SOURCE: Park Sterling Corporation

Park Sterling Corporation

January 30, 2015 07:00 ET

Park Sterling Corporation Announces Results for Fourth Quarter 2014

CHARLOTTE, NC--(Marketwired - January 30, 2015) - Park Sterling Corporation (NASDAQ: PSTB), the holding company for Park Sterling Bank, today released unaudited results of operations and other financial information for the fourth quarter of 2014. Highlights at and for the three and twelve months ended December 31, 2014 include:

Three Month Highlights

  • Net income available to common shareholders of $3.5 million, or $0.08 per share, compared to $2.5 million, or $0.06 per share, in the prior quarter
  • Adjusted net income available to common shareholders, which excludes merger-related expenses and gain or loss on sale of securities, of $3.9 million, or $0.09 per share, compared to $4.0 million, or $0.09 per share, in the prior quarter
  • Organic loan growth, excluding loans held for sale, of $27.3 million, representing 7% annualized growth rate
  • Record mortgage originations of $58.4 million, representing 8% quarterly growth rate
  • Decreased nonperforming loans to 0.56% of total loans from 0.82% in prior quarter
  • Decreased nonperforming assets to 0.89% of total assets from 1.12% in prior quarter
  • Tangible common equity increased to 10.13% of tangible assets from 10.09% at September 30, 2014
  • Declared cash dividend on common shares of $0.03 per share (January 2015), a 50% increase

Twelve Month Highlights

  • Net income available to common shareholders of $12.9 million, or $0.29 per share, compared to $15.0 million, or $0.34 per share, in the prior year
  • Adjusted net income available to common shareholders, which excludes merger-related expenses and gain or loss on sale of securities, of $15.2 million, or $0.34 per share, compared to $16.3 million, or $0.37 per share, in the prior year
  • Record organic loan growth, excluding loans held for sale, of $184.9 million, representing a 14% increase from the prior year
  • Record discretionary assets under management of $405.8 million, representing a 17% increase from the prior year
  • Entered Virginia market through new Richmond office
  • Completed merger with Provident Community Bancshares, Inc. on May 1, 2014
  • Introduced "Answers You Can Bank On℠" brand campaign

"Park Sterling's fourth quarter capped an exceptional year for the company," said James C. Cherry, Chief Executive Officer. "In January, we entered the attractive Virginia market with a de novo commercial banking office in Greater Richmond and subsequently expanded our presence there to include wealth management and mortgage banking capabilities. We expect to open a second office in Richmond this year. In March, we rolled out the third-phase of our retail mobile banking platform by introducing two distinctive capabilities -- 'Debit On/Off' and 'Picture Pay™.' We expect to enhance our mobile and online capabilities for small business and commercial customers this year. In March, we announced our partnership with Provident Community Bancshares, Inc., expanding our presence in the attractive Charlotte and Upstate South Carolina markets. We closed the merger in only 57 days and have since fully-integrated its branches and operations into Park Sterling. In September, we launched our first brand campaign under the tagline 'Answers You Can Bank On℠,' which communicates our commitment to provide customers with unique solutions designed to meet their individual financial needs. Finally, throughout the year, we continued to attract exceptional talent to the Park Sterling team, enhance our product capabilities, enhance our employee training and improve our operating processes to ensure our ability to deliver the Park Sterling brand promise.

Financially, for the three months ended December 31, 2014, we reported strong operating results with adjusted net income available to common shareholders, which excludes merger-related expenses and gain or loss on sale of securities, of $3.9 million, or $0.09 per share. Results include continued organic loan growth, driven by our metro markets, as well as record mortgage banking production and record levels of discretionary assets under management. In addition, the company continues to maintain exceptional balance sheet strength. Nonperforming loans decreased $3.8 million, or 30%, to $8.9 million in the quarter and now represent 0.56% of total loans. Nonperforming assets decreased $5.1 million, or 20%, to $20.9 million and now represent 0.89% of total assets. Finally, capitalization remained strong with tangible common equity to tangible assets of 10.13% and Tier 1 leverage ratio of 10.17% at quarter-end. 

For the twelve months ended December 31, 2014, we reported adjusted net income available to common shareholders of $15.2 million, or $0.34 per share, compared to $16.3 million, or $0.37 per share, for the twelve months ended December 31, 2013. The decrease in earnings resulted primarily from expenses related to our organic growth initiatives, which have not yet reached full productivity. 

Yesterday, the board declared a quarterly dividend of $0.03 per common share, payable on February 24, 2015 to all shareholders of record as of the close of business on February 10, 2015. This represents a 50% increase in the quarterly dividend payout from our previous $0.02 per share level, and demonstrates the confidence our board of directors has in the financial position of our company. Future dividends will be subject to board approval.

Overall, we are pleased to report these strong financial and strategic results for the fourth quarter and year and believe that Park Sterling is well positioned to continue pursuing our vision of building a full-service regional community bank in the Carolinas, Virginia and North Georgia." 

Financial Results

Income Statement - Three Months Ended December 31, 2014

Park Sterling reported net income available to common shareholders of $3.5 million, or $0.08 per share, for the three months ended December 31, 2014 ("2014Q4"). This compares to net income available to common shareholders of $2.5 million, or $0.06 per share, for the three months ended September 30, 2014 ("2014Q3") and net income available to common shareholders of $4.0 million, or $0.09 per share, for the three months ended December 31, 2013 ("2013Q4"). The increase in net income available to common shareholders from 2014Q3 included a $1.5 million decrease in merger-related expenses which was partially offset by decreased net interest income. The decrease in net income available to common shareholders from 2013Q4 was driven by the absence of a nontaxable $1.1 million gain in 2013Q4 generated from settling, at a discount, the contingent underwriting fee liability remaining from Park Sterling Bank's public offering in 2010. 

Park Sterling reported adjusted net income available to common shareholders, which excludes merger-related expenses and gain or loss on sale of securities, of $3.9 million, or $0.09 per share, in 2014Q4. This compares to adjusted net income available to common shareholders of $4.0 million, or $0.09 per share, in 2014Q3 and adjusted net income available to common shareholders of $4.3 million, or $0.10 per share, in 2013Q4. Compared to 2014Q3, adjusted net income available to common shareholders reflects higher noninterest expense and lower net interest income. Compared to 2013Q4, adjusted net income available to common shareholders reflects the absence of the aforementioned gain from settling the contingent underwriting fee liability.

Net interest income totaled $20.6 million in 2014Q4, which represented a 1% decrease from $20.7 million in 2014Q3 and a 16% increase from $17.7 million in 2013Q4. Average total earning assets increased $40.2 million, or 2%, in 2014Q4 to $2.11 billion, compared to $2.07 billion in 2014Q3 and increased $384.4 million, or 22%, compared to $1.72 billion in 2013Q4. The linked-quarter growth from 2014Q3 included a $45.6 million, or 3%, increase in average loans (including loans held for sale), driven by organic growth, which was partially offset by a $510,000, or 0%, decrease in average marketable securities and a $4.9 million, or 8%, decrease in average other earning assets. The decrease in average other earning assets reflects deployment of cash into loans. The year-over-year growth from 2013Q4 included a $250.9 million, or 19%, increase in average loans (including loans held for sale), driven by organic growth and the acquisition of Provident Community Bancshares, Inc., a $131.2 million, or 37%, increase in average marketable securities, also driven by the acquisition, and a $2.4 million, or 4%, increase in average other earning assets.

