EX-99.1 2 ex99-1.htm EXHIBIT 99.1 ex99-1.htm
Exhibit 99.1


Park Sterling Corporation Announces
Record Operating Results for Fourth Quarter 2012


Charlotte, NC – February 8, 2013 – 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 2012.  Highlights at and for the three months ended December 31, 2012 include:

Highlights
·
Net income available to common shareholders of $1.3 million, or $0.03 per share
·
Net income available to common shareholders, excluding merger-related expenses, of $3.5 million, or $0.08 per share
·
Increase in net interest margin to 4.36% from 3.97% at September 30, 2012
·
Increase in net interest margin, excluding accelerated mark accretion, to 4.13% from 3.98% at September 30, 2012
·
Decrease in nonperforming loans to 1.31% of total loans from 2.45% at September 30, 2012
·
Decrease in nonperforming assets to 2.13% of total assets from 2.74% at September 30, 2012
·
Strong capitalization, with tangible common equity to tangible assets of 11.11%
·
Completed merger with Citizens South Banking Corporation on October 1, 2012

“Park Sterling’s fourth quarter marked the successful consummation of our merger with Citizens South and continued progress toward achieving our vision of creating a regional-sized community bank in the Carolinas and Virginia,” said James C. Cherry, Chief Executive Officer. “We reported record operating results, with adjusted net income available to common shareholders, which excludes merger-related expenses and gain on sale of securities, increasing 257% to $3.5 million, or $0.08 per share, for the three months ended December 31, 2012. Our metropolitan markets led the effort in generating $12.0 million in organic loan growth during the period, representing a 13% annualized growth rate. We also posted continued organic growth in both our mortgage banking and wealth management operations. In addition, we benefited from reaching our targeted $2.5 million in quarterly cost savings from the merger with Citizens South, and are now well positioned to invest future savings in new growth opportunities.

Asset quality continued to improve during the fourth quarter. While the absolute level of nonperforming loans increased as a result of the merger with Citizens South, this level decreased as a percentage of total loans from 2.45% at September 30, 2012 to 1.31% at December 31, 2012.  Nonperforming assets similarly increased on an absolute basis, but decreased as a percentage of total assets from 2.74% to 2.13%. Approximately 63% of Park Sterling’s loans now carry acquisition accounting related net fair market value adjustments, which we believe will help buffer future results against potential loan losses. The combination of our normal allowance and these loan marks represented 4.73% of total loans at year-end. Net charge-offs for the year represented a modest 0.18% of average loans, and we actually posted a small net recovery of 0.03% in the fourth quarter. We believe this mixture of good asset quality and sound reserve levels, combined with our strong capital position and liquidity, provides an excellent foundation for future growth.

Park Sterling is now the largest community bank headquartered in the attractive Charlotte-Gastonia-Rock Hill MSA, with a strong deposit franchise extending through the Upstate region of South Carolina and into North Georgia, and an expanding presence in the important growth markets of Raleigh and Wilmington, North Carolina, and Greenville and Charleston, South Carolina. Our asset-based lending and residential construction groups offer specialized avenues to originate attractive risk-return loans in this highly competitive environment. Further, our treasury management, wealth management and mortgage banking capabilities provide significant opportunities to diversify revenues away from traditional lending activities. We believe that together, Park Sterling’s appealing footprint, broad product capabilities, good asset quality, strong balance sheet and exceptional bankers position us for continued success.”
 
 
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Fourth Quarter 2012 Financial Results

Income Statement

Three Month Results
Park Sterling reported a 105% increase in net income available to common shareholders to $1.3 million, or $0.03 per share, for the three months ended December 31, 2012 (“2012Q4”).  This compares to net income of $620,000, or $0.02 per share, for the three months ended September 30, 2012 (“2012Q3”) and a net loss of $982,000, or $0.03 per share, for the three months ended December 31, 2011 (“2011Q4”).  The increase in reported net income from the prior periods resulted primarily from increased earning assets, higher net interest margin and higher noninterest income associated with the merger with Citizens South Banking Corporation, which was completed on October 1, 2012.  Net income for 2011Q4 included two months of results from the merger with Community Capital Corporation, which was completed on November 1, 2011.

Park Sterling reported a 257% increase in adjusted net income available to common shareholders, which excludes merger related expenses and gain on sale of securities, to a record $3.5 million, or $0.08 per share, for 2012Q4.  This compares to adjusted net income of $987,000, or $0.03 per share, for 2012Q3 and of $432,000, or $0.01 per share, for 2011Q4.  There was no gain on the sale of securities in either 2012Q4 or 2011Q4. The increase in adjusted net income from the prior periods again reflects improvements associated with the merger with Citizens South, combined with continued organic growth.

Net interest income totaled $19.5 million for 2012Q4, which represented a $9.6 million, or 96%, increase from $10.0 million for 2012Q3, and an $11.7 million, or 150%, increase from $7.8 million for 2011Q4. Average earning assets increased $784.3 million, or 79%, from 2012Q3 to $1.8 billion at 2012Q4, which included a $669.2 million, or 93%, increase in average loans to $1.4 billion. Average earning assets increased $944.5 million, or 113%, from 2011Q4, which included a $765.2 million, or 123%, increase in average loans.

