Exhibit 99.1

 

 

 

Park Sterling Corporation Announces

Results for Fourth Quarter 2016

 

 

Charlotte, NC – January 26, 2017 – Park Sterling Corporation (NASDAQ: PSTB), the holding company for Park Sterling Bank, today released unaudited results of operations and other financial information for the fourth quarter of 2016. Highlights at and for the three and twelve months ended December 31, 2016 include:

 

Three Month Highlights

●	Net income of $5.3 million, or $0.10 per share, compared to $6.3 million, or $0.12 per share, in the quarter ended September 30, 2016

●	Adjusted net income, which excludes merger-related expenses and gain on sale of securities, was $7.3 million, or $0.14 per share, and was equal to the third quarter

●	Merger-related costs were $3.0 million, an increase of $1.5 million from the third quarter, due to final First Capital Bancorp, Inc. (“First Capital”) merger costs associated with the consolidation of our operations center and a Richmond branch

●	Noninterest income increased $398 thousand from a strong third quarter; with continued growth in deposit service charges, exceptional capital markets income and a decline in mortgage banking income

●	Noninterest expenses totaled $25.0 million, an increase of $3.9 million from the prior quarter

●	Adjusted noninterest expenses, which excludes merger-related costs, increased $2.4 million from the prior quarter reflecting in part a $1.5 million loss on an interest rate hedge on variable rate debt repaid during the quarter

●	Income tax expense declined to an effective rate of 22% due a $798 thousand benefit associated with the early adoption of ASU 2016-09, Stock-based Compensation

●	Average loans, excluding loans held for sale, showed steady growth at an 10% annualized growth rate from the prior quarter

●	Total average deposits increased $30 million or 5% annualized from the prior quarter

●	Credit quality remained strong

●	Capital levels remained strong with Tier 1 leverage ratio of 9.98%

●	The Board of Directors declared a quarterly cash dividend on common shares of $0.04 per share (January 2017)

 

Twelve Month Highlights

●	Net income increased $3.3 million from 2015 to a record $19.9 million, or $0.38 per share

●	Adjusted net income, which excludes merger-related expenses and gain or loss on sale of securities, was $27.2 million compared to $17.8 million in 2015, an increase of $9.4 million or 53%, and adjusted earnings per share increased to $0.52 from $0.40 in 2015, an increase of 29%

●	These results include the acquisition of First Capital which was completed on January 1, 2016

 

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

 

 

 

Financial Results

 

Income Statement – Three Months Ended December 31, 2016

 

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

 

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

 

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

  

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

 

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

 

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

 

 

 

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

 

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

 

Income Statement – Twelve Months Ended December 31, 2016

 

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

 

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

 

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

 

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

 

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

 

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

 

 

 

Balance Sheet

 

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

 

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

 

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

 

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

 

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

 

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

 

Asset Quality

 

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

 

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

 

 

 

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Conference Call

A conference call will be held at 8:30 a.m., Eastern Time this morning (January 26, 2017). The conference call can be accessed by dialing (877) 512-1104 and requesting the Park Sterling Corporation earnings call. Listeners should dial in 10 minutes prior to the start of the call. The live webcast and presentation slides will be available on www.parksterlingbank.com under Investor Relations, “Investor Presentations.”

 

A replay of the webcast will be available on www.parksterlingbank.com under Investor Relations, “Investor Presentations” shortly following the call. A replay of the conference call can be accessed approximately one hour after the call by dialing (877) 344-7529 and requesting conference number 10099223.

 

About Park Sterling Corporation

Park Sterling Corporation, the holding company for Park Sterling Bank, is headquartered in Charlotte, North Carolina. Park Sterling, a regional community-focused financial services company with $3.3 billion in assets, is the largest community bank headquartered in the Charlotte area and has 55 banking offices stretching across the Carolinas and into North Georgia, as well as in Richmond, Virginia. The bank serves professionals, individuals, and small and mid-sized businesses by offering a full array of financial services, including deposit, mortgage banking, cash management, consumer and business finance, capital markets and wealth management services with a commitment to “Answers You Can Bank On^SM.” Park Sterling prides itself on being large enough to help customers achieve their financial aspirations, yet small enough to care that they do. Park Sterling is focused on building a banking franchise that is noted for sound risk management, strong community focus and exceptional customer service. For more information, visit www.parksterlingbank.com. Park Sterling Corporation shares are traded on NASDAQ under the symbol PSTB.

 

Non-GAAP Financial Measures

Tangible assets, tangible common equity, tangible book value, average tangible common equity, adjusted net income, adjusted operating revenues, adjusted noninterest income, adjusted noninterest expenses, adjusted operating expense, adjusted allowance for loan losses, and related ratios and per share measures, including adjusted return on average assets and adjusted return on average equity, as used throughout this release, are non-GAAP financial measures. For additional information, see “Reconciliation of Non-GAAP Financial Measures” in the accompanying tables.

 

