SOURCE: Park Sterling Corporation

Park Sterling Corporation

July 27, 2017 07:00 ET

Park Sterling Corporation Announces Results for Second Quarter 2017

CHARLOTTE, NC --(Marketwired - July 27, 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 second quarter of 2017.

  • Net income of $8.5 million, or $0.16 per share, compared to $7.5 million, or $0.14 per share, in the quarter ended March 31, 2017
  • Adjusted net income (non-GAAP), which excludes merger-related expenses and gain on sale of securities, was $9.2 million, or $0.17 per share, compared to $7.5 million, or $0.14 per share in the prior quarter
  • Reported annualized return on average assets and equity for the second quarter was 1.03% and 9.33%, respectively, while adjusted annualized return on average assets and average equity (non-GAAP) was 1.10% and 10.08%, respectively
  • Noninterest income decreased $50 thousand from the prior quarter, with a decrease in mortgage banking income mostly offset by growth in other areas
  • Noninterest expenses totaled $21.4 million, an increase of $0.84 million from the prior quarter; adjusted noninterest expenses (non-GAAP), which excludes merger-related expenses, decreased $0.1 million from the prior quarter
  • Reported efficiency ratio was 63% for the second quarter, while adjusted efficiency ratio (non-GAAP) was 59% for the second quarter
  • Nonperforming loans declined to a very low level of 0.48% of total loans
  • Capital levels remained strong with a Tier 1 leverage ratio of 10.05%
  • The Board of Directors declared a quarterly cash dividend on common shares of $0.04 per share (July 2017)

"As we began 2016, we embarked on a path to improve our returns and the efficiency of our business model by leveraging the investments in people and products we had made in previous years," said Jim Cherry, Chief Executive Officer. "At that time, our financial performance goals, adjusted for merger-related costs, were to surpass a 1% return on average assets and a 10% return on average equity, and to lower our efficiency ratio below 60% by the end of 2018. We are very pleased to report that we achieved these results in the second quarter 2017 as our annualized adjusted return on average assets was 1.10% and our adjusted return on average equity was 10.08%. Additionally, our adjusted efficiency ratio was 59%. These results reflect the very fine work of all of my colleagues at Park Sterling in supporting existing customers and winning new customers with exceptional service and market leading products. Looking forward, we are excited about our announced strategic partnership with South State Bank and the opportunity to more completely fulfill our original vision of creating the premier regional banking franchise in the southeast."

Financial Results

Income Statement - Three Months Ended June 30, 2017

Park Sterling reported net income of $8.5 million, or $0.16 per share, for the three months ended June 30, 2017 ("2017Q2"). This compares to net income of $7.5 million, or $0.14 per share, for the three months ended March 31, 2017 ("2017Q1") and net income of $5.6 million, or $0.11 per share, for the three months ended June 30, 2016 ("2016Q2"). The increase in net income from 2017Q1 resulted primarily from an increase in interest income on loans and lower provision for loan losses, partially offset by an increase in interest expense on borrowed funds, professional fees related to the South State merger and income tax expense on higher pretax income. The increase in net income from 2016Q2 was primarily a result of the increase in interest income described above, as well as a decrease in provision for loan losses and a decrease in merger-related expenses, partially offset by increased income taxes on higher pretax income in 2017Q2.

Net interest income totaled $28.6 million in 2017Q2, which represents a $1.5 million, or 6%, increase from $27.1 million in 2017Q1 and a $2.5 million, or 10%, increase from $26.1 million in 2016Q2. Average total earning assets increased $63 million in 2017Q2 to $3.05 billion, compared to $2.98 billion in 2017Q1 and increased $205 million, or 7%, compared to $2.84 billion in 2016Q2. The increase in average total earning assets in 2017Q2 from 2017Q1 included an increase in average loans (including loans held for sale) of $55 million, or 9% annualized, an increase in average marketable securities of $3.3 million, and an increase in average other interest-earning assets of $4.3 million. The increase in average total earning assets in 2017Q2 from 2016Q2 resulted primarily from a $180 million, or 8%, increase in average loans (including loans held for sale), a $4.5 million, or 1%, increase in average marketable securities and a $19.6 million, or 42%, increase in average other interest-earning assets.

Net interest margin was 3.77% in 2017Q2, representing a 9 basis point increase from 3.68% in 2017Q1 and an 8 basis point increase from 3.69% in 2016Q2. The increase in net interest margin from 2017Q1 resulted primarily from an 18 basis point increase in loan yields, partially offset by a 29 basis point increase in the cost of borrowed funds, both of which reflect the increase in the prime lending rate. The increase in net interest margin from 2016Q2 was primarily the result of a 10 basis point increase in loan yields and an improved yield on investment securities, partially offset by an increase in the cost of interest-bearing liabilities.

The Company reported no provision for loan losses expense in 2017Q2, compared to $678 thousand of provision recorded in 2017Q1, and $882 thousand of provision recorded in 2016Q2. Allowance for loan loss levels decreased to 0.51% of total loans at 2017Q2 compared to 0.52% at 2017Q1.

Noninterest income totaled $5.4 million in 2017Q2, compared to $5.5 million in 2017Q1 and $5.4 million in 2016Q2. The decrease from 2017Q1 is primarily the result of a $186 thousand decrease in mortgage banking income from the first quarter, partially offset by increases in service charges, wealth and capital markets income. The $43 thousand increase in noninterest income from 2016Q2 reflects increases in service charge income and other noninterest income, partially offset by decreases in mortgage banking, wealth and capital markets income.

Noninterest expense increased $0.8 million, or 4%, to $21.4 million in 2017Q2 from $20.6 million in 2017Q1, and decreased $0.5 million, or 2%, compared to $21.9 million in 2016Q2. The increase in noninterest expense from 2017Q1 resulted from $0.9 million in merger-related expenses incurred in the second quarter as compared to no merger-related expenses in the first quarter. The decrease in noninterest expenses from 2017Q1 was due primarily to a decrease in merger-related expenses of $0.4 million and decreases in all other categories of noninterest expense reflecting expense saving following the First Capital merger systems conversion completed in May 2016.

