8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

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

Date of Report (Date of earliest event reported):  July 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 Rule 405 of the Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 of the Securities Exchange Act (17 CFR 240.12b-2)

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 July 27, 2017, Park Sterling Corporation (“Park Sterling”) announced its financial results for the second quarter ended June 30, 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 8.01. Other Events.

On July 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 August 25, 2017 to all common shareholders of record as of the close of business on August 9, 2017. Future dividends will be subject to Board approval. A copy of the press release is attached as Exhibit 99.2 and is incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

Exhibit No.	Exhibit Description
99.1	Press Release, dated July 27, 2017, with respect to Park Sterling’s financial results for the second quarter ended June 30, 2017
99.2	Press Release, dated July 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: July 27, 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 July 27, 2017, with respect to Park Sterling’s financial results for the second quarter ended June 30, 2017
99.2	Press Release, dated July 26, 2017, with respect to declaration of dividend

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EX-99.1

Exhibit 99.1

 

Park Sterling Corporation Announces

Results for Second Quarter 2017

Charlotte, NC – July 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 second quarter of 2017.

● Net income of $8.5 million, or $0.16 per share, compared to $7.5 million, or $0.14 per share, in the quarter ended March 31, 2017

● Adjusted net income (non-GAAP), which excludes merger-related expenses and gain on sale of securities, was $9.2 million, or $0.17 per share, compared to $7.5 million, or $0.14 per share in the prior quarter

● Reported annualized return on average assets and equity for the second quarter was 1.03% and 9.33%, respectively, while adjusted annualized return on average assets and average equity (non-GAAP) was 1.10% and 10.08% respectively

● Noninterest income decreased $50 thousand from the prior quarter, with a decrease in mortgage banking income mostly offset by growth in other areas

● Noninterest expenses totaled $21.4 million, an increase of $0.84 million from the prior quarter; adjusted noninterest expenses (non-GAAP), which excludes merger-related expenses, decreased $0.1 million from the prior quarter

● Reported efficiency ratio was 63% for the second quarter, while adjusted efficiency ratio (non-GAAP), was 59% for the second quarter

● Nonperforming loans declined to a very low level of 0.48% of total loans

● Capital levels remained strong with a Tier 1 leverage ratio of 10.05%

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

“As we began 2016, we embarked on a path to improve our returns and the efficiency of our business model by leveraging the investments in people and products we had made in previous years,” said Jim Cherry, Chief Executive Officer. “At that time, our financial performance goals, adjusted for merger-related costs, were to surpass a 1% return on average assets and a 10% return on average equity, and to lower our efficiency ratio below 60% by the end of 2018. We are very pleased to report that we achieved these results in the second quarter 2017 as our annualized adjusted return on average assets was 1.10% and our adjusted return on average equity was 10.08%. Additionally, our adjusted efficiency ratio was 59%. These results reflect the very fine work of all of my colleagues at Park Sterling in supporting existing customers and winning new customers with exceptional service and market leading products. Looking forward, we are excited about our announced strategic partnership with South State Bank and the opportunity to more completely fulfill our original vision of creating the premier regional banking franchise in the southeast.”

Financial Results

Income Statement – Three Months Ended June 30, 2017

Park Sterling reported net income of $8.5 million, or $0.16 per share, for the three months ended June 30, 2017 (“2017Q2”). This compares to net income of $7.5 million, or $0.14 per share, for the three months ended March 31, 2017 (“2017Q1”) and net income of $5.6 million, or $0.11 per share, for the three months ended June 30, 2016 (“2016Q2”). The increase in net income from 2017Q1 resulted primarily from an increase in interest income on loans and lower provision for loan losses, partially offset by an increase in interest expense on borrowed funds, professional fees related to the South State merger and income tax expense on higher pretax income. The increase in net income from 2016Q2 was primarily a result of the increase in interest income described above, as well as a decrease in provision for loan losses and a decrease in merger-related expenses, partially offset by increased income taxes on higher pretax income in 2017Q2.

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Net interest income totaled $28.6 million in 2017Q2, which represents a $1.5 million, or 6%, increase from $27.1 million in 2017Q1 and a $2.5 million, or 10%, increase from $26.1 million in 2016Q2. Average total earning assets increased $63 million in 2017Q2 to $3.05 billion, compared to $2.98 billion in 2017Q1 and increased $205 million, or 7%, compared to $2.84 billion in 2016Q2. The increase in average total earning assets in 2017Q2 from 2017Q1 included an increase in average loans (including loans held for sale) of $55 million, or 9% annualized, an increase in average marketable securities of $3.3 million, and an increase in average other interest-earning assets of $4.3 million. The increase in average total earning assets in 2017Q2 from 2016Q2 resulted primarily from a $180 million, or 8%, increase in average loans (including loans held for sale), a $4.5 million, or 1%, increase in average marketable securities and a $19.6 million, or 42%, increase in average other interest-earning assets.

