SOURCE: Park Sterling Corporation

Park Sterling Corporation

July 28, 2016 07:00 ET

Park Sterling Corporation Announces Results for Second Quarter 2016

CHARLOTTE, NC --(Marketwired - July 28, 2016) - Park Sterling Corporation (NASDAQ: PSTB), the holding company for Park Sterling Bank, today released unaudited results of operations and other financial information for the second quarter of 2016. Highlights at and for the three months ended June 30, 2016 include:

Highlights

  • Net income of $5.6 million, or $0.11 per share, compared to $2.7 million, or $0.05 per share, in the quarter ended March 31, 2016
  • Adjusted net income, which excludes merger-related expenses and gain or loss on sale of securities, increased $275,000 (4%) to $6.4 million, or $0.12 per share, compared to $6.2 million, or $0.12 per share, in the prior quarter
  • Noninterest income grew 14% over first quarter 2016 with strong performance across several categories
  • Noninterest expenses declined from the first quarter of 2016
  • Loans, including loans held for sale, showed steady growth of $52.0 million, representing a 9% annualized growth rate
  • Nonperforming loans to total loans decreased 9 basis points to 0.33% from 0.42% at March 31, 2016
  • Nonperforming assets to total assets decreased 9 basis points to 0.35% from 0.44% at March 31, 2016
  • Capital levels remained strong with total common equity to total assets of 11.17%, tangible common equity to tangible assets of 9.00% and Tier 1 leverage ratio of 10.06%
  • Core systems conversion with First Capital Bancorp, Inc. were completed (May 2016)
  • The Board of Directors declared a 33% increase in the quarterly cash dividend on common shares to $0.04 per share (July 2016)

"We are delighted to report strong results for the second quarter of 2016," said James C. Cherry, Chief Executive Officer. "For the quarter, we achieved higher profitability and returns driven by steady loan growth, strong increases in noninterest income sources and reduced expenses. Our solid financial condition reflects superior asset quality and healthy capital and liquidity levels.

On the capital management front, yesterday the board declared a 33% increase in the quarterly dividend to $0.04 per common share from the prior level of $0.03 per share, payable on August 23, 2016 to all shareholders of record as of the close of business on August 9, 2016. Future dividends will be subject to board approval. Additionally, during the second quarter we repurchased approximately 150,000 shares under our previously announced 2.2 million share repurchase program.

We remain committed to build a full-service, highly regarded regional community bank. With the successful conversion of First Capital Bancorp's core systems onto the Park Sterling platform, we now have a company operating on common core systems with $3.2 billion in assets serving customers through 56 branches in highly attractive markets across the Carolinas, Virginia and North Georgia. The second quarter results reflect management's focus in 2016 on improving performance by leveraging Park Sterling's distinguishing strengths. These include our position in high growth markets, exceptionally talented and experienced bankers, quality products and services, solid financial condition and strong risk culture."

Financial Results

Income Statement -- Three Months Ended June 30, 2016

Park Sterling reported net income of $5.6 million, or $0.11 per share, for the three months ended June 30, 2016 ("2016Q2"). This compares to net income of $2.7 million, or $0.05 per share, for the three months ended March 31, 2016 ("2016Q1") and net income of $4.3 million, or $0.10 per share, for the three months ended June 30, 2015 ("2015Q2"). The increase in net income from both 2016Q1 and 2015Q2 resulted primarily from reduced merger -related costs in 2016Q2 as well as an increase in net interest income from 2015Q2 and noninterest income compared to 2016Q1 and 2015Q2.

Park Sterling reported adjusted net income, which excludes merger-related expenses and gain or loss on sale of securities, of $6.4 million, or $0.12 per share, in 2016Q2. This compares to adjusted net income of $6.2 million, or $0.12 per share, in 2016Q1 and adjusted net income of $4.4 million, or $0.10 per share, in 2015Q2. Compared to 2016Q1 and 2015Q2, adjusted net income reflects higher noninterest income and lower noninterest expense.

Net interest income totaled $26.1 million in 2016Q2, which represents a $547 thousand, or 2%, decrease from $26.6 million in 2016Q1 and a $5.4 million, or 26%, increase from $20.6 million in 2015Q2. Average total earning assets increased $9.5 million in 2016Q2 to $2.84 billion, compared to $2.83 billion in 2016Q1 and increased $657.7 million, or 30%, compared to $2.19 billion in 2015Q2. The increase in average total earning assets in 2016Q2 from 2016Q1 included an increase in average loans (including loans held for sale) of $23.7 million, or 1%, offset by decreases in average marketable securities of $5.0 million, or 1%, and average other interest-earning assets of $9.3 million, or 17%. The increase in average total earning assets in 2016Q2 from 2015Q2 resulted primarily from a $654.7 million, or 40%, increase in average loans (including loans held for sale) as a result of both organic growth and the acquisition of First Capital and a $9.4 million, or 2%, increase in average marketable securities, offset by a $6.4 million, or 12%, decrease in average other earning assets.

Net interest margin was 3.69% in 2016Q2, representing a 9 basis point decrease from 3.78% in both 2016Q1 and 2015Q2. The decrease in net interest margin from 2016Q1 resulted primarily from a 12 basis point decrease in yield on loans to 4.68%, as the yield on loans in 2016Q1 was driven by a higher level of accretion of the acquired performing fair value mark related to the acquisition of First Capital loans. In addition, the cost of interest-bearing liabilities increased 2 basis points from 2016Q1 as the cost of wholesale funding increased slightly. The reduction in net interest margin yield from 20152Q is significantly impacted by the merger with First Capital which was completed on January 1, 2016. The change was primarily driven by higher rates on interest bearing deposits and the cost associated with the $30 million senior term loan that was used to partially fund the merger, offset in part by the addition of higher yielding earning assets as a result of the merger.

The Company reported $882,000 of provision expense in 2016Q2, compared to $556,000 of provision recorded in 2016Q1, and a provision of $134,000 in 2015Q2. Allowance for loan loss levels increased to 0.47% of total loans at 2016Q2 compared to 0.43% at 2016Q1 due to an increase in the qualitative component of the allowance.