Cautionary Statement Regarding Forward Looking Statements

This news release contains, and Park Sterling and its management may make, certain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts and often use words such as “may,” “plan,” “contemplate,” “anticipate,” “believe,” “intend,” “continue,” expect,” “project,” “predict,” “estimate,” “could,” “should,” “would,” “will,” “goal,” “target” and similar expressions. These forward-looking statements express management's current expectations or forecasts of future events, results and conditions and, by their nature, are subject to risks and uncertainties and there are a number of factors that could cause actual results to differ materially from those in such statements. Factors that might cause such a difference include, but are not limited to: changes in loan mix, deposit mix, capital and liquidity levels, emerging regulatory expectations and measures, net interest income, noninterest income, noninterest expense, credit trends and conditions, including loan losses, allowance for loan loss, charge-offs, delinquency trends and nonperforming asset levels, deterioration in the credit quality of the loan portfolio or the value of collateral securing loans, deterioration in the value of securities held for investment, the impacts of an increasing rate environment, and other similar matters; inability to identify and successfully negotiate and complete additional combinations with other potential merger partners or to successfully integrate such businesses into Park Sterling, including the Company’s ability to adequately estimate or to realize the benefits and cost savings from and limit any unexpected liabilities acquired as a result of any such business combinations; failure to generate an adequate return on investment related to new branches or other hiring initiatives; inability to generate future organic growth in loan balances, retail banking, wealth management, mortgage banking or capital markets results through the hiring of new personnel, development of new products, including new online and mobile banking platforms for treasury services, opening of de novo branches or otherwise; inability to capitalize on identified revenue enhancements or expense management opportunities, including the inability to achieve or maintain adjusted operating expense to adjusted operating revenue targets; inability to generate future ATM and card income from marketing expenses; the effects of negative or soft economic conditions, including stress in the commercial real estate markets or failure of continued recovery in the residential real estate markets; changes in consumer and investor confidence and the related impact on financial markets and institutions; the potential impacts of any government shutdown or debt ceiling impasse, including the risk of a U.S. credit rating downgrade or default, or continued global economic instability, which could cause disruptions in the financial markets, impact interest rates, and cause other potential unforeseen consequences; fluctuations in the market price of the common stock, regulatory, legal and contractual requirements, other uses of capital, financial performance, market conditions generally, and future actions by the board of directors, in each case impacting repurchases of common stock or declaration of dividends; legal and regulatory developments, including changes in the federal risk-based capital rules; increased competition from both banks and nonbanks; changes in accounting standards, rules and interpretations, inaccurate estimates or assumptions in accounting, including acquisition accounting fair market value assumptions and accounting for purchased credit-impaired loans, and the impact on Park Sterling’s financial statements; and management’s ability to effectively manage credit risk, market risk, operational risk, legal risk, and regulatory and compliance risk.

 

 

 

You should not place undue reliance on any forward-looking statement and should consider all of the preceding uncertainties and risks, as well as those more fully discussed in any of Park Sterling’s filings with the SEC. Forward-looking statements speak only as of the date they are made, and Park Sterling undertakes no obligation to update any forward-looking statement to reflect the impact of circumstances or events that arise after the date the forward-looking statement was made.

 

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For additional information contact:

Donald K. Truslow

Chief Financial Officer

(704) 716-2134

don.truslow@parksterlingbank.com 

 

 

 

PARK STERLING CORPORATION                     

CONDENSED CONSOLIDATED INCOME STATEMENT                     

THREE MONTH RESULTS                     

($ in thousands, except per share amounts)  

 

		December 31,				September 30,				June 30,				March 31,				December 31,
		2016				2016				2016				2016				2015
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Interest income
Loans, including fees		$	27,066			$	26,521			$	26,729			$	27,124			$	19,284
Taxable investment securities			2,793				2,583				2,640				2,687				2,677
Tax-exempt investment securities			135				137				137				147				146
Nonmarketable equity securities			163				151				153				154				109
Interest on deposits at banks			54				51				34				42				22
Federal funds sold			1				1				5				8				1
Total interest income			30,212				29,444				29,698				30,162				22,239
Interest expense
Money market, NOW and savings deposits			941				953				1,014				1,017				743
Time deposits			1,469				1,447				1,449				1,398				903
Short-term borrowings			361				345				251				294				205
Long-term debt			371				379				440				410				55
Subordinated debt			499				497				494				446				358
Total interest expense			3,641				3,621				3,648				3,565				2,264
Net interest income			26,571				25,823				26,050				26,597				19,975
Provision for loan losses			550				642				882				556				409
Net interest income after provision			26,021				25,181				25,168				26,041				19,566
Noninterest income
Service charges on deposit accounts			1,761				1,671				1,528				1,489				1,439
Mortgage banking income			765				1,015				873				775				699
Income from wealth management activities			682				739				863				803				887
Income from capital market activities			1,070				680				767				68				437
ATM and card income			713				730				776				573				647
Income from bank-owned life insurance			663				532				526				988				371
Gain (loss) on sale of securities available for sale			6				-				(87	)			(6	)			-
Amortization of indemnification asset and true-up liability expense			-				(139	)			(25	)			(147	)			(165	)
Other noninterest income			185				219				154				184				208
Total noninterest income			5,845				5,447				5,375				4,727				4,523
Noninterest expenses
Salaries and employee benefits			11,480				11,755				11,774				13,018				9,541
Occupancy and equipment			3,577				3,111				3,041				3,125				2,680
Data processing and outside service fees			2,105				2,331				2,224				5,523				1,669
Legal and professional fees			869				978				950				725				1,471
Deposit charges and FDIC insurance			391				405				478				432				413
Loss on disposal of fixed assets			2,175				144				230				44				50
Communication fees			504				532				505				483				480
Postage and supplies			125				115				191				173				99
Loan and collection expense			57				425				273				37				194
Core deposit intangible amortization			458				458				458				458				347
Advertising and promotion			254				44				367				421				271
Net cost of operation of other real estate owned			11				(92	)			70				266				(23	)
Other noninterest expense			3,019				906				1,385				1,448				1,170
Total noninterest expenses			25,025				21,112				21,946				26,153				18,362
Income before income taxes			6,841				9,516				8,597				4,615				5,727
Income tax expense			1,510				3,192				3,045				1,874				1,952
Net income		$	5,331			$	6,324			$	5,552			$	2,741			$	3,775
Earnings per common share, fully diluted		$	0.10			$	0.12			$	0.11			$	0.05			$	0.09
Weighted average diluted common shares			53,147,221				52,743,928				52,704,537				52,599,584				44,322,428

 

 

 

PARK STERLING CORPORATION

CONDENSED CONSOLIDATED INCOME STATEMENT

TWELVE MONTH RESULTS

($ in thousands, except per share amounts) 

