StellarOne Reports Third Quarter Earnings Up 13.1% to $6.3 Million or $0.28 Per Diluted Share

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CHARLOTTESVILLE, Va., Oct. 21, 2013 (GLOBE NEWSWIRE) -- StellarOne Corporation (Nasdaq:STEL) ("StellarOne"), today reported third quarter 2013 net income of $6.3 million, or $0.28 net income per diluted common share. This represents a 13.1% increase over net income of $5.6 million or $0.24 per diluted common share recognized during the same quarter in the prior year, and remained constant as compared to net income of $6.3 million or $0.28 per diluted share in the second quarter of 2013.

For the nine months ended September 30, 2013, earnings were $18.5 million or $0.81 per diluted common share, up 16.2% compared to $15.9 million or $0.69 per diluted common share in 2012.

"Our third quarter results were indicative of continued positive momentum with improving asset quality measures, solid loan growth, expense management and stable revenues. As expected, mortgage revenues were impacted by a significant drop in refinance activity during the quarter. However, construction and purchase mortgage activity continue to be robust. Commercial loan growth and associated balance sheet growth mitigated the impact of the mortgage revenue contraction during the quarter. Asset quality measures continued to show incremental improvement, allowing for a continued reduction in loan loss provisioning expense for the quarter," said O. R. Barham, Jr., President and Chief Executive Officer.

On June 10, 2013 StellarOne announced that it will merge with Union First Market Bankshares Corporation (Nasdaq:UBSH) (or "Union"), creating the largest community banking institution in the Commonwealth of Virginia. Under the terms of the agreement, Union will acquire StellarOne, with common shareholders of StellarOne receiving 0.9739 shares of Union common stock for each share of StellarOne. The transaction has received all regulatory approvals, but is subject to shareholder approvals with expected closing on or around January 1, 2014.

Third quarter financial performance highlights included:

  • Earnings were impacted by $586 thousand in merger related expenses for the quarter associated with the announced merger with Union.
  • Operating earnings for the quarter, excluding the impact of such merger costs, were $6.9 million or $0.30 per diluted share and the ROA and ROE associated with operating earnings were 0.89% and 6.38% or up from 0.74% and 5.21% when compared to the third quarter of 2012, respectively.
  • Revenues remained stable, with net revenues totaling $32.0 million, up $300 thousand or 0.95% as compared to $31.7 million for third quarter last year.
  • Total period end loans increased 10.2% compared to the third quarter of 2012 and 3.7% compared to the second quarter of 2013 due primarily to loan growth in the construction and commercial real estate portfolios.
  • Nonperforming asset levels improved to $30.4 million, a decrease of $12.7 million or 29.4% from 2012, lowering the ratio of non-performing assets as a percentage of total assets to 0.99% as of September 30, 2013, compared to 1.46% as of September 30, 2012.
  • Annualized net charge-offs as a percentage of average loans receivable amounted to 0.31% for the third quarter of 2013, up from 0.24% for the second quarter of 2013 and down from 0.42% for same quarter last year.

Growth in Average Earning Assets Supports Revenue Levels

Net interest income for the third quarter of 2013 was $24.8 million, up 2.2% compared to $24.3 million in the second quarter of 2013 and consistent with the $24.3 million for the third quarter of 2012. Average earning assets were $2.7 billion for the third quarter of 2013, up $53.2 million or 2.0% over the second quarter of 2013, and up $93.1 million or 3.5% over the third quarter of 2012. Average loans receivable were $2.3 billion for the third quarter of 2013, up $71.9 million or 3.3% over the second quarter of 2013, and up $186.9 million or 9.0% over the third quarter of 2012.

The net interest margin was 3.70% for the third quarter of 2013, compared to 3.73% for the second quarter of 2013 and 3.77% for the third quarter of 2012. The average yield on earning assets for the current quarter decreased 7 basis points to 4.20% on a sequential basis. Loan and investment yields contracted 10 basis points and 4 basis points, respectively, on a sequential basis. Continued reductions in deposit costs contributed to a 3 basis point improvement in the cost of interest bearing liabilities sequentially, moving from 0.66% during the second quarter of 2013 to 0.63% during the third quarter of 2013.

Operating Noninterest Income Decreases on Mortgage Contraction

On an operating basis, which excludes gains and losses from sales and impairments of securities and other assets, total non-interest income amounted to $7.2 million for the third quarter of 2013, down $642 thousand or 8.2% on a sequential basis compared to $7.8 million for the second quarter of 2013, and down $177 thousand or 2.4% compared to the third quarter last year. The sequential quarter decrease in operating noninterest income stemmed largely from a reduction in mortgage revenues associated with reduced margins and loan production volumes from our mortgage segment. The decrease for the same quarter compared to the prior year is also related to a reduction in mortgage revenues which was substantially offset by increases in wealth management fee income and retail banking fees.