Net interest margin was 3.87% in 2014Q4, representing an 11 basis point decrease from 3.98% in 2014Q3 and a 21 basis point decrease from 4.08% in 2013Q4. The reduction in net interest margin in 2014Q4 from 2014Q3 resulted primarily from a 13 basis point decrease in yield on interest earning assets, which more than offset a 2 basis point decrease in the cost of interest-bearing liabilities. The reduction in net interest margin in 2014Q4 from 2013Q4 resulted primarily from a 30 basis point decrease in the yield on interest-earning assets, which was partially offset by a 12 basis point decrease in cost of average interest-bearing liabilities.

Adjusted net interest margin, which excludes accelerated accretion from net acquisition accounting fair market value adjustments ($134,000 in 2014Q4, $173,000 in 2014Q3 and $365,000 in 2013Q4), was 3.85% in 2014Q4, representing a 10 basis point decrease from 3.95% in 2014Q3 and a 14 basis point decrease from 3.99% in 2013Q4. The reduction in adjusted net interest margin in 2014Q4 from both 2014Q3 and 2013Q4 resulted primarily from the decrease in yields on interest-earning assets as discussed above. 

The company reported a $420,000 net release in provision for loan losses in 2014Q4 compared to a $484,000 net release in 2014Q3 and provision expense of $780,000 in 2013Q4. Provision expense in 2013Q4 was driven, in part, by $982,000 in combined reserves and charge-offs related to a single troubled debt restructuring. The net release in 2014Q4 was driven by continued improvement in loan credit quality and a $674,000 decrease in specific reserves.

Noninterest income increased $213,000, or 7%, to $3.4 million in 2014Q4, compared to $3.1 million in 2014Q3 and decreased $1.1 million, or 24%, compared to $4.4 million in 2013Q4. The linked-quarter growth from 2014Q3 was driven by strong results in several areas, including a $100,000, or 12%, increase in mortgage banking income, reflecting record mortgage origination activity, a $96,000, or 15%, increase in ATM and card income and an $86,000, or 11%, increase in income from wealth management activities. The period also benefitted from a $121,000 decrease in FDIC loss-share related expenses (amortization of the indemnification asset and true-up liability expense) and the absence of a $63,000 loss on sale of securities in 2014Q3. The year-over-year decrease from 2013Q4 resulted primarily from a $1.0 million increase in FDIC loss share related expenses as well as the absence of the previously mentioned 2013Q4 nontaxable $1.1 million gain generated from settling the contingent underwriting fee liability. 

Adjusted noninterest income, which excludes gain or loss on sale of securities, increased $150,000, or 5%, to $3.4 million in 2014Q4 compared to $3.2 million in 2014Q3 and decreased $1.1 million, or 24%, from $4.4 million in 2013Q4. The linked-quarter growth from 2014Q3 reflects the changes in noninterest income noted above. The year-over-year decrease from 2013Q4 reflects the absence of the nontaxable gain noted above.

As discussed in the prior quarter, FDIC loss-share related expenses reflect reductions in the company's loss share reimbursement expectations given better than originally forecast performance of the underlying covered loans. The commercial components of the Bank of Hiawassee (BOH) and New Horizons Bank (NHB) loss share agreements, which account for approximately 63% of covered loans, expire in March 2015 and April 2016, respectively. The company expects expenses related to loss share agreements to taper as expiration of the BOH commercial agreement approaches in the first quarter of 2015. 

Noninterest expenses decreased $1.3 million, or 6%, to $19.3 million in 2014Q4, compared to $20.6 million in 2014Q3 and increased $3.6 million, or 23%, compared to $15.7 million in 2013Q4. Adjusted noninterest expenses, which exclude merger-related expenses ($712,000 in 2014Q4, $2.2 million in 2014Q3 and $386,000 in 2013Q4), increased $176,000, or 1%, in 2014Q4 to $18.6 million, compared to $18.4 million in 2014Q3 and increased $3.3 million, or 21%, compared to $15.3 million in 2013Q4. The linked-quarter increase in adjusted noninterest expenses from 2014Q3 included a $163,000, or 55%, increase in loan and collection expenses, reflecting higher seasonal activity (including payment of pre-foreclosure property taxes), a $100,000, or 18%, increase in legal and professional fees, in part reflecting investments in enhanced products and services, and a $78,000, or 3%, increase in occupancy and equipment expense, reflecting higher maintenance and repair costs. Offsetting these increases were a $210,000, or 2%, decrease in personnel expenses and a $123,000, or 36%, decrease in net cost of operation of other real estate owned. The year-over-year increase in adjusted noninterest expenses from 2013Q4 reflects the company's hiring initiatives and acquisition of Provident Community.

The company's effective tax rate was 31.2% in 2014Q4, compared to 33.84% in 2014Q3 and 27.88% in 2013Q4.

Income Statement - Twelve Months Ended December 31, 2014

Park Sterling reported a $2.1 million, or 14%, decrease in net income available to common shareholders to $12.9 million, or $0.29 per share, for the twelve months ended December 31, 2014 ("FY2014"), compared to net income available to common shareholders of $15.0 million, or $0.34 per share, for the twelve months ended December 31, 2013 ("FY2013"). Net interest income increased $5.2 million, or 7%, in FY2014 to $77.6 million, compared to $72.4 million in FY2013, primarily reflecting higher average earning assets from organic growth and the Provident Community acquisition. Provision expense decreased $2.0 million, or 272%, in FY2014 to a net reversal of $1.3 million, as compared to $746,000 in provision expense in FY2013, reflecting improved asset quality. Noninterest income decreased $1.1 million, or 8%, to $14.0 million, compared to $15.1 million in FY2013, due to a $4.0 million increase in FDIC loss-share related expenses, which was partially offset by an increase in customer-related income, including service charges on deposits, ATM and card income, income from wealth management and income from new capital markets activities. Noninterest expenses increased $9.8 million, or 15%, in FY2014 to $73.9 million, compared to $64.1 million in FY2013 which was primarily the result of having eight months of expenses for Provident Community, as well as an increase in personnel expenses due to hiring initiatives during the year. Finally, FY2014 benefitted from the absence of $353,000 in preferred stock dividends in FY2013 associated with the Small Business Lending Fund program, which the company exited in September 2013. 

Park Sterling reported a $1.1 million, or 7%, decrease in adjusted net income available to common shareholders, which excludes merger-related expenses and gain or loss on sale of securities, to $15.2 million, or $0.34 per share, in FY2014, compared to adjusted net income available to common shareholders of $16.3 million, or $0.37 per share, in FY2013.

