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):  April 26, 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))

  Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

  Emerging growth company ☐

  If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02. Results of Operations and Financial Condition.

On April 27, 2017, Park Sterling Corporation (“Park Sterling”) announced its financial results for the first quarter ended March 31, 2017.  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.

A copy of the slide presentation prepared by executive management in connection with Park Sterling’s release of its financial results for the quarter ended March 31, 2017 is furnished as Exhibit 99.2. All of the information in the presentation is presented as of April 27, 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 April 26, 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 May 25, 2017 to all common shareholders of record as of the close of business on May 9, 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 April 27, 2017, with respect to Park Sterling’s financial results for the first quarter ended March 31, 2017
99.2	Slide Presentation relating to Park Sterling’s financial results for the first quarter ended March 31, 2017
99.3	Press Release, dated April 26, 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: April 27, 2017

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 April 27, 2017, with respect to Park Sterling’s financial results for the first quarter ended March 31, 2017
99.2	Slide Presentation relating to Park Sterling’s financial results for the first quarter ended March 31, 2017
99.3	Press Release, dated April 26, 2017, with respect to declaration of dividend

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EX-99.1

Exhibit 99.1

Park Sterling Corporation Announces

Results for First Quarter 2017

Charlotte, NC – April 27, 2017 – Park Sterling Corporation (NASDAQ: PSTB), the holding company for Park Sterling Bank, today released unaudited results of operations and other financial information for the first quarter of 2017. In a separate press release, Park Sterling and South State Corporation (NASDAQ: SSB) jointly announced the signing of a definitive merger agreement. South State Corporation will host a conference call to discuss the transaction at 10:00 a.m. EST on Thursday, April 27, 2017. Callers wishing to participate may call toll-free by dialing (877) 506-9272. The number for international participants is (412) 380-2004. The conference ID number is 10087433. Please note that this call will be in lieu of the previously announced Park Sterling earnings call originally scheduled for 8:30 a.m. EST on Thursday, April 27, 2017, which call will not be held.

● Net income of $7.5 million, or $0.14 per share, compared to $5.3 million, or $0.10 per share, in the quarter ended December 31, 2016

● Adjusted net income (non-GAAP), which excludes merger-related expenses and gain on sale of securities, was $7.5 million, or $0.14 per share, compared to $7.3 million, or $0.14 per share in the prior quarter

● Noninterest income decreased $377 thousand from a strong fourth quarter; with a decrease from the record capital markets income in the fourth quarter partially offset by growth in mortgage banking income

● Noninterest expenses totaled $20.6 million, a decrease of $4.4 million from the prior quarter which included $3.0 million in merger-related expenses

● Adjusted noninterest expenses (non-GAAP), which excludes merger-related costs, decreased $1.4 million from the prior quarter; the prior quarter results included a $1.5 million loss on the termination of an interest rate hedge on variable rate debt that was repaid

● Nonperforming loans declined to a very low level of 0.49% of total loans

● Capital levels remained strong with Tier 1 leverage ratio of 9.99%

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

“We are very pleased with our results for the first quarter of 2017. Our priorities are to deliver high quality products and services through exceptionally talented and experienced in-market banking professionals and to continue to improve profitability and returns,” said Jim Cherry, Chief Executive Officer. “Our distinctive value proposition is rewarding us with attractive growth in loans, deposits and revenue, which enables us to deliver increasing earnings and returns for our shareholders.”

Financial Results

Income Statement – Three Months Ended March 31, 2017

Park Sterling reported net income of $7.5 million, or $0.14 per share, for the three months ended March 31, 2017 (“2017Q1”). This compares to net income of $5.3 million, or $0.10 per share, for the three months ended December 31, 2016 (“2016Q4”) and net income of $2.7 million, or $0.05 per share, for the three months ended March 31, 2016 (“2016Q1”). The increase in net income from 2016Q4 resulted primarily from the absence of $3.0 million in merger-related expenses recorded in 2016Q4 and a $1.5 million loss on the termination of an interest rate hedge on debt repaid during 2016Q4, partially offset by an increase in income tax expense. The increase in net income from 2016Q1 was primarily a result of the benefits and cost savings from the acquisition of First Capital Bancorp, Inc., which was completed on January 1, 2016, and the absence of merger-related expenses of $5.2 million recorded in 2016Q1, partially offset by increased income taxes on higher pretax income in 2017Q1.

Net interest income totaled $27.1 million in 2017Q1, which represents a $0.5 million, or 2%, increase from $26.6 million in 2016Q4 and a $0.5 million, or 2%, increase from $26.6 million in 2016Q1. Average total earning assets increased $35 million in 2017Q1 to $2.98 billion, compared to $2.95 billion in 2016Q4 and increased $151 million, or 5%, compared to $2.83 billion in 2016Q1. The increase in average total earning assets in 2017Q1 from 2016Q4 included an increase in average loans (including loans held for sale) of $17.6 million, or 3% annualized, an increase in average marketable securities of $17.3 million, and an increase in average other interest-earning assets of $0.6 million. The increase in average total earning assets in 2017Q1 from 2016Q1 resulted primarily from a $148.9 million, or 7%, increase in average loans (including loans held for sale), a $3.8 million, or 1%, decrease in average marketable securities and a $6.0 million, or 11%, increase in average other earning assets.

