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):  October 26, 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 October 27, 2016, Park Sterling Corporation (“Park Sterling”) announced its financial results for the third quarter ended September 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 October 27, 2016, Park Sterling will hold an investor conference call to disclose its financial results for the third quarter ended September 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 October 27, 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.

On October 26, 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 November 22, 2016 to all common shareholders of record as of the close of business on November 8, 2016. Future dividends will be subject to Board approval.

Park Sterling also announced that its board of directors approved a new share repurchase program that authorizes the company to purchase up to 2.65 million common shares. The share repurchase authorization, which replaces the existing share repurchase authorization expiring November 1, 2016, extends through November 1, 2018 and permits the company to effect the repurchases from time to time through a combination of open market repurchases, privately negotiated transactions, accelerated share repurchase transactions, and other derivative transactions. 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 October 27, 2016, with respect to Park Sterling’s financial results for the third quarter ended September 30, 2016
99.2	Slide Package prepared for use in connection with Park Sterling’s conference call to be held on October 27, 2016
99.3	Press Release, dated October 26, 2016, with respect to declaration of dividend and with respect to authorization of share repurchase program

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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: October 27, 2016

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

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EXHIBIT INDEX

Exhibit No.	Exhibit Description
99.1	Press Release, dated October 27, 2016, with respect to Park Sterling’s financial results for the third quarter ended September 30, 2016
99.2	Slide Package prepared for use in connection with Park Sterling’s conference call to be held on October 27, 2016
99.3	Press Release, dated October 26, 2016, with respect to declaration of dividend and with respect to authorization of share repurchase program

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EX-99.1

Exhibit 99.1

Park Sterling Corporation Announces

Results for Third Quarter 2016

Charlotte, NC – October 27, 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 third quarter of 2016. Highlights at and for the three months ended September 30, 2016 include:

Highlights

● Net income of $6.3 million, or $0.12 per share, compared to $5.6 million, or $0.11 per share, in the quarter ended June 30, 2016

● Adjusted net income, which excludes merger-related expenses and gain or loss on sale of securities, increased $869 thousand (13%) to $7.3 million, or $0.14 per share, compared to $6.4 million, or $0.12 per share, in the prior quarter

● Noninterest income held steady following strong growth in the second quarter of 2016 with good growth in deposit service charges and mortgage banking income

● Noninterest expenses declined 4% from the second quarter of 2016, driven in part by continued disciplined expense management and the achievement of the remaining cost savings realized from the merger with First Capital Bancorp, Inc. (“First Capital”)

● Average loans, excluding loans held for sale, showed steady growth at an 8% annualized growth rate over the second quarter of 2016.

● Credit quality remained strong

● Capital levels remained strong with Tier 1 leverage ratio of 10.06%

● Completed the early termination of loss share agreements with the FDIC on August 26, 2016

● The Board of Directors declared a quarterly cash dividend on common shares of $0.04 per share and authorized a new share repurchase program

“We are pleased with our results for the third quarter of 2016,” said James C. Cherry, Chief Executive Officer. “Our priorities for 2016 have included achieving attractive earnings growth accompanied by steadily improving returns, as demonstrated by our financial performance in the quarter. We believe that Park Sterling’s distinguishing strengths will enable us to achieve our original vision of building a full service, highly regarded regional community bank serving markets in the Carolinas, Virginia, and North Georgia. These distinguishing strengths include our position in high growth markets, our exceptionally talented and experienced banking professionals, our capabilities in offering high quality products and services to our customers, strong risk culture, and solid financial condition.”

Financial Results

Income Statement – Three Months Ended September 30, 2016

Park Sterling reported net income of $6.3 million, or $0.12 per share, for the three months ended September 30, 2016 (“2016Q3”). This compares to net income of $5.6 million, or $0.11 per share, for the three months ended June 30, 2016 (“2016Q2”) and net income of $4.8 million, or $0.11 per share, for the three months ended September 30, 2015 (“2015Q3”). The increase in net income from 2016Q2 resulted from reduced expenses across most categories of noninterest expense and lower expenses for loan losses reflecting strong credit quality. The increase in net income from 2015Q3 resulted from an increase in net interest income, partially offset by an increase in noninterest expenses, reflecting the inclusion of First Capital.   

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Park Sterling reported adjusted net income, which excludes merger-related expenses and gain or loss on sale of securities, of $7.3 million, or $0.14 per share, in 2016Q3. This compares to adjusted net income of $6.4 million, or $0.12 per share, in 2016Q2 and adjusted net income of $4.7 million, or $0.11 per share, in 2015Q3. Compared to 2016Q2, the increase in adjusted net income reflects lower noninterest expense and a lower provision for loan losses; compared to 2015Q3, the increase in adjusted net income reflects higher net interest income and noninterest income, partially offset by increased noninterest expense.

Net interest income totaled $25.8 million in 2016Q3, which represents a $227 thousand, or 1%, decrease from $26.1 million in 2016Q2 and a $5.8 million, or 27%, increase from $20.4 million in 2015Q3. Average total earning assets increased $57.0 million in 2016Q3 to $2.90 billion, compared to $2.84 billion in 2016Q2 and increased $643.9 million, or 29%, compared to $2.26 billion in 2015Q3. The increase in average total earning assets in 2016Q3 from 2016Q2 included an increase in average loans (including loans held for sale) of $49.7 million, or 2%, a decrease in average marketable securities of $.4 million, and an increase in average other interest-earning assets of $7.7 million, or 16%. The increase in average total earning assets in 2016Q3 from 2015Q3 resulted primarily from a $667.3 million, or 40%, increase in average loans (including loans held for sale) as a result of both organic growth and the merger with First Capital, partially offset by a $9.0 million, or 2%, decrease in average marketable securities and a $14.4 million, or 21%, decrease in average other earning assets.