Noninterest income increased $648,000, or 14%, to $5.4 million in 2016Q2, compared to $4.7 million in 2016Q1 and increased $1.1 million, or 25%, compared to $4.3 million in 2015Q2. The increase from 2016Q1 was driven primarily by a $699,000 volume-related increase in capital markets income, as well as a $203,000 increase in ATM and card income that resulted from year-to-date EMV-chip card conversion cost adjustments. Other increases include a $122,000, or 83%, decrease in FDIC loss share indemnification asset and true-up liability expense as we approach the expiration date of another agreement and a $98,000, or 13%, increase in mortgage banking income. Partially offsetting these increases was a $462,000, or 47%, decrease in BOLI income due in part to $402,000 of death benefits received in 2016Q1 and an additional $81,000 of losses on the sale of securities. The increase in noninterest income from 2015Q2 reflects higher capital markets income, as well as higher service charges on deposit accounts and lower amortization on the FDIC loss share indemnification asset and true-up liability expense, offset partially by lower income from mortgage banking and wealth management activities.

Noninterest expenses decreased $4.2 million, or 16%, to $21.9 million in 2016Q2 compared to $26.2 million in 2016Q1, and increased $3.7 million, or 20%, compared to $18.2 million in 2015Q2. Adjusted noninterest expenses, which exclude merger-related expenses ($1.3 million in 2016Q2, $5.2 million in 2016Q1 and $167,000 in 2015Q2), decreased $282 thousand, or 1%, to $20.7 million in 2016Q2 compared to $21.0 million in 2016Q1, and increased $2.6 million, or 14%, compared to $18.1 million in 2015Q2. Overall the decrease in adjusted noninterest expenses from 2016Q1 was due primarily to a $351,000 decrease in salaries and compensation expense due to the 2016Q1 increase in the incentive accrual and the realization of additional merger related cost savings. The other notable decrease was the net cost of operation of OREO, which in 2016Q1 included a loss on the sale of a branch that had been transferred to OREO in 2015. Offsetting these decreases was an increase in loan and collection expense due to a recent HELOC program for which the company absorbs borrower closing costs, as well as the timing of loan activity. The increase in adjusted noninterest expenses from 2015Q2 is primarily a function of the merger with First Capital.

The company's effective tax rate was 35.4% in 2016Q2, compared to 40.6% in 2016Q1 and 34.7% in 2015Q2. During 2016Q1, the rate was impacted by certain non-deductible merger-related expenses and adjustments made to deferred tax assets for the true-up in tax rates and re-measurement due to the First Capital merger, partially offset by the non-taxable BOLI death benefits received in 2016Q1.

Balance Sheet

Total assets increased $20.3 million, or 1%, to $3.2 billion at 2016Q2, as compared to total assets of $3.2 billion at 2016Q1. Cash and equivalents decreased $22.6 million, or 28%, to $69.9 million and total securities, including non-marketable securities, decreased $4.8 million, to $509.7 million. Total loans, excluding loans held for sale, increased $47.8 million, or 8% annualized, to $2.3 billion at 2016Q2.

Loan mix remained relatively consistent with 2016Q1. The combination of commercial and industrial and owner-occupied real estate loans decreased slightly from 31.1% to 30.6% of total loans, and investor-owned commercial real estate loans increased from 31.7% to 32.8% of total loans. Acquisition, construction and development loans decreased to 13.8% from 14.2% of total loans. Total consumer loans remained flat at 22% of total loans.

In terms of accounting designations, compared to 2016Q1: (i) non-acquired loans, which include certain renewed and/or restructured acquired performing loans that are re-designated as non-acquired, increased $119.3 million, or 8%, to $1.6 billion; (ii) acquired performing loans decreased $64.1 million, or 9%, to $661.9 million; and (iii) purchase credit impaired ("PCI") loans decreased $7.4 million, or 7%, to $98.7 million. At 2016Q2, noncovered performing acquired loans (which totaled $660.7 million) included a $4.9 million net acquisition accounting fair market value adjustment, representing a 0.74% "mark;" noncovered PCI loans (which totaled $85.4 million) included a $22.8 million adjustment, representing a 21.1% "mark;" and covered performing acquired and PCI loans (which totaled $14.5 million) included a $3.5 million adjustment, representing a 19.7% "mark."

Total deposits decreased $24.6 million, or 1%, to $2.5 billion at 2016Q2, as compared to total deposits of $2.5 billion at 2016Q1. Noninterest bearing demand deposits increased $27.1 million, or 6%, to $496.2 million (20% of total deposits). Non-brokered money market, NOW and savings deposits decreased $22.6 million, or 2%, to $1.2 billion (47% of total deposits). Time deposits less than $250,000 decreased $9.1 million, or 2%, to $547.6 million (22% of total deposits) and time deposits greater than $250,000 decreased $11.7 million, or 10%, to $108.1 million (4% of total deposits). Finally, brokered deposits decreased $8.3 million, or 5%, to $152.2 million (6% of total deposits). Core deposits, which exclude time deposits greater than $250,000 and brokered deposits, represented 89.5% of total deposits at 2016Q2 and 88.8% of total deposits at 2016Q1.

Total borrowings increased $29.9 million, or 11%, to $297.8 million at 2016Q2 compared to $268.0 million at 2016Q1. Borrowings at 2016Q2 included $235.0 million in FHLB borrowings, $29.7 million in a senior unsecured term loan at the bank holding company level, and $33.2 million of acquired trust preferred securities, net of acquisition accounting fair market value adjustments.

Total shareholders' equity increased $4.9 million, or 1%, to $354.5 million at 2016Q2 compared to $349.5 million at 2016Q1, driven by an increase in retained earnings and higher unrealized gains related to available-for-sale securities and balance sheet interest rate hedges. The company's ratio of common equity to assets increased to 11.17% at 2016Q2 from 11.08% at 2016Q1. The company's ratio of tangible common equity to tangible assets increased to 9.00% at 2016Q2 from 8.87% at 2016Q1. The company's Common Equity Tier 1 ("CET1") ratio decreased to 11.14% at 2016Q2 compared to 11.11% at 2016Q1 due to an increase in risk weighted assets. The company's Tier 1 leverage ratio was 10.06% at 2016Q2 compared to 9.76% at 2016Q1.