Mortgage banking-related fees totaled $1.3 million for the third quarter of 2013, or down $601 thousand or 31.2% compared to $1.9 million for the second quarter of 2013 and down $538 thousand, or 28.9%, compared to $1.9 million in the same quarter in 2012. Of total mortgage originations for the quarter, 53.6% represented home purchases. Loans sold in the third quarter of 2013 totaled $73.5 million or down $1.2 million or 1.7% from the $74.7 million sold during the second quarter of 2013. The mortgage segment contributed after-tax earnings of $414 thousand for the current quarter, compared to $701 thousand last quarter, and $587 thousand for same quarter last year.

Losses on foreclosed assets were $285 thousand for the quarter, a decrease of $96 thousand or 25.2% compared to $381 thousand for the same quarter in 2012. Other operating income decreased $71 thousand compared to the same quarter in the prior year due to a contraction of revenues associated with commercial lending loan swap fee income.

Retail banking fee income totaled $3.5 million for the third quarter of 2013, an increase of $80 thousand or 2.3% sequentially and an increase of $326 thousand or 10.2% over the same quarter in 2012. An increase in overdraft revenue led to the sequential increase, while an increase in interchange income and newly instituted fees contributed to the year over year increase.

Wealth management revenues from trust and brokerage fees for the third quarter of 2013 were $1.3 million or down $76 thousand or 5.5% on a sequential quarter basis and up $141 thousand or 12.0% when compared to the third quarter of 2012. The revenue increase year over year is a result of higher fee realizations and growth in assets. The sequential quarter decrease is related to lower fee realizations from brokerage services. Fiduciary assets amounted to $538.3 million at September 30, 2013, compared to $539.7 million at June 30, 2013. After-tax earnings were $219 thousand for the quarter, compared to $271 thousand sequentially and $166 thousand for the same quarter last year.

Net Charge-Offs Decrease and Overall Asset Quality Improves

Non-performing assets totaled $30.4 million at September 30, 2013, up $228 thousand or 0.8% sequentially from $30.2 million at June 30, 2013 and down $12.7 million or 29.4% compared to $43.1 million at September 30, 2012. The ratio of non-performing assets as a percentage of total assets dropped to 0.99% as of September 30, 2013, compared to 1.0% as of June 30, 2013 and was also down when compared to 1.46% at September 30, 2012.

Net charge-offs for the third quarter of 2013 totaled $1.7 million, increased $440 thousand or 33.9% compared to the $1.3 million for the second quarter of 2013 and down $443 million or 20.3% when compared to $2.2 million for the third quarter of 2012. Annualized net charge-offs as a percentage of average loans receivable amounted to 0.31% for the third quarter of 2013, up from 0.24% for the second quarter of 2013 and down from 0.42% for the third quarter of 2012. StellarOne recorded provision for loan losses of $200 thousand for the third quarter of 2013, an increase of $585 thousand compared to the $385 thousand recovery of provision for the second quarter of 2013 and a decrease of $1.7 million compared to the third quarter of 2012. The decreased provisioning throughout 2013 is reflective of the continued improvement in underlying credit quality metrics used in measuring the risk inherent in the loan portfolio.

The allowance as a percentage of non-performing loans was 99.5% at September 30, 2013, or slightly lower than the 104.9% at June 30, 2013. The allowance for loan losses was $25.8 million at September 30, 2013, compared to $27.4 million at June 30, 2013. The allowance as a percentage of total loans was 1.14% at September 30, 2013, compared to 1.25% at June 30, 2013.

Foreclosed assets totaled $4.4 million at September 30, 2013, up $354 thousand or 8.6% compared to $4.1 million at June 30, 2013 and down $3.5 million or 43.7% compared to $7.9 million at September 30, 2012.

Included in the loan portfolio at September 30, 2013, are loans classified as troubled debt restructurings ("TDRs") totaling $19.2 million or 0.85% of total loans. TDRs were reduced sequentially by 6.8% or $1.4 million as compared to $20.6 million at June 30, 2013. At September 30, 2013, $17.8 million or 93.0% of total TDRs were performing under the modified terms.

Operating Expenses Increase on Merger Costs

Noninterest expenses were $22.8 million for the third quarter of 2013, down sequentially by $432 thousand or 1.9% compared to $23.3 million in the second quarter of 2013, and up $532 thousand or 2.4% compared to third quarter of 2012.

Excluding the effects of non-recurring merger costs of $586 thousand in third quarter 2013 and $871 thousand in second quarter 2013, operating expenses would have been $22.2 million for the third quarter of 2013, down $147 thousand or 0.7% sequentially, and down $54 thousand or 0.2% compared to same quarter last year. Compensation and benefits were $11.8 million for the third quarter of 2013, down sequentially by $167 thousand or 1.4% compared to $12.0 million in the second quarter of 2013, and down $376 thousand or 3.1% compared to third quarter of 2012. The decrease sequentially was attributable to a reduction in salary and overtime costs and ongoing efficiency efforts. The decrease relative to 2012 was related to a $416 thousand decrease in VBA medical costs when compared to the third quarter of 2012.

