SOURCE: Park Sterling Corporation

Park Sterling Corporation

November 02, 2011 08:38 ET

Park Sterling Corporation Announces Third Quarter 2011 Results

CHARLOTTE, NC--(Marketwire - Nov 2, 2011) - Park Sterling Corporation (NASDAQ: PSTB), the holding company for Park Sterling Bank and CapitalBank, today released unaudited results of operations and other financial information for the third quarter of 2011. Highlights for the quarter, as shown below, do not include results from the November 1, 2011 acquisition of CapitalBank:

Third Quarter Highlights:

  • Nonperforming loans decreased $6.1 million, or 22%, compared to the second quarter of 2011 to $21.4 million, or 5.84% of total loans
  • Nonperforming assets decreased $3.9 million, or 12%, compared to the second quarter of 2011 to $28.7 million, or 4.93% of total assets
  • Provision for loan losses decreased $2.7 million, or 82%, to $568,000 compared to the second quarter of 2011
  • Net charge-offs decreased $1.7 million, or 46%, to $2.0 million, or 2.19% of average loans (annualized), compared to $3.7 million, or 3.87% of average loans (annualized), in the second quarter of 2011
  • Net interest income increased slightly to $3.9 million compared to $3.8 million in the second quarter of 2011
  • Net loss of $1.4 million, or $0.05 per diluted share, compared to a net loss of $3.1 million, or $0.11 per diluted share, in the second quarter of 2011 and a net loss of $3.7 million, or $0.23 per diluted share, in the third quarter of 2010
  • Excluding pre-tax, merger-related expenses of $496,000 in the third quarter of 2011 and $632,000 in the second quarter of 2011, the net loss narrowed to $1.1 million, or approximately $0.04 per diluted share, compared to $2.7 million, or approximately $0.10 per diluted share in the second quarter of 2011
  • Capital levels remain strong as tangible common equity as a percentage of tangible assets increased to 29.98% from 28.43% in the second quarter of 2011

Business Highlights:

  • Consummated merger with Community Capital Corporation ("Community Capital") on November 1, 2011
  • Received regulatory approval for de novo branches in Raleigh, North Carolina and Greenville, South Carolina, with conversion from loan production office to branch offices expected during the fourth quarter of 2011

"Park Sterling's third quarter was marked by significant progress in reducing problem assets and their attendant drag on earnings," said Jim Cherry, Chief Executive Officer. "As expected, during the quarter, we began to realize the benefits of our organic growth initiatives with attractive new loan production reported in each of our markets. Combined with our ongoing progress in reducing construction and development exposures, this new loan production contributed to achieving a more balanced loan mix. In addition, Park Sterling's credit quality continued to improve as nonperforming assets, provision expense, and net charge-offs each decreased, as anticipated.

During the quarter, significant time was devoted to ensuring the successful consummation of our merger with Community Capital. With that merger now complete, we are laser focused on ensuring that we provide customers and communities across our combined footprint with superior products and services. We expect, subject to regulatory approval, to merge our two operating banks, CapitalBank and Park Sterling Bank, into a single charter by year-end, which will allow us to more efficiently and effectively deliver an exceptional customer experience across the new Park Sterling franchise.

On the mergers and acquisitions front, we believe there are a growing number of prospects across Virginia and the Carolinas that will be attracted to a partnership with Park Sterling. They are driven in part by the continuing uncertain regulatory and economic environment, and we remain active in seeking attractive partnership opportunities for Park Sterling."

Third Quarter 2011 Financial Highlights

Asset Quality

Asset quality continued to improve during the third quarter of 2011. Nonperforming loans, which included $2.0 million in performing troubled debt restructurings (TDRs), decreased $6.1 million, or 22%, to $21.4 million, or 5.84% of total loans, compared to $27.6 million, or 7.25% of total loans, as of June 30, 2011. Nonperforming assets, which included $1.6 million in nonperforming loans held for sale, decreased $3.9 million, or 12%, to $28.7 million, or 4.93% of total assets, down from $32.6 million, or 5.34% of total assets, as of June 30, 2011.