Asset Quality

Asset quality continues to remain strong. Nonperforming assets were $11.0 million at 2016Q2, or 0.35% of total assets, compared to $14.0 million at 2016Q1, or 0.44% of total assets. Nonperforming loans were $7.8 million at 2016Q2, and represented 0.33% of total loans, compared to $9.6 million at 2016Q1, or 0.42% of total loans. The settlement of two loan relationships that were past due in 2016Q1 as well as the continued sales of other real estate owned contributed to the declines in both ratios. The company reported net recoveries of $159,000, or 0.03% of average loans (annualized), in 2016Q2, compared to net recoveries of $212,000, or 0.04% of average loans (annualized), in 2016Q1.

The allowance for loan losses increased $1 million, or 11%, to $10.9 million, or 0.47% of total loans, at 2016Q2, compared to $9.8 million, or 0.43% of total loans, at 2016Q1. The increase in allowance included (i) a $255,000, or 16%, decrease in the quantitative component, resulting from lower historic loss rates due to a net recovery in 2016Q2 and (ii) a $1.2 million or 15%, increase in the qualitative component, reflecting management's judgment of inherent loss in the loan portfolio not represented in historic loss rates, based on heightened general economic market uncertainty and increased financial market volatility which emerged toward the end of 2016Q2.

As contemplated during the Bank's 2010 public offering, the Company awarded certain performance-based restricted shares to officers and directors following the holding company reorganization. These shares vest one-third each when the Company's stock price per share reaches the following performance thresholds for 30 consecutive trading days: (i) 125% of offer price ($8.13); (ii) 140% of offer price ($9.10); and (iii) 160% of offer price ($10.40). These anti-dilutive restricted shares are issued (and thereby have voting rights), but are not included in earnings per share or tangible book value per share calculations until they vest (and thereby have economic rights). There were 436,590 shares outstanding at each of June 30, 2016 and March 31, 2016 and 554,400 shares outstanding at each of the reported quarters of 2015.

Conference Call

A conference call will be held at 8:30 a.m., Eastern Time this morning (July 28, 2016). 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 10087667.

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 $3.2 billion in assets, is the largest community bank headquartered in the Charlotte area and has 56 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: synergies and other financial benefits from the merger with First Capital Bancorp, Inc. ("First Capital") may not be realized within the expected time frames; costs or difficulties related to integration matters might be greater than expected; 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 a potential 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; 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; the possibility of recognizing other than temporary impairments on holdings of collateralized loan obligation securities as a result of the Volcker Rule; 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)  June 30,   March 31,   December 31,   September 30,   June 30,  
   2016   2016   2015   2015   2015  
   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)  
Interest income                          
 Loans, including fees  $26,729   $27,124   $19,284   $19,475   $19,667  
 Taxable investment securities   2,640    2,687    2,677    2,636    2,508  
 Tax-exempt investment securities   137    147    146    152    143  
 Nonmarketable equity securities   153    154    109    142    122  
 Interest on deposits at banks   34    42    22    23    18  
 Federal funds sold   5    8    1    1    -  
  Total interest income   29,698    30,162    22,239    22,429    22,458  
Interest expense                          
 Money market, NOW and savings deposits   1,014    1,017    743    654    532  
 Time deposits   1,449    1,398    903    841    752  
 Short-term borrowings   251    294    205    90    76  
 Long-term debt   440    410    55    134    131  
 Subordinated debt   494    446    358    348    351  
  Total interest expense   3,648    3,565    2,264    2,067    1,842  
  Net interest income   26,050    26,597    19,975    20,362    20,616  
Provision for loan losses   882    556    409    -    134  
  Net interest income after provision   25,168    26,041    19,566    20,362    20,482  
Noninterest income                          
 Service charges on deposit accounts   1,528    1,489    1,439    1,370    1,107  
 Mortgage banking income   873    775    699    700    956  
 Income from wealth management activities   863    803    887    947    906  
 Income from capital market activities   767    68    437    238    394  
 ATM and card income   776    573    647    537    629  
 Income from bank-owned life insurance   526    988    371    1,058    553  
 Gain (loss) on sale of securities available for sale   (87 )  (6 )  -    54    -  
 Amortization of indemnification asset                          
 and true-up liability expense   (25 )  (147 )  (165 )  (162 )  (165 )
 Other noninterest income   154    184    208    185    (88 )
  Total noninterest income   5,375    4,727    4,523    4,927    4,292  
Noninterest expenses                          
 Salaries and employee benefits   11,774    13,018    9,541    9,952    10,021  
 Occupancy and equipment   3,041    3,125    2,680    2,591    2,491  
 Data processing and outside service fees   2,224    5,523    1,669    1,668    1,640  
 Legal and professional fees   950    725    1,471    472    660  
 Deposit charges and FDIC insurance   478    432    413    401    433  
 Loss on disposal of fixed assets   230    44    50    597    113  
 Communication fees   505    483    480    501    541  
 Postage and supplies   191    173    99    123    116  
 Loan and collection expense   273    37    194    151    242  
 Core deposit intangible amortization   458    458    347    347    347  
 Advertising and promotion   367    421    271    313    304  
 Net cost of operation of other real estate owned   70    266    (23 )  163    232  
 Other noninterest expense   1,385    1,448    1,170    1,140    1,092  
  Total noninterest expenses   21,946    26,153    18,362    18,419    18,232  
  Income before income taxes   8,597    4,615    5,727    6,870    6,542  
Income tax expense   3,045    1,874    1,952    2,092    2,273  
  Net income  $5,552   $2,741   $3,775   $4,778   $4,269  
                           
Earnings per common share, fully diluted  $0.11   $0.05   $0.09   $0.11   $0.10  
Weighted average diluted common shares   52,704,537    52,599,584    44,322,428    44,287,019    44,301,895  
      
