SOURCE: Park Sterling Corporation

Park Sterling Corporation

January 26, 2017 07:00 ET

Park Sterling Corporation Announces Results for Fourth Quarter 2016

CHARLOTTE, NC--(Marketwired - January 26, 2017) - 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 2016. Highlights at and for the three and twelve months ended December 31, 2016 include:

Three Month Highlights

  • Net income of $5.3 million, or $0.10 per share, compared to $6.3 million, or $0.12 per share, in the quarter ended September 30, 2016
  • Adjusted net income, which excludes merger-related expenses and gain on sale of securities, was $7.3 million, or $0.14 per share, and was equal to the third quarter
  • Merger-related costs were $3.0 million, an increase of $1.5 million from the third quarter, due to final First Capital Bancorp, Inc. ("First Capital") merger costs associated with the consolidation of our operations center and a Richmond branch
  • Noninterest income increased $398 thousand from a strong third quarter; with continued growth in deposit service charges, exceptional capital markets income and a decline in mortgage banking income
  • Noninterest expenses totaled $25.0 million, an increase of $3.9 million from the prior quarter
  • Adjusted noninterest expenses, which excludes merger-related costs, increased $2.4 million from the prior quarter reflecting in part a $1.5 million loss on an interest rate hedge on variable rate debt repaid during the quarter
  • Income tax expense declined to an effective rate of 22% due a $798 thousand benefit associated with the early adoption of ASU 2016-09, Stock-based Compensation
  • Average loans, excluding loans held for sale, showed steady growth at an 10% annualized growth rate from the prior quarter
  • Total average deposits increased $30 million or 5% annualized from the prior quarter
  • Credit quality remained strong
  • Capital levels remained strong with Tier 1 leverage ratio of 9.98%
  • The Board of Directors declared a quarterly cash dividend on common shares of $0.04 per share (January 2017)

Twelve Month Highlights

  • Net income increased $3.3 million from 2015 to a record $19.9 million, or $0.38 per share
  • Adjusted net income, which excludes merger-related expenses and gain or loss on sale of securities, was $27.2 million compared to $17.8 million in 2015, an increase of $9.4 million or 53%, and adjusted earnings per share increased to $0.52 from $0.40 in 2015, an increase of 29%
  • These results include the acquisition of First Capital which was completed on January 1, 2016

"We are very pleased with Park Sterling's results for the 2016 fourth quarter and full year which continue to confirm the attractiveness of a regional community bank that delivers high quality products and services through exceptionally talented and experienced in-market banking professionals," said Jim Cherry, Chief Executive Officer. "Our distinctive value proposition is clearly resonating with customers. They are embracing our capabilities and rewarding us with strong growth in loans, deposits and revenue, which enables us to deliver increasing earnings and returns for our shareholders, while offering an engaging work environment for our employees."

Financial Results

Income Statement -- Three Months Ended December 31, 2016

Park Sterling reported net income of $5.3 million, or $0.10 per share, for the three months ended December 31, 2016 ("2016Q4"). This compares to net income of $6.3 million, or $0.12 per share, for the three months ended September 30, 2016 ("2016Q3") and net income of $3.8 million, or $0.09 per share, for the three months ended December 31, 2015 ("2015Q4"). The decrease in net income from 2016Q3 resulted from increases in net interest income and noninterest income, a decrease in income tax expense, offset by increases in noninterest expense. The increase in net income from 2015Q4 resulted from an increase in net interest income, offset by an increase in noninterest expenses, reflecting the inclusion of First Capital, which was completed on January 1, 2016.

Park Sterling reported adjusted net income, which excludes merger-related expenses and gain or loss on sale of securities, of $7.3 million, or $0.14 per share, in 2016Q4. This compares to adjusted net income of $7.3 million, or $0.14 per share, in 2016Q3 and adjusted net income of $4.8 million, or $0.11 per share, in 2015Q4. Compared to 2016Q3, the level of adjusted net income reflects higher levels of both net interest income and noninterest income partially offset by an increase in noninterest expense and a reduction in income tax expense associated with the adoption of ASU 2016-09. Compared to 2015Q3, the increase in adjusted net income reflects higher net interest income and noninterest income, partially offset by increased noninterest expense, reflecting the inclusion of First Capital.

Net interest income totaled $26.6 million in 2016Q4, which represents a $768 thousand, or 3%, increase from $25.8 million in 2016Q3 and a $6.6 million, or 33%, increase from $20 million in 2015Q4. Average total earning assets increased $49.1 million in 2016Q4 to $2.95 billion, compared to $2.90 billion in 2016Q3 and increased $696.1 million, or 31%, compared to $2.25 billion in 2015Q4. The increase in average total earning assets in 2016Q4 from 2016Q3 included an increase in average loans (including loans held for sale) of $57.8 million, or 9.8% annualized, a decrease in average marketable securities of $15.7 million, and an increase in average other interest-earning assets of $7.0 million. The increase in average total earning assets in 2016Q4 from 2015Q4 resulted primarily from a $700.2 million, or 41%, increase in average loans (including loans held for sale) as a result of both organic growth and the merger with First Capital, a $19.8 million, or 4%, decrease in average marketable securities and a $16.5 million, or 37%, increase in average other earning assets.

Net interest margin was 3.58% in 2016Q4, representing a 4 basis point increase from 3.54% in 2016Q3 and a 6 basis point increase from 3.52% in 2015Q4. The increase in net interest margin from 2016Q3 resulted primarily from a 2 basis point increase in yield on investment securities resulting from a bond called at a premium to book value, a 1 basis point increase from accretion on acquired loans, a 2 basis point increase caused by the collection of interest on non accruing loans, and a 1 basis point decrease in net margin compression. The increase in net interest margin from 2015Q4 was significantly impacted by the merger with First Capital which was completed on January 1, 2016. The change was primarily driven by a 16 basis point increase in the yield on interest-earning assets, offset by a 7 basis point increase in the cost of interest-bearing deposits and an increase in the cost of borrowed funds. In addition, the net interest margin in 2016Q4 benefitted from a $157.9 million increase in noninterest-bearing deposits from 2015Q4.

The Company reported $550 thousand of provision expense in 2016Q4, compared to $642 thousand of provision recorded in 2016Q3, and $409 thousand of provision recorded in 2015Q4. Allowance for loan loss levels increased to 0.50% of total loans at 2016Q4 compared to 0.49% at 2016Q3.

