StellarOne CORP - FORM 8-K - EX-99.1

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8-K - StellarOne CORP	earningrelease.htm

FOR IMMEDIATE RELEASE

Contact:

Jeffrey W. Farrar

Executive Vice President and CFO

(434) 964-2217

jfarrar@stellarone.com

STELLARONE CORPORATION

REPORTS FIRST QUARTER EARNINGS

Charlottesville, VA, April 28, 2011 – StellarOne Corporation (NASDAQ: STEL) (“StellarOne”) today reported first quarter 2011 earnings of $2.9 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 $0.11 net income per diluted common share. Those results compare to net income available to common shareholders of $1.4 million, or $0.06 net income per diluted common share during the same quarter in the prior year, and net income to common shareholders of $2.4 million, or $0.10 net income per diluted common share for the fourth quarter of 2010. Continued asset quality improvement resulting in lower loan loss provision levels, along with decreasing foreclosed assets and mortgage indemnification losses, contributed to the growth in recurring earnings.

“We are off to a positive start for 2011, and pleased to see continued improvement in our credit quality and earnings results. Asset quality metrics were improved in virtually every phase, allowing for some reduced loss provisioning. We had some respectable recurring revenue growth year over year from net interest margin expansion, but did experience reduced mortgage revenues, retail banking revenues and balance sheet contraction. Loan growth continues to be a challenge, but activity in the commercial segment appears to be improving. Increasing our lending activity is a high priority for us right now. We have added some seasoned lenders in the Richmond market that are beginning to have an impact,” said O. R. Barham, Jr., President and Chief Executive Officer.

·	Non-performing asset levels decreased $2.2 million on a sequential basis, lowering the ratio of non-performing assets as a percentage of total assets to 1.80% as of March 31, 2011, compared to 1.85% as of December 31, 2010.

·	Net charge-offs as a percentage of average loans outstanding were 0.88% for the first quarter of 2011, down compared to 1.43% for the fourth quarter of 2010.

·	Noninterest income on an operating basis increased 7.9% sequentially due to lower write-downs of foreclosed assets, lower losses from mortgage indemnifications and an increase in wealth management revenues.

·	Net interest income on a tax-equivalent basis decreased $847 thousand or 3.3% for the quarter on a lower earning asset base, as the net interest margin remained relatively stable, dropping two basis points on a sequential quarter basis.

Pre-tax, pre-provision earnings amounted to $8.0 million for the first quarter of 2011, a decrease of $634 thousand or 7.3% compared to the fourth quarter of 2010, and a decrease of $769 thousand or 8.8% when compared to the same period in the prior year. This decrease relates to nonrecurring revenue items being realized in both prior year periods compared to minimal nonrecurring items in the current period.

Net Interest Margin Remains Stable Sequentially

Net interest income on a tax-equivalent basis amounted to $24.6 million for the first quarter of 2011, which compares to $25.4 million for the fourth quarter of 2010, and $23.1 million for the same period in the prior year. The net interest margin was 3.85% for the first quarter of 2011, compared to 3.87% for the fourth quarter of 2010 and 3.52% for the first quarter of 2010. The average yield on earning assets for the current quarter decreased 8 basis points to 4.85% as compared to 4.93% for the fourth quarter of 2010, which was offset by a 6 basis point improvement in the cost of interest bearing liabilities, moving from 1.26% during the fourth quarter of 2010 to 1.20% during the first quarter of 2011. The re-pricing sensitivity of interest earning assets outpaced interest bearing liabilities during the first quarter as loan yields contracted 9 basis points sequentially due to repricing within the current portfolio and lower yields realized on new production due to the protracted, exceptionally low rate environment. The cost of FHLB advances and subordinated debt both increased 4 basis points sequentially. This was offset by decreases of 7 basis points and 12 basis points for time deposits less than $100 thousand and greater than $100 thousand, respectively, which contributed to the 6 basis point improvement to the cost of funds.