PARK STERLING CORPORATION        
CONDENSED CONSOLIDATED INCOME STATEMENT       
SIX MONTH RESULTS        
($ in thousands, except per share amounts) June 30,   June 30,  
  2016   2015  
  (Unaudited)   (Unaudited)  
Interest income          
 Loans, including fees $53,853   $38,778  
 Taxable investment securities  5,327    5,299  
 Tax-exempt investment securities  284    281  
 Nonmarketable equity securities  307    249  
 Interest on deposits at banks  76    36  
 Federal funds sold  13    -  
  Total interest income  59,860    44,643  
 Interest expense          
 Money market, NOW and savings deposits  2,032    1,052  
 Time deposits  2,847    1,459  
 Short-term borrowings  545    152  
 Long-term debt  850    259  
 Subordinated debt  940    679  
  Total interest expense  7,214    3,601  
  Net interest income  52,646    41,042  
Provision for loan losses  1,438    314  
  Net interest income after provision  51,208    40,728  
Noninterest income          
 Service charges on deposit accounts  3,017    2,126  
 Mortgage banking income  1,648    1,907  
 Income from wealth management activities  1,666    1,768  
 Income from capital market activities  835    792  
 ATM and card income  1,349    1,323  
 Income from bank-owned life insurance  1,514    1,321  
 Gain (loss) on sale of securities available for sale  (93 )  -  
 Amortization of indemnification asset and true-up liability expense  (172 )  (559 )
 Other noninterest income  338    115  
  Total noninterest income  10,102    8,793  
Noninterest expenses          
 Salaries and employee benefits  24,792    20,452  
 Occupancy and equipment  6,166    5,046  
 Data processing and outside service fees  7,747    3,288  
 Legal and professional fees  1,675    1,458  
 Deposit charges and FDIC insurance  910    825  
 Loss on disposal of fixed assets  274    349  
 Communication fees  988    1,119  
 Postage and supplies  364    265  
 Loan and collection expense  310    396  
 Core deposit intangible amortization  916    695  
 Advertising and promotion  788    678  
 Net cost of operation of other real estate owned  336    267  
 Other noninterest expense  2,833    2,533  
 Total noninterest expenses  48,099    37,371  
 Income before income taxes  13,211    12,150  
Income tax expense  4,919    4,098  
Net income $8,292   $8,052  
           
Earnings per common share, fully diluted $0.16   $0.18  
Weighted average diluted common shares  52,650,886    44,287,424  
           
PARK STERLING CORPORATION               
WEALTH MANAGEMENT ASSETS               
($ in thousands)               
   June 30,  March 31,  December 31,  September 30,  June 30,
   2016  2016  2015  2015  2015
   (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
Discretionary assets held  $322,996  $339,198  $434,346  $425,229  $438,289
Non-discretionary assets held   32,173   31,174   32,289   32,152   36,067
Total wealth management assets  $355,169  $370,372  $466,635  $457,381  $474,356
                
PARK STERLING CORPORATION               
MORTGAGE ORIGINATION               
($ in thousands)               
   June 30,  March 31,  December 31,  September 30,  June 30,
   2016  2016  2015  2015  2015
   (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
Mortgage origination - purchase  $25,316  $14,656  $16,101  $20,063  $28,536
Mortgage origination - refinance   16,221   13,430   10,049   15,101   18,479
Mortgage origination - construction   18,403   14,764   18,746   20,452   24,694
Total mortgage origination  $59,941  $42,850  $44,896  $55,616  $71,709
 
PARK STERLING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
($in thousands)
                
   June 30,   March 31,   December 31,   September 30,   June 30,  
   2016   2016   2015*   2015   2015  
   (Unaudited)   (Unaudited)       (Unaudited)   (Unaudited)  
ASSETS                          
Cash and due from banks  $33,348   $34,038   $53,840   $16,096   $17,042  
Interest-earning balances at banks   34,955    47,143    16,451    41,230    26,940  
Investment securities available for sale   393,131    396,863    384,934    401,820    402,489  
Investment securities held to maturity   102,125    104,459    106,458    109,072    111,633  
Nonmarketable equity securities   14,420    13,118    11,366    11,377    13,500  
Federal funds sold   1,570    11,271    235    920    360  
Loans held for sale   11,967    7,593    4,943    5,145    10,701  
Loans - Non-covered   2,311,775    2,262,294    1,724,164    1,681,227    1,637,115  
Loans - Covered   15,122    16,849    17,651    18,897    20,348  
Allowance for loan losses   (10,873 )  (9,832 )  (9,064 )  (8,742 )  (8,468 )
 Net loans   2,316,024    2,269,311    1,732,751    1,691,382    1,648,995  
                           
Premises and equipment, net   65,711    65,494    55,658    56,948    58,979  
FDIC receivable for loss share agreements   1,164    1,477    943    1,190    1,209  
Other real estate owned - non-covered   2,866    3,425    4,211    7,087    8,904  
Other real estate owned - covered   380    985    1,240    1,056    884  
Bank-owned life insurance   69,695    69,202    58,633    58,286    57,823  
Deferred tax asset   28,985    30,088    28,971    29,711    32,137  
Goodwill   63,197    63,707    29,197    29,197    29,197  
Core deposit intangible   12,354    12,813    9,571    9,918    10,265  
Other assets   22,183    22,750    14,862    14,699    12,822  
                           
 Total assets  $3,174,075   $3,153,737   $2,514,264   $2,485,134   $2,443,880  
                           
                     
LIABILITIES AND SHAREHOLDERS' EQUITY                          
                           
Deposits:                          
Demand noninterest-bearing  $496,195   $469,046   $350,836   $370,815   $347,162  
Money market, NOW and savings   1,229,040    1,255,848    1,062,046    1,041,502    988,847  
Time deposits   748,188    773,089    539,780    534,541    538,932  
 Total deposits   2,473,423    2,497,983    1,952,662    1,946,858    1,874,941  
                           
Short-term borrowings   200,000    170,000    185,000    130,000    180,000  
Long-term debt   64,714    65,000    30,000    55,000    55,000  
Subordinated debt   33,176    33,014    24,262    24,092    23,922  
Accrued expenses and other liabilities   48,312    38,229    37,636    44,979    30,274  
 Total liabilities   2,819,625    2,804,226    2,229,560    2,200,929    2,164,137  
                           
Shareholders' equity:                          
 Common stock   53,332    53,038    44,854    44,909    44,911  
 Additional paid-in capital   275,246    274,706    222,596    222,587    222,271  
 Retained earnings   25,219    21,263    20,117    17,692    14,261  
 Accumulated other comprehensive income (loss)   653    504    (2,863 )  (983 )  (1,700 )
 Total shareholders' equity   354,450    349,511    284,704    284,205    279,743  
                           
Total liabilities and shareholders' equity  $3,174,075   $3,153,737   $2,514,264   $2,485,134   $2,443,880  
                           
 Common shares issued and outstanding   53,332,369    53,038,020    44,854,509    44,909,447    44,910,686  
                           
 * Derived from audited financial statements.                          
 