The provision for loan losses decreased $2.7 million, or 82%, to $568,000, compared to the second quarter of 2011. Net charge-offs decreased $1.7 million, or 46%, to $2.0 million, representing 2.19% of average loans on an annualized basis, compared to $3.7 million, or 3.87% of average loans (annualized) in the prior quarter. The allowance for loan losses was $9.8 million, or 2.68% of total loans at September 30, 2011, a decrease of $1.4 million from $11.3 million, or 2.96% of total loans, at June 30, 2011. This decrease in the allowance resulted both from positive trends in credit quality in the loan portfolio and from the recognition of losses on previously identified impaired loans and a related reduction in specific reserves. The allowance represented 45.84% of nonperforming loans (including TDRs) at September 30, 2011 up from 40.91% at June 30, 2011.

Compared to the third quarter of 2010, nonperforming loans increased 61% from $13.4 million, or 3.36% of total loans. Nonperforming assets increased 94% from $14.8 million, or 2.34% of total assets. The provision for loan losses decreased 91% from $6.1 million. Net charge-offs increased 2% from $2.0 million, or 1.97% of average loans (annualized).

Net Interest Income and Net Interest Margin

Net interest income increased slightly to $3.9 million compared to $3.8 million in the second quarter of 2011, and the net interest margin increased 9 basis points during the same time period to 2.69%. The increase in the net interest margin related primarily to a $230,000 decrease in interest expense during the third quarter of 2011, due in large part to improved deposit mix and pricing. Average earning assets decreased $13.4 million, or 2%, compared to the second quarter of 2011, due to an $18.8 million, or 5%, decrease in average loan balances, resulting in part from the resolution of problem credits and a managed decrease in construction and development (C&D) exposure to improve the loan mix.

Compared to the third quarter of 2010, net interest income increased 6% to $3.9 million from $3.6 million, and the net interest margin increased 2 basis points during the same time period. Average interest-earning assets increased $29.0 million, or 5%, resulting from the utilization of net proceeds of $140.2 million from the common stock offering completed during the third quarter of 2010.

Noninterest Income

Noninterest income increased $67,000 compared to the second quarter of 2011 and increased $85,000 compared to the third quarter of 2010. The increase in noninterest income in both periods included $52,000 in incremental other income associated with a new $8 million investment in bank-owned life insurance purchased during the third quarter of 2011. The increase in noninterest income from the third quarter of 2010 was also due in part to higher NSF fees and deposit service charges.

Noninterest Expense

Noninterest expense decreased $258,000 to $5.2 million compared to $5.5 million in the second quarter of 2011. This decrease in noninterest expense primarily reflected $484,000 in lower legal and professional fees, partially offset by an $81,000 increase in other expenses, $76,000 increase in salaries and employee benefits, and $71,000 increase loan and collection expenses. Noninterest expense included $496,000 of merger-related expense during the third quarter of 2011 compared to $632,000 during the second quarter of 2011, primarily in legal and professional fees.

Compared to the third quarter of 2010, noninterest expense increased $2.2 million, primarily due to increased salaries and employee benefits related to the management expansion that occurred during the second half of 2010 and the addition of new employees during 2011. Also impacting the increase in noninterest expense were higher costs related to being a newly public company, merger related expenses resulting from the Community Capital acquisition, and an increase in OREO-related and loan and collection expenses due to the addition of nonperforming assets resulting from a deterioration in the loan portfolio during the second half of 2010.

Balance Sheet and Capital

Total assets decreased $28.3 million, or 5%, compared to the second quarter of 2011. Loans decreased $13.0 million, or 3%, in the third quarter of 2011 resulting in part from the resolution of problem credits and a managed decrease in C&D exposure to improve the loan mix. Cash, interest earning balances, Federal funds sold and investment securities together decreased $26.5 million, or 12%, compared to the second quarter of 2011. The decrease resulted in part from an $8 million investment in bank-owned life insurance that is included in other assets. The decrease also reflected management's decision to reduce certain lower yielding interest-earning assets by allowing higher priced time deposits to mature without renewal.