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Net interest margin was 3.68% in 2017Q1, representing a 10 basis point increase from 3.58% in 2016Q4 and a 10 basis point decrease from 3.78% in 2016Q1. The increase in net interest margin from 2016Q4 resulted primarily from a 12 basis point increase in loan yields. The decrease in net interest margin from 2016Q1 was primarily the result of a 20 basis point decrease in loan yields, partially offset by a 21 basis point increase in yields on investment securities.

The Company reported $678 thousand of provision expense in 2017Q1, compared to $550 thousand of provision recorded in 2016Q4, and $556 thousand of provision recorded in 2016Q1. Allowance for loan loss levels increased to 0.52% of total loans at 2017Q1 compared to 0.50% at 2016Q4.

Noninterest income totaled $5.5 million in 2017Q1, compared to $5.8 million in 2016Q4 and $4.7 million in 2016Q1. The decrease from 2016Q4 is primarily the result of a $461 thousand decrease in capital market income from the record fourth quarter level, partially offset by a $196 thousand increase in mortgage banking income. The increase in noninterest income from 2016Q1 reflects increases in capital market income, mortgage banking income and service charge income, partially offset by a decrease in income from bank-owned life as a result of one-time gain from death benefits recorded in 2016Q1.

Noninterest expense decreased $4.4 million, or 18%, to $20.6 million in 2017Q1 from $25.0 million in 2016Q4, and decreased $5.5 million, or 21%, compared to $26.2 million in 2016Q1. The decrease in noninterest expense from 2016Q4 resulted from the absence of $3.0 million in merger-related expenses and the $1.5 million loss on termination of the interest rate hedge, each recorded in 2016Q4. Adjusted noninterest expenses (non-GAAP), which exclude merger-related expenses ($0 in 2017Q1, $3.0 million in 2016Q4 and $5.2 million in 2016Q1), decreased $1.4 million, or 6%, to $20.6 million in 2017Q1 compared to $22.0 million in 2016Q4, and decreased $0.4 million compared to $21.0 million in 2016Q1. The decrease in adjusted noninterest expenses from 2016Q4 was due primarily to the absence of the loss on termination of the interest rate hedge recorded in 2016Q4.

The Company’s effective tax rate was 33.2% in 2017Q1, compared to 22.1% in 2016Q4 and 40.6% in 2016Q1. The increase in the effective tax rate compared to 2016Q4 was the result of the early adoption in 2016Q4 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 in 2016Q4 caused by the adoption of this standard, the 2016Q4 effective tax rate was 33.7%.

Balance Sheet

Total assets increased $53.4 million, or 7% annualized, to $3.31 billion at 2017Q1, as compared to total assets of $3.26 billion at 2016Q4. Total securities, including non-marketable securities, increased $21.1 million, to $532.9 million. Total loans, excluding loans held for sale, increased $48.4 million, or 8% annualized, to $2.46 billion at 2017Q1.

The mix of commercial and consumer loans remained largely consistent with 2016Q4. Total commercial loans increased $49.6 million and represent 79% of the loan portfolio. Commercial and industrial and commercial real estate owner occupied increased $35.6 million and represent 32.1% of the portfolio, up from 31.3% at 2016Q4, reflecting an increased focus on commercial and industrial and commercial real estate owner occupied lending. Acquisition, construction and development loans decreased $13.1 million and represent 15% of the portfolio, down from 15.9% at 2016Q4. Total consumer loans decreased $0.6 million and remain flat as a percentage of total loans at 21% of the portfolio.

Total deposits decreased $5 million, or 1% annualized, to $2.51 billion at 2017Q1. Noninterest bearing demand deposits increased $3.1 million, or 2% annualized, to $524.4 million (21% of total deposits). Money market, NOW and savings deposits were up $26.6 million from 2016Q4 and represent 51% of total deposits. Time deposits decreased $34.2 million to $706.8 million at 2017Q1.

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Total borrowings increased $55.2 million, or 64% annualized, to $403 million at 2017Q1 compared to $348.2 million at 2016Q4. At 2017Q1, FHLB borrowings totaled $340 million, the senior unsecured term loan at the holding company totaled $29.7 million, and acquired subordinated debt, net of acquisition accounting fair value marks, totaled $33.7 million.

Total shareholders’ equity increased $5.9 million to $361.7 million at 2017Q1 compared to $355.8 million at 2016Q4, driven by a $5.4 million increase in retained earnings and an increase of $0.6 million in accumulated other comprehensive income. 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 2017Q1, there were 82,600 shares of common stock repurchased at a cost of $0.9 million to neutralize the effect of stock compensation vestings and exercises.

The Company’s capital ratios remain strong at March 31, 2017 with Common Equity Tier 1 (“CET1”) at 11.04% and Tier 1 leverage ratio at 9.99%.

Asset Quality

Asset quality remains strong. Nonperforming assets were $15.3 million at 2017Q1, or 0.46% of total assets, compared to $15.4 million at 2016Q4, or 0.47% of total assets. Nonperforming loans were $12.1 million at 2017Q1, and represented 0.49% of total loans, compared to $12.9 million at 2016Q4, or 0.54% of total loans. The Company reported net recoveries of $30 thousand, or 0.01% of average loans (annualized), in 2017Q1, compared to net charge-offs of $37 thousand, or 0.01% of average loans (annualized), in 2016Q4.