Noninterest income totaled $5.8 million in 2016Q4, compared to $5.4 million in 2016Q3 and increased $1.3 million, or 29%, compared to $4.5 million in 2015Q4. Compared to 2016Q3, service charges on deposit accounts and income from capital markets activities increased by $90 thousand and $390 thousand, respectively. In addition, increased BOLI income and the absence of FDIC loss share indemnification asset activity increased noninterest income by $131 thousand and $139 thousand respectively. Offsetting these increases was a $250 thousand decrease in mortgage banking income caused by a decline in the year-end pipeline from record levels in 2016Q3. The increase in noninterest income from 2015Q3 reflects the impact of the First Capital merger, higher service charges on deposit accounts and increases in capital markets income and income from bank owned-life insurance, partially offset by lower wealth management income.

Noninterest expense increased $3.9 million, or 19%, to $25.0 million in 2016Q4 compared to $21.3 million in 2016Q3, and compared to $18.4 million in 2015Q4. Adjusted noninterest expenses, which exclude merger-related expenses ($3.0 million in 2016Q4, $1.5 million in 2016Q3 and $1.4 million in 2015Q4), increased $2.4 million, or 12%, to $22.0 million in 2016Q4 compared to $19.6 million in 2016Q3, and increased $5.1 million, or 30%, compared to $17.0 million in 2015Q4. The increase in adjusted noninterest expenses from 2016Q3 was due primarily to a $1.5 million loss on an interest rate hedge related to variable rate debt repaid during the quarter as well as to increases of $323 thousand in salaries and employee benefits, $152 thousand in legal and professional fees and $154 thousand in advertising and promotion. Offsetting these increases was a $372 thousand reduction in loan and collection expense. The increase in adjusted noninterest expenses from 2015Q3 is primarily a function of the merger with First Capital.

The Company's effective tax rate was 22.07% in 2016Q4, compared to 33.5% in 2016Q3 and 34.1% in 2015Q4. The decline in the effective tax rate experienced in 2016Q4 was the result of the early adoption of ASU 2016-09, which requires that excess tax benefits on stock-based compensation be recognized as a reduction of tax expense rather than as a component of other comprehensive income. Excluding the effect of the $798 thousand reduction in tax expense caused by the adoption of this standard, the effective tax rate was 33.74%.

Income Statement -- Twelve Months Ended December 31, 2016

Park Sterling reported a $3.3 million, or 20%, increase in net income for the twelve months ended December 31, 2016 ("FY2016") to $19.9 million, or $0.38 per share, compared to net income for the twelve months ended December 31, 2015 ("FY2015") of $16.6 million, or $0.37 per share. The increase in net income from FY2015 was significantly impacted by the First Capital merger. Net interest income and non interest income increased by a total of $26.8 million, while increased provision for loan losses and noninterest expense increased by $1.9 million and $20.1 million, respectively.

Net interest income totaled $105.0 million in FY2016, which represents a $23.7 million, or 29%, increase from $81.4 million in FY2015. This increase is primarily attributable to having higher average earning assets in 2016 as a result of the merger with First Capital as well as organic loan growth. Net interest margin was 3.64% in FY2016, representing a 4 basis point decrease from 3.68% in FY2015. The reduction in net interest margin resulted primarily from a 9 basis point increase in yield on interest-earning assets, offset by a 19 basis point increase in the cost of interest-bearing liabilities.

The Company reported $2.6 million in provision for loan losses in FY2016, compared to $723 thousand in provision for loan losses in FY2015. The increase in provision expense is primarily a factor of continued organic loan growth.

Noninterest income increased $3.2 million, or 17%, to $21.4 million in FY2016, compared to $18.2 million in FY2015. The increase from FY2015 reflects higher levels of service charges on deposit accounts, income from capital markets activities, and ATM and card income as well as lower amortization on the FDIC loss share indemnification asset and true-up liability expense. Offsetting these increases are decreases in income from wealth management activities and a decrease in the gain (loss) on sale of securities available for sale.

Noninterest expense increased $20.8 million, or 27%, in FY2016 to $94.2 million compared to $74.2 million in FY2015. The increase in noninterest expense from FY2015 resulted primarily from increased expenses as a result of organic growth and the merger with First Capital, including an increase in merger related expense of $9.2 million.

The company's effective tax rate decreased to 32.5% in FY2016 compared to 32.9% in FY2015. The early adoption of ASU 2016-09 resulted in a decrease in income tax expense of $798 thousand; excluding the impact of this new standard, the effective rate was 35.24%.

Balance Sheet

Total assets increased $28.5 million, or 4% annualized, to $3.3 billion at 2016Q4, as compared to total assets of $3.2 billion at 2016Q3. Total securities, including non-marketable securities, decreased $9.0 million, to $511.8 million. Total loans, excluding loans held for sale, increased $43.2 million, or 7% annualized, to $2.4 billion at 2016Q4.

The mix of commercial and consumer loans remained consistent with 2016Q3. Total commercial loans increased $51.4 million and represent 79% of the loan portfolio. Acquisition, construction and development loans increased $35.8 million and represent 15% of the portfolio. Total consumer loans decreased $8.2 million and remain flat as a percentage of total loans at 21% of the portfolio.

Total deposits increased $29.5 million, or 5% annualized, to $2.5 billion at 2016Q4. Noninterest bearing demand deposits increased $15.7 million, or 12% annualized, to $521.3 million (21% of total deposits). Money market, NOW and savings deposits were up $22.7 million from 2016Q3 and represent 50% of total deposits. Time deposits decreased $8.9 million to $741.1 million at 2016Q4.

Total borrowings increased $5.2 million, or 6% annualized, to $348.2 million at 2016Q4 compared to $343.1 million at 2016Q3. At 2016Q4, FHLB borrowings totaled $285 million, the senior unsecured term loan at the holding company totaled $29.7 million, and acquired trust preferred securities, net of acquisition accounting fair value marks, totaled $33.5 million.

Total shareholders' equity decreased $2.9 million to $355.8 million at 2016Q4 compared to $358.7 million at 2016Q3, driven by a $3.2 million increase in retained earnings and offset by a reduction of $3.9 million in accumulated other comprehensive income and by a reduction in common stock and additional paid in capital totaling $2.1 million. The change in accumulated other comprehensive income was caused by the effect of market interest rate increases on the fair value of available for sale investment securities. During 2016Q4, there were 476,900 shares of common stock repurchased at a cost of $4.7 million to neutralize the effect of stock compensation vestings and exercises.

The Company's capital ratios remain strong at December 31, 2016 with Common Equity Tier 1 ("CET1") at 11.05% and Tier 1 leverage ratio at 9.98%.