PARK STERLING CORPORATION
SUMMARY OF LOAN PORTFOLIO
($ in thousands)
                
   June 30,  March 31,  December 31,  September 30,  June 30,
   2016  2016  2015*  2015  2015
BY LOAN TYPE  (Unaudited)  (Unaudited)     (Unaudited)  (Unaudited)
Commercial:                    
 Commercial and industrial  $334,644  $334,027  $246,907  $211,741  $189,356
 Commercial real estate (CRE) - owner-occupied   376,440   374,428   331,222   328,327   330,853
 CRE - investor income producing   764,168   723,539   506,110   514,118   498,190
 Acquisition, construction and development (AC&D) - 1-4 Family Construction   100,604   97,614   32,262   27,299   31,500
 AC&D - Lots and land   94,686   88,492   44,411   47,948   48,680
 AC&D - CRE construction   125,466   136,561   87,452   85,643   86,570
 Other commercial   10,410   10,167   8,601   8,830   7,212
  Total commercial loans   1,806,418   1,764,828   1,256,965   1,223,906   1,192,361
                     
Consumer:                    
 Residential mortgage   244,063   235,737   223,884   224,110   214,850
 Home equity lines of credit   181,020   177,594   157,378   157,430   156,960
 Residential construction   65,867   71,117   72,170   66,823   62,973
 Other loans to individuals   26,575   27,245   28,817   24,896   27,696
  Total consumer loans   517,525   511,693   482,249   473,259   462,479
   Total loans   2,323,943   2,276,521   1,739,214   1,697,165   1,654,840
 Deferred costs (fees)   2,954   2,622   2,601   2,959   2,623
   Total loans, net of deferred costs (fees)  $2,326,897  $2,279,143  $1,741,815  $1,700,124  $1,657,463
                     
* Derived from audited financial statements.                    
                
   June 30,  March 31,  December 31,  September 30,  June 30,
   2016  2016  2015*  2015  2015
BY ACQUIRED AND NON-ACQUIRED  (Unaudited)  (Unaudited)     (Unaudited)  (Unaudited)
Acquired loans - performing  $661,930  $726,025  $279,949  $300,102  $317,394
Acquired loans - purchase credit impaired   98,672   106,105   94,917   102,537   112,819
 Total acquired loans   760,602   832,130   374,866   402,639   430,213
Non-acquired loans, net of deferred costs (fees)**   1,566,295   1,447,013   1,366,949   1,297,485   1,227,250
 Total loans  $2,326,897  $2,279,143  $1,741,815  $1,700,124  $1,657,463
 * 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)
                
   June 30,   March 31,   December 31,   September 30,   June 30,  
   2016   2016   2015   2015   2015  
   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)  
Beginning of period allowance  $9,832   $9,064   $8,742   $8,468   $8,590  
Loans charged-off   (94 )  (82 )  (237 )  (121 )  (572 )
Recoveries of loans charged-off   253    294    150    415    245  
 Net charge-offs   159    212    (87 )  294    (327 )
                           
Provision expense   882    556    409    -    205  
Benefit attributable to FDIC loss share agreements   -    -    -    -    (71 )
 Total provision expense charged to operations   882    556    409    -    134  
Provision expense recorded through FDIC loss share receivable   -    -    -    (20 )  71  
 End of period allowance  $10,873   $9,832   $9,064   $8,742   $8,468  
                           
Net charge-offs (recoveries)  $(159 ) $(212 ) $87   $(294 ) $327  
Net charge-offs (recoveries) to average loans (annualized)   -0.03 %  -0.04 %  0.02 %  -0.07 %  0.08 %
 
PARK STERLING CORPORATION
ACQUIRED LOANS
($ in thousands)
                
   June 30,   March 31,   December 31,   September 30,   June 30,  
ACQUIRED LOANS AND FAIR MARKET VALUE (FMV) ADJUSTMENTS  2016   2016   2015*   2015   2015  
(Unaudited)   (Unaudited)       (Unaudited)   (Unaudited)  
                           
Non-acquired loans  $1,566,295   $1,447,013   $1,366,949   $1,297,485   $1,227,250  
                           
 Purchased performing loans   666,894    732,075    282,081    302,296    319,844  
 Less: remaining FMV adjustments   (4,964 )  (6,050 )  (2,132 )  (2,194 )  (2,450 )
 Purchased performing loans, net   661,930    726,025    279,949    300,102    317,394  
                            
 Purchased credit impaired loans   124,985    133,644    120,957    129,890    141,528  
 Less: remaining FMV adjustments   (26,313 )  (27,539 )  (26,040 )  (27,353 )  (28,709 )
 Purchased credit impaired loans, net   98,672    106,105    94,917    102,537    112,819  
Total loans  $2,326,897   $2,279,143   $1,741,815   $1,700,124   $1,657,463  
                      
   June 30,   March 31,   December 31,   September 30,   June 30,  
PURCHASED PERFORMING FMV ADJUSTMENTS  2016   2016   2015   2015   2015  
(Unaudited)   (Unaudited)       (Unaudited)   (Unaudited)  
                      
Beginning FMV adjustment  $(6,050 ) $(2,132 ) $(2,194 ) $(2,450 ) $(2,974 )
Increase from First Capital   -    (5,200 )  -    -    -  
Accretion to interest income:                          
 First Capital   777    1,027    -    -    -  
 All other mergers   309    255    62    256    282  
                           