The efficiency ratio was 66.49% for the third quarter of 2013, compared to 66.81% for the second quarter of 2013 and 66.66% for the same quarter in 2012. The sequential quarter improvement reflects stable revenue for the quarter coupled with lower operating expenses. The year over year decrease reflects similar trends on revenue and operating expenses, but also reflects the impact of severance costs on the third quarter 2012 efficiency ratio.

Effective Tax Rate

The provision for income taxes was $2.7 million for the third quarter of 2013 compared to $2.9 million for the second quarter of 2013, and $2.0 million for the same quarter last year. This produced an effective tax rate for the third quarter of 2013 of 30.0% compared to 31.6% for the prior quarter and 26.0% for same quarter last year. The increase in the tax rate as compared to prior year effective tax rates was due to the impact of $413 thousand of nondeductible expenses included in merger costs incurred during the quarter. Merger costs were higher in the sequential quarter, accounting for the higher effective rate. For the nine months ended September 30, 2013 the effective rate was 29.8%, compared to 26.8% for same period prior year.

Balance Sheet Trends

Period end loans increased $81.3 million sequentially or 3.7% compared to the second quarter of 2013, while average loans for the third quarter of 2013 were $2.3 billion, up $71.9 million or 3.3% compared to the second quarter of 2013. Average securities were $476.9 million for the third quarter, down $10.8 million or 2.2% sequentially and down $71.4 million or 13.0% from $548.3 million for the third quarter of 2012. Average deposits for the third quarter of 2013 were $2.4 billion or essentially flat on a sequential quarter basis compared to the second quarter of 2013. Average interest and noninterest bearing demand deposit accounts were $1.03 billion at September 30, 2013, a $22.7 million or a 2.3% increase over June 30, 2013. At September 30, 2013, total period end assets were $3.1 billion, compared to $3.0 billion at June 30, 2013. Period end cash and cash equivalents were $54.2 million at September 30, 2013, an increase of $2.5 million or 4.9% compared to $51.7 million at June 30, 2013.

About StellarOne

StellarOne Corporation is a traditional community bank with assets of $3.1 billion offering a full range of business and consumer banking services, including trust and wealth management services. Through the activities of our sole subsidiary, StellarOne Bank, we operate over 50 full-service financial centers, two loan production offices, and over 60 ATMs serving the New River Valley, Roanoke Valley, Shenandoah Valley, Richmond, Tidewater, and Central and North Central Virginia.

Additional information is available on the Company's website at http://www.stellarone.com under "Investor Relations". Shares of the Company's common stock are traded on the NASDAQ Global Select Market under the symbol STEL.

Non-GAAP Financial Measures

This report refers to the efficiency ratio, which is computed by calculating noninterest expense less amortization of intangibles and goodwill impairments and dividing this by the sum of net interest income on a tax equivalent basis and non-interest income excluding gains on securities and losses on foreclosed assets. The report also refers to operating earnings and noninterest income, which reflects both earnings and noninterest income adjusted for non-recurring expenses associated with merger expenses, asset gains and losses or other expenses that are unusual in nature. Comparison of our efficiency ratio and operating earnings with those of other companies may not be possible because other companies may calculate them differently. Pre-tax, pre-provision earnings, which adjusts for tax equivalent items and 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 ratio is used by management to assess the quality of capital and management believes that investors may find it useful in their analysis of the company. This capital measure is 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 management believes provide investors with important information regarding 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 "expect," "believe," "estimate," "plan," "project," "anticipate," "intend," "will" 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, and (vii) changes may occur in the securities markets. Please refer to StellarOne's filings with the Securities and Exchange Commission for additional information, which may be accessed at http://www.stellarone.com.