Asset Quality

Asset quality remains strong. Nonperforming assets were $15.4 million at 2016Q4, or 0.47% of total assets, compared to $14.2 million at 2016Q3, or 0.44% of total assets. Nonperforming loans were $12.9 million at 2016Q4, and represented 0.54% of total loans, compared to $11.5 million at 2016Q3, or 0.48% of total loans. The Company reported net charge offs of $37 thousand, or 0.01% of average loans (annualized) in 2016Q4, compared to net recoveries of $97 thousand, or (0.02%) of average loans (annualized), in 2016Q3.

The allowance for loan losses increased $513 thousand, or 2%, to $12.1 million, or 0.50% of total loans, at 2016Q4, compared to $11.6 million, or 0.49%, of total loans at 2016Q3. The increase in allowance is primarily attributable to the increase in outstanding loans at period end.

Conference Call

A conference call will be held at 8:30 a.m., Eastern Time this morning (January 26, 2017). The conference call can be accessed by dialing (877) 512-1104 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 10099223.

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 $3.3 billion in assets, is the largest community bank headquartered in the Charlotte area and has 55 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, average tangible common equity, adjusted net income, adjusted operating revenues, adjusted noninterest income, adjusted noninterest expenses, adjusted operating expense, adjusted allowance for loan losses, 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. 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, results and conditions 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: changes in loan mix, deposit mix, capital and liquidity levels, emerging regulatory expectations and measures, net interest income, noninterest income, noninterest expense, credit trends and conditions, including loan losses, allowance for loan loss, charge-offs, delinquency trends and nonperforming asset levels, deterioration in the credit quality of the loan portfolio or the value of collateral securing loans, deterioration in the value of securities held for investment, the impacts of an increasing rate environment, and other similar 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, including new online and mobile banking platforms for treasury services, opening of de novo branches or otherwise; inability to capitalize on identified revenue enhancements or expense management opportunities, including the inability to achieve or maintain adjusted operating expense to adjusted operating revenue targets; inability to generate future ATM and card income from marketing 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; 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, other uses of capital, 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.

You should not place undue reliance on any forward-looking statement and should consider all of the preceding uncertainties and risks, as well as those more fully discussed in any of Park Sterling's filings with the SEC. 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,
   2016  2016  2016  2016  2015
   (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
Interest income                        
 Loans, including fees  $27,066   $26,521   $26,729   $27,124   $19,284
 Taxable investment securities   2,793    2,583    2,640    2,687    2,677
 Tax-exempt investment securities   135    137    137    147    146
 Nonmarketable equity securities   163    151    153    154    109
 Interest on deposits at banks   54    51    34    42    22
 Federal funds sold   1    1    5    8    1
  Total interest income   30,212    29,444    29,698    30,162    22,239
Interest expense                        
 Money market, NOW and savings deposits   941    953    1,014    1,017    743
 Time deposits   1,469    1,447    1,449    1,398    903
 Short-term borrowings   361    345    251    294    205
 Long-term debt   371    379    440    410    55
 Subordinated debt   499    497    494    446    358
  Total interest expense   3,641    3,621    3,648    3,565    2,264
  Net interest income   26,571    25,823    26,050    26,597    19,975
Provision for loan losses   550    642    882    556    409
  Net interest income after provision   26,021    25,181    25,168    26,041    19,566
Noninterest income                        
 Service charges on deposit accounts   1,761    1,671    1,528    1,489    1,439
 Mortgage banking income   765    1,015    873    775    699
 Income from wealth management activities   682    739    863    803    887
 Income from capital market activities   1,070    680    767    68    437
 ATM and card income   713    730    776    573    647
 Income from bank-owned life insurance   663    532    526    988    371
 Gain (loss) on sale of securities available for sale   6    -    (87)    (6)    -
 Amortization of indemnification asset and true-up liability expense   -    (139)    (25)    (147)    (165)
 Other noninterest income   185    219    154    184    208
 Total noninterest income   5,845    5,447    5,375    4,727    4,523
Noninterest expenses                        
 Salaries and employee benefits   11,480    11,755    11,774    13,018    9,541
 Occupancy and equipment   3,577    3,111    3,041    3,125    2,680
 Data processing and outside service fees   2,105    2,331    2,224    5,523    1,669
 Legal and professional fees   869    978    950    725    1,471
 Deposit charges and FDIC insurance   391    405    478    432    413
 Loss on disposal of fixed assets   2,175    144    230    44    50
 Communication fees   504    532    505    483    480
 Postage and supplies   125    115    191    173    99
 Loan and collection expense   57    425    273    37    194
 Core deposit intangible amortization   458    458    458    458    347
 Advertising and promotion   254    44    367    421    271
 Net cost of operation of other real estate owned   11    (92)    70    266    (23)
 Other noninterest expense   3,019    906    1,385    1,448    1,170
  Total noninterest expenses   25,025    21,112    21,946    26,153    18,362
  Income before income taxes   6,841    9,516    8,597    4,615    5,727
Income tax expense   1,510    3,192    3,045    1,874    1,952
  Net income  $5,331   $6,324   $5,552   $2,741   $3,775
 
Earnings per common share, fully diluted  $0.10   $0.12   $0.11   $0.05   $0.09
Weighted average diluted common shares   53,147,221    52,743,928    52,704,537    52,599,584    44,322,428
                
                
       
PARK STERLING CORPORATION
CONDENSED CONSOLIDATED INCOME STATEMENT
TWELVE MONTH RESULTS
($ in thousands, except per share amounts)    December 31,    December 31,
     2016    2015*
     (Unaudited)     
Interest income             
 Loans, including fees  $ 107,440   $ 77,537  
 Taxable investment securities    10,703     10,612  
 Tax-exempt investment securities    556     579  
 Nonmarketable equity securities    621     500  
 Interest on deposits at banks    181     82  
 Federal funds sold    15     2  
  Total interest income    119,516     89,312  
Interest expense             
 Money market, NOW and savings deposits    3,925     2,449  
 Time deposits    5,763     3,202  
 Short-term borrowings    1,251     528  
 Long-term debt    1,600     367  
 Subordinated debt    1,936     1,385  
  Total interest expense    14,475     7,931  
  Net interest income    105,041     81,381  
Provision for loan losses    2,630     723  
  Net interest income after provision    102,411     80,658  
Noninterest income             
 Service charges on deposit accounts    6,449     4,934  
 Mortgage banking income    3,428     3,306  
 Income from wealth management activities    3,087     3,602  
 Income from capital market activities    2,585     1,467  
 ATM and card income    2,792     2,507  
 Income from bank-owned life insurance    2,709     2,749  
 Gain (loss) on sale of securities available for sale    (87 )   54  
 Amortization of indemnification asset    -        
 and true-up liability expense    (311 )   (886 )
 Other noninterest income    742     510  
  Total noninterest income    21,394     18,243  
Noninterest expenses             
 Salaries and employee benefits    48,027     39,945  
 Occupancy and equipment    12,854     10,317  
 Data processing and outside service fees    12,183     6,625  
 Legal and professional fees    3,522     3,402  
 Deposit charges and FDIC insurance    1,706     1,639  
 Loss on disposal of fixed assets    2,593     996  
 Communication fees    2,024     2,099  
 Postage and supplies    604     488  
 Loan and collection expense    792     740  
 Core deposit intangible amortization    1,832     1,389  
 Advertising and promotion    1,086     1,263  
 Net cost of operation of other real estate owned    255     406  
 Other noninterest expense    6,758     4,844  
  Total noninterest expenses    94,236     74,153  
  Income before income taxes    29,569     24,748  
Income tax expense    9,621     8,142  
   Net income  $ 19,948   $ 16,606  
   