Net interest margin was 4.36% in 2012Q4, representing a 39 basis point improvement from 3.97% in 2012Q3 and a 66 basis point improvement from 3.70% in 2011Q4. Adjusted net interest margin, which excludes accelerated interest income, was 4.13% in 2012Q4, representing a 15 basis point improvement from 3.98% in 2012Q3 and a 43 basis point improvement from 3.70% in 2011Q4. The accelerated interest income, which totaled $1.0 million in 2012Q4 compared to a $17,000 reversal in 2012Q3, includes $921,000 of accelerated accretion from credit and interest rate marks associated with acquisition accounting adjustments for performing acquired loans, as accounted for under the contractual cash flow method of accounting, and $121,000 in other accretion adjustments. The accelerated accretion of credit and interest rate marks resulted from borrowers repaying performing acquired loans faster than required by their contractual terms and/or restructuring loans in such a way as to effectively result in a new loan under the contractual cash flow method of accounting, both of which result in the associated remaining credit and interest rate marks being fully accreted into interest income.

Provision for loan losses was $994,000 for 2012Q4, compared to $7,000 for 2012Q3 and $1.1 million for 2011Q4.  Fourth quarter 2012 results included $906,000 of provision expense associated with acquired loans, comprised of a $676,000 impairment in two of the company’s six purchase credit impaired (PCI) loan pools and a $230,000 qualitative allowance associated with performing loans acquired in the merger with Citizens South. The remaining increase in provision expense in 2012Q4 resulted from higher non-acquired loan balances. Fourth quarter 2011 results included $187,000 of provision expense associated with acquired loans, comprised of a $37,000 impairment in the company’s PCI loan pools and a $150,000 qualitative allowance associated with performing loans acquired in the merger with Community Capital.

Noninterest income was $3.8 million in 2012Q4, compared to $3.3 million in 2012Q3 and $1.4 million in 2011Q4.  Adjusted noninterest income, which excludes gain on sale of securities, increased $1.5 million, or 64%, to $3.8 million in 2012Q4, compared to $2.3 million in 2012Q3. This improvement reflects both the merger with Citizens South and continued organic growth in both the company’s mortgage banking and wealth management operations. Mortgage banking, which also benefited from the merger with Citizens South, reported a $153,000, or 23%, increase in revenues to $815,000, and wealth management reported a $28,000, or 4%, increase in revenues to $693,000.

Noninterest expenses totaled $20.3 million in 2012Q4, compared to $12.2 million in 2012Q3 and $10.0 million in 2011Q4. Adjusted noninterest expenses, which excludes merger-related expenses of $3.2 million, $1.4 million and $2.6 million, respectively, increased $6.2 million, or 58%, to $17.1 million in 2012Q4 compared to $10.8 million in 2012Q3, and increased $9.7 million, or 131%, compared to $7.4 million in 2011Q4. The increase from 2012Q3 again resulted primarily from the merger with Citizens South, while the inclusion of a full quarter of results from Community Capital and organic growth efforts also contributed to the increase from 2011Q4. Management remains comfortable in the company’s ability to achieve our targeted $10.2 million in sustainable annual cost savings from the merger with Citizens South by the end of 2013.
 
 
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Twelve Month Results
Park Sterling reported net income available to common shareholders of $4.3 million, or $0.12 per share, for the twelve months ended December 31, 2012, compared to a net loss of $8.4 million, or $0.29 per share, for the twelve months ended December 31, 2011. Results for 2012 included three months of operations from the merger with Citizens South and a full year of operations from Community Capital. Results for 2011 included two months of operations from the merger with Community Capital.

The company reported adjusted net income available to common shareholders of $7.5 million, or $0.21 per share, in 2012, compared to a net loss of $5.9 million, or $0.21 per share, in 2011. Net interest income increased $31.9 million, or 165%, from 2011, primarily as a result of higher levels of average earning assets from both acquired operations and organic loan growth. Net interest margin increased 128 basis points to 4.27% in 2012 compared to 2.99% in 2011, primarily as a result of higher yielding assets from the mergers, including accretion of acquisition accounting net fair market value adjustments, and improved liability mix and pricing. Noninterest income increased $10.0 million, or 621%, to $11.6 million in 2012 from $1.6 million in 2011, driven both by acquired operations and organic growth. Adjusted noninterest income increased $8.5 million, or 537%, to $10.1 million in 2012 from $1.6 million in 2011.  Noninterest expense increased $29.3 million, or 118%, to $54.3 million in 2012 from $24.9 million in 2011, again driven both by acquired operations and organic growth. Adjusted noninterest expenses increased $27.3 million, or 129%, to $48.4 million in 2012 from $21.1 million in 2011.

Balance Sheet

Total assets increased $922 million, or 83%, to $2.0 billion at 2012Q4 compared to total assets of $1.1 billion at 2012Q3, primarily as a result of the merger with Citizens South. Cash and equivalents increased $77.7 million, or 73%, to $184.2 million.  Securities increased $61.6 million, or 32%, to $253.0 million. Total loans, which exclude loans held for sale, increased $648.6 million, or 92%, to $1.4 billion, including $101.4 million in covered loans associated with the two failed bank transactions acquired with Citizens South. Park Sterling posted $12.0 million, or 3% (13% annualized), in organic loan growth in 2012Q4.  New loan origination remains somewhat tempered as a result of aggressive competition in the market with respect to term structure and interest rates, and continued general softness in the economy.