Balance Sheet

Total assets increased $32.9 million, or 1%, to $2.4 billion at 2014Q4, compared to total assets of $2.3 billion at 2014Q3. Cash and equivalents decreased $7.5 million, or 13%, to $51.4 million at 2014Q4 compared to $58.9 million at 2014Q3, due to deployment into loans. Total securities, including non-marketable securities, increased $8.5 million, or 2%, to $503.0 million at 2014Q4, compared to $494.5 million at 2014Q3. Total securities include two investments in senior tranches of collateralized loan obligations ("CLOs") totaling $14.8 million, with respect to which the collateral eligibility provisions have not yet been amended to comply with the new bank investment criteria under the Volcker Rule. The two securities had a net unrealized loss of $232,000 at 2014Q4 that could result in the company recognizing other than temporary impairment should they ultimately be determined not to comply with the Volcker Rule.

Total loans, excluding loans held for sale, increased $27.3 million, or 2% (7% annualized growth rate), to $1.58 billion at 2014Q4, compared to $1.55 billion in 2014Q3. The company's metropolitan markets, which include Charlotte, Raleigh and Wilmington, North Carolina, Greenville and Charleston, South Carolina and Richmond, Virginia, reported organic growth of $38.7 million, or 20% annualized, to $822.8 million, due to continued success in origination efforts. The community markets reported a $5.9 million, or 6% annualized, decrease in loans to $406.0 million, due primarily to runoff in acquired loans. The company's central business units, which primarily include mortgage, wealth management, builder finance and special assets, reported a $5.5 million, or 6% annualized, decrease to $351.9 million, as increases in origination activities were more than offset by reductions in special asset loans.

In terms of accounting designations, compared to 2014Q3, (i) noncovered PCI loans decreased $7.0 million, or 8%, net of fair market value acquisition-related adjustments, to $93.4 million in 2014Q4; (ii) noncovered acquired performing loans decreased $25.5 million, or 7%, net of fair market value acquisition-related adjustments, to $363.0 million; (iii) covered PCI and acquired performing loans decreased $7.4 million, or 15%, net of fair market value acquisition-related adjustments, to $41.7 million; and (iv) non-acquired loans increased $67.2 million, or 7%, to $1.1 billion. Non-acquired loans include certain renewed and/or restructured acquired performing loans that are redesignated as non-acquired. Noncovered acquired performing loans include a remaining $2.9 million net acquisition accounting fair market value adjustment, representing a 0.79% "mark," noncovered PCI loans include a remaining $22.8 million net acquisition accounting fair market value adjustment, representing a 19.63% "mark," and covered PCI and acquired performing loans include a remaining $9.7 million net acquisition accounting fair market value adjustment, representing a 18.92% "mark." 

Total deposits decreased $13.3 million, or 1%, to $1.85 billion at 2014Q4, compared to $1.86 billion at 2014Q3. Noninterest bearing demand deposits decreased $1.1 million, or 0%, to $321.0 million (17% of total deposits). Non-brokered money market, NOW and savings deposits increased $4.4 million, or 0%, to $924.8 million (50% of total deposits). Non-brokered time deposits decreased $18.8 million, or 4%, to $463.8 million (25% of total deposits). Finally, brokered deposits increased $2.2 million, or 2%, to $141.8 million (7.7% of total deposits). Core deposits, which exclude time deposits greater than $250,000 and brokered deposits, represented 89.6% of total deposits at 2014Q4 compared to 89.7% at 2014Q3. 

Total borrowings increased $40.2 million, or 25%, to $203.6 million at 2014Q4 compared to $163.4 million at 2014Q3, as the company increased FHLB borrowings to fund organic loan growth. Borrowings at 2014Q4 included $180.0 million in FHLB borrowings, and $23.6 million of acquired trust preferred securities, net of acquisition accounting fair market value adjustments.

Total shareholders' equity increased $3.9 million, or 1%, to $275.1 million at 2014Q4 compared to $271.1 million at 2014Q3, driven by retained earnings. The company did not repurchase any shares in 2014Q4 under its previously announced 2.2 million share repurchase authorization. The company's ratio of tangible common equity to tangible assets increased to 10.13% at 2014Q4 from 10.09% at 2014Q3. The company's Tier 1 leverage ratio increased to 10.17% at 2014Q4 from 10.09% at 2014Q3. The company's tangible book value per share increased $0.10 to $5.35 per share at 2014Q4, compared to $5.25 per share at 2014Q3. These capitalization and tangible book value ratios reflect a $752,000 reduction in goodwill resulting from Day 1 fair market value acquisition accounting-related adjustments identified in 2014Q4, which included a $1.2 million refinement of the loan marks associated with the Provident Community acquisition.

Asset Quality

Asset quality remains an area of strength for the company. Nonperforming loans decreased $3.8 million, or 30%, to $8.9 million at 2014Q4, or 0.56% of total loans, compared to $12.7 million at 2014Q3, or 0.82% of total loans. Nonperforming assets decreased $5.1 million, or 20%, to $20.9 million at 2014Q4, or 0.89% of total assets, compared to $26.0 million at 2014Q3, or 1.12% of total assets. Nonperforming assets include $3.0 million of covered OREO for which the company expects 80% of losses and associated expenses to be reimbursed under its FDIC loss-share agreements.

The company reported net charge-offs of $776,000, or 0.20% of average loans (annualized), in 2014Q4, compared to a net recovery of $764,000, or 0.20% of average loans (annualized), in 2014Q3 and net charge-offs of $805,000, or 0.24% of average loans (annualized), in 2013Q4. The 2014Q4 charge-offs related, in part, to previously established specific reserves on impaired loans for which some future recoveries are expected.

The allowance for loan losses was $8.3 million, or 0.52% of total loans, at 2014Q4, compared to $9.5 million, or 0.61% of total loans, at 2014Q3. The decrease in allowance included (i) a $1.5 million, or 34%, decrease to $3.0 million in the quantitative component, reflecting significantly improved portfolio performance in recent quarters; (ii) a $1.0 million, or 28%, increase to $4.6 million in the qualitative component, reflecting management's judgment regarding inherent loss in the portfolio not captured by historical losses; and (iii) a $652,000, or 49%, decrease to $685,000 in the specific component.

During the first quarter of 2011, and as contemplated in Park Sterling Bank's 2010 public offering, 568,260 shares of restricted stock were issued but will not vest until the company's share price achieves certain performance thresholds above the equity offering price (these restricted stock awards, of which 554,400 remained outstanding at 2014Q4, vest one-third each when the share price reaches, for 30 consecutive days, $8.125, $9.10 and $10.40 per share, respectively). These performance thresholds have not yet been achieved. Accordingly, these additional shares have been excluded from earnings and tangible book value per share calculations. As of December 31, 2014, 13,860 of these restricted shares had been forfeited.