Earnings per common share, fully diluted  $ 0.38   $ 0.37  
Weighted average diluted common shares    52,846,949     44,304,888  
 * Derived from audited financial statements.
 
 
          
PARK STERLING CORPORATION
WEALTH MANAGEMENT ASSETS
($ in thousands)
  as of the period ended
  December 31,  September 30,  June 30,  March 31,  December 31,
  2016  2016  2016  2016  2015
  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
Discretionary assets held $278,872  $294,849  $322,996  $339,198  $434,346
Non-discretionary assets held  36,522   28,476   32,173   31,174   32,289
Total wealth management assets $315,394  $323,325  $355,169  $370,372  $466,635
               
PARK STERLING CORPORATION
MORTGAGE ORIGINATION
($ in thousands)
  for the three month period ended
  December 31,  September 30,  June 30,  March 31,  December 31,
  2016  2016  2016  2016  2015
  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
Mortgage origination - purchase $14,767  $21,982  $25,316  $14,656  $16,101
Mortgage origination - refinance  21,316   20,552   16,221   13,430   10,049
Mortgage origination - construction  18,535   19,440   18,403   14,764   18,746
Total mortgage origination $54,618  $61,974  $59,941  $42,850  $44,896
               
               
            
PARK STERLING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands)  December 31, September 30, June 30, March 31, December 31,
   2016 2016 2016 2016 2015*
   (Unaudited) (Unaudited) (Unaudited) (Unaudited)  
ASSETS                           
Cash and due from banks  $ 34,162  $ 35,066  $ 33,348  $ 34,038  $ 53,840  
Interest-earning balances at banks    48,882    38,540    34,955    47,143    16,451  
Investment securities available for sale    402,501    405,010    393,131    396,863    384,934  
Investment securities held to maturity    91,752    99,415    102,125    104,459    106,458  
Nonmarketable equity securities    17,501    16,289    14,420    13,118    11,366  
Federal funds sold    570    345    1,570    11,271    235  
Loans held for sale    7,996    15,203    11,967    7,593    4,943  
Loans - Non-covered    2,412,186    2,368,950    2,311,775    2,262,294    1,724,164  
Loans - Covered    -    -    15,122    16,849    17,651  
Allowance for loan losses    (12,125 )  (11,612 )  (10,873 )  (9,832 )  (9,064 )
  Net loans    2,400,061    2,357,338    2,316,024    2,269,311    1,732,751  
                            
Premises and equipment, net    63,080    64,632    65,711    65,494    55,658  
FDIC receivable for loss share agreements    -    -    1,164    1,477    943  
Other real estate owned - non-covered    2,438    2,730    2,866    3,425    4,211  
Other real estate owned - covered    -    -    380    985    1,240  
Bank-owned life insurance    70,785    70,167    69,695    69,202    58,633  
Deferred tax asset    25,721    26,947    28,985    30,088    28,971  
Goodwill    63,317    63,030    63,197    63,707    29,197  
Core deposit intangible    11,438    11,896    12,354    12,813    9,571  
Other assets    15,192    20,330    22,183    22,750    14,862  
   
  Total assets  $ 3,255,396  $ 3,226,938  $ 3,174,075  $ 3,153,737  $ 2,514,264  
LIABILITIES AND SHAREHOLDERS' EQUITY                           
Deposits:                           
Demand noninterest-bearing  $ 521,295  $ 505,591  $ 496,195  $ 469,046  $ 350,836  
Money market, NOW and savings    1,251,385    1,228,687    1,229,040    1,255,848    1,062,046  
Time deposits    741,072    749,999    748,188    773,089    539,780  
  Total deposits    2,513,752    2,484,277    2,473,423    2,497,983    1,952,662  
                            
Short-term borrowings    285,000    280,000    200,000    170,000    185,000  
Long-term debt    29,736    29,725    64,714    65,000    30,000  
Subordinated debt    33,501    33,339    33,176    33,014    24,262  
Accrued expenses and other liabilities    37,562    40,901    48,312    38,229    37,636  
  Total liabilities    2,899,551    2,868,242    2,819,625    2,804,226    2,229,560  
Shareholders' equity:                           
  Common stock    53,117    53,306    53,332    53,038    44,854  
  Additional paid-in capital    273,400    275,323    275,246    274,706    222,596  
  Retained earnings    32,608    29,409    25,219    21,263    20,117  
  Accumulated other comprehensive income (loss)    (3,280 )  658    653    504    (2,863 )
  Total shareholders' equity    355,845    358,696    354,450    349,511    284,704  
   
Total liabilities and shareholders' equity  $ 3,255,396  $ 3,226,938  $ 3,174,075  $ 3,153,737  $ 2,514,264  
   
  Common shares issued and outstanding    53,116,519    53,305,834    53,332,369    53,038,020    44,854,509  
* Derived from audited financial statements.
 
