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StellarOne Reports Annual Earnings of $22.2 Million; Fourth Quarter Earnings Up 30.4% to $6.2 Million or $0.27 Per Diluted Common Share

CHARLOTTESVILLE, Va., Jan. 24, 2013 (GLOBE NEWSWIRE) -- StellarOne Corporation (Nasdaq:STEL) ("StellarOne"), today reported fourth quarter 2012 net income available to common shareholders of $6.2 million, or $0.27 net income per diluted common share. This represents a 30.4% increase over net income of $4.8 million or $0.17 per diluted common share recognized during the same quarter in the prior year. Full year 2012 earnings available to common shareholders were $22.2 million or $0.96 per diluted common share, up 65% compared to $13.4 million or $0.59 per diluted common share in 2011.

Fourth quarter financial performance highlights included:

  • Revenue growth improved, with net revenues totaling $33.6 million, up $1.1 million or 3.3% as compared to $32.5 million for fourth quarter last year.
  • Pre-tax, pre-provision earnings were $10.6 million, up $1.7 million or 19.4% over the $8.9 million recognized for the fourth quarter last year.
  • Asset and loan growth improved with period end total assets of $3.02 billion and loans receivable of $2.1 billion. Period end loans receivable increased $25.0 million or 1.2% sequentially.
  • Asset quality metrics continue to improve, with $1.1 million in recoveries for the quarter, and foreclosed asset levels the lowest in the last eight quarters.
  • Nonperforming asset levels improved to $41.6 million, a decrease of $6.1 million or 12.8% from 2011, lowering the ratio of non-performing assets as a percentage of total assets to 1.38% as of December 31, 2012, compared to 1.64% as of December 31, 2011.
  • Annualized net charge-offs as a percentage of average loans receivable amounted to 0.28% for the fourth quarter of 2012, down from 0.42% for the third quarter of 2012 and down from 0.86% for same quarter last year.

"2012 was a rewarding year for StellarOne," said O. R. Barham, Jr., President and Chief Executive Officer. "We achieved significantly improved profitability in large part due to asset quality improvement, but also saw noninterest income grow 10.6% annually led by our mortgage line of business, with solid contributions from commercial and retail banking as well as wealth management. We continued to strengthen our talented team, and opened three strategic branch locations in Charlottesville, Richmond and Virginia Beach. Loan growth was stronger in the second half of the year, and we have some positive momentum heading into 2013."

"We accomplished many strategic initiatives in 2012, which included an emphasis on efficiency," said Jeffrey W. Farrar, Executive Vice President and Chief Financial Officer. "Annual operating costs for 2012 were only slightly higher than 2011, and while several of our efficiency initiatives will not reap benefits until 2013, our fourth quarter efficiency ratio represented almost 360 basis points of improvement over the same period in 2011, and improved almost 100 basis points annually in spite of muted revenue growth, an acceleration of organic growth efforts and non-recurring costs associated with efficiency efforts. Efficiency will be a continuing focus for 2013. Our net interest margin, while beginning to experience some pressure, held up better than most and remained at 3.80% for the year as compared to 2011. Lastly, we began to see improvement in balance sheet growth and operating leverage during the second half of the year."

Net Interest Margin Contracts Slightly

The net interest margin was 3.75% for the fourth quarter of 2012, compared to 3.77% for the third quarter of 2012 and 3.79% for the fourth quarter of 2011. The continued re-pricing of the balance sheet within the low interest rate environment resulted in asset yield compression and some margin compression. The average yield on earning assets for the current quarter decreased 8 basis points to 4.37% on a sequential basis. Loan and investment yields contracted 11 basis points and 3 basis points, respectively, on a sequential basis. Loan yields contracted due to re-pricing within the current portfolio and reduced yields on new production. Investment yields contracted due to lower yields realized on the recent investment activity in the current low rate environment. Continued reductions in deposit costs are reflected by the 8 basis point improvement in the cost of interest bearing liabilities noted sequentially, moving from 0.83% during the third quarter of 2012 to 0.75% during the fourth quarter of 2012. Higher earning assets offset the margin compression experienced during the quarter as net interest income on a tax-equivalent basis remained stable at $24.9 million for the fourth quarter of 2012, compared to $25.1 million for the fourth quarter last year and $25.0 million in the third quarter of 2012.

Operating Noninterest Income Increase

On an operating basis, which excludes gains and losses from sales and impairments of securities and other assets, total non-interest income amounted to $8.9 million for the fourth quarter of 2012, up $238 thousand or 2.7% on a sequential basis compared to $8.7 million for the third quarter of 2012, and up $1.2 million or 15.5% compared to the fourth quarter last year. The sequential quarter increase in operating noninterest income stemmed largely from continued strong production volumes from our mortgage segment. The majority of the increase for the same quarter compared to the prior year is related to increases in wealth management fee income, insurance income, retail banking fees and loan swap fee income.