 

		December 31,				December 31,
		2016				2015*
		(Unaudited)
Interest income
Loans, including fees		$	107,440			$	77,537
Taxable investment securities			10,703				10,612
Tax-exempt investment securities			556				579
Nonmarketable equity securities			621				500
Interest on deposits at banks			181				82
Federal funds sold			15				2
Total interest income			119,516				89,312
Interest expense
Money market, NOW and savings deposits			3,925				2,449
Time deposits			5,763				3,202
Short-term borrowings			1,251				528
Long-term debt			1,600				367
Subordinated debt			1,936				1,385
Total interest expense			14,475				7,931
Net interest income			105,041				81,381
Provision for loan losses			2,630				723
Net interest income after provision			102,411				80,658
Noninterest income
Service charges on deposit accounts			6,449				4,934
Mortgage banking income			3,428				3,306
Income from wealth management activities			3,087				3,602
Income from capital market activities			2,585				1,467
ATM and card income			2,792				2,507
Income from bank-owned life insurance			2,709				2,749
Gain (loss) on sale of securities available for sale			(87	)			54
Amortization of indemnification asset and true-up liability expense			(311	)			(886	)
Other noninterest income			742				510
Total noninterest income			21,394				18,243
Noninterest expenses
Salaries and employee benefits			48,027				39,945
Occupancy and equipment			12,854				10,317
Data processing and outside service fees			12,183				6,625
Legal and professional fees			3,522				3,402
Deposit charges and FDIC insurance			1,706				1,639
Loss on disposal of fixed assets			2,593				996
Communication fees			2,024				2,099
Postage and supplies			604				488
Loan and collection expense			792				740
Core deposit intangible amortization			1,832				1,389
Advertising and promotion			1,086				1,263
Net cost of operation of other real estate owned			255				406
Other noninterest expense			6,758				4,844
Total noninterest expenses			94,236				74,153
Income before income taxes			29,569				24,748
Income tax expense			9,621				8,142
Net income		$	19,948			$	16,606
Earnings per common share, fully diluted		$	0.38			$	0.37
Weighted average diluted common shares			52,846,949				44,304,888

 

* Derived from audited financial statements.

 

 

PARK STERLING CORPORATION

WEALTH MANAGEMENT ASSETS

($ in thousands)

 

		as of the period ended
		December 31,				September 30,				June 30,				March 31,				December 31,
		2016				2016				2016				2016				2015
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Discretionary assets held		$	278,872			$	294,849			$	322,996			$	339,198			$	434,346
Non-discretionary assets held			36,522				28,476				32,173				31,174				32,289
Total wealth management assets		$	315,394			$	323,325			$	355,169			$	370,372			$	466,635

 

PARK STERLING CORPORATION

MORTGAGE ORIGINATION

($ in thousands)

 

		for the three month period ended
		December 31,				September 30,				June 30,				March 31,				December 31,
		2016				2016				2016				2016				2015
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Mortgage origination - purchase		$	14,767			$	21,982			$	25,316			$	14,656			$	16,101
Mortgage origination - refinance			21,316				20,552				16,221				13,430				10,049
Mortgage origination - construction			18,535				19,440				18,403				14,764				18,746
Total mortgage origination		$	54,618			$	61,974			$	59,941			$	42,850			$	44,896

 

 

PARK STERLING CORPORATION          

CONDENSED CONSOLIDATED BALANCE SHEETS      

($ in thousands)  

 

		December 31,				September 30,				June 30,				March 31,				December 31,
		2016				2016				2016				2016				2015*
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
ASSETS
Cash and due from banks		$	34,162			$	35,066			$	33,348			$	34,038			$	53,840
Interest-earning balances at banks			48,882				38,540				34,955				47,143				16,451
Investment securities available for sale			402,501				405,010				393,131				396,863				384,934
Investment securities held to maturity			91,752				99,415				102,125				104,459				106,458
Nonmarketable equity securities			17,501				16,289				14,420				13,118				11,366
Federal funds sold			570				345				1,570				11,271				235
Loans held for sale			7,996				15,203				11,967				7,593				4,943
Loans - Non-covered			2,412,186				2,368,950				2,311,775				2,262,294				1,724,164
Loans - Covered			-				-				15,122				16,849				17,651
Allowance for loan losses			(12,125	)			(11,612	)			(10,873	)			(9,832	)			(9,064	)
Net loans			2,400,061				2,357,338				2,316,024				2,269,311				1,732,751
Premises and equipment, net			63,080				64,632				65,711				65,494				55,658
FDIC receivable for loss share agreements			-				-				1,164				1,477				943
Other real estate owned - non-covered			2,438				2,730				2,866				3,425				4,211
Other real estate owned - covered			-				-				380				985				1,240
Bank-owned life insurance			70,785				70,167				69,695				69,202				58,633
Deferred tax asset			25,721				26,947				28,985				30,088				28,971
Goodwill			63,317				63,030				63,197				63,707				29,197
Core deposit intangible			11,438				11,896				12,354				12,813				9,571
Other assets			15,192				20,330				22,183				22,750				14,862
Total assets		$	3,255,396			$	3,226,938			$	3,174,075			$	3,153,737			$	2,514,264
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand noninterest-bearing		$	521,295			$	505,591			$	496,195			$	469,046			$	350,836
Money market, NOW and savings			1,251,385				1,228,687				1,229,040				1,255,848				1,062,046
Time deposits			741,072				749,999				748,188				773,089				539,780
Total deposits			2,513,752				2,484,277				2,473,423				2,497,983				1,952,662
Short-term borrowings			285,000				280,000				200,000				170,000				185,000
Long-term debt			29,736				29,725				64,714				65,000				30,000
Subordinated debt			33,501				33,339				33,176				33,014				24,262
Accrued expenses and other liabilities			37,562				40,901				48,312				38,229				37,636
Total liabilities			2,899,551				2,868,242				2,819,625				2,804,226				2,229,560
Shareholders' equity:
Common stock			53,117				53,306				53,332				53,038				44,854
Additional paid-in capital			273,400				275,323				275,246				274,706				222,596
Retained earnings			32,608				29,409				25,219				21,263				20,117
Accumulated other comprehensive income (loss)			(3,280	)			658				653				504				(2,863	)
Total shareholders' equity			355,845				358,696				354,450				349,511				284,704
Total liabilities and shareholders' equity		$	3,255,396			$	3,226,938			$	3,174,075			$	3,153,737			$	2,514,264
Common shares issued and outstanding			53,116,519				53,305,834				53,332,369				53,038,020				44,854,509

 

* Derived from audited financial statements.

