StellarOne CORP - FORM 8-K - EX-99.1 - PRESS RELEASE

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8-K - EARNINGS RELEASE - StellarOne CORP	earnings_release.htm

FOR IMMEDIATE RELEASE

Contact: Jeffrey W. Farrar

Executive Vice President and CFO

(434) 964-2217

jfarrar@stellarone.com

STELLARONE CORPORATION

REPORTS INCREASED QUARTERLY AND FULL YEAR 2011 EARNINGS

Charlottesville, VA, January 26, 2012 – StellarOne Corporation (NASDAQ: STEL) (“StellarOne”) today reported fourth quarter 2011 earnings of $4.8 million and net income available to common shareholders of $3.8 million, or $0.17 net income per diluted common share, after deducting the dividends and discount accretion on preferred stock from net income. This represents a 61.1% increase over net income available to common shareholders of $2.4 million, or $0.10 net income per diluted common share recognized during the same quarter in the prior year, and a 3.2% decrease compared to net income to common shareholders of $3.9 million, or $0.17 net income per diluted common share for the third quarter of 2011. Full year 2011 earnings available to common shareholders were $13.4 million or $0.59 per common share, up 70% compared to $7.9 million or $0.35 per diluted common share in 2010.

The results for the fourth quarter of 2011 include $628 thousand in accelerated discount accretion charges resulting from the full exit and redemption of remaining preferred shares associated with the Troubled Asset Relief Program (TARP) on December 28, 2011. The effect of this acceleration reduced earnings per share for the quarter by approximately $0.03 per common share.

“One of our primary strategic goals for 2011 was to exit the TARP program. We are pleased to have fully accomplished this goal in the fourth quarter of 2011 with no dilution to our common shareholders. Our common shareholders will benefit from reduced earnings dilution and the potential for increased dividends in the coming quarters. The fourth quarter saw a continuation of improving asset quality and earnings growth. While loan growth remains sluggish, we are seeing some improved loan activity in a number of our markets including our organic growth strategies currently underway in both the Richmond and Hampton Roads markets. With the repayment of TARP, we are also better positioned to take advantage of market opportunities.” said O. R. Barham, Jr., President and Chief Executive Officer.

Fourth quarter key metrics and business highlights included:

·	Revenues were stable, with net interest margin expanding slightly and mortgage revenue growth offsetting some decreases in other noninterest revenue streams.

·	Nonperforming assets as a percentage of total assets decreased 7.3% on a sequential quarter basis to 1.64%.

·	Accruing troubled debt restructurings decreased $9.2 million when compared to the same period in the prior year, and declined $1.8 million on a sequential quarter basis.

·	Net interest margin expanded slightly to 3.79% in the fourth quarter of 2011 from 3.77% in the third quarter of 2011 due to reduced deposit costs.

·	Divestiture of the wholesale mortgage line of business was completed.

Net Interest Margin Up Slightly Over Prior Quarter

Net interest income on a tax-equivalent basis amounted to $25.1 million for the fourth quarter of 2011, or essentially equal to the third quarter of 2011, and a $363 thousand, or 1.4%, decrease from $25.4 million for the same period in the prior year. The net interest margin was 3.79% for the fourth quarter of 2011, compared to 3.77% for the third quarter of 2011 and 3.87% for the fourth quarter of 2010. The average yield on earning assets for the current quarter decreased 7 basis points to 4.62% as compared to 4.69% for the third quarter of 2011, which was more than offset by an 11 basis point improvement in the cost of interest bearing liabilities, moving from 1.11% during the third quarter of 2011 to 1.00% during the fourth quarter of 2011. Investment yields and loan yields contracted 35 basis points and 5 basis points, respectively, on a sequential basis. Investment yields have contracted during the quarter due to the sale of some higher yielding municipal securities in order to realign portfolio risk, continued runoff of seasoned investments and lower yields realized on the recent investment of excess liquidity in the current low rate environment. Loan yields have contracted slightly due to re-pricing within the current portfolio and reduced yields on new production. The 11 basis point improvement to the overall cost of funds on a sequential basis was driven by reduced cost of interest bearing deposits by 12 basis points. Net interest margin will continue to be pressured by pricing competition for quality loan opportunities, lower investment yields, and the flattening yield curve.

Operating Noninterest Income Remains Stable on a Sequential Basis

On an operating basis, which excludes gains and losses from sales and impairments of securities and other assets, total noninterest income amounted to $7.9 million for the fourth quarter of 2011, up $39 thousand or essentially flat on a sequential basis compared to $7.8 million for the third quarter of 2011, and up $771 thousand or 10.9% compared to the same period in the prior year. The mix of noninterest income shifted sequentially during the quarter. Mortgage banking fees increased $656 thousand and was offset by decreases of $143 thousand in retail banking fees, $129 thousand in brokerage fee income and an increase of $209 thousand in losses and write-downs on foreclosed assets. The $771 thousand increase in operating noninterest income when compared to the same period in the prior year stemmed from the absence of losses on mortgage indemnifications in the fourth quarter of 2011 compared to $854 thousand of losses in the same period in the prior year. This was offset by $144 thousand decrease in brokerage fee income compared to the same quarter in the prior year. Lower fee realizations attributed to the revenue decrease.