The allowance for loan losses increased $708 thousand, or 6%, to $12.8 million, or 0.52% of total loans, at 2017Q1, compared to $12.1 million, or 0.50%, of total loans at 2016Q4. The increase in allowance is primarily attributable to the increase in outstanding loans at period end.

* * * * * * *

Conference Call

As noted above, Park Sterling and South State Corporation (NASDAQ: SSB) jointly announced the signing of a definitive merger agreement in a separate press release. South State Corporation will host a conference call to discuss the transaction at 10:00 a.m. EST on Thursday, April 27, 2017. Callers wishing to participate may call toll-free by dialing (877) 506-9272. The number for international participants is (412) 380-2004. The conference ID number is 10087433. Please note that this call will be in lieu of the previously announced Park Sterling earnings call originally scheduled for 8:30 a.m. EST on Thursday, April 27, 2017, which call will not be held.

Callers can also listen to the live audio webcast through the Investor Relations section of www.SouthStateBank.com. A replay will be available from 2 p.m. Eastern Time on April 27, 2017 until 9 a.m. on May 11, 2017. To listen to the replay, dial (877) 344-7529 or (412) 317-0088. The passcode is 10087433. The event will also be archived and available beginning April 27 by midnight Eastern Time in the Investor Relations section of www.SouthStateBank.com. Additionally, an investor presentation summarizing key operating assumptions, is available on SSB’s website at www.SouthStateBank.com under investor relations.

About Park Sterling Corporation

Park Sterling Corporation, the holding company for Park Sterling Bank, is headquartered in Charlotte, North Carolina. Park Sterling, a regional community-focused financial services company with $3.3 billion in assets, is the largest community bank headquartered in the Charlotte area and has 54 banking offices stretching across the Carolinas and into North Georgia, as well as in Richmond, Virginia. The bank serves professionals, individuals, and small and mid-sized businesses by offering a full array of financial services, including deposit, mortgage banking, cash management, consumer and business finance, capital markets and wealth management services with a commitment to “Answers You Can Bank On^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.

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Non-GAAP Financial Measures

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

Cautionary Statement Regarding Forward-Looking Statements

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

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

IMPORTANT ADDITIONAL INFORMATION

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

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

PARTICIPANTS IN THE SOLICITATION

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

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For additional information contact:

Donald K. Truslow

Chief Financial Officer

(704) 716-2134

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PARK STERLING CORPORATION

CONDENSED CONSOLIDATED INCOME STATEMENT

THREE MONTH RESULTS

($ in thousands, except per share amounts)  

	March 31,		December 31,		September 30,			June 30,			March 31,
	2017		2016		2016			2016			2016
	(Unaudited)		(Unaudited)		(Unaudited)			(Unaudited)			(Unaudited)
Interest income
Loans, including fees	$	27,462	$	27,066	$	26,521		$	26,729		$	27,124
Taxable investment securities		2,935		2,793		2,583			2,640			2,687
Tax-exempt investment securities		135		135		137			137			147
Nonmarketable equity securities		198		163		151			153			154
Interest on deposits at banks		89		54		51			34			42
Federal funds sold		2		1		1			5			8
Total interest income		30,821		30,212		29,444			29,698			30,162
Interest expense
Money market, NOW and savings deposits		967		941		953			1,014			1,017
Time deposits		1,425		1,469		1,447			1,449			1,398
Short-term borrowings		501		361		345			251			294
Long-term debt		371		371		379			440			410
Subordinated debt		499		499		497			494			446
Total interest expense		3,763		3,641		3,621			3,648			3,565
Net interest income		27,058		26,571		25,823			26,050			26,597
Provision for loan losses		678		550		642			882			556
Net interest income after provision		26,380		26,021		25,181			25,168			26,041
Noninterest income
Service charges on deposit accounts		1,682		1,761		1,671			1,528			1,489
Mortgage banking income		961		765		1,015			873			775
Income from wealth management activities		649		682		739			863			803
Income from capital market activities		609		1,070		680			767			68
ATM and card income		714		713		730			776			573
Income from bank-owned life insurance		578		663		532			526			988
Gain (loss) on sale of securities available for sale		58		6		-			(87	)		(6	)
Amortization of indemnification asset and true-up liability expense		-		-		(139	)		(25	)		(147	)
Other noninterest income		217		185		219			154			184
Total noninterest income		5,468		5,845		5,447			5,375			4,727
Noninterest expenses
Salaries and employee benefits		11,483		11,480		11,755			11,774			13,018
Occupancy and equipment		2,907		3,577		3,111			3,041			3,125
Data processing and outside service fees		1,925		2,105		2,331			2,224			5,523
Legal and professional fees		783		869		978			950			725
Deposit charges and FDIC insurance		485		391		405			478			432
Loss on disposal of fixed assets		24		2,175		144			230			44
Communication fees		463		504		532			505			483
Postage and supplies		142		125		115			191			173
Loan and collection expense		117		57		425			273			37
Core deposit intangible amortization		454		458		458			458			458
Advertising and promotion		146		254		44			367			421
Net cost of operation of other real estate owned		175		11		(92	)		70			266
Other noninterest expense		1,538		3,019		906			1,385			1,448
Total noninterest expenses		20,642		25,025		21,112			21,946			26,153
Income before income taxes		11,206		6,841		9,516			8,597			4,615
Income tax expense		3,717		1,510		3,192			3,045			1,874
Net income	$	7,489	$	5,331	$	6,324		$	5,552		$	2,741
Earnings per common share, fully diluted	$	0.14	$	0.10	$	0.12		$	0.11		$	0.05
Weighted average diluted common shares		53,462,857		53,155,493		52,743,928			52,704,537			52,599,584