 

 

PARK STERLING CORPORATION

SUMMARY OF LOAN PORTFOLIO

($ in thousands)

 

		December 31,				September 30,				June 30,				March 31,				December 31,
		2016				2016				2016				2016				2015*
BY LOAN TYPE		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Commercial:
Commercial and industrial		$	391,338			$	351,506			$	334,644			$	334,027			$	246,907
Commercial real estate (CRE) - owner-occupied			367,547				366,506				376,440				374,428				331,222
CRE - investor income producing			740,964				768,513				764,168				723,539				506,110
Acquisition, construction and development (AC&D) - 1-4 Family Construction			81,753				108,706				100,604				97,614				32,262
AC&D - Lots and land			105,362				88,620				94,686				88,492				44,411
AC&D - CRE construction			194,732				148,696				125,466				136,561				87,452
Other commercial			12,900				10,653				10,410				10,167				8,601
Total commercial loans			1,894,596				1,843,200				1,806,418				1,764,828				1,256,965
Consumer:
Residential mortgage			259,836				254,298				244,063				235,737				223,884
Home equity lines of credit			176,799				181,246				181,020				177,594				157,378
Residential construction			59,060				63,847				65,867				71,117				72,171
Other loans to individuals			18,756				23,281				26,575				27,245				28,816
Total consumer loans			514,451				522,672				517,525				511,693				482,249
Total loans			2,409,047				2,365,872				2,323,943				2,276,521				1,739,214
Deferred costs (fees)			3,139				3,078				2,954				2,622				2,601
Total loans, net of deferred costs (fees)		$	2,412,186			$	2,368,950			$	2,326,897			$	2,279,143			$	1,741,815

 

* Derived from audited financial statements.

 

		December 31,				September 30,				June 30,				March 31,				December 31,
		2016				2016				2016				2016				2015*
BY ACQUIRED AND NON-ACQUIRED		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Acquired loans - performing		$	538,845			$	599,840			$	661,930			$	726,025			$	279,949
Acquired loans - purchase credit impaired			85,456				90,571				98,672				106,105				94,917
Total acquired loans			624,301				690,411				760,602				832,130				374,866
Non-acquired loans, net of deferred costs (fees)**			1,787,885				1,678,539				1,566,295				1,447,013				1,366,949
Total loans		$	2,412,186			$	2,368,950			$	2,326,897			$	2,279,143			$	1,741,815

 

* Derived from audited financial statements.

** Includes loans transferred from acquired pools following release of acquisition accounting FMV adjustments.

 

 

 

PARK STERLING CORPORATION

ALLOWANCE FOR LOAN LOSSES

THREE MONTH RESULTS

($ in thousands) 

 

		December 31,				September 30,				June 30,				March 31,				December 31,
		2016				2016				2016				2016				2015*
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Beginning of period allowance		$	11,612			$	10,873			$	9,832			$	9,064			$	8,742
Loans charged-off			(223	)			(156	)			(94	)			(82	)			(237	)
Recoveries of loans charged-off			186				253				253				294				150
Net charge-offs			(37	)			97				159				212				(87	)
Provision expense			550				642				882				556				409
Benefit attributable to FDIC loss share agreements			-				-				-				-				-
Total provision expense charged to operations			550				642				882				556				409
Provision expense recorded through FDIC loss share receivable			-				-				-				-				(20	)
End of period allowance		$	12,125			$	11,612			$	10,873			$	9,832			$	9,064
Net charge-offs (recoveries)		$	37			$	(97	)		$	(159	)		$	(212	)		$	87
Net charge-offs (recoveries) to average loans (annualized)			0.01	%			-0.02	%			-0.03	%			-0.04	%			0.02	%

 

* Derived from audited financial statements.

 

 

PARK STERLING CORPORATION

ACQUIRED LOANS

($ in thousands)

 

		December 31,				September 30,				June 30,				March 31,				December 31,
ACQUIRED LOANS AND FAIR MARKET		2016				2016				2016				2016				2015*
VALUE (FMV) ADJUSTMENTS		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Non-acquired loans		$	1,787,885			$	1,678,539			$	1,566,295			$	1,447,013			$	1,366,949
Purchased performing loans			542,269				604,000				666,894				732,075				282,081
Less: remaining FMV adjustments			(3,424	)			(4,160	)			(4,964	)			(6,050	)			(2,132	)
Purchased performing loans, net			538,845				599,840				661,930				726,025				279,949
Purchased credit impaired loans			109,805				115,736				124,985				133,644				120,957
Less: remaining FMV adjustments			(24,349	)			(25,165	)			(26,313	)			(27,539	)			(26,040	)
Purchased credit impaired loans, net			85,456				90,571				98,672				106,105				94,917
Total loans		$	2,412,186			$	2,368,950			$	2,326,897			$	2,279,143			$	1,741,815

 

 

