8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  July 27, 2016

Park Sterling Corporation

(Exact name of registrant as specified in its charter)

North Carolina	001-35032	27-4107242
(State or other jurisdiction	(Commission File	(IRS Employer
of incorporation)	Number)	Identification No.)

1043 E. Morehead Street, Suite 201, Charlotte, NC	28204
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (704) 716-2134

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

On July 28, 2016, Park Sterling Corporation (“Park Sterling”) announced its financial results for the second quarter ended June 30, 2016.  A copy of the related press release is furnished as Exhibit 99.1. The information included herein, as well as Exhibit 99.1 referenced herein, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be deemed incorporated by reference in filings under the Securities Act of 1933, as amended (the “Securities Act”).

Item 7.01. Regulation FD Disclosure.

On July 28, 2016, Park Sterling will hold an investor conference call to disclose its financial results for the second quarter ended June 30, 2016. A copy of the slide package prepared for use by executive management for this presentation is furnished as Exhibit 99.2. All of the information in the presentation is presented as of July 28, 2016, and Park Sterling does not assume any obligation to update such information in the future.

The information included in the preceding paragraph, as well as Exhibit 99.2 referenced therein, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act nor shall it be deemed incorporated by reference in filings under the Securities Act.

Item 8.01. Other Events.

Dividend

On July 27, 2016, Park Sterling issued a press release announcing that its board of directors (“Board”) declared a quarterly cash dividend to its common shareholders of $0.04 per common share, payable on August 23, 2016 to all common shareholders of record as of the close of business on August 9, 2016. Future dividends will be subject to Board approval. A copy of the press release is attached as Exhibit 99.3 and is incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

Exhibit No.	Exhibit Description
99.1	Press Release, dated July 28, 2016, with respect to Park Sterling’s financial results for the second quarter ended June 30, 2016
99.2	Slide Package prepared for use in connection with Park Sterling’s conference call to be held on July 28, 2016
99.3	Press Release, dated July 27, 2016, with respect to declaration of dividend

2 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: July 28, 2016

PARK STERLING CORPORATION
By:	/s/ Donald K. Truslow
	Donald K. Truslow
	Chief Financial Officer

3 

EXHIBIT INDEX

Exhibit No.	Exhibit Description
99.1	Press Release, dated July 28, 2016, with respect to Park Sterling’s financial results for the second quarter ended June 30, 2016
99.2	Slide Package prepared for use in connection with Park Sterling’s conference call to be held on July 28, 2016
99.3	Press Release, dated July 27, 2016, with respect to declaration of dividend

4 

EX-99.1

Exhibit 99.1

Park Sterling Corporation Announces

Results for Second Quarter 2016

Charlotte, NC – July 28, 2016 – 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 2016. Highlights at and for the three months ended June 30, 2016 include:

Highlights

● Net income of $5.6 million, or $0.11 per share, compared to $2.7 million, or $0.05 per share, in the quarter ended March 31, 2016

● Adjusted net income, which excludes merger-related expenses and gain or loss on sale of securities, increased $275,000 (4%) to $6.4 million, or $0.12 per share, compared to $6.2 million, or $0.12 per share, in the prior quarter

● Noninterest income grew 14% over first quarter 2016 with strong performance across several categories

● Noninterest expenses declined from the first quarter of 2016

● Loans, including loans held for sale, showed steady growth of $52.0 million, representing a 9% annualized growth rate

● Nonperforming loans to total loans decreased 9 basis points to 0.33% from 0.42% at March 31, 2016

● Nonperforming assets to total assets decreased 9 basis points to 0.35% from 0.44% at March 31, 2016

● Capital levels remained strong with total common equity to total assets of 11.17%, tangible common equity to tangible assets of 9.00% and Tier 1 leverage ratio of 10.06%

● Core systems conversion with First Capital Bancorp, Inc. were completed (May 2016)

● The Board of Directors declared a 33% increase in the quarterly cash dividend on common shares to $0.04 per share (July 2016)

“We are delighted to report strong results for the second quarter of 2016,” said James C. Cherry, Chief Executive Officer. “For the quarter, we achieved higher profitability and returns driven by steady loan growth, strong increases in noninterest income sources and reduced expenses. Our solid financial condition reflects superior asset quality and healthy capital and liquidity levels.

On the capital management front, yesterday the board declared a 33% increase in the quarterly dividend to $0.04 per common share from the prior level of $0.03 per share, payable on August 23, 2016 to all shareholders of record as of the close of business on August 9, 2016. Future dividends will be subject to board approval. Additionally, during the second quarter we repurchased approximately 150,000 shares under our previously announced 2.2 million share repurchase program.

We remain committed to build a full-service, highly regarded regional community bank. With the successful conversion of First Capital Bancorp’s core systems onto the Park Sterling platform, we now have a company operating on common core systems with $3.2 billion in assets serving customers through 56 branches in highly attractive markets across the Carolinas, Virginia and North Georgia. The second quarter results reflect management’s focus in 2016 on improving performance by leveraging Park Sterling’s distinguishing strengths. These include our position in high growth markets, exceptionally talented and experienced bankers, quality products and services, solid financial condition and strong risk culture.”

Financial Results

Income Statement – Three Months Ended June 30, 2016

Park Sterling reported net income of $5.6 million, or $0.11 per share, for the three months ended June 30, 2016 (“2016Q2”). This compares to net income of $2.7 million, or $0.05 per share, for the three months ended March 31, 2016 (“2016Q1”) and net income of $4.3 million, or $0.10 per share, for the three months ended June 30, 2015 (“2015Q2”). The increase in net income from both 2016Q1 and 2015Q2 resulted primarily from reduced merger -related costs in 2016Q2 as well as an increase in net interest income from 2015Q2 and noninterest income compared to 2016Q1 and 2015Q2.   

Park Sterling reported adjusted net income, which excludes merger-related expenses and gain or loss on sale of securities, of $6.4 million, or $0.12 per share, in 2016Q2. This compares to adjusted net income of $6.2 million, or $0.12 per share, in 2016Q1 and adjusted net income of $4.4 million, or $0.10 per share, in 2015Q2. Compared to 2016Q1 and 2015Q2, adjusted net income reflects higher noninterest income and lower noninterest expense.