Mortgage banking revenue totaled $2.6 million for the fourth quarter of 2011, or up $656 thousand or 33.4% compared to $2.0 million for the third quarter of 2011 and down $146 thousand or 5.3% when compared to the same quarter in 2010. The record low mortgage rates in effect for the fourth quarter of 2011 drove much of the volume increase sequentially as demand for refinance and purchase money both increased. The divestiture of the wholesale mortgage operation completed in the fourth quarter of 2011 is expected to improve the mortgage risk profile and ability to grow revenues and expanding mortgage presence in the Richmond and Hampton Roads markets.

Retail banking fee income remained stable at $3.9 million for the fourth quarter of 2011, a decrease of $143 thousand or 3.6% compared to $4.0 million for the third quarter of 2011. This sequential

quarter decrease was attributable to decreases of $106 thousand and $22 thousand in NSF revenue and interchange income, respectively.

Wealth management revenues from trust and brokerage fees for the fourth quarter of 2011 were $1.1 million or down $136 thousand or 11.4% on a sequential quarter basis and down $98 thousand or 8.5% compared to the fourth quarter of 2010. Fiduciary assets increased $26.7 million or 6.5% sequentially to $440.3 million, compared to $413.6 million at September 30, 2011.

Non-Performing Assets Improve Sequentially

Non-performing assets totaled $47.7 million at December 31, 2011, down $4.7 million or 9.0% sequentially from $52.5 million at September 30, 2011 and down $6.6 million or 12.2% compared to $54.4 million at December 31, 2010. The ratio of non-performing assets as a percentage of total assets decreased to 1.64% as of December 31, 2011, compared to 1.77% as of September 30, 2011 and 1.85% at December 31, 2010.

Net charge-offs for the fourth quarter of 2011 totaled $4.4 million or up $662 thousand compared to the $3.8 million realized during the third quarter of 2011 and down $3.2 million when compared to $7.6 million during the fourth quarter of 2010. Annualized net charge-offs as a percentage of average loans receivable amounted to 0.86% for the fourth quarter of 2011, up from 0.73% for the third quarter of 2011 and down from 1.43% for the fourth quarter of 2010.

Non-performing loans decreased $4.3 million or 9.9% to $39.2 million at December 31, 2011, when compared to $43.5 million at both September 30, 2011 and December 31, 2010.

Foreclosed assets totaled $8.6 million at December 31, 2011, down $434 thousand or 4.8% compared to $9.0 million at September 30, 2011 and down $2.3 million or 21.3% compared to $10.9 million as of December 31, 2010. Past due and matured loans between 30 and 89 days totaled $34.5 million at December 31, 2011, down $8.9 million or 20.5% compared to $43.3 million at September 30, 2011.

Included in the loan portfolio at December 31, 2011, are loans classified as troubled debt restructurings (“TDRs”) totaling $38.7 million or 1.9% of total loans. TDRs were reduced sequentially by 5.0% or $2.0 million as compared to $40.7 million at September 30, 2011. Of the total restructurings, $30.5 million are on accrual status, which represent performing relationships for which a modification to the contractual interest rate or repayment structure has been granted in order to address a financial hardship. At December 31, 2011, $30.3 million or 78.2% of total TDRs represent residential consumer real estate loans under a mortgage modification program designed to help homeowners remain in their homes.

StellarOne recorded a provision for loan losses of $1.8 million for the fourth quarter of 2011, a decrease of $1.5 million compared to the $3.3 million recognized for the third quarter of 2011 and a decrease of $3.5 million compared to the fourth quarter of 2010. This decrease is reflective of the 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 increased to 83.2% at December 31, 2011, or up 2.1% when compared to 81.1% at September 30, 2011. The fourth quarter 2011 provision compares to net charge-offs of $4.4 million, resulting in an allowance for loan losses of $32.6 million at December 31, 2011, a decrease of $2.7 million when compared to $35.3 million at September 30, 2011. The allowance as a percentage of total loans was 1.60% at December 31, 2011, compared to 1.74% at September 30, 2011.

Efficiency Ratio Increases Sequentially

The efficiency ratio was 72.3% for the fourth quarter of 2011, compared to 69.3% for the third quarter of 2011 and 70.5% for the same quarter in 2010. The sequential quarter increase in the efficiency ratio reflects a slight increase in total revenue and increased overhead including some nonrecurring expenses associated with human capital administration and strategic initiatives. Noninterest expense for the fourth quarter amounted to $24.6 million, up $1.2 million or 5.3% compared to $23.3 million for the third quarter of 2011 and up $639 thousand or 2.7% when compared to the fourth quarter of 2010.