The merger with Citizens South led to a shift in loan mix during the fourth quarter. Total consumer loans increased from 25% of total loans at 2012Q3 to 31% of total loans at 2012Q4. This shift was driven by an increase in residential mortgages from 8% to 14% of total loans. Home equity lines of credit and residential construction loans remained flat at 12% and 4% of total loans, respectively. The combination of commercial and industrial and owner-occupied real estate loans remained the largest category of loans at $418.7 million, or 31%, of total loans at 2012Q4, but declined from 33% of total loans at 2012Q3. Investor owned commercial real estate totaled $372.4 million at 2012Q4, representing 27% of total loans compared to 29% at 2012Q3. Acquisition, construction and development loans totaled $140.5 million at 2012Q4, representing 10% of total loans compared to 11% at 2012Q3.

The merger with Citizens South also led to a shift in deposit mix during the fourth quarter.  Total deposits increased $800.3 million, or 96%, to $1.6 billion at 2012Q4 compared to $831.7 million at 2012Q3. Noninterest bearing demand deposits increased $77.6 million, or 47%, to $243.5 million at 2012Q4, but declined from 20% of total deposits at 2012Q3 to 15% of total deposits at 2012Q4. Money market, NOW and savings deposits increased $417.0 million, or 122%, to $758.8 million at 2012Q4, and represented 46% of total deposits compared to 41% at 2012Q3. Non-brokered time deposits increased $326.3 million, or 170%, to $518.7 million at 2012Q4, and represented 32% of total deposits compared to 23% at 2012Q3. Finally, brokered deposits decreased $20.5 million, or 16%, to $111.0 million at 2012Q4, and represented 7% of total deposits compared to 16% at 2012Q3.
 
 
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Total borrowings increased $33.0 million, or 48%, to $101.7 million at 2012Q4 compared to $68.7 million at 2012Q3, including borrowings assumed in the merger with Citizens South. Borrowings at 2012Q4 included $70.0 million in Federal Home Loan Bank borrowings, $14.7 million of acquired trust preferred securities, net of acquisition accounting fair market value adjustments, and $6.9 million of Tier 2-eligible subordinated debt.

Total shareholders’ equity increased $79.7 million, or 41%, to $275.5 million at 2012Q4 compared to $195.8 million at 2012Q3. This included $20.5 million of preferred stock issued in association with the Citizens South merger upon conversion of its preferred stock previously issued to the United States Department of the Treasury in connection with its participation in the Small Business Lending Fund. Common shareholders equity increased $59.2 million, or 30%, to $255.0 million. This increase primarily resulted from the issuance of 11,857,266 shares of Park Sterling’s common stock, valued at $58.6 million (based on the $4.94 per share closing price on the last trading day prior to consummation), as the stock component of consideration for the merger with Citizens South. The company’s ratio of tangible common equity to tangible assets remained strong, but did decrease to 11.11% at 2012Q4 from 17.31% at 2012Q3 as a result of more effectively leveraging capital through the merger. Similarly, the Tier 1 leverage ratio remained strong, but did decrease to 11.25% at 2012Q4 from 15.39% at 2012Q3.
 
The merger with Citizens South led to a net $5.9 million increase in core deposit intangibles and a $22.5 million increase in goodwill in 2012Q4. This represents a $7.6 million increase from earlier estimates, primarily as a result of a reduction in anticipated positive fair market value accounting adjustments associated with the two FDIC loss share agreements assumed in connection with the merger. The reduction in anticipated positive adjustments resulted from improved estimated performance in the underlying covered loan and OREO portfolios, which suggests a reduced need for loss share reimbursements over the life of the agreements.

Asset Quality

Asset quality continued to improve in the fourth quarter, reflecting stabilizing economic conditions in the company’s markets, continued management focus on problem assets and continued discipline in the origination of new loans. As a result of the merger with Citizens South, nonperforming loans increased in absolute level by $472,000, or 3%, to $17.8 million at 2012Q4, compared to $17.3 million at 2012Q3. However, nonperforming loans declined on a percentage basis over that same period to 1.31% of total loans in 2012Q4 from 2.45% in 2012Q3. Nonperforming loans totaled $20.2 million at 2011Q4 and represented 2.66% of total loans.

Similarly, nonperforming assets increased in absolute level by $12.8 million, or 42%, to $43.2 million at 2012Q4 compared to $30.4 million at 2012Q3.  However, nonperforming assets declined on a percentage basis over that same period to 2.13% of total assets in 2012Q4 from 2.74% in 2012Q3. In addition, approximately half of the dollar increase in nonperforming assets from Citizens South can be attributed to $6.7 million in covered OREO, for which the company expects certain losses to be reimbursed under the FDIC loss share agreements. Nonperforming assets totaled $36.2 million at 2011Q4 and represented 3.25% of total assets.

The company reported a net recovery of $390,000 in 2012Q4, or 0.03% of average loans (annualized), compared to net charge-offs of $231,000 in 2012Q3, or 0.13% of average loans (annualized), and net charge-offs of $789,000 in 2011Q4, or 0.51% of average loans (annualized). For the full year, the company reported net charge-offs of $1.6 million in 2012, or 0.18% of average loans, compared to net charge-offs of $11.7 million in 2011, or 6.06% of average loans.

The allowance for loan losses was $10.6 million, or 0.78% of total loans at 2012Q4, compared to $9.2 million, or 1.30% of total loans at 2012Q3 and $10.2 million, or 1.34% of total loans at 2011Q4. The increase in the absolute level of allowance in 2012Q4 from 2012Q3 primarily reflects the earlier discussed $676,000 increase related to impairments in purchase credit impaired pools and $230,000 increase in the qualitative allowance component associated with acquired performing loans. The decrease in percentage of total loans reflects the inclusion of acquired loans, for which no allowance is provided under generally accepted accounting principles. Adjusted allowance for loan losses, which includes the allowance for loan losses and acquisition accounting related net fair market value adjustments for acquired loans, represented 4.73% of total loans in 2012Q4, compared to 4.34% in 2012Q3 and 5.97% in 2011Q4.
 