Net interest income totaled $26.1 million in 2016Q2, which represents a $547 thousand, or 2%, decrease from $26.6 million in 2016Q1 and a $5.4 million, or 26%, increase from $20.6 million in 2015Q2. Average total earning assets increased $9.5 million in 2016Q2 to $2.84 billion, compared to $2.83 billion in 2016Q1 and increased $657.7 million, or 30%, compared to $2.19 billion in 2015Q2. The increase in average total earning assets in 2016Q2 from 2016Q1 included an increase in average loans (including loans held for sale) of $23.7 million, or 1%, offset by decreases in average marketable securities of $5.0 million, or 1%, and average other interest-earning assets of $9.3 million, or 17%. The increase in average total earning assets in 2016Q2 from 2015Q2 resulted primarily from a $654.7 million, or 40%, increase in average loans (including loans held for sale) as a result of both organic growth and the acquisition of First Capital and a $9.4 million, or 2%, increase in average marketable securities, offset by a $6.4 million, or 12%, decrease in average other earning assets.     

Net interest margin was 3.69% in 2016Q2, representing a 9 basis point decrease from 3.78% in both 2016Q1 and 2015Q2. The decrease in net interest margin from 2016Q1 resulted primarily from a 12 basis point decrease in yield on loans to 4.68%, as the yield on loans in 2016Q1 was driven by a higher level of accretion of the acquired performing fair value mark related to the acquisition of First Capital loans. In addition, the cost of interest-bearing liabilities increased 2 basis points from 2016Q1 as the cost of wholesale funding increased slightly. The reduction in net interest margin yield from 20152Q is significantly impacted by the merger with First Capital which was completed on January 1, 2016.  The change was primarily driven by higher rates on interest bearing deposits  and the cost associated with the  $30 million senior term loan that was used to partially fund the merger,  offset in part by the addition of higher yielding earning assets as a result of the merger.

The Company reported $882,000 of provision expense in 2016Q2, compared to $556,000 of provision recorded in 2016Q1, and a provision of $134,000 in 2015Q2. Allowance for loan loss levels increased to 0.47% of total loans at 2016Q2 compared to 0.43% at 2016Q1 due to an increase in the qualitative component of the allowance.

Noninterest income increased $648,000, or 14%, to $5.4 million in 2016Q2, compared to $4.7 million in 2016Q1 and increased $1.1 million, or 25%, compared to $4.3 million in 2015Q2. The increase from 2016Q1 was driven primarily by a $699,000 volume-related increase in capital markets income, as well as a $203,000 increase in ATM and card income that resulted from year-to-date EMV-chip card conversion cost adjustments. Other increases include a $122,000, or 83%, decrease in FDIC loss share indemnification asset and true-up liability expense as we approach the expiration date of another agreement and a $98,000, or 13%, increase in mortgage banking income. Partially offsetting these increases was a $462,000, or 47%, decrease in BOLI income due in part to $402,000 of death benefits received in 2016Q1 and an additional $81,000 of losses on the sale of securities. The increase in noninterest income from 2015Q2 reflects higher capital markets income, as well as higher service charges on deposit accounts and lower amortization on the FDIC loss share indemnification asset and true-up liability expense, offset partially by lower income from mortgage banking and wealth management activities.

Noninterest expenses decreased $4.2 million, or 16%, to $21.9 million in 2016Q2 compared to $26.2 million in 2016Q1, and increased $3.7 million, or 20%, compared to $18.2 million in 2015Q2. Adjusted noninterest expenses, which exclude merger-related expenses ($1.3 million in 2016Q2, $5.2 million in 2016Q1 and $167,000 in 2015Q2), decreased $282 thousand, or 1%, to $20.7 million in 2016Q2 compared to $21.0 million in 2016Q1, and increased $2.6 million, or 14%, compared to $18.1 million in 2015Q2. Overall the decrease in adjusted noninterest expenses from 2016Q1 was due primarily to a $351,000 decrease in salaries and compensation expense due to the 2016Q1 increase in the incentive accrual and the realization of additional merger related cost savings. The other notable decrease was the net cost of operation of OREO, which in 2016Q1 included a loss on the sale of a branch that had been transferred to OREO in 2015. Offsetting these decreases was an increase in loan and collection expense due to a recent HELOC program for which the company absorbs borrower closing costs, as well as the timing of loan activity. The increase in adjusted noninterest expenses from 2015Q2 is primarily a function of the merger with First Capital.

The company’s effective tax rate was 35.4% in 2016Q2, compared to 40.6% in 2016Q1 and 34.7% in 2015Q2. During 2016Q1, the rate was impacted by certain non-deductible merger-related expenses and adjustments made to deferred tax assets for the true-up in tax rates and re-measurement due to the First Capital merger, partially offset by the non-taxable BOLI death benefits received in 2016Q1.

Balance Sheet

Total assets increased $20.3 million, or 1%, to $3.2 billion at 2016Q2, as compared to total assets of $3.2 billion at 2016Q1. Cash and equivalents decreased $22.6 million, or 28%, to $69.9 million and total securities, including non-marketable securities, decreased $4.8 million, to $509.7 million. Total loans, excluding loans held for sale, increased $47.8 million, or 8% annualized, to $2.3 billion at 2016Q2.

Loan mix remained relatively consistent with 2016Q1. The combination of commercial and industrial and owner-occupied real estate loans decreased slightly from 31.1% to 30.6% of total loans, and investor-owned commercial real estate loans increased from 31.7% to 32.8% of total loans. Acquisition, construction and development loans decreased to 13.8% from 14.2% of total loans. Total consumer loans remained flat at 22% of total loans.

In terms of accounting designations, compared to 2016Q1: (i) non-acquired loans, which include certain renewed and/or restructured acquired performing loans that are re-designated as non-acquired, increased $119.3 million, or 8%, to $1.6 billion; (ii) acquired performing loans decreased $64.1 million, or 9%, to $661.9 million; and (iii) purchase credit impaired (“PCI”) loans decreased $7.4 million, or 7%, to $98.7 million. At 2016Q2, noncovered performing acquired loans (which totaled $660.7 million) included a $4.9 million net acquisition accounting fair market value adjustment, representing a 0.74% “mark;” noncovered PCI loans (which totaled $85.4 million) included a $22.8 million adjustment, representing a 21.1% “mark;” and covered performing acquired and PCI loans (which totaled $14.5 million) included a $3.5 million adjustment, representing a 19.7% “mark.”

Total deposits decreased $24.6 million, or 1%, to $2.5 billion at 2016Q2, as compared to total deposits of $2.5 billion at 2016Q1. Noninterest bearing demand deposits increased $27.1 million, or 6%, to $496.2 million (20% of total deposits). Non-brokered money market, NOW and savings deposits decreased $22.6 million, or 2%, to $1.2 billion (47% of total deposits). Time deposits less than $250,000 decreased $9.1 million, or 2%, to $547.6 million (22% of total deposits) and time deposits greater than $250,000 decreased $11.7 million, or 10%, to $108.1 million (4% of total deposits). Finally, brokered deposits decreased $8.3 million, or 5%, to $152.2 million (6% of total deposits). Core deposits, which exclude time deposits greater than $250,000 and brokered deposits, represented 89.5% of total deposits at 2016Q2 and 88.8% of total deposits at 2016Q1.