The sequential quarter increase in noninterest expense was driven by increases of $488 thousand in compensation and benefits expense, $152 thousand in supplies and equipment and $375 thousand in professional fees. The increase in compensation and benefits expense is largely related to increased commissions and incentives associated with the higher mortgage volume, higher than normal medical claims and nonrecurring costs of $175 thousand associated with one-time bonuses and severance packages. In addition, increased costs of $240 thousand associated with incentive plans for revenue producing units also contributed to the sequential increase. Professional fees included approximately $271 thousand of nonrecurring costs associated with strategic planning initiatives.

The increase relative to the same quarter in 2010 can be attributed to a $1.2 million increase in compensation and benefits expense and a $486 thousand increase in professional fees, which were partially offset by an $899 thousand decrease in FDIC insurance expense. Professional fees increased due to higher legal fees associated with customer workout arrangements and nonrecurring corporate consulting fees. The compensation and benefits increase is related to the hiring of some key management positions over the past eighteen months, branch closings, severance agreements and the reestablishment of incentive plans for revenue producing units. Company-wide initiatives are ongoing in an effort to reduce and reallocate our cost of human capital. These efforts resulted in the net reduction of eight full-time equivalent positions on a sequential quarter basis and twenty-seven positions when compared to December 31, 2010. FTE levels are expected to show further reductions in first quarter 2012 associated with the wholesale mortgage divestiture and announced branch consolidations.

Capital Position Remains Strong After TARP Repayment

Subsequent to the TARP repayment, risk-based capital ratios continue to substantially exceed regulatory standards for well-capitalized banks. The period-end tangible common equity ratio was 10.52% at December 31, 2011 compared to 9.95% at September 30, 2011. Tier 1 risk-based and total risk-based capital ratios were 15.17% and 16.42%, respectively, at December 31, 2011 compared to 16.26% and 17.51% at September 30, 2011. Shareholders’ equity represented 14.19% of total assets at December 31, 2011, while book value per common share was $18.15 per share.

Balance Sheet Contracts Slightly While Loans Remain Stable

Period end loans increased $4.0 million or were essentially flat compared to the third quarter 2011, while average loans for the fourth quarter of 2011 were $2.05 billion or down approximately $10.1 million or less than 1% when compared to $2.06 billion for the third quarter of 2011. Continued soft loan demand, aggressive pricing competition for quality loans and increased curtailments as a result of the slowed economy have impacted the ability to grow the loan portfolio. Average securities were $466.6 million for the fourth quarter, up $20.2 million or 4.5% from $446.3 million for the third quarter of 2011, reflecting increased investment activity driven by reduced loan opportunities. Average deposits for the fourth quarter of 2011 were $2.40 billion or down $19.7 million or less than 1% on a sequential quarter basis compared to $2.42 billion for the third quarter of 2011.

Average interest bearing deposits decreased sequentially by approximately $19.8 million or less than 1%, while average non-interest bearing deposits remained stable. At December 31, 2011, total assets were $2.92 billion, compared to $2.96 billion at September 30, 2011. Cash and cash equivalents were $100.0 million at December 31, 2011, a decrease of $57.6 million or 36.6% compared to $157.6 million at September 30, 2011.

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 our sole subsidiary, StellarOne Bank, we operate 54 full-service financial centers, one loan production office, and 63 ATMs serving the New River Valley, Roanoke Valley, Shenandoah Valley, and Central and North Central Virginia.

Earnings Webcast

To hear a live webcast of StellarOne’s fourth quarter 2011 earnings conference call at 10:00 a.m. (EDT) on January 26, 2012, 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, January 26, 2012 through 11:59 PM (EDT) on Thursday, February 2, 2012, by dialing toll free (855) 859 2056 and using passcode #40637910.

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. 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 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.

SELECTED FINANCIAL DATA (UNAUDITED)
STELLARONE CORPORATION (NASDAQ: STEL)
(Dollars in thousands, except per share data)


SUMMARY INCOME STATEMENT	Three Months Ended December 31,						Twelve Months Ended December 31,
	2011			2010			2011			2010
Interest income - taxable equivalent	$	30,580		$	32,373		$	123,957		$	130,404
Interest expense		5,520			6,950			24,440			33,912
Net interest income - taxable equivalent		25,060			25,423			99,517			96,492
Less: taxable equivalent adjustment		787			663			3,096			2,482
Net interest income		24,273			24,760			96,421			94,010
Provision for loan and lease losses		1,750			5,300			12,700			22,850
Net interest income after provision for
loan and lease losses		22,523			19,460			83,721			71,160
Noninterest income		8,409			7,827			31,466			33,269
Noninterest expense		24,595			23,956			94,698			92,959
Income tax expense		1,568			502			4,604			1,705
Net income		4,769			2,829			15,885			9,765
Dividends and accretion on preferred stock		(973	)		(472	)		(2,455	)		(1,865	)
Net income available to common shareholders	$	3,796		$	2,357		$	13,430		$	7,900

Earnings per share available to common shareholders
Basic	$	0.17		$	0.10		$	0.59		$	0.35
Diluted	$	0.17		$	0.10		$	0.59		$	0.35