STELLARONE CORPORATION (NASDAQ: STEL)
SELECTED FINANCIAL DATA (UNAUDITED)
(Dollars in thousands, except per share data)
SUMMARY INCOME STATEMENT Three Months Ended September 30, Nine Months Ended September 30,
2013 2012 2013 2012
Interest income - taxable equivalent $ 29,007 $ 29,586 $ 86,334 $ 88,960
Interest expense 3,494 4,544 10,971 14,361
Net interest income - taxable equivalent 25,513 25,042 75,363 74,599
Less: taxable equivalent adjustment 675 743 2,054 2,225
Net interest income 24,838 24,299 73,309 72,374
Provision for loan and lease losses 200 1,900 515 4,150
Net interest income after provision for loan and lease losses 24,638 22,399 72,794 68,224
Noninterest income 7,162 7,401 22,428 21,446
Noninterest expense 22,820 22,288 68,843 67,895
Income tax expense 2,691 1,952 7,862 5,833
Net income $ 6,289 $ 5,560 $ 18,517 $ 15,942
Earnings per share available to common shareholders
Basic $ 0.28 $ 0.24 $ 0.81 $ 0.69
Diluted $ 0.28 $ 0.24 $ 0.81 $ 0.69
SUMMARY AVERAGE BALANCE SHEET Three Months Ended September 30, Nine Months Ended September 30,
2013 2012 2013 2012
Total loans $ 2,253,777 $ 2,066,911 $ 2,192,911 $ 2,057,773
Total investment securities 476,937 548,345 490,116 507,109
Total earning assets 2,737,018 2,643,968 2,697,694 2,610,999
Total assets 3,049,761 2,973,511 3,017,105 2,936,311
Total deposits 2,453,139 2,438,057 2,456,208 2,406,920
Shareholders' equity 427,325 424,686 429,143 420,811
PERFORMANCE RATIOS Three Months Ended September 30, Nine Months Ended September 30,
2013 2012 2013 2012
Return on average assets 0.82% 0.74% 0.82% 0.73%
Return on average equity 5.84% 5.21% 5.77% 5.06%
Return on average realized equity (A) 5.87% 5.34% 5.85% 5.27%
Net interest margin (taxable equivalent) 3.70% 3.77% 3.74% 3.82%
Efficiency (taxable equivalent) (B) 66.49% 66.66% 67.49% 68.71%
CAPITAL MANAGEMENT September 30,
2013 2012
Tangible equity ratio 10.56% 10.90%
Tangible common equity ratio 10.56% 10.90%
Period end shares issued and outstanding 22,534,554 22,881,857
Book value per common share 19.11 18.71
Tangible book value per common share 13.90 13.54
Three Months Ended September 30, Nine Months Ended September 30,
2013 2012 2013 2012
Shares issued (cancelled) 7,950 (8,278) (361,152) 78,753
Average common shares issued and outstanding 22,732,109 23,104,631 22,816,837 23,086,118
Average diluted common shares issued and outstanding 22,819,990 23,105,549 22,858,528 23,086,465
Cash dividends paid per common share $ 0.10 $ 0.06 $ 0.28 $ 0.18
SUMMARY ENDING BALANCE SHEET September 30,
2013 2012
Total loans $ 2,264,733 $ 2,055,099
Total investment securities 480,332 557,138
Total earning assets 2,767,152 2,647,905
Total assets 3,082,227 2,959,846
Total deposits 2,446,381 2,421,735
Shareholders' equity 430,716 428,077
OTHER DATA
End of period full-time equivalent employees 715 746
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) Comparison of our efficiency ratio with those of other companies may not be possible, because other companies may calculate the efficiency ratio differently. See Non-GAAP reconciliation for detail.
STELLARONE CORPORATION (NASDAQ: STEL)
CREDIT QUALITY (UNAUDITED)
(Dollars in thousands)
CREDIT QUALITY Three Months Ended September 30, Nine Months Ended September 30,
2013 2012 2013 2012
Allowance for loan losses:
Beginning of period $ 27,366 $ 30,142 $ 29,824 $ 32,588
Provision for loan losses 200 1,900 515 4,150
Charge-offs (2,077) (2,733) (6,052) (8,528)
Recoveries 338 551 1,540 1,650
Net charge-offs (1,739) (2,182) (4,512) (6,878)
End of period $ 25,827 $ 29,860 $ 25,827 $ 29,860
Accruing Troubled Debt Restructurings $ 17,826 $ 25,003
Loans greater than 90 days past due still accruing $ 318 $ 2
September 30,
2013 2012
Non accrual loans $ 24,630 $ 32,544
Non accrual TDR's 1,338 2,628
Total non-performing loans 25,968 35,172
Foreclosed assets 4,449 7,907
Total non-performing assets $ 30,417 $ 43,079
Nonperforming assets as a % of total assets 0.99% 1.46%
Nonperforming assets as a % of loans plus foreclosed assets 1.34% 2.09%
Allowance for loan losses as a % of total loans 1.14% 1.45%
Annualized net charge-offs as a % of average loans outstanding - 3 months 0.31% 0.42%
Annualized net charge-offs as a % of average loans outstanding - year to date 0.41% 0.45%
September 30, 2013