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PARK STERLING CORPORATION

WEALTH MANAGEMENT ASSETS

($ in thousands)

	March 31,		December 31,		September 30,		June 30,		March 31,
	2017		2016		2016		2016		2016
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Discretionary assets held	$	288,250	$	278,872	$	294,849	$	322,996	$	339,198
Non-discretionary assets held		44,996		36,522		28,476		32,173		31,174
Total wealth management assets	$	333,246	$	315,394	$	323,325	$	355,169	$	370,372

PARK STERLING CORPORATION

MORTGAGE ORIGINATION

($ in thousands)

	for the three month period ended
	March 31,		December 31,		September 30,		June 30,		March 31,
	2017		2016		2016		2016		2016
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Mortgage origination - purchase	$	18,446	$	14,767	$	21,982	$	25,316	$	14,656
Mortgage origination - refinance		16,068		21,316		20,552		16,221		13,430
Mortgage origination - construction		16,823		18,535		19,440		18,403		14,764
Total mortgage origination	$	51,337	$	54,618	$	61,974	$	59,941	$	42,850

7

PARK STERLING CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in thousands)  

	March 31,			December 31,			September 30,			June 30,			March 31,
	2017			2016*			2016			2016			2016
	(Unaudited)						(Unaudited)			(Unaudited)			(Unaudited)
ASSETS
Cash and due from banks	$	40,081		$	34,162		$	35,066		$	33,348		$	34,038
Interest-earning balances at banks		32,997			48,882			38,540			34,955			47,143
Investment securities available for sale		423,345			402,501			405,010			393,131			396,863
Investment securities held to maturity		89,579			91,752			99,415			102,125			104,459
Nonmarketable equity securities		19,967			17,501			16,289			14,420			13,118
Federal funds sold		765			570			345			1,570			11,271
Loans held for sale		6,181			7,996			15,203			11,967			7,593
Loans - Non-covered		2,460,595			2,412,186			2,368,950			2,311,775			2,262,294
Loans - Covered		-			-			-			15,122			16,849
Allowance for loan losses		(12,833	)		(12,125	)		(11,612	)		(10,873	)		(9,832	)
Net loans		2,447,762			2,400,061			2,357,338			2,316,024			2,269,311
Premises and equipment, net		62,392			63,080			64,632			65,711			65,494
FDIC receivable for loss share agreements		-			-			-			1,164			1,477
Other real estate owned - non-covered		3,167			2,438			2,730			2,866			3,425
Other real estate owned - covered		-			-			-			380			985
Bank-owned life insurance		71,337			70,785			70,167			69,695			69,202
Deferred tax asset		21,250			25,721			26,947			28,985			30,088
Goodwill		63,317			63,317			63,030			63,197			63,707
Core deposit intangible		10,984			11,438			11,896			12,354			12,813
Other assets		15,632			15,192			20,330			22,183			22,750
Total assets	$	3,308,756		$	3,255,396		$	3,226,938		$	3,174,075		$	3,153,737
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand noninterest-bearing	$	524,380		$	521,295		$	505,591		$	496,195		$	469,046
Money market, NOW and savings		1,277,986			1,251,385			1,228,687			1,229,040			1,255,848
Time deposits		706,829			741,072			749,999			748,188			773,089
Total deposits		2,509,195			2,513,752			2,484,277			2,473,423			2,497,983
Short-term borrowings		340,000			285,000			280,000			200,000			170,000
Long-term debt		29,747			29,736			29,725			64,714			65,000
Subordinated debt		33,671			33,501			33,339			33,176			33,014
Accrued expenses and other liabilities		34,423			37,562			40,901			48,312			38,229
Total liabilities		2,947,036			2,899,551			2,868,242			2,819,625			2,804,226
Shareholders' equity:
Common stock		53,113			53,117			53,306			53,332			53,038
Additional paid-in capital		273,291			273,400			275,323			275,246			274,706
Retained earnings		37,977			32,608			29,409			25,219			21,263
Accumulated other comprehensive income (loss)		(2,661	)		(3,280	)		658			653			504
Total shareholders' equity		361,720			355,845			358,696			354,450			349,511
Total liabilities and shareholders' equity	$	3,308,756		$	3,255,396		$	3,226,938		$	3,174,075		$	3,153,737
Common shares issued and outstanding		53,112,726			53,116,519			53,305,834			53,332,369			53,038,020

* Derived from audited financial statements.