Net interest margin was 3.54% in 2016Q3, representing a 15 basis point decrease from 3.69% in 2016Q2 and a 4 basis point decrease from 3.58% in 2015Q3. The decrease in net interest margin from 2016Q2 resulted primarily from a 19 basis point decrease in yield on loans to 4.49%, as the yield on loans in 2016Q2 included a higher level of accretion of the acquired performing fair value mark related to the acquisition of First Capital loans, as well as accretion tied to acquired loans related to other mergers. In addition, the cost of interest-bearing liabilities decreased 2 basis points from 2016Q2 due to a reduction in the cost of wholesale funding sources and a modest decline in the cost of money market deposits. The reduction in net interest margin from 2015Q3 was 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 $642,000 of provision expense in 2016Q3, compared to $882,000 of provision recorded in 2016Q2, and no provision in 2015Q3. Allowance for loan loss levels increased to 0.49% of total loans at 2016Q3 compared to 0.47% at 2016Q2.

Noninterest income totaled $5.4 million in 2016Q3, compared to $5.4 million in 2016Q2 and increased $520 thousand, or 11%, compared to $4.9 million in 2015Q3. Compared to 2016Q2, service charges on deposit accounts and mortgage banking income increased by $143 thousand and $142 thousand, respectively, while income from wealth management activities and FDIC loss share indemnification asset and true up liability expense was lower by $124 thousand and $114 thousand respectively. The increase in noninterest income from 2015Q3 reflects higher capital markets income, mortgage banking income and higher service charges on deposit accounts. Offsetting these increases from 2015Q3 are lower wealth management income and income from bank owned life insurance.

Noninterest expenses decreased $834 thousand, or 4%, to $21.1 million in 2016Q3 compared to $21.9 million in 2016Q2, and increased $2.7 million, or 15%, compared to $18.4 million in 2015Q3. Adjusted noninterest expenses, which exclude merger-related expenses ($1.5 million in 2016Q3, $1.3 million in 2016Q2 and $31 thousand in 2015Q3), decreased $1.1 million, or 5%, to $19.6 million in 2016Q3 compared to $20.7 million in 2016Q2, and increased $1.2 million, or 7%, compared to $18.4 million in 2015Q3. The decrease in adjusted noninterest expenses from 2016Q2 was due primarily to decreases of $322 thousand in salaries and employee benefits, $243 thousand in advertising and promotion and $409 thousand in other noninterest expense. The other notable decrease was a $162 thousand decrease in the net cost of operation of OREO, which was caused primarily by the termination of the FDIC loss share agreements. Offsetting these decreases was a $156 thousand increase in loan and collection expense, reflecting in part the termination of the FDIC loss share agreements, and modest increases in occupancy and equipment, legal and professional fees and communication fees. The increase in adjusted noninterest expenses from 2015Q3 is primarily a function of the merger with First Capital.

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The Company’s effective tax rate was 33.5% in 2016Q3, compared to 35.4% in 2016Q2 and 30.5% in 2015Q3. The decline in the effective tax rate was caused by changes in the proportion of permanent tax differences to pretax income.

Balance Sheet

Total assets increased $52.9 million, or 2%, to $3.2 billion at 2016Q3, as compared to total assets of $3.2 billion at 2016Q2. Total securities, including non-marketable securities, increased $11.0 million, to $520.7 million. Total loans, excluding loans held for sale, increased $42.1 million, or 7% annualized, to $2.4 billion at 2016Q3.

The mix of commercial and consumer loans remained consistent with 2016Q2. Total commercial loans increased $36.8 million and represent 78% of the loan portfolio. Acquisition, construction and development loans increased $38.6 million and represent 15% of the portfolio. Total consumer loans increased $42.9 million and remain flat as a percentage of total loans at 22% of the portfolio.

Total deposits increased $10.9 million, or 2% annualized, to $2.5 billion at 2016Q3. Noninterest bearing demand deposits increased $9.4 million, or 8% annualized, to $505.6 million (20% of total deposits). Money market, NOW and savings deposits were level with 2016Q2 and represent 49% of total deposits. Time deposits increased $1.8 million to $750.0 million at 2016Q3.

Total borrowings increased $45.2 million, or 15%, to $343.1 million at 2016Q3 compared to $297.8 million at 2016Q2. At 2016Q3, FHLB borrowings totaled $280.0 million, the senior unsecured term loan at the holding company totaled $29.7 million, and acquired trust preferred securities, net of acquisition accounting fair value marks, totaled $33.3 million.  Short term FHLB borrowings increased by $80.0 million from 2016Q2 to $280.0 million due to $35 million of long term debt being reclassified as short term debt, as the maturity date of these borrowings at 2016Q3 was less than one year to maturity, with the remainder of the increase funding balance sheet growth during the period.

Total shareholders’ equity increased $4.2 million, or 1%, to $358.7 million at 2016Q3 compared to $354.5 million at 2016Q2, driven by an increase in retained earnings. The Company’s ratio of common equity to assets was 11.12% at 2016Q3 compared to 11.17% at 2016Q2. The Company’s ratio of tangible common equity to tangible assets remained at 9.00% at both 2016Q3 and 2016Q2. The Company’s Common Equity Tier 1 (“CET1”) ratio decreased to 11.07% at 2016Q3 compared to 11.14% at 2016Q2 due to an increase in risk weighted assets. The Company’s Tier 1 leverage ratio was 10.06% at both 2016Q3 and 2016Q2.

Asset Quality

Asset quality continues to remain strong. Nonperforming assets were $14.2 million at 2016Q3, or 0.44% of total assets, compared to $11.0 million at 2016Q2, or 0.35% of total assets. Nonperforming loans were $11.5 million at 2016Q3, and represented 0.48% of total loans, compared to $7.8 million at 2016Q2, or 0.33% of total loans. The increase in nonperforming loans reflects the addition of two loans that are well secured and currently are not expected to result in a loss. The Company reported net recoveries of $97 thousand, or 0.02% of average loans (annualized) in 2016Q3, compared to net recoveries of $159 thousand, or 0.03% of average loans (annualized), in 2016Q2.