Loans
Outstanding


Nonaccrual
Loans
Nonaccrual
Loans to
Loans
Outstanding
Construction and land development $ 213,236 $ 5,249 2.46%
Commercial real estate:
Commercial real estate - owner occupied 387,649 1,459 0.38%
Commercial real estate - non-owner occupied 548,404 2,030 0.37%
Multifamily, nonresidential, farmland and junior liens 132,254 4,268 3.23%
Total commercial real estate 1,068,307 7,757 0.73%
Consumer real estate:
Home equity lines 233,395 1,658 0.71%
Secured by 1-4 family residential, secured by deeds of trust 495,908 10,428 2.10%
Total consumer real estate 729,303 12,086 1.66%
Commercial and industrial loans (except those secured by real estate) 191,732 742 0.39%
Consumer and other 62,155 134 0.22%
Total loans $ 2,264,733 $ 25,968 1.15%
STELLARONE CORPORATION (NASDAQ: STEL)
BALANCE SHEET (UNAUDITED)
(Dollars in thousands, except per share data)
SELECTED BALANCE SHEET DATA 9/30/2013 9/30/2012 Percent
Increase
(Decrease)
Assets
Cash and cash equivalents $ 54,232 $ 54,857 -1.14%
Investment securities, at fair value 480,332 557,138 -13.79%
Mortgage loans held for sale 18,696 26,006 -28.11%
Loans:
Construction and land development 213,236 188,868 12.90%
Commercial real estate 1,068,307 913,324 16.97%
Consumer real estate 729,303 738,464 -1.24%
Commercial and industrial loans (except those secured by real estate) 191,732 185,041 3.62%
Consumer and other 62,155 29,402 >100%
Total loans 2,264,733 2,055,099 10.20%
Deferred loan fees (649) (191) >100%
Allowance for loan losses (25,827) (29,860) -13.51%
Net loans 2,238,257 2,025,048 10.53%
Premises and equipment, net 74,033 72,195 2.55%
Core deposit intangibles, net 2,728 3,773 -27.70%
Goodwill 114,167 113,652 0.45%
Bank owned life insurance 45,491 43,736 4.01%
Foreclosed assets 4,449 7,907 -43.73%
Other assets 49,842 55,534 -10.25%
Total assets 3,082,227 2,959,846 4.13%
Liabilities
Deposits:
Noninterest bearing deposits 416,087 349,099 19.19%
Money market & interest checking 1,069,109 1,030,434 3.75%
Savings 310,361 317,077 -2.12%
CD's and other time deposits 650,824 725,125 -10.25%
Total deposits 2,446,381 2,421,735 1.02%
Federal funds purchased and securities sold under agreements to repurchase 29,380 870 >100%
Federal Home Loan Bank advances 126,700 55,000 >100%
Subordinated debt 32,991 32,991 0.00%
Other liabilities 15,734 17,161 -8.32%
Total liabilities 2,651,511 2,531,769 4.73%
Stockholders' equity
Common stock 22,535 22,882 -1.52%
Additional paid-in capital 266,282 271,537 -1.94%
Retained earnings 139,222 122,726 13.44%
Accumulated other comprehensive income 2,677 10,932 -75.51%
Total stockholders' equity 430,716 428,077 0.62%
Total liabilities and stockholders' equity $ 3,082,227 $ 2,959,846 4.13%
STELLARONE CORPORATION (NASDAQ: STEL)
QUARTERLY INCOME STATEMENT (UNAUDITED)
(Dollars in thousands)
Percent
For the three months ended Increase
9/30/2013 9/30/2012 (Decrease)
Interest Income
Loans, including fees $ 25,884 $ 25,812 0.28%
Federal funds sold and deposits in other banks 4 24 -83.33%
Investment securities:
Taxable 1,292 1,725 -25.10%
Tax-exempt 1,152 1,282 -10.14%
Total interest income 28,332 28,843 -1.77%
Interest Expense
Deposits 2,654 3,779 -29.77%
Federal funds purchased and securities sold under agreements to repurchase 24 8 >100%
Federal Home Loan Bank advances 471 413 14.04%
Subordinated debt 345 344 0.29%
Total interest expense 3,494 4,544 -23.11%
Net interest income 24,838 24,299 2.22%
Provision for loan losses 200 1,900 -89.47%
Net interest income after provision for loan losses 24,638 22,399 10.00%
Noninterest Income
Retail banking fees 3,535 3,209 10.16%
Fiduciary and brokerage fee income 1,313 1,172 12.03%
Mortgage banking-related fees 1,326 1,864 -28.86%
Losses on mortgage indemnifications and repurchases (144) (28) >100%
(Losses) gains on sale of premises and equipment (36) 17 >100%
Gains on securities available for sale -- 9 -100.00%
Losses on sale / impairments of foreclosed assets (285) (381) -25.20%