8

PARK STERLING CORPORATION

SUMMARY OF LOAN PORTFOLIO

($ in thousands)

	March 31,		December 31,		September 30,		June 30,		March 31,
	2017		2016*		2016		2016		2016
BY LOAN TYPE	(Unaudited)				(Unaudited)		(Unaudited)		(Unaudited)
Commercial:
Commercial and industrial	$	430,247	$	387,401	$	351,506	$	334,644	$	334,027
Commercial real estate (CRE) - owner-occupied		360,318		367,553		366,506		376,440		374,428
CRE - investor income producing		770,404		743,107		768,513		764,168		723,539
Acquisition, construction and development (AC&D) - 1-4 Family Construction		85,025		82,707		108,706		100,604		97,614
AC&D - Lots and land		98,339		105,362		88,620		94,686		88,492
AC&D - CRE construction		186,325		194,732		148,696		125,466		136,561
Other commercial		12,743		12,900		10,653		10,410		10,167
Total commercial loans		1,943,401		1,893,762		1,843,200		1,806,418		1,764,828
Consumer:
Residential mortgage		273,624		260,521		254,298		244,063		235,737
Home equity lines of credit		170,709		176,799		181,246		181,020		177,594
Residential construction		52,631		59,060		63,847		65,867		71,117
Other loans to individuals		16,936		18,905		23,281		26,575		27,245
Total consumer loans		513,900		515,285		522,672		517,525		511,693
Total loans		2,457,301		2,409,047		2,365,872		2,323,943		2,276,521
Deferred costs (fees)		3,294		3,139		3,078		2,954		2,622
Total loans, net of deferred costs (fees)	$	2,460,595	$	2,412,186	$	2,368,950	$	2,326,897	$	2,279,143

* Derived from audited financial statements.

	March 31,		December 31,		September 30,		June 30,		March 31,
	2017		2016*		2016		2016		2016
BY ACQUIRED AND NON-ACQUIRED	(Unaudited)				(Unaudited)		(Unaudited)		(Unaudited)
Acquired loans - performing	$	495,216	$	538,845	$	599,840	$	661,930	$	726,025
Acquired loans - purchase credit impaired		81,869		85,456		90,571		98,672		106,105
Total acquired loans		577,085		624,301		690,411		760,602		832,130
Non-acquired loans, net of deferred costs (fees)**		1,883,510		1,787,885		1,678,539		1,566,295		1,447,013
Total loans	$	2,460,595	$	2,412,186	$	2,368,950	$	2,326,897	$	2,279,143

* 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)

	March 31,			December 31,			September 30,			June 30,			March 31,
	2017			2016*			2016			2016			2016
	(Unaudited)						(Unaudited)			(Unaudited)			(Unaudited)
Beginning of period allowance	$	12,125		$	11,612		$	10,873		$	9,832		$	9,064
Loans charged-off		(146	)		(223	)		(156	)		(94	)		(82	)
Recoveries of loans charged-off		176			186			253			253			294
Net charge-offs (recoveries)		30			(37	)		97			159			212
Provision expense		678			550			642			882			556
Benefit attributable to FDIC loss share agreements		-			-			-			-			-
Total provision expense charged to operations		678			550			642			882			556
Provision expense recorded through FDIC loss share receivable		-			-			-			-			-
End of period allowance	$	12,833		$	12,125		$	11,612		$	10,873		$	9,832
Net charge-offs (recoveries)	$	30		$	(37	)	$	97		$	159		$	212
Net charge-offs (recoveries) to average loans (annualized)		0.01	%		-0.01	%		0.02	%		0.03	%		0.04	%

* Derived from audited financial statements.

9

PARK STERLING CORPORATION

ACQUIRED LOANS

($ in thousands)

	March 31,			December 31,			September 30,			June 30,			March 31,
ACQUIRED LOANS AND FAIR MARKET	2017			2016*			2016			2016			2016
VALUE (FMV) ADJUSTMENTS	(Unaudited)						(Unaudited)			(Unaudited)			(Unaudited)
Non-acquired loans	$	1,883,510		$	1,787,885		$	1,678,539		$	1,566,295		$	1,447,013
Purchased performing loans		498,314			542,269			604,000			666,894			732,075
Less: remaining FMV adjustments		(3,098	)		(3,424	)		(4,160	)		(4,964	)		(6,050	)
Purchased performing loans, net		495,216			538,845			599,840			661,930			726,025
Purchased credit impaired loans		104,416			109,805			115,736			124,985			133,644
Less: remaining FMV adjustments		(22,547	)		(24,349	)		(25,165	)		(26,313	)		(27,539	)
Purchased credit impaired loans, net		81,869			85,456			90,571			98,672			106,105
Total loans	$	2,460,595		$	2,412,186		$	2,368,950		$	2,326,897		$	2,279,143

	March 31,			December 31,			September 30,			June 30,			March 31,
PURCHASED PERFORMING FMV	2017			2016*			2016			2016			2016
ADJUSTMENTS	(Unaudited)						(Unaudited)			(Unaudited)			(Unaudited)
Beginning FMV adjustment	$	(3,424	)	$	(4,160	)	$	(4,964	)	$	(6,050	)	$	(2,132	)
Increase from First Capital		-			-			-			-			(5,200	)
Accretion to interest income:
First Capital		236			503			623			777			1,027
All other mergers		90			233			181			309			255
Ending FMV adjustment	$	(3,098	)	$	(3,424	)	$	(4,160	)	$	(4,964	)	$	(6,050	)