SUMMARY AVERAGE BALANCE SHEET	Three Months Ended December 31,						Twelve Months Ended December 31,
		2011			2010			2011			2010
Total loans	$	2,054,650		$	2,129,457		$	2,077,067		$	2,161,387
Total investment securities		466,553			367,079			419,149			375,928
Total earning assets		2,626,406			2,604,363			2,616,532			2,644,417
Total assets		2,939,235			2,946,014			2,930,426			2,976,744
Total deposits		2,399,885			2,378,594			2,391,761			2,386,730
Shareholders' equity		432,969			428,478			428,931			425,638

PERFORMANCE RATIOS	Three Months Ended December 31,						Twelve Months Ended December 31,
		2011			2010			2011			2010
Return on average assets		0.64	%		0.38	%		0.54	%		0.33	%
Return on average equity		4.37	%		2.62	%		3.70	%		2.29	%
Return on average realized equity (A)		4.46	%		2.66	%		3.76	%		2.33	%
Net interest margin (taxable equivalent)		3.79	%		3.87	%		3.80	%		3.65	%
Efficiency (taxable equivalent) (B)		72.29	%		70.52	%		70.69	%		70.74	%

CAPITAL MANAGEMENT	December 31,
		2011			2010

Tier 1 risk-based capital ratio		15.17	%		14.19	%
Tangible equity ratio		10.52	%		10.80	%
Tangible common equity ratio		10.52	%		9.74	%
Period end shares issued and outstanding		22,819,000			22,748,062
Book value per common share	$	18.15		$	17.43
Tangible book value per common share	$	12.90		$	12.07

	Three Months Ended December 31,						Twelve Months Ended December 31,
		2011			2010			2011			2010
Shares issued		3,064			-			43,267			86,937
Average common shares issued and outstanding		22,815,959			22,747,546			22,794,508			22,721,246
Average diluted common shares issued and outstanding		22,869,724			22,816,864			22,849,874			22,779,584
Cash dividends paid per common share	$	0.04		$	0.04		$	0.16		$	0.16

SUMMARY ENDING BALANCE SHEET	December 31,
		2011			2010
Total loans	$	2,031,131		$	2,098,896
Total investment securities		477,964			381,231
Total earning assets		2,610,530			2,637,179
Total assets		2,917,928			2,940,442
Total deposits		2,395,600			2,386,102
Shareholders' equity		414,173			426,437

OTHER DATA
End of period full time equivalent employees		811			838

(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 by the sum of net interest income on a fully tax equivalent basis and non-interest income excluding gains on securities, loss on sale of foreclosed assets and other than temporary impairment on securities and goodwill. This is a non-GAAP financial measure, which we believe provides investors with important information regarding our operational efficiency. Comparison of our efficiency ratio with those of other companies may not be possible, because other companies may calculate the efficiency ratio differently.

(C)	Individual amounts shown above are calculated from actual, not rounded amounts in the thousands, which appear above.

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



CREDIT QUALITY	Three Months Ended December 31,						Twelve Months Ended December 31,
	2011			2010			2011			2010
Allowance for loan losses:
Beginning of period	$	35,268		$	39,973		$	37,649		$	40,172
Provision for loan losses		1,750			5,300			12,700			22,850
Charge-offs		(5,045	)		(8,192	)		(19,928	)		(27,578	)
Recoveries		615			568			2,167			2,205
Net charge-offs		(4,430	)		(7,624	)		(17,761	)		(25,373	)
End of period	$	32,588		$	37,649		$	32,588		$	37,649

Accruing Troubled Debt Restructurings	$	30,531		$	33,267

Loans greater than 90 days past due still accruing	$	1,516		$	-


	December 31,
	2011			2010
Non accrual loans	$	30,985		$	38,048
Non accrual TDR's		8,189			5,426
Total non-performing loans		39,174			43,474
Foreclosed assets		8,575			10,894
Total non-performing assets	$	47,749		$	54,368
Nonperforming assets as a % of total assets		1.64	%		1.85	%
Nonperforming assets as a % of loans plus
foreclosed assets		2.34	%		2.58	%
Allowance for loan losses as a % of total loans		1.60	%		1.79	%
Net charge-offs as a % of average loans outstanding - 3 months		0.86	%		1.43	%
Net charge-offs as a % of average loans outstanding - year to date		0.86	%		1.17	%


	December 31, 2011
	Loans Outstanding		Nonaccrual Loans		Nonaccrual Loans to Loans Outstanding
Construction and land development:
Commercial		164,672		8,187		4.97	%
Residential		49,995		137		0.27	%
Total construction and land development		214,667		8,324		3.88	%
Commercial real estate:
Commercial real estate - owner occupied		317,976		7,139		2.25	%
Commercial real estate - non-owner occupied		417,658		2,143		0.51	%
Farmland		15,756		445		2.82	%
Multifamily, nonresidential and junior liens		93,470		5,328		5.70	%
Total commercial real estate		844,860		15,055		1.78	%
Consumer real estate:
Home equity lines		263,035		3,154		1.20	%
Secured by 1-4 family residential, secured by first deeds of trust		450,667		11,030		2.45	%
Secured by 1-4 family residential, secured by second deeds of trust		42,534		445		1.05	%
Total consumer real estate		756,236		14,629		1.93	%
Commercial and industrial loans (except those secured by real estate)		189,887		1,141		0.60	%
Consumer and other:
Consumer installment loans		20,216		2		0.01	%
Deposit overdrafts		3,526		-		0.00	%
All other loans		1,739		23		1.32	%
Total consumer and other		25,481		25		0.10	%
Total loans		2,031,131		39,174		1.93	%