Ending FMV adjustment  $(4,964 ) $(6,050 ) $(2,132 ) $(2,194 ) $(2,692 )
                      
   June 30,   March 31,   December 31,   September 30,   June 30,  
PCI FMV ADJUSTMENT  2016   2016   2015   2015   2015  
(Unaudited)   (Unaudited)       (Unaudited)   (Unaudited)  
                      
Contractual principal and interest  $143,701   $153,124   $140,269   $152,098   $162,386  
Nonaccretable difference   (14,652 )  (14,975 )  (12,843 )  (14,512 )  (12,843 )
Expected cash flows as of the end of period   129,049    138,149    127,426    137,586    149,543  
Accretable yield   (30,377 )  (32,044 )  (32,509 )  (35,049 )  (36,773 )
Ending basis in PCI loans- estimated fair value  $98,672   $106,105   $94,917   $102,537   $112,770  
                           
Beginning accretable yield  $(32,044 ) $(32,509 ) $(35,049 ) $(36,773 ) $(38,465 )
Increase from First Capital   -    (1,663 )  -    -    -  
Loan system servicing income   1,434    1,551    1,437    1,525    1,567  
Accretion to interest income   1,343    1,471    1,438    1,551    1,733  
Reclass to (from) non-accretable yield   (522 )  (993 )  (553 )  (897 )  (1,653 )
Other adjustments   (588 )  99    218    (455 )  45  
Period end accretable yield**  $(30,377 ) $(32,044 ) $(32,509 ) $(35,049 ) $(36,773 )
  *  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)  June 30, 2016          June 30, 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)  $2,298,569   $26,729  4.68 % $1,643,844   $19,667  4.80 %
 Fed funds sold   3,848    5  0.52 %  730    -  0.00 %
 Taxable investment securities   484,057    2,640  2.18 %  474,807    2,508  2.11 %
 Tax-exempt investment securities   14,131    137  3.88 %  13,960    143  4.10 %
 Other interest-earning assets   42,559    187  1.77 %  52,098    140  1.08 %
                            
  Total interest-earning assets   2,843,164    29,698  4.20 %  2,185,439    22,458  4.12 %
                            
Allowance for loan losses   (9,961 )          (8,895 )        
Cash and due from banks   35,011            16,356          
Premises and equipment   66,029            58,912          
Goodwill   63,509            29,211          
Intangible assets   12,574            10,435          
Other assets   124,705            115,213          
                            
  Total assets  $3,135,031           $2,406,671          
                            
Liabilities and shareholders' equity                           
Interest-bearing liabilities:                           
 Interest-bearing demand  $426,427   $81  0.08 % $411,806   $71  0.07 %
 Savings and money market   744,945    840  0.45 %  525,359    405  0.31 %
 Time deposits - core   686,003    1,272  0.75 %  458,139    632  0.55 %
 Brokered deposits   139,164    270  0.78 %  133,981    176  0.53 %
  Total interest-bearing deposits   1,996,539    2,463  0.50 %  1,529,285    1,284  0.34 %
 Short-term borrowings   163,132    251  0.62 %  148,901    76  0.20 %
 Long-term debt   64,808    440  2.73 %  55,000    131  0.96 %
 Subordinated debt   33,102    494  6.00 %  23,833    351  5.91 %
  Total borrowed funds   261,042    1,185  1.83 %  227,734    558  0.98 %
                            
  Total interest-bearing liabilities   2,257,581    3,648  0.65 %  1,757,019    1,842  0.42 %
                            
Net interest rate spread        26,050  3.55 %       20,616  3.70 %
                            
Noninterest-bearing demand deposits   483,465            338,092          
Other liabilities   41,480            30,884          
Shareholders' equity   352,505            280,676          
                            
Total liabilities and shareholders' equity  $3,135,031           $2,406,671          
                            
Net interest margin           3.69 %          3.78 %
(1)Nonaccrual loans are included in the average loan balances.
(2)Interest income and yields for the three months ended June 30, 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                      
SIX MONTHS                       
($ in thousands)  June 30, 2016          June 30, 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)  $2,286,696   $53,853  4.74 % $1,623,279   $38,778  4.82 %
 Fed funds sold   5,372    13  0.49 %  596    -  0.00 %
 Taxable investment securities   485,605    5,327  2.19 %  477,255    5,299  2.22 %
 Tax-exempt investment securities   15,089    284  3.76 %  13,409    281  4.19 %
 Other interest-earning assets   45,666    383  1.69 %  56,258    285  1.02 %
                            
  Total interest-earning assets   2,838,428    59,860  4.24 %  2,170,797    44,643  4.15 %
                            
Allowance for loan losses   (9,912 )          (8,633 )        
Cash and due from banks   35,885            16,646          
Premises and equipment   66,271            59,133          
Goodwill   62,783            29,225          
Intangible assets   12,646            10,606          
Other assets   127,727            117,376          
                            
  Total assets  $3,133,828           $2,395,150          
                            
Liabilities and shareholders' equity                           
Interest-bearing liabilities:                           
 Interest-bearing demand  $426,610   $168  0.08 % $409,863   $139  0.07 %
 Savings and money market   739,124    1,671  0.45 %  521,374    800  0.31 %
 Time deposits - core   698,146    2,492  0.72 %  459,713    1,220  0.54 %
 Brokered deposits   132,994    548  0.83 %  137,254    352  0.52 %
  Total interest-bearing deposits   1,996,874    4,879  0.49 %  1,528,204    2,511  0.33 %
 Short-term borrowings   177,417    545  0.62 %  150,055    152  0.20 %
 Long-term FHLB borrowings   65,316    850  2.62 %  53,950    259  0.97 %
 Subordinated debt   33,015    940  5.73 %  23,749    679  5.77 %
  Total borrowed funds   275,748    2,335  1.70 %  227,754    1,090  0.97 %
                            
  Total interest-bearing liabilities   2,272,622    7,214  0.64 %  1,755,958    3,601  0.41 %
                            