The Company's effective tax rate was 32.2% in 2017Q2, compared to 33.2% in 2017Q1 and 35.4% in 2016Q2. The decrease in the effective tax rate compared to 2017Q1 was the result of excess tax benefits on stock-based compensation.

Balance Sheet

Total assets increased $32.2 million, or 4% annualized, to $3.34 billion at 2017Q2, compared to total assets of $3.31 billion at 2017Q1. Total securities, including non-marketable securities, decreased $21.4 million, to $511.5 million. Total loans, excluding loans held for sale, increased $41.5 million, or 7% annualized, to $2.50 billion at 2017Q2.

The mix of commercial and consumer loans remained largely consistent with 2017Q1. Total commercial loans increased $28.4 million and represent 79% of the loan portfolio. Commercial and industrial and commercial real estate owner occupied increased $25.6 million and represent 32.6% of the portfolio, up from 32.1% at 2017Q1, reflecting an increased focus on commercial and industrial and commercial real estate owner occupied lending. Acquisition, construction and development loans decreased $31.5 million and represent 13.5% of the portfolio, down from 15.0% at 2017Q1. Total consumer loans increased $13.2 million and remain flat as a percentage of total loans at 21% of the portfolio.

Total deposits increased $28 million, or 4% annualized, to $2.54 billion at 2017Q2. Noninterest bearing demand deposits increased $30 million, or 23% annualized, to $554.4 million from 2017Q1. Money market, NOW and savings deposits were up $13.1 million from 2017Q1 and represent 51% of total deposits. Time deposits decreased $15.2 million to $691.7 million at 2017Q2.

Total borrowings increased $5.2 million, or 5% annualized, to $408.6 million at 2017Q2 compared to $403.4 million at 2017Q1. At 2017Q2, FHLB borrowings totaled $345 million, the senior unsecured term loan at the holding company totaled $29.8 million, and acquired subordinated debt, net of acquisition accounting fair value marks, totaled $33.8 million.

Total shareholders' equity increased $7.6 million to $369.3 million at 2017Q2 compared to $361.7 million at 2017Q1, driven by a $6.4 million increase in retained earnings and an increase of $0.9 million in accumulated other comprehensive income. The change in accumulated other comprehensive income was caused by the effect of market interest rates on the fair value of available for sale investment securities.

The Company's capital ratios remain strong at June 30, 2017 with the Common Equity Tier 1 ("CET1") ratio at 11.10% and the Tier 1 leverage ratio at 10.05%.

Asset Quality

Asset quality remains strong. Nonperforming assets were $15.1 million at 2017Q2, or 0.45% of total assets, compared to $15.3 million at 2017Q1, or 0.46% of total assets. Nonperforming loans were $12.0 million at 2017Q2, and represented 0.48% of total loans, compared to $12.1 million at 2017Q1, or 0.49% of total loans. The Company reported net charge-offs of $131 thousand, or 0.02% of average loans (annualized), in 2017Q2, compared to net recoveries of $30 thousand, or 0.01% of average loans (annualized), in 2017Q1.

The allowance for loan losses decreased $131 thousand, or 1%, to $12.7 million, or 0.51% of total loans, at 2017Q2, compared to $12.8 million, or 0.52% of total loans, at 2017Q1. The decrease in the allowance from 2017Q1 is primarily attributable to a change in qualitative factors reducing the required reserve, partially offset by an increase in the allowance related to loan growth for the period.

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 54 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
Statements included in this communication which are not historical in nature or do not relate to current facts are intended to be, and are hereby identified as, forward-looking statements for purposes of the safe harbor provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words "may," "will," "anticipate," "could," "should," "would," "believe," "contemplate," "expect," "estimate," "continue," "plan," "project" and "intend," as well as other similar words and expressions of the future, are intended to identify forward-looking statements. South State Corporation ("South State") and Park Sterling Corporation ("Park Sterling") caution readers that forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from anticipated results. Such risks and uncertainties, include, among others, the following possibilities: the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the definitive merger agreement between South State and Park Sterling; the outcome of any legal proceedings that may be instituted against South State or Park Sterling; the failure to obtain necessary regulatory approvals (and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the transaction) and shareholder approvals or to satisfy any of the other conditions to the transaction on a timely basis or at all; the possibility that the anticipated benefits of the transaction are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where South State and Park Sterling do business; the possibility that the transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; diversion of management's attention from ongoing business operations and opportunities; potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the transaction; South State's ability to complete the acquisition and integrate Park Sterling successfully; 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 in a timely, cost-efficient manner; 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; failure of assumptions underlying noninterest expense levels; failure of assumptions underlying the establishment of the allowance for loan losses; deterioration in the value of securities held in the investment securities portfolio; the company's ability to fully realize the value of its net deferred tax asset, including the impact of lower federal income tax rates on the carrying amount or the risk that the company may be required to establish a valuation allowance; uncertainties about the financial stability and growth rates of non-U.S. jurisdictions, the risk that those jurisdictions may face difficulties servicing their sovereign debt, and related stresses on the financial, credit and real estate markets generally, which could negatively impact the company's revenues and the value of its assets and liabilities; changes in general economic or business conditions, customer behavior and other uncertainties that could lead to reduced revenues and deterioration in the credit quality of the loan portfolio or the value of the collateral securing those loans and result in higher credit losses than currently expected; sensitivity to the interest rate environment, including continued low interest rates, a rapid increase in interest rates or a change in the shape of the yield curve, and the impact on net interest margins; cyber-security events; failure to anticipate or inability to adapt to rapid technological developments and changes; 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; the impact of implementation of 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; and other factors that may affect future results of South State and Park Sterling. Additional factors that could cause results to differ materially from those described above can be found in South State's Annual Report on Form 10-K for the year ended December 31, 2016, which is on file with the Securities and Exchange Commission (the "SEC") and available in the "Investor Relations" section of South State's website, http://www.southstatebank.com, under the heading "SEC Filings" and in other documents South State files with the SEC, and in Park Sterling's Annual Report on Form 10-K for the year ended December 31, 2016, which is on file with the SEC and available on the "Investor Relations" page linked to Park Sterling's website, http://www.parksterlingbank.com, under the heading "Regulatory Filings" and in other documents Park Sterling files with the SEC.