		December 31,				September 30,				June 30,				March 31,				December 31,
PURCHASED PERFORMING FMV		2016				2016				2016				2016				2015*
ADJUSTMENTS		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Beginning FMV adjustment		$	(4,160	)		$	(4,964	)		$	(6,050	)		$	(2,132	)		$	(2,194	)
Increase from First Capital			-				-				-				(5,200	)			-
Accretion to interest income:
First Capital			503				623				777				1,027				-
All other mergers			233				181				309				255				62
Ending FMV adjustment		$	(3,424	)		$	(4,160	)		$	(4,964	)		$	(6,050	)		$	(2,132	)

 

 

		December 31,				September 30,				June 30,				March 31,				December 31,
PCI FMV ADJUSTMENT		2016				2016				2016				2016				2015*
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Contractual principal and interest		$	125,512			$	133,223			$	143,701			$	153,124			$	140,269
Nonaccretable difference			(10,448	)			(11,529	)			(14,652	)			(14,975	)			(12,843	)
Expected cash flows as of the end of period			115,064				121,694				129,049				138,149				127,426
Accretable yield			(29,608	)			(31,123	)			(30,377	)			(32,044	)			(32,509	)
Ending basis in PCI loans- estimated fair value		$	85,456			$	90,571			$	98,672			$	106,105			$	94,917
Beginning accretable yield		$	(31,123	)		$	(30,377	)		$	(32,044	)		$	(32,509	)		$	(35,049	)
Increase from First Capital			-				-				-				(1,663	)			-
Loan system servicing income			1,389				1,532				1,434				1,551				1,437
Accretion to interest income			1,285				1,241				1,343				1,471				1,438
Reclass to (from) non-accretable yield			(929	)			(2,691	)			(522	)			(993	)			(553	)
Other adjustments			(230	)			(828	)			(588	)			99				218
Period end accretable yield**		$	(29,608	)		$	(31,123	)		$	(30,377	)		$	(32,044	)		$	(32,509	)

 

*

Derived from audited financial statements.

**

Difference between the remaining FMV discount on purchased credit impaired loans and the period end accretable yield is a function of projected estimated expected interest income being included in the period end accretable yield.

 

 

 

PARK STERLING CORPORATION

AVERAGE BALANCE SHEETS AND NET INTEREST ANALYSIS

THREE MONTHS

($ in thousands) 

 

		December 31, 2016												December 31, 2015
		Average				Income/				Yield/				Average				Income/				Yield/
		Balance				Expense				Rate (3)				Balance				Expense				Rate (3)
Assets
Interest-earning assets:
Loans and loans held for sale, net (1)(2)		$	2,406,142			$	27,066				4.48	%		$	1,705,899			$	19,284				4.48	%
Fed funds sold			808				1				0.49	%			762				1				0.52	%
Taxable investment securities			468,632				2,793				2.38	%			487,113				2,677				2.20	%
Tax-exempt investment securities			13,489				135				4.00	%			14,794				146				3.95	%
Other interest-earning assets			60,245				217				1.43	%			43,837				131				1.19	%
Total interest-earning assets			2,949,316				30,212				4.08	%			2,252,405				22,239				3.92	%
Allowance for loan losses			(11,723	)											(8,809	)
Cash and due from banks			35,021												30,518
Premises and equipment			64,595												56,299
Goodwill			63,153												29,197
Intangible assets			11,659												9,737
Other assets			117,278												111,636
Total assets		$	3,229,299											$	2,480,983
Liabilities and shareholders' equity
Interest-bearing liabilities:
Interest-bearing demand		$	435,705			$	78				0.07	%		$	392,661			$	61				0.06	%
Savings and money market			733,880				747				0.40	%			590,993				614				0.41	%
Time deposits - core			655,455				1,204				0.73	%			470,564				791				0.67	%
Brokered deposits			152,662				381				0.99	%			132,821				180				0.54	%
Total interest-bearing deposits			1,977,702				2,410				0.48	%			1,587,039				1,646				0.41	%
Short-term borrowings			244,620				361				0.59	%			159,458				205				0.51	%
Long-term debt			29,729				371				4.96	%			4,565				55				4.78	%
Subordinated debt			33,426				499				5.94	%			24,172				358				5.88	%
Total borrowed funds			307,775				1,231				1.59	%			188,195				618				1.30	%
Total interest-bearing liabilities			2,285,477				3,641				0.63	%			1,775,234				2,264				0.51	%
Net interest rate spread							26,571				3.44	%							19,975				3.41	%
Noninterest-bearing demand deposits			537,325												379,413
Other liabilities			46,512												41,665
Shareholders' equity			359,985												284,671
Total liabilities and shareholders' equity		$	3,229,299											$	2,480,983
Net interest margin											3.58	%											3.52	%

 

(1)

Nonaccrual loans are included in the average loan balances.

(2)

Interest income and yields for the three months ended December 31, 2016 and 2015 include accretion from acquisition accounting adjustments associated with acquired loans.

(3)

Yield/ rate calculated on Actual/Actual day count basis, except for yield on investments which is calculated on a 30/360 day count basis.