Total borrowings increased $29.9 million, or 11%, to $297.8 million at 2016Q2 compared to $268.0 million at 2016Q1. Borrowings at 2016Q2 included $235.0 million in FHLB borrowings, $29.7 million in a senior unsecured term loan at the bank holding company level, and $33.2 million of acquired trust preferred securities, net of acquisition accounting fair market value adjustments.

Total shareholders’ equity increased $4.9 million, or 1%, to $354.5 million at 2016Q2 compared to $349.5 million at 2016Q1, driven by an increase in retained earnings and higher unrealized gains related to available-for-sale securities and balance sheet interest rate hedges. The company’s ratio of common equity to assets increased to 11.17% at 2016Q2 from 11.08% at 2016Q1. The company’s ratio of tangible common equity to tangible assets increased to 9.00% at 2016Q2 from 8.87% at 2016Q1. The company’s Common Equity Tier 1 (“CET1”) ratio decreased to 11.14% at 2016Q2 compared to 11.11% at 2016Q1 due to an increase in risk weighted assets. The company’s Tier 1 leverage ratio was 10.06% at 2016Q2 compared to 9.76% at 2016Q1.

Asset Quality

Asset quality continues to remain strong. Nonperforming assets were $11.0 million at 2016Q2, or 0.35% of total assets, compared to $14.0 million at 2016Q1, or 0.44% of total assets. Nonperforming loans were $7.8 million at 2016Q2, and represented 0.33% of total loans, compared to $9.6 million at 2016Q1, or 0.42% of total loans. The settlement of two loan relationships that were past due in 2016Q1 as well as the continued sales of other real estate owned contributed to the declines in both ratios. The company reported net recoveries of $159,000, or 0.03% of average loans (annualized), in 2016Q2, compared to net recoveries of $212,000, or 0.04% of average loans (annualized), in 2016Q1.

The allowance for loan losses increased $1 million, or 11%, to $10.9 million, or 0.47% of total loans, at 2016Q2, compared to $9.8 million, or 0.43% of total loans, at 2016Q1. The increase in allowance included (i) a $255,000, or 16%, decrease in the quantitative component, resulting from lower historic loss rates due to a net recovery in 2016Q2 and (ii) a $1.2 million or 15%, increase in the qualitative component, reflecting management’s judgment of inherent loss in the loan portfolio not represented in historic loss rates, based on heightened general economic market uncertainty and increased financial market volatility which emerged toward the end of 2016Q2.

As contemplated during the Bank’s 2010 public offering, the Company awarded certain performance-based restricted shares to officers and directors following the holding company reorganization. These shares vest one-third each when the Company’s stock price per share reaches the following performance thresholds for 30 consecutive trading days: (i) 125% of offer price ($8.13); (ii) 140% of offer price ($9.10); and (iii) 160% of offer price ($10.40). These anti-dilutive restricted shares are issued (and thereby have voting rights), but are not included in earnings per share or tangible book value per share calculations until they vest (and thereby have economic rights). There were 436,590 shares outstanding at each of June 30, 2016 and March 31, 2016 and 554,400 shares outstanding at each of the reported quarters of 2015.

*  *  *  *   *  *  *

Conference Call

A conference call will be held at 8:30 a.m., Eastern Time this morning (July 28, 2016). The conference call can be accessed by dialing (877) 512-1104 and requesting the Park Sterling Corporation earnings call. Listeners should dial in 10 minutes prior to the start of the call. The live webcast and presentation slides will be available on www.parksterlingbank.com under Investor Relations, “Investor Presentations.”

A replay of the webcast will be available on www.parksterlingbank.com under Investor Relations, “Investor Presentations” shortly following the call. A replay of the conference call can be accessed approximately one hour after the call by dialing (877) 344-7529 and requesting conference number 10087667.

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 $3.2 billion in assets, is the largest community bank headquartered in the Charlotte area and has 56 banking offices stretching across the Carolinas and into North Georgia, as well as in Richmond, Virginia. The bank serves professionals, individuals, and small and mid-sized businesses by offering a full array of financial services, including deposit, mortgage banking, cash management, consumer and business finance, capital markets and wealth management services with a commitment to “Answers You Can Bank On^SM.” Park Sterling prides itself on being large enough to help customers achieve their financial aspirations, yet small enough to care that they do. Park Sterling is focused on building a banking franchise that is noted for sound risk management, strong community focus and exceptional customer service. For more information, visit www.parksterlingbank.com. Park Sterling Corporation shares are traded on NASDAQ under the symbol PSTB.

Non-GAAP Financial Measures

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

Cautionary Statement Regarding Forward Looking Statements

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

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

###

For additional information contact:

