 and more  275,483  1,417 2.04%  331,951  2,293 2.74%
Total interest-bearing deposits  2,063,517  5,990 1.15%  2,100,177  9,615 1.82%
             
Federal funds purchased and securities sold under agreements to repurchase  1,026  8 3.05%  637  5 3.18%
Federal Home Loan Bank advances and other borrowings  85,001  687 3.16%  144,837  1,315 3.55%
Subordinated debt  32,991  265 3.14%  32,991  265 3.14%
             
   119,018  960 3.16%  178,465  1,585 3.48%
             
 Total interest-bearing liabilities  2,182,535  6,950 1.26%  2,278,642  11,200 1.95%
             
 Total noninterest-bearing liabilities  335,001      328,055    
             
Total liabilities  2,517,536      2,606,697    
Stockholders' equity  428,478      422,788    
             
Total liabilities and stockholders' equity  $ 2,946,014      $ 3,029,485    
             
Net interest income (tax equivalent)    $ 25,423      $ 23,540  
Average interest rate spread     3.67%     3.14%
Interest expense as percentage of average earning assets     1.06%     1.64%
Net interest margin     3.87%     3.45%
             
(1) Income and yields are reported on a taxable equivalent basis using a 35% tax rate.
 
STELLARONE CORPORATION (Nasdaq:STEL)
CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES (UNAUDITED)
TWELVE MONTHS ENDED DECEMBER 31, 2010 AND 2009
(Dollars in thousands)
             
  For the Twelve Months Ended December 31,
  2010 2009
Dollars in thousands Average

Balance
Interest

Inc/Exp
Average

Rates
Average

Balance
Interest

Inc/Exp
Average

Rates
             
Assets            
Loans receivable, net (1)  $ 2,161,387  $ 115,025 5.32%  $ 2,270,754  $ 126,214 5.56%
Investment securities            
Taxable  264,632  8,475 3.16%  233,375  9,655 4.08%
Tax exempt (1)  111,296  6,720 5.96%  100,362  6,165 6.06%
Total investments  375,928  15,195 3.99%  333,737  15,820 4.68%
             
Interest bearing deposits  55,101  124 0.22%  50,066  94 0.19%
Federal funds sold  52,001  127 0.24%  53,157  115 0.21%
   483,030  15,446 3.16%  436,960  16,029 3.62%
             
Total earning assets  2,644,417  $ 130,471 4.93%  2,707,714  $ 142,243 5.25%
             
Total nonearning assets  332,327      323,923    
             
Total assets  $ 2,976,744      $ 3,031,637    
             
Liabilities and Stockholders' Equity            
Interest-bearing deposits            
Interest checking  $ 560,591  $ 3,363 0.60%  $ 531,627  $ 5,243 0.99%
Money market  400,210  4,579 1.14%  293,211  4,407 1.50%
Savings  227,197  1,844 0.81%  193,127  1,709 0.88%
Time deposits:            
Less than $100,000  604,831  12,394 2.05%  735,645  21,540 2.93%
$100,000 and more  290,421  6,763 2.33%  330,277  10,714 3.24%
Total interest-bearing deposits  2,083,250  28,943 1.39%  2,083,887  43,613 2.09%
             
Federal funds purchased and securities sold under agreements to repurchase  982  29 2.91%  501  16 3.15%
Federal Home Loan Bank advances and other borrowings  113,315  3,866 3.36%  160,904  5,756 3.53%
Subordinated debt  32,991  1,074 3.21%  32,991  1,257 3.76%
             
   147,288  4,969 3.33%  194,396  7,029 3.57%
             
Total interest-bearing liabilities  2,230,538  33,912 1.52%  2,278,283  50,642 2.22%
             
Total noninterest-bearing liabilities  320,568      324,981    
             
Total liabilities  2,551,106      2,603,264    
Stockholders' equity  425,638      428,373    
             
Total liabilities and stockholders' equity  $ 2,976,744      $ 3,031,637    
             
Net interest income (tax equivalent)    $ 96,559      $ 91,601  
Average interest rate spread     3.42%     3.04%
Interest expense as percentage of average earning assets     1.28%     1.87%
Net interest margin     3.65%     3.38%
             
(1) Income and yields are reported on a taxable equivalent basis using a 35% tax rate.
 