The allowance for loan losses increased $739 thousand, or 7%, to $11.6 million, or 0.49% of total loans, at 2016Q3, compared to $10.9 million, or 0.47% of total loans, at 2016Q2. The increase in allowance is primarily attributable to the increase in outstanding loans at period end. There was no significant change in the qualitative component of the allowance, which reflects management’s judgment of inherent loss in the loan portfolio not represented in historic loss rates.

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* * * * * * *

Conference Call

A conference call will be held at 8:30 a.m., Eastern Time this morning (October 27, 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 10094052.

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: 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; 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.

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

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For additional information contact:

Donald K. Truslow

Chief Financial Officer

(704) 716-2134

don.truslow@parksterlingbank.com

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PARK STERLING CORPORATION

CONDENSED CONSOLIDATED INCOME STATEMENT

THREE MONTH RESULTS 

($ in thousands, except per share amounts)	September 30,			June 30,			March 31,			December 31,			September 30,
	2016			2016			2016			2015			2015
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Interest income
Loans, including fees	$	26,521		$	26,729		$	27,124		$	19,284		$	19,475
Taxable investment securities		2,583			2,640			2,687			2,677			2,636
Tax-exempt investment securities		137			137			147			146			152
Nonmarketable equity securities		151			153			154			109			142
Interest on deposits at banks		51			34			42			22			23
Federal funds sold		1			5			8			1			1
Total interest income		29,444			29,698			30,162			22,239			22,429
Interest expense
Money market, NOW and savings deposits		953			1,014			1,017			743			654
Time deposits		1,447			1,449			1,398			903			841
Short-term borrowings		345			251			294			205			90
Long-term debt		379			440			410			55			134
Subordinated debt		497			494			446			358			348
Total interest expense		3,621			3,648			3,565			2,264			2,067
Net interest income		25,823			26,050			26,597			19,975			20,362
Provision for loan losses		642			882			556			409			-
Net interest income after provision		25,181			25,168			26,041			19,566			20,362
Noninterest income
Service charges on deposit accounts		1,671			1,528			1,489			1,439			1,370
Mortgage banking income		1,015			873			775			699			700
Income from wealth management activities		739			863			803			887			947
Income from capital market activities		680			767			68			437			238
ATM and card income		730			776			573			647			537
Income from bank-owned life insurance		532			526			988			371			1,058
Gain (loss) on sale of securities available for sale		-			(87	)		(6	)		-			54
Amortization of indemnification asset and true-up liability expense		(139	)		(25	)		(147	)		(165	)		(162	)
Other noninterest income		219			154			184			208			185
Total noninterest income		5,447			5,375			4,727			4,523			4,927
Noninterest expenses
Salaries and employee benefits		11,755			11,774			13,018			9,541			9,952
Occupancy and equipment		3,111			3,041			3,125			2,680			2,591
Data processing and outside service fees		2,331			2,224			5,523			1,669			1,668
Legal and professional fees		978			950			725			1,471			472
Deposit charges and FDIC insurance		405			478			432			413			401
Loss on disposal of fixed assets		144			230			44			50			597
Communication fees		532			505			483			480			501
Postage and supplies		115			191			173			99			123
Loan and collection expense		425			273			37			194			151
Core deposit intangible amortization		458			458			458			347			347
Advertising and promotion		44			367			421			271			313
Net cost of operation of other real estate owned		(92	)		70			266			(23	)		163
Other noninterest expense		906			1,385			1,448			1,170			1,140
Total noninterest expenses		21,112			21,946			26,153			18,362			18,419
Income before income taxes		9,516			8,597			4,615			5,727			6,870
Income tax expense		3,192			3,045			1,874			1,952			2,092
Net income	$	6,324		$	5,552		$	2,741		$	3,775		$	4,778
Earnings per common share, fully diluted	$	0.12		$	0.11		$	0.05		$	0.09		$	0.11
Weighted average diluted common shares		52,743,928			52,704,537			52,599,584			44,322,428			44,287,019

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PARK STERLING CORPORATION

CONDENSED CONSOLIDATED INCOME STATEMENT

NINE MONTH RESULTS

($ in thousands, except per share amounts)	September 30,			September 30,
	2016			2015
	(Unaudited)			(Unaudited)
Interest income
Loans, including fees	$	80,374		$	58,253
Taxable investment securities		7,910			7,935
Tax-exempt investment securities		421			433
Nonmarketable equity securities		458			391
Interest on deposits at banks		127			60
Federal funds sold		14			1
Total interest income		89,304			67,073
Interest expense
Money market, NOW and savings deposits		2,984			1,706
Time deposits		4,294			2,299
Short-term borrowings		890			241
Long-term debt		1,229			394
Subordinated debt		1,437			1,027
Total interest expense		10,834			5,667
Net interest income		78,470			61,406
Provision for loan losses		2,080			314
Net interest income after provision		76,390			61,092
Noninterest income
Service charges on deposit accounts		4,688			3,495
Mortgage banking income		2,663			2,607
Income from wealth management activities		2,405			2,715
Income from capital market activities		1,515			1,030
ATM and card income		2,079			1,860
Income from bank-owned life insurance		2,046			2,379
Gain (loss) on sale of securities available for sale		(93	)		54
Amortization of indemnification asset and true-up liability expense		(311	)		(721	)
Other noninterest income		557			301
Total noninterest income		15,549			13,720
Noninterest expenses
Salaries and employee benefits		36,547			30,404
Occupancy and equipment		9,277			7,638
Data processing and outside service fees		10,078			4,956
Legal and professional fees		2,653			1,930
Deposit charges and FDIC insurance		1,315			1,226
Loss on disposal of fixed assets		418			946
Communication fees		1,520			1,619
Postage and supplies		479			389
Loan and collection expense		735			547
Core deposit intangible amortization		1,374			1,042
Advertising and promotion		832			991
Net cost of operation of other real estate owned		244			430
Other noninterest expense		3,739			3,673
Total noninterest expenses		69,211			55,791
Income before income taxes		22,728			19,021
Income tax expense		8,111			6,190
Net income	$	14,617		$	12,831
Earnings per common share, fully diluted	$	0.28		$	0.29
Weighted average diluted common shares		52,674,316			44,294,191