	March 31,			December 31,			September 30,			June 30,			March 31,
	2017			2016*			2016			2016			2016
PCI FMV ADJUSTMENTS	(Unaudited)						(Unaudited)			(Unaudited)			(Unaudited)
Contractual principal and interest	$	119,326		$	125,512		$	133,223		$	143,701		$	153,124
Nonaccretable difference		(7,142	)		(10,448	)		(11,529	)		(14,652	)		(14,975	)
Expected cash flows as of the end of period		112,184			115,064			121,694			129,049			138,149
Accretable yield		(30,315	)		(29,608	)		(31,123	)		(30,377	)		(32,044	)
Ending basis in PCI loans- estimated fair value	$	81,869		$	85,456		$	90,571		$	98,672		$	106,105
Beginning accretable yield	$	(29,608	)	$	(31,123	)	$	(30,377	)	$	(32,044	)	$	(32,509	)
Increase from First Capital		-			-			-			-			(1,663	)
Loan system servicing income		1,413			1,389			1,532			1,434			1,551
Accretion to interest income		2,014			1,285			1,241			1,343			1,471
Reclass to (from) non-accretable yield		(3,802	)		(929	)		(2,691	)		(522	)		(993	)
Other adjustments		(332	)		(230	)		(828	)		(588	)		99
Period end accretable yield**	$	(30,315	)	$	(29,608	)	$	(31,123	)	$	(30,377	)	$	(32,044	)

* 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.

10

PARK STERLING CORPORATION

AVERAGE BALANCE SHEETS AND NET INTEREST ANALYSIS

THREE MONTHS

($ in thousands)

	March 31, 2017								March 31, 2016
	Average			Income/		Yield/			Average			Income/		Yield/
	Balance			Expense		Rate (2)			Balance			Expense		Rate (2)
Assets
Interest-earning assets:
Loans and loans held for sale, net (1)	$	2,423,722		$	27,462		4.60	%	$	2,274,824		$	27,124		4.80	%
Fed funds sold		866			2		0.94	%		6,895			8		0.47	%
Taxable investment securities		486,065			2,935		2.42	%		487,154			2,687		2.21	%
Tax-exempt investment securities		13,322			135		4.05	%		16,047			147		3.66	%
Other interest-earning assets		60,799			287		1.91	%		48,772			196		1.62	%
Total interest-earning assets		2,984,774			30,821		4.19	%		2,833,692			30,162		4.28	%
Allowance for loan losses		(12,276	)							(9,864	)
Cash and due from banks		36,995								36,758
Premises and equipment		63,033								66,514
Goodwill		63,317								62,055
Intangible assets		11,187								12,718
Other assets		111,480								130,752
Total assets	$	3,258,510							$	3,132,625
Liabilities and shareholders' equity
Interest-bearing liabilities:
Interest-bearing demand	$	464,792		$	86		0.08	%	$	426,795		$	85		0.08	%
Savings and money market		730,253			562		0.31	%		733,301			831		0.46	%
Time deposits - core		639,264			1,174		0.74	%		710,289			1,219		0.69	%
Brokered deposits		148,705			570		1.55	%		126,824			280		0.89	%
Total interest-bearing deposits		1,983,014			2,392		0.49	%		1,997,209			2,415		0.49	%
Short-term borrowings		298,667			501		0.68	%		191,701			294		0.62	%
Long-term debt		29,741			371		5.06	%		65,824			410		2.51	%
Subordinated debt		33,589			499		6.02	%		32,930			446		5.45	%
Total borrowed funds		361,997			1,371		1.54	%		290,455			1,150		1.59	%
Total interest-bearing liabilities		2,345,011			3,763		0.65	%		2,287,664			3,565		0.63	%
Net interest rate spread					27,058		3.54	%					26,597		3.65	%
Noninterest-bearing demand deposits		517,090								456,457
Other liabilities		37,279								39,948
Shareholders' equity		359,130								348,556
Total liabilities and shareholders' equity	$	3,258,510							$	3,132,625
Net interest margin							3.68	%							3.78	%

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

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

11

PARK STERLING CORPORATION

SELECTED RATIOS

($ in thousands, except per share amounts) 