Conference Call

A conference call will be held at 8:30 a.m., Eastern Time this morning (January 30, 2015). The conference call can be accessed by dialing (888) 317-6016 and requesting the Park Sterling Corporation earnings call. Listeners should dial in 10 minutes prior to the start of the call. The live webcast and presentation slides will be available on www.parksterlingbank.com under Investor Relations, "Investor Presentations."

A replay of the webcast will be available on www.parksterlingbank.com under Investor Relations, "Investor Presentations" shortly following the call. A replay of the conference call can be accessed approximately one hour after the call by dialing (877) 344-7529 and requesting conference number 10056778.

About Park Sterling Corporation
Park Sterling Corporation, the holding company for Park Sterling Bank, is headquartered in Charlotte, North Carolina. Park Sterling, a regional community-focused financial services company with approximately $2.4 billion in assets, is the largest community bank headquartered in the Charlotte area and has 53 banking offices stretching across the Carolinas and into North Georgia, as well as in Richmond, Virginia. The bank serves professionals, individuals, and small and mid-sized businesses by offering a full array of financial services, including deposit, mortgage banking, cash management, consumer and business finance, capital markets and wealth management services with a commitment to "Answers You Can Bank On℠." Park Sterling prides itself on being large enough to help customers achieve their financial aspirations, yet small enough to care that they do. Park Sterling is focused on building a banking franchise that is noted for sound risk management, strong community focus and exceptional customer service. For more information, visit www.parksterlingbank.com. Park Sterling Corporation shares are traded on NASDAQ under the symbol PSTB.

Non-GAAP Financial Measures
Tangible assets, tangible common equity, tangible book value, adjusted net income available to common shareholders, adjusted net interest margin, adjusted noninterest income, adjusted noninterest expenses, adjusted allowance for loan losses, adjusted net charge-offs/ recoveries, and related ratios and per share measures, including adjusted return on average assets, as used throughout this release, are non-GAAP financial measures. For additional information, see "Reconciliation of Non-GAAP Financial Measures" in the accompanying tables.

Cautionary Statement Regarding Forward Looking Statements
This news release contains, and Park Sterling and its management may make, certain statements that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts and often use words such as "may," "plan," "contemplate," "anticipate," "believe," "intend," "continue," expect," "project," "predict," "estimate," "could," "should," "would," "will," "goal," "target" and similar expressions. These forward-looking statements express management's current expectations or forecasts of future events and, by their nature, are subject to risks and uncertainties and there are a number of factors that could cause actual results to differ materially from those in such statements. Factors that might cause such a difference include, but are not limited to: failure to realize synergies and other financial benefits from the merger with Provident Community within the expected time frames; increases in expected costs or decreases in expected savings or difficulties related to merger integration matters; inability to identify and successfully negotiate and complete additional combinations with other potential merger partners or to successfully integrate such businesses into Park Sterling, including the company's ability to adequately estimate or to realize the benefits and cost savings from and limit any unexpected liabilities acquired as a result of any such business combinations; failure to generate an adequate return on investment related to new branches or other hiring initiatives; inability to generate future organic growth in loan balances, retail banking, wealth management, mortgage banking or capital markets results through the hiring of new personnel, development of new products, opening of de novo branches or otherwise; variability in the performance of covered loans and associated loss-share related expenses; the effects of negative or soft economic conditions, including stress in the commercial real estate markets or failure of continued recovery in the residential real estate markets; changes in consumer and investor confidence and the related impact on financial markets and institutions; changes in interest rates; failure of assumptions underlying noninterest expense levels; failure of assumptions underlying the establishment of allowances for loan losses; deterioration in the credit quality of the loan portfolio or in the value of the collateral securing those loans; deterioration in the value of securities held in the investment securities portfolio; the possibility of recognizing other than temporary impairments on holdings of collateralized loan obligation securities as a result of the Volcker Rule; the impacts on Park Sterling of a potential increasing rate environment; the potential impacts of any government shutdown or debt ceiling impasse, including the risk of a U.S. credit rating downgrade or default, or continued global economic instability, which could cause disruptions in the financial markets, impact interest rates, and cause other potential unforeseen consequences; fluctuations in the market price of the common stock, regulatory, legal and contractual requirements of Park Sterling, other uses of capital, the company's financial performance, market conditions generally, and future actions by the board of directors, in each case impacting repurchases of common stock or declaration of dividends; legal and regulatory developments, including changes in the federal risk-based capital rules; increased competition from both banks and nonbanks; changes in accounting standards, rules and interpretations, inaccurate estimates or assumptions in accounting, including acquisition accounting fair market value assumptions and accounting for purchased credit-impaired loans, and the impact on Park Sterling's financial statements; and management's ability to effectively manage credit risk, market risk, operational risk, legal risk, and regulatory and compliance risk.

Forward-looking statements speak only as of the date they are made, and Park Sterling undertakes no obligation to update any forward-looking statement to reflect the impact of circumstances or events that arise after the date the forward-looking statement was made.

   
PARK STERLING CORPORATION  
CONDENSED CONSOLIDATED INCOME STATEMENT  
THREE MONTH RESULTS  
($ in thousands, except per share amounts)
 
  December 31,  September 30,  June 30,  March 31,  December 31,  
  2014  2014  2014  2014  2013  
  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)  
Interest income                     
 Loans, including fees $19,482  $19,725  $18,734  $16,926  $17,753  
 Taxable investment securities  2,598   2,597   2,152   1,971   1,599  
 Tax-exempt investment securities  138   138   133   222   185  
 Nonmarketable equity securities  108   103   85   66   41  
 Interest on deposits at banks  22   22   53   21   24  
 Federal funds sold  -   1   -   -   -  
  Total interest income  22,348   22,586   21,157   19,206   19,602  
Interest expense                     
 Money market, NOW and savings deposits  538   570   615   547   384  
 Time deposits  725   771   828   831   948  
 Short-term borrowings  -   1   1   -   -  
 FHLB advances  179   162   128   127   139  
 Subordinated debt  350   350   506   426   429  
  Total interest expense  1,792   1,854   2,078   1,931   1,900  
  Net interest income  20,556   20,732   19,079   17,275   17,702  
 Provision for loan losses  (420 ) (484 ) (365 ) (17 ) 780  
  Net interest income after provision  20,976   21,216   19,444   17,292   16,922  
Noninterest income                     
 Service charges on deposit accounts  1,109   1,137   1,001   633   629  
 Mortgage banking income  922   822   653   244   777  
 Income from wealth management activities  869   783   773   775   848  
 Income from capital market activities  149   364   35   97   -  
 ATM and card income  727   631   726   548   555  
 Income from bank-owned life insurance  491   552   525   1,120   417  
 Gain (loss) on sale of securities available for sale  -   (63 ) (33 ) 276   (6 )
 Amortization of indemnification asset and true-up liability expense  (1,224 ) (1,345 ) (738 ) (482 ) (218 )
 Other noninterest income  308   257   1,036   275   1,402  
  Total noninterest income  3,351   3,138   3,978   3,486   4,404  
Noninterest expenses                     
 Salaries and employee benefits  10,386   10,240   9,684   9,228   8,386  
 Occupancy and equipment  2,627   3,527   2,249   2,005   1,941  
 Data processing and outside service fees  1,652   1,907   1,544   1,346   1,389  
 Legal and professional fees  816   887   1,122   661   655  
 Deposit charges and FDIC insurance  442   441   368   240   379  
 Loss on disposal of fixed assets  2   317   80   1   430  
 Communication fees  519   480   538   436   425  
 Postage and supplies  146   176   170   175   194  
 Loan and collection expense  461   298   304   288   411  
 Core deposit intangible amortization  348   347   317   257   257  
 Advertising and promotion  474   564   223   233   282  
 Net cost of operation of other real estate owned  215   343   206   53   (48 )
 Other noninterest expense  1,219   1,121   1,431   820   1,025  
  Total noninterest expenses  19,307   20,648   18,236   15,743   15,726  
  Income before income taxes  5,020   3,706   5,186   5,035   5,600  
 Income tax expense  1,564   1,254   1,760   1,480   1,561  
  Net income $3,456  $2,452  $3,426  $3,555  $4,039  
                      