All forward-looking statements speak only as of the date they are made and are based on information available at that time. Neither South State nor Park Sterling assumes any obligation to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements were made or to reflect the occurrence of unanticipated events except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements.

IMPORTANT ADDITIONAL INFORMATION
In connection with the proposed transaction between South State and Park Sterling, South State has filed with the SEC a Registration Statement on Form S-4 that includes a preliminary Joint Proxy Statement of South State and Park Sterling and a Preliminary Prospectus of South State, as well as other relevant documents concerning the proposed transaction. Once the Registration Statement is declared effective by the SEC, Park Sterling and South State will mail a definitive Joint Proxy Statement/Prospectus to their respective shareholders. The proposed transaction involving South State and Park Sterling will be submitted to Park Sterling's shareholders and South State's shareholders for their consideration. This communication shall not constitute an offer to sell or the solicitation of an offer to buy any securities nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. Shareholders of South State and shareholders of Park Sterling are urged to read the registration statement and the joint proxy statement/prospectus regarding the transaction when it becomes available and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information.

Shareholders will be able to obtain a free copy of the definitive joint proxy statement/prospectus, as well as other filings containing information about South State and Park Sterling, without charge, at the SEC's website (http://www.sec.gov). Copies of the joint proxy statement/prospectus and the filings with the SEC that will be incorporated by reference in the joint proxy statement/prospectus can also be obtained, without charge, by directing a request to South State Corporation, 520 Gervais Street, Columbia, South Carolina 29201, Attention: John C. Pollok, Senior Executive Vice President, CFO and COO, (800) 277-2175 or to Park Sterling Corporation, 1043 E. Morehead Street, Suite 201, Charlotte, North Carolina 28204, Attention: Donald K. Truslow, (704) 323-4292.

PARTICIPANTS IN THE SOLICITATION
South State, Park Sterling and certain of their respective directors, executive officers and employees may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information regarding South State's directors and executive officers is available in its definitive proxy statement, which was filed with the SEC on March 6, 2017, and certain of its Current Reports on Form 8-K. Information regarding Park Sterling's directors and executive officers is available in its definitive proxy statement, which was filed with the SEC on April 13, 2017, and certain of its Current Reports on Form 8-K. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the joint proxy statement/prospectus and other relevant materials filed with the SEC. Free copies of this document may be obtained as described in the preceding paragraph.

          
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,
  2017  2017  2016  2016  2016
  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
Interest income              
 Loans, including fees $ 29,518  $ 27,462  $ 27,066  $ 26,521  $ 26,729
 Taxable investment securities 2,985  2,935  2,793  2,583  2,640
 Tax-exempt investment securities 135  135  135  137  137
 Nonmarketable equity securities 219  198  163  151  153
 Interest on deposits at banks 109  89  54  51  34
 Federal funds sold 2  2  1  1  5
  Total interest income 32,968  30,821  30,212  29,444  29,698
Interest expense              
 Money market, NOW and savings deposits 1,031  967  941  953  1,014
 Time deposits 1,482  1,425  1,469  1,447  1,449
 Short-term borrowings 922  501  361  345  251
 Long-term debt 371  371  371  379  440
 Subordinated debt 552  499  499  497  494
  Total interest expense 4,358  3,763  3,641  3,621  3,648
  Net interest income 28,610  27,058  26,571  25,823  26,050
Provision for loan losses -  678  550  642  882
  Net interest income after provision 28,610  26,380  26,021  25,181  25,168
Noninterest income              
 Service charges on deposit accounts 1,725  1,682  1,761  1,671  1,528
 Mortgage banking income 775  961  765  1,015  873
 Income from wealth management activities 689  649  682  739  863
 Income from capital market activities 645  609  1,070  680  767
 ATM and card income 751  714  713  730  776
 Income from bank-owned life insurance 578  578  663  532  526
 Gain (loss) on sale of securities available for sale -  58  6  -  (87)
 Amortization of indemnification asset and true-up liability expense -  -  -  (139)  (25)
 Other noninterest income 255  217  185  219  154
  Total noninterest income 5,418  5,468  5,845  5,447  5,375
Noninterest expenses              
 Salaries and employee benefits 11,388  11,483  11,480  11,755  11,774
 Occupancy and equipment 2,924  2,907  3,577  3,111  3,041
 Data processing and outside service fees 1,907  1,925  2,105  2,331  2,224
 Legal and professional fees 1,650  783  869  978  950
 Deposit charges and FDIC insurance 442  485  391  405  478
 Loss on disposal of fixed assets -  24  2,175  144  230
 Communication fees 460  463  504  532  505
 Postage and supplies 107  142  125  115  191
 Loan and collection expense 210  117  57  425  273
 Core deposit intangible amortization 454  454  458  458  458
 Advertising and promotion 140  146  254  44  367
 Net cost of operation of other real estate owned 240  175  11  (92)  70
 Other noninterest expense 1,527  1,538  3,019  906  1,385
  Total noninterest expenses 21,449  20,642  25,025  21,112  21,946
  Income before income taxes 12,579  11,206  6,841  9,516  8,597
Income tax expense 4,052  3,717  1,510  3,192  3,045
  Net income $ 8,527  $ 7,489  $ 5,331  $ 6,324  $ 5,552
               
Earnings per common share, fully diluted $ 0.16  $ 0.14  $ 0.10  $ 0.12  $ 0.11
Weighted average diluted common shares 53,481,846  53,462,857  53,155,493  52,743,928  52,704,537
               