	March 31,			December 31,			September 30,			June 30,			March 31,
	2017			2016			2016			2016			2016
	Unaudited			Unaudited			Unaudited			Unaudited			Unaudited
ASSET QUALITY
Nonaccrual loans	$	9,613		$	8,819		$	8,623		$	5,185		$	6,595
Troubled debt restructuring (and still accruing)		2,486			2,892			2,549			2,582			2,696
Past due 90 days plus (and still accruing)		-			1,230			293			-			293
Nonperforming loans		12,099			12,941			11,465			7,767			9,584
OREO		3,167			2,438			2,730			3,246			4,410
Nonperforming assets		15,266			15,379			14,195			11,013			13,994
Past due 30-59 days (and still accruing)		430			1,175			1,104			985			217
Past due 60-89 days (and still accruing)		587			1,836			2,558			5,800			499
Nonperforming loans to total loans		0.49	%		0.54	%		0.48	%		0.33	%		0.42	%
Nonperforming assets to total assets		0.46	%		0.47	%		0.44	%		0.35	%		0.44	%
Allowance to total loans		0.52	%		0.50	%		0.49	%		0.47	%		0.43	%
Allowance to nonperforming loans		106.07	%		93.69	%		101.28	%		139.99	%		102.59	%
Allowance to nonperforming assets		84.06	%		78.84	%		81.80	%		98.73	%		70.26	%
Past due 30-89 days (accruing) to total loans		0.04	%		0.12	%		0.15	%		0.29	%		0.03	%
Net charge-offs (recoveries) to average loans (annualized)		0.01	%		-0.01	%		0.02	%		0.03	%		0.04	%
CAPITAL
Book value per common share	$	6.86		$	6.81		$	6.85		$	6.75		$	6.69
Tangible book value per common share**	$	5.45		$	5.38		$	5.42		$	5.31		$	5.22
Common shares outstanding		53,112,726			53,116,519			53,305,834			53,332,369			53,038,020
Weighted average dilutive common shares outstanding		53,462,857			53,155,493			52,743,928			52,704,537			52,599,584
Common Equity Tier 1 (CET1) capital	$	288,866		$	288,594		$	287,518		$	282,721		$	275,490
Tier 1 capital		314,316			314,043			312,781			307,736			300,354
Tier 2 capital		12,181			12,125			11,615			10,914			9,832
Total risk based capital		326,497			326,168			324,396			318,650			310,186
Risk weighted assets		2,616,215			2,613,003			2,596,463			2,538,461			2,478,547
Average assets for leverage ratio		3,147,201			3,165,665			3,108,707			3,058,742			3,076,505
Common Equity Tier 1 (CET1) ratio		11.04	%		11.04	%		11.07	%		11.14	%		11.11	%
Tier 1 ratio		12.01	%		12.02	%		12.04	%		12.12	%		12.12	%
Total risk based capital ratio		12.48	%		12.48	%		12.49	%		12.55	%		12.51	%
Tier 1 leverage ratio		9.99	%		9.92	%		10.06	%		10.06	%		9.76	%
Tangible common equity to tangible assets**		8.89	%		8.84	%		9.00	%		9.00	%		8.87	%
LIQUIDITY
Net loans to total deposits		97.55	%		95.48	%		94.89	%		93.64	%		90.85	%
Reliance on wholesale funding		18.99	%		17.39	%		17.65	%		16.25	%		15.50	%
INCOME STATEMENT (THREE MONTH RESULTS; ANNUALIZED)
Return on Average Assets		0.93	%		0.66	%		0.79	%		0.71	%		0.35	%
Return on Average Common Equity		8.46	%		5.89	%		7.04	%		6.33	%		3.16	%
Net interest margin (non-tax equivalent)		3.68	%		3.58	%		3.54	%		3.69	%		3.78	%

** Non-GAAP financial measure

12

Non-GAAP Financial Measures

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

PARK STERLING CORPORATION

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

($ in thousands, except per share amounts) 

	March 31,			December 31,			September 30,			June 30,			March 31,
	2017			2016			2016			2016			2016
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Adjusted net income
Net income (as reported)	$	7,489		$	5,331		$	6,324		$	5,552		$	2,741
Plus: merger-related expenses		-			2,984			1,487			1,268			5,193
Less: (gain) loss on sale of securities		(58	)		(6	)		-			87			6
Less: tax impact of merger-related expenses and (gain) loss on sale of securities		20			(1,004	)		(499	)		(464	)		(1,772	)
Adjusted net income	$	7,451		$	7,305		$	7,312		$	6,443		$	6,168
Divided by: weighted average diluted shares		53,462,857			53,155,493			52,743,928			52,704,537			52,599,584
Adjusted net income per share		0.14			0.14			0.14			0.12			0.12
Estimated tax rate for adjustment		33.73	%		33.73	%		33.54	%		34.26	%		34.09	%
Adjusted noninterest income
Noninterest income (as reported)	$	5,468		$	5,845		$	5,447		$	5,375		$	4,727
Less: (gain) loss on sale of securities		(58	)		(6	)		-			87			6
Adjusted noninterest income	$	5,410		$	5,839		$	5,447		$	5,462		$	4,733
Adjusted noninterest expenses
Noninterest expenses (as reported)	$	20,642		$	25,025		$	21,112		$	21,946		$	26,153
Less: merger-related expenses		-			(2,984	)		(1,487	)		(1,268	)		(5,193	)
Adjusted noninterest expenses	$	20,642		$	22,041		$	19,625		$	20,678		$	20,960
Adjusted operating expense
Noninterest expenses (as reported)	$	20,642		$	25,025		$	21,112		$	21,946		$	26,153
Less: merger-related expenses		-			(2,984	)		(1,487	)		(1,268	)		(5,193	)
Less: amortization of intangibles		(454	)		(458	)		(458	)		(458	)		(458	)
Adjusted operating expense	$	20,188		$	21,583		$	19,167		$	20,220		$	20,502
Adjusted operating revenues
Net Interest Income (as reported)	$	27,058		$	26,571		$	25,823		$	26,050		$	26,597
Plus: noninterest income (as reported)		5,468			5,845			5,447			5,375			4,727
Less: (gain) loss on sale of securities		(58	)		(6	)		-			87			6
Adjusted operating revenues	$	32,468		$	32,410		$	31,270		$	31,512		$	31,330
Adjusted operating expense to adjusted operating revenues
Adjusted operating expense	$	20,188		$	21,583		$	19,167		$	20,220		$	20,502
Divided by: adjusted operating revenues		32,468			32,410			31,270			31,512			31,330
Adjusted operating expense to adjusted operating revenues		62.18	%		66.59	%		61.30	%		64.17	%		65.44	%
Noninterest expenses to net interest income plus noninterest income		63.46	%		77.20	%		67.52	%		69.84	%		83.49	%
Adjusted return on average assets
Adjusted net income	$	7,451		$	7,305		$	7,312		$	6,443		$	6,168
Divided by: average assets		3,258,510			3,229,299			3,186,799			3,135,031			3,132,625
Multiplied by: annualization factor		4.06			3.98			3.98			4.02			4.02
Adjusted return on average assets		0.93	%		0.90	%		0.91	%		0.83	%		0.79	%
Return on average assets		0.93	%		0.66	%		0.79	%		0.71	%		0.35	%
Adjusted return on average equity
Adjusted net income	$	7,451		$	7,305		$	7,312		$	6,443		$	6,168
Divided by: average common equity		359,130			359,985			357,577			352,505			348,556
Multiplied by: annualization factor		4.06			3.98			3.98			4.02			4.02
Adjusted return on average equity		8.41	%		8.07	%		8.14	%		7.35	%		7.12	%
Return on average equity		8.46	%		5.89	%		7.04	%		6.33	%		3.16	%