Operating Noninterest Income Increases Sequentially

On an operating basis, which excludes gains and losses from sales and impairments of securities and other assets, total non-interest income amounted to $7.7 million for the first quarter of 2011, or up $559 thousand or 7.9% on a sequential basis compared to $7.1 million for the fourth quarter of 2010, and essentially flat compared to the same period in prior year. The sequential quarter increase on a consolidated basis is largely attributable to a $589 thousand decrease in losses on mortgage indemnifications, a $560 thousand decrease in losses on foreclosed assets and a $182 thousand increase in wealth management revenues which were offset by a $577 thousand decrease in mortgage banking fees and a $343 thousand contraction in retail banking fees. While operating noninterest income remained flat compared to the same quarter in the prior year, retail banking fees contracted $364 thousand and were offset by increases of $146 thousand in wealth management revenues, $104 thousand in increased insurance revenues included in other operating income and $71 thousand in mortgage banking fees.

Mortgage banking revenue totaled $2.1 million for the first quarter of 2011, or down $577 thousand or 20.7% compared to $2.8 million for the fourth quarter of 2010 and up $71 thousand or 3.6% when compared to the same quarter in 2010. This sequential quarter revenue decrease was associated with higher mortgage rates resulting in reduced refinance activity. Indemnification expense totaled $265 thousand for the quarter, down $589 thousand or 69.0% compared to the $854 thousand in the fourth quarter of 2010 and up $132 thousand or 99.3% compared to $133 thousand for the same quarter in 2010.

Retail banking fee income amounted to $3.6 million for the first quarter of 2011, a decrease of $343 thousand or 8.8% compared to $3.9 million for the fourth quarter of 2010. This sequential quarter decrease was attributable to a decrease of $282 thousand and $36 thousand in consumer NSF and commercial NSF income, respectively, while interchange fee income remained flat on a sequential quarter basis.

Wealth management revenues from trust and brokerage fees for the first quarter of 2011 were $1.3 million or up $182 thousand or 15.7% and $146 thousand or 12.2% when compared to $1.2 million realized during both the fourth and first quarters of 2010, respectively. Higher fee realizations attributed to the revenue increase. Fiduciary assets decreased $23.1 million sequentially to $466.6 million, compared to $489.7 million at December 31, 2010, with much of the decrease associated with market valuation declines in the first quarter.

Non-performing Asset Levels Continue To Decline

StellarOne’s non-performing assets totaled $52.2 million at March 31, 2011, down $2.2 million or 4.0% from $54.4 million at December 31, 2010 and down $9.8 million or 15.8% compared to $62.0 million at March 31, 2010. The ratio of non-performing assets as a percentage of total assets decreased sequentially to 1.80% as of March 31, 2011, compared to 1.85% at December 31, 2010 and 2.07% at March 31, 2010. Non-performing loans totaled $43.2 million at March 31, 2011, essentially flat when compared to $43.0 million at December 31, 2010 and down $16.6 million or 27.8% compared to $59.8 million at March 31, 2010. Foreclosed assets totaled $9.0 million, down $1.9 million or 17.4% compared to $10.9 million at December 31, 2010 and up $6.8 million or greater than 100% compared to March 31, 2010. Past due and matured loans between 30 and 89 days totaled $41.8 million at March 31, 2011, down $11 million or 20.8% compared to $52.8 million at December 31, 2010.

Annualized net charge-offs as a percentage of average loans receivable amounted to 0.88% for the first quarter of 2011, down compared to 1.43% for the fourth quarter 2010 results and down from 1.13% for the first quarter of 2010. Net charge-offs for the first quarter of 2011 totaled $4.6 million or down $3.0 million compared to the $7.6 million realized during the fourth quarter of 2010 and down $1.6 million when compared to $6.2 million during the first quarter of 2010.

The mix of non-performing loans continues to be weighted to the construction and land development loan segment of our portfolio. Of the total nonaccrual loans of $43.2 million at March 31, 2011, approximately $16.4 million are residential development and construction loans.

