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Park Sterling Corporation Announces Results for Second Quarter 2017

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Park Sterling Corporation Announces Results for Second Quarter 2017

Park Sterling Corporation Announces Results for Second Quarter 2017

CHARLOTTE, NC --(Marketwired - July 27, 2017) - Park Sterling Corporation (NASDAQ:PSTB), the holding company for Park Sterling Bank, today released unaudited results of operations and other financial information for the second quarter of 2017.

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

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

Financial Results

Income Statement - Three Months Ended June 30, 2017

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

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

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

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

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

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

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

Balance Sheet

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

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

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

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

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

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

Asset Quality

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

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

About Park Sterling Corporation
Park Sterling Corporation, the holding company for Park Sterling Bank, is headquartered in Charlotte, North Carolina. Park Sterling, a regional community-focused financial services company with $3.3 billion in assets, is the largest community bank headquartered in the Charlotte area and has 54 banking offices stretching across the Carolinas and into North Georgia, as well as in Richmond, Virginia. The bank serves professionals, individuals, and small and mid-sized businesses by offering a full array of financial services, including deposit, mortgage banking, cash management, consumer and business finance, capital markets and wealth management services with a commitment to "Answers You Can Bank On℠." Park Sterling prides itself on being large enough to help customers achieve their financial aspirations, yet small enough to care that they do. Park Sterling is focused on building a banking franchise that is noted for sound risk management, strong community focus and exceptional customer service. For more information, visit www.parksterlingbank.com. Park Sterling Corporation shares are traded on NASDAQ under the symbol PSTB.

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

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

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

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

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

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

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

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

                   
PARK STERLING CORPORATION          
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES          
($ in thousands, except per share amounts) June 30,   March 31,   December 31,   September 30,   June 30,
  2017   2017   2016   2016   2016
  (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
Adjusted net income                  
  Net income (as reported) $8,527   $7,489   $5,331   $6,324   $5,552
  Plus: merger-related expenses 923   -   2,984   1,487   1,268
  Less: (gain) loss on sale of securities -   (58)   (6)   -   87
  Less: tax impact of merger-related expenses and (gain) loss on sale of securities (236)   20   (1,004)   (499)   (464)
    Adjusted net income $9,214   $7,451   $7,305   $7,312   $6,443
                   
  Divided by: weighted average diluted shares 53,481,846   53,462,857   53,155,493   52,743,928   52,704,537
    Adjusted net income per share 0.17   0.14   0.14   0.14   0.12
  Estimated tax rate for adjustment 25.57%   34.48%   33.71%   33.56%   34.24%
                   
Adjusted noninterest income                  
  Noninterest income (as reported) $5,418   $5,468   $5,845   $5,447   $5,375
  Less: (gain) loss on sale of securities -   (58)   (6)   -   87
    Adjusted noninterest income $5,418   $5,410   $5,839   $5,447   $5,462
                   
Adjusted noninterest expenses                  
  Noninterest expenses (as reported) $21,449   $20,642   $25,025   $21,112   $21,946
  Less: merger-related expenses (923)   -   (2,984)   (1,487)   (1,268)
    Adjusted noninterest expenses $20,526   $20,642   $22,041   $19,625   $20,678
                   
Adjusted operating expense                  
  Noninterest expenses (as reported) $21,449   $20,642   $25,025   $21,112   $21,946
  Less: merger-related expenses (923)   -   (2,984)   (1,487)   (1,268)
  Less: amortization of intangibles (454)   (454)   (458)   (458)   (458)
    Adjusted operating expense $20,072   $20,188   $21,583   $19,167   $20,220
                   
Adjusted operating revenues                  
  Net Interest Income (as reported) $28,610   $27,058   $26,571   $25,823   $26,050
  Plus: noninterest income (as reported) 5,418   5,468   5,845   5,447   5,375
  Less: (gain) loss on sale of securities -   (58)   (6)   -   87
    Adjusted operating revenues $34,028   $32,468   $32,410   $31,270   $31,512
                   
Adjusted efficiency ratio                  
  Adjusted operating expense $20,072   $20,188   $21,583   $19,167   $20,220
  Divided by: adjusted operating revenues 34,028   32,468   32,410   31,270   31,512
    Adjusted efficiency ratio 58.99%   62.18%   66.59%   61.30%   64.17%
    Efficiency ratio 63.03%   63.46%   77.20%   67.52%   69.84%
                   
Adjusted return on average assets                  
  Adjusted net income $9,214   $7,451   $7,305   $7,312   $6,443
  Divided by: average assets 3,316,742   3,258,510   3,229,299   3,186,799   3,135,031
  Multiplied by: annualization factor 4.01   4.06   3.98   3.98   4.02
    Adjusted return on average assets 1.11%   0.93%   0.90%   0.91%   0.83%
    Return on average assets 1.03%   0.93%   0.66%   0.79%   0.71%
                   