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


							Percent
							Increase
SELECTED BALANCE SHEET DATA	12/31/2011			12/31/2010			(Decrease)

Assets
Cash and cash equivalents	$	99,970		$	139,886			-28.53	%
Investment securities available for sale		477,964			381,231			25.37	%
Mortgage loans held for sale		42,027			51,722			-18.74	%

Loans:
Construction and land development		214,667			237,637			-9.67	%
Commercial real estate		844,860			879,149			-3.90	%
Consumer real estate		756,236			768,353			-1.58	%
Commercial and industrial loans (except those secured by real estate)		189,887			183,693			3.37	%
Consumer and other		25,481			30,064			-15.24	%
Total loans		2,031,131			2,098,896			-3.23	%
Deferred loan costs		299			588			-49.15	%
Allowance for loan losses		(32,588	)		(37,649	)		-13.44	%
Net loans		1,998,842			2,061,835			-3.06	%

Premises and equipment, net		74,602			79,033			-5.61	%
Deferred income tax asset		-			1,909			-100.00	%
Core deposit intangibles, net		5,011			6,662			-24.78	%
Goodwill		113,652			113,652			0.00	%
Bank owned life insurance		42,413			31,116			36.31	%
Foreclosed assets		8,575			10,894			-21.29	%
Other assets		54,872			62,502			-12.21	%

Total assets		2,917,928			2,940,442			-0.77	%

Liabilities
Deposits:
Noninterest bearing deposits		310,756			322,924			-3.77	%
Money market & interest checking		1,013,826			989,426			2.47	%
Savings		289,260			255,215			13.34	%
CD's and other time deposits		781,758			818,537			-4.49	%
Total deposits		2,395,600			2,386,102			0.40	%

Federal funds purchased and securities sold under agreements to repurchase		841			987			-14.79	%
Federal Home Loan Bank advances		60,000			85,000			-29.41	%
Subordinated debt		32,991			32,991			0.00	%
Deferred income tax liability		2,654			-
Other liabilities		11,669			8,925			30.75	%

Total liabilities		2,503,755			2,514,005			-0.41	%

Stockholders' equity
Preferred stock		-			28,763			-100.00	%
Common stock		22,819			22,748			0.31	%
Additional paid-in capital		271,080			270,047			0.38	%
Retained earnings		110,940			101,188			9.64	%
Accumulated other comprehensive income, net		9,334			3,691			>100.00	%

Total stockholders’ equity		414,173			426,437			-2.88	%

Total liabilities and stockholders’ equity	$	2,917,928		$	2,940,442			-0.77	%

QUARTERLY PERFORMANCE SUMMARY (UNAUDITED)
STELLARONE CORPORATION (NASDAQ: STEL)
(Dollars in thousands)
							Percent
	For the three months ended						Increase
	12/31/2011			12/31/2010			(Decrease)
Interest Income
Loans, including fees	$	26,634		$	28,666			-7.09	%
Federal funds sold and deposits in other banks		72			58			24.14	%
Investment securities:
Taxable		1,675			1,844			-9.16	%
Tax-exempt		1,412			1,142			23.64	%
Total interest income		29,793			31,710			-6.05	%

Interest Expense
Deposits		4,693			5,990			-21.65	%
Federal funds purchased and securities sold under
agreements to repurchase		7			8			-12.50	%
Federal Home Loan Bank advances and other borrowings		477			687			-30.57	%
Subordinated debt		343			265			29.43	%

Total interest expense		5,520			6,950			-20.58	%

Net interest income		24,273			24,760			-1.97	%
Provision for loan losses		1,750			5,300			-66.98	%
Net interest income after provision for loan losses		22,523			19,460			15.74	%

Noninterest Income
Retail banking fees		3,876			3,899			-0.59	%
Commissions and fees from fiduciary activities		814			768			5.99	%
Brokerage fee income		245			389			-37.02	%
Mortgage banking-related fees		2,623			2,769			-5.27	%
Losses on mortgage indemnifications and repurchases		-			(854	)		-100.00	%
Gains on sale of premises and equipment		91			172		>100.00%
Impairments on securities available for sale		-			(58	)		-100.00	%
Gains on securities available for sale		447			612			-26.96	%
Losses / impairments on foreclosed assets		(432	)		(688	)		-37.21	%
Income from bank owned life insurance		329			324			1.39	%
Other operating income		416			494			-15.89	%
Total noninterest income		8,409			7,827			7.44	%