Net interest margin was 3.77% in 2017Q2, representing a 9 basis point increase from 3.68% in 2017Q1 and an 8 basis point increase from 3.69% in 2016Q2. The increase in net interest margin from 2017Q1 resulted primarily from an 18 basis point increase in loan yields, partially offset by a 29 basis point increase in the cost of borrowed funds, both of which reflect the increase in the prime lending rate. The increase in net interest margin from 2016Q2 was primarily the result of a 10 basis point increase in loan yields and an improved yield on investment securities, partially offset by an increase in the cost of interest-bearing liabilities.

The Company reported no provision for loan losses expense in 2017Q2, compared to $678 thousand of provision recorded in 2017Q1, and $882 thousand of provision recorded in 2016Q2. Allowance for loan loss levels decreased to 0.51% of total loans at 2017Q2 compared to 0.52% at 2017Q1.

Noninterest income totaled $5.4 million in 2017Q2, compared to $5.5 million in 2017Q1 and $5.4 million in 2016Q2. The decrease from 2017Q1 is primarily the result of a $186 thousand decrease in mortgage banking income from the first quarter, partially offset by increases in service charges, wealth and capital markets income. The $43 thousand increase in noninterest income from 2016Q2 reflects increases in service charge income and other noninterest income, partially offset by decreases in mortgage banking, wealth and capital markets income.

Noninterest expense increased $0.8 million, or 4%, to $21.4 million in 2017Q2 from $20.6 million in 2017Q1, and decreased $0.5 million, or 2%, compared to $21.9 million in 2016Q2. The increase in noninterest expense from 2017Q1 resulted from $0.9 million in merger-related expenses incurred in the second quarter as compared to no merger-related expenses in the first quarter. The decrease in noninterest expenses from 2017Q1 was due primarily to a decrease in merger-related expenses of $0.4 million and decreases in all other categories of noninterest expense reflecting expense saving following the First Capital merger systems conversion completed in May 2016.

The Company’s effective tax rate was 32.2% in 2017Q2, compared to 33.2% in 2017Q1 and 35.4% in 2016Q2. The decrease in the effective tax rate compared to 2017Q1 was the result of excess tax benefits on stock-based compensation.

Balance Sheet

Total assets increased $32.2 million, or 4% annualized, to $3.34 billion at 2017Q2, compared to total assets of $3.31 billion at 2017Q1. Total securities, including non-marketable securities, decreased $21.4 million, to $511.5 million. Total loans, excluding loans held for sale, increased $41.5 million, or 7% annualized, to $2.50 billion at 2017Q2.

The mix of commercial and consumer loans remained largely consistent with 2017Q1. Total commercial loans increased $28.4 million and represent 79% of the loan portfolio. Commercial and industrial and commercial real estate owner occupied increased $25.6 million and represent 32.6% of the portfolio, up from 32.1% at 2017Q1, reflecting an increased focus on commercial and industrial and commercial real estate owner occupied lending. Acquisition, construction and development loans decreased $31.5 million and represent 13.5% of the portfolio, down from 15.0% at 2017Q1. Total consumer loans increased $13.2 million and remain flat as a percentage of total loans at 21% of the portfolio.

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Total deposits increased $28 million, or 4% annualized, to $2.54 billion at 2017Q2. Noninterest bearing demand deposits increased $30 million, or 23% annualized, to $554.4 million from 2017Q1. Money market, NOW and savings deposits were up $13.1 million from 2017Q1 and represent 51% of total deposits. Time deposits decreased $15.2 million to $691.7 million at 2017Q2.

Total borrowings increased $5.2 million, or 5% annualized, to $408.6 million at 2017Q2 compared to $403.4 million at 2017Q1. At 2017Q2, FHLB borrowings totaled $345 million, the senior unsecured term loan at the holding company totaled $29.8 million, and acquired subordinated debt, net of acquisition accounting fair value marks, totaled $33.8 million.

Total shareholders’ equity increased $7.6 million to $369.3 million at 2017Q2 compared to $361.7 million at 2017Q1, driven by a $6.4 million increase in retained earnings and an increase of $0.9 million in accumulated other comprehensive income. The change in accumulated other comprehensive income was caused by the effect of market interest rates on the fair value of available for sale investment securities.

The Company’s capital ratios remain strong at June 30, 2017 with the Common Equity Tier 1 (“CET1”) ratio at 11.10% and the Tier 1 leverage ratio at 10.05%.

Asset Quality

Asset quality remains strong. Nonperforming assets were $15.1 million at 2017Q2, or 0.45% of total assets, compared to $15.3 million at 2017Q1, or 0.46% of total assets. Nonperforming loans were $12.0 million at 2017Q2, and represented 0.48% of total loans, compared to $12.1 million at 2017Q1, or 0.49% of total loans. The Company reported net charge-offs of $131 thousand, or 0.02% of average loans (annualized), in 2017Q2, compared to net recoveries of $30 thousand, or 0.01% of average loans (annualized), in 2017Q1.

The allowance for loan losses decreased $131 thousand, or 1%, to $12.7 million, or 0.51% of total loans, at 2017Q2, compared to $12.8 million, or 0.52% of total loans, at 2017Q1. The decrease