Earnings per common share, fully diluted $0.08  $0.06  $0.08  $0.08  $0.09  
Weighted average diluted common shares  44,323,628   44,233,532   44,213,802   44,264,178   44,288,998  
                      
                      
  
PARK STERLING CORPORATION  
CONDENSED CONSOLIDATED INCOME STATEMENT  
TWELVE MONTH RESULTS  
($ in thousands, except per share amounts)
 
  December 31,   December 31,  
  2014   2013*  
  (Unaudited)      
Interest income          
 Loans, including fees $74,867   $72,669  
 Taxable investment securities  9,318    5,029  
 Tax-exempt investment securities  631    756  
 Nonmarketable equity securities  362    150  
 Interest on deposits at banks  118    177  
 Federal funds sold  1    24  
  Total interest income  85,297    78,805  
Interest expense          
 Money market, NOW and savings deposits  2,270    1,570  
 Time deposits  3,155    2,538  
 Short-term borrowings  3    7  
 FHLB advances  596    550  
 Subordinated debt  1,631    1,717  
  Total interest expense  7,655    6,382  
  Net interest income  77,642    72,423  
Provision for loan losses  (1,286 )  746  
  Net interest income after provision  78,928    71,677  
Noninterest income          
 Service charges on deposit accounts  3,881    2,646  
 Mortgage banking income  2,641    3,123  
 Income from wealth management activities  3,200    3,198  
 Income from capital market activities  646    -  
 ATM and card income  2,632    2,373  
 Income from bank-owned life insurance  2,688    1,863  
 Gain (loss) on sale of securities available for sale  180    98  
 Amortization of indemnification asset and true-up liability expense  (3,790 )  248  
 Other noninterest income  1,875    1,537  
  Total noninterest income  13,953    15,086  
Noninterest expenses          
 Salaries and employee benefits  39,538    34,570  
 Occupancy and equipment  10,409    7,691  
 Data processing and outside service fees  6,449    5,950  
 Legal and professional fees  3,486    3,142  
 Deposit charges and FDIC insurance  1,491    1,647  
 (Gain) loss on disposal of fixed assets  400    412  
 Communication fees  1,974    1,737  
 Postage and supplies  667    1,009  
 Loan and collection expense  1,350    1,972  
 Core deposit intangible amortization  1,269    1,029  
 Advertising and promotion  1,494    839  
 Net cost of operation of other real estate owned  817    (371 )
 Other noninterest expense  4,590    4,472  
  Total noninterest expenses  73,934    64,099  
  Income before income taxes  18,947    22,664  
Income tax expense  6,058    7,359  
  Net income  12,889    15,305  
Preferred dividends  -    353  
  Net income available to common shares $12,889   $14,952  
           
Earnings per common share, fully diluted $0.29   $0.34  
Weighted average diluted common shares  44,247,000    44,053,253  
           
* Derived from audited financial statements.          
           
                 
PARK STERLING CORPORATION  
CONDENSED CONSOLIDATED BALANCE SHEETS  
($ in thousands)
 
  December 31,  September 30,  June 30,  March 31,  December 31,  
  2014  2014**  2014**  2014  2013*  
  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)     
ASSETS                     
Cash and due from banks $16,549  $16,505  $21,117  $14,226  $13,087  
Interest-earning balances at banks  34,356   41,883   47,623   90,620   41,680  
Investment securities available for sale  375,683   367,262   349,532   340,215   349,491  
Investment securities held to maturity  115,741   117,463   119,302   51,303   51,972  
Nonmarketable equity securities  11,532   9,731   5,906   5,242   5,905  
Federal funds sold  485   465   280   -   300  
Loans held for sale  11,602   4,763   6,388   2,063   2,430  
Loans - Non-covered  1,538,354   1,503,558   1,419,366   1,237,653   1,224,674  
Loans - Covered  42,339   49,834   55,532   65,173   71,134  
Allowance for loan losses  (8,262 ) (9,458 ) (9,178 ) (9,076 ) (8,831 )
 Net loans  1,572,431   1,543,934   1,465,720   1,293,750   1,286,977  
                      
Premises and equipment, net  59,247   59,334   59,362   55,893   55,923  
FDIC receivable for loss share agreements  3,964   5,078   6,993   9,209   10,025  
Other real estate owned - non-covered  8,979   8,570   10,774   8,874   9,404  
Other real estate owned - covered  3,011   4,703   5,234   6,652   5,088  
Bank-owned life insurance  57,712   57,293   56,831   47,840   47,832  
Deferred tax asset  35,623   37,487   37,575   34,183   36,318  
Goodwill  29,240   29,240   29,240   26,420   26,420  
Core deposit intangible  10,960   11,307   11,654   8,372   8,629  
Other assets  12,115   11,279   12,023   10,382   9,309  
                      
 Total assets $2,359,230  $2,326,297  $2,245,554  $2,005,244  $1,960,790  
                      
LIABILITIES AND SHAREHOLDERS' EQUITY                   
                      
Deposits:                     
Demand noninterest-bearing $321,019  $322,097  $331,866  $265,929  $255,861  
Money market, NOW and savings  988,954   984,448   942,070   835,169   799,596  
Time deposits  541,381   558,063   588,771   536,363   544,428  
 Total deposits  1,851,354   1,864,608   1,862,707   1,637,461   1,599,885  
                      
Short-term borrowings  -   -   8,575   2,287   996  
FHLB advances  180,000   140,000   55,000   55,000   55,000  
Subordinated debt  23,583   23,413   23,244   22,171   22,052  
Accrued expenses and other liabilities  29,188   27,105   26,481   22,359   20,774  
 Total liabilities  2,084,125   2,055,126   1,976,007   1,739,278   1,698,707  
                      
Shareholders' equity:                     
 Common stock  44,860   44,851   44,833   44,726   44,731  
 Additional paid-in capital  222,819   222,507   222,195   222,412   222,559  
 Retained earnings (accumulated deficit)  8,901   6,341   4,787   2,254   (405 )
 Accumulated other comprehensive loss  (1,475 ) (2,528 ) (2,268 ) (3,426 ) (4,802 )
 Total shareholders' equity  275,105   271,171   269,547   265,966   262,083  
                      
Total liabilities and shareholders' equity $2,359,230  $2,326,297  $2,245,554  $2,005,244  $1,960,790  
                      
 Common shares issued and outstanding  44,859,798   44,850,813   44,833,516   44,726,416   44,730,669  
                      

 * Derived from audited financial statements. 
** Revised to reflect measurement period adjustments to goodwill.