           
PARK STERLING CORPORATION
SUMMARY OF LOAN PORTFOLIO
($ in thousands)
   December 31,  September 30,  June 30,  March 31,  December 31,
   2016  2016  2016  2016  2015*
BY LOAN TYPE  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)   
Commercial:                         
 Commercial and industrial   $391,338   $351,506   $334,644   $334,027   $246,907
 Commercial real estate (CRE) - owner-occupied    367,547    366,506    376,440    374,428    331,222
 CRE - investor income producing    740,964    768,513    764,168    723,539    506,110
 Acquisition, construction and development (AC&D) -                         
 1-4 Family Construction    81,753    108,706    100,604    97,614    32,262
 AC&D - Lots and land    105,362    88,620    94,686    88,492    44,411
 AC&D - CRE construction    194,732    148,696    125,466    136,561    87,452
 Other commercial    12,900    10,653    10,410    10,167    8,601
  Total commercial loans    1,894,596    1,843,200    1,806,418    1,764,828    1,256,965
 
Consumer:                         
 Residential mortgage    259,836    254,298    244,063    235,737    223,884
 Home equity lines of credit    176,799    181,246    181,020    177,594    157,378
 Residential construction    59,060    63,847    65,867    71,117    72,171
 Other loans to individuals    18,756    23,281    26,575    27,245    28,816
  Total consumer loans    514,451    522,672    517,525    511,693    482,249
   Total loans    2,409,047    2,365,872    2,323,943    2,276,521    1,739,214
 Deferred costs (fees)    3,139    3,078    2,954    2,622    2,601
   Total loans, net of deferred costs (fees)   $2,412,186   $2,368,950   $2,326,897   $2,279,143   $1,741,815
 
* Derived from audited financial statements.
 
   December 31,  September 30,  June 30,  March 31,  December 31,
   2016  2016  2016  2016  2015*
BY ACQUIRED AND NON-ACQUIRED  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)   
Acquired loans - performing   $538,845   $599,840   $661,930   $726,025   $279,949
Acquired loans - purchase credit impaired    85,456    90,571    98,672    106,105    94,917
 Total acquired loans    624,301    690,411    760,602    832,130    374,866
Non-acquired loans, net of deferred costs (fees)**    1,787,885    1,678,539    1,566,295    1,447,013    1,366,949
   Total loans   $2,412,186   $2,368,950   $2,326,897   $2,279,143   $1,741,815
*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,
    2016   2016   2016   2016   2015*
    (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)    
Beginning of period allowance   $11,612    $10,873    $9,832    $9,064    $8,742  
Loans charged-off    (223 )   (156 )   (94 )   (82 )   (237 )
Recoveries of loans charged-off    186     253     253     294     150  
 Net charge-offs    (37 )   97     159     212     (87 )
Provision expense    550     642     882     556     409  
Benefit attributable to FDIC loss share agreements    -     -     -     -     -  
 Total provision expense charged to operations    550     642     882     556     409  
Provision expense recorded through FDIC loss share receivable    -     -     -     -     (20 )
 End of period allowance   $12,125    $11,612    $10,873    $9,832    $9,064  
   
Net charge-offs (recoveries)   $37    $(97 )  $(159 )  $(212 )  $87  
Net charge-offs (recoveries) to average loans (annualized)    0.01 %   -0.02 %   -0.03 %   -0.04 %   0.02 %
* Derived from audited financial statements.
 
 
           
PARK STERLING CORPORATION            
ACQUIRED LOANS            
($ in thousands)            
   December 31,   September 30,   June 30,   March 31,   December 31,
ACQUIRED LOANS AND FAIR MARKET  2016   2016   2016   2016   2015*
VALUE (FMV) ADJUSTMENTS  (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)    
 
Non-acquired loans   $1,787,885    $1,678,539    $1,566,295    $1,447,013    $1,366,949  
 Purchased performing loans    542,269     604,000     666,894     732,075     282,081  
 Less: remaining FMV adjustments    (3,424 )   (4,160 )   (4,964 )   (6,050 )   (2,132 )
 Purchased performing loans, net    538,845     599,840     661,930     726,025     279,949  
 Purchased credit impaired loans    109,805     115,736     124,985     133,644     120,957  
 Less: remaining FMV adjustments    (24,349 )   (25,165 )   (26,313 )   (27,539 )   (26,040 )
 Purchased credit impaired loans, net    85,456     90,571     98,672     106,105     94,917  
Total loans   $2,412,186    $2,368,950    $2,326,897    $2,279,143    $1,741,815  
   
   December 31,   September 30,   June 30,   March 31,   December 31,
PURCHASED PERFORMING FMV  2016   2016   2016   2016   2015*
ADJUSTMENTS  (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)    
   
Beginning FMV adjustment   $(4,160 )  $(4,964 )  $(6,050 )  $(2,132 )  $(2,194 )
Increase from First Capital    -     -     -     (5,200 )   -  
Accretion to interest income:                               
 First Capital    503     623     777     1,027     -  
 All other mergers    233     181     309     255     62  
Ending FMV adjustment   $(3,424 )  $(4,160 )  $(4,964 )  $(6,050 )  $(2,132 )
   
   December 31,   September 30,   June 30,   March 31,   December 31,
   2016   2016   2016   2016   2015*
PCI FMV ADJUSTMENT  (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)    
   
Contractual principal and interest   $125,512    $133,223    $143,701    $153,124    $140,269  
Nonaccretable difference    (10,448 )   (11,529 )   (14,652 )   (14,975 )   (12,843 )
 Expected cash flows as of the end of period    115,064     121,694     129,049     138,149     127,426  
Accretable yield    (29,608 )   (31,123 )   (30,377 )   (32,044 )   (32,509 )
Ending basis in PCI loans- estimated fair value   $85,456    $90,571    $98,672    $106,105    $94,917  
   
Beginning accretable yield   $(31,123 )  $(30,377 )  $(32,044 )  $(32,509 )  $(35,049 )
Increase from First Capital    -     -     -     (1,663 )   -  
Loan system servicing income    1,389     1,532     1,434     1,551     1,437  
Accretion to interest income    1,285     1,241     1,343     1,471     1,438  
Reclass to (from) non-accretable yield    (929 )   (2,691 )   (522 )   (993 )   (553 )
Other adjustments    (230 )   (828 )   (588 )   99     218  
Period end accretable yield**   $(29,608 )  $(31,123 )  $(30,377 )  $(32,044 )  $(32,509 )
*Derived from audited financial statements.
**Difference between the remaining FMV discount on purchased credit impaired loans and the period end accretable yield is a function of projected estimated expected interest income being included in the period end accretable yield.
 