               
PARK STERLING CORPORATION
CONDENSED CONSOLIDATED INCOME STATEMENT
SIX MONTH RESULTS
($ in thousands, except per share amounts)  June 30,   June 30,
   2017   2016
   (Unaudited)   (Unaudited)
Interest income       
 Loans, including fees $56,980  $53,853
 Taxable investment securities  5,920   5,327
 Tax-exempt investment securities  270   284
 Nonmarketable equity securities  417   307
 Interest on deposits at banks  198   76
 Federal funds sold  4   13
  Total interest income  63,789   59,860
Interest expense       
 Money market, NOW and savings deposits  1,998   2,032
 Time deposits  2,907   2,847
 Short-term borrowings  1,423   545
 Long-term debt  742   850
 Subordinated debt  1,051   940
  Total interest expense  8,121   7,214
  Net interest income  55,668   52,646
Provision for loan losses  678   1,438
  Net interest income after provision  54,990   51,208
Noninterest income       
 Service charges on deposit accounts  3,407   3,017
 Mortgage banking income  1,736   1,648
 Income from wealth management activities  1,338   1,666
 Income from capital market activities  1,254   835
 ATM and card income  1,465   1,349
 Income from bank-owned life insurance  1,156   1,514
 Gain (loss) on sale of securities available for sale  58   (93)
 Amortization of indemnification asset and true-up liability expense  -   (172)
 Other noninterest income  472   338
  Total noninterest income  10,886   10,102
Noninterest expenses       
 Salaries and employee benefits  22,871   24,792
 Occupancy and equipment  5,831   6,166
 Data processing and outside service fees  3,832   7,747
 Legal and professional fees  2,433   1,675
 Deposit charges and FDIC insurance  927   910
 Loss on disposal of fixed assets  24   274
 Communication fees  923   988
 Postage and supplies  249   364
 Loan and collection expense  327   310
 Core deposit intangible amortization  908   916
 Advertising and promotion  286   788
 Net cost of operation of other real estate owned  415   336
 Other noninterest expense  3,065   2,833
  Total noninterest expenses  42,091   48,099
  Income before income taxes  23,785   13,211
Income tax expense  7,769   4,919
  Net income $16,016  $8,292
        
Earnings per common share, fully diluted $0.30  $0.16
Weighted average diluted common shares  53,458,705   52,650,886
      
      
PARK STERLING CORPORATION     
WEALTH MANAGEMENT ASSETS     
($ in thousands)     
   
  June 30,  March 31,  December 31,  September 30,  June 30,
  2017  2017  2016  2016  2016
  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
Discretionary assets held $ 256,623  $ 288,250  $ 278,872  $ 294,849  $ 322,996
Non-discretionary assets held 27,274  44,996  36,522  28,476  32,173
Total wealth management assets $ 283,897  $ 333,246  $ 315,394  $ 323,325  $ 355,169
               
PARK STERLING CORPORATION     
MORTGAGE ORIGINATION     
($ in thousands)     
  for the three month period ended
  June 30,  March 31,  December 31,  September 30,  June 30,
  2017  2017  2016  2016  2016
  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
Mortgage origination - purchase $ 16,180  $ 18,446  $ 14,767  $ 21,982  $ 25,316
Mortgage origination - refinance 8,609  16,068  21,316  20,552  16,221
Mortgage origination - construction 22,441  16,823  18,535  19,440  18,403
Total mortgage origination $ 47,230  $ 51,337  $ 54,618  $ 61,974  $ 59,941
          
          
PARK STERLING CORPORATION     
CONDENSED CONSOLIDATED BALANCE SHEETS     
($ in thousands) June 30,  March 31,  December 31,  September 30,  June 30,
  2017  2017  2016*  2016  2016
  (Unaudited)  (Unaudited)     (Unaudited)  (Unaudited)
ASSETS              
Cash and due from banks $ 35,508  $ 40,081  $ 34,162  $ 35,066  $ 33,348
Interest-earning balances at banks 55,862  32,997  48,882  38,540  34,955
Investment securities available for sale 403,602  423,345  402,501  405,010  393,131
Investment securities held to maturity 87,690  89,579  91,752  99,415  102,125
Nonmarketable equity securities 20,179  19,967  17,501  16,289  14,420
Federal funds sold 260  765  570  345  1,570
Loans held for sale 3,102  6,181  7,996  15,203  11,967
Loans - Non-covered 2,502,120  2,460,595  2,412,186  2,368,950  2,311,775
Loans - Covered -  -  -  -  15,122
Allowance for loan losses (12,702)  (12,833)  (12,125)  (11,612)  (10,873)
 Net loans 2,489,418  2,447,762  2,400,061  2,357,338  2,316,024
               
Premises and equipment, net 62,779  62,392  63,080  64,632  65,711
FDIC receivable for loss share agreements -  -  -  -  1,164
Other real estate owned - non-covered 3,175  3,167  2,438  2,730  2,866
Other real estate owned - covered -  -  -  -  380
Bank-owned life insurance 71,831  71,337  70,785  70,167  69,695
Deferred tax asset 20,790  21,250  25,721  26,947  28,985
Goodwill 63,317  63,317  63,317  63,030  63,197
Core deposit intangible 10,530  10,984  11,438  11,896  12,354
Other assets 12,956  15,632  15,192  20,330  22,183
               
 Total assets $ 3,340,999  $ 3,308,756  $ 3,255,396  $ 3,226,938  $ 3,174,075
               
LIABILITIES AND SHAREHOLDERS' EQUITY              
               
Deposits:              
Demand noninterest-bearing $ 554,399  $ 524,380  $ 521,295  $ 505,591  $ 496,195
Money market, NOW and savings 1,291,127  1,277,986  1,251,385  1,228,687  1,229,040
Time deposits 691,656  706,829  741,072  749,999  748,188
 Total deposits 2,537,182  2,509,195  2,513,752  2,484,277  2,473,423
               
Short-term borrowings 345,000  340,000  285,000  280,000  200,000
Long-term debt 29,758  29,747  29,736  29,725  64,714
Subordinated debt 33,832  33,671  33,501  33,339  33,176
Accrued expenses and other liabilities 25,963  34,423  37,562  40,901  48,312
 Total liabilities 2,971,735  2,947,036  2,899,551  2,868,242  2,819,625
               
Shareholders' equity:              
 Common stock 53,280  53,113  53,117  53,306  53,332
 Additional paid-in capital 273,409  273,291  273,400  275,323  275,246
 Retained earnings 44,375  37,977  32,608  29,409  25,219
 Accumulated other comprehensive income (loss) (1,800)  (2,661)  (3,280)  658  653
 Total shareholders' equity 369,264  361,720  355,845  358,696  354,450
               
Total liabilities and shareholders' equity $ 3,340,999  $ 3,308,756  $ 3,255,396  $ 3,226,938  $ 3,174,075
               
 Common shares issued and outstanding 53,279,996  53,112,726  53,116,519  53,305,834  53,332,369
               
 * Derived from audited financial statements.              
           