Donald K. Truslow

Chief Financial Officer

(704) 716-2134

don.truslow@parksterlingbank.com

PARK STERLING CORPORATION

CONDENSED CONSOLIDATED INCOME STATEMENT

THREE MONTH RESULTS  

($ in thousands, except per share amounts)	June 30,			March 31,			December 31,			September 30,			June 30,
	2016			2016			2015			2015			2015
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Interest income
Loans, including fees	$	26,729		$	27,124		$	19,284		$	19,475		$	19,667
Taxable investment securities		2,640			2,687			2,677			2,636			2,508
Tax-exempt investment securities		137			147			146			152			143
Nonmarketable equity securities		153			154			109			142			122
Interest on deposits at banks		34			42			22			23			18
Federal funds sold		5			8			1			1			-
Total interest income		29,698			30,162			22,239			22,429			22,458
Interest expense
Money market, NOW and savings deposits		1,014			1,017			743			654			532
Time deposits		1,449			1,398			903			841			752
Short-term borrowings		251			294			205			90			76
Long-term debt		440			410			55			134			131
Subordinated debt		494			446			358			348			351
Total interest expense		3,648			3,565			2,264			2,067			1,842
Net interest income		26,050			26,597			19,975			20,362			20,616
Provision for loan losses		882			556			409			-			134
Net interest income after provision		25,168			26,041			19,566			20,362			20,482
Noninterest income
Service charges on deposit accounts		1,528			1,489			1,439			1,370			1,107
Mortgage banking income		873			775			699			700			956
Income from wealth management activities		863			803			887			947			906
Income from capital market activities		767			68			437			238			394
ATM and card income		776			573			647			537			629
Income from bank-owned life insurance		526			988			371			1,058			553
Gain (loss) on sale of securities available for sale		(87	)		(6	)		-			54			-
Amortization of indemnification asset and true-up liability expense		(25	)		(147	)		(165	)		(162	)		(165	)
Other noninterest income		154			184			208			185			(88	)
Total noninterest income		5,375			4,727			4,523			4,927			4,292
Noninterest expenses
Salaries and employee benefits		11,774			13,018			9,541			9,952			10,021
Occupancy and equipment		3,041			3,125			2,680			2,591			2,491
Data processing and outside service fees		2,224			5,523			1,669			1,668			1,640
Legal and professional fees		950			725			1,471			472			660
Deposit charges and FDIC insurance		478			432			413			401			433
Loss on disposal of fixed assets		230			44			50			597			113
Communication fees		505			483			480			501			541
Postage and supplies		191			173			99			123			116
Loan and collection expense		273			37			194			151			242
Core deposit intangible amortization		458			458			347			347			347
Advertising and promotion		367			421			271			313			304
Net cost of operation of other real estate owned		70			266			(23	)		163			232
Other noninterest expense		1,385			1,448			1,170			1,140			1,092
Total noninterest expenses		21,946			26,153			18,362			18,419			18,232
Income before income taxes		8,597			4,615			5,727			6,870			6,542
Income tax expense		3,045			1,874			1,952			2,092			2,273
Net income	$	5,552		$	2,741		$	3,775		$	4,778		$	4,269
Earnings per common share, fully diluted	$	0.11		$	0.05		$	0.09		$	0.11		$	0.10
Weighted average diluted common shares		52,704,537			52,599,584			44,322,428			44,287,019			44,301,895

PARK STERLING CORPORATION

CONDENSED CONSOLIDATED INCOME STATEMENT

SIX MONTH RESULTS 

($ in thousands, except per share amounts)	June 30,			June 30,
	2016			2015
	(Unaudited)			(Unaudited)
Interest income
Loans, including fees	$	53,853		$	38,778
Taxable investment securities		5,327			5,299
Tax-exempt investment securities		284			281
Nonmarketable equity securities		307			249
Interest on deposits at banks		76			36
Federal funds sold		13			-
Total interest income		59,860			44,643
Interest expense
Money market, NOW and savings deposits		2,032			1,052
Time deposits		2,847			1,459
Short-term borrowings		545			152
Long-term debt		850			259
Subordinated debt		940			679
Total interest expense		7,214			3,601
Net interest income		52,646			41,042
Provision for loan losses		1,438			314
Net interest income after provision		51,208			40,728
Noninterest income
Service charges on deposit accounts		3,017			2,126
Mortgage banking income		1,648			1,907
Income from wealth management activities		1,666			1,768
Income from capital market activities		835			792
ATM and card income		1,349			1,323
Income from bank-owned life insurance		1,514			1,321
Gain (loss) on sale of securities available for sale		(93	)		-
Amortization of indemnification asset and true-up liability expense		(172	)		(559	)
Other noninterest income		338			115
Total noninterest income		10,102			8,793
Noninterest expenses
Salaries and employee benefits		24,792			20,452
Occupancy and equipment		6,166			5,046
Data processing and outside service fees		7,747			3,288
Legal and professional fees		1,675			1,458
Deposit charges and FDIC insurance		910			825
Loss on disposal of fixed assets		274			349
Communication fees		988			1,119
Postage and supplies		364			265
Loan and collection expense		310			396
Core deposit intangible amortization		916			695
Advertising and promotion		788			678
Net cost of operation of other real estate owned		336			267
Other noninterest expense		2,833			2,533
Total noninterest expenses		48,099			37,371
Income before income taxes		13,211			12,150
Income tax expense		4,919			4,098
Net income	$	8,292		$	8,052
Earnings per common share, fully diluted	$	0.16		$	0.18
Weighted average diluted common shares		52,650,886			44,287,424

PARK STERLING CORPORATION

WEALTH MANAGEMENT ASSETS

($ in thousands) 

	June 30,		March 31,		December 31,		September 30,		June 30,
	2016		2016		2015		2015		2015
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Discretionary assets held	$	322,996	$	339,198	$	434,346	$	425,229	$	438,289
Non-discretionary assets held		32,173		31,174		32,289		32,152		36,067
Total wealth management assets	$	355,169	$	370,372	$	466,635	$	457,381	$	474,356

PARK STERLING CORPORATION

MORTGAGE ORIGINATION

($ in thousands) 

	June 30,		March 31,		December 31,		September 30,		June 30,
	2016		2016		2015		2015		2015
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Mortgage origination - purchase	$	25,316	$	14,656	$	16,101	$	20,063	$	28,536
Mortgage origination - refinance		16,221		13,430		10,049		15,101		18,479
Mortgage origination - construction		18,403		14,764		18,746		20,452		24,694
Total mortgage origination	$	59,941	$	42,850	$	44,896	$	55,616	$	71,709

PARK STERLING CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS  

($ in thousands)	June 30,			March 31,			December 31,			September 30,			June 30,
	2016			2016			2015*			2015			2015
	(Unaudited)			(Unaudited)						(Unaudited)			(Unaudited)
ASSETS
Cash and due from banks	$	33,348		$	34,038		$	53,840		$	16,096		$	17,042
Interest-earning balances at banks		34,955			47,143			16,451			41,230			26,940
Investment securities available for sale		393,131			396,863			384,934			401,820			402,489
Investment securities held to maturity		102,125			104,459			106,458			109,072			111,633
Nonmarketable equity securities		14,420			13,118			11,366			11,377			13,500
Federal funds sold		1,570			11,271			235			920			360
Loans held for sale		11,967			7,593			4,943			5,145			10,701
Loans - Non-covered		2,311,775			2,262,294			1,724,164			1,681,227			1,637,115
Loans - Covered		15,122			16,849			17,651			18,897			20,348
Allowance for loan losses		(10,873	)		(9,832	)		(9,064	)		(8,742	)		(8,468	)
Net loans		2,316,024			2,269,311			1,732,751			1,691,382			1,648,995
Premises and equipment, net		65,711			65,494			55,658			56,948			58,979
FDIC receivable for loss share agreements		1,164			1,477			943			1,190			1,209
Other real estate owned - non-covered		2,866			3,425			4,211			7,087			8,904
Other real estate owned - covered		380			985			1,240			1,056			884
Bank-owned life insurance		69,695			69,202			58,633			58,286			57,823
Deferred tax asset		28,985			30,088			28,971			29,711			32,137
Goodwill		63,197			63,707			29,197			29,197			29,197
Core deposit intangible		12,354			12,813			9,571			9,918			10,265
Other assets		22,183			22,750			14,862			14,699			12,822
Total assets	$	3,174,075		$	3,153,737		$	2,514,264		$	2,485,134		$	2,443,880
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand noninterest-bearing	$	496,195		$	469,046		$	350,836		$	370,815		$	347,162
Money market, NOW and savings		1,229,040			1,255,848			1,062,046			1,041,502			988,847
Time deposits		748,188			773,089			539,780			534,541			538,932
Total deposits		2,473,423			2,497,983			1,952,662			1,946,858			1,874,941
Short-term borrowings		200,000			170,000			185,000			130,000			180,000
Long-term debt		64,714			65,000			30,000			55,000			55,000
Subordinated debt		33,176			33,014			24,262			24,092			23,922
Accrued expenses and other liabilities		48,312			38,229			37,636			44,979			30,274
Total liabilities		2,819,625			2,804,226			2,229,560			2,200,929			2,164,137
Shareholders' equity:
Common stock		53,332			53,038			44,854			44,909			44,911
Additional paid-in capital		275,246			274,706			222,596			222,587			222,271
Retained earnings		25,219			21,263			20,117			17,692			14,261
Accumulated other comprehensive income (loss)		653			504			(2,863	)		(983	)		(1,700	)
Total shareholders' equity		354,450			349,511			284,704			284,205			279,743
Total liabilities and shareholders' equity	$	3,174,075		$	3,153,737		$	2,514,264		$	2,485,134		$	2,443,880
Common shares issued and outstanding		53,332,369			53,038,020			44,854,509			44,909,447			44,910,686