 

 

PARK STERLING CORPORATION

AVERAGE BALANCE SHEETS AND NET INTEREST ANALYSIS

TWELVE MONTHS

($ in thousands) 

 

		December 31, 2016												December 31, 2015
		Average				Income/				Yield/				Average				Income/				Yield/
		Balance				Expense				Rate (3)				Balance				Expense				Rate (3)
Assets
Interest-earning assets:
Loans and loans held for sale, net (1)(2)		$	2,332,205			$	107,440				4.61	%		$	1,658,657			$	77,537				4.67	%
Fed funds sold			3,118				15				0.48	%			799				2				0.25	%
Taxable investment securities			495,305				10,703				2.16	%			483,352				10,612				2.20	%
Tax-exempt investment securities			14,416				556				3.86	%			14,222				579				4.07	%
Other interest-earning assets			36,781				802				2.18	%			55,889				582				1.04	%
Total interest-earning assets			2,881,825				119,516				4.15	%			2,212,919				89,312				4.04	%
Allowance for loan losses			(10,655	)											(8,700	)
Cash and due from banks			35,371												19,982
Premises and equipment			65,613												58,100
Goodwill			62,949												29,211
Intangible assets			12,266												10,256
Other assets			123,772												114,647
Total assets		$	3,171,141											$	2,436,415
Liabilities and shareholders' equity
Interest-bearing liabilities:
Interest-bearing demand		$	428,933			$	314				0.07	%		$	398,731			$	259				0.06	%
Savings and money market			739,265				3,194				0.43	%			549,713				1,945				0.35	%
Time deposits - core			676,302				4,874				0.72	%			464,423				2,729				0.59	%
Brokered deposits			143,939				1,306				0.91	%			136,489				718				0.53	%
Total interest-bearing deposits			1,988,439				9,688				0.49	%			1,549,356				5,651				0.36	%
Short-term borrowings			209,004				1,251				0.60	%			142,890				528				0.37	%
Long-term debt			47,422				1,600				3.37	%			55,480				367				0.66	%
Subordinated debt			33,180				1,936				5.83	%			23,920				1,385				5.79	%
Total borrowed funds			289,606				4,787				1.65	%			222,290				2,280				1.03	%
Total interest-bearing liabilities			2,278,045				14,475				0.64	%			1,771,646				7,931				0.45	%
Net interest rate spread							105,041				3.51	%							81,381				3.59	%
Noninterest-bearing demand deposits			494,987												349,373
Other liabilities			43,431												33,887
Shareholders' equity			354,678												281,509
Total liabilities and shareholders' equity		$	3,171,141											$	2,436,415
Net interest margin											3.64	%											3.68	%

 

(1)

Nonaccrual loans are included in the average loan balances.

(2)

Interest income and yields for the twelve months ended December 31, 2016 and 2015 include accretion from acquisition accountingadjustments associated with acquired loans.

(3)

Yield/ rate calculated on Actual/Actual day count basis, except for yield on investments which is calculated on a 30/360 day count basis.

 

 

PARK STERLING CORPORATION

SELECTED RATIOS

($ in thousands, except per share amounts) 

 

		December 31,				September 30,				June 30,				March 31,				December 31,
		2016				2016				2016				2016				2015
		Unaudited				Unaudited				Unaudited				Unaudited				Unaudited
ASSET QUALITY
Nonaccrual loans		$	8,819			$	8,623			$	5,185			$	6,595			$	4,326
Troubled debt restructuring (and still accruing)			2,892				2,549				2,582				2,696				2,774
Past due 90 days plus (and still accruing)			1,230				293				-				293				1,151
Nonperforming loans			12,941				11,465				7,767				9,584				8,251
OREO			2,438				2,730				3,246				4,410				5,451
Nonperforming assets			15,379				14,195				11,013				13,994				13,702
Past due 30-59 days (and still accruing)			1,175				1,104				985				217				1,222
Past due 60-89 days (and still accruing)			1,836				2,558				5,800				499				1,340
Nonperforming loans to total loans			0.54	%			0.48	%			0.33	%			0.42	%			0.47	%
Nonperforming assets to total assets			0.47	%			0.44	%			0.35	%			0.44	%			0.54	%
Allowance to total loans			0.50	%			0.49	%			0.47	%			0.43	%			0.52	%
Allowance to nonperforming loans			93.69	%			101.28	%			139.99	%			102.59	%			109.85	%
Allowance to nonperforming assets			78.84	%			81.80	%			98.73	%			70.26	%			66.15	%
Past due 30-89 days (accruing) to total loans			0.12	%			0.15	%			0.29	%			0.03	%			0.15	%
Net charge-offs (recoveries) to average loans (annualized)			0.01	%			-0.02	%			-0.03	%			-0.04	%			0.02	%
CAPITAL
Book value per common share		$	6.75			$	6.84			$	6.77			$	6.69			$	6.49
Tangible book value per common share**		$	5.33			$	5.41			$	5.33			$	5.22			$	5.60
Common shares outstanding			53,116,519				53,305,834				53,332,369				53,038,020				44,854,509
Weighted average dilutive common shares outstanding			53,147,221				52,743,928				52,704,537				52,599,584				44,322,428
Common Equity Tier 1 (CET1) capital		$	288,594			$	287,518			$	282,721			$	275,490			$	251,807
Tier 1 capital			314,043				312,781				307,736				300,354				268,605
Tier 2 capital			12,125				11,615				10,914				9,832				9,064
Total risk based capital			326,168				324,396				318,650				310,186				277,669
Risk weighted assets			2,610,908				2,596,463				2,538,461				2,478,547				1,939,417
Average assets for leverage ratio			3,146,928				3,108,707				3,058,742				3,076,505				2,441,811
Common Equity Tier 1 (CET1) ratio			11.05	%			11.07	%			11.14	%			11.11	%			12.98	%
Tier 1 ratio			12.03	%			12.04	%			12.12	%			12.12	%			13.85	%
Total risk based capital ratio			12.49	%			12.49	%			12.55	%			12.51	%			14.32	%
Tier 1 leverage ratio			9.98	%			10.06	%			10.06	%			9.76	%			11.00	%
Tangible common equity to tangible assets**			8.84	%			9.00	%			9.00	%			8.87	%			9.93	%
LIQUIDITY
Net loans to total deposits			95.48	%			94.89	%			93.64	%			90.85	%			88.74	%
Reliance on wholesale funding			17.39	%			17.65	%			16.25	%			15.50	%			16.77	%
INCOME STATEMENT (THREE MONTH RESULTS; ANNUALIZED)
Return on Average Assets			0.66	%			0.79	%			0.71	%			0.35	%			0.60	%
Return on Average Common Equity			5.89	%			7.04	%			6.33	%			3.16	%			5.26	%
Net interest margin (non-tax equivalent)			3.58	%			3.54	%			3.69	%			3.78	%			3.52	%