 
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During the first quarter of 2011, and as contemplated in the 2010 equity offering, 568,260 shares of restricted stock were issued but will not vest until the company’s share price achieves certain performance thresholds above the equity offering price (these restricted stock awards vest one-third each when the share price reaches, for 30 consecutive days, $8.125, $9.10 and $10.40 per share, respectively). These performance thresholds have not yet been achieved. Accordingly, these additional shares have been excluded from earnings and tangible book value per share calculations.
 
*                      *                      *                      *                      *                      *                      *                      *                      *                      *                      *                      *                      *
 
Conference Call

A conference call will be held at 8:30 a.m., Eastern Time this morning (February 8, 2013).  The conference call can be accessed by dialing (877) 317-6789 and requesting the Park Sterling Corporation earnings call.  Listeners should dial in 10 minutes prior to the start of the call. The live webcast and presentation slides will be available on www.parksterlingbank.com under Investor Relations, “Investor Presentations.”

A replay of the webcast will be available on www.parksterlingbank.com under Investor Relations, “Investor Presentations” shortly following the call.  A replay of the conference call can be accessed approximately one hour after the call by dialing (877) 344-7529 and requesting conference number 10009544.


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 $2 billion in assets, is the largest community bank in the Charlotte area and has 44 banking offices stretching across the Carolinas and into North Georgia. The bank serves professionals, individuals, and small and mid-sized businesses by offering a full array of financial services, including deposit, mortgage brokerage, cash management, consumer and business finance, and wealth management. 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, adjusted net income (loss), adjusted net interest margin, adjusted noninterest income, adjusted noninterest expenses, asset quality measures including the effects of acquisition accounting fair market value adjustments (loan marks), and related ratios and per share measures, 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, including financial and other estimates and expectations regarding the merger with Citizens South Banking Corporation; the  general business strategy of engaging in bank mergers, organic growth,  branch openings and closing, expansion or addition of product capabilities, expected footprint of the banking franchise and anticipated asset size; anticipated loan growth; changes in loan mix and deposit mix; capital and liquidity levels; net interest income, provision expense, noninterest income and noninterest expenses; credit trends and conditions, including loan losses, allowance for loan loss, charge-offs, delinquency trends and nonperforming asset levels; the amount, timing and prices of share repurchases; and other similar matters. These forward-looking statements are not guarantees of future results or performance and by their nature involve certain risks and uncertainties that are based on management’s beliefs and assumptions and on the information available to Park Sterling at the time that these disclosures were prepared. Actual outcomes and results may differ materially from those expressed in, or implied by, any of these forward-looking statements.
 
 
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You should not place undue reliance on any forward-looking statement and should consider all of the following uncertainties and risks, as well as those more fully discussed in any of Park Sterling’s filings with the SEC: failure to realize synergies and other financial benefits from the Citizens South merger within the expected time frames; increases in expected costs or decreases in expected savings or difficulties related to integration of the merger; inability to identify and successfully negotiate and complete additional combinations with potential merger partners or to successfully integrate such businesses into Park Sterling, including the company’s ability to adequately estimate or to realize the benefits and cost savings from and limit any unexpected liabilities acquired as a result of any such business combination; the effects of negative economic conditions or a “double dip” recession, including stress in the commercial real estate markets or delay or failure of recovery in the residential real estate markets; the impact of deterioration of the United States credit standing; changes in consumer and investor confidence and the related impact on financial markets and institutions; changes in interest rates; failure of assumptions underlying the establishment of allowances for loan losses; deterioration in the credit quality of the loan portfolio or in the value of the collateral securing those loans; deterioration in the value of securities held in the investment securities portfolio; fluctuations in the market price of the common stock,  regulatory, legal and contractual requirements, other uses of capital, the company’s financial performance, market conditions generally or modification, extension or termination of the authorization by the board of directors, in each case impacting purchases of common stock; 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.

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.
###
For additional information contact:
David Gaines
Chief Financial Officer
(704) 716-2134
dave.gaines@parksterlingbank.com

 
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PARK STERLING CORPORATION
CONDENSED CONSOLIDATED INCOME STATEMENT
THREE MONTH RESULTS
 ($ in thousands, except per share amounts)
 
   
December 31,
2012
   
September 30,
2012
   
June 30,
2012
   
March 31,
2012
   
December 31,
2011
 
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
 
Interest income
                             
Loans, including fees
  $ 20,269     $ 10,346     $ 10,416     $ 12,110     $ 8,285  
Taxable investment securities
    792       826       969       1,020       795  
Tax-exempt investment securities
    191       187       186       185       183  
Nonmarketable equity securities
    80       22       28       64       43  
Interest on deposits at banks
    79       34       28       11       29  
Federal funds sold
    11       16       15       8       5  
Total interest income
    21,422       11,431       11,642       13,398       9,340  
Interest expense
                                       
Money market, NOW and savings deposits
    491       339       333       326       269  
Time deposits
    777       632       720       821       836  
Short-term borrowings
    7       -       -       3       1  
FHLB advances
    143       149       148       161       135  
Subordinated debt
    472       340       341       367       286  
Total interest expense
    1,890       1,460       1,542       1,678       1,528  
Net interest income
    19,532       9,971       10,100       11,720       7,812  
Provision for loan losses
    994       7       899       123       1,110  
Net interest income after provision
    18,538       9,964       9,201       11,597       6,702  
Noninterest income
                                       