 
             
PARK STERLING CORPORATION             
AVERAGE BALANCE SHEETS AND NET INTEREST ANALYSIS           
THREE MONTHS             
($ in thousands)  December 31, 2016         December 31, 2015       
    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)   $2,406,142   $27,066  4.48 %  $1,705,899   $19,284  4.48 %
 Fed funds sold    808     1  0.49 %   762     1  0.52 %
 Taxable investment securities    468,632     2,793  2.38 %   487,113     2,677  2.20 %
 Tax-exempt investment securities    13,489     135  4.00 %   14,794     146  3.95 %
 Other interest-earning assets    60,245     217  1.43 %   43,837     131  1.19 %
   
  Total interest-earning assets    2,949,316     30,212  4.08 %   2,252,405     22,239  3.92 %
   
Allowance for loan losses    (11,723 )            (8,809 )         
Cash and due from banks    35,021              30,518           
Premises and equipment    64,595              56,299           
Goodwill    63,153              29,197           
Intangible assets    11,659              9,737           
Other assets    117,278              111,636           
   
  Total assets   $3,229,299             $2,480,983           
   
Liabilities and shareholders' equity                               
Interest-bearing liabilities:                               
 Interest-bearing demand   $435,705    $78  0.07 %  $392,661    $61  0.06 %
 Savings and money market    733,880     747  0.40 %   590,993     614  0.41 %
 Time deposits - core    655,455     1,204  0.73 %   470,564     791  0.67 %
 Brokered deposits    152,662     381  0.99 %   132,821     180  0.54 %
  Total interest-bearing deposits    1,977,702     2,410  0.48 %   1,587,039     1,646  0.41 %
 Short-term borrowings    244,620     361  0.59 %   159,458     205  0.51 %
 Long-term debt    29,729     371  4.96 %   4,565     55  4.78 %
 Subordinated debt    33,426     499  5.94 %   24,172     358  5.88 %
  Total borrowed funds    307,775     1,231  1.59 %   188,195     618  1.30 %
   
  Total interest-bearing liabilities    2,285,477     3,641  0.63 %   1,775,234     2,264  0.51 %
   
Net interest rate spread          26,571  3.44 %         19,975  3.41 %
   
Noninterest-bearing demand deposits    537,325              379,413           
Other liabilities    46,512              41,665           
Shareholders' equity    359,985              284,671           
   
Total liabilities and shareholders' equity   $3,229,299             $2,480,983           
   
Net interest margin             3.58 %            3.52 %
(1) Nonaccrual loans are included in the average loan balances.
(2) Interest income and yields for the three months ended December 31, 2016 and 2015 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
AVERAGE BALANCE SHEETS AND NET INTEREST ANALYSIS
TWELVE MONTHS
($ in thousands)  December 31, 2016         December 31, 2015       
    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)   $2,332,205    $107,440  4.61 %  $1,658,657    $77,537  4.67 %
 Fed funds sold    3,118     15  0.48 %   799     2  0.25 %
 Taxable investment securities    495,305     10,703  2.16 %   483,352     10,612  2.20 %
 Tax-exempt investment securities    14,416     556  3.86 %   14,222     579  4.07 %
 Other interest-earning assets    36,781     802  2.18 %   55,889     582  1.04 %
   
  Total interest-earning assets    2,881,825     119,516  4.15 %   2,212,919     89,312  4.04 %
   
Allowance for loan losses    (10,655 )            (8,700 )         
Cash and due from banks    35,371              19,982           
Premises and equipment    65,613              58,100           
Goodwill    62,949              29,211           
Intangible assets    12,266              10,256           
Other assets    123,772              114,647           
   
  Total assets   $3,171,141             $2,436,415           
   
Liabilities and shareholders' equity                               
Interest-bearing liabilities:                               
 Interest-bearing demand   $428,933    $314  0.07 %  $398,731    $259  0.06 %
 Savings and money market    739,265     3,194  0.43 %   549,713     1,945  0.35 %
 Time deposits - core    676,302     4,874  0.72 %   464,423     2,729  0.59 %
 Brokered deposits    143,939     1,306  0.91 %   136,489     718  0.53 %
  Total interest-bearing deposits    1,988,439     9,688  0.49 %   1,549,356     5,651  0.36 %
 Short-term borrowings    209,004     1,251  0.60 %   142,890     528  0.37 %
 Long-term debt    47,422     1,600  3.37 %   55,480     367  0.66 %
 Subordinated debt    33,180     1,936  5.83 %   23,920     1,385  5.79 %
  Total borrowed funds    289,606     4,787  1.65 %   222,290     2,280  1.03 %
   
  Total interest-bearing liabilities    2,278,045     14,475  0.64 %   1,771,646     7,931  0.45 %
   
Net interest rate spread          105,041  3.51 %         81,381  3.59 %
   
Noninterest-bearing demand deposits    494,987              349,373           
Other liabilities    43,431              33,887           
Shareholders' equity    354,678              281,509           
   
Total liabilities and shareholders' equity   $3,171,141             $2,436,415           
   
Net interest margin             3.64 %            3.68 %
(1) Nonaccrual loans are included in the average loan balances.
(2) Interest income and yields for the twelve months ended December 31, 2016 and 2015 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,
  2016 2016 2016 2016 2015
  Unaudited Unaudited Unaudited Unaudited Unaudited
ASSET QUALITY                         
 Nonaccrual loans $8,819   $8,623   $5,185   $6,595   $4,326  
 Troubled debt restructuring (and still accruing)  2,892    2,549    2,582    2,696    2,774  
 Past due 90 days plus (and still accruing)  1,230    293    -    293    1,151  
 Nonperforming loans  12,941    11,465    7,767    9,584    8,251  
 OREO  2,438    2,730    3,246    4,410    5,451  
 Nonperforming assets  15,379    14,195    11,013    13,994    13,702  
 Past due 30-59 days (and still accruing)  1,175    1,104    985    217    1,222  
 Past due 60-89 days (and still accruing)  1,836    2,558    5,800    499    1,340  
   
 Nonperforming loans to total loans  0.54 %  0.48 %  0.33 %  0.42 %  0.47 %
 Nonperforming assets to total assets  0.47 %  0.44 %  0.35 %  0.44 %  0.54 %
 Allowance to total loans  0.50 %  0.49 %  0.47 %  0.43 %  0.52 %
 Allowance to nonperforming loans  93.69 %  101.28 %  139.99 %  102.59 %  109.85 %
 Allowance to nonperforming assets  78.84 %  81.80 %  98.73 %  70.26 %  66.15 %
 Past due 30-89 days (accruing) to total loans  0.12 %  0.15 %  0.29 %  0.03 %  0.15 %
 Net charge-offs (recoveries) to average loans (annualized)  0.01 %  -0.02 %  -0.03 %  -0.04 %  0.02 %
                
