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):  January 25, 2017

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 January 26, 2017, Park Sterling Corporation (“Park Sterling”) announced its financial results for the third quarter ended December 31, 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 January 26, 2016, Park Sterling will hold an investor conference call to disclose its financial results for the fourth quarter ended December 31, 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 January 26, 2017, 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 January 25, 2017, 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 February 7, 2017 to all common shareholders of record as of the close of business on February 22, 2017. 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 January 26, 2017, with respect to Park Sterling’s financial results for the third quarter ended December 31, 2016
99.2	Slide Package prepared for use in connection with Park Sterling’s conference call to be held on January 26, 2017
99.3	Press Release, dated January 25, 2017, with respect to declaration of dividend

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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: January 26, 2017

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

EXHIBIT INDEX

Exhibit No.	Exhibit Description
99.1	Press Release, dated January 26, 2017, with respect to Park Sterling’s financial results for the fourth quarter ended December 31, 2016
99.2	Slide Package prepared for use in connection with Park Sterling’s conference call to be held on January 26, 2017
99.3	Press Release, dated January 25, 2017, 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 Fourth Quarter 2016

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

Three Month Highlights

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

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

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

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

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

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

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

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

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

● Credit quality remained strong

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

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

Twelve Month Highlights

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

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

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

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

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Financial Results

Income Statement – Three Months Ended December 31, 2016

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

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

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

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

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

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

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

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

Income Statement – Twelve Months Ended December 31, 2016

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

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

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

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

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

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

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Balance Sheet

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

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

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

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

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

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

Asset Quality

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

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

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* * * * * * *

Conference Call

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

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

About Park Sterling Corporation

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

Non-GAAP Financial Measures

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

Cautionary Statement Regarding Forward Looking Statements

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

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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.

###

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)  

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

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PARK STERLING CORPORATION

CONDENSED CONSOLIDATED INCOME STATEMENT

TWELVE MONTH RESULTS

($ in thousands, except per share amounts) 

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

* Derived from audited financial statements.

8

PARK STERLING CORPORATION

WEALTH MANAGEMENT ASSETS

($ in thousands)

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

PARK STERLING CORPORATION

MORTGAGE ORIGINATION

($ in thousands)

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

9

PARK STERLING CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in thousands)  

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

* Derived from audited financial statements.

10

PARK STERLING CORPORATION

SUMMARY OF LOAN PORTFOLIO

($ in thousands)

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

* Derived from audited financial statements.

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

* Derived from audited financial statements.

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

PARK STERLING CORPORATION

ALLOWANCE FOR LOAN LOSSES

THREE MONTH RESULTS

($ in thousands) 

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

* Derived from audited financial statements.

11

PARK STERLING CORPORATION

ACQUIRED LOANS

($ in thousands)

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

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

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

* Derived from audited financial statements.

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

12

PARK STERLING CORPORATION

AVERAGE BALANCE SHEETS AND NET INTEREST ANALYSIS

THREE MONTHS

($ in thousands) 

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

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

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

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

13

PARK STERLING CORPORATION

AVERAGE BALANCE SHEETS AND NET INTEREST ANALYSIS

TWELVE MONTHS

($ in thousands) 

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

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

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

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

14

PARK STERLING CORPORATION

SELECTED RATIOS

($ in thousands, except per share amounts) 

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

** Non-GAAP financial measure

15

Non-GAAP Financial Measures

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

PARK STERLING CORPORATION

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

($ in thousands, except per share amounts)  

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

16

PARK STERLING CORPORATION

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

($ in thousands, except per share amounts)  

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

17

EX-99.2

Exhibit 99.2

EX-99.3

Exhibit 99.3

 

Park Sterling Corporation Announces Quarterly

Cash Dividend on Common Shares 

Charlotte, NC – January 25, 2017 – 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 February 22, 2017 to all shareholders of record as of the close of business on February 7, 2017. 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 $3.3 billion in assets, is the largest community bank headquartered in the Charlotte area and has 55 banking offices stretching across the Carolinas and into North Georgia, as well as in Richmond, Virginia. The bank serves professionals, individuals, and small and mid-sized businesses by offering a full array of financial services, including deposit, mortgage banking, cash management, consumer and business finance, capital markets and wealth management services with a commitment to “Answers You Can Bank On^SM.” Park Sterling prides itself on being large enough to help customers achieve their financial aspirations, yet small enough to care that they do. Park Sterling is focused on building a banking franchise that is noted for sound risk management, strong community focus and exceptional customer service. For more information, visit www.parksterlingbank.com. Park Sterling Corporation shares are traded on NASDAQ under the symbol PSTB.

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