PARK STERLING CORPORATION
SUMMARY OF LOAN PORTFOLIO
($in thousands)
 
  December 31, September 30, June 30, March 31, December 31,
  2014 2014 2014 2014 2013*
BY LOAN TYPE (Unaudited) (Unaudited) (Unaudited) (Unaudited)  
Commercial:               
 Commercial and industrial $173,786 $173,309 $142,973 $125,018 $122,400
 Commercial real estate (CRE) - owner-occupied  333,782  330,303  306,514  265,128  267,581
 CRE - investor income producing  470,647  464,390  459,467  409,898  382,187
 Acquisition, construction and development (AC&D) - 1-4 Family Construction  29,401  32,932  28,549  19,268  19,959
 AC&D - Lots and land  55,443  55,360  43,861  42,459  56,759
 AC&D - CRE construction  71,590  53,459  62,688  60,477  65,589
 Other commercial  5,045  5,281  6,580  4,573  3,849
  Total commercial loans  1,139,694  1,115,034  1,050,632  926,821  918,324
                
Consumer:               
 Residential mortgage  205,150  198,968  194,847  172,378  173,376
 Home equity lines of credit  155,297  154,792  153,944  143,123  143,754
 Residential construction  55,882  56,482  48,903  39,798  40,821
 Other loans to individuals  22,586  26,444  25,066  19,665  18,795
  Total consumer loans  438,915  436,686  422,760  374,964  376,746
   Total loans  1,578,609  1,551,720  1,473,392  1,301,785  1,295,070
 Deferred costs (fees)  2,084  1,672  1,506  1,041  738
   Total loans, net of deferred costs (fees) $1,580,693 $1,553,392 $1,474,898 $1,302,826 $1,295,808
                
* Derived from audited financial statements.               
                
  December 31, September 30, June 30, March 31, December 31,
  2014 2014 2014 2014 2013*
BY ACQUIRED AND NON-ACQUIRED (Unaudited) (Unaudited) (Unaudited) (Unaudited)  
Acquired loans - performing $364,789 $388,243 $409,812 $375,675 $404,440
Acquired loans - purchase credit impaired  133,241  149,652  164,196  149,502  163,787
 Total acquired loans  498,030  537,895  574,008  525,177  568,227
Non-acquired loans, net of deferred costs (fees)**  1,082,663  1,015,497  900,890  777,649  727,581
 Total loans $1,580,693 $1,553,392 $1,474,898 $1,302,826 $1,295,808
                
* Derived from audited financial statements.
** Includes loans transferred from acquired pools following release of acquisition accounting FMV adjustments.
                 
PARK STERLING CORPORATION  
ALLOWANCE FOR LOAN LOSSES  
THREE MONTH RESULTS  
($ in thousands)
 
  December 31,  September 30,  June 30,  March 31,  December 31,  
  2014  2014  2014  2014  2013  
  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)  
Beginning of period allowance $9,458  $9,178  $9,076  $8,831  $8,652  
Loans charged-off  (984 ) (175 ) (411 ) (520 ) (1,471 )
Recoveries of loans charged-off  208   939   871   1,069   666  
 Net charge-offs  (776 ) 764   460   549   (805 )
                      
Provision expense (release)  (420 ) (484 ) (356 ) (304 ) 984  
Benefit attributable to FDIC loss share agreements  -   -   (9 ) 287   (204 )
 Total provision expense charged to operations  (420 ) (484 ) (365 ) (17 ) 780  
Provision expense recorded through FDIC loss share receivable  -   -   7   (287 ) 204  
 End of period allowance $8,262  $9,458  $9,178  $9,076  $8,831  
                      
Net charge-offs (recoveries) $776  $(764 )$(460 )$(549 )$805  
Net charge-offs (recoveries) to average loans (annualized)  0.20 % -0.20 % -0.13 % -0.17 % 0.24 %
                      
                      
 
PARK STERLING CORPORATION
AVERAGE BALANCE SHEETS AND NET INTEREST ANALYSIS
THREE MONTHS
($ in thousands)
   December 31, 2014         December 31, 2013       
   Average   Income/  Yield/  Average   Income/  Yield/
   Balance   Expense  Rate (3)  Balance   Expense  Rate (3)
Assets                        
Interest-earning assets:                        
 Loans and loans held for sale, net (1)(2)  $1,561,246   $19,482  4.95%  $1,310,381   $17,753  5.38%
 Fed funds sold   600    -  0.00%   658    -  0.00%
 Taxable investment securities   475,241    2,598  2.19%   340,316    1,599  1.88%
 Tax-exempt investment securities   12,845    138  4.30%   16,614    185  4.45%
 Other interest-earning assets   57,141    130  0.90%   54,719    65  0.47%
                          
  Total interest-earning assets   2,107,073    22,348  4.21%   1,722,688    19,602  4.51%
                          
 Allowance for loan losses   (9,440 )         (9,458 )      
 Cash and due from banks   21,788           12,650        
 Premises and equipment   59,342           56,551        
 Goodwill   29,752           26,587        
 Intangible assets   11,156           8,715        
 Other assets   122,986           119,026        
                          
  Total assets  $2,342,657          $1,936,759        
                         
Liabilities and shareholders' equity                        
Interest-bearing liabilities:                        
 Interest-bearing demand  $393,497   $63  0.06%  $294,056   $61  0.08%
 Savings and money market   533,748    418  0.31%   451,395    323  0.28%
 Time deposits - core   471,757    607  0.51%   455,284    763  0.66%
 Brokered deposits   139,942    175  0.50%   101,046    185  0.73%
  Total interest-bearing deposits   1,538,944    1,263  0.33%   1,301,781    1,332  0.41%
 Federal Home Loan Bank advances   149,457    179  0.48%   61,304    139  0.90%
 Subordinated debt   23,494    350  5.91%   21,994    429  7.74%
 Other borrowings   2    -  0.00%   2,313    -  0.00%
  Total borrowed funds   172,953    529  1.21%   85,611    568  2.63%
                          
  Total interest-bearing liabilities   1,711,897    1,792  0.42%   1,387,392    1,900  0.54%
                         
Net interest rate spread        20,556  3.79%        17,702  3.97%
                         
Noninterest-bearing demand deposits   328,534           262,142        
Other liabilities   28,557           24,008        
Shareholders' equity   273,669           263,217        
                         
Total liabilities and shareholders' equity  $2,342,657          $1,936,759        
                         
Net interest margin           3.87%           4.08%

(1) Nonaccrual loans are included in the average loan balances.           
(2) Interest income and yields for the three months ended December 31, 2014 and 2013 include accretion from acquisition accounting 
adjustments associated with acquired loans.           
(3) Yield/ rate calculated on Actual/Actual day count basis, except for yield on investments which is calculated on a 30/360 day count basis. 