STELLARONE CORPORATION (Nasdaq:STEL)
FINANCIAL INFORMATION - FOUR QUARTER TREND (UNAUDITED)
(Dollars in thousands, except per share data)
         
  Quarter Ended
  December 31,

2010
September 30,

2010
June 30,

2010
March 31,

2010
Interest income  31,710  31,582  32,150  32,481
Interest expense  6,950  8,048  8,932  9,982
Net interest income  24,760  23,534  23,218  22,499
Provision for loan losses  5,300  3,500  7,350  6,700
Total net interest income after provision  19,460  20,034  15,868  15,799
Non interest income  7,827  8,247  8,380  8,814
Non interest expense  23,956  23,665  22,791  22,547
Income before income taxes  3,331  4,616  1,457  2,066
Income tax (benefit) expense  502  1,088  (96)  212
Net income  2,829  3,528  1,553  1,854
Preferred stock dividends  (378)  (378)  (374)  (370)
Accretion of preferred stock discount  (94)  (92)  (91)  (88)
Net income available to common shareholders  2,357  3,058  1,088  1,396
Net income per share        
basic  0.10  0.13  0.05  0.06
diluted  0.10  0.13  0.05  0.06
 
STELLARONE CORPORATION (Nasdaq:STEL)
SEGMENT INFORMATION (UNAUDITED)
(Dollars in thousands)
             
             
At and for the Three Months Ended December 31, 2010 (In thousands):
             
  Commercial

Bank
Mortgage

Banking
Wealth

Management


Other
Intersegment

Elimination


Consolidated
Net interest income  $ 24,525  $ 500  $ --   $ (265)  $ --   $ 24,760
Provision for loan losses  5,300  --  --  --  --  5,300
Noninterest income  5,832  1,832  1,157  82  (1,076)  7,827
Noninterest expense  21,195  2,226  1,030  581  (1,076)  23,955
Provision for income taxes  713  32  38  (280)  --  502
Net income (loss)  $ 3,149  $ 73  $ 90  $ (483)  $ --   $ 2,829
             
Total Assets  $ 2,870,097  $ 52,788  $ 473  $ 462,991  $ (445,907)  $ 2,940,442
Average Assets  $ 2,877,873  $ 52,439  $ 181  $ 465,865  $ (450,344)  $ 2,946,014
             
At and for the Three Months Ended December 31, 2009 (In thousands):
             
  Commercial

Bank
Mortgage

Banking
Wealth

Management


Other
Intersegment

Elimination


Consolidated
Net interest income  $ 22,620  $ 543  $ --   $ (265)  $ --   $ 22,899
Provision for loan losses  3,500  --  --  --  --  3,500
Noninterest income  4,685  1,096  1,058  (338)  (1,051)  5,451
Noninterest expense  22,722  1,717  993  396  (1,051)  24,778
Provision for income taxes  (105)  (23)  19  (364)  --  (474)
Net income (loss)  $ 1,188  $ (54)  $ 46  $ (634)  $ --   $ 546
             
Total Assets  $ 2,967,537  $ 47,140  $ 610  $ 457,860  $ (440,045)  $ 3,033,101
Average Assets  $ 2,960,909  $ 49,164  $ 439  $ 420,710  $ (401,737)  $ 3,029,485
             
At and for the Twelve Months Ended December 31, 2010 (In thousands):
             
  Commercial

Bank
Mortgage

Banking
Wealth

Management


Other
Intersegment

Elimination


Consolidated
Net interest income  $ 93,535  $ 1,549  $ --   $ (1,074)  $ --   $ 94,010
Provision for loan losses  22,850  --  --  --  --  22,850
Noninterest income  24,976  7,101  4,757  720  (4,285)  33,269
Noninterest expense  83,442  7,695  3,975  2,132  (4,285)  92,959
Provision for income taxes  2,130  286  234  (945)  --  1,705
Net income (loss)  $ 10,089  $ 669  $ 547  $ (1,540)  $ --   $ 9,765
             
Average Assets  $ 2,919,816  $ 39,790  $ 174  $ 462,758  $ (445,794)  $ 2,976,744
             
At and for the Twelve Months Ended December 31, 2009 (In thousands):
             
  Commercial

Bank
Mortgage

Banking
Wealth

Management


Other
Intersegment

Elimination


Consolidated
Net interest income  $ 88,665  $ 1,784  $ --   $ (1,252)  $ --   $ 89,197
Provision for loan losses  37,800  --  --  --  --  37,800
Noninterest income  21,569  6,240  4,162  (1,629)  (4,203)  26,140
Noninterest expense  85,949  6,417  3,770  1,728  (4,203)  93,661
Provision for income taxes  (6,505)  482  118  (1,689)  --  (7,594)
Net income (loss)  $ (7,012)  $ 1,126  $ 275  $ (2,919)  $ --   $ (8,530)
             
Average Assets  $ 2,968,455  $ 41,850  $ 467  $ 426,444  $ (405,580)  $ 3,031,637
CONTACT: Jeffrey W. Farrar, Executive Vice President and CFO
         (434) 964-2217
         jfarrar@stellarone.com

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