* Derived from audited financial statements.

PARK STERLING CORPORATION

SUMMARY OF LOAN PORTFOLIO

($ in thousands) 

	June 30,		March 31,		December 31,		September 30,		June 30,
	2016		2016		2015*		2015		2015
BY LOAN TYPE	(Unaudited)		(Unaudited)				(Unaudited)		(Unaudited)
Commercial:
Commercial and industrial	$	334,644	$	334,027	$	246,907	$	211,741	$	189,356
Commercial real estate (CRE) - owner-occupied		376,440		374,428		331,222		328,327		330,853
CRE - investor income producing		764,168		723,539		506,110		514,118		498,190
Acquisition, construction and development (AC&D) - 1-4 Family Construction		100,604		97,614		32,262		27,299		31,500
AC&D - Lots and land		94,686		88,492		44,411		47,948		48,680
AC&D - CRE construction		125,466		136,561		87,452		85,643		86,570
Other commercial		10,410		10,167		8,601		8,830		7,212
Total commercial loans		1,806,418		1,764,828		1,256,965		1,223,906		1,192,361
Consumer:
Residential mortgage		244,063		235,737		223,884		224,110		214,850
Home equity lines of credit		181,020		177,594		157,378		157,430		156,960
Residential construction		65,867		71,117		72,170		66,823		62,973
Other loans to individuals		26,575		27,245		28,817		24,896		27,696
Total consumer loans		517,525		511,693		482,249		473,259		462,479
Total loans		2,323,943		2,276,521		1,739,214		1,697,165		1,654,840
Deferred costs (fees)		2,954		2,622		2,601		2,959		2,623
Total loans, net of deferred costs (fees)	$	2,326,897	$	2,279,143	$	1,741,815	$	1,700,124	$	1,657,463

* Derived from audited financial statements.

	June 30,		March 31,		December 31,		September 30,		June 30,
	2016		2016		2015*		2015		2015
BY ACQUIRED AND NON-ACQUIRED	(Unaudited)		(Unaudited)				(Unaudited)		(Unaudited)
Acquired loans - performing	$	661,930	$	726,025	$	279,949	$	300,102	$	317,394
Acquired loans - purchase credit impaired		98,672		106,105		94,917		102,537		112,819
Total acquired loans		760,602		832,130		374,866		402,639		430,213
Non-acquired loans, net of deferred costs (fees)**		1,566,295		1,447,013		1,366,949		1,297,485		1,227,250
Total loans	$	2,326,897	$	2,279,143	$	1,741,815	$	1,700,124	$	1,657,463

* 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,
	2016			2016			2015			2015			2015
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Beginning of period allowance	$	9,832		$	9,064		$	8,742		$	8,468		$	8,590
Loans charged-off		(94	)		(82	)		(237	)		(121	)		(572	)
Recoveries of loans charged-off		253			294			150			415			245
Net charge-offs		159			212			(87	)		294			(327	)
Provision expense		882			556			409			-			205
Benefit attributable to FDIC loss share agreements		-			-			-			-			(71	)
Total provision expense charged to operations		882			556			409			-			134
Provision expense recorded through FDIC loss share receivable		-			-			-			(20	)		71
End of period allowance	$	10,873		$	9,832		$	9,064		$	8,742		$	8,468
Net charge-offs (recoveries)	$	(159	)	$	(212	)	$	87		$	(294	)	$	327
Net charge-offs (recoveries) to average loans (annualized)		-0.03	%		-0.04	%		0.02	%		-0.07	%		0.08	%

PARK STERLING CORPORATION

ACQUIRED LOANS

($ in thousands) 

	June 30,			March 31,			December 31,			September 30,			June 30,
ACQUIRED LOANS AND FAIR MARKET VALUE (FMV)	2016			2016			2015*			2015			2015
ADJUSTMENTS	(Unaudited)			(Unaudited)						(Unaudited)			(Unaudited)
Non-acquired loans	$	1,566,295		$	1,447,013		$	1,366,949		$	1,297,485		$	1,227,250
Purchased performing loans		666,894			732,075			282,081			302,296			319,844
Less: remaining FMV adjustments		(4,964	)		(6,050	)		(2,132	)		(2,194	)		(2,450	)
Purchased performing loans, net		661,930			726,025			279,949			300,102			317,394
Purchased credit impaired loans		124,985			133,644			120,957			129,890			141,528
Less: remaining FMV adjustments		(26,313	)		(27,539	)		(26,040	)		(27,353	)		(28,709	)
Purchased credit impaired loans, net		98,672			106,105			94,917			102,537			112,819
Total loans	$	2,326,897		$	2,279,143		$	1,741,815		$	1,700,124		$	1,657,463

	June 30,			March 31,			December 31,			September 30,			June 30,
PURCHASED PERFORMING FMV ADJUSTMENTS	2016			2016			2015			2015			2015
	(Unaudited)			(Unaudited)						(Unaudited)			(Unaudited)
Beginning FMV adjustment	$	(6,050	)	$	(2,132	)	$	(2,194	)	$	(2,450	)	$	(2,974	)
Increase from First Capital		-			(5,200	)		-			-			-
Accretion to interest income:
First Capital		777			1,027			-			-			-
All other mergers		309			255			62			256			282
Ending FMV adjustment	$	(4,964	)	$	(6,050	)	$	(2,132	)	$	(2,194	)	$	(2,692	)