CAPITAL                         
 Book value per common share $6.75   $6.84   $6.77   $6.69   $6.49  
 Tangible book value per common share** $5.33   $5.41   $5.33   $5.22   $5.60  
 Common shares outstanding  53,116,519    53,305,834    53,332,369    53,038,020    44,854,509  
 Weighted average dilutive common shares outstanding  53,147,221    52,743,928    52,704,537    52,599,584    44,322,428  
 Common Equity Tier 1 (CET1) capital $288,594   $287,518   $282,721   $275,490   $251,807  
 Tier 1 capital  314,043    312,781    307,736    300,354    268,605  
 Tier 2 capital  12,125    11,615    10,914    9,832    9,064  
 Total risk based capital  326,168    324,396    318,650    310,186    277,669  
 Risk weighted assets  2,610,908    2,596,463    2,538,461    2,478,547    1,939,417  
 Average assets for leverage ratio  3,146,928    3,108,707    3,058,742    3,076,505    2,441,811  
 Common Equity Tier 1 (CET1) ratio  11.05 %  11.07 %  11.14 %  11.11 %  12.98 %
 Tier 1 ratio  12.03 %  12.04 %  12.12 %  12.12 %  13.85 %
 Total risk based capital ratio  12.49 %  12.49 %  12.55 %  12.51 %  14.32 %
 Tier 1 leverage ratio  9.98 %  10.06 %  10.06 %  9.76 %  11.00 %
 Tangible common equity to tangible assets**  8.84 %  9.00 %  9.00 %  8.87 %  9.93 %
                
LIQUIDITY                         
 Net loans to total deposits  95.48 %  94.89 %  93.64 %  90.85 %  88.74 %
 Reliance on wholesale funding  17.39 %  17.65 %  16.25 %  15.50 %  16.77 %
              
INCOME STATEMENT (THREE MONTH RESULTS; ANNUALIZED)                      
 Return on Average Assets  0.66 %  0.79 %  0.71 %  0.35 %  0.60 %
 Return on Average Common Equity  5.89 %  7.04 %  6.33 %  3.16 %  5.26 %
 Net interest margin (non-tax equivalent)  3.58 %  3.54 %  3.69 %  3.78 %  3.52 %
** Non-GAAP financial measure
 
 

Non-GAAP Financial Measures

Tangible assets, tangible common equity, tangible book value, adjusted average tangible common equity, adjusted net income, adjusted noninterest income, adjusted operating revenues, adjusted noninterest expense, adjusted operating expenses, adjusted allowance for loan losses, 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); and (iii) adjusted net income and adjusted noninterest income (which exclude merger-related expenses and gain or loss on sale of securities, as applicable), adjusted noninterest expense (which excludes merger-related expenses), adjusted operating expense (which excludes merger-related expenses and amortization of intangibles) and adjusted operating revenues (which includes net interest income and noninterest income and excludes gain or loss on sale of securities, as applicable) to evaluate core earnings and to facilitate comparisons with peers.

               
PARK STERLING CORPORATION              
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES             
($ in thousands, except per share amounts)  as of or for the three month period ended   as of or for the year ended  
   December 31,   September 30,   June 30,   March 31,   December 31,   December 31,   December 31,  
   2016   2016   2016   2016   2015   2016   2015  
   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)  
Adjusted net income                                    
 Pretax income (as reported)  $6,841   $9,516   $8,597   $4,615   $5,727   $29,569   $24,748  
 Plus: merger-related expenses   2,984    1,487    1,268    5,193    1,396    10,932    1,715  
   (gain) loss on sale of securities   (6 )  -    87    6    -    87    (54 )
  Adjusted pretax income   9,819    11,003    9,952    9,814    7,123    40,588    26,409  
 Tax expense   2,514    3,691    3,509    3,646    2,332    13,360    8,615  
  Adjusted net income  $7,305   $7,312   $6,443   $6,168   $4,791   $27,228   $17,794  
                                     
 Divided by: weighted average diluted shares   53,147,221    52,743,928    52,704,537    52,599,584    44,322,428    52,846,949    44,304,888  
  Adjusted net income per share   0.14    0.14    0.12   $0.12   $0.11    0.52   $0.40  
 Estimated tax rate for adjustment   33.73 %  33.54 %  34.26 %  34.09 %  32.75 %  32.92 %  32.62 %
                                     
Adjusted noninterest income                                    
 Noninterest income (as reported)  $5,845   $5,447   $5,375   $4,727   $4,523   $21,394   $18,243  
 Less: (gain) loss on sale of securities   (6 )  -    87    6    -    87    (54 )
  Adjusted noninterest income  $5,839   $5,447   $5,462   $4,733   $4,523   $21,481   $18,189  
                                     
Adjusted noninterest expenses                                    
 Noninterest expenses (as reported)  $25,025   $21,112   $21,946   $26,153   $18,362   $94,236   $74,153  
 Less: merger-related expenses   (2,984 )  (1,487 )  (1,268 )  (5,193 )  (1,396 )  (10,932 )  (1,715 )
  Adjusted noninterest expenses  $22,041   $19,625   $20,678   $20,960   $16,966   $83,304   $72,438  
                                     
Adjusted operating expense                                    
 Noninterest expenses (as reported)  $25,025   $21,112   $21,946   $26,153   $18,362   $94,236   $74,153  
 Less: merger-related expenses   (2,984 )  (1,487 )  (1,268 )  (5,193 )  (1,396 )  (10,932 )  (1,715 )
 Less: amortization of intangibles   (458 )  (458 )  (458 )  (458 )  (347 )  (1,832 )  (1,389 )
  Adjusted operating expense  $21,583   $19,167   $20,220   $20,502   $16,619   $81,472   $71,049  
                                     
Adjusted operating revenues                                    
 Net Interest Income (as reported)  $26,571   $25,823   $26,050   $26,597   $19,975   $105,041   $81,381  
 Plus: noninterest income (as reported)   5,845    5,447    5,375    4,727    4,523    21,394    18,243  
 Less: (gain) loss on sale of securities   (6 )  -    87    6    -    87    (54 )
  Adjusted operating revenues  $32,410   $31,270   $31,512   $31,330   $24,498   $126,522   $99,570  
                                     
Adjusted operating expense to adjusted operating revenues                                
 Adjusted operating expense  $21,583   $19,167   $20,220   $20,502   $16,619   $81,472   $71,049  
 Divided by: adjusted operating revenues   32,410    31,270    31,512    31,330    24,498    126,522    99,570  
  Adjusted operating expense to adjusted operating revenues   66.59 %  61.30 %  64.17 %  65.44 %  67.84 %  64.39 %  71.36 %
  Noninterest expenses to net interest income plus noninterest income   77.20 %  67.52 %  69.84 %  83.49 %  74.95 %  74.53 %  74.43 %
                                     