Mortgage banking-related fees totaled $2.6 million for the fourth quarter of 2012, or up $303 thousand or 13.0% compared to $2.3 million for the third quarter of 2012 and essentially flat when compared to the same quarter in 2011. The sequential increase is primarily volume driven and not margin related as loans sold in the fourth quarter of 2012 totaled $78.2 million or up $5.2 million or 7.4% from the $70.8 million sold during the third quarter of 2012. In addition to this revenue increase, the continued absence of significant mortgage indemnification expenses contributed to a significant improvement in earnings contribution from the mortgage segment, with after-tax earnings of $722 thousand representing $0.03 per common diluted share for the current quarter.

Losses on foreclosed assets decreased $59 thousand or 15.5% sequentially for the quarter, reflecting a $2.1 million or 27.2% decrease in foreclosed asset balances. Other operating income decreased $74 thousand during the quarter due to a contraction of $86 thousand in commercial lending loan swap fee income, falling from $412 thousand to $326 thousand.

Retail banking fee income totaled $4.0 million for the fourth quarter of 2012, an increase of $130 thousand or 3.4% sequentially and increased $98 thousand or 2.5% over the same quarter in 2011. An increase in overdraft revenue led to the sequential and year over year increases while all other retail banking revenue streams remained stable when compared to both periods.

Wealth management revenues from trust and brokerage fees for the fourth quarter of 2012 were $1.2 million or down $43 thousand or 3.3% on a sequential quarter basis and up $188 thousand or 17.8% when compared to the fourth quarter of 2011. The year over year increase is primarily due to higher brokerage fee realizations while the sequential reduction is associated with a net contraction in underlying assets. Fiduciary assets decreased sequentially by $10.3 million or 2.2% amounting to $455.3 million at December 31, 2012, compared to $465.7 million at September 30, 2012. This business segment produced over $50 million in new business for 2012.

Net Charge-Offs Decrease and Overall Asset Quality Improves

Non-performing assets totaled $41.6 million at December 31, 2012, down $1.4 million or 3.3% sequentially from $43.1 million at September 30, 2012 and down $6.1 million or 12.8% compared to $47.7 million at December 31, 2011. The ratio of non-performing assets as a percentage of total assets dropped to 1.38% as of December 31, 2012, compared to 1.46% as of September 30, 2012 and was also down when compared to 1.64% at December 31, 2011.

Net charge-offs for the fourth quarter of 2012 totaled $1.4 million, down $746 thousand or 34.2% compared to the $2.2 million for the third quarter of 2012 and down $3.0 million or 67.6% when compared to $4.4 million for the fourth quarter of 2011. Annualized net charge-offs as a percentage of average loans receivable amounted to 0.28% for the fourth quarter of 2012, down from 0.42% for the third quarter of 2012 and down from 0.86% for the fourth quarter of 2011. StellarOne recorded a provision for loan losses of $1.4 million for the fourth quarter of 2012, a decrease of $500 thousand compared to the $1.9 million recognized for the third quarter of 2012 and a decrease of $350 thousand compared to the fourth quarter of 2011. The decreased provisioning throughout 2012 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 83.1% at December 31, 2012, or consistent with the 84.9% at September 30, 2012. The fourth quarter net charge offs of $1.4 million were equal to loan loss provisioning of $1.4 million, resulting in an allowance for loan losses of $29.8 million at December 31, 2012, or essentially unchanged when compared to $29.9 million at September 30, 2012. The allowance as a percentage of total loans was 1.43% at December 31, 2012, compared to 1.45% at September 30, 2012.

Foreclosed assets were at an eight quarter low and totaled $5.8 million at December 31, 2012, down $2.1 million or 27.2% compared to $7.9 million at September 30, 2012 and down $2.8 million or 32.8% compared to $8.6 million at December 31, 2011.

Included in the loan portfolio at December 31, 2012, are loans classified as troubled debt restructurings ("TDRs") totaling $24.3 million or 1.2% of total loans. TDRs were reduced sequentially by 12.0% or $3.3 million as compared to $27.6 million at September 30, 2012. At December 31, 2012, $22.2 million or 91.4% of total TDRs were performing under the modified terms.

Operating Expenses

Noninterest expenses were $23.8 million for the fourth quarter of 2012, up sequentially by $160 thousand or 0.7% compared to $23.6 million in the third quarter of 2012, and down $691 thousand or 2.8% compared to fourth quarter of 2011.

The sequential quarter increase in noninterest expense was driven by higher professional fees, which were primarily associated with our cost save initiative and seasonal legal costs associated with workout efforts. Our compensation and benefits expense decreased $125 thousand or 1.0% on a sequential basis. The driver of this decrease was lower medical insurance and postretirement benefit expense of $258 thousand, which was offset by a $120 thousand increase in mortgage commissions and incentives. Recurring compensation and benefit expense remained level excluding mortgage commissions and incentives quarter to quarter.

The majority of the noninterest expense decrease when comparing the fourth quarter of 2012 to the same quarter in the prior year relates to a $368 thousand decrease in compensation and benefits. This decrease was caused by lower salary and benefit expense of approximately $489 thousand, which was offset by a $104 thousand increase in mortgage commissions and sales incentives. During 2012, FTE's were reduced by 52 to 759 FTE at December 31, 2012. This includes both the FTE's eliminated during phase one of our cost initiative and purposeful reductions managed through attrition and branch closings.