Loan mix continued to improve during the third quarter of 2011. Construction and development related exposures decreased 20% compared to the second quarter of 2011. C&D loans represented 15.3% of total loans at September 30, 2011, compared to 18.6% at June 30, 2011 and 27.4% at September 30, 2010. Commercial and industrial loans and owner-occupied commercial real estate loans together increased 5% compared to the second quarter of 2011. C&I and owner-occupied loans represented 30.4% of total loans at September 30, 2011, compared to 28.1% at June 30, 2011 and 24.9% at September 30, 2011. Non-owner-occupied commercial real estate loans and 1-4 family loans remained fairly steady compared to the second quarter of 2011 at 29.5% and 5.4% of total loans, respectively. Home equity lines of credit increased slightly from 14.8% to 15.4% of total loans on a linked-quarter basis.

Total deposits decreased $28.9 million, or 7%, compared to the second quarter of 2011. This decrease in deposits was primarily due to a managed 15% decrease in time deposits, as management both allowed higher-priced special rates to mature without renewal and reduced brokered deposits. The decrease was offset by an 8% increase in money market, NOW and savings deposits, and a 2% increase in demand deposits. Compared to the third quarter of 2010, total deposits decreased $42.4 million, or 10%, resulting from a 32% decrease in time deposits, offset by a 65% increase in money market, NOW and savings deposits, and a 41% increase in demand deposits. Core deposits, which excludes brokered deposits, as a percentage of total deposits were 77%, compared to 76% in the first quarter of 2011 and 72% in the third quarter of 2010.

Shareholders' equity increased $1.0 million to $174.6 million compared to $173.6 million at June 30, 2011, as an increase in accumulated other comprehensive income offset the third quarter 2011 net loss of $1.4 million. Shareholders' equity decreased $9.2 million compared to the third quarter of 2010 as a result of $11.9 million in accumulated net losses. Tangible common equity as a percentage of tangible assets was 29.98%, an increase from 28.43% at June 30, 2011 and from 29.06% at September 30, 2010. Tier 1 leverage ratio was 27.13%, compared to 27.07% at June 30, 2011 and 32.80% at September 30, 2010.

During the first quarter of 2011, and as contemplated in the 2010 equity offering, 568,260 shares of restricted stock were issued but will not vest until the Company's share price achieves certain performance thresholds above the equity offering price (these restricted stock awards vest one-third each at $8.125, $9.10 and $10.40 per share, respectively). Accordingly, these additional shares have been excluded from earnings and tangible book value per share calculations.

Conference Call

A conference call will be held at 8:30 a.m., ET this morning (November 2, 2011). The conference call can be accessed by dialing (877) 317-6789 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 one hour after the call by dialing (877) 344-7529, conference number 10005537.

About Park Sterling Corporation
Park Sterling Corporation is the holding company for Park Sterling Bank, headquartered in Charlotte, North Carolina, and for CapitalBank, headquartered in Greenwood, South Carolina. Park Sterling's primary focus is to provide financial services to small and mid-sized businesses, owner-occupied and income producing real estate owners, professionals and consumers doing business or residing within its target markets. Park Sterling offers a full array of banking services, including a diverse wealth management group. Park Sterling is committed to building a banking franchise across the Carolinas and Virginia that is noted for sound risk management, superior customer service and exceptional client relationships. For more information, visit www.parksterlingbank.com. Park Sterling's shares are traded on NASDAQ under the symbol PSTB.