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PARK STERLING CORPORATION

WEALTH MANAGEMENT ASSETS

($ in thousands)

	September 30,		June 30,		March 31,		December 31,		September 30,
	2016		2016		2016		2015		2015
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Discretionary assets held	$	294,849	$	322,996	$	339,198	$	434,346	$	425,229
Non-discretionary assets held		28,476		32,173		31,174		32,289		32,152
Total wealth management assets	$	323,325	$	355,169	$	370,372	$	466,635	$	457,381

PARK STERLING CORPORATION

MORTGAGE ORIGINATION

($ in thousands)

	September 30,		June 30,		March 31,		December 31,		September 30,
	2016		2016		2016		2015		2015
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Mortgage origination - purchase	$	21,982	$	25,316	$	14,656	$	16,101	$	20,063
Mortgage origination - refinance		20,552		16,221		13,430		10,049		15,101
Mortgage origination - construction		20,051		18,403		14,764		18,746		20,452
Total mortgage origination	$	62,585	$	59,941	$	42,850	$	44,896	$	55,616

8

PARK STERLING CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in thousands)	September 30,			June 30,			March 31,			December 31,			September 30,
	2016			2016			2016			2015*			2015
	(Unaudited)			(Unaudited)			(Unaudited)						(Unaudited)
ASSETS
Cash and due from banks	$	35,066		$	33,348		$	34,038		$	53,840		$	16,096
Interest-earning balances at banks		38,540			34,955			47,143			16,451			41,230
Investment securities available for sale		405,010			393,131			396,863			384,934			401,820
Investment securities held to maturity		99,415			102,125			104,459			106,458			109,072
Nonmarketable equity securities		16,289			14,420			13,118			11,366			11,377
Federal funds sold		345			1,570			11,271			235			920
Loans held for sale		15,203			11,967			7,593			4,943			5,145
Loans - Non-covered		2,368,950			2,311,775			2,262,294			1,724,164			1,681,227
Loans - Covered		-			15,122			16,849			17,651			18,897
Allowance for loan losses		(11,612	)		(10,873	)		(9,832	)		(9,064	)		(8,742	)
Net loans		2,357,338			2,316,024			2,269,311			1,732,751			1,691,382
Premises and equipment, net		64,632			65,711			65,494			55,658			56,948
FDIC receivable for loss share agreements		-			1,164			1,477			943			1,190
Other real estate owned - non-covered		2,730			2,866			3,425			4,211			7,087
Other real estate owned - covered		-			380			985			1,240			1,056
Bank-owned life insurance		70,167			69,695			69,202			58,633			58,286
Deferred tax asset		26,947			28,985			30,088			28,971			29,711
Goodwill		63,030			63,197			63,707			29,197			29,197
Core deposit intangible		11,896			12,354			12,813			9,571			9,918
Other assets		20,330			22,183			22,750			14,862			14,699
Total assets	$	3,226,938		$	3,174,075		$	3,153,737		$	2,514,264		$	2,485,134
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand noninterest-bearing	$	505,591		$	496,195		$	469,046		$	350,836		$	370,815
Money market, NOW and savings		1,228,687			1,229,040			1,255,848			1,062,046			1,041,502
Time deposits		749,999			748,188			773,089			539,780			534,541
Total deposits		2,484,277			2,473,423			2,497,983			1,952,662			1,946,858
Short-term borrowings		280,000			200,000			170,000			185,000			130,000
Long-term debt		29,725			64,714			65,000			30,000			55,000
Subordinated debt		33,339			33,176			33,014			24,262			24,092
Accrued expenses and other liabilities		40,901			48,312			38,229			37,636			44,979
Total liabilities		2,868,242			2,819,625			2,804,226			2,229,560			2,200,929
Shareholders' equity:
Common stock		53,306			53,332			53,038			44,854			44,909
Additional paid-in capital		275,323			275,246			274,706			222,596			222,587
Retained earnings		29,409			25,219			21,263			20,117			17,692
Accumulated other comprehensive income (loss)		658			653			504			(2,863	)		(983	)
Total shareholders' equity		358,696			354,450			349,511			284,704			284,205
Total liabilities and shareholders' equity	$	3,226,938		$	3,174,075		$	3,153,737		$	2,514,264		$	2,485,134
Common shares issued and outstanding		53,305,834			53,332,369			53,038,020			44,854,509			44,909,447

* Derived from audited financial statements.

9

PARK STERLING CORPORATION

SUMMARY OF LOAN PORTFOLIO

($ in thousands)

	September 30,		June 30,		March 31,		December 31,		September 30,
	2016		2016		2016		2015*		2015
BY LOAN TYPE	(Unaudited)		(Unaudited)		(Unaudited)				(Unaudited)
Commercial:
Commercial and industrial	$	351,506	$	334,644	$	334,027	$	246,907	$	211,741
Commercial real estate (CRE) - owner-occupied		366,506		376,440		374,428		331,222		328,327
CRE - investor income producing		768,513		764,168		723,539		506,110		514,118
Acquisition, construction and development (AC&D) - 1-4 Family Construction		108,706		100,604		97,614		32,262		27,299
AC&D - Lots and land		88,620		94,686		88,492		44,411		47,948
AC&D - CRE construction		148,696		125,466		136,561		87,452		85,643
Other commercial		10,653		10,410		10,167		8,601		8,830
Total commercial loans		1,843,200		1,806,418		1,764,828		1,256,965		1,223,906
Consumer:
Residential mortgage		254,298		244,063		235,737		223,884		224,110
Home equity lines of credit		181,246		181,020		177,594		157,378		157,430
Residential construction		63,847		65,867		71,117		72,170		66,823
Other loans to individuals		23,281		26,575		27,245		28,817		24,896
Total consumer loans		522,672		517,525		511,693		482,249		473,259
Total loans		2,365,872		2,323,943		2,276,521		1,739,214		1,697,165
Deferred costs (fees)		3,078		2,954		2,622		2,601		2,959
Total loans, net of deferred costs (fees)	$	2,368,950	$	2,326,897	$	2,279,143	$	1,741,815	$	1,700,124

* Derived from audited financial statements.