Income from bank owned life insurance 440 445 -1.12%
Insurance income 127 137 -7.30%
Other operating income 886 957 -7.42%
Total noninterest income 7,162 7,401 -3.23%
Noninterest Expense
Compensation and employee benefits 11,812 12,188 -3.09%
Net occupancy 2,363 2,223 6.30%
Equipment 2,117 1,885 12.31%
Amortization-intangible assets 320 413 -22.52%
Marketing 482 376 28.19%
State franchise taxes 588 564 4.26%
FDIC insurance 463 490 -5.51%
Data processing 371 376 -1.33%
Professional fees 370 587 -36.97%
Telecommunications 368 420 -12.38%
Merger related costs 586 -- 100.00%
Other operating expenses 2,980 2,766 7.74%
Total noninterest expense 22,820 22,288 2.39%
Income before income taxes 8,980 7,512 19.54%
Income tax expense 2,691 1,952 37.86%
Net income $ 6,289 $ 5,560 13.11%
STELLARONE CORPORATION (NASDAQ: STEL)
YEAR TO DATE INCOME STATEMENT (UNAUDITED)
(Dollars in thousands)
Percent
For the Nine Months Ended Increase
9/30/2013 9/30/2012 (Decrease)
Interest Income
Loans, including fees $ 76,648 $ 77,705 -1.36%
Federal funds sold and deposits in other banks 34 90 -62.22%
Investment securities:
Taxable 4,101 5,054 -18.86%
Tax-exempt 3,497 3,886 -10.01%
Total interest income 84,280 86,735 -2.83%
Interest Expense
Deposits 8,621 12,053 -28.47%
Federal funds purchased and securities sold under agreements to repurchase 40 20 100.00%
Federal Home Loan Bank advances 1,287 1,260 2.14%
Subordinated debt 1,023 1,028 -0.49%
Total interest expense 10,971 14,361 -23.61%
Net interest income 73,309 72,374 1.29%
Provision for loan losses 515 4,150 -87.59%
Net interest income after provision for loan losses 72,794 68,224 6.70%
Noninterest Income
Retail banking fees 10,042 9,801 2.46%
Fiduciary and brokerage fee income 3,930 3,583 9.68%
Mortgage banking-related fees 5,088 5,023 1.29%
Losses on mortgage indemnifications and repurchases (215) (584) -63.18%
(Losses) gains on sale of premises and equipment (60) 10 >100%
Gains on securities available for sale 6 88 -93.18%
Losses on sale / impairments of foreclosed assets (659) (1,051) -37.30%
Income from bank owned life insurance 1,309 1,323 -1.06%
Insurance income 778 796 -2.26%
Other operating income 2,209 2,457 -10.09%
Total noninterest income 22,428 21,446 4.58%
Noninterest Expense
Compensation and employee benefits 36,214 37,112 -2.42%
Net occupancy 6,926 6,382 8.52%
Equipment 6,397 6,255 2.27%
Amortization-intangible assets 951 1,238 -23.18%
Marketing 1,020 1,004 1.59%
State franchise taxes 1,763 1,691 4.26%
FDIC insurance 1,475 1,673 -11.84%
Data processing 1,180 1,052 12.17%
Professional fees 1,718 2,152 -20.17%
Telecommunications 1,125 1,256 -10.43%
Merger related costs 1,457 -- 100.00%
Other operating expenses 8,617 8,080 6.65%
Total noninterest expense 68,843 67,895 1.40%
Income before income taxes 26,379 21,775 21.14%
Income tax expense 7,862 5,833 34.78%
Net income $ 18,517 $ 15,942 16.15%
STELLARONE CORPORATION (NASDAQ: STEL)
CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES (UNAUDITED)
THREE MONTHS ENDED September 30, 2013 AND 2012
(Dollars in thousands)
For the Three Months Ended September 30,
2013 2012
Average Interest Average Average Interest Average
Dollars in thousands Balance Inc/Exp Rates Balance Inc/Exp Rates
Assets
Loans receivable, net (1) $ 2,253,777 $ 25,939 4.57% $ 2,066,911 $ 25,865 4.98%
Investment securities
Taxable 353,221 1,292 1.43% 414,806 1,725 1.63%
Tax exempt (1) 123,716 1,772 5.60% 133,539 1,972 5.78%
Total investments 476,937 3,064 2.51% 548,345 3,697 2.64%
Federal funds sold and deposits in other banks 6,304 4 0.25% 28,712 24 0.33%
483,241 3,068 2.48% 577,057 3,721 2.53%
Total earning assets 2,737,018 $ 29,007 4.20% 2,643,968 $ 29,586 4.45%
Total nonearning assets 312,743 329,543
Total assets $ 3,049,761 $ 2,973,511
Liabilities and Stockholders' Equity
Interest-bearing deposits
Interest checking $ 628,026 $ 142 0.09% $ 604,102 $ 309 0.20%
Money market 452,570 356 0.31% 437,761 506 0.46%
Savings 312,845 66 0.08% 316,922 219 0.27%