Service charges on deposit accounts
    879       324       299       314       241  
Mortgage banking income
    815       662       540       461       297  
Income from wealth management activities
    693       665       661       599       447  
ATM and card income
    664       207       223       228       163  
Income from bank-owned life insurance
    450       294       260       259       213  
Gain on sale of securities available for sale
    -       989       489       -       -  
Other noninterest income
    307       177       91       60       35  
Total noninterest income
    3,808       3,318       2,563       1,921       1,396  
Noninterest expenses
                                       
Salaries and employee benefits
    11,041       6,314       5,871       6,118       6,245  
Occupancy and equipment
    1,942       928       910       874       705  
Data processing and outside service fees
    1,599       784       696       1,291       460  
Net cost of operation of other real estate owned
    1,167       964       809       522       400  
Legal and professional fees
    1,077       1,181       614       318       505  
Deposit charges and FDIC insurance
    473       261       250       266       98  
Advertising and promotion
    367       144       108       161       132  
Postage and supplies
    360       112       124       195       171  
Communication fees
    319       198       196       232       119  
Core deposit intangible amortization
    257       102       102       102       68  
Loan and collection expense
    248       434       295       244       255  
Other noninterest expense
    1,403       781       860       647       853  
Total noninterest expenses
    20,253       12,203       10,835       10,970       10,011  
Income (loss) before income taxes
    2,093       1,079       929       2,548       (1,913 )
Income tax expense (benefit)
    771       459       251       825       (931 )
Net income (loss)
    1,322       620       678       1,723       (982 )
Preferred dividends
    51       -       -       -       -  
Net income (loss) available to common shares
  $ 1,271     $ 620     $ 678     $ 1,723     $ (982 )
                                         
Earnings (loss) per common share, fully diluted
  $ 0.03     $ 0.02     $ 0.02     $ 0.05     $ (0.03 )
Weighted average diluted common shares
    44,025,874       32,138,554       32,120,402       32,075,398       30,719,363  
 
 
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PARK STERLING CORPORATION
CONDENSED CONSOLIDATED INCOME STATEMENT
TWELVE MONTH RESULTS
($ in thousands, except per share amounts)
 
   
December 31,
2012
(Unaudited)
   
December 31,
2011*
 
Interest income
           
Loans, including fees
  $ 53,142     $ 21,776  
Taxable investment securities
    3,606       2,830  
Tax-exempt investment securities
    750       716  
Nonmarketable equity securities
    194       53  
Interest on deposits at banks
    153       99  
Federal funds sold
    49       90  
Total interest income
    57,894       25,564  
Interest expense
               
Money market, NOW and savings deposits
    1,488       743  
Time deposits
    2,951       4,011  
Short-term borrowings
    11       3  
FHLB advances
    600       557  
Subordinated debt
    1,520       855  
Total interest expense
    6,570       6,169  
Net interest income
    51,324       19,395  
Provision for loan losses
    2,023       9,385  
Net interest income after provision
    49,301       10,010  
Noninterest income
               
Service charges on deposit accounts
    1,814       315  
Mortgage banking income
    2,478       297  
ATM and card income
    1,322       181  
Income from wealth management activities
    2,619       447  
Income from bank-owned life insurance
    1,264       265  
Gain on sale of securities available for sale
    1,478       20  
Other noninterest income
    634       85  
Total noninterest income
    11,609       1,610  
Noninterest expenses
               
Salaries and employee benefits
    29,343       14,778  
Occupancy and equipment
    4,654       1,677  
Data processing and outside service fees
    4,371       807  
Net cost of operation of other real estate owned
    3,462       829  
Legal and professional fees
    3,190       2,738  
Deposit charges and FDIC insurance
    1,250       702  
Advertising and promotion
    781       372  
Postage and supplies
    791       315  
Communication fees
    945       232  
Core deposit intangible amortization
    564       68  
Loan and collection expense
    1,221       630  
Other noninterest expense
    3,689       1,775  
Total noninterest expenses
    54,261       24,923  
Income (loss) before income taxes
    6,649       (13,303 )
Income tax expense (benefit)
    2,306       (4,944 )
Net income (loss)
    4,343       (8,359 )
Preferred dividends
    51       -  
Net income (loss) available to common shares
  $ 4,292     $ (8,359 )
                 
Earnings (loss) per common share, fully diluted
  $ 0.12     $ (0.29 )
Weighted average diluted common shares
    35,108,229       28,723,647  
 
* Derived from audited financial statements.
 