 

** Non-GAAP financial measure

 

 

Non-GAAP Financial Measures

Tangible assets, tangible common equity, tangible book value, adjusted average tangible common equity, adjusted net income, adjusted noninterest income, adjusted operating revenues, adjusted noninterest expense, adjusted operating expenses, adjusted allowance for loan losses, and related ratios and per share measures, including adjusted return on average assets and adjusted return on average equity, as used throughout this release, are non-GAAP financial measures. Management uses (i) tangible assets, tangible common equity and tangible book value (which exclude goodwill and other intangibles from equity and assets), and related ratios, to evaluate the adequacy of shareholders’ equity and to facilitate comparisons with peers; (ii) adjusted allowance for loan losses (which includes net FMV adjustments related to acquired loans) as supplemental information for comparing the combined allowance and fair market value adjustments to the combined acquired and non-acquired loan portfolios (fair market value adjustments are available only for losses on acquired loans); and (iii) adjusted net income and adjusted noninterest income (which exclude merger-related expenses and gain or loss on sale of securities, as applicable), adjusted noninterest expense (which excludes merger-related expenses), adjusted operating expense (which excludes merger-related expenses and amortization of intangibles) and adjusted operating revenues (which includes net interest income and noninterest income and excludes gain or loss on sale of securities, as applicable) to evaluate core earnings and to facilitate comparisons with peers.

 

PARK STERLING CORPORATION

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

($ in thousands, except per share amounts)  

 

		as of or for the three month period ended																				as of or for the year ended
		December 31,				September 30,				June 30,				March 31,				December 31,				December 31,				December 31,
		2016				2016				2016				2016				2015				2016				2015
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Adjusted net income
Pretax income (as reported)		$	6,841			$	9,516			$	8,597			$	4,615			$	5,727			$	29,569			$	24,748
Plus: merger-related expenses			2,984				1,487				1,268				5,193				1,396				10,932				1,715
(gain) loss on sale of securities			(6	)			-				87				6				-				87				(54	)
Adjusted pretax income			9,819				11,003				9,952				9,814				7,123				40,588				26,409
Tax expense			2,514				3,691				3,509				3,646				2,332				13,360				8,615
Adjusted net income		$	7,305			$	7,312			$	6,443			$	6,168			$	4,791			$	27,228			$	17,794
Divided by: weighted average diluted shares			53,147,221				52,743,928				52,704,537				52,599,584				44,322,428				52,846,949				44,304,888
Adjusted net income per share			0.14				0.14				0.12			$	0.12			$	0.11				0.52			$	0.40
Estimated tax rate for adjustment			33.73	%			33.54	%			34.26	%			34.09	%			32.75	%			32.92	%			32.62	%
Adjusted noninterest income
Noninterest income (as reported)		$	5,845			$	5,447			$	5,375			$	4,727			$	4,523			$	21,394			$	18,243
Less: (gain) loss on sale of securities			(6	)			-				87				6				-				87				(54	)
Adjusted noninterest income		$	5,839			$	5,447			$	5,462			$	4,733			$	4,523			$	21,481			$	18,189
Adjusted noninterest expenses
Noninterest expenses (as reported)		$	25,025			$	21,112			$	21,946			$	26,153			$	18,362			$	94,236			$	74,153
Less: merger-related expenses			(2,984	)			(1,487	)			(1,268	)			(5,193	)			(1,396	)			(10,932	)			(1,715	)
Adjusted noninterest expenses		$	22,041			$	19,625			$	20,678			$	20,960			$	16,966			$	83,304			$	72,438
Adjusted operating expense
Noninterest expenses (as reported)		$	25,025			$	21,112			$	21,946			$	26,153			$	18,362			$	94,236			$	74,153
Less: merger-related expenses			(2,984	)			(1,487	)			(1,268	)			(5,193	)			(1,396	)			(10,932	)			(1,715	)
Less: amortization of intangibles			(458	)			(458	)			(458	)			(458	)			(347	)			(1,832	)			(1,389	)
Adjusted operating expense		$	21,583			$	19,167			$	20,220			$	20,502			$	16,619			$	81,472			$	71,049
Adjusted operating revenues
Net Interest Income (as reported)		$	26,571			$	25,823			$	26,050			$	26,597			$	19,975			$	105,041			$	81,381
Plus: noninterest income (as reported)			5,845				5,447				5,375				4,727				4,523				21,394				18,243
Less: (gain) loss on sale of securities			(6	)			-				87				6				-				87				(54	)
Adjusted operating revenues		$	32,410			$	31,270			$	31,512			$	31,330			$	24,498			$	126,522			$	99,570
Adjusted operating expense to adjusted operating revenues
Adjusted operating expense		$	21,583			$	19,167			$	20,220			$	20,502			$	16,619			$	81,472			$	71,049
Divided by: adjusted operating revenues			32,410				31,270				31,512				31,330				24,498				126,522				99,570
Adjusted operating expense to adjusted operating revenues			66.59	%			61.30	%			64.17	%			65.44	%			67.84	%			64.39	%			71.36	%
Noninterest expenses to net interest income plus noninterest income			77.20	%			67.52	%			69.84	%			83.49	%			74.95	%			74.53	%			74.43	%
Adjusted return on average assets
Adjusted net income		$	7,305			$	7,312			$	6,443			$	6,168			$	4,791			$	27,228			$	17,794
Divided by: average assets			3,229,299				3,186,799				3,135,031				3,132,625				2,480,983				3,171,141				2,436,415
Multiplied by: annualization factor			3.98				3.98				4.02				4.02				3.97				1.00				1.00
Adjusted return on average assets			0.90	%			0.91	%			0.83	%			0.79	%			0.77	%			0.86	%			0.73	%
Return on average assets			0.66	%			0.79	%			0.71	%			0.35	%			0.60	%			0.63	%			0.68	%