Professional fees, equipment expense and amortization of intangibles decreased when comparing the fourth quarter of 2012 to the same quarter in the prior year by $281 thousand, $235 thousand and $102 thousand, respectively. Professional fees included nonrecurring strategic planning initiatives in the prior year. Equipment expense tends to fluctuate from quarter to quarter due to the embedded maintenance component. The drop in amortization of intangibles relates to core deposit intangibles that became fully amortized during the third quarter of 2012. These decreases were somewhat offset by increased marketing and occupancy expenses of $157 thousand and $107 thousand, respectively. Both of these increases were largely attributable to the two new retail locations in Richmond and Tidewater opened during the third quarter of 2012.

The efficiency ratio was 68.25% for the fourth quarter of 2012, compared to 67.94% for the third quarter of 2012 and 71.84% for the same quarter in 2011. The sequential quarter increase in the efficiency ratio reflects higher professional costs associated with phases two and three of our cost save initiative, which were somewhat offset by slightly higher noninterest income revenues. The year over year decrease is the result of a combination of managed decreases in noninterest expense and increased revenues from noninterest income.

Effective Tax Rate

The provision for income taxes was $2.2 million for the fourth quarter of 2012 compared to $2.0 million for the third quarter of 2012. This produced an effective tax rate for the fourth quarter of 2012 of 26.5% compared to 26.0% for the prior quarter. The increase in the sequential effective tax rate was due to higher earnings relative to permanent differences and an adjustment made during the last quarter, which increased our estimated realization of pass through tax credits and suppressed the effective rate. For the year ended December 31, 2012 the effective rate was 26.8%, which is consistent with the quarter and future expectations.

Capital Ratios

Risk-based capital ratios continue to substantially exceed published regulatory standards for well-capitalized banks. The period-end tangible common equity ratio was 10.80% at December 31, 2012 compared to 10.90% at September 30, 2012. Tier 1 risk-based and total risk-based capital ratios were 15.60% and 16.85%, respectively, at December 31, 2012 compared to 15.65% and 16.90% at September 30, 2012. Shareholders' equity represented 14.3% of total assets at December 31, 2012, while book value per common share was $18.86 per share.

Balance Sheet Trends

Period end loans increased $25.0 million sequentially or 1.2% compared to the third quarter of 2012, while average loans for the fourth quarter of 2012 were $2.08 billion, up $17.8 million or 0.9% compared to the third quarter of 2012. Period end commercial and industrial loans grew sequentially by $18.8 million or 10.2%. While loan growth picked up during the second half of 2012, soft demand, pricing competition for quality loans and increased curtailments are continued realities within our markets. Average securities were $522.0 million for the fourth quarter, down $26.3 million or 4.8% from $548.3 million for the third quarter of 2012. Average deposits for the fourth quarter of 2012 were $2.43 billion or essentially flat on a sequential quarter basis compared to the third quarter of 2012. Average interest and noninterest bearing demand deposit accounts were $968.5 million at December 31, 2012, a $21.3 million or 2.3% increase over September 30, 2012. At December 31, 2012, total period end assets were $3.02 billion, compared to $2.96 billion at September 30, 2012. Period end cash and cash equivalents were $89.9 million at December 31, 2012, an increase of $35.1 million or 64.0% compared to $54.9 million at September 30, 2012.

About StellarOne

StellarOne Corporation is a traditional community bank with assets of $3 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.

Earnings Webcast

To hear a live webcast of StellarOne's fourth quarter 2012 earnings conference call at 10:00 a.m. (EST) on Thursday, January 24, 2013, 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 1:00 p.m. (EST) on Thursday, January 24, 2013 through 11:59 PM (EST) on Thursday, January 31, 2013, by dialing toll free (855) 859 2056 and using passcode #85706355.

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 noninterest income, which reflects noninterest income adjusted for non-recurring expenses associated with asset gains and losses or 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 "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, 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 www.StellarOne.com.

NOTE: Risk-based capital ratios are preliminary.