Non-GAAP Measures
Tangible assets, tangible common equity, tangible book value, earnings (loss) excluding merger-related expenses and related ratios and EPS measures, as used throughout this release, are non-GAAP financial measures. Management uses tangible assets, tangible common equity and tangible book value and related ratios to evaluate the adequacy of shareholders' equity and to facilitate comparisons with peers. Management uses earnings (loss) excluding merger-related expenses and related EPS measures to evaluate core earnings (loss). For additional information, see "Reconciliation of Non-GAAP 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, plans or forecasts of future events, results and condition, including financial and other estimates and expectations regarding the merger with Community Capital Corporation, the general business strategy of engaging in bank mergers, organic growth including branch openings and anticipated asset size, expansion of product capabilities, anticipated loan growth, refinement of the loan loss allowance methodology, recruiting of key leadership positions, decreases in construction and development loans and other changes in loan mix, changes in deposit mix, capital and liquidity levels, emerging regulatory expectations and measures, net interest income, credit trends and conditions, including loan losses, allowance, charge-offs, delinquency trends and nonperforming loan and asset levels, residential sales activity and other similar matters. These statements are not guarantees of future results or performance and by their nature involve certain risks and uncertainties that are based on management's beliefs and assumptions and on the information available to management at the time that these disclosures were prepared. Actual outcomes and results may differ materially from those expressed in, or implied by, any of these forward-looking statements.

You should not place undue reliance on any forward-looking statement and should consider all of the following uncertainties and risks, as well as those more fully discussed in any of Park Sterling's filings with the SEC: failure to realize synergies and other financial benefits from the merger with Community Capital within the expected time frame; increases in expected costs or difficulties related to integration of the Community Capital merger; inability to identify and successfully negotiate and complete additional combinations with potential merger partners or to successfully integrate such businesses into Park Sterling, including the company's ability to realize the benefits and cost savings from and limit any unexpected liabilities acquired as a result of any such business combination; the effects of negative economic conditions, including stress in the commercial real estate markets or delay or failure of recovery in the residential real estate markets; changes in consumer and investor confidence and the related impact on financial markets and institutions; changes in interest rates; failure of assumptions underlying the establishment of our allowance; deterioration in the credit quality of our loan portfolios or in the value of the collateral securing those loans or in the value of guarantor support for those loans, where applicable; deterioration in the value of securities held in our investment securities portfolio; failure of assumptions underlying the utilization of our deferred tax assets; legal and regulatory developments; increased competition from both banks and nonbanks; changes in accounting standards, rules and interpretations, inaccurate estimates or assumptions in accounting and the impact on Park Sterling's financial statements; Park Sterling's ability to attract new employees; and management's ability to effectively manage credit risk, market risk, operational risk, legal risk, and regulatory and compliance risk.

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

PARK STERLING CORPORATION
CONDENSED INCOME STATEMENT
THREE MONTH RESULTS
($ in thousands, except per share amounts) September 30, June 30, March 31, December 31, September 30,
2011 2011 2011 2010 * 2010
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Interest income
Loans, including fees $ 4,283 $ 4,450 $ 4,758 $ 4,984 $ 4,963
Federal funds sold 22 33 30 46 42
Taxable investment securities 681 684 681 587 370
Tax-exempt investment securities 181 181 171 160 161
Interest on deposits at banks 44 11 14 16 23
Total interest income 5,211 5,359 5,654 5,793 5,559
Interest expense
Money market, NOW and savings deposits 158 176 141 132 104
Time deposits 868 1,080 1,226 1,435 1,490
Short-term borrowings 1 1 - 1 1
Long-term borrowings 140 141 141 140 144
Subordinated debt 190 189 190 188 190
Total interest expense 1,357 1,587 1,698 1,896 1,929
Net interest income 3,854 3,772 3,956 3,897 3,630
Provision for loan losses 568 3,245 4,462 8,237 6,143
Net interest income (loss) after provision 3,286 527 (506 ) (4,340 ) (2,513 )
Total noninterest income 111 44 72 43 26
Noninterest expenses
Salaries and employee benefits 3,051 2,975 2,507 2,114 1,777
Occupancy and equipment 369 301 256 250 236
Advertising and promotion 115 87 38 50 84
Legal and professional fees 721 1,205 307 208 78
Deposit charges and FDIC insurance 134 196 287 185 184
Data processing and outside service fees 142 128 123 109 109
Directors fees 45 45 41 182 164
Net cost of operation of other real estate 101 93 235 16 120
Loan and collection expense 180 109 86 63 82
Shareholder reporting expense 36 94 64 15 8
Other noninterest expense 322 241 290 356 148
Total noninterest expenses 5,216 5,474 4,234 3,548 2,990
Income (loss) before income taxes (1,819 ) (4,903 ) (4,668 ) (7,845 ) (5,477 )
Income tax expense (benefit) (443 ) (1,789 ) (1,781 ) (3,324 ) (1,809 )
Net income (loss) $ (1,376 ) $ (3,114 ) $ (2,887 ) $ (4,521 ) $ (3,668 )
Earnings (loss) per share, fully diluted $ (0.05 ) $ (0.11 ) $ (0.10 ) $ (0.16 ) $ (0.23 )
Weighted average diluted shares 28,051,098 28,051,098 28,051,098 28,051,098 15,998,924
* Derived from audited financial statements.