 
Page 8 of 13

 
 
PARK STERLING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands)
 
   
December 31,
2012
   
September 30,
2012
   
June 30,
2012
   
March 31,
2012
   
December 31,
2011*
 
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
       
ASSETS
                             
Cash and due from banks
  $ 36,798     $ 47,115     $ 15,898     $ 18,016     $ 18,426  
Interest-earning balances at banks
    101,431       37,256       29,795       15,567       10,115  
Investment securities available-for-sale
    245,571       186,802       222,221       232,464       210,146  
Nonmarketable equity securities
    7,422       4,599       5,470       8,510       8,510  
Federal funds sold
    45,995       22,165       29,455       20,085       -  
Loans held for sale
    14,147       6,095       5,331       8,055       6,254  
Loans - Non-covered
    1,255,387       708,283       712,506       727,862       759,047  
Loans - Covered
    101,446       -       -       -       -  
Allowance for loan losses
    (10,591 )     (9,207 )     (9,431 )     (9,556 )     (10,154 )
Net loans
    1,346,242       699,076       703,075       718,306       748,893  
                                         
Premises and equipment, net
    57,222       26,729       24,619       24,371       24,515  
FDIC receivable for loss share agreements
    20,323       -       -       -       -  
Other real estate owned - non-covered
    18,662       13,028       14,744       16,674       14,403  
Other real estate owned - covered
    6,728       -       -       -       -  
Bank-owned life insurance
    46,162       26,945       26,689       26,456       26,223  
Deferred tax asset
    41,824       29,087       29,841       30,143       31,131  
Goodwill
    23,114       622       622       649       428  
Core deposit intangible
    9,658       3,715       3,817       3,920       4,022  
Other assets
    11,334       6,954       7,542       7,535       10,156  
                                         
Total assets
  $ 2,032,633     $ 1,110,188     $ 1,119,119     $ 1,130,751     $ 1,113,222  
                                         
LIABILITIES AND SHAREHOLDERS' EQUITY                                        
                                         
Deposits:
                                       
Demand noninterest-bearing
  $ 243,495     $ 165,899     $ 158,838     $ 148,929     $ 142,652  
Money market, NOW and savings
    758,763       341,788       332,648       329,633       333,968  
Time deposits
    629,746       323,988       350,548       377,875       370,017  
Total deposits
    1,632,004       831,675       842,034       856,437       846,637  
                                         
Short-term borrowings
    10,143       1,135       1,678       852       9,765  
FHLB advances
    70,000       55,000       55,000       55,000       40,000  
Subordinated debt
    21,573       12,592       12,494       12,396       12,296  
Accrued expenses and other liabilities
    23,372       13,982       13,727       13,250       14,470  
Total liabilities
    1,757,092       914,384       924,933       937,935       923,168  
                                         
Shareholders' equity:
                                       
Preferred stock
    20,500       -       -       -       -  
Common stock
    44,576       32,707       32,707       32,644       32,644  
Additional paid-in capital
    220,842       173,826       173,318       172,873       172,390  
Accumulated deficit
    (13,575 )     (14,839 )     (15,459 )     (16,137 )     (17,860 )
Accumulated other comprehensive income
    3,198       4,110       3,620       3,436       2,880  
Total shareholders' equity
    275,541       195,804       194,186       192,816       190,054  
                                         
Total liabilities and shareholders' equity
  $ 2,032,633     $ 1,110,188     $ 1,119,119     $ 1,130,751     $ 1,113,222  
                                         
Common shares issued and outstanding
    44,575,853       32,706,627       32,706,627       32,643,627       32,643,627  

* Derived from audited financial statements.

 
Page 9 of 13

 

PARK STERLING CORPORATION
SUMMARY OF LOAN PORTFOLIO
($ in thousands)
 
 
 
December 31,
   
September 30,
   
June 30,
   
March 31,
   
December 31,
 
   
2012
   
2012
   
2012
   
2012
      2011*  
BY LOAN TYPE
 
(Unaudited)
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
         
Commercial:
                               
Commercial and industrial
  $ 119,315     $ 70,155     $ 67,821     $ 72,094     $ 80,746  
Commercial real estate - owner-occupied
    299,412       161,360       161,467       166,064       169,663  
Commercial real estate - investor income producing
    372,375       206,808       197,368       193,641       194,460  
Acquisition, construction and development
    140,492       81,027       86,612       87,065       92,349  
Other commercial
    5,628       13,059       13,486       13,518       15,658  
Total commercial loans
    937,222       532,409       526,754       532,382       552,876  
                                         
Consumer:
                                       
Residential mortgage
    188,230       58,062       66,876       75,377       79,512  
Home equity lines of credit
    163,625       82,690       83,661       86,029       90,408  
Residential construction
    52,811       25,872       25,559       24,670       25,126  
Other loans to individuals
    15,554       9,839       10,119       9,635       11,496  
Total consumer loans
    420,220       176,463       186,215       195,711       206,542  
Total loans
    1,357,442       708,872       712,969       728,093       759,418  
Deferred costs (fees)
    (609 )     (589 )     (463 )     (231 )     (371 )
Total loans, net of deferred costs (fees)
  $ 1,356,833     $ 708,283     $ 712,506     $ 727,862     $ 759,047  
                                         
BY ACQUIRED AND NON-ACQUIRED**
                                       
Acquired loans - performing
  $ 614,574     $ 246,267     $ 262,104     $ 285,174     $ 299,682  
Acquired loans - purchase credit impaired
    234,352       42,823       48,045       55,843       63,818  
Total acquired loans
    848,926       289,090       310,149       341,017       363,500  
Non-acquired loans, net of deferred costs (fees)
    507,907       419,193       402,357       386,845       395,547  
Total loans
  $ 1,356,833     $ 708,283     $ 712,506     $ 727,862     $ 759,047  
 
* 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,
 
   
2012
   
2012
   
2012
   
2012
   
2011
 
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
 
Beginning of period allowance
  $ 9,207     $ 9,431     $ 9,556     $ 10,154     $ 9,833  
Provision for loan losses
    994       7       899       123       1,110  
Loans charged-off
    (330 )     (1,102 )     (1,262 )     (828 )     (1,295 )
Recoveries of loans charged-off
    720       871       238       107       506  
End of period allowance
    10,591       9,207       9,431       9,556       10,154  
                                         