STELLARONE CORPORATION (NASDAQ: STEL)
SELECTED FINANCIAL DATA (UNAUDITED)
(Dollars in thousands, except per share data)
SUMMARY INCOME STATEMENT Three Months Ended December 31, Twelve Months Ended December 31,
2012 2011 2012 2011
Interest income - taxable equivalent $ 29,050 $ 30,580 $ 118,009 $ 123,957
Interest expense 4,118 5,520 18,479 24,440
Net interest income - taxable equivalent 24,932 25,060 99,530 99,517
Less: taxable equivalent adjustment 729 787 2,953 3,096
Net interest income 24,203 24,273 96,577 96,421
Provision for loan and lease losses 1,400 1,750 5,550 12,700
Net interest income after provision for loan and lease losses 22,803 22,523 91,027 83,721
Noninterest income 9,417 8,259 34,343 31,051
Noninterest expense 23,754 24,445 95,128 94,283
Income tax expense 2,245 1,568 8,079 4,604
Net income 6,221 4,769 22,163 15,885
Dividends and accretion on preferred stock -- (973) -- (2,455)
Net income available to common shareholders $ 6,221 $ 3,796 $ 22,163 $ 13,430
Earnings per share available to common shareholders
Basic $ 0.27 $ 0.17 $ 0.96 $ 0.59
Diluted $ 0.27 $ 0.17 $ 0.96 $ 0.59
SUMMARY AVERAGE BALANCE SHEET Three Months Ended December 31, Twelve Months Ended December 31,
2012 2011 2012 2011
Total loans $ 2,084,741 $ 2,054,650 $ 2,064,552 $ 2,077,067
Total investment securities 521,999 466,553 510,852 419,149
Total earning assets 2,644,993 2,626,406 2,619,544 2,616,532
Total assets 2,973,428 2,939,235 2,945,641 2,930,426
Total deposits 2,433,728 2,399,885 2,413,658 2,391,761
Shareholders' equity 431,505 432,969 423,499 428,931
PERFORMANCE RATIOS Three Months Ended December 31, Twelve Months Ended December 31,
2012 2011 2012 2011
Return on average assets 0.83% 0.64% 0.75% 0.54%
Return on average equity 5.74% 4.37% 5.23% 3.70%
Return on average realized equity (A) 5.89% 4.46% 5.37% 3.76%
Net interest margin (taxable equivalent) 3.75% 3.79% 3.80% 3.80%
Efficiency (taxable equivalent) (B) 68.25% 71.84% 69.40% 70.38%
CAPITAL MANAGEMENT December 31,
2012 2011
Tier 1 risk-based capital ratio 15.60% 15.17%
Tangible equity ratio 10.80% 10.52%
Tangible common equity ratio 10.80% 10.52%
Period end shares issued and outstanding 22,889,091 22,819,000
Book value per common share 18.86 18.15
Tangible book value per common share 13.71 12.90
Three Months Ended December 31, Twelve Months Ended December 31,
2012 2011 2012 2011
Shares issued (cancelled) (450) 3,064 78,303 43,267
Average common shares issued and outstanding 23,099,400 22,869,516 23,089,457 22,857,521
Average diluted common shares issued and outstanding 23,100,576 22,869,724 23,090,012 22,861,199
Cash dividends paid per common share $ 0.08 $ 0.04 $ 0.26 $ 0.16
SUMMARY ENDING BALANCE SHEET December 31,
2012 2011
Total loans $ 2,080,068 $ 2,031,131
Total investment securities 553,476 477,964
Total earning assets 2,709,183 2,610,460
Total assets 3,023,204 2,917,928
Total deposits 2,484,324 2,395,600
Shareholders' equity 431,642 414,173
OTHER DATA
End of period full-time equivalent employees 759 811
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 December 31, Twelve Months Ended December 31,
2012 2011 2012 2011
Allowance for loan losses:
Beginning of period $ 29,860 $ 35,268 $ 32,588 $ 37,649
Provision for loan losses 1,400 1,750 5,550 12,700
Charge-offs (2,562) (5,045) (11,090) (19,927)
Recoveries 1,126 615 2,776 2,166
Net charge-offs (1,436) (4,430) (8,314) (17,761)
End of period $ 29,824 $ 32,588 $ 29,824 $ 32,588
Accruing Troubled Debt Restructurings $ 22,217 $ 30,531
Loans greater than 90 days past due still accruing $ 182 $ 1,516
December 31,
2012 2011
Non accrual loans $ 33,795 $ 30,985
Non accrual TDR's 2,087 8,189
Total non-performing loans 35,882 39,174
Foreclosed assets 5,760 8,575
Total non-performing assets $ 41,642 $ 47,749
Nonperforming assets as a % of total assets 1.38% 1.64%
Nonperforming assets as a % of loans plus foreclosed assets 2.00% 2.34%
Allowance for loan losses as a % of total loans 1.43% 1.60%
Annualized net charge-offs as a % of average loans outstanding - 3 months 0.28% 0.86%
Annualized net charge-offs as a % of average loans outstanding - year to date 0.40% 0.86%
December 31, 2012