Adjusted return on average equity                  
  Adjusted net income $9,214   $7,451   $7,305   $7,312   $6,443
  Divided by: average common equity 366,483   359,130   359,985   357,577   352,505
  Multiplied by: annualization factor 4.01   4.06   3.98   3.98   4.02
    Adjusted return on average equity 10.08%   8.41%   8.07%   8.14%   7.35%
    Return on average equity 9.33%   8.46%   5.89%   7.04%   6.33%
                   
                   
PARK STERLING CORPORATION         
RECONCILIATION OF NON-GAAP MEASURES         
($ in thousands, except per share amounts) June 30,   March 31,   December 31,   September 30,   June 30,
  2017   2017   2016   2016   2016
  (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
Tangible common equity to tangible assets                  
  Total assets $ 3,340,999   $ 3,308,756   $ 3,255,396   $ 3,226,938   $ 3,174,075
  Less: intangible assets (73,847)   (74,301)   (74,755)   (74,926)   (75,551)
    Tangible assets $ 3,267,152   $ 3,234,455   $ 3,180,641   $ 3,152,012   $ 3,098,524
                   
  Total common equity $ 369,264   $ 361,720   $ 355,845   $ 358,696   $ 354,450
  Less: intangible assets (73,847)   (74,301)   (74,755)   (74,926)   (75,551)
    Tangible common equity $ 295,417   $ 287,419   $ 281,090   $ 283,770   $ 278,899
                   
  Tangible common equity $ 295,417   $ 287,419   $ 281,090   $ 283,770   $ 278,899
  Divided by: tangible assets 3,267,152   3,234,455   3,180,641   3,152,012   3,098,524
    Tangible common equity to tangible assets 9.04%   8.89%   8.84%   9.00%   9.00%
    Common equity to assets 11.05%   10.93%   10.93%   11.12%   11.17%
                   
Tangible book value per share                  
  Issued and outstanding shares 53,279,996   53,112,726   53,116,519   53,305,834   53,332,369
  Less: unvested restricted stock awards (375,056)   (390,233)   (405,732)   (837,561)   (969,991)
    Period end dilutive shares 52,904,940   52,722,493   52,710,787   52,468,273   52,362,378
                   
  Tangible common equity $ 295,417   $ 287,419   $ 281,090   $ 283,770   $ 278,899
  Divided by: period end dilutive shares 52,904,940   52,722,493   52,710,787   52,468,273   52,362,378
    Tangible common book value per share $ 5.58   $ 5.45   $ 5.33   $ 5.41   $ 5.33
    Common book value per share $ 6.98   $ 6.86   $ 6.75   $ 6.84   $ 6.77
                   
Adjusted return on average tangible common equity                  
  Average common equity $ 366,483   $ 359,130   $ 359,985   $ 357,577   $ 352,505
  Less: average intangible assets (74,050)   (74,504)   (74,812)   (75,196)   (76,083)
    Average tangible common equity $ 292,433   $ 284,626   $ 285,173   $ 282,381   $ 276,422
                   
  Net income $ 8,527   $ 7,489   $ 5,331   $ 6,324   $ 5,552
  Divided by: average tangible common equity 292,433   284,626   285,173   282,381   276,422
  Multiplied by: annualization factor 4.01   4.06   3.98   3.98   4.02
    Return on average tangible common equity 11.70%   10.67%   7.44%   8.91%   8.08%
                   
  Adjusted net income $ 9,214   $ 7,451   $ 7,305   $ 7,312   $ 6,443
  Divided by: average tangible common equity 292,433   284,626   285,173   282,381   276,422
  Multiplied by: annualization factor 4.01   4.06   3.98   3.98   4.02
    Adjusted return on average tangible common equity 12.64%   10.62%   10.19%   10.30%   9.37%
                   
Adjusted allowance for loan losses                  
  Allowance for loan losses $ 12,702   $ 12,833   $ 12,125   $ 11,612   $ 10,873
  Plus: acquisition accounting FMV adjustments to acquired loans 22,185   25,645   27,773   29,325   31,277
    Adjusted allowance for loan losses $ 34,887   $ 38,478   $ 39,898   $ 40,937   $ 42,150
  Divided by: total loans (excluding LHFS before FMV adjustments) $ 2,524,305   $ 2,486,240   $ 2,439,959   $ 2,398,275   $ 2,358,174
    Adjusted allowance for loan losses to total loans 1.38%   1.55%   1.64%   1.71%   1.79%
    Allowance for loan losses to total loans 0.51%   0.52%   0.50%   0.49%   0.47%
                     
                     

For additional information contact:
Donald K. Truslow
Chief Financial Officer
(704) 716-2134
don.truslow@parksterlingbank.com

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