Net charge-offs (recoveries)
  $ (390 )   $ 231     $ 1,024     $ 721     $ 789  
Net charge-offs (recoveries) to average loans (annualized)
    -0.03 %     0.13 %     0.56 %     0.39 %     0.51 %
 
 
Page 10 of 13

 
 
PARK STERLING CORPORATION
SELECTED RATIOS
($ in thousands, except per share amounts)
 
   
December 31,
2012
   
September 30,
2012
   
June 30,
2012
   
March 31,
2012
   
December 31,
2011*
 
   
Unaudited
   
Unaudited
   
Unaudited
   
Unaudited
       
ASSET QUALITY
                             
Nonaccrual loans
  $ 10,374     $ 9,792     $ 16,757     $ 17,703     $ 16,256  
Troubled debt restructuring
    7,367       7,390       3,428       3,451       3,972  
Past due 90 days plus (and still accruing)
    77       164       131       698       -  
Nonperforming loans
    17,818       17,346       20,316       21,852       20,228  
OREO
    25,390       13,028       14,744       16,674       14,403  
Loans held for sale (nonaccruing)
    -       -       -       -       1,560  
Nonperforming assets
    43,208       30,374       35,060       38,526       36,191  
Past due 30-59 days (and still accruing)
    607       1,040       992       742       2,401  
Past due 60-89 days (and still accruing)
    121       561       74       764       924  
                                         
Nonperforming loans to total loans
    1.31 %     2.45 %     2.85 %     3.00 %     2.66 %
Nonperforming assets to total assets
    2.13 %     2.74 %     3.13 %     3.41 %     3.25 %
Allowance to total loans
    0.78 %     1.30 %     1.32 %     1.31 %     1.34 %
Allowance to nonperforming loans
    59.44 %     53.08 %     46.42 %     43.73 %     50.20 %
Allowance to nonperforming assets
    24.51 %     30.31 %     26.90 %     24.80 %     28.06 %
Past due 30-89 days (accruing) to total loans
    0.05 %     0.23 %     0.15 %     0.21 %     0.44 %
Net charge-offs (recoveries) to average loans (annualized)
    -0.03 %     0.13 %     0.56 %     0.39 %     0.51 %
                                         
CAPITAL
                                       
Book value per common share
  $ 5.79     $ 6.09     $ 6.04     $ 6.01     $ 5.93  
Tangible book value per common share**
  $ 5.05     $ 5.96     $ 5.90     $ 5.87     $ 5.79  
Common shares outstanding
    44,575,853       32,706,627       32,706,627       32,643,627       32,643,627  
Dilutive common shares outstanding
    44,025,874       32,138,554       32,138,402       32,075,398       32,075,367  
                                         
Tier 1 capital
  $ 219,060     $ 165,345     $ 162,167     $ 161,337     $ 160,122  
Tier 2 capital
    17,611       16,103       16,326       16,451       17,049  
Total risk based capital
    236,671       181,447       178,494       177,788       177,171  
Risk weighted assets
    1,452,229       774,035       769,382       786,703       819,762  
Average assets for leverage ratio
    1,947,156       1,074,410       1,087,079       1,092,468       901,067  
                                         
Tier 1 ratio
    15.08 %     21.36 %     21.08 %     20.51 %     19.53 %
Total risk based capital ratio
    16.30 %     23.44 %     23.20 %     22.60 %     21.61 %
Tier 1 leverage ratio
    11.25 %     15.39 %     14.92 %     14.77 %     17.77 %
Tangible common equity to tangible assets**
    11.11 %     17.31 %     17.02 %     16.72 %     16.74 %
                                         
LIQUIDITY
                                       
Net loans to total deposits
    82.49 %     84.06 %     83.50 %     83.87 %     88.46 %
Reliance on wholesale funding
    12.27 %     22.24 %     23.02 %     23.98 %     20.38 %
                                         
INCOME STATEMENT (THREE MONTH RESULTS; ANNUALIZED)                                        
Return on Average Assets
    0.25 %     0.22 %     0.24 %     0.61 %     -0.42 %
Return on Average Common Equity
    1.96 %     1.26 %     1.40 %     3.60 %     -2.11 %
Net interest margin (non-tax equivalent)
    4.36 %     3.97 %     4.01 %     4.65 %     3.70 %
                                         
INCOME STATEMENT (ANNUAL RESULTS)                                        
Return on Average Assets
    0.32 %     n/a       n/a       n/a       -1.20 %
Return on Average Equity
    1.99 %     n/a       n/a       n/a       -4.69 %
Net interest margin (non-tax equivalent)
    4.27 %     n/a       n/a       n/a       2.99 %
 
* Balance sheet information derived from audited financial statements. Income statement information unaudited.
** Non-GAAP financial measure
 
 
Page 11 of 13

 

Non-GAAP Financial Measures
Tangible assets, tangible common equity, tangible book value, adjusted net income (loss), adjusted net interest margin, adjusted noninterest income, adjusted noninterest expenses, and 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 adjustements related to acquired loans) to evaluate both its asset quality and asset quality trends, and to facilitate comparisons with peers; and (iii) adjusted net income (loss), adjusted noninterest income and adjusted noninterest expenses (which exclude merger-related expenses and gain on sale of securities, as applicable), and adjusted net interest margin (which excludes accelerated mark accretion) to evaluate core earnings (loss) and to facilitate comparisons with peers.