	June 30,			March 31,			December 31,			September 30,			June 30,
PCI FMV ADJUSTMENT	2016			2016			2015			2015			2015
	(Unaudited)			(Unaudited)						(Unaudited)			(Unaudited)
Contractual principal and interest	$	143,701		$	153,124		$	140,269		$	152,098		$	162,386
Nonaccretable difference		(14,652	)		(14,975	)		(12,843	)		(14,512	)		(12,843	)
Expected cash flows as of the end of period		129,049			138,149			127,426			137,586			149,543
Accretable yield		(30,377	)		(32,044	)		(32,509	)		(35,049	)		(36,773	)
Ending basis in PCI loans- estimated fair value	$	98,672		$	106,105		$	94,917		$	102,537		$	112,770
Beginning accretable yield	$	(32,044	)	$	(32,509	)	$	(35,049	)	$	(36,773	)	$	(38,465	)
Increase from First Capital		-			(1,663	)		-			-			-
Loan system servicing income		1,434			1,551			1,437			1,525			1,567
Accretion to interest income		1,343			1,471			1,438			1,551			1,733
Reclass to (from) non-accretable yield		(522	)		(993	)		(553	)		(897	)		(1,653	)
Other adjustments		(588	)		99			218			(455	)		45
Period end accretable yield**	$	(30,377	)	$	(32,044	)	$	(32,509	)	$	(35,049	)	$	(36,773	)

* 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, 2016								June 30, 2015
	Average			Income/		Yield/			Average			Income/		Yield/
	Balance			Expense		Rate (3)			Balance			Expense		Rate (3)
Assets
Interest-earning assets:
Loans and loans held for sale, net (1)(2)	$	2,298,569		$	26,729		4.68	%	$	1,643,844		$	19,667		4.80	%
Fed funds sold		3,848			5		0.52	%		730			-		0.00	%
Taxable investment securities		484,057			2,640		2.18	%		474,807			2,508		2.11	%
Tax-exempt investment securities		14,131			137		3.88	%		13,960			143		4.10	%
Other interest-earning assets		42,559			187		1.77	%		52,098			140		1.08	%
Total interest-earning assets		2,843,164			29,698		4.20	%		2,185,439			22,458		4.12	%
Allowance for loan losses		(9,961	)							(8,895	)
Cash and due from banks		35,011								16,356
Premises and equipment		66,029								58,912
Goodwill		63,509								29,211
Intangible assets		12,574								10,435
Other assets		124,705								115,213
Total assets	$	3,135,031							$	2,406,671
Liabilities and shareholders' equity
Interest-bearing liabilities:
Interest-bearing demand	$	426,427		$	81		0.08	%	$	411,806		$	71		0.07	%
Savings and money market		744,945			840		0.45	%		525,359			405		0.31	%
Time deposits - core		686,003			1,272		0.75	%		458,139			632		0.55	%
Brokered deposits		139,164			270		0.78	%		133,981			176		0.53	%
Total interest-bearing deposits		1,996,539			2,463		0.50	%		1,529,285			1,284		0.34	%
Short-term borrowings		163,132			251		0.62	%		148,901			76		0.20	%
Long-term debt		64,808			440		2.73	%		55,000			131		0.96	%
Subordinated debt		33,102			494		6.00	%		23,833			351		5.91	%
Total borrowed funds		261,042			1,185		1.83	%		227,734			558		0.98	%
Total interest-bearing liabilities		2,257,581			3,648		0.65	%		1,757,019			1,842		0.42	%
Net interest rate spread					26,050		3.55	%					20,616		3.70	%
Noninterest-bearing demand deposits		483,465								338,092
Other liabilities		41,480								30,884
Shareholders' equity		352,505								280,676
Total liabilities and shareholders' equity	$	3,135,031							$	2,406,671
Net interest margin							3.69	%							3.78	%

(1) Nonaccrual loans are included in the average loan balances.

(2) Interest income and yields for the three months ended June 30, 2016 and 2015 include accretion from acquisition accounting adjustments associated with acquired loans.

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

PARK STERLING CORPORATION

AVERAGE BALANCE SHEETS AND NET INTEREST ANALYSIS

SIX MONTHS 

($ in thousands)	June 30, 2016								June 30, 2015
	Average			Income/		Yield/			Average			Income/		Yield/
	Balance			Expense		Rate (3)			Balance			Expense		Rate (3)
Assets
Interest-earning assets:
Loans and loans held for sale, net (1)(2)	$	2,286,696		$	53,853		4.74	%	$	1,623,279		$	38,778		4.82	%
Fed funds sold		5,372			13		0.49	%		596			-		0.00	%
Taxable investment securities		485,605			5,327		2.19	%		477,255			5,299		2.22	%
Tax-exempt investment securities		15,089			284		3.76	%		13,409			281		4.19	%
Other interest-earning assets		45,666			383		1.69	%		56,258			285		1.02	%
Total interest-earning assets		2,838,428			59,860		4.24	%		2,170,797			44,643		4.15	%
Allowance for loan losses		(9,912	)							(8,633	)
Cash and due from banks		35,885								16,646
Premises and equipment		66,271								59,133
Goodwill		62,783								29,225
Intangible assets		12,646								10,606
Other assets		127,727								117,376
Total assets	$	3,133,828							$	2,395,150
Liabilities and shareholders' equity
Interest-bearing liabilities:
Interest-bearing demand	$	426,610		$	168		0.08	%	$	409,863		$	139		0.07	%
Savings and money market		739,124			1,671		0.45	%		521,374			800		0.31	%
Time deposits - core		698,146			2,492		0.72	%		459,713			1,220		0.54	%
Brokered deposits		132,994			548		0.83	%		137,254			352		0.52	%
Total interest-bearing deposits		1,996,874			4,879		0.49	%		1,528,204			2,511		0.33	%
Short-term borrowings		177,417			545		0.62	%		150,055			152		0.20	%
Long-term FHLB borrowings		65,316			850		2.62	%		53,950			259		0.97	%
Subordinated debt		33,015			940		5.73	%		23,749			679		5.77	%
Total borrowed funds		275,748			2,335		1.70	%		227,754			1,090		0.97	%
Total interest-bearing liabilities		2,272,622			7,214		0.64	%		1,755,958			3,601		0.41	%
Net interest rate spread					52,646		3.60	%					41,042		3.73	%
Noninterest-bearing demand deposits		469,961								328,805
Other liabilities		40,714								30,951
Shareholders' equity		350,531								279,436
Total liabilities and shareholders' equity	$	3,133,828							$	2,395,150
Net interest margin							3.73	%							3.81	%

(1) Nonaccrual loans are included in the average loan balances.

