Tuesday, November 03, 2009
Bad loans hampering StellarOne performance
The bank's president said continued unemployment will exacerbate the situation.
The latest from The Ticker blog
StellarOne Bank said borrowers behind on their loans, many at Smith Mountain Lake, drove its third-quarter loss to $7.7 million.
The bank, which earned $2 million during the same period a year ago, posted a total loss of $8.1 million during the July-September quarter. It paid additional charges related to the receipt of a federal capital investment under the Troubled Asset Relief Program.
During the quarter, the bank set aside $20.1 million in additional protection against loan-related losses, more than three times the amount during the same period a year ago, according to its third-quarter earnings announcement Oct. 28.
"Obviously, we had a challenging third quarter," said O.R. Barham, the company's president and chief executive officer, during a conference call with analysts.
StellarOne is the Christiansburg-based bank of StellarOne Corp. and the second-largest community bank in Virginia. StellarOne Corp., based in Charlottesville, was formed by the 2008 merger of FNB Corp. of Christiansburg and Virginia Financial Group of Culpeper.
Barham, who was previously VFG's CEO, said that about 35 percent of the StellarOne Bank problem loans were Smith Mountain Lake-related, a trend that has been hampering StellarOne since its formation. Barham said the lake area is "very stressed" because of an excess of available homes, but added that the problem is easing somewhat.
Although the provision for loan losses was large, officials said the bank had adequate capital to cover the charge.
Nine months into 2009, StellarOne has lost $9.2 million, or 41 cents a share. At the same date in 2008, it had earned $10.3 million, or 51 cents a share.
Barham told analysts his chief concern is unemployment. While Virginia recently posted a jobless rate of 6.6 percent, fifth-lowest in the nation, the local jobless rate is 6 percent to 8 percent in many of the communities of Southwest and central Virginia where StellarOne has its 58 branches, Barham said.
Unemployment is a concern because consumers without paychecks can't spend or repay loans, which places a drag on the commercial real estate market -- a focus of bank lending, he said.