PARK STERLING CORPORATION

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

($ in thousands, except per share amounts)  

 

		as of or for the three month period ended																				as of or for the year ended
		December 31,				September 30,				June 30,				March 31,				December 31,				December 31,				December 31,
		2016				2016				2016				2016				2015				2016				2015
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Adjusted return on average equity
Adjusted net income		$	7,305			$	7,312			$	6,443			$	6,168			$	4,791			$	27,228			$	17,794
Divided by: average common equity			359,985				357,577				352,505				348,556				284,671				354,678				281,509
Multiplied by: annualization factor			3.98				3.98				4.02				4.02				3.97				1.00				1.00
Adjusted return on average equity			8.07	%			8.14	%			7.35	%			7.12	%			6.68	%			7.68	%			6.32	%
Return on average equity			5.89	%			7.04	%			6.33	%			3.16	%			5.26	%			0.00	%			0.00	%
Tangible common equity to tangible assets
Total assets		$	3,255,396			$	3,226,938			$	3,174,075			$	3,153,737			$	2,514,264			$	3,255,396			$	2,514,264
Less: intangible assets			(74,755	)			(74,926	)			(75,551	)			(76,520	)			(38,768	)			(74,755	)			(38,768	)
Tangible assets		$	3,180,641			$	3,152,012			$	3,098,524			$	3,077,217			$	2,475,496			$	3,180,641			$	2,475,496
Total common equity		$	355,845			$	358,696			$	354,450			$	349,511			$	284,704			$	355,845			$	284,704
Less: intangible assets			(74,755	)			(74,926	)			(75,551	)			(76,520	)			(38,768	)			(74,755	)			(38,768	)
Tangible common equity		$	281,090			$	283,770			$	278,899			$	272,991			$	245,936			$	281,090			$	245,936
Tangible common equity		$	281,090			$	283,770			$	278,899			$	272,991			$	245,936			$	281,090			$	245,936
Divided by: tangible assets			3,180,641				3,152,012				3,098,524				3,077,217				2,475,496				3,180,641				2,475,496
Tangible common equity to tangible assets			8.84	%			9.00	%			9.00	%			8.87	%			9.93	%			8.84	%			9.93	%
Common equity to assets			10.93	%			11.12	%			11.17	%			11.08	%			11.32	%			10.93	%			11.32	%
Tangible book value per share
Issued and outstanding shares			53,116,519				53,305,834				53,332,369				53,038,020				44,854,509				53,116,519				44,854,509
Less: nondilutive restricted stock awards			(405,732	)			(837,561	)			(969,991	)			(785,658	)			(959,305	)			(405,732	)			(959,305	)
Period end dilutive shares			52,710,787				52,468,273				52,362,378				52,252,362				43,895,204				52,710,787				43,895,204
Tangible common equity		$	281,090			$	283,770			$	278,899			$	272,991			$	245,936			$	281,090			$	245,936
Divided by: period end dilutive shares			52,710,787				52,468,273				52,362,378				52,252,362				43,895,204				52,710,787				43,895,204
Tangible common book value per share		$	5.33			$	5.41			$	5.33			$	5.22			$	5.60			$	5.33			$	5.60
Common book value per share		$	6.75			$	6.84			$	6.77			$	6.69			$	6.49			$	6.75			$	6.49
Adjusted return on average tangible common equity
Average common equity		$	359,985			$	357,577			$	352,505			$	348,556			$	284,671			$	354,678			$	281,509
Less: average intangible assets			(74,812	)			(75,196	)			(76,083	)			(74,773	)			(38,934	)			(75,215	)			(39,467	)
Average tangible common equity		$	285,173			$	282,381			$	276,422			$	273,783			$	245,737			$	279,463			$	242,042
Net income		$	5,331			$	6,324			$	5,552			$	2,741			$	3,775			$	19,948			$	16,606
Divided by: average tangible common equity			285,173				282,381				276,422				273,783				245,737				279,463				242,042
Multiplied by: annualization factor			3.98				3.98				4.02				4.02				3.97				1.00				1.00
Return on average tangible common equity			7.44	%			8.91	%			8.08	%			4.03	%			6.09	%			7.14	%			6.86	%
Adjusted net income		$	7,305			$	7,312			$	6,443			$	6,168			$	4,791			$	27,228			$	17,794
Divided by: average tangible common equity			285,173				282,381				276,422				273,783				245,737				279,463				242,042
Multiplied by: annualization factor			3.98				3.98				4.02				4.02				3.97				1.00				1.00
Adjusted return on average tangible common equity			10.19	%			10.31	%			9.37	%			9.06	%			7.74	%			9.74	%			7.35	%
Adjusted allowance for loan losses
Allowance for loan losses		$	12,125			$	11,612			$	10,873			$	9,832			$	9,064			$	12,125			$	9,064
Plus: acquisition accounting FMV adjustments to acquired loans			27,773				29,325				31,277				33,589				28,173				27,773				28,173
Adjusted allowance for loan losses		$	39,898			$	40,937			$	42,150			$	43,421			$	37,237			$	39,898			$	37,237
Divided by: total loans (excluding LHFS before FMV adjustments)		$	2,439,959			$	2,398,275			$	2,358,174			$	2,312,732			$	1,769,988			$	2,439,959			$	1,769,988
Adjusted allowance for loan losses to total loans			1.64	%			1.71	%			1.79	%			1.88	%			2.10	%			1.64	%			2.10	%
Allowance for loan losses to total loans			0.50	%			0.49	%			0.47	%			0.43	%			0.52	%			0.50	%			0.52	%

  

17