Noninterest Expense
Compensation and employee benefits		13,015			11,803			10.27	%
Net occupancy		2,110			2,170			-2.76	%
Supplies and equipment		2,364			2,106			12.25	%
Amortization-intangible assets		413			413			0.00	%
Marketing		216			360			-40.00	%
State franchise taxes		596			554			7.58	%
FDIC insurance		571			1,470			-61.16	%
Data processing		692			657			5.33	%
Professional fees		1,016			530			91.70	%
Telecommunications		427			430			-0.70	%
Other operating expenses		3,175			3,463			-8.32	%
Total noninterest expense		24,595			23,956			2.67	%

Income before income taxes		6,337			3,331			90.24	%
Income tax expense		1,568			502		>100.00%
Net income	$	4,769		$	2,829			68.58	%

QUARTERLY PERFORMANCE SUMMARY
STELLARONE CORPORATION (NASDAQ: STEL)
(Dollars in thousands)
							Percent
	For the Twelve Months Ended						Increase
	12/31/2011			12/31/2010			(Decrease)
Interest Income
Loans, including fees	$	107,999		$	114,828			-5.95	%
Federal funds sold and deposits in other banks		282			251			12.35	%
Investment securities:
Taxable		7,049			8,408			-16.16	%
Tax-exempt		5,531			4,368			26.63	%
Dividends		-			67			-100.00	%
Total interest income		120,861			127,922			-5.52	%

Interest Expense
Deposits		21,117			28,943			-27.04	%
Federal funds purchased and securities sold under
agreements to repurchase		32			29			10.34	%
Federal Home Loan Bank advances and other borrowings		2,158			3,866			-44.18	%
Subordinated debt		1,133			1,074			5.49	%

Total interest expense		24,440			33,912			-27.93	%

Net interest income		96,421			94,010			2.56	%
Provision for loan losses		12,700			22,850			-44.42	%
Net interest income after provision for loan losses		83,721			71,160			17.65	%

Noninterest Income
Retail banking fees		15,291			16,237			-5.83	%
Commissions and fees from fiduciary activities		3,386			3,264			3.74	%
Brokerage fee income		1,560			1,492			4.56	%
Mortgage banking-related fees		8,186			9,388			-12.80	%
Gain on sale of financial center		-			748			-100.00	%
Losses on mortgage indemnifications and repurchases		(232	)		(2,265	)		-89.76	%
Gains on sale of premises and equipment		84			199		>100.00%
Impairments on securities available for sale		-			(110	)		-100.00	%
Gains on securities available for sale		509			1,268			-59.86	%
Losses / impairments on foreclosed assets		(1,149	)		(1,147	)		0.17	%
Income from bank owned life insurance		1,298			1,296			0.15	%
Other operating income		2,533			2,899			-12.63	%
Total noninterest income		31,466			33,269			-5.42	%

Noninterest Expense
Compensation and employee benefits		50,200			45,898			9.37	%
Net occupancy		8,274			8,389			-1.37	%
Supplies and equipment		9,116			8,401			8.51	%
Amortization-intangible assets		1,651			1,651			0.00	%
Marketing		953			1,146			-16.84	%
State franchise taxes		2,384			2,216			7.58	%
FDIC insurance		2,679			5,518			-51.45	%
Data processing		2,721			2,398			13.47	%
Professional fees		2,889			2,600			11.12	%
Telecommunications		1,647			1,686			-2.31	%
Other operating expenses		12,184			13,056			-6.68	%
Total noninterest expense		94,698			92,959			1.87	%

Income before income taxes		20,489			11,470			78.63	%
Income tax expense		4,604			1,705		>100.00%
Net income	$	15,885		$	9,765			62.67	%

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


	For the Three Months Ended December 31,
	2011							2010
	Average		Interest		Average			Average		Interest		Average
Dollars in thousands	Balance		Inc/Exp		Rates			Balance		Inc/Exp		Rates

Assets
Loans receivable, net (1)	$	2,054,650	$	26,660		5.15	%	$	2,129,457	$	28,714		5.35	%
Investment securities
Taxable		317,374		1,675		2.07	%		249,848		1,844		2.89	%
Tax exempt (1)		149,179		2,173		5.70	%		117,231		1,757		5.86	%
Total investments		466,553		3,848		3.23	%		367,079		3,601		3.84	%

Interest bearing deposits		97,392		67		0.27	%		53,739		29		0.21	%
Federal funds sold		7,811		5		0.25	%		54,088		29		0.21	%
		571,756		3,920		2.69	%		474,906		3,659		3.02	%

Total earning assets		2,626,406	$	30,580		4.62	%		2,604,363	$	32,373		4.93	%

Total nonearning assets		312,829							341,651

Total assets	$	2,939,235						$	2,946,014

Liabilities and Stockholders' Equity
Interest-bearing deposits
Interest checking	$	575,175	$	398		0.27	%	$	552,735	$	546		0.39	%
Money market		430,592		692		0.64	%		419,603		1,048		0.99	%
Savings		288,103		332		0.46	%		248,643		471		0.75	%
Time deposits:
Less than $100,000		524,014		2,072		1.57	%		567,053		2,508		1.75	%
$100,000 and more		266,344		1,199		1.79	%		275,483		1,417		2.04	%
Total interest-bearing deposits		2,084,228		4,693		0.89	%		2,063,517		5,990		1.15	%