PARK STERLING CORPORATION
CONDENSED INCOME STATEMENT
NINE MONTH RESULTS
($ in thousands, expect per share amounts) September 30, September 30,
2011 2010
(Unaudited) (Unaudited)
Interest income
Loans, including fees $ 13,491 $ 15,275
Federal funds sold 85 60
Taxable investment securities 2,046 981
Tax-exempt investment securities 533 481
Interest on deposits at banks 69 51
Total interest income 16,224 16,848
Interest expense
Money market, NOW and savings deposits 475 276
Time deposits 3,174 4,434
Short-term borrowings 2 9
FHLB advances 422 423
Subordinated debt 569 569
Total interest expense 4,642 5,711
Net interest income 11,582 11,137
Provision for loan losses 8,275 8,768
Net interest income (loss) after provision 3,307 2,369
Total noninterest income 227 88
Noninterest expenses
Salaries and employee benefits 8,533 4,328
Occupancy and equipment 926 666
Advertising and promotion 240 237
Legal and professional fees 2,233 237
Deposit charges and FDIC insurance 617 543
Data processing and outside service fees 393 302
Directors fees 131 211
Net cost of operation of other real estate 429 395
Loan and collection expense 375 161
Shareholder reporting expense 194 24
Other noninterest expense 853 406
Total noninterest expenses 14,924 7,510
Income (loss) before income taxes (11,390 ) (5,053 )
Income tax expense (benefit) (4,013 ) (1,714 )
Net income (loss) $ (7,377 ) $ (3,339 )
Earnings (loss) per share, fully diluted $ (0.26 ) $ (0.38 )
Weighted average diluted shares 28,051,098 8,674,175
* Derived from audited financial statements.