Time deposits:
Less than $100,000 441,680 1,276 1.15% 484,365 1,699 1.40%
$100,000 and more 220,485 814 1.46% 251,863 1,046 1.65%
Total interest-bearing deposits 2,055,606 2,654 0.51% 2,095,013 3,779 0.72%
Federal funds purchased and securities sold under agreements to repurchase 16,003 24 0.59% 1,920 8 1.55%
Federal Home Loan Bank advances 105,159 471 1.75% 55,000 413 2.94%
Subordinated debt 32,991 345 4.10% 32,991 344 4.09%
154,153 840 2.13% 89,911 765 3.33%
Total interest-bearing liabilities 2,209,759 3,494 0.63% 2,184,924 4,544 0.83%
Total noninterest-bearing liabilities 412,677 363,901
Total liabilities 2,622,436 2,548,825
Stockholders' equity 427,325 424,686
Total liabilities and stockholders' equity $ 3,049,761 $ 2,973,511
Net interest income (tax equivalent) $ 25,513 $ 25,042
Average interest rate spread 3.57% 3.62%
Interest expense as percentage of average earning assets 0.51% 0.68%
Net interest margin 3.70% 3.77%
(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)
NINE MONTHS ENDED September 30, 2013 AND 2012
(Dollars in thousands)
For the Nine Months Ended September 30,
2013 2012
Average Interest Average Average Interest Average
Dollars in thousands Balance Inc/Exp Rates Balance Inc/Exp Rates
Assets
Loans receivable, net (1) $ 2,192,911 $ 76,820 4.68% $ 2,057,773 $ 77,836 5.05%
Investment securities
Taxable 365,135 4,101 1.48% 370,541 5,054 1.79%
Tax exempt (1) 124,981 5,379 5.68% 136,568 5,980 5.75%
Total investments 490,116 9,480 2.55% 507,109 11,034 2.86%
Federal funds sold and deposits in other banks 14,667 34 0.31% 46,117 90 0.26%
504,783 9,514 2.49% 553,226 11,124 2.64%
Total earning assets 2,697,694 $ 86,334 4.28% 2,610,999 $ 88,960 4.55%
Total nonearning assets 319,411 325,312
Total assets $ 3,017,105 $ 2,936,311
Liabilities and Stockholders' Equity
Interest-bearing deposits
Interest checking $ 626,472 $ 496 0.11% $ 593,817 $ 1,101 0.25%
Money market 458,729 1,231 0.36% 421,755 1,551 0.49%
Savings 313,930 247 0.11% 307,840 800 0.35%
Time deposits:
Less than $100,000 452,333 4,085 1.21% 495,902 5,381 1.45%
$100,000 and more 226,922 2,562 1.51% 255,595 3,220 1.68%
Total interest-bearing deposits 2,078,386 8,621 0.55% 2,074,909 12,053 0.78%
Federal funds purchased and securities sold under agreements to repurchase 7,256 40 0.73% 1,209 20 2.17%
Federal Home Loan Bank advances 73,617 1,287 2.30% 55,785 1,260 2.97%
Subordinated debt 32,991 1,023 4.09% 32,991 1,028 4.09%
113,864 2,350 2.72% 89,985 2,308 3.37%
Total interest-bearing liabilities 2,192,250 10,971 0.67% 2,164,894 14,361 0.89%
Total noninterest-bearing liabilities 395,712 350,606
Total liabilities 2,587,962 2,515,500
Stockholders' equity 429,143 420,811
Total liabilities and stockholders' equity $ 3,017,105 $ 2,936,311
Net interest income (tax equivalent) $ 75,363 $ 74,599
Average interest rate spread 3.61% 3.66%
Interest expense as percentage of average earning assets 0.54% 0.73%
Net interest margin 3.74% 3.82%
(1) Income and yields are reported on a taxable equivalent basis using a 35% tax rate.
STELLARONE CORPORATION (NASDAQ: STEL)
SEGMENT INFORMATION (UNAUDITED)
(Dollars in thousands)
At and for the Three Months Ended September 30, 2013
Commercial Mortgage Wealth Intersegment
Bank Banking Management Other Elimination Consolidated
Net interest income $ 24,375 $ 790 $ 18 $ (345) $ -- $ 24,838
Provision for loan losses 200 -- -- -- -- 200
Noninterest income 5,858 1,182 1,313 26 (1,217) 7,162
Noninterest expense 20,864 1,380 1,018 775 (1,217) 22,820
Provision for income taxes 2,662 178 94 (243) -- 2,691
Net income (loss) $ 6,507 $ 414 $ 219 $ (851) $ -- $ 6,289
Total Assets $ 2,989,592 $ 80,267 $ 4,528 $ 468,514 $ (460,674) $ 3,082,227
Average Assets $ 2,970,257 $ 69,485 $ 2,167 $ 465,135 $ (457,283) $ 3,049,761
At and for the Three Months Ended September 30, 2012
Commercial Mortgage Wealth Intersegment
Bank Banking Management Other Elimination Consolidated
Net interest income $ 24,482 $ 161 $ -- $ (344) $ -- $ 24,299