Federal funds purchased and securities sold under agreements to repurchase		946		7		2.95	%		1,026		8		3.05	%
Federal Home Loan Bank advances and other borrowings		60,000		477		3.11	%		85,001		687		3.16	%
Subordinated debt		32,991		343		4.07	%		32,991		265		3.14	%

		93,937		827		3.44	%		119,018		960		3.16	%

Total interest-bearing liabilities		2,178,165		5,520		1.00	%		2,182,535		6,950		1.26	%

Total noninterest-bearing liabilities		328,101							335,001

Total liabilities		2,506,266							2,517,536
Stockholders' equity		432,969							428,478

Total liabilities and stockholders' equity	$	2,939,235						$	2,946,014


Net interest income (tax equivalent)			$	25,060						$	25,423
Average interest rate spread						3.62	%						3.67	%
Interest expense as percentage of average earning assets						0.83	%						1.06	%
Net interest margin						3.79	%						3.87	%

(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, 2011 AND 2010
(Dollars in thousands)


	For the Twelve Months Ended December 31,
	2011							2010
	Average		Interest		Average			Average		Interest		Average
Dollars in thousands	Balance		Inc/Exp		Rates			Balance		Inc/Exp		Rates

Assets
Loans receivable, net (1)	$	2,077,067	$	108,117		5.21	%	$	2,161,387	$	115,025		5.32	%
Investment securities
Taxable		274,660		7,049		2.53	%		264,632		8,408		3.13	%
Tax exempt (1)		144,489		8,509		5.81	%		111,296		6,720		5.96	%
Total investments		419,149		15,558		3.66	%		375,928		15,128		3.97	%

Interest bearing deposits		99,582		231		0.23	%		55,101		124		0.22	%
Federal funds sold		20,734		51		0.24	%		52,001		127		0.24	%
		539,465		15,840		2.90	%		483,030		15,379		3.14	%

Total earning assets		2,616,532	$	123,957		4.74	%		2,644,417	$	130,404		4.93	%

Total nonearning assets		313,894							332,327

Total assets	$	2,930,426						$	2,976,744

Liabilities and Stockholders' Equity
Interest-bearing deposits
Interest checking	$	569,201	$	1,999		0.35	%	$	560,591	$	3,363		0.60	%
Money market		430,572		3,757		0.87	%		400,210		4,579		1.14	%
Savings		278,605		1,638		0.59	%		227,197		1,844		0.81	%
Time deposits:
Less than $100,000		535,813		8,781		1.64	%		604,831		12,394		2.05	%
$100,000 and more		265,778		4,942		1.86	%		290,421		6,763		2.33	%
Total interest-bearing deposits		2,079,969		21,117		1.02	%		2,083,250		28,943		1.39	%

Federal funds purchased and securities sold under agreements to repurchase		1,054		32		2.99	%		982		29		2.91	%
Federal Home Loan Bank advances and other borrowings		64,932		2,158		3.28	%		113,315		3,866		3.36	%
Subordinated debt		32,991		1,133		3.39	%		32,991		1,074		3.21	%

		98,977		3,323		3.31	%		147,288		4,969		3.33	%

Total interest-bearing liabilities		2,178,946		24,440		1.12	%		2,230,538		33,912		1.52	%

Total noninterest-bearing liabilities		322,549							320,568

Total liabilities		2,501,495							2,551,106
Stockholders' equity		428,931							425,638

Total liabilities and stockholders' equity	$	2,930,426						$	2,976,744


Net interest income (tax equivalent)			$	99,517						$	96,492
Average interest rate spread						3.62	%						3.41	%
Interest expense as percentage of average earning assets						0.93	%						1.28	%
Net interest margin						3.80	%						3.65	%

(1) Income and yields are reported on a taxable equivalent basis using a 35% tax rate.

STELLARONE CORPORATION (NASDAQ: STEL)
FINANCIAL INFORMATION - FOUR QUARTER TREND (UNAUDITED)
(Dollars in thousands, except per share data)


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

Interest income	$	29,793		$	30,394		$	30,369		$	30,305
Interest expense		5,520			6,151			6,326			6,443
Net interest income		24,273			24,243			24,043			23,862
Provision for loan losses		1,750			3,300			3,150			4,500
Total net interest income after provision		22,523			20,943			20,893			19,362
Non interest income		8,409			7,864			7,521			7,672
Non interest expense		24,595			23,346			23,220			23,537
Income before income taxes		6,337			5,461			5,194			3,497
Provision for income taxes		1,568			1,242			1,169			625
Net income	$	4,769		$	4,219		$	4,025		$	2,872
Preferred stock dividends		(271	)		(223	)		(354	)		(370	)
Accretion of preferred stock discount		(702	)		(73	)		(366	)		(95	)
Net income available to common shareholders	$	3,796		$	3,923		$	3,305		$	2,407
Net income per share
basic	$	0.17		$	0.17		$	0.15		$	0.11
diluted	$	0.17		$	0.17		$	0.14		$	0.11