PARK STERLING CORPORATION
CONDENSED BALANCE SHEETS
($ in thousands)
September 30, June 30, March 31, December 31, September 30,
2011 2011 2011 2010 * 2010
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
ASSETS
Cash and due from banks $ 14,962 $ 14,349 $ 54,192 $ 2,433 $ 11,591
Interest earning balances at banks 36,311 8,571 3,796 5,040 5,859
Investment securities available-for-sale 130,667 146,734 112,273 140,590 115,357
Federal funds sold 5,295 44,060 57,525 57,905 96,560
Loans held for sale 1,559 1,600 - - -
Loans 367,412 380,365 388,187 399,829 397,658
Allowance for loan losses (9,833 ) (11,277 ) (11,768 ) (12,424 ) (13,150 )
Net loans 357,579 369,088 376,419 387,405 384,508
Other real estate owned 5,691 3,470 1,565 1,246 1,441
Bank owned life insurance 8,052 - - - -
Other assets 22,267 22,796 22,646 21,489 17,314
Total assets $ 582,383 $ 610,668 $ 628,416 $ 616,108 $ 632,630
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand noninterest-bearing $ 42,890 $ 42,156 $ 37,098 $ 36,333 $ 30,468
Money market, NOW and savings 120,017 110,874 107,186 71,666 72,639
Time deposits 212,085 250,876 277,228 299,821 314,042
Total deposits 374,992 403,906 421,512 407,820 417,149
Short-term borrowings 1,083 1,661 1,213 874 1,100
FHLB advances 20,000 20,000 20,000 20,000 20,000
Subordinated debt 6,895 6,895 6,895 6,895 6,895
Accrued expenses and other liabilities 4,796 4,622 4,026 3,418 3,639
Total liabilities 407,766 437,084 453,646 439,007 448,783
Shareholders' equity:
Common stock 28,619 28,619 28,619 130,438 130,438
Additional paid-in capital 160,368 159,890 159,367 57,102 56,778
Accumulated deficit (16,878 ) (15,502 ) (12,388 ) (9,501 ) (4,981 )
Accumulated other comprehensive income (loss) 2,508 577 (828 ) (938 ) 1,612
Total shareholders' equity 174,617 173,584 174,770 177,101 183,847
Total liabilities and shareholders' equity $ 582,383 $ 610,668 $ 628,416 $ 616,108 $ 632,630
Common shares issued and outstanding 28,619,358 28,619,358 28,619,358 28,051,098 28,051,098
* Derived from audited financial statements.
PARK STERLING CORPORATION
SUMMARY OF LOAN PORTFOLIO
($ in thousands)
September 30, June 30, March 31, December 31, September 30,
2011 2011 2011 2010 * 2010
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Commercial:
Commercial and industrial $ 44,939 $ 45,056 $ 48,107 $ 48,401 $ 47,166
Commercial real estate - owner-occupied 66,979 61,878 52,764 55,089 51,779
Commercial real estate - investor income producing 108,558 111,349 113,612 110,407 101,359
Acquisition, construction and development 51,522 64,662 75,977 87,846 100,522
Other commercial 7,763 6,840 5,232 3,225 2,866
Total commercial loans 279,761 289,785 295,692 304,968 303,692
Consumer:
Residential mortgage 19,816 21,767 25,034 21,716 20,920
Home equity lines of credit 56,787 56,481 53,725 56,968 58,115