	September 30,		June 30,		March 31,		December 31,		September 30,
	2016		2016		2016			2015*		2015
BY ACQUIRED AND NON-ACQUIRED	(Unaudited)		(Unaudited)		(Unaudited)				(Unaudited)
Acquired loans - performing	$	599,840	$	661,930	$	726,025	$	279,949	$	300,102
Acquired loans - purchase credit impaired		90,571		98,672		106,105		94,917		102,537
Total acquired loans		690,411		760,602		832,130		374,866		402,639
Non-acquired loans, net of deferred costs (fees)**		1,678,539		1,566,295		1,447,013		1,366,949		1,297,485
Total loans	$	2,368,950	$	2,326,897	$	2,279,143	$	1,741,815	$	1,700,124

* 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)	September 30,			June 30,			March 31,			December 31,			September 30,
	2016			2016			2016			2015*			2015
	(Unaudited)			(Unaudited)			(Unaudited)						(Unaudited)
Beginning of period allowance	$	10,873		$	9,832		$	9,064		$	8,742		$	8,468
Loans charged-off		(156	)		(94	)		(82	)		(237	)		(121	)
Recoveries of loans charged-off		253			253			294			150			415
Net charge-offs		97			159			212			(87	)		294
Provision expense		642			882			556			409			-
Benefit attributable to FDIC loss share agreements		-			-			-			-			-
Total provision expense charged to operations		642			882			556			409			-
Provision expense recorded through FDIC loss share receivable		-			-			-			-			(20	)
End of period allowance	$	11,612		$	10,873		$	9,832		$	9,064		$	8,742
Net charge-offs (recoveries)	$	(97	)	$	(159	)	$	(212	)	$	87		$	(294	)
Net charge-offs (recoveries) to average loans (annualized)		-0.02	%		-0.03	%		-0.04	%		0.02	%		-0.07	%

* Derived from audited financial statements.

10

PARK STERLING CORPORATION

ACQUIRED LOANS

($ in thousands)

	September 30,			June 30,			March 31,			December 31,			September 30,
ACQUIRED LOANS AND FAIR MARKET VALUE (FMV) ADJUSTMENTS	2016			2016			2016			2015*			2015
	(Unaudited)			(Unaudited)			(Unaudited)						(Unaudited)
Non-acquired loans	$	1,678,539		$	1,566,295		$	1,447,013		$	1,366,949		$	1,297,485
Purchased performing loans		604,000			666,894			732,075			282,081			302,296
Less: remaining FMV adjustments		(4,160	)		(4,964	)		(6,050	)		(2,132	)		(2,194	)
Purchased performing loans, net		599,840			661,930			726,025			279,949			300,102
Purchased credit impaired loans		115,736			124,985			133,644			120,957			129,890
Less: remaining FMV adjustments		(25,165	)		(26,313	)		(27,539	)		(26,040	)		(27,353	)
Purchased credit impaired loans, net		90,571			98,672			106,105			94,917			102,537
Total loans	$	2,368,950		$	2,326,897		$	2,279,143		$	1,741,815		$	1,700,124

	September 30,			June 30,			March 31,			December 31,			September 30,
PURCHASED PERFORMING FMV ADJUSTMENTS	2016			2016			2016			2015*			2015
	(Unaudited)			(Unaudited)			(Unaudited)						(Unaudited)
Beginning FMV adjustment	$	(4,964	)	$	(6,050	)	$	(2,132	)	$	(2,194	)	$	(2,450	)
Increase from First Capital		-			-			(5,200	)		-			-
Accretion to interest income:
First Capital		623			777			1,027			-			-
All other mergers		181			309			255			62			256
Ending FMV adjustment	$	(4,160	)	$	(4,964	)	$	(6,050	)	$	(2,132	)	$	(2,194	)

	September 30,			June 30,			March 31,			December 31,			September 30,
PCI FMV ADJUSTMENT	2016			2016			2016			2015*			2015
	(Unaudited)			(Unaudited)			(Unaudited)						(Unaudited)
Contractual principal and interest	$	136,393		$	143,701		$	153,124		$	140,269		$	152,098
Nonaccretable difference		(14,699	)		(14,652	)		(14,975	)		(12,843	)		(14,512	)
Expected cash flows as of the end of period		121,694			129,049			138,149			127,426			137,586
Accretable yield		(31,123	)		(30,377	)		(32,044	)		(32,509	)		(35,049	)
Ending basis in PCI loans- estimated fair value	$	90,571		$	98,672		$	106,105		$	94,917		$	102,537
Beginning accretable yield	$	(30,377	)	$	(32,044	)	$	(32,509	)	$	(35,049	)	$	(36,773	)
Increase from First Capital		-			-			(1,663	)		-			-
Loan system servicing income		1,532			1,434			1,551			1,437			1,525
Accretion to interest income		1,241			1,343			1,471			1,438			1,551
Reclass to (from) non-accretable yield		(2,691	)		(522	)		(993	)		(553	)		(897	)
Other adjustments		(828	)		(588	)		99			218			(455	)
Period end accretable yield**	$	(31,123	)	$	(30,377	)	$	(32,044	)	$	(32,509	)	$	(35,049	)

* 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.