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


At and for the Three Months Ended December 31, 2011

	Commercial		Mortgage		Wealth					Intersegment
	Banking		Banking		Management		Other			Elimination			Consolidated
Net interest income	$	24,303	$	312	$	-	$	(342	)	$	-		$	24,273
Provision for loan losses		1,750		-		-		-			-			1,750
Noninterest income		5,785		2,648		1,158		26			(1,208	)		8,409
Noninterest expense		22,063		2,217		1,104		419			(1,208	)		24,595
Provision for income taxes		1,592		223		16		(263	)		-			1,568
Net income (loss)	$	4,683	$	520	$	38	$	(472	)	$	-		$	4,769

Total Assets	$	2,868,333	$	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 Three Months Ended December 31, 2010

	Commercial		Mortgage		Wealth					Intersegment
	Banking		Banking		Management		Other			Elimination			Consolidated
Net interest income	$	24,525	$	500	$	-	$	(265	)	$	-		$	24,760
Provision for loan losses		5,300		-		-		-			-			5,300
Noninterest income		5,832		1,832		1,157		82			(1,076	)		7,827
Noninterest expense		21,195		2,226		1,030		581			(1,076	)		23,956
Provision for income taxes		713		33		37		(281	)		-			502
Net income (loss)	$	3,149	$	73	$	90	$	(483	)	$	-		$	2,829

Total Assets	$	2,870,097	$	52,788	$	473	$	462,991		$	(445,907	)	$	2,940,442
Average Assets	$	2,877,575	$	52,439	$	479	$	465,865		$	(450,344	)	$	2,946,014

At and for the Twelve Months Ended December 31, 2011

	Commercial		Mortgage		Wealth					Intersegment
	Banking		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		22,977		8,122		5,045		106			(4,784	)		31,466
Noninterest expense		86,257		7,667		4,399		1,159			(4,784	)		94,698
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


At and for the Twelve Months Ended December 31, 2010

	Commercial		Mortgage		Wealth					Intersegment
	Banking		Banking		Management		Other			Elimination			Consolidated
Net interest income	$	93,535	$	1,549	$	-	$	(1,074	)	$	-		$	94,010
Provision for loan losses		22,850		-		-		-			-			22,850
Noninterest income		24,976		7,101		4,757		720			(4,285	)		33,269
Noninterest expense		83,442		7,695		3,975		2,132			(4,285	)		92,959
Provision for income taxes		2,130		286		234		(945	)		-			1,705
Net income (loss)	$	10,089	$	669	$	548	$	(1,541	)	$	-		$	9,765

Average Assets	$	2,919,449	$	39,790	$	541	$	462,758		$	(445,794	)	$	2,976,744

STELLARONE CORPORATION (NASDAQ: STEL)
NON-GAAP RECONCILIATION (UNAUDITED)
(Dollars in thousands)

	For the three months ended
	December 31, 2011			September 30, 2011			December 31, 2010
Noninterest expense	$	24,595		$	23,346		$	23,956
Less:
Amortization of intangible assets		413			413			413
Adjusted noninterest expense		24,182			22,933			23,543

Net interest income (tax equivalent)		25,060			25,059			25,423
Noninterest income		8,409			7,864			7,827
Less:
Gains on sale of securities available for sale		447			41			612
Losses / impairments on foreclosed assets		(432	)		(223	)		(688	)
Impairments on securities available for sale		-			-			(58	)
Net revenues	$	33,454		$	33,105		$	33,384

Efficiency ratio		72.3	%		69.3	%		70.5	%

	For the three months ended
	December 31, 2011			September 30, 2011			December 31, 2010
Noninterest income	$	8,409		$	7,864		$	7,827
Less:
Gains on securities available for sale		447			41			612
Gains (losses) on sale of premises and equipment		91			(9	)		172
Impairments on securities available for sale		-			-			(58	)
Operating earnings	$	7,871		$	7,832		$	7,101

	For the three months ended
	December 31, 2011			September 30, 2011			December 31, 2010
Net income	$	4,769		$	4,219		$	2,829
Plus:
Income tax expense		1,568			1,242			502
Provision for loan losses		1,750			3,300			5,300
Pre-tax pre-provision earnings	$	8,087		$	8,761		$	8,631

	For the three months ended
	December 31, 2011			September 30, 2011
Total stockholders' equity	$	414,173		$	432,865
Less:
Core deposit intangibles, net		5,011			5,424
Goodwill		113,652			113,652
Preferred stock		-			21,798
Tangible common equity		295,510			291,991

Total assets		2,917,928			2,957,841
Less: Core deposit intangibles, net		5,011			5,424
Goodwill		113,652			113,652
Tangible assets	$	2,799,265		$	2,838,765

Tangible common equity ratio		10.56	%		10.29	%

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

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