Net interest rate spread        52,646  3.60 %       41,042  3.73 %
                            
Noninterest-bearing demand deposits   469,961            328,805          
Other liabilities   40,714            30,951          
Shareholders' equity   350,531            279,436          
                            
Total liabilities and shareholders' equity  $3,133,828           $2,395,150          
                            
Net interest margin           3.73 %          3.81 %
(1)Nonaccrual loans are included in the average loan balances.
(2)Interest income and yields for the six months ended June 30, 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)  June 30,   March 31,   December 31,   September 30,   June 30,  
   2016   2016   2015   2015   2015  
   Unaudited   Unaudited   Unaudited   Unaudited   Unaudited  
ASSET QUALITY                          
 Nonaccrual loans  $5,185   $6,595   $4,326   $5,342   $5,545  
 Troubled debt restructuring (and still accruing)   2,582    2,696    2,774    3,090    3,115  
 Past due 90 days plus (and still accruing)   -    293    1,151    47    -  
 Nonperforming loans   7,767    9,584    8,251    8,479    8,660  
 OREO   3,246    4,410    5,451    8,143    9,788  
 Nonperforming assets   11,013    13,994    13,702    16,622    18,448  
 Past due 30-59 days (and still accruing)   985    217    1,222    1,790    2,559  
 Past due 60-89 days (and still accruing)   5,800    499    1,340    3,753    481  
                            
 Nonperforming loans to total loans   0.33 %  0.42 %  0.47 %  0.50 %  0.52 %
 Nonperforming assets to total assets   0.35 %  0.44 %  0.54 %  0.67 %  0.75 %
 Allowance to total loans   0.47 %  0.43 %  0.52 %  0.51 %  0.51 %
 Allowance to nonperforming loans   139.99 %  102.59 %  109.85 %  103.10 %  97.78 %
 Allowance to nonperforming assets   98.73 %  70.26 %  66.15 %  52.59 %  45.90 %
 Past due 30-89 days (accruing) to total loans   0.29 %  0.03 %  0.15 %  0.33 %  0.18 %
 Net charge-offs (recoveries) to average loans (annualized)   -0.03
%  -0.04
%  0.02
%  -0.07
%  0.08
%
                           
CAPITAL                          
 Book value per common share  $6.77   $6.69   $6.49   $6.47   $6.37  
 Tangible book value per common share**  $5.33   $5.22   $5.60   $5.58   $5.47  
 Common shares outstanding   53,332,369    53,038,020    44,854,509    44,909,447    44,910,686  
 Weighted average dilutive common shares outstanding   52,704,537    52,599,584    44,322,428    44,287,019    44,301,895  
                            
 Common Equity Tier 1 (CET1) capital  $282,721   $275,490   $251,807   $249,289   $245,328  
 Tier 1 capital   307,736    300,354    268,605    265,917    261,596  
 Tier 2 capital   10,914    9,832    9,064    8,742    8,577  
 Total risk based capital   318,650    310,186    277,669    274,659    270,173  
 Risk weighted assets   2,538,461    2,478,547    1,939,417    1,887,065    1,844,540  
 Average assets for leverage ratio   3,058,742    3,076,505    2,441,811    2,434,376    2,359,401  
                            
 Common Equity Tier 1 (CET1) ratio   11.14 %  11.11 %  12.98 %  13.21 %  13.30 %
 Tier 1 ratio   12.12 %  12.12 %  13.85 %  14.09 %  14.18 %
 Total risk based capital ratio   12.55 %  12.51 %  14.32 %  14.55 %  14.65 %
 Tier 1 leverage ratio   10.06 %  9.76 %  11.00 %  10.92 %  11.09 %
 Tangible common equity to tangible assets**   9.00 %  8.87 %  9.93 %  10.02 %  9.99 %
                            
LIQUIDITY                          
 Net loans to total deposits   93.64 %  90.85 %  88.74 %  86.88 %  87.95 %
 Reliance on wholesale funding   16.25 %  15.50 %  16.77 %  16.02 %  18.45 %
                            
INCOME STATEMENT (THREE MONTH RESULTS; ANNUALIZED)                         
 Return on Average Assets   0.71 %  0.35 %  0.60 %  0.77 %  0.71 %
 Return on Average Common Equity   6.33 %  3.16 %  5.26 %  6.71 %  6.10 %
 Net interest margin (non-tax equivalent)   3.69 %  3.78 %  3.52 %  3.58 %  3.78 %
                            
 ** 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)                     
   June 30,   March 31,   December 31,   September 30,   June 30,  
   2016   2016   2015   2015   2015  
   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)  
Adjusted net income                          
 Pretax income (as reported)  $8,597   $4,615   $5,727   $6,870   $6,542  
 Plus: merger-related expenses   1,268    5,193    1,396    31    167  
   (gain) loss on sale of securities   87    6    -    (54 )  -  
  Adjusted pretax income   9,952    9,814    7,123    6,847    6,709  
 Tax expense   3,509    3,646    2,332    2,085    2,331  
  Adjusted net income  $6,443   $6,168   $4,791   $4,762   $4,378  
                            
 Divided by: weighted average diluted shares   52,704,537    52,599,584    44,322,428    44,287,019    44,301,895  
  Adjusted net income per share   0.12    0.12   $0.11   $0.11   $0.10  
 Estimated tax rate for adjustment   34.26 %  34.09 %  32.75 %  32.56 %  34.75 %
                           
Adjusted noninterest income                          
 Noninterest income (as reported)  $5,375   $4,727   $4,523   $4,927   $4,292  
 Less: (gain) loss on sale of securities   87    6    -    (54 )  -  
  Adjusted noninterest income  $5,462   $4,733   $4,523   $4,873   $4,292  
                           
Adjusted noninterest expenses                          
 Noninterest expenses (as reported)  $21,946   $26,153   $18,362   $18,419   $18,232  
 Less: merger-related expenses   (1,268 )  (5,193 )  (1,396 )  (31 )  (167 )
  Adjusted noninterest expenses  $20,678   $20,960   $16,966   $18,388   $18,065  
                           