           
PARK STERLING CORPORATION     
SUMMARY OF LOAN PORTFOLIO     
($ in thousands)     
  June 30,  March 31,  December 31,  September 30,  June 30,
  2017  2017  2016*  2016  2016
BY LOAN TYPE (Unaudited)  (Unaudited)     (Unaudited)  (Unaudited)
Commercial:              
 Commercial and industrial $ 454,952  $ 430,247  $ 387,401  $ 351,506  $ 334,644
 Commercial real estate (CRE) - owner-occupied 361,213  360,318  367,553  366,506  376,440
 CRE - investor income producing 801,698  770,404  743,107  768,513  764,168
 Acquisition, construction and development (AC&D) - 1-4 Family Construction 95,236  85,025  82,707  108,706  100,604
 AC&D - Lots and land 92,761  98,339  105,362  88,620  94,686
 AC&D - CRE construction 150,170  186,325  194,732  148,696  125,466
 Other commercial 15,712  12,743  12,900  10,653  10,410
 Total commercial loans 1,971,742  1,943,401  1,893,762  1,843,200  1,806,418
               
Consumer:              
 Residential mortgage 283,911  273,624  260,521  254,298  244,063
 Home equity lines of credit 173,840  170,709  176,799  181,246  181,020
 Residential construction 52,222  52,631  59,060  63,847  65,867
 Other loans to individuals 17,133  16,936  18,905  23,281  26,575
 Total consumer loans 527,106  513,900  515,285  522,672  517,525
 Total loans 2,498,848  2,457,301  2,409,047  2,365,872  2,323,943
 Deferred costs (fees) 3,272  3,294  3,139  3,078  2,954
 Total loans, net of deferred costs (fees) $ 2,502,120  $ 2,460,595  $ 2,412,186  $ 2,368,950  $ 2,326,897
                
 * Derived from audited financial statements.              
               
  June 30,  March 31,  December 31,  September 30,  June 30,
  2017  2017  2016*  2016  2016
BY ACQUIRED AND NON-ACQUIRED (Unaudited)  (Unaudited)     (Unaudited)  (Unaudited)
Acquired loans - performing $ 425,758  $ 495,216  $ 538,845  $ 599,840  $ 661,930
Acquired loans - purchase credit impaired 75,074  81,869  85,456  90,571  98,672
 Total acquired loans 500,832  577,085  624,301  690,411  760,602
Non-acquired loans, net of deferred costs (fees)** 2,001,288  1,883,510  1,787,885  1,678,539  1,566,295
 Total loans $ 2,502,120  $ 2,460,595  $ 2,412,186  $ 2,368,950  $ 2,326,897
               
* 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,
  2017  2017  2016*  2016  2016
  (Unaudited)  (Unaudited)     (Unaudited)  (Unaudited)
Beginning of period allowance $ 12,833  $ 12,125  $ 11,612  $ 10,873  $ 9,832
Loans charged-off (329)  (146)  (223)  (156)  (94)
Recoveries of loans charged-off 198  176  186  253  253
 Net (charge-offs) recoveries (131)  30  (37)  97  159
               
Provision expense -  678  550  642  882
Benefit attributable to FDIC loss share agreements -  -  -  -  -
 Total provision expense charged to operations -  678  550  642  882
Provision expense recorded through FDIC loss share receivable -  -  -  -  -
 End of period allowance $ 12,702  $ 12,833  $ 12,125  $ 11,612  $ 10,873
               
Net (charge-offs) recoveries $ (131)  $ 30  $ (37)  $ 97  $ 159
Net (charge-offs) recoveries to average loans (annualized) -0.02%  0.01%  -0.01%  0.02%  0.03%
               
 * Derived from audited financial statements.     
  
  
PARK STERLING CORPORATION     
ACQUIRED LOANS     
($ in thousands)     
 
ACQUIRED LOANS AND FAIR MARKET VALUE (FMV) ADJUSTMENTS
June 30,
2017
(Unaudited)
 
 
 
March 31,
2017
(Unaudited)
 
 
 
December 31,
2016*
 
 
 
 
September 30,
2016
(Unaudited)
 
 
 
June 30,
2016
(Unaudited)
               
Non-acquired loans $ 2,001,288  $ 1,883,510  $ 1,787,885  $ 1,678,539  $ 1,566,295
               
 Purchased performing loans 428,404  498,314  542,269  604,000  666,894
 Less: remaining FMV adjustments (2,646)  (3,098)  (3,424)  (4,160)  (4,964)
 Purchased performing loans, net 425,758  495,216  538,845  599,840  661,930
                
 Purchased credit impaired loans 94,613  104,416  109,805  115,736  124,985
 Less: remaining FMV adjustments (19,539)  (22,547)  (24,349)  (25,165)  (26,313)
 Purchased credit impaired loans, net 75,074  81,869  85,456  90,571  98,672
               
Total loans $ 2,502,120  $ 2,460,595  $ 2,412,186  $ 2,368,950  $ 2,326,897
               
               
 
PURCHASED PERFORMING FMV ADJUSTMENTS
30-Jun
2017
(Unaudited)
 
 
 
March 31,
2017
(Unaudited)
 
 
 
December 31,
2016*
 
 
 
 
September 30,
2016
(Unaudited)
 
 
 
June 30,
2016
(Unaudited)
               
Beginning FMV adjustment $ (3,098)  $ (3,424)  $ (4,160)  $ (4,964)  $ (6,050)
Accretion to interest income:              
 First Capital 304  236  503  623  777
 All other mergers 148  90  233  181  309
               