(2) Interest income and yields for the six months ended June 30, 2016 and 2015 include accretion from acquisition accounting adjustments associated with acquired loans.

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

PARK STERLING CORPORATION

SELECTED RATIOS 

($ in thousands, except per share amounts)	June 30,			March 31,			December 31,			September 30,			June 30,
	2016			2016			2015			2015			2015
	Unaudited			Unaudited			Unaudited			Unaudited			Unaudited
ASSET QUALITY
Nonaccrual loans	$	5,185		$	6,595		$	4,326		$	5,342		$	5,545
Troubled debt restructuring (and still accruing)		2,582			2,696			2,774			3,090			3,115
Past due 90 days plus (and still accruing)		-			293			1,151			47			-
Nonperforming loans		7,767			9,584			8,251			8,479			8,660
OREO		3,246			4,410			5,451			8,143			9,788
Nonperforming assets		11,013			13,994			13,702			16,622			18,448
Past due 30-59 days (and still accruing)		985			217			1,222			1,790			2,559
Past due 60-89 days (and still accruing)		5,800			499			1,340			3,753			481
Nonperforming loans to total loans		0.33	%		0.42	%		0.47	%		0.50	%		0.52	%
Nonperforming assets to total assets		0.35	%		0.44	%		0.54	%		0.67	%		0.75	%
Allowance to total loans		0.47	%		0.43	%		0.52	%		0.51	%		0.51	%
Allowance to nonperforming loans		139.99	%		102.59	%		109.85	%		103.10	%		97.78	%
Allowance to nonperforming assets		98.73	%		70.26	%		66.15	%		52.59	%		45.90	%
Past due 30-89 days (accruing) to total loans		0.29	%		0.03	%		0.15	%		0.33	%		0.18	%
Net charge-offs (recoveries) to average loans (annualized)		-0.03	%		-0.04	%		0.02	%		-0.07	%		0.08	%
CAPITAL
Book value per common share	$	6.77		$	6.69		$	6.49		$	6.47		$	6.37
Tangible book value per common share**	$	5.33		$	5.22		$	5.60		$	5.58		$	5.47
Common shares outstanding		53,332,369			53,038,020			44,854,509			44,909,447			44,910,686
Weighted average dilutive common shares outstanding		52,704,537			52,599,584			44,322,428			44,287,019			44,301,895
Common Equity Tier 1 (CET1) capital	$	282,721		$	275,490		$	251,807		$	249,289		$	245,328
Tier 1 capital		307,736			300,354			268,605			265,917			261,596
Tier 2 capital		10,914			9,832			9,064			8,742			8,577
Total risk based capital		318,650			310,186			277,669			274,659			270,173
Risk weighted assets		2,538,461			2,478,547			1,939,417			1,887,065			1,844,540
Average assets for leverage ratio		3,058,742			3,076,505			2,441,811			2,434,376			2,359,401
Common Equity Tier 1 (CET1) ratio		11.14	%		11.11	%		12.98	%		13.21	%		13.30	%
Tier 1 ratio		12.12	%		12.12	%		13.85	%		14.09	%		14.18	%
Total risk based capital ratio		12.55	%		12.51	%		14.32	%		14.55	%		14.65	%
Tier 1 leverage ratio		10.06	%		9.76	%		11.00	%		10.92	%		11.09	%
Tangible common equity to tangible assets**		9.00	%		8.87	%		9.93	%		10.02	%		9.99	%
LIQUIDITY
Net loans to total deposits		93.64	%		90.85	%		88.74	%		86.88	%		87.95	%
Reliance on wholesale funding		16.25	%		15.50	%		16.77	%		16.02	%		18.45	%
INCOME STATEMENT (THREE MONTH RESULTS; ANNUALIZED)
Return on Average Assets		0.71	%		0.35	%		0.60	%		0.77	%		0.71	%
Return on Average Common Equity		6.33	%		3.16	%		5.26	%		6.71	%		6.10	%
Net interest margin (non-tax equivalent)		3.69	%		3.78	%		3.52	%		3.58	%		3.78	%

** Non-GAAP financial measure

Non-GAAP Financial Measures

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

PARK STERLING CORPORATION

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

($ in thousands, except per share amounts)  

	June 30,			March 31,			December 31,			September 30,			June 30,
	2016			2016			2015			2015			2015
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Adjusted net income
Pretax income (as reported)	$	8,597		$	4,615		$	5,727		$	6,870		$	6,542
Plus: merger-related expenses		1,268			5,193			1,396			31			167
(gain) loss on sale of securities		87			6			-			(54	)		-
Adjusted pretax income		9,952			9,814			7,123			6,847			6,709
Tax expense		3,509			3,646			2,332			2,085			2,331
Adjusted net income	$	6,443		$	6,168		$	4,791		$	4,762		$	4,378
Divided by: weighted average diluted shares		52,704,537			52,599,584			44,322,428			44,287,019			44,301,895
Adjusted net income per share		0.12			0.12		$	0.11		$	0.11		$	0.10
Estimated tax rate for adjustment		34.26	%		34.09	%		32.75	%		32.56	%		34.75	%
Adjusted noninterest income
Noninterest income (as reported)	$	5,375		$	4,727		$	4,523		$	4,927		$	4,292
Less: (gain) loss on sale of securities		87			6			-			(54	)		-
Adjusted noninterest income	$	5,462		$	4,733		$	4,523		$	4,873		$	4,292
Adjusted noninterest expenses
Noninterest expenses (as reported)	$	21,946		$	26,153		$	18,362		$	18,419		$	18,232
Less: merger-related expenses		(1,268	)		(5,193	)		(1,396	)		(31	)		(167	)
Adjusted noninterest expenses	$	20,678		$	20,960		$	16,966		$	18,388		$	18,065
Adjusted operating expense
Noninterest expenses (as reported)	$	21,946		$	26,153		$	18,362		$	18,419		$	18,232
Less: merger-related expenses		(1,268	)		(5,193	)		(1,396	)		(31	)		(167	)
Less: amortization of intangibles		(458	)		(458	)		(347	)		(347	)		(347	)
Adjusted operating expense	$	20,220		$	20,502		$	16,619		$	18,041		$	17,718
Adjusted operating revenues
Net Interest Income (as reported)	$	26,050		$	26,597		$	19,975		$	20,362		$	20,616
Plus: noninterest income (as reported)		5,375			4,727			4,523			4,927			4,292
Less: (gain) loss on sale of securities		87			6			-			(54	)		-
Adjusted operating revenues	$	31,512		$	31,330		$	24,498		$	25,235		$	24,908
Adjusted operating expense to adjusted operating revenues
Adjusted operating expense	$	20,220		$	20,502		$	16,619		$	18,041		$	17,718
Divided by: adjusted operating revenues		31,512			31,330			24,498			25,235			24,908
Adjusted operating expense to adjusted operating revenues		64.17	%		65.44	%		67.84	%		71.49	%		71.13	%
Noninterest expenses to net interest income plus noninterest income		69.84	%		83.49	%		74.95	%		72.83	%		73.20	%
Adjusted return on average assets
Adjusted net income	$	6,443		$	6,168		$	4,791		$	4,762		$	4,378
Divided by: average assets		3,135,031			3,132,625			2,480,983			2,473,034			2,406,671
Multiplied by: annualization factor		4.02			4.02			3.97			3.97			4.01
Adjusted return on average assets		0.83	%		0.79	%		0.77	%		0.76	%		0.73	%
Return on average assets		0.71	%		0.35	%		0.60	%		0.77	%		0.71	%