StellarOne recorded a provision for loan losses of $4.5 million for the first quarter of 2011, a decrease of $0.8 million compared to the fourth quarter of 2010 and a decrease of $2.2 million compared to the first quarter of 2010. The first quarter 2011 provision compares to net charge-offs of $4.6 million, resulting in an allowance as a percentage of total loans of 1.82% or up three basis points when compared to 1.79% as of December 31, 2010. Specific reserves within the allowance dropped $557 thousand from the fourth quarter 2010 to the first quarter due to the resolution of problem loans and related charge-offs taken during the current quarter. This coupled with the loan contraction noted during the period resulted in an increase to the allowance as a percentage of total loans and a slight decrease to the coverage of non-performing loans. The allowance represents 86.9% of non-performing loans at March 31, 2011, or down .70% when compared to 87.6% at December 31, 2010.

Efficiency Ratio Decreases Sequentially

StellarOne’s efficiency ratio was 71.4% for the first quarter of 2011, compared to 71.5% for the fourth quarter of 2010 and 71.2% for the same quarter in 2010. The sequential quarter stability in the efficiency ratio reflects a slight decrease in both noninterest expense and total revenue. Non-interest expense for the first quarter amounted to $23.5 million, or down $420 thousand or 1.8%

when compared to $24.0 million for the fourth quarter of 2010 and up $989 thousand or 4.4% when compared to the first quarter in 2010. The sequential quarter decrease was driven by decreases of $593 thousand in FDIC insurance expense and $422 thousand in other operating expenses, which were offset by a $552 thousand increase in compensation and employee benefits. The decrease in FDIC insurance expense is expected to continue going forward, while the decrease in other expenses is related to the lower mortgage volume and will be dependent on future volume. The increase in compensation and benefits is related to incentive expense that is linked to performance goal attainments in the quarter.

Capital Levels Remain Robust After Partial TARP Repayment

StellarOne’s risk-based capital ratios remain well above regulatory standards for well-capitalized banks. The period-end tangible common equity ratio was 10.08% at March 31, 2011 compared to 9.79% at December 31, 2010. Tier 1 risk-based and total risk-based capital ratios were 14.88% and 16.14%, respectively, at March 31, 2011 compared to 14.19% and 15.44% at December 31, 2010. Excluding the $30 million in preferred stock issued in connection with participation in the TARP program, StellarOne’s Tier 1 risk-based capital ratio was 13.56% compared to 12.83% at December 31, 2010. Shareholders’ equity, excluding the preferred stock, represented 14.0% of total assets at March 31, 2011, while book value per common share was $17.51 per share. Subsequent to quarter end, on April 13, 2011 the Company redeemed 25% or 7,500 shares of its Fixed Rate Cumulative Perpetual Preferred Stock outstanding with the U.S. Department of the Treasury. Excluding the 7,500 shares of Fixed Rate Cumulative Perpetual Preferred Stock redeemed shortly after period end, the period-end tangible common equity ratio, tier 1 risk-based and total risk-based capital ratios would have been 9.81%, 14.55% and 15.80%, respectively, at March 31 2011.

Loan and Balance Sheet Experience Some Modest Contraction

Period end loans decreased $34.2 million as compared to the fourth quarter 2010, while average loans for the first quarter of 2011 were $2.10 billion, or down approximately 1.4% when compared to $2.13 billion for the fourth quarter of 2010. Average securities were $359.0 million for the first quarter, down $8.1 million or 2.2% from $367.1 million for the fourth quarter of 2010. Average deposits for the first quarter of 2011 were $2.36 billion or essentially flat on a sequential quarter basis. Average interest bearing deposits increased sequentially by approximately $8.1 million, while average non-interest bearing deposits decreased approximately $11.9 million. At March 31, 2011, total assets were $2.90 billion, compared to $2.94 billion at December 31, 2010. Cash and cash equivalents were $178.4 million at March 31, 2011, an increase of $38.5 million or 27.5% compared to $139.9 million at December 31, 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. Through the activities of its sole subsidiary, StellarOne Bank, StellarOne 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 first quarter 2011 earnings conference call at 10:00 a.m. (EDT) 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 1:00 p.m. (EDT) on Thursday, April 28, 2011 through 11:59 PM (EDT) on Friday, May 6, 2011, by dialing toll free (800) 642-1687 and using passcode #57691445.