Ending FMV adjustment $ (2,646)  $ (3,098)  $ (3,424)  $ (4,160)  $ (4,964)
               
               
 
PCI FMV ADJUSTMENTS
June 30,
2017
(Unaudited)
 
 
 
March 31,
2017
(Unaudited)
 
 
 
December 31,
2016*
 
 
 
 
September 30,
2016
(Unaudited)
 
 
 
June 30,
2016
(Unaudited)
               
Contractual principal and interest $ 109,655  $ 119,970  $ 125,512  $ 133,223  $ 143,701
Nonaccretable difference (4,312)  (7,142)  (10,448)  (11,529)  (14,652)
 Expected cash flows as of the end of period 105,343  112,828  115,064  121,694  129,049
Accretable yield (30,269)  (30,959)  (29,608)  (31,123)  (30,377)
Ending basis in PCI loans- estimated fair value $ 75,074  $ 81,869  $ 85,456  $ 90,571  $ 98,672
               
Beginning accretable yield $ (30,959)  $ (29,608)  $ (31,123)  $ (30,377)  $ (32,044)
Loan system servicing income 1,318  1,413  1,389  1,532  1,434
Accretion to interest income 2,687  2,000  1,285  1,241  1,343
Reclass from non-accretable yield (2,699)  (3,802)  (929)  (2,691)  (522)
Other adjustments (616)  (962)  (230)  (828)  (588)
Period end accretable yield** $ (30,269)  $ (30,959)  $ (29,608)  $ (31,123)  $ (30,377)
               
               
 * 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, 2017        June 30, 2016      
  Average  Income/  Yield/  Average  Income/  Yield/
  Balance  Expense  Rate (2)  Balance  Expense  Rate (2)
Assets                 
Interest-earning assets:                 
 Loans and loans held for sale, net (1) $ 2,478,976  $ 29,518  4.78%  $ 2,298,569  $ 26,729  4.68%
 Fed funds sold 874  2  0.92%  3,848  5  0.52%
 Taxable investment securities 489,402  2,985  2.45%  484,057  2,640  2.18%
 Tax-exempt investment securities 13,295  135  4.07%  14,131  137  3.88%
 Other interest-earning assets 65,103  328  2.02%  42,559  187  1.77%
                   
  Total interest-earning assets 3,047,650  32,968  4.34%  2,843,164  29,698  4.20%
                  
Allowance for loan losses (12,862)        (9,961)      
Cash and due from banks 36,678        35,011      
Premises and equipment 62,750        66,029      
Goodwill 63,317        63,509      
Intangible assets 10,733        12,574      
Other assets 108,476        124,705      
                  
  Total assets $ 3,316,742        $ 3,135,031      
                  
Liabilities and shareholders' equity                 
 Interest-bearing liabilities:                 
 Interest-bearing demand $ 480,120  $ 87  0.07%  $ 426,427  $ 81  0.08%
 Savings and money market 741,545  608  0.33%  744,945  840  0.45%
 Time deposits - core 616,544  1,228  0.80%  686,003  1,272  0.75%
 Brokered deposits 146,314  590  1.62%  139,164  270  0.78%
  Total interest-bearing deposits 1,984,523  2,513  0.51%  1,996,539  2,463  0.50%
 Short-term borrowings 340,934  922  1.08%  163,132  251  0.62%
 Long-term debt 29,753  371  5.00%  64,808  440  2.73%
 Subordinated debt 33,752  552  6.56%  33,102  494  6.00%
  Total borrowed funds 404,439  1,845  1.83%  261,042  1,185  1.83%
                  
  Total interest-bearing liabilities 2,388,962  4,358  0.73%  2,257,581  3,648  0.65%
                  
Net interest rate spread    28,610  3.61%     26,050  3.55%
                  
Noninterest-bearing demand deposits 531,695        483,465      
Other liabilities 29,602        41,480      
Shareholders' equity 366,483        352,505      
                  
Total liabilities and shareholders' equity $ 3,316,742        $ 3,135,031      
                  
Net interest margin       3.77%        3.69%
                  
(1) Nonaccrual loans are included in the average loan balances.     
(2) 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, 2017        June 30, 2016      
  Average  Income/  Yield/  Average  Income/  Yield/
  Balance  Expense  Rate (2)  Balance  Expense  Rate (2)
Assets                 
Interest-earning assets:                 
 Loans and loans held for sale, net (1) $ 2,451,502  $ 56,980  4.69%  $ 2,286,696  $ 53,853  4.74%
 Fed funds sold 870  4  0.93%  5,372  13  0.49%
 Taxable investment securities 487,742  5,920  2.45%  485,605  5,327  2.21%
 Tax-exempt investment securities 13,309  270  4.09%  15,089  284  3.79%
 Other interest-earning assets 62,963  615  1.97%  45,666  383  1.69%
                  
  Total interest-earning assets 3,016,386  63,789  4.26%  2,838,428  59,860  4.24%
                  
Allowance for loan losses (12,571)        (9,912)      
Cash and due from banks 36,836        35,885      
Premises and equipment 62,891        66,271      
Goodwill 63,317        62,783      
Intangible assets 10,959        12,646      
Other assets 109,969        127,727      
                  
  Total assets $ 3,287,787        $ 3,133,828      
                  
Liabilities and shareholders' equity                 
Interest-bearing liabilities:                 
 Interest-bearing demand $ 472,498  $ 173  0.07%  $ 426,610  $ 168  0.08%
 Savings and money market 735,930  1,170  0.32%  739,124  1,671  0.45%
 Time deposits - core 627,842  2,402  0.77%  698,146  2,492  0.72%
 Brokered deposits 147,502  1,160  1.59%  132,994  548  0.83%
  Total interest-bearing deposits 1,983,772  4,905  0.50%  1,996,874  4,879  0.49%
 Short-term borrowings 319,917  1,423  0.90%  177,417  545  0.62%
 Long-term debt 29,747  742  5.03%  65,316  850  2.62%
 Subordinated debt 33,671  1,051  6.29%  33,015  940  5.73%
  Total borrowed funds 383,335  3,216  1.69%  275,748  2,335  1.70%
                  