Loans
Outstanding


Nonaccrual
Loans
Nonaccrual
Loans to
Loans
Outstanding
Construction and land development:
Commercial $ 149,072 $ 8,330 5.59%
Residential 45,308 1,070 2.36%
Total construction and land development 194,380 9,400 4.84%
Commercial real estate:
Commercial real estate - owner occupied 343,944 3,646 1.06%
Commercial real estate - non-owner occupied 458,646 1,798 0.39%
Farmland 12,099 71 0.59%
Multifamily, nonresidential and junior liens 106,334 4,709 4.43%
Total commercial real estate 921,023 10,224 1.11%
Consumer real estate:
Home equity lines 246,806 3,721 1.51%
Secured by 1-4 family residential, secured by first deeds of trust 447,400 11,659 2.61%
Secured by 1-4 family residential, secured by second deeds of trust 34,690 262 0.76%
Total consumer real estate 728,896 15,642 2.15%
Commercial and industrial loans (except those secured by real estate) 203,840 584 0.29%
Consumer and other:
Consumer installment loans 26,697 28 0.10%
Deposit overdrafts 3,677 -- 0.00%
All other loans 1,555 4 0.26%
Total consumer and other 31,929 32 0.10%
Total loans $ 2,080,068 $ 35,882 1.73%
STELLARONE CORPORATION (NASDAQ: STEL)
BALANCE SHEET (UNAUDITED)
(Dollars in thousands, except per share data)
Percent
Increase
SELECTED BALANCE SHEET DATA 12/31/2012 12/31/2011 (Decrease)
Assets
Cash and cash equivalents $ 89,949 $ 99,970 -10.02%
Investment securities, at fair value 553,476 477,964 15.80%
Mortgage loans held for sale 37,778 42,027 -10.11%
Loans:
Construction and land development 194,380 214,667 -9.45%
Commercial real estate 921,023 844,860 9.01%
Consumer real estate 728,896 756,236 -3.62%
Commercial and industrial loans (except those secured by real estate) 203,840 189,887 7.35%
Consumer and other 31,929 25,481 25.31%
Total loans 2,080,068 2,031,131 2.41%
Deferred loan costs (475) 299 > 100%
Allowance for loan losses (29,824) (32,588) -8.48%
Net loans 2,049,769 1,998,842 2.55%
Premises and equipment, net 72,060 74,602 -3.41%
Core deposit intangibles, net 3,462 5,011 -30.91%
Goodwill 113,652 113,652 0.00%
Bank owned life insurance 44,182 42,413 4.17%
Foreclosed assets 5,760 8,575 -32.83%
Other assets 53,116 54,872 -3.20%
Total assets 3,023,204 2,917,928 3.61%
Liabilities
Deposits:
Noninterest bearing deposits 362,713 310,756 16.72%
Money market & interest checking 1,108,202 1,013,826 9.31%
Savings 314,353 289,260 8.67%
CD's and other time deposits 699,056 781,758 -10.58%
Total deposits 2,484,324 2,395,600 3.70%
Federal funds purchased and securities sold under agreements to repurchase 765 841 -9.04%
Federal Home Loan Bank advances 55,000 60,000 -8.33%
Subordinated debt 32,991 32,991 0.00%
Deferred income tax liability 3,810 2,654 43.56%
Other liabilities 14,672 11,669 25.73%
Total liabilities 2,591,562 2,503,755 3.51%
Stockholders' equity
Common stock 22,889 22,819 0.31%
Additional paid-in capital 271,747 271,080 0.25%
Retained earnings 127,099 110,940 14.57%
Accumulated other comprehensive income 9,907 9,334 6.14%
Total stockholders' equity 431,642 414,173 4.22%
Total liabilities and stockholders' equity $ 3,023,204 $ 2,917,928 3.61%
STELLARONE CORPORATION (NASDAQ: STEL)
QUARTERLY INCOME STATEMENT (UNAUDITED)
(Dollars in thousands)
Percent
For the three months ended Increase
12/31/2012 12/31/2011 (Decrease)
Interest Income
Loans, including fees $ 25,487 $ 26,634 -4.31%
Federal funds sold and deposits in other banks 21 72 -70.83%
Investment securities:
Taxable 1,569 1,675 -6.33%
Tax-exempt 1,244 1,412 -11.90%
Total interest income 28,321 29,793 -4.94%
Interest Expense
Deposits 3,355 4,693 -28.51%
Federal funds purchased and securities sold under agreements to repurchase 6 7 -14.29%
Federal Home Loan Bank advances 413 477 -13.42%
Subordinated debt 344 343 0.29%
Total interest expense 4,118 5,520 -25.40%
Net interest income 24,203 24,273 -0.29%
Provision for loan losses 1,400 1,750 -20.00%
Net interest income after provision for loan losses 22,803 22,523 1.24%
Noninterest Income
Retail banking fees 3,974 3,876 2.53%
Fiduciary and brokerage fee income 1,247 1,059 17.75%
Mortgage banking-related fees 2,638 2,623 0.57%
Losses on mortgage indemnifications and repurchases (9) -- N/A