 
PARK STERLING CORPORATION
SELECTED RATIOS
($ in thousands, except per share amounts)
 
  December 31,  September 30,  June 30,  March 31,  December 31,
  2014  2014  2014  2014  2013
  Unaudited  Unaudited  Unaudited  Unaudited  Unaudited
ASSET QUALITY                   
 Nonaccrual loans $5,585  $5,894  $5,205  $5,092  $8,428
 Troubled debt restructuring  3,289   4,315   3,550   3,562   3,854
 Past due 90 days plus (and still accruing)  30   2,485   775   493   17
 Nonperforming loans  8,904   12,694   9,530   9,147   12,299
 OREO  11,990   13,273   16,008   15,526   14,492
 Nonperforming assets  20,894   25,967   25,538   24,673   26,791
 Past due 30-59 days (and still accruing)  619   1,973   2,028   160   1,437
 Past due 60-89 days (and still accruing)  289   1,788   3,299   646   255
                     
 Nonperforming loans to total loans  0.56%   0.82%   0.65%   0.70%   0.95%
 Nonperforming assets to total assets  0.89%   1.12%   1.14%   1.23%   1.37%
 Allowance to total loans  0.52%   0.61%   0.62%   0.70%   0.68%
 Allowance to nonperforming loans  92.79%   74.51%   96.31%   99.22%   71.80%
 Allowance to nonperforming assets  39.54%   36.42%   35.94%   36.79%   32.96%
 Past due 30-89 days (accruing) to total loans  0.06%   0.24%   0.36%   0.06%   0.13%
 Net charge-offs (recoveries) to average loans (annualized)  0.20%   -0.20%   -0.13%   -0.17%   0.24%
                    
CAPITAL                   
 Book value per common share $6.21  $6.13  $6.10  $6.01  $5.92
 Tangible book value per common share** $5.35  $5.25  $5.21  $5.26  $5.16
 Common shares outstanding  44,859,798   44,850,813   44,833,516   44,726,416   44,730,669
 Average dilutive common shares outstanding  44,323,628   44,233,532   44,213,802   44,264,178   44,288,998
                     
 Tier 1 capital $231,088  $225,456  $222,489  $225,702  $218,552
 Tier 2 capital  8,469   9,660   9,429   16,223   15,725
 Total risk based capital  239,557   235,116   231,918   241,925   234,277
 Risk weighted assets  1,717,003   1,693,196   1,620,786   1,417,813   1,424,112
 Average assets for leverage ratio  2,273,275   2,235,267   2,099,906   1,923,622   1,879,283
                     
 Tier 1 ratio  13.46%   13.32%   13.73%   15.92%   15.35%
 Total risk based capital ratio  13.95%   13.89%   14.31%   17.06%   16.45%
 Tier 1 leverage ratio  10.17%   10.09%   10.60%   11.73%   11.63%
 Tangible common equity to tangible assets**  10.13%   10.09%   10.37%   11.73%   11.79%
                    
LIQUIDITY                   
 Net loans to total deposits  84.93%   82.80%   78.69%   79.01%   80.44%
 Reliance on wholesale funding  16.81%   14.94%   11.80%   14.13%   14.56%
                    
INCOME STATEMENT (THREE MONTH RESULTS; ANNUALIZED)                  
 Return on Average Assets  0.59%   0.42%   0.63%   0.73%   0.83%
 Return on Average Common Equity  5.01%   3.58%   5.16%   5.43%   6.09%
 Net interest margin (non-tax equivalent)  3.87%   3.98%   3.90%   3.97%   4.08%
                    
INCOME STATEMENT (ANNUAL RESULTS)                   
 Return on Average Assets  0.59%   n/a   n/a   n/a   0.76%
 Return on Average Equity  4.78%   n/a   n/a   n/a   5.42%
 Net interest margin (non-tax equivalent)  3.94%   n/a   n/a   n/a   4.17%

 ** Non-GAAP financial measure           

Non-GAAP Financial Measures
Tangible assets, tangible common equity, tangible book value, adjusted net income available to common shareholders, adjusted net interest margin, adjusted noninterest income, adjusted noninterest expenses, adjusted allowance for loan losses, adjusted net charge-offs (recoveries) to average loans (annualized), and related ratios and per share measures, including adjusted return on average assets and adjusted return on average equity, as used throughout this release, are non-GAAP financial measures. Management uses (i) tangible assets, tangible common equity and tangible book value (which exclude goodwill and other intangibles from equity and assets), and related ratios, to evaluate the adequacy of shareholders' equity and to facilitate comparisons with peers; (ii) adjusted allowance for loan losses (which includes net FMV adjustments related to acquired loans) as supplemental information for comparing the combined allowance and fair market value adjustments to the combined acquired and non-acquired loan portfolios (fair market value adjustments are available only for losses on acquired loans); (iii) adjusted net charge-offs/ recoveries (which exclude the impact of acquisition accounting related to PCI loans) to evaluate both its asset quality and asset quality trends, and to facilitate comparisons with peers; and (iv) adjusted net income, adjusted noninterest income and adjusted noninterest expenses(which exclude merger-related expenses and gain on or loss sale of securities, as applicable), adjusted net interest margin (which excludes accelerated accretion of net acquisition accounting fair market value adjustments), and adjusted return on average assets and adjusted return on average equity (which exclude merger-related expenses and gain or loss on sale of securities) to evaluate core earnings and to facilitate comparisons with peers.