11

PARK STERLING CORPORATION

AVERAGE BALANCE SHEETS AND NET INTEREST ANALYSIS

THREE MONTHS

($ in thousands)	September 30, 2016								September 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)	$	2,348,297		$	26,521		4.49	%	$	1,681,017		$	19,475		4.60	%
Fed funds sold		971			1		0.41	%		1,237			1		0.32	%
Taxable investment securities		483,815			2,583		2.14	%		491,586			2,636		2.14	%
Tax-exempt investment securities		14,013			137		3.91	%		15,248			152		3.99	%
Other interest-earning assets		53,088			202		1.51	%		67,215			165		0.97	%
Total interest-earning assets		2,900,184			29,444		4.04	%		2,256,303			22,429		3.94	%
Allowance for loan losses		(11,054	)							(8,724	)
Cash and due from banks		34,703								16,010
Premises and equipment		65,332								57,867
Goodwill		63,076								29,197
Intangible assets		12,120								10,087
Other assets		122,438								112,294
Total assets	$	3,186,799							$	2,473,034
Liabilities and shareholders' equity
Interest-bearing liabilities:
Interest-bearing demand	$	426,755		$	68		0.06	%	$	382,897		$	60		0.06	%
Savings and money market		744,930			777		0.41	%		564,187			530		0.37	%
Time deposits - core		653,937			1,179		0.72	%		467,547			719		0.61	%
Brokered deposits		156,867			376		0.95	%		138,655			186		0.53	%
Total interest-bearing deposits		1,982,489			2,400		0.48	%		1,553,286			1,495		0.38	%
Short-term borrowings		235,870			345		0.58	%		166,630			90		0.21	%
Long-term debt		29,718			379		5.07	%		55,000			134		0.97	%
Subordinated debt		33,262			497		5.94	%		24,003			348		5.75	%
Total borrowed funds		298,850			1,221		1.63	%		245,633			572		0.92	%
Total interest-bearing liabilities		2,281,339			3,621		0.63	%		1,798,919			2,067		0.46	%
Net interest rate spread					25,823		3.41	%					20,362		3.49	%
Noninterest-bearing demand deposits		502,158								359,800
Other liabilities		45,725								31,889
Shareholders' equity		357,577								282,426
Total liabilities and shareholders' equity	$	3,186,799							$	2,473,034
Net interest margin							3.54	%							3.58	%

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

(2) Interest income and yields for the three months ended September 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.

12

PARK STERLING CORPORATION

AVERAGE BALANCE SHEETS AND NET INTEREST ANALYSIS

NINE MONTHS

($ in thousands)	September 30, 2016								September 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)	$	2,307,380		$	80,374		4.65	%	$	1,642,736		$	58,253		4.74	%
Fed funds sold		3,894			14		0.48	%		812			1		0.16	%
Taxable investment securities		485,004			7,910		2.17	%		482,084			7,935		2.19	%
Tax-exempt investment securities		14,728			421		3.81	%		14,029			433		4.12	%
Other interest-earning assets		48,158			585		1.62	%		59,951			451		1.01	%
Total interest-earning assets		2,859,164			89,304		4.17	%		2,199,612			67,073		4.08	%
Allowance for loan losses		(10,296	)							(8,664	)
Cash and due from banks		35,488								16,432
Premises and equipment		65,956								58,706
Goodwill		62,881								29,216
Intangible assets		12,470								10,431
Other assets		125,951								115,664
Total assets	$	3,151,614							$	2,421,397
Liabilities and shareholders' equity
Interest-bearing liabilities:
Interest-bearing demand	$	426,659		$	235		0.07	%	$	400,776		$	198		0.07	%
Savings and money market		741,074			2,447		0.44	%		535,801			1,331		0.33	%
Time deposits - core		683,302			3,670		0.72	%		462,353			1,938		0.56	%
Brokered deposits		141,009			926		0.88	%		137,726			538		0.52	%
Total interest-bearing deposits		1,992,044			7,278		0.49	%		1,536,656			4,005		0.35	%
Short-term borrowings		197,043			890		0.60	%		155,641			241		0.21	%
Long-term debt		53,364			1,229		3.08	%		54,304			394		0.97	%
Subordinated debt		33,098			1,437		5.80	%		23,835			1,027		5.76	%
Total borrowed funds		283,505			3,556		1.68	%		233,780			1,662		0.95	%
Total interest-bearing liabilities		2,275,549			10,834		0.64	%		1,770,436			5,667		0.43	%
Net interest rate spread					78,470		3.54	%					61,406		3.65	%
Noninterest-bearing demand deposits		480,772								339,250
Other liabilities		42,396								31,267
Shareholders' equity		352,897								280,444
Total liabilities and shareholders' equity	$	3,151,614							$	2,421,397
Net interest margin							3.67	%							3.73	%

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

(2) Interest income and yields for the nine months ended September 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.