Gains on sale of premises and equipment 58 91 -36.26%
Gains on securities available for sale 440 447 -1.57%
Losses on sale / impairments of foreclosed assets (440) (582) -24.40%
Income from bank owned life insurance 446 329 35.56%
Insurance income 197 94 > 100%
Other operating income 866 322 > 100%
Total noninterest income 9,417 8,259 14.02%
Noninterest Expense
Compensation and employee benefits 12,647 13,015 -2.83%
Net occupancy 2,212 2,105 5.08%
Equipment 1,965 2,200 -10.68%
Amortization-intangible assets 311 413 -24.70%
Marketing 373 216 72.69%
State franchise taxes 564 596 -5.37%
FDIC insurance 562 571 -1.58%
Data processing 787 692 13.73%
Professional fees 735 1,016 -27.66%
Telecommunications 405 427 -5.15%
Other operating expenses 3,193 3,194 -0.03%
Total noninterest expense 23,754 24,445 -2.83%
Income before income taxes 8,466 6,337 33.60%
Income tax expense 2,245 1,568 43.18%
Net income $ 6,221 $ 4,769 30.45%
STELLARONE CORPORATION (NASDAQ: STEL)
YEAR TO DATE INCOME STATEMENT (UNAUDITED)
(Dollars in thousands)
Percent
For the Twelve Months Ended Increase
12/31/2012 12/31/2011 (Decrease)
Interest Income
Loans, including fees $ 103,192 $ 107,999 -4.45%
Federal funds sold and deposits in other banks 110 282 -60.99%
Investment securities:
Taxable 6,623 7,049 -6.04%
Tax-exempt 5,131 5,531 -7.23%
Total interest income 115,056 120,861 -4.80%
Interest Expense
Deposits 15,407 21,117 -27.04%
Federal funds purchased and securities sold under agreements to repurchase 26 32 -18.75%
Federal Home Loan Bank advances 1,674 2,158 -22.43%
Subordinated debt 1,372 1,133 21.09%
Total interest expense 18,479 24,440 -24.39%
Net interest income 96,577 96,421 0.16%
Provision for loan losses 5,550 12,700 -56.30%
Net interest income after provision for loan losses 91,027 83,721 8.73%
Noninterest Income
Retail banking fees 15,424 15,291 0.87%
Fiduciary and brokerage fee income 5,202 4,946 5.18%
Mortgage banking-related fees 8,909 8,186 8.83%
Losses on mortgage indemnifications and repurchases (593) (232) > 100%
Gains on sale of premises and equipment 68 84 -19.05%
Gains on securities available for sale 528 509 3.73%
Losses on sale / impairments of foreclosed assets (1,491) (1,564) -4.67%
Income from bank owned life insurance 1,768 1,298 36.21%
Insurance income 1,217 777 56.63%
Other operating income 3,311 1,756 88.55%
Total noninterest income 34,343 31,051 10.60%
Noninterest Expense
Compensation and employee benefits 51,375 50,200 2.34%
Net occupancy 8,593 8,259 4.04%
Equipment 8,220 8,402 -2.17%
Amortization-intangible assets 1,549 1,651 -6.18%
Marketing 1,376 953 44.39%
State franchise taxes 2,255 2,384 -5.41%
FDIC insurance 2,235 2,679 -16.57%
Data processing 2,929 2,721 7.64%
Professional fees 2,886 2,889 -0.10%
Telecommunications 1,660 1,647 0.79%
Other operating expenses 12,050 12,498 -3.58%
Total noninterest expense 95,128 94,283 0.90%
Income before income taxes 30,242 20,489 47.60%
Income tax expense 8,079 4,604 75.48%
Net income $ 22,163 $ 15,885 39.52%
STELLARONE CORPORATION (NASDAQ: STEL)
CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES (UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, 2012 AND 2011
(Dollars in thousands)
For the Three Months Ended December 31,
2012 2011
Average Interest Average Average Interest Average
Dollars in thousands Balance Inc/Exp Rates Balance Inc/Exp Rates
Assets
Loans receivable, net (1) $ 2,084,741 $ 25,546 4.87% $ 2,054,650 $ 26,660 5.15%
Investment securities
Taxable 391,289 1,569 1.57% 317,374 1,675 2.07%
Tax exempt (1) 130,710 1,914 5.73% 149,179 2,173 5.70%
Total investments 521,999 3,483 2.61% 466,553 3,848 3.23%
Federal funds sold and deposits in other banks 38,253 21 0.21% 105,203 72 0.27%
560,252 3,504 2.45% 571,756 3,920 2.69%
Total earning assets 2,644,993 $ 29,050 4.37% 2,626,406 $ 30,580 4.62%
Total nonearning assets 328,435 312,829
Total assets $ 2,973,428 $ 2,939,235
Liabilities and Stockholders' Equity
Interest-bearing deposits
Interest checking $ 615,586 $ 208 0.13% $ 575,175 $ 398 0.27%
Money market 440,879 472 0.43% 430,592 692 0.64%
Savings 315,464 129 0.16% 288,103 332 0.46%
Time deposits:
Less than $100,000 468,561 1,574 1.34% 524,014 2,072 1.57%