Non-GAAP Financial Measures

This report refers to the efficiency ratio, which is computed by dividing non-interest 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 non-interest 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 non-recurring 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 March 31,
	2011			2010
Interest income - taxable equivalent	$	31,019		$	33,096
Interest expense		6,443			9,982
Net interest income - taxable equivalent		24,576			23,114
Less: taxable equivalent adjustment		713			615
Net interest income		23,863			22,499
Provision for loan and lease losses		4,500			6,700
Net interest income after provision for
loan and lease losses		19,363			15,799
Noninterest income		7,670			8,814
Noninterest expense		23,536			22,547
Income tax expense		626			212
Net income		2,871			1,854
Dividends and accretion on preferred stock		(370	)		(370	)
Accretion of preferred stock discount		(95	)		(88	)
Net income available to common shareholders	$	2,406		$	1,396

Earnings per share available to common shareholders
Basic	$	0.11		$	0.06
Diluted	$	0.11		$	0.06

SUMMARY AVERAGE BALANCE SHEET	Three Months Ended March 31,
		2011			2010
Total loans	$	2,104,031		$	2,204,297
Total securities		359,027			365,556
Total earning assets		2,591,490			2,666,861
Total assets		2,910,242			2,998,983
Total deposits		2,358,546			2,402,716
Shareholders' equity		427,732			422,260

PERFORMANCE RATIOS	Three Months Ended March 31,
		2011			2010
Return on average assets		0.40	%		0.25	%
Return on average equity		2.72	%		1.78	%
Return on average realized equity (A)		2.75	%		1.78	%
Net interest margin (taxable equivalent)		3.85	%		3.52	%
Efficiency (taxable equivalent) (B)		71.44	%		71.15	%

CAPITAL MANAGEMENT	March 31,
		2011			2010

Tier 1 risk-based capital ratio		14.88	%		13.67	%
Tangible equity ratio		11.12	%		10.45	%
Tangible common equity ratio		10.08	%		9.40	%
Period end shares issued and outstanding		22,775,733			22,684,816
Book value per common share		17.51			17.30
Tangible book value per common share		12.25			11.94

	Three Months Ended March 31,
		2011			2010
Shares issued		27,671			23,691
Average common shares issued and outstanding		22,764,099			22,674,490
Average diluted common shares issued and outstanding		22,833,417			22,729,666
Cash dividends paid per common share	$	0.04		$	0.04

SUMMARY ENDING BALANCE SHEET	March 31,
		2011			2010
Total loans	$	2,064,732		$	2,161,084
Total securities		380,078			380,268
Total earning assets		2,595,852			2,698,327
Total assets		2,898,396			3,002,617
Total deposits		2,364,564			2,409,088
Shareholders' equity		428,869			422,492

OTHER DATA
End of period full time equivalent employees		833			818

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.

QUARTERLY PERFORMANCE SUMMARY (UNAUDITED)
STELLARONE CORPORATION (NASDAQ: STEL)
(Dollars in thousands)



CREDIT QUALITY	Three Months Ended March 31,
	2011			2010
Allowance for loan losses:
Beginning of period	$	37,649		$	40,172
Provision for loan losses		4,500			6,700
Charge-offs		(4,978	)		(6,708	)
Recoveries		348			480
Net charge-offs		(4,630	)		(6,228	)

End of period	$	37,519		$	40,644

Accruing Troubled Debt Restructurings	$	41,335		$	23,032

Loans greater than 90 days past due still accruing	$	148		$	885

	March 31,
		2011			2010

Non accrual loans	$	39,096		$	57,951
Non accrual TDR's		4,078			1,810
Total non-performing loans		43,174			59,761
Foreclosed assets		9,036			2,267
Total non-performing assets	$	52,210		$	62,028
Nonperforming assets as a % of total assets		1.80	%		2.07	%
Nonperforming assets as a % of loans plus foreclosed assets		2.52	%		2.87	%
Allowance for loan losses as a % of total loans		1.82	%		1.88	%
Net charge-offs as a % of average loans outstanding		0.88	%		1.13	%