  Total interest-bearing liabilities 2,367,107  8,121  0.69%  2,272,622  7,214  0.64%
                  
Net interest rate spread    55,668  3.57%     52,646  3.60%
                  
Noninterest-bearing demand deposits 524,433        469,961      
Other liabilities 33,420        40,714      
Shareholders' equity 362,827        350,531      
                  
Total liabilities and shareholders' equity $ 3,287,787        $ 3,133,828      
                  
Net interest margin       3.72%        3.73%
                  
(1) Nonaccrual loans are included in the average loan balances.     
(2) 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,
  2017  2017  2016  2016  2016
  Unaudited  Unaudited  Unaudited  Unaudited  Unaudited
ASSET QUALITY              
 Nonaccrual loans $ 9,373  $ 9,613  $ 8,819  $ 8,623  $ 5,185
 Troubled debt restructuring (and still accruing) 2,457  2,486  2,892  2,549  2,582
 Past due 90 days plus (and still accruing) 133  -  1,230  293  -
 Nonperforming loans 11,963  12,099  12,941  11,465  7,767
 OREO 3,175  3,167  2,438  2,730  3,246
 Nonperforming assets 15,138  15,266  15,379  14,195  11,013
 Past due 30-59 days (and still accruing) 677  430  1,175  1,104  985
 Past due 60-89 days (and still accruing) 332  587  1,836  2,558  5,800
                
 Nonperforming loans to total loans 0.48%  0.49%  0.54%  0.48%  0.33%
 Nonperforming assets to total assets 0.45%  0.46%  0.47%  0.44%  0.35%
 Allowance to total loans 0.51%  0.52%  0.50%  0.49%  0.47%
 Allowance to nonperforming loans 159.63%  106.07%  93.69%  101.28%  139.99%
 Allowance to nonperforming assets 114.10%  84.06%  78.84%  81.80%  98.73%
 Past due 30-89 days (accruing) to total loans 0.04%  0.04%  0.12%  0.15%  0.29%
 Net charge-offs (recoveries) to average loans (annualized) -0.02%  0.01%  -0.01%  0.02%  0.03%
               
CAPITAL              
 Book value per common share $ 6.98  $ 6.86  $ 6.75  $ 6.84  $ 6.77
 Tangible book value per common share** $ 5.58  $ 5.45  $ 5.33  $ 5.41  $ 5.33
 Common shares outstanding 53,279,996  53,112,726  53,116,519  53,305,834  53,332,369
 Weighted average dilutive common shares outstanding 53,481,846  53,462,857  53,155,493  52,743,928  52,704,537
                
 Common Equity Tier 1 (CET1) capital $ 300,698  $ 293,743  $ 288,594  $ 287,518  $ 282,721
 Tier 1 capital 326,415  319,274  314,043  312,781  307,736
 Tier 2 capital 12,703  12,888  12,125  11,615  10,914
 Total risk based capital 339,118  332,162  326,168  324,396  318,650
 Risk weighted assets 2,708,328  2,668,708  2,613,003  2,596,463  2,538,461
 Average assets for leverage ratio 3,246,949  3,186,307  3,165,665  3,108,707  3,058,742
                
 Common Equity Tier 1 (CET1) ratio 11.10%  11.01%  11.04%  11.07%  11.14%
 Tier 1 ratio 12.05%  11.96%  12.04%  12.05%  12.12%
 Total risk based capital ratio 12.52%  12.45%  12.48%  12.49%  12.55%
 Tier 1 leverage ratio 10.05%  10.02%  9.92%  10.06%  10.06%
 Tangible common equity to tangible assets** 9.04%  8.89%  8.84%  9.00%  9.00%
               
LIQUIDITY              
 Net loans to total deposits 98.12%  97.55%  95.48%  94.89%  93.64%
 Reliance on wholesale funding 18.61%  19.01%  17.39%  17.65%  16.24%
               
INCOME STATEMENT (THREE MONTH RESULTS; ANNUALIZED)              
 Return on Average Assets 1.03%  0.93%  0.66%  0.79%  0.71%
 Return on Average Common Equity 9.33%  8.46%  5.89%  7.04%  6.33%
 Net interest margin (non-tax equivalent) 3.77%  3.68%  3.58%  3.54%  3.69%
               
 ** 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, tangible book value and average tangible common equity (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) to facilitate comparisons with peers; and (iii) adjusted net income, adjusted noninterest income and adjusted noninterest expense (which exclude merger-related expenses and/or gain or loss on sale of securities, as applicable), 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,
  2017  2017  2016  2016  2016
  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
Adjusted net income              
 Net income (as reported) $8,527  $7,489  $5,331  $6,324  $5,552
 Plus: merger-related expenses 923  -  2,984  1,487  1,268
 Less: (gain) loss on sale of securities -  (58)  (6)  -  87
 Less: tax impact of merger-related expenses and (gain) loss on sale of securities (236)  20  (1,004)  (499)  (464)
  Adjusted net income $9,214  $7,451  $7,305  $7,312  $6,443
               
 Divided by: weighted average diluted shares 53,481,846  53,462,857  53,155,493  52,743,928  52,704,537
  Adjusted net income per share 0.17  0.14  0.14  0.14  0.12
 Estimated tax rate for adjustment 25.57%  34.48%  33.71%  33.56%  34.24%
               
Adjusted noninterest income              
 Noninterest income (as reported) $5,418  $5,468  $5,845  $5,447  $5,375
 Less: (gain) loss on sale of securities -  (58)  (6)  -  87
  Adjusted noninterest income $5,418  $5,410  $5,839  $5,447  $5,462
               
Adjusted noninterest expenses              
 Noninterest expenses (as reported) $21,449  $20,642  $25,025  $21,112  $21,946
 Less: merger-related expenses (923)  -  (2,984)  (1,487)  (1,268)
  Adjusted noninterest expenses $20,526  $20,642  $22,041  $19,625  $20,678
               