$100,000 and more 240,329 972 1.61% 266,344 1,199 1.79%
Total interest-bearing deposits 2,080,819 3,355 0.64% 2,084,228 4,693 0.89%
Federal funds purchased and securities sold under agreements to repurchase 797 6 2.95% 946 7 2.95%
Federal Home Loan Bank advances 55,000 413 2.94% 60,000 477 3.11%
Subordinated debt 32,991 344 4.08% 32,991 343 4.07%
88,788 763 3.36% 93,937 827 3.44%
Total interest-bearing liabilities 2,169,607 4,118 0.75% 2,178,165 5,520 1.00%
Total noninterest-bearing liabilities 372,316 328,101
Total liabilities 2,541,923 2,506,266
Stockholders' equity 431,505 432,969
Total liabilities and stockholders' equity $ 2,973,428 $ 2,939,235
Net interest income (tax equivalent) $ 24,932 $ 25,060
Average interest rate spread 3.62% 3.62%
Interest expense as percentage of average earning assets 0.62% 0.83%
Net interest margin 3.75% 3.79%
(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, 2012 AND 2011
(Dollars in thousands)
For the Twelve Months Ended December 31,
2012 2011
Average Interest Average Average Interest Average
Dollars in thousands Balance Inc/Exp Rates Balance Inc/Exp Rates
Assets
Loans receivable, net (1) $ 2,064,552 $ 103,382 5.01% $ 2,077,067 $ 108,117 5.21%
Investment securities
Taxable 375,756 6,623 1.73% 274,660 7,049 2.53%
Tax exempt (1) 135,096 7,894 5.75% 144,489 8,509 5.81%
Total investments 510,852 14,517 2.80% 419,149 15,558 3.66%
Federal funds sold and deposits in other banks 44,140 110 0.24% 120,316 282 0.23%
554,992 14,627 2.60% 539,465 15,840 2.90%
Total earning assets 2,619,544 $ 118,009 4.50% 2,616,532 $ 123,957 4.74%
Total nonearning assets 326,097 313,894
Total assets $ 2,945,641 $ 2,930,426
Liabilities and Stockholders' Equity
Interest-bearing deposits
Interest checking $ 599,289 $ 1,309 0.22% $ 569,201 $ 1,999 0.35%
Money market 426,562 2,023 0.47% 430,572 3,757 0.87%
Savings 309,757 928 0.30% 278,605 1,638 0.59%
Time deposits:
Less than $100,000 489,029 6,955 1.42% 535,813 8,781 1.64%
$100,000 and more 251,758 4,192 1.67% 265,778 4,942 1.86%
Total interest-bearing deposits 2,076,395 15,407 0.74% 2,079,969 21,117 1.02%
Federal funds purchased and securities sold under agreements to repurchase 1,105 26 2.31% 1,054 32 2.99%
Federal Home Loan Bank advances 55,587 1,674 2.96% 64,932 2,158 3.28%
Subordinated debt 32,991 1,372 4.09% 32,991 1,133 3.39%
89,683 3,072 3.37% 98,977 3,323 3.31%
Total interest-bearing liabilities 2,166,078 18,479 0.85% 2,178,946 24,440 1.12%
Total noninterest-bearing liabilities 356,064 322,549
Total liabilities 2,522,142 2,501,495
Stockholders' equity 423,499 428,931
Total liabilities and stockholders' equity $ 2,945,641 $ 2,930,426
Net interest income (tax equivalent) $ 99,530 $ 99,517
Average interest rate spread 3.65% 3.62%
Interest expense as percentage of average earning assets 0.71% 0.93%
Net interest margin 3.80% 3.80%
(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)
2012
Quarter Ended
December 31, September 30, June 30, March 31,
Interest income $ 28,321 $ 28,843 $ 28,934 $ 28,958
Interest expense 4,118 4,544 4,754 5,063
Net interest income 24,203 24,299 24,180 23,895
Provision for loan losses 1,400 1,900 1,400 850
Total net interest income after provision 22,803 22,399 22,780 23,045
Non interest income 9,417 8,707 8,197 8,022
Non interest expense 23,754 23,594 24,328 23,452
Income before income taxes 8,466 7,512 6,649 7,615
Income tax expense 2,245 1,952 1,768 2,114
Net income $ 6,221 $ 5,560 $ 4,881 $ 5,501
Net income per share
basic $ 0.27 $ 0.24 $ 0.21 $ 0.24
diluted $ 0.27 $ 0.24 $ 0.21 $ 0.24
STELLARONE CORPORATION (NASDAQ: STEL)
SEGMENT INFORMATION (UNAUDITED)
(Dollars in thousands)
At and for the Three Months Ended December 31, 2012
Commercial Mortgage Wealth Intersegment
Bank Banking Management Other Elimination Consolidated
Net interest income $ 24,343 $ 203 $ -- $ (343) $ -- $ 24,203
Provision for loan losses 1,400 -- -- -- -- 1,400
Noninterest income 6,679 2,691 1,247 25 (1,225) 9,417
Noninterest expense 21,867 1,863 1,129 120 (1,225) 23,754
Provision for income taxes 2,059 309 35 (158) -- 2,245
Net income (loss) $ 5,696 $ 722 $ 83 $ (280) $ -- $ 6,221
Total Assets $ 2,976,470 $ 38,075 $ 602 $ 469,378 $ (461,321) $ 3,023,204