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,
	2016			2016			2015			2015			2015
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Adjusted return on average equity
Adjusted net income	$	6,443		$	6,168		$	4,791		$	4,762		$	4,378
Divided by: average common equity		352,505			348,556			284,671			282,426			280,676
Multiplied by: annualization factor		4.02			4.02			3.97			3.97			4.01
Adjusted return on average equity		7.35	%		7.12	%		6.68	%		6.69	%		6.26	%
Return on average equity		6.33	%		3.16	%		5.26	%		6.71	%		6.10	%
Tangible common equity to tangible assets
Total assets	$	3,174,075		$	3,153,737		$	2,514,264		$	2,485,134		$	2,443,880
Less: intangible assets		(75,551	)		(76,520	)		(38,768	)		(39,115	)		(39,462	)
Tangible assets	$	3,098,524		$	3,077,217		$	2,475,496		$	2,446,019		$	2,404,418
Total common equity	$	354,450		$	349,511		$	284,704		$	284,205		$	279,743
Less: intangible assets		(75,551	)		(76,520	)		(38,768	)		(39,115	)		(39,462	)
Tangible common equity	$	278,899		$	272,991		$	245,936		$	245,090		$	240,281
Tangible common equity	$	278,899		$	272,991		$	245,936		$	245,090		$	240,281
Divided by: tangible assets		3,098,524			3,077,217			2,475,496			2,446,019			2,404,418
Tangible common equity to tangible assets		9.00	%		8.87	%		9.93	%		10.02	%		9.99	%
Common equity to assets		11.17	%		11.08	%		11.32	%		11.44	%		11.45	%
Tangible book value per share
Issued and outstanding shares		53,332,369			53,038,020			44,854,509			44,909,447			44,910,686
Less: nondilutive restricted stock awards		(969,991	)		(785,658	)		(959,305	)		(974,183	)		(985,531	)
Period end dilutive shares		52,362,378			52,252,362			43,895,204			43,935,264			43,925,155
Tangible common equity	$	278,899		$	272,991		$	245,936		$	245,090		$	240,281
Divided by: period end dilutive shares		52,362,378			52,252,362			43,895,204			43,935,264			43,925,155
Tangible common book value per share	$	5.33		$	5.22		$	5.60		$	5.58		$	5.47
Common book value per share	$	6.77		$	6.69		$	6.49		$	6.47		$	6.37
Adjusted return on average tangible common equity
Average common equity	$	352,505		$	348,556		$	284,671		$	282,426		$	280,676
Less: average intangible assets		(76,083	)		(74,773	)		(38,934	)		(39,284	)		(39,646	)
Average tangible common equity	$	276,422		$	273,783		$	245,737		$	243,142		$	241,030
Net income	$	5,552		$	2,741		$	3,775		$	4,778		$	4,269
Divided by: average tangible common equity		276,422			273,783			245,737			243,142			241,030
Multiplied by: annualization factor		4.02			4.02			3.97			3.97			4.01
Return on average tangible common equity		8.08	%		4.03	%		6.09	%		7.80	%		7.10	%
Adjusted net income	$	6,443		$	6,168		$	4,791		$	4,762		$	4,378
Divided by: average tangible common equity		276,422			273,783			245,737			243,142			241,030
Multiplied by: annualization factor		4.02			4.02			3.97			3.97			4.01
Adjusted return on average tangible common equity		9.37	%		9.06	%		7.74	%		7.77	%		7.29	%
Adjusted allowance for loan losses
Allowance for loan losses	$	10,873		$	9,832		$	9,064		$	8,742		$	8,468
Plus: acquisition accounting FMV adjustments to acquired loans		31,277			33,589			28,173			29,548			31,159
Adjusted allowance for loan losses	$	42,150		$	43,421		$	37,237		$	38,290		$	39,627
Divided by: total loans (excluding LHFS before FMV adjustments)	$	2,358,174		$	2,312,732		$	1,769,988		$	1,729,672		$	1,688,622
Adjusted allowance for loan losses to total loans		1.79	%		1.88	%		2.10	%		2.21	%		2.35	%
Allowance for loan losses to total loans		0.47	%		0.43	%		0.52	%		0.51	%		0.51	%

EX-99.2

Exhibit 99.2
 

EX-99.3

Exhibit 99.3

Park Sterling Corporation Announces Quarterly

Cash Dividend on Common Shares

Charlotte, NC – July 27, 2016 – Park Sterling Corporation (NASDAQ: PSTB), the holding company for Park Sterling Bank, today announced that its board of directors has declared a regular quarterly cash dividend to its common shareholders of $0.04 per common share, payable on August 23, 2016 to all shareholders of record as of the close of business on August 9, 2016. Any future dividends will be subject to board approval.

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 approximately $3.1 billion in assets, is the largest community bank headquartered in the Charlotte area and has 56 banking offices in the Carolinas, Virginia and North Georgia. 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.

Forward-Looking Statements

This press release contains statements about future dividends that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and are subject to a number of factors that could cause actual events to differ materially from those anticipated, including without limitation future results of operations and financial condition, approval of the declaration of any quarterly dividend by Park Sterling’s Board of Directors and the precautionary statements included in Park Sterling’s filings with the SEC, including without limitation the “Risk Factors” section of its Form 10-K. Park Sterling undertakes no obligation to update publicly any forward-looking statements.

###

For additional information contact:

Donald K. Truslow

Chief Financial Officer

(704) 716-2134

don.truslow@parksterlingbank.com