Adjusted return on average assets                                    
 Adjusted net income  $7,305   $7,312   $6,443   $6,168   $4,791   $27,228   $17,794  
 Divided by: average assets   3,229,299    3,186,799    3,135,031    3,132,625    2,480,983    3,171,141    2,436,415  
 Multiplied by: annualization factor   3.98    3.98    4.02    4.02    3.97    1.00    1.00  
  Adjusted return on average assets   0.90 %  0.91 %  0.83 %  0.79 %  0.77 %  0.86 %  0.73 %
  Return on average assets   0.66 %  0.79 %  0.71 %  0.35 %  0.60 %  0.63 %  0.68 %
                                     
                             
                  
PARK STERLING CORPORATION                  
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES                  
($ in thousands, except per share amounts)  as of or for the three month period ended  as of or for the year ended
   December 31,  September 30,   June 30,   March 31,  December 31,  December 31,  December 31,
   2016  2016   2016   2016  2015  2016   2015
   (Unaudited)  (Unaudited)   (Unaudited)   (Unaudited)  (Unaudited)  (Unaudited)   (Unaudited)
Adjusted return on average equity                                           
 Adjusted net income   $7,305    $7,312    $6,443    $6,168    $4,791    $27,228    $17,794  
 Divided by: average common equity    359,985     357,577     352,505     348,556     284,671     354,678     281,509  
 Multiplied by: annualization factor    3.98     3.98     4.02     4.02     3.97     1.00     1.00  
  Adjusted return on average equity    8.07 %   8.14 %   7.35 %   7.12 %   6.68 %   7.68 %   6.32 %
  Return on average equity    5.89 %   7.04 %   6.33 %   3.16 %   5.26 %   0.00 %   0.00 %
                              
Tangible common equity to tangible assets                                           
 Total assets   $3,255,396    $3,226,938    $3,174,075    $3,153,737    $2,514,264    $3,255,396    $2,514,264  
 Less: intangible assets    (74,755 )   (74,926 )   (75,551 )   (76,520 )   (38,768 )   (74,755 )   (38,768 )
  Tangible assets   $3,180,641    $3,152,012    $3,098,524    $3,077,217    $2,475,496    $3,180,641    $2,475,496  
                               
 Total common equity   $355,845    $358,696    $354,450    $349,511    $284,704    $355,845    $284,704  
 Less: intangible assets    (74,755 )   (74,926 )   (75,551 )   (76,520 )   (38,768 )   (74,755 )   (38,768 )
  Tangible common equity   $281,090    $283,770    $278,899    $272,991    $245,936    $281,090    $245,936  
                               
 Tangible common equity   $281,090    $283,770    $278,899    $272,991    $245,936    $281,090    $245,936  
 Divided by: tangible assets    3,180,641     3,152,012     3,098,524     3,077,217     2,475,496     3,180,641     2,475,496  
  Tangible common equity to tangible assets    8.84 %   9.00 %   9.00 %   8.87 %   9.93 %   8.84 %   9.93 %
  Common equity to assets    10.93 %   11.12 %   11.17 %   11.08 %   11.32 %   10.93 %   11.32 %
                              
Tangible book value per share                                           
 Issued and outstanding shares    53,116,519     53,305,834     53,332,369     53,038,020     44,854,509     53,116,519     44,854,509  
 Less: nondilutive restricted stock awards    (405,732 )   (837,561 )   (969,991 )   (785,658 )   (959,305 )   (405,732 )   (959,305 )
  Period end dilutive shares    52,710,787     52,468,273     52,362,378     52,252,362     43,895,204     52,710,787     43,895,204  
                              
 Tangible common equity   $281,090    $283,770    $278,899    $272,991    $245,936    $281,090    $245,936  
 Divided by: period end dilutive shares    52,710,787     52,468,273     52,362,378     52,252,362     43,895,204     52,710,787     43,895,204  
  Tangible common book value per share   $5.33    $5.41    $5.33    $5.22    $5.60    $5.33    $5.60  
  Common book value per share   $6.75    $6.84    $6.77    $6.69    $6.49    $6.75    $6.49  
                              
Adjusted return on average tangible common equity                                           
 Average common equity   $359,985    $357,577    $352,505    $348,556    $284,671    $354,678    $281,509  
 Less: average intangible assets    (74,812 )   (75,196 )   (76,083 )   (74,773 )   (38,934 )   (75,215 )   (39,467 )
  Average tangible common equity   $285,173    $282,381    $276,422    $273,783    $245,737    $279,463    $242,042  
                               
 Net income   $5,331    $6,324    $5,552    $2,741    $3,775    $19,948    $16,606  
 Divided by: average tangible common equity    285,173     282,381     276,422     273,783     245,737     279,463     242,042  
 Multiplied by: annualization factor    3.98     3.98     4.02     4.02     3.97     1.00     1.00  
  Return on average tangible common equity    7.44 %   8.91 %   8.08 %   4.03 %   6.09 %   7.14 %   6.86 %
                               
 Adjusted net income   $7,305    $7,312    $6,443    $6,168    $4,791    $27,228    $17,794  
 Divided by: average tangible common equity    285,173     282,381     276,422     273,783     245,737     279,463     242,042  
 Multiplied by: annualization factor    3.98     3.98     4.02     4.02     3.97     1.00     1.00  
  Adjusted return on average tangible common equity    10.19 %   10.31 %   9.37 %   9.06 %   7.74 %   9.74 %   7.35 %
                              
Adjusted allowance for loan losses                                           
 Allowance for loan losses   $12,125    $11,612    $10,873    $9,832    $9,064    $12,125    $9,064  
 Plus: acquisition accounting FMV adjustments to acquired loans    27,773     29,325     31,277     33,589     28,173     27,773     28,173  
  Adjusted allowance for loan losses   $39,898    $40,937    $42,150    $43,421    $37,237    $39,898    $37,237  
 Divided by: total loans (excluding LHFS before FMV adjustments)   $2,439,959    $2,398,275    $2,358,174    $2,312,732    $1,769,988    $2,439,959    $1,769,988  
  Adjusted allowance for loan losses to total loans    1.64 %   1.71 %   1.79 %   1.88 %   2.10 %   1.64 %   2.10 %
  Allowance for loan losses to total loans    0.50 %   0.49 %   0.47 %   0.43 %   0.52 %   0.50 %   0.52 %
                               

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