Average Assets $ 2,939,772 $ 25,911 $ 619 $ 468,857 $ (461,731) $ 2,973,428
At and for the Three Months Ended December 31, 2011
Commercial Mortgage Wealth Intersegment
Bank Banking Management Other Elimination Consolidated
Net interest income $ 24,303 $ 312 $ -- $ (342) $ -- $ 24,273
Provision for loan losses 1,750 -- -- -- -- 1,750
Noninterest income 5,635 2,648 1,158 26 (1,208) 8,259
Noninterest expense 21,913 2,217 1,104 419 (1,208) 24,445
Provision for income taxes 1,592 223 16 (263) -- 1,568
Net income (loss) $ 4,683 $ 520 $ 38 $ (472) $ -- $ 4,769
Total Assets $ 2,868,332 $ 42,894 $ 415 $ 451,866 $ (445,579) $ 2,917,928
Average Assets $ 2,894,269 $ 37,322 $ 433 $ 469,852 $ (462,641) $ 2,939,235
At and for the Twelve Months Ended December 31, 2012
Commercial Mortgage Wealth Intersegment
Bank Banking Management Other Elimination Consolidated
Net interest income $ 97,206 $ 742 $ -- $ (1,371) $ -- $ 96,577
Provision for loan losses 5,550 -- -- -- -- 5,550
Noninterest income 25,365 8,616 5,253 105 (4,996) 34,343
Noninterest expense 87,846 6,878 4,493 907 (4,996) 95,128
Provision for income taxes 7,886 744 228 (779) -- 8,079
Net income (loss) $ 21,289 $ 1,736 $ 532 $ (1,394) $ -- $ 22,163
Average Assets $ 2,916,051 $ 21,924 $ 508 $ 461,310 $ (454,152) $ 2,945,641
At and for the Twelve Months Ended December 31, 2011
Commercial Mortgage Wealth Intersegment
Bank Banking Management Other Elimination Consolidated
Net interest income $ 96,659 $ 895 $ -- $ (1,133) $ -- $ 96,421
Provision for loan losses 12,700 -- -- -- -- 12,700
Noninterest income 22,562 8,122 5,045 106 (4,784) 31,051
Noninterest expense 85,842 7,667 4,399 1,159 (4,784) 94,283
Provision for income taxes 4,794 405 194 (789) -- 4,604
Net income (loss) $ 15,885 $ 945 $ 452 $ (1,397) $ -- $ 15,885
Average Assets $ 2,896,875 $ 24,854 $ 444 $ 465,607 $ (457,354) $ 2,930,426
STELLARONE CORPORATION (NASDAQ: STEL)
NON-GAAP RECONCILIATION (UNAUDITED)
(Dollars in thousands)
For the Three Months Ended For the Twelve Months Ended
December 31, 2012 September 30, 2012 December 31, 2011 December 31, 2012 December 31, 2011
Noninterest expense $ 23,754 $ 23,594 $ 24,445 $ 95,128 $ 94,283
Less:
Amortization of intangible assets 311 413 413 1,549 1,651
Adjusted noninterest expense 23,443 23,181 24,032 93,579 92,632
Net interest income (tax equivalent) 24,932 25,042 25,060 99,530 99,517
Noninterest income 9,417 8,707 8,259 34,343 31,051
Less:
Gains on sale of securities available for sale 440 9 447 528 509
Losses / impairments on foreclosed assets (440) (381) (582) (1,491) (1,564)
Net revenues $ 34,349 $ 34,121 $ 33,454 $ 134,836 $ 131,623
Efficiency ratio 68.25% 67.94% 71.84% 69.40% 70.38%
For the Three Months Ended For the Twelve Months Ended
December 31, 2012 September 30, 2012 December 31, 2011 December 31, 2012 December 31, 2011
Noninterest income $ 9,417 $ 8,707 $ 8,259 $ 34,343 $ 31,051
Less:
Gains on securities available for sale 440 9 447 528 509
Gains on sale of premises and equipment 58 17 91 68 84
Operating earnings $ 8,919 $ 8,681 $ 7,721 $ 33,747 $ 30,458
For the Three Months Ended For the Twelve Months Ended
December 31, 2012 September 30, 2012 December 31, 2011 December 31, 2012 December 31, 2011
Net income $ 6,221 $ 5,560 $ 4,769 $ 22,163 $ 15,885
Plus:
Income tax expense 2,245 1,952 1,568 8,079 4,604
Provision for loan losses 1,400 1,900 1,750 5,550 12,700
Tax equivalent adjustment 729 743 787 2,953 3,096
Pre-tax pre-provision earnings $ 10,595 $ 10,155 $ 8,874 $ 38,745 $ 36,285
For the Three Months Ended
December 31, 2012 September 30, 2012 December 31, 2011
Total stockholders' equity $ 431,642 $ 428,077 $ 414,173
Less:
Core deposit intangibles, net 3,462 3,773 5,011
Goodwill 113,652 113,652 113,652
Net other intangibles 787 886 1,183
Tangible common equity 313,741 309,766 294,327
Total assets 3,023,204 2,959,846 2,917,928
Less:
Core deposit intangibles, net 3,462 3,773 5,011
Goodwill 113,652 113,652 113,652
Net other intangibles 787 886 1,183
Tangible assets $ 2,905,303 $ 2,841,535 $ 2,798,082
Tangible common equity ratio 10.80% 10.90% 10.52%

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