Adjusted operating expense              
 Noninterest expenses (as reported) $21,449  $20,642  $25,025  $21,112  $21,946
 Less: merger-related expenses (923)  -  (2,984)  (1,487)  (1,268)
 Less: amortization of intangibles (454)  (454)  (458)  (458)  (458)
  Adjusted operating expense $20,072  $20,188  $21,583  $19,167  $20,220
               
Adjusted operating revenues              
 Net Interest Income (as reported) $28,610  $27,058  $26,571  $25,823  $26,050
 Plus: noninterest income (as reported) 5,418  5,468  5,845  5,447  5,375
 Less: (gain) loss on sale of securities -  (58)  (6)  -  87
  Adjusted operating revenues $34,028  $32,468  $32,410  $31,270  $31,512
               
Adjusted efficiency ratio              
 Adjusted operating expense $20,072  $20,188  $21,583  $19,167  $20,220
 Divided by: adjusted operating revenues 34,028  32,468  32,410  31,270  31,512
  Adjusted efficiency ratio 58.99%  62.18%  66.59%  61.30%  64.17%
  Efficiency ratio 63.03%  63.46%  77.20%  67.52%  69.84%
               
Adjusted return on average assets              
 Adjusted net income $9,214  $7,451  $7,305  $7,312  $6,443
 Divided by: average assets 3,316,742  3,258,510  3,229,299  3,186,799  3,135,031
 Multiplied by: annualization factor 4.01  4.06  3.98  3.98  4.02
  Adjusted return on average assets 1.11%  0.93%  0.90%  0.91%  0.83%
  Return on average assets 1.03%  0.93%  0.66%  0.79%  0.71%
               
Adjusted return on average equity              
 Adjusted net income $9,214  $7,451  $7,305  $7,312  $6,443
 Divided by: average common equity 366,483  359,130  359,985  357,577  352,505
 Multiplied by: annualization factor 4.01  4.06  3.98  3.98  4.02
  Adjusted return on average equity 10.08%  8.41%  8.07%  8.14%  7.35%
  Return on average equity 9.33%  8.46%  5.89%  7.04%  6.33%
               
               
PARK STERLING CORPORATION         
RECONCILIATION OF NON-GAAP MEASURES         
($ in thousands, except per share amounts) June 30,  March 31,  December 31,  September 30,  June 30,
  2017  2017  2016  2016  2016
  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
Tangible common equity to tangible assets              
 Total assets $ 3,340,999  $ 3,308,756  $ 3,255,396  $ 3,226,938  $ 3,174,075
 Less: intangible assets (73,847)  (74,301)  (74,755)  (74,926)  (75,551)
  Tangible assets $ 3,267,152  $ 3,234,455  $ 3,180,641  $ 3,152,012  $ 3,098,524
               
 Total common equity $ 369,264  $ 361,720  $ 355,845  $ 358,696  $ 354,450
 Less: intangible assets (73,847)  (74,301)  (74,755)  (74,926)  (75,551)
  Tangible common equity $ 295,417  $ 287,419  $ 281,090  $ 283,770  $ 278,899
               
 Tangible common equity $ 295,417  $ 287,419  $ 281,090  $ 283,770  $ 278,899
 Divided by: tangible assets 3,267,152  3,234,455  3,180,641  3,152,012  3,098,524
  Tangible common equity to tangible assets 9.04%  8.89%  8.84%  9.00%  9.00%
  Common equity to assets 11.05%  10.93%  10.93%  11.12%  11.17%
               
Tangible book value per share              
 Issued and outstanding shares 53,279,996  53,112,726  53,116,519  53,305,834  53,332,369
 Less: unvested restricted stock awards (375,056)  (390,233)  (405,732)  (837,561)  (969,991)
  Period end dilutive shares 52,904,940  52,722,493  52,710,787  52,468,273  52,362,378
               
 Tangible common equity $ 295,417  $ 287,419  $ 281,090  $ 283,770  $ 278,899
 Divided by: period end dilutive shares 52,904,940  52,722,493  52,710,787  52,468,273  52,362,378
  Tangible common book value per share $ 5.58  $ 5.45  $ 5.33  $ 5.41  $ 5.33
  Common book value per share $ 6.98  $ 6.86  $ 6.75  $ 6.84  $ 6.77
               
Adjusted return on average tangible common equity              
 Average common equity $ 366,483  $ 359,130  $ 359,985  $ 357,577  $ 352,505
 Less: average intangible assets (74,050)  (74,504)  (74,812)  (75,196)  (76,083)
  Average tangible common equity $ 292,433  $ 284,626  $ 285,173  $ 282,381  $ 276,422
               
 Net income $ 8,527  $ 7,489  $ 5,331  $ 6,324  $ 5,552
 Divided by: average tangible common equity 292,433  284,626  285,173  282,381  276,422
 Multiplied by: annualization factor 4.01  4.06  3.98  3.98  4.02
  Return on average tangible common equity 11.70%  10.67%  7.44%  8.91%  8.08%
               
 Adjusted net income $ 9,214  $ 7,451  $ 7,305  $ 7,312  $ 6,443
 Divided by: average tangible common equity 292,433  284,626  285,173  282,381  276,422
 Multiplied by: annualization factor 4.01  4.06  3.98  3.98  4.02
  Adjusted return on average tangible common equity 12.64%  10.62%  10.19%  10.30%  9.37%
               
Adjusted allowance for loan losses              
 Allowance for loan losses $ 12,702  $ 12,833  $ 12,125  $ 11,612  $ 10,873
 Plus: acquisition accounting FMV adjustments to acquired loans 22,185  25,645  27,773  29,325  31,277
  Adjusted allowance for loan losses $ 34,887  $ 38,478  $ 39,898  $ 40,937  $ 42,150
 Divided by: total loans (excluding LHFS before FMV adjustments) $ 2,524,305  $ 2,486,240  $ 2,439,959  $ 2,398,275  $ 2,358,174
  Adjusted allowance for loan losses to total loans 1.38%  1.55%  1.64%  1.71%  1.79%
  Allowance for loan losses to total loans 0.51%  0.52%  0.50%  0.49%  0.47%
           
           

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