Residential construction 4,787 6,048 7,018 9,051 8,616
Other loans to individuals 6,530 6,494 6,811 7,245 6,413
Total consumer loans 87,920 90,790 92,588 94,980 94,064
Total loans 367,681 380,575 388,280 399,948 397,756
Deferred fees (269 ) (210 ) (93 ) (119 ) (98 )
Total loans, net of deferred fees $ 367,412 $ 380,365 $ 388,187 $ 399,829 $ 397,658
* Derived from audited financial statements.
PARK STERLING CORPORATION
ALLOWANCE FOR LOAN LOSSES
THREE MONTH RESULTS
($ in thousands)
September 30, June 30, March 31, December 31, September 30,
2011 2011 2011 2010 * 2010
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Beginning of period allowance $ 11,277 $ 11,768 $ 12,424 $ 13,150 $ 8,974
Provision for loan losses 568 3,245 4,462 8,237 6,143
Loans charged-off 2,113 4,096 5,581 9,000 1,986
Recoveries of loans charged-off 101 360 463 37 19
End of period allowance 9,833 11,277 11,768 12,424 13,150
Net loans charged-off $ 2,012 $ 3,736 $ 5,118 $ 8,963 $ 1,967
Annualized net charge-offs 2.19 % 3.87 % 5.16 % 8.86 % 1.97 %
PARK STERLING CORPORATION
AVERAGE BALANCE SHEETS AND NET INTEREST ANALYSIS
THREE MONTHS
September 30, 2011 September 30, 2010
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
Assets
Interest-earning assets:
Loans with fees (1) $ 367,096 $ 4,283 4.63 % $ 399,580 $ 4,963 4.93 %
Fed funds sold 36,505 22 0.24 % 70,388 42 0.24 %
Taxable investment securities 118,445 681 2.30 % 50,216 370 2.95 %
Tax-exempt investment securities 16,201 181 4.47 % 14,570 161 4.42 %
Other interest-earning assets 30,496 44 0.57 % 4,971 23 1.84 %
Total interest-earning assets 568,743 5,211 3.64 % 539,725 5,559 4.09 %
Allowance for loan losses (10,698 ) (9,061 )
Cash and due from banks 14,315 8,061
Premises and equipment 5,087 4,596
Other assets 29,607 12,339
Total assets $ 607,054 $ 555,660
Liabilities and shareholders' equity
Interest-bearing liabilities:
Interest-bearing demand $ 12,770 $ 3 0.09 % $ 9,695 $ 3 0.12 %
Savings and money market 107,069 155 0.57 % 52,138 101 0.77 %
Time deposits - core 141,154 487 1.37 % 192,666 909 1.87 %
Time deposits - brokered 93,906 381 1.61 % 125,007 581 1.84 %
Total interest-bearing deposits 354,899 1,026 1.15 % 379,506 1,594 1.67 %
Federal Home Loan Bank advances 20,000 140 2.78 % 20,000 144 2.86 %
Other borrowings 8,418 191 9.00 % 8,490 191 8.93 %
Total borrowed funds 28,418 331 4.62 % 28,490 335 4.67 %
Total interest-bearing liabilities 383,317 1,357 1.40 % 407,996 1,929 1.88 %
Net interest rate spread 3,854 2.23 % 3,630 2.21 %
Noninterest-bearing demand deposits 44,130 30,833
Other liabilities 5,210 2,168
Shareholders' equity 174,397 114,663
Total liabilities and shareholders' equity $ 607,054 $ 555,660
Net interest margin 2.69 % 2.67 %
(1) Average loan balances include nonaccrual loans.