Provision for loan losses 1,900 -- -- -- -- 1,900
Noninterest income 5,525 1,955 1,172 (99) (1,152) 7,401
Noninterest expense 21,059 1,277 937 167 (1,152) 22,288
Provision for income taxes 1,848 252 69 (217) -- 1,952
Net income (loss) $ 5,200 $ 587 $ 166 $ (393) $ -- $ 5,560
Total Assets $ 2,925,559 $ 26,309 $ 636 $ 466,591 $ (459,249) $ 2,959,846
Average Assets $ 2,945,031 $ 20,368 $ 617 $ 462,947 $ (455,452) $ 2,973,511
At and for the Nine Months Ended September 30, 2013
Commercial Mortgage Wealth Intersegment
Bank Banking Management Other Elimination Consolidated
Net interest income $ 72,714 $ 1,598 $ 19 $ (1,022) $ -- $ 73,309
Provision for loan losses 515 -- -- -- -- 515
Noninterest income 17,217 4,854 3,930 79 (3,652) 22,428
Noninterest expense 63,479 4,172 3,056 1,788 (3,652) 68,843
Provision for income taxes 7,470 684 268 (560) -- 7,862
Net income (loss) $ 18,467 $ 1,596 $ 625 $ (2,171) $ -- $ 18,517
Average Assets $ 2,955,487 $ 51,893 $ 1,777 $ 467,295 $ (459,347) $ 3,017,105
At and for the Nine Months Ended September 30, 2012
Commercial Mortgage Wealth Intersegment
Bank Banking Management Other Elimination Consolidated
Net interest income $ 72,863 $ 538 $ -- $ (1,027) $ -- $ 72,374
Provision for loan losses 4,150 -- -- -- -- 4,150
Noninterest income 16,827 4,678 3,632 (235) (3,456) 21,446
Noninterest expense 64,114 3,766 2,998 473 (3,456) 67,895
Provision for income taxes 5,828 434 192 (621) -- 5,833
Net income (loss) $ 15,598 $ 1,016 $ 442 $ (1,114) $ -- $ 15,942
Average Assets $ 2,908,031 $ 20,585 $ 525 $ 458,776 $ (451,606) $ 2,936,311
STELLARONE CORPORATION (NASDAQ: STEL)
NON-GAAP RECONCILIATION (UNAUDITED)
(Dollars in thousands)
For the Three Months Ended For the Nine Months Ended
September 30, 2013 June 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
Noninterest expense $ 22,820 $ 23,252 $ 22,288 $ 68,843 $ 67,895
Less:
Merger expense 586 871 -- 1,457 --
Amortization of intangible assets 320 320 413 951 1,238
Adjusted noninterest expense 21,914 22,061 21,875 66,435 66,657
Net interest income (tax equivalent) 25,513 24,950 25,042 75,363 74,599
Noninterest income 7,162 7,826 7,401 22,428 21,446
Less:
Gains on sale of securities available for sale -- -- 9 6 88
Losses / impairments on foreclosed assets (285) (244) (381) (659) (1,051)
Net revenues $ 32,960 $ 33,020 $ 32,815 $ 98,444 $ 97,008
Efficiency ratio 66.49% 66.81% 66.66% 67.49% 68.71%
For the Three Months Ended For the Nine Months Ended
September 30, 2013 June 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
Noninterest income $ 7,162 $ 7,826 $ 7,401 $ 22,428 $ 21,446
Less:
Gains on securities available for sale -- -- 9 6 88
(Losses) gains on sale of premises and equipment (36) (14) 17 (60) 10
Operating noninterest income $ 7,198 $ 7,840 $ 7,375 $ 22,482 $ 21,348
For the Three Months Ended For the Nine Months Ended
September 30, 2013 June 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
Net income $ 6,289 $ 6,317 $ 5,560 $ 18,517 $ 15,942
Plus:
Income tax expense 2,691 2,914 1,952 7,862 5,833
Provision for loan losses 200 (385) 1,900 515 4,150
Tax equivalent adjustment 675 678 743 2,054 2,225
Pre-tax pre-provision earnings $ 9,855 $ 9,524 $ 10,155 $ 28,948 $ 28,150
For the Three Months Ended
September 30, 2013 June 30, 2013 September 30, 2012
Total stockholders' equity $ 430,716 $ 426,329 $ 428,077
Less:
Core deposit intangibles, net 2,728 3,048 3,773
Goodwill 114,167 114,167 113,652
Net other intangibles 645 708 1,084
Tangible common equity 313,176 308,406 309,568
Total assets 3,082,227 3,014,166 2,959,846
Less:
Core deposit intangibles, net 2,728 3,048 3,773
Goodwill 114,167 114,167 113,652
Net other intangibles 645 708 1,084
Tangible assets $ 2,964,687 $ 2,896,243 $ 2,841,337
Tangible common equity ratio 10.56% 10.65% 10.90%

CONTACT: Jeffrey W. Farrar, Executive Vice President and Chief Financial Officer of StellarOne Corporation (434) 964-2217 JFarrar@StellarOne.com

Source:StellarOne Corporation