13

PARK STERLING CORPORATION

RECONCILIATION OF NON-GAAP MEASURES

($ in thousands, except per share amounts)  

	March 31,			December 31,			September 30,			June 30,			March 31,
	2017			2016			2016			2016			2016
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Tangible common equity to tangible assets
Total assets	$	3,308,756		$	3,255,396		$	3,226,938		$	3,174,075		$	3,153,737
Less: intangible assets		(74,301	)		(74,755	)		(74,926	)		(75,551	)		(76,520	)
Tangible assets	$	3,234,455		$	3,180,641		$	3,152,012		$	3,098,524		$	3,077,217
Total common equity	$	361,720		$	355,845		$	358,696		$	354,450		$	349,511
Less: intangible assets		(74,301	)		(74,755	)		(74,926	)		(75,551	)		(76,520	)
Tangible common equity	$	287,419		$	281,090		$	283,770		$	278,899		$	272,991
Tangible common equity	$	287,419		$	281,090		$	283,770		$	278,899		$	272,991
Divided by: tangible assets		3,234,455			3,180,641			3,152,012			3,098,524			3,077,217
Tangible common equity to tangible assets		8.89	%		8.84	%		9.00	%		9.00	%		8.87	%
Common equity to assets		10.93	%		10.93	%		11.12	%		11.17	%		11.08	%
Tangible book value per share
Issued and outstanding shares		53,112,726			53,116,519			53,305,834			53,332,369			53,038,020
Less: unvested restricted stock awards		(390,233	)		(405,732	)		(837,561	)		(969,991	)		(785,658	)
Period end dilutive shares		52,722,493			52,710,787			52,468,273			52,362,378			52,252,362
Tangible common equity	$	287,419		$	281,090		$	283,770		$	278,899		$	272,991
Divided by: period end dilutive shares		52,722,493			52,710,787			52,468,273			52,362,378			52,252,362
Tangible common book value per share	$	5.45		$	5.33		$	5.41		$	5.33		$	5.22
Common book value per share	$	6.86		$	6.75		$	6.84		$	6.77		$	6.69
Adjusted return on average tangible common equity
Average common equity	$	359,130		$	359,985		$	357,577		$	352,505		$	348,556
Less: average intangible assets		(74,504	)		(74,812	)		(75,196	)		(76,083	)		(74,773	)
Average tangible common equity	$	284,626		$	285,173		$	282,381		$	276,422		$	273,783
Net income	$	7,489		$	5,331		$	6,324		$	5,552		$	2,741
Divided by: average tangible common equity		284,626			285,173			282,381			276,422			273,783
Multiplied by: annualization factor		4.06			3.98			3.98			4.02			4.02
Return on average tangible common equity		10.67	%		7.44	%		8.91	%		8.08	%		4.03	%
Adjusted net income	$	7,451		$	7,305		$	7,312		$	6,443		$	6,168
Divided by: average tangible common equity		284,626			285,173			282,381			276,422			273,783
Multiplied by: annualization factor		4.06			3.98			3.98			4.02			4.02
Adjusted return on average tangible common equity		10.62	%		10.19	%		10.30	%		9.37	%		9.06	%
Adjusted allowance for loan losses
Allowance for loan losses	$	12,833		$	12,125		$	11,612		$	10,873		$	9,832
Plus: acquisition accounting FMV adjustments to acquired loans		25,645			27,773			29,548			31,159			33,589
Adjusted allowance for loan losses	$	38,478		$	39,898		$	41,160		$	42,032		$	43,421
Divided by: total loans (excluding LHFS before FMV adjustments)	$	2,486,240		$	2,439,959		$	2,398,498		$	2,358,056		$	2,312,732
Adjusted allowance for loan losses to total loans		1.55	%		1.64	%		1.72	%		1.78	%		1.88	%
Allowance for loan losses to total loans		0.52	%		0.50	%		0.49	%		0.47	%		0.43	%

14

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 – April 26, 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 May 25, 2017 to all shareholders of record as of the close of business on May 9, 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 54 banking offices stretching across the Carolinas and into North Georgia, as well as in Richmond, Virginia. The bank serves professionals, individuals, and small and mid-sized businesses by offering a full array of financial services, including deposit, mortgage banking, cash management, consumer and business finance, capital markets and wealth management services with a commitment to “Answers You Can Bank On^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