13

PARK STERLING CORPORATION

SELECTED RATIOS

($ in thousands, except per share amounts)	September 30,			June 30,			March 31,			December 31,			September 30,
	2016			2016			2016			2015			2015
	Unaudited			Unaudited			Unaudited			Unaudited			Unaudited
ASSET QUALITY
Nonaccrual loans	$	8,623		$	5,185		$	6,595		$	4,326		$	5,342
Troubled debt restructuring (and still accruing)		2,549			2,582			2,696			2,774			3,090
Past due 90 days plus (and still accruing)		293			-			293			1,151			47
Nonperforming loans		11,465			7,767			9,584			8,251			8,479
OREO		2,730			3,246			4,410			5,451			8,143
Nonperforming assets		14,195			11,013			13,994			13,702			16,622
Past due 30-59 days (and still accruing)		1,104			985			217			1,222			1,790
Past due 60-89 days (and still accruing)		2,558			5,800			499			1,340			3,753
Nonperforming loans to total loans		0.48	%		0.33	%		0.42	%		0.47	%		0.50	%
Nonperforming assets to total assets		0.44	%		0.35	%		0.44	%		0.54	%		0.67	%
Allowance to total loans		0.49	%		0.47	%		0.43	%		0.52	%		0.51	%
Allowance to nonperforming loans		101.28	%		139.99	%		102.59	%		109.85	%		103.10	%
Allowance to nonperforming assets		81.80	%		98.73	%		70.26	%		66.15	%		52.59	%
Past due 30-89 days (accruing) to total loans		0.15	%		0.29	%		0.03	%		0.15	%		0.33	%
Net charge-offs (recoveries) to average loans (annualized)		-0.02	%		-0.03	%		-0.04	%		0.02	%		-0.07	%
CAPITAL
Book value per common share	$	6.84		$	6.77		$	6.69		$	6.49		$	6.47
Tangible book value per common share**	$	5.41		$	5.33		$	5.22		$	5.60		$	5.58
Common shares outstanding		53,305,834			53,332,369			53,038,020			44,854,509			44,909,447
Weighted average dilutive common shares outstanding		52,743,928			52,704,537			52,599,584			44,322,428			44,287,019
Common Equity Tier 1 (CET1) capital	$	287,518		$	282,721		$	275,490		$	251,807		$	249,289
Tier 1 capital		312,781			307,736			300,354			268,605			265,917
Tier 2 capital		11,615			10,914			9,832			9,064			8,742
Total risk based capital		324,396			318,650			310,186			277,669			274,659
Risk weighted assets		2,596,463			2,538,461			2,478,547			1,939,417			1,887,065
Average assets for leverage ratio		3,108,707			3,058,742			3,076,505			2,441,811			2,434,376
Common Equity Tier 1 (CET1) ratio		11.07	%		11.14	%		11.11	%		12.98	%		13.21	%
Tier 1 ratio		12.05	%		12.12	%		12.12	%		13.85	%		14.09	%
Total risk based capital ratio		12.49	%		12.55	%		12.51	%		14.32	%		14.55	%
Tier 1 leverage ratio		10.06	%		10.06	%		9.76	%		11.00	%		10.92	%
Tangible common equity to tangible assets**		9.00	%		9.00	%		8.87	%		9.93	%		10.02	%
LIQUIDITY
Net loans to total deposits		94.89	%		93.64	%		90.85	%		88.74	%		86.88	%
Reliance on wholesale funding		17.65	%		16.25	%		15.50	%		16.77	%		16.02	%
INCOME STATEMENT (THREE MONTH RESULTS; ANNUALIZED)
Return on Average Assets		0.79	%		0.71	%		0.35	%		0.60	%		0.77	%
Return on Average Common Equity		7.04	%		6.33	%		3.16	%		5.26	%		6.71	%
Net interest margin (non-tax equivalent)		3.54	%		3.69	%		3.78	%		3.52	%		3.58	%

** Non-GAAP financial measure

14

Non-GAAP Financial Measures

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

PARK STERLING CORPORATION

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

($ in thousands, except per share amounts)

(as of or for the three month period ended)	September 30,			June 30,			March 31,			December 31,			September 30,
	2016			2016			2016			2015			2015
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Adjusted net income
Pretax income (as reported)	$	9,516		$	8,597		$	4,615		$	5,727		$	6,870
Plus: merger-related expenses		1,487			1,268			5,193			1,396			31
(gain) loss on sale of securities		-			87			6			-			(54	)
Adjusted pretax income		11,003			9,952			9,814			7,123			6,847
Tax expense		3,691			3,509			3,646			2,332			2,085
Adjusted net income	$	7,312		$	6,443		$	6,168		$	4,791		$	4,762
Divided by: weighted average diluted shares		52,743,928			52,704,537			52,599,584			44,322,428			44,287,019
Adjusted net income per share		0.14			0.12			0.12		$	0.11		$	0.11
Estimated tax rate for adjustment		33.54	%		34.26	%		34.09	%		32.75	%		32.56	%
Adjusted noninterest income
Noninterest income (as reported)	$	5,447		$	5,375		$	4,727		$	4,523		$	4,927
Less: (gain) loss on sale of securities		-			87			6			-			(54	)
Adjusted noninterest income	$	5,447		$	5,462		$	4,733		$	4,523		$	4,873
Adjusted noninterest expenses
Noninterest expenses (as reported)	$	21,112		$	21,946		$	26,153		$	18,362		$	18,419
Less: merger-related expenses		(1,487	)		(1,268	)		(5,193	)		(1,396	)		(31	)
Adjusted noninterest expenses	$	19,625		$	20,678		$	20,960		$	16,966		$	18,388
Adjusted operating expense
Noninterest expenses (as reported)	$	21,112		$	21,946		$	26,153		$	18,362		$	18,419
Less: merger-related expenses		(1,487	)		(1,268	)		(5,193	)		(1,396	)		(31	)
Less: amortization of intangibles		(458	)		(458	)		(458	)		(347	)		(347	)
Adjusted operating expense	$	19,167		$	20,220		$	20,502		$	16,619		$	18,041
Adjusted operating revenues
Net Interest Income (as reported)	$	25,823		$	26,050		$	26,597		$	19,975		$	20,362
Plus: noninterest income (as reported)		5,447			5,375			4,727			4,523			4,927
Less: (gain) loss on sale of securities		-			87			6			-			(54	)
Adjusted operating revenues	$	31,270		$	31,512		$	31,330		$	24,498		$	25,235
Adjusted operating expense to adjusted operating revenues
Adjusted operating expense	$	19,167		$	20,220		$	20,502		$	16,619		$	18,041
Divided by: adjusted operating revenues		31,270			31,512			31,330			24,498			25,235
Adjusted operating expense to adjusted operating revenues		61.30	%		64.17	%		65.44	%		67.84	%		71.49	%
Noninterest expenses to net interest income plus noninterest income		67.52	%		69.84	%		83.49	%		74.95	%		72.83	%
Adjusted return on average assets
Adjusted net income	$	7,312		$	6,443		$	6,168		$	4,791		$	4,762
Divided by: average assets		3,186,799			3,135,031			3,132,625			2,480,983			2,473,034
Multiplied by: annualization factor		3.98			4.02			4.02			3.97			3.97
Adjusted return on average assets		0.91	%		0.83	%		0.79	%		0.77	%		0.76	%
Return on average assets		0.79	%		0.71	%		0.35	%		0.60	%		0.77	%

15

PARK STERLING CORPORATION

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

($ in thousands, except per share amounts)