Adjusted operating expense                          
 Noninterest expenses (as reported)  $21,946   $26,153   $18,362   $18,419   $18,232  
 Less: merger-related expenses   (1,268 )  (5,193 )  (1,396 )  (31 )  (167 )
 Less: amortization of intangibles   (458 )  (458 )  (347 )  (347 )  (347 )
  Adjusted operating expense  $20,220   $20,502   $16,619   $18,041   $17,718  
                           
Adjusted operating revenues                          
 Net Interest Income (as reported)  $26,050   $26,597   $19,975   $20,362   $20,616  
 Plus: noninterest income (as reported)   5,375    4,727    4,523    4,927    4,292  
 Less: (gain) loss on sale of securities   87    6    -    (54 )  -  
  Adjusted operating revenues  $31,512   $31,330   $24,498   $25,235   $24,908  
                           
Adjusted operating expense to adjusted operating revenues                          
 Adjusted operating expense  $20,220   $20,502   $16,619   $18,041   $17,718  
 Divided by: adjusted operating revenues   31,512    31,330    24,498    25,235    24,908  
  Adjusted operating expense to adjusted operating revenues   64.17 %  65.44 %  67.84 %  71.49 %  71.13 %
  Noninterest expenses to net interest income plus noninterest income   69.84 %  83.49 %  74.95 %  72.83 %  73.20 %
                           
Adjusted return on average assets                          
 Adjusted net income  $6,443   $6,168   $4,791   $4,762   $4,378  
 Divided by: average assets   3,135,031    3,132,625    2,480,983    2,473,034    2,406,671  
 Multiplied by: annualization factor   4.02    4.02    3.97    3.97    4.01  
  Adjusted return on average assets   0.83 %  0.79 %  0.77 %  0.76 %  0.73 %
  Return on average assets   0.71 %  0.35 %  0.60 %  0.77 %  0.71 %
                      
PARK STERLING CORPORATION                     
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES                     
($ in thousands, except per share amounts)                     
   June 30,   March 31,   December 31,   September 30,   June 30,  
   2016   2016   2015   2015   2015  
   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)  
Adjusted return on average equity                          
 Adjusted net income  $6,443   $6,168   $4,791   $4,762   $4,378  
 Divided by: average common equity   352,505    348,556    284,671    282,426    280,676  
 Multiplied by: annualization factor   4.02    4.02    3.97    3.97    4.01  
  Adjusted return on average equity   7.35 %  7.12 %  6.68 %  6.69 %  6.26 %
  Return on average equity   6.33 %  3.16 %  5.26 %  6.71 %  6.10 %
                           
Tangible common equity to tangible assets                          
 Total assets  $3,174,075   $3,153,737   $2,514,264   $2,485,134   $2,443,880  
 Less: intangible assets   (75,551 )  (76,520 )  (38,768 )  (39,115 )  (39,462 )
  Tangible assets  $3,098,524   $3,077,217   $2,475,496   $2,446,019   $2,404,418  
                           
 Total common equity  $354,450   $349,511   $284,704   $284,205   $279,743  
 Less: intangible assets   (75,551 )  (76,520 )  (38,768 )  (39,115 )  (39,462 )
  Tangible common equity  $278,899   $272,991   $245,936   $245,090   $240,281  
                            
 Tangible common equity  $278,899   $272,991   $245,936   $245,090   $240,281  
 Divided by: tangible assets   3,098,524    3,077,217    2,475,496    2,446,019    2,404,418  
  Tangible common equity to tangible assets   9.00 %  8.87 %  9.93 %  10.02 %  9.99 %
  Common equity to assets   11.17 %  11.08 %  11.32 %  11.44 %  11.45 %
                           
Tangible book value per share                          
 Issued and outstanding shares   53,332,369    53,038,020    44,854,509    44,909,447    44,910,686  
 Less: nondilutive restricted stock awards   (969,991 )  (785,658 )  (959,305 )  (974,183 )  (985,531 )
  Period end dilutive shares   52,362,378    52,252,362    43,895,204    43,935,264    43,925,155  
                            
 Tangible common equity  $278,899   $272,991   $245,936   $245,090   $240,281  
 Divided by: period end dilutive shares   52,362,378    52,252,362    43,895,204    43,935,264    43,925,155  
  Tangible common book value per share  $5.33   $5.22   $5.60   $5.58   $5.47  
  Common book value per share  $6.77   $6.69   $6.49   $6.47   $6.37  
                           
Adjusted return on average tangible common equity                          
 Average common equity  $352,505   $348,556   $284,671   $282,426   $280,676  
 Less: average intangible assets   (76,083 )  (74,773 )  (38,934 )  (39,284 )  (39,646 )
  Average tangible common equity  $276,422   $273,783   $245,737   $243,142   $241,030  
                            
 Net income  $5,552   $2,741   $3,775   $4,778   $4,269  
 Divided by: average tangible common equity   276,422    273,783    245,737    243,142    241,030  
 Multiplied by: annualization factor   4.02    4.02    3.97    3.97    4.01  
  Return on average tangible common equity   8.08 %  4.03 %  6.09 %  7.80 %  7.10 %
                            
 Adjusted net income  $6,443   $6,168   $4,791   $4,762   $4,378  
 Divided by: average tangible common equity   276,422    273,783    245,737    243,142    241,030  
 Multiplied by: annualization factor   4.02    4.02    3.97    3.97    4.01  
  Adjusted return on average tangible common equity   9.37 %  9.06 %  7.74 %  7.77 %  7.29 %
                           
Adjusted allowance for loan losses                          
 Allowance for loan losses  $10,873   $9,832   $9,064   $8,742   $8,468  
 Plus: acquisition accounting FMV adjustments to acquired loans   31,277    33,589    28,173    29,548    31,159  
  Adjusted allowance for loan losses  $42,150   $43,421   $37,237   $38,290   $39,627  
 Divided by: total loans (excluding LHFS before FMV adjustments)  $2,358,174   $2,312,732   $1,769,988   $1,729,672   $1,688,622  
  Adjusted allowance for loan losses to total loans   1.79 %  1.88 %  2.10 %  2.21 %  2.35 %
  Allowance for loan losses to total loans   0.47 %  0.43 %  0.52 %  0.51 %  0.51 %

Contact Information