                 
PARK STERLING CORPORATION  
RECONCILIATION OF NON-GAAP MEASURES  
($ in thousands, except per share amounts)  
(three month and period end results unless otherwise stated)
 
  
  December 31,  September 30,  June 30,  March 31,  December 31,  
  2014  2014  2014  2014  2013  
  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)     
Adjusted net income (three months)                     
 Pretax income (as reported) $5,020  $3,706  $5,186  $5,035  $5,600  
 Plus: merger-related expenses  712   2,229   594   81   386  
   (gain) loss on sale of securities  -   63   33   (276 ) 6  
  Adjusted pretax income  5,732   5,998   5,813   4,840   5,992  
 Tax expense  1,786   2,030   1,972   1,414   1,697  
  Adjusted net income available to common shareholders $3,946  $3,968  $3,841  $3,426  $4,295  
                      
 Divided by: weighted average diluted shares  44,323,628   44,233,532   44,213,802   44,264,178   44,288,998  
  Adjusted net income available to common shareholders per share $0.09  $0.09  $0.09  $0.08  $0.10  
 Estimated tax rate  31.15 % 33.85 % 33.93 % 29.21 % 28.32 %
                      
Adjusted net income (twelve months)                     
 Pretax income (as reported) $18,947              $22,664  
 Plus: merger-related expenses  3,616               2,211  
   (gain) loss on sale of securities  (180 )             (98 )
  Adjusted pretax income  22,383               24,777  
 Tax expense  7,156               8,089  
  Adjusted net income $15,227              $16,688  
 Preferred dividends  -               353  
  Adjusted net income available to common shareholders $15,227              $16,335  
                       
 Divided by: weighted average diluted shares  44,247,000               44,053,253  
  Adjusted net income available to common shareholders per share  0.34              $0.37  
 Estimated tax rate  31.97 %             32.65 %
                      
                      
Adjusted net interest margin                     
 Net interest income (as reported) $20,556  $20,732  $19,079  $17,275  $17,702  
 Less: accelerated mark accretion  (134 ) (173 ) (86 ) (18 ) (365 )
  Adjusted net interest income  20,422   20,559   18,993   17,257   17,337  
 Divided by: average earning assets  2,107,073   2,066,906   1,938,459   1,764,187   1,722,688  
 Multiplied by: annualization factor  3.97   3.97   4.01   4.06   3.97  
  Adjusted net interest margin  3.85 % 3.95 % 3.93 % 3.97 % 3.99 %
  Net interest margin  3.87 % 3.98 % 3.95 % 3.97 % 4.08 %
                      
Adjusted noninterest income                     
 Noninterest income (as reported) $3,351  $3,138  $3,978  $3,486  $4,404  
 Less: (gain) loss on sale of securities  -   63   33   (276 ) 6  
  Adjusted noninterest income $3,351  $3,201  $4,011  $3,210  $4,410  
                      
Adjusted noninterest expense                     
 Noninterest expense (as reported) $19,307  $20,648  $18,236  $15,743  $15,726  
 Less: merger-related expenses  (712 ) (2,229 ) (594 ) (81 ) (386 )
  Adjusted noninterest expense  18,595   18,419   17,642   15,662   15,340  
                      
                  
PARK STERLING CORPORATION  
RECONCILIATION OF NON-GAAP MEASURES  
($ in thousands, except per share amounts)  
(three month and period end results unless otherwise stated)
 
  
   December 31,  September 30,  June 30,  March 31,  December 31,  
   2014  2014  2014  2014  2013  
   (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)  
Adjusted return on average assets                      
 Adjusted net income available to common shareholders  $3,946  $3,968  $3,841  $3,426  $4,295  
 Divided by: average assets   2,342,657   2,304,501   2,168,914   1,976,654   1,936,759  
 Multiplied by: annualization factor   3.97   3.97   4.01   4.06   3.97  
  Adjusted return on average assets   0.67 % 0.68 % 0.71 % 0.70 % 0.88 %
  Return on average assets   0.59 % 0.42 % 0.63 % 0.73 % 0.83 %
                       
Adjusted return on average equity                      
 Adjusted net income available to common shareholders  $3,946  $3,968  $3,841  $3,426  $4,295  
 Divided by: average common equity   273,669   271,853   266,304   265,544   263,217  
 Multiplied by: annualization factor   3.97   3.97   4.01   4.06   3.97  
  Adjusted return on average equity   5.72 % 5.79 % 5.78 % 5.23 % 6.47 %
  Return on average equity   5.01 % 3.58 % 5.16 % 5.43 % 6.09 %
                       
Tangible common equity to tangible assets                      
 Total assets  $2,359,230  $2,326,297  $2,245,554  $2,005,244  $1,960,790  
 Less: intangible assets   (40,200 ) (40,547 ) (40,894 ) (34,792 ) (35,049 )
  Tangible assets  $2,319,030  $2,285,750  $2,204,660  $1,970,452  $1,925,741  
                       
 Total common equity  $275,105  $271,171  $269,547  $265,966  $262,083  
 Less: intangible assets   (40,200 ) (40,547 ) (40,894 ) (34,792 ) (35,049 )
  Tangible common equity  $234,905  $230,624  $228,653  $231,174  $227,034  
                        
 Tangible common equity  $234,905  $230,624  $228,653  $231,174  $227,034  
 Divided by: tangible assets  $2,319,030  $2,285,750  $2,204,660  $1,970,452  $1,925,741  
  Tangible common equity to tangible assets   10.13 % 10.09 % 10.37 % 11.73 % 11.79 %
  Common equity to assets   11.66 % 11.66 % 12.00 % 13.26 % 13.37 %
                       
Tangible book value per share                      
 Issued and outstanding shares   44,859,798   44,850,813   44,833,516   44,726,416   44,730,669  
 Less: nondilutive restricted stock awards   (921,097 ) (931,465 ) (919,216 ) (796,399 ) (770,399 )
  Period end dilutive shares   43,938,701   43,919,348   43,914,300   43,930,017   43,960,270  
                        
 Tangible common equity  $234,905  $230,624  $228,653  $231,174  $227,034  
 Divided by: period end dilutive shares   43,938,701   43,919,348   43,914,300   43,930,017   43,960,270  
  Tangible common book value per share  $5.35  $5.25  $5.21  $5.26  $5.16  
  Common book value per share  $6.26  $6.17  $6.14  $6.05  $5.96  
                       
Adjusted allowance for loan losses                      
 Allowance for loan losses  $8,262  $9,458  $9,178  $9,076  $8,831  
 Plus: acquisition accounting FMV adjustments to acquired loans   35,419   38,982   40,987   34,663   37,783  
  Adjusted allowance for loan losses  $43,681  $48,440  $50,165  $43,739  $46,614  
 Divided by: total loans (excluding LHFS)  $1,580,693  $1,553,392  $1,474,898  $1,302,826  $1,295,808  
  Adjusted allowance for loan losses to total loans   2.76 % 3.12 % 3.40 % 3.36 % 3.60 %
  Allowance for loan losses to total loans   0.52 % 0.61 % 0.62 % 0.70 % 0.68 %
                       
Adjusted net charge-offs (recoveries) (annualized)                      
 Net charge-offs (recoveries)  $776  $(764 )$(460 )$(549 )$805  
 Less: net charge-offs (recoveries) of PCI loans (ASC 310-30)   -   -   -   (149 ) -  
  Adjusted net charge-offs (recoveries)  $776  $(764 )$(460 )$(698 )$805  
 Divided by: average loans  $1,561,246  $1,515,671  $1,397,158  $1,305,157  $1,310,381  
 Multiplied by: annualization factor   3.97   3.97   4.01   4.06   3.97  
  Adjusted net charge-offs (recoveries) (annualized) to average loans   0.20 % -0.20 % -0.13 % -0.22 % 0.24 %
  Net charge-offs (recoveries) (annualized) to average loans   0.20 % -0.20 % -0.13 % -0.17 % 0.24 %
                 

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