	March 31, 2011
	Loans Outstanding		Nonaccrual Loans		Nonaccrual Loans to Loans Outstanding
Construction and land development		233,514		16,368		7.01	%
Commercial real estate:
Commercial real estate		733,672		7,280		0.99	%
Farmland		17,651		1,816		10.29	%
Multifamily, nonresidential and junior liens		103,956		120		0.12	%
Total commercial real estate		855,279		9,216		1.08	%
Consumer real estate:
Home equity lines		266,025		3,501		1.32	%
Secured by 1-4 family residential, secured by first deeds of trust		456,286		10,172		2.23	%
Secured by 1-4 family residential, secured by second deeds of trust		44,478		1,088		2.45	%
Total consumer real estate		766,789		14,761		1.93	%
Commercial and industrial loans (except those secured by real estate)		181,650		2,809		1.55	%
Consumer and other:
Consumer installment loans		24,809		-		0.00	%
Deposit overdrafts		1,008		-		0.00	%
All other loans		1,684		20		1.19	%
Total consumer and other		27,501		20		0.07	%
Total loans		2,064,732		43,174		2.09	%

QUARTERLY PERFORMANCE SUMMARY (UNAUDITED)
STELLARONE CORPORATION (NASDAQ: STEL)
(Dollars in thousands, except per share data)


							Percent
							Increase
SELECTED BALANCE SHEET DATA	3/31/2011			3/31/2010			(Decrease)

Assets
Cash and cash equivalents	$	178,422		$	165,420			7.86	%

Securities:
Securities available for sale		380,078			379,842			0.06	%
Securities held to maturity		-			426			-100.00	%
Total securities		380,078			380,268			-0.05	%

Mortgage loans held for sale		12,047			29,355			-58.96	%

Loans:
Construction and land development		233,514			265,700			-12.11	%
Commercial real estate		855,279			858,644			-0.39	%
Consumer real estate		766,789			784,586			-2.27	%
Commercial and industrial loans (except those secured by real estate)		181,650			216,316			-16.03	%
Consumer and other		27,501			35,838			-23.26	%
Total loans		2,064,732			2,161,084			-4.46	%
Deferred loan costs		596			911			-34.58	%
Allowance for loan losses		(37,519	)		(40,644	)		-7.69	%
Net loans		2,027,809			2,121,351			-4.41	%

Premises and equipment, net		77,893			81,242			-4.12	%
Core deposit intangibles, net		6,249			7,900			-20.90	%
Goodwill		113,652			113,652			0.00	%
Bank owned life insurance		31,435			30,519			3.00	%
Foreclosed assets		9,036			2,267			298.59	%
Other assets		61,775			70,643			-12.55	%

Total assets		2,898,396			3,002,617			-3.47	%

Liabilities
Deposits:
Noninterest bearing deposits		307,847			298,682			3.07	%
Money market & interest checking		981,617			969,425			1.26	%
Savings		275,751			207,266			33.04	%
CD's and other time deposits		799,349			933,715			-14.39	%
Total deposits		2,364,564			2,409,088			-1.85	%

Federal funds purchased and securities
sold under agreements to repurchase		1,156			952			21.43	%
Federal Home Loan Bank advances		60,000			125,000			-52.00	%
Subordinated debt		32,991			32,991			0.00	%
Other liabilities		10,816			12,094			-10.57	%

Total liabilities		2,469,527			2,580,125			-4.29	%

Stockholders' equity
Preferred stock		28,858			28,486			1.31	%
Common stock		22,776			22,685			0.40	%
Additional paid-in capital		270,396			269,241			0.43	%
Retained earnings		102,677			97,431			5.38	%
Accumulated other comprehensive income, net		4,162			4,649			-10.48	%

Total stockholders’ equity		428,869			422,492			1.51	%

Total liabilities and stockholders’ equity	$	2,898,396		$	3,002,617			-3.47	%

QUARTERLY PERFORMANCE SUMMARY (UNAUDITED)
STELLARONE CORPORATION (NASDAQ: STEL)
(Dollars in thousands)
							Percent
	For the Three Months Ended						Increase
	3/31/2011			3/31/2010			(Decrease)
Interest Income
Loans, including fees	$	27,264		$	29,086			-6.26	%
Federal funds sold and deposits in other banks		68			61			11.48	%
Investment securities:
Taxable		1,721			2,258			-23.78	%
Tax-exempt		1,253			1,047			19.68	%
Dividends		-			29			-100.00	%
Total interest income		30,306			32,481			-6.70	%