PARK STERLING CORPORATION
SELECTED RATIOS
($ in thousands, except per share amounts)
September 30, June 30, March 31. December 31, September 30,
2011 2011 2011 2010 * 2010
Unaudited Unaudited Unaudited (Unaudited)
ASSET QUALITY
Nonaccrual loans $ 19,448 $ 25,565 $ 34,027 $ 40,911 $ 10,043
Troubled debt restructuring 2,001 2,002 1,198 1,198 3,314
Nonperforming loans 21,449 27,566 35,225 42,109 13,357
OREO 5,691 3,470 1,565 1,246 1,441
Loans held for sale 1,559 1,600 - - -
Nonperforming assets 28,699 32,637 36,790 43,356 14,797
Past due 30-59 days (and still accruing) 655 - 3,469 - 6,599
Past due 60-89 days (and still accruing) 819 - - - 660
Past due 90 days plus (and still accruing) - - - - -
Nonperforming loans to total loans 5.84 % 7.25 % 9.07 % 10.53 % 3.36 %
Nonperforming assets to total assets 4.93 % 5.34 % 5.85 % 7.04 % 2.34 %
Allowance to total loans 2.68 % 2.96 % 3.03 % 3.11 % 3.31 %
Allowance to nonperforming loans 45.84 % 40.91 % 33.41 % 29.50 % 98.45 %
Allowance to nonperforming assets 34.26 % 34.55 % 31.99 % 28.66 % 88.87 %
CAPITAL
Book value per share $ 6.22 $ 6.19 $ 6.23 $ 6.31 $ 6.55
Tangible book value per share $ 6.22 $ 6.19 $ 6.23 $ 6.31 $ 6.55
Common shares outstanding 28,619,358 28,619,358 28,619,358 28,051,098 28,051,098
Dilutive common shares outstanding 28,051,098 28,051,098 28,051,098 28,051,098 28,051,098
Tier 1 capital $ 162,207 $ 166,762 $ 170,956 $ 173,395 $ 182,234
Tier 2 capital 13,124 12,143 12,035 12,373 12,280
Total risk based capital 175,331 178,905 182,991 185,768 194,514
Risk weighted assets 439,708 413,846 411,869 431,324 422,956
Average assets 596,997 616,034 604,498 637,650 555,655
Tier 1 ratio 36.89 % 40.30 % 42.25 % 40.20 % 43.09 %
Total risk based capital ratio 39.87 % 43.23 % 45.23 % 43.07 % 45.99 %
Tier 1 leverage ratio 27.17 % 27.07 % 28.36 % 27.39 % 32.80 %
Tangible common equity to tangible assets 29.98 % 28.43 % 27.81 % 28.75 % 29.06 %
LIQUIDITY
Net loans to total deposits 95.36 % 91.38 % 89.30 % 94.99 % 92.18 %
Liquidity ratio 49.70 % 53.09 % 53.99 % 50.48 % 54.99 %
Equity to Total Assets 29.98 % 28.43 % 27.81 % 28.75 % 29.06 %
INCOME STATEMENT (THREE MONTH RESULTS; ANNUALIZED)
Return on Average Assets -0.91 % -2.00 % -1.93 % -2.81 % -2.64 %
Return on Average Equity -3.16 % -7.12 % -6.60 % -9.75 % -12.80 %
Net interest margin (tax equivalent) 2.69 % 2.60 % 2.76 % 2.52 % 2.74 %
INCOME STATEMENT (ANNUAL RESULTS)
Return on Average Assets n/a n/a n/a -1.46 % n/a
Return on Average Equity n/a n/a n/a -8.00 % n/a
Net interest margin (tax equivalent) n/a n/a n/a 2.95 % n/a
* Derived from audited financial statements.
PARK STERLING CORPORATION
RECONCILIATION OF NON-GAAP MEASURES
($ in thousands)
September 30, June 30, March 31, December 31, September 30,
2011 2011 2011 2010 * 2010
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Tangible assets
Total assets $ 582,383 $ 610,668 $ 628,416 $ 616,108 $ 632,630
Less: intangible assets - - - - -
Tangible assets $ 582,383 $ 610,668 $ 628,416 $ 616,108 $ 632,630
Tangible common equity
Total common equity $ 174,617 $ 173,584 $ 174,770 $ 177,101 $ 183,847
Less: intangible assets - - - - -
Tangible common equity $ 174,617 $ 173,584 $ 174,770 $ 177,101 $ 183,847
Tangible book value per share
Issued and outstanding shares 28,619,358 28,619,358 28,619,358 28,051,098 28,051,098
Add: dilutive stock options - - - - -
Deduct: nondilutive restricted awards 568,260 568,260 568,260 - -
Period end dilutive shares 28,051,098 28,051,098 28,051,098 28,051,098 28,051,098
Tangible common equity $ 174,617 $ 173,584 $ 174,770 $ 177,101 $ 183,847
Divided by: period end dilutive shares 28,051,098 28,051,098 28,051,098 28,051,098 28,051,098
Tangible common book value per share $ 6.22 $ 6.19 $ 6.23 $ 6.31 $ 6.55
Earnings per share (excluding merger-related expenses)
Net income (loss) $ (1,376 ) $ (3,114 ) $ (2,887 ) $ (4,521 ) $ (3,668 )
Plus: merger-related expenses 496 632 - - -
Less: related income tax expense (174 ) (231 ) - - -
Net income (loss) (excluding merger-related expenses) $ (1,054 ) $ (2,713 ) $ (2,887 ) $ (4,521 ) $ (3,668 )
Divided by: weighted average dilutive shares 28,051,098 28,051,098 28,051,098 28,051,098 15,998,924
Earnings per share (excluding merger-related expenses) $ (0.04 ) $ (0.10 ) $ (0.10 ) $ (0.16 ) $ (0.23 )
* Derived from audited financial statements.

Non-GAAP Measures
Tangible assets, tangible common equity, tangible book value, earnings (loss) excluding merger-related expenses and related ratios and EPS measures, as used throughout this release, are non-GAAP financial measures. Management uses tangible assets, tangible common equity and tangible book value and related ratios to evaluate the adequacy of shareholders' equity and to facilitate comparisons with peers. Management uses earnings (loss) excluding merger-related expenses and related EPS measures to evaluate core earnings (loss). For additional information, see "Reconciliation of Non-GAAP Measures" in the accompanying tables.