(as of or for the three month period ended)	September 30,			June 30,			March 31,			December 31,			September 30,
	2016			2016			2016			2015			2015
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Adjusted return on average equity
Adjusted net income	$	7,312		$	6,443		$	6,168		$	4,791		$	4,762
Divided by: average common equity		357,577			352,505			348,556			284,671			282,426
Multiplied by: annualization factor		3.98			4.02			4.02			3.97			3.97
Adjusted return on average equity		8.14	%		7.35	%		7.12	%		6.68	%		6.69	%
Return on average equity		7.04	%		6.33	%		3.16	%		5.26	%		6.71	%
Tangible common equity to tangible assets
Total assets	$	3,226,938		$	3,174,075		$	3,153,737		$	2,514,264		$	2,485,134
Less: intangible assets		(74,926	)		(75,551	)		(76,520	)		(38,768	)		(39,115	)
Tangible assets	$	3,152,012		$	3,098,524		$	3,077,217		$	2,475,496		$	2,446,019
Total common equity	$	358,696		$	354,450		$	349,511		$	284,704		$	284,205
Less: intangible assets		(74,926	)		(75,551	)		(76,520	)		(38,768	)		(39,115	)
Tangible common equity	$	283,770		$	278,899		$	272,991		$	245,936		$	245,090
Tangible common equity	$	283,770		$	278,899		$	272,991		$	245,936		$	245,090
Divided by: tangible assets		3,152,012			3,098,524			3,077,217			2,475,496			2,446,019
Tangible common equity to tangible assets		9.00	%		9.00	%		8.87	%		9.93	%		10.02	%
Common equity to assets		11.12	%		11.17	%		11.08	%		11.32	%		11.44	%
Tangible book value per share
Issued and outstanding shares		53,305,834			53,332,369			53,038,020			44,854,509			44,909,447
Less: nondilutive restricted stock awards		(837,561	)		(969,991	)		(785,658	)		(959,305	)		(974,183	)
Period end dilutive shares		52,468,273			52,362,378			52,252,362			43,895,204			43,935,264
Tangible common equity	$	283,770		$	278,899		$	272,991		$	245,936		$	245,090
Divided by: period end dilutive shares		52,468,273			52,362,378			52,252,362			43,895,204			43,935,264
Tangible common book value per share	$	5.41		$	5.33		$	5.22		$	5.60		$	5.58
Common book value per share	$	6.84		$	6.77		$	6.69		$	6.49		$	6.47
Adjusted return on average tangible common equity
Average common equity	$	357,577		$	352,505		$	348,556		$	284,671		$	282,426
Less: average intangible assets		(75,196	)		(76,083	)		(74,773	)		(38,934	)		(39,284	)
Average tangible common equity	$	282,381		$	276,422		$	273,783		$	245,737		$	243,142
Net income	$	6,324		$	5,552		$	2,741		$	3,775		$	4,778
Divided by: average tangible common equity		282,381			276,422			273,783			245,737			243,142
Multiplied by: annualization factor		3.98			4.02			4.02			3.97			3.97
Return on average tangible common equity		8.91	%		8.08	%		4.03	%		6.09	%		7.80	%
Adjusted net income	$	7,312		$	6,443		$	6,168		$	4,791		$	4,762
Divided by: average tangible common equity		282,381			276,422			273,783			245,737			243,142
Multiplied by: annualization factor		3.98			4.02			4.02			3.97			3.97
Adjusted return on average tangible common equity		10.30	%		9.37	%		9.06	%		7.74	%		7.77	%
Adjusted allowance for loan losses
Allowance for loan losses	$	11,612		$	10,873		$	9,832		$	9,064		$	8,742
Plus: acquisition accounting FMV adjustments to acquired loans		29,325			31,277			33,589			28,173			29,548
Adjusted allowance for loan losses	$	40,937		$	42,150		$	43,421		$	37,237		$	38,290
Divided by: total loans (excluding LHFS before FMV adjustments)	$	2,398,275		$	2,358,174		$	2,312,732		$	1,769,988		$	1,729,672
Adjusted allowance for loan losses to total loans		1.71	%		1.79	%		1.88	%		2.10	%		2.21	%
Allowance for loan losses to total loans		0.49	%		0.47	%		0.43	%		0.52	%		0.51	%

16 

EX-99.2

Exhibit 99.2

EX-99.3

Exhibit 99.3

Park Sterling Corporation Announces Quarterly

Cash Dividend on Common Shares and

Share Repurchase Program

Charlotte, NC – October 26, 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 November 22, 2016 to all shareholders of record as of the close of business on November 8, 2016. Any future dividends will be subject to board approval.

Park Sterling Corporation also announced today that its board of directors has authorized a new share repurchase program for up to 2.65 million common shares, or approximately 5% of the company’ s 53.3 million outstanding and issued common shares. This new share repurchase authorization, which replaces the existing share repurchase program expiring November 1, 2016, is effective through November 1, 2018 and permits the company to effect repurchases from time to time through a combination of open market repurchases, privately negotiated transactions, accelerated share repurchase transactions and other derivative transactions. The specific timing and amount of any repurchases will depend on a variety of factors, including general market conditions, the trading price of the stock, regulatory, legal and contractual requirements and the company’s financial performance. This repurchase program does not obligate the company to repurchase any particular number of shares. Park Sterling expects to fund any repurchases from cash on hand and internally generated funds.

James C. Cherry, Chief Executive Officer, stated, “The authorization of our new share repurchase program, along with the declared dividend, reflects the confidence our board of directors has in Park Sterling’s financial position and growth outlook, as well as their commitment to enhancing shareholder value. The intent of this program is to both help offset the potential dilutive effect of employee equity-based awards and to take advantage of opportunities to repurchase Park Sterling shares when doing so is believed to produce an attractive return for our shareholders relative to the company’s other investment opportunities.”

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.

Forward-Looking Statements
This press release contains "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 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 share repurchase authorization by the board of directors. You should not place undue reliance on any forward-looking statement and should consider the above uncertainties as well as 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