Interest Expense
Deposits		5,533			8,609			-35.73	%
Federal funds purchased and securities sold under agreements to repurchase		8			6			33.33	%
Federal Home Loan Bank advances and other borrowings		640			1,110			-42.34	%
Subordinated debt		262			257			1.95	%
Total interest expense		6,443			9,982			-35.45	%

Net interest income		23,863			22,499			6.06	%
Provision for loan losses		4,500			6,700			-32.84	%
Net interest income after provision for loan losses		19,363			15,799			22.56	%

Noninterest Income
Retail banking fees		3,556			3,920			-9.29	%
Commissions and fees from fiduciary activities		904			834			8.39	%
Brokerage fee income		435			359			21.17	%
Mortgage banking-related fees		2,065			1,994			3.56	%
Gain on sale of financial center		-			748			-100.00	%
Losses on mortgage indemnifications and repurchases		(265	)		(133	)		99.25	%
Gains on sale of premises and equipment		-			27		-100		%
Gains on securities available for sale		10			302		-96.69		%
Losses / impairments on foreclosed assets		(128	)		(231	)		-44.59	%
Income from bank owned life insurance		319			324			-1.54	%
Other operating income		774			670			15.52	%
Total noninterest income		7,670			8,814			-12.98	%

Noninterest Expense
Compensation and employee benefits		12,355			11,310			9.24	%
Net occupancy		2,073			2,179			-4.86	%
Supplies and equipment		2,207			2,178			1.33	%
Amortization-intangible assets		413			413			0.00	%
Marketing		327			153			113.73	%
State franchise taxes		598			554			7.94	%
FDIC insurance		877			1,109			-20.92	%
Data processing		636			543			17.13	%
Professional fees		633			675			-6.22	%
Telecommunications		376			425			-11.53	%
Other operating expenses		3,041			3,008			1.10	%
Total noninterest expense		23,536			22,547			4.39	%

Income before income taxes		3,497			2,066		69.26		%
Income tax expense		626			212		195.28		%
Net income	$	2,871		$	1,854		54.85		%

STELLARONE CORPORATION (NASDAQ: STEL)
CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2011 AND 2010
(Dollars in thousands)


	For the Three Months Ended March 31,
	2011							2010
	Average		Interest		Average			Average		Interest		Average
	Balance		Inc/Exp		Rates			Balance		Inc/Exp		Rates

Assets
Loans receivable, net (1)	$	2,104,031	$	27,302		5.26	%	$	2,204,297	$	29,136		5.36	%
Investment securities
Taxable		229,709		1,721		3.00	%		259,875		2,288		3.52	%
Tax exempt (1)		129,318		1,928		5.96	%		105,681		1,611		6.10	%
Total investments		359,027		3,649		4.07	%		365,556		3,899		4.27	%

Interest bearing deposits		77,042		36		0.19	%		44,060		28		0.25	%
Federal funds sold		51,390		32		0.25	%		52,948		33		0.25	%
		487,459		3,717		3.05	%		462,564		3,960		3.43	%

Total earning assets		2,591,490	$	31,019		4.85	%		2,666,861	$	33,096		5.04	%

Total nonearning assets		318,752							332,122

Total assets	$	2,910,242						$	2,998,983

Liabilities and Stockholders' Equity
Interest-bearing deposits
Interest checking	$	559,393	$	533		0.39	%	$	558,797	$	1,332		0.97	%
Money market		420,202		1,041		1.00	%		392,243		1,294		1.34	%
Savings		268,854		468		0.71	%		200,064		450		0.91	%
Time deposits:
Less than $100,000		542,760		2,243		1.68	%		643,709		3,577		2.25	%
$100,000 and more		264,169		1,248		1.92	%		312,297		1,956		2.54	%
Total interest-bearing deposits		2,055,378		5,533		1.09	%		2,107,110		8,609		1.66	%