PARK STERLING CORPORATION
RECONCILIATION OF NON-GAAP MEASURES
($ in thousands, except per share amounts)
(three month and period end results unless otherwise stated)
 
   
December 31,
2012
   
September 30,
2012
   
June 30,
2012
   
March 31,
2012
   
December 31,
2011
 
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
 
Adjusted net income
                             
Pretax income (loss) (as reported)
  $ 2,093     $ 1,079     $ 929     $ 2,548     $ (1,913 )
Plus: merger-related expenses
    3,167       1,364       434       930       2,609  
Less: gain on sale of securities
    -       (989 )     (489 )     -       -  
Pretax income (loss)
    5,260       1,454       874       3,478       696  
Tax expense (benefit)
    1,691       467       281       1,118       264  
Adjusted net income
  $ 3,569     $ 987     $ 593     $ 2,360     $ 432  
Preferred dividends
    51       -       -       -       -  
Adjusted net income available to common shareholders
  $ 3,518     $ 987     $ 593     $ 2,360     $ 432  
                                         
Adjusted net income available to common shareholders per share
  $ 0.08     $ 0.03     $ 0.02     $ 0.07     $ 0.01  
Divided by: weighted average diluted shares
    44,025,874       32,138,554       32,120,402       32,075,398       30,719,363  
Estimated tax rate
    32.15 %     32.15 %     32.15 %     32.15 %     37.90 %
                                         
Adjusted net income (loss) (twelve months)
                                       
Pretax income (loss) (as reported)
  $ 6,649                             $ (13,303 )
Plus: merger-related expenses
    5,895                               3,813  
Less: gain on sale of securities
    (1,478 )                             (20 )
Pretax income (loss)
    11,066                               (9,510 )
Tax expense (benefit)
    3,558                               (3,604 )
Adjusted net income (loss)
  $ 7,508                             $ (5,906 )
Preferred dividends
    51                               -  
Adjusted net income (loss) available to common shareholders
  $ 7,457                             $ (5,906 )
                                         
Adjusted net income (loss) available to common shareholders per share
  $ 0.21                             $ (0.21 )
Divided by: weighted average diluted shares
    35,108,229                               28,723,647  
Estimated tax rate
    32.15 %                             37.90 %
                                         
Adjusted net interest margin
                                       
Net interest income (as reported)
  $ 19,532     $ 9,971     $ 10,099     $ 11,719     $ 7,813  
Less: accelerated mark accretion
    (1,042 )     17       (277 )     (1,469 )     -  
Adjusted net interest income
    18,490       9,988       9,822       10,250       7,813  
Divided by: average earning assets
    1,782,922       998,669       1,012,570       1,013,668       838,436  
Mutliplied by: annualization factor
    3.98       3.98       4.02       4.02       3.97  
Adjusted net interest margin
    4.13 %     3.98 %     3.90 %     4.07 %     3.70 %
                                         
Adjusted noninterest income
                                       
Noninterest income (as reported)
  $ 3,808     $ 3,318     $ 2,563     $ 1,921     $ 1,396  
Less: gain on sale of securities
    -       (989 )     (489 )     -       -  
Adjusted noninterest income
  $ 3,808     $ 2,329     $ 2,074     $ 1,921     $ 1,396  
                                         
Adjusted noninterest income (twelve months)                                        
Noninterest income (as reported)
  $ 11,609                             $ 1,610  
Less: gain on sale of securities
    (1,478 )                             (20 )
Adjusted noninterest income
  $ 10,131                             $ 1,590  
                                         
Adjusted noninterest expense
                                       
Noninterest expense (as reported)
  $ 20,253     $ 12,203     $ 10,835     $ 10,970     $ 10,011  
Less: merger-related expenses
    (3,167 )     (1,364 )     (434 )     (930 )     (2,609 )
Adjusted noninterest expense
    17,086       10,839       10,401       10,040       7,402  
                                         
Adjusted noninterest expense (twelve months)                                        
Noninterest expense (as reported)
  $ 54,261                             $ 24,923  
Less: merger-related expenses
    (5,895 )                             (3,813 )
Adjusted noninterest expense
    48,366                               21,110  
 
 
Page 12 of 13

 
 
PARK STERLING CORPORATION
RECONCILIATION OF NON-GAAP MEASURES
($ in thousands, except per share amounts)
(three month and period end results unless otherwise stated)
 
   
December 31,
2012
   
September 30,
2012
   
June 30,
2012
   
March 31,
2012
   
December 31,
2011
 
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
 
Tangible common equity to tangible assets
                             
Total assets
  $ 2,032,633     $ 1,110,188     $ 1,119,119     $ 1,130,751     $ 1,113,222  
Less: intangible assets
    (32,772 )     (4,337 )     (4,439 )     (4,569 )     (4,450 )
Tangible assets
  $ 1,999,861     $ 1,105,851     $ 1,114,680     $ 1,126,182     $ 1,108,772  
 
                                       
Total common equity
  $ 255,041     $ 195,804     $ 194,186     $ 192,816     $ 190,054  
Less: intangible assets
    (32,772 )     (4,337 )     (4,439 )     (4,569 )     (4,450 )
Tangible common equity
  $ 222,269     $ 191,467     $ 189,747     $ 188,247     $ 185,604  
 
                                       
Tangible common equity
  $ 222,269     $ 191,467     $ 189,747     $ 188,247     $ 185,604  
Divided by: tangible assets
  $ 1,999,861