StellarOne (STEL) Reports Problem Asset Auction Results; Sees Q3 Loan Loss Provision of $6M

October 6, 2008 4:39 PM EDT

StellarOne Corporation (Nasdaq: STEL) today reported that it expects to record an additional $1.7 million pre-tax charge on the recently concluded auction of certain assets that had been reclassified as held for sale in conjunction with the merger of Virginia Financial Group, Inc. and FNB Corporation. This concludes the disposition of the majority of such assets other than approximately $1 million in property that was taken back at auction and will be reflected in foreclosed assets and non-performing assets at net realizable value.

StellarOne also expects its provisioning for loan losses to be approximately $6 million for Q3, with net charge-offs amounting to approximately $2.5 million for the quarter. The additional provisioning was necessitated by an increase in non-performing assets and additional valuation adjustments related primarily to certain acquisition and development projects in Smith Mountain Lake, Virginia. This portfolio accounts for approximately $50 million or 2.2% of StellarOne's outstanding loan portfolio at September 30, 2008. Non-performing assets are expected to be approximately 1.6% of assets and 2.2% of loans plus foreclosed properties at September 30, 2008.

StellarOne will also record a pre-tax charge of $280,000 associated with a small position in Fannie Mae preferred stock during Q3. The cumulative effect on EPS for the quarter as a result of the aforementioned write-downs and provisioning for loan losses net-of-tax is estimated to be approximately $0.24-$0.25. The Company will announce its Q3 earnings on October 29, 2008.

StellarOne Corporation, through its subsidiaries, provides various financial and banking products and services to consumers and businesses in Virginia.

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