Federal funds purchased and securities sold under agreements to repurchase		1,044		8		3.07	%		861		6		2.79	%
Federal Home Loan Bank advances and other borrowings		80,000		640		3.20	%		127,167		1,110		3.49	%
Subordinated debt		32,991		262		3.18	%		32,991		257		3.12	%

		114,035		910		3.19	%		161,019		1,373		3.41	%

Total interest-bearing liabilities		2,169,413		6,443		1.20	%		2,268,129		9,982		1.78	%

Total noninterest-bearing liabilities		313,097							308,594

Total liabilities		2,482,510							2,576,723
Stockholders' equity		427,732							422,260

Total liabilities and stockholders' equity	$	2,910,242						$	2,998,983


Net interest income (tax equivalent)			$	24,576						$	23,114
Average interest rate spread						3.65	%						3.26	%
Interest expense as percentage of average earning assets						1.01	%						1.52	%
Net interest margin						3.85	%						3.52	%

(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)

	2011			2010
	Quarter Ended
	March 31,			December 31,			September 30,			June 30,

Interest income	$	30,306		$	31,710		$	31,582		$	32,150
Interest expense		6,443			6,950			8,048			8,932
Net interest income		23,863			24,760			23,534			23,218
Provision for loan losses		4,500			5,300			3,500			7,350
Total net interest income after provision		19,363			19,460			20,034			15,868
Non interest income		7,670			7,827			8,247			8,380
Non interest expense		23,536			23,956			23,665			22,791
Income before income taxes		3,497			3,331			4,616			1,457
Provision for income taxes (benefit)		626			502			1,088			(96	)
Net income	$	2,871		$	2,829		$	3,528		$	1,553
Preferred stock dividends		(370	)		(378	)		(378	)		(374	)
Accretion of preferred stock discount		(95	)		(94	)		(92	)		(91	)
Net income available to common shareholders	$	2,406		$	2,357		$	3,058		$	1,088
Net income per share
basic	$	0.11		$	0.10		$	0.13		$	0.05
diluted	$	0.11		$	0.10		$	0.13		$	0.05

STELLARONE CORPORATION (NASDAQ: STEL)
SEGMENT INFORMATION (UNAUDITED)
(Dollars in thousands)


At and for the Three Months Ended March 31, 2011

	Commercial		Mortgage		Wealth					Intersegment
	Bank		Banking		Management		Other			Elimination			Consolidated
Net interest income	$	23,879	$	245	$	-	$	(261	)	$	-		$	23,863
Provision for loan losses		4,500		-		-		-			-			4,500
Noninterest income		5,644		1,875		1,339		26			(1,214	)		7,670
Noninterest expense		21,555		1,906		1,093		196			(1,214	)		23,536
Provision for income taxes		645		64		74		(157	)		-			626
Net income (loss)	$	2,824	$	150	$	172	$	(275	)	$	-		$	2,871

Total Assets	$	2,876,655	$	12,613	$	498	$	465,231		$	(456,601	)	$	2,898,396
Average Assets	$	2,875,903	$	24,683	$	166	$	464,309		$	(454,819	)	$	2,910,242

At and for the Three Months Ended March 31, 2010

	Commercial		Mortgage		Wealth					Intersegment
	Bank		Banking		Management		Other			Elimination			Consolidated
Net interest income	$	22,401	$	355	$	-	$	(257	)	$	-		$	22,499
Provision for loan losses		6,700		-		-		-			-			6,700
Noninterest income		6,603		1,881		1,192		212			(1,073	)		8,814
Noninterest expense		20,369		1,764		987		501			(1,073	)		22,547
Provision for income taxes		189		142		61		(181	)		-			212
Net income (loss)	$	1,746	$	330	$	144	$	(366	)	$	-		$	1,854

Total Assets	$	2,953,335	$	30,829	$	473	$	459,417		$	(441,437	)	$	3,002,617
Average Assets	$	2,948,033	$	33,634	$	197	$	459,469		$	(442,353	)	$	2,998,983

CONTACT:	Jeffrey W. Farrar
	Executive Vice President and CFO of StellarOne Corporation
	(434) 964-2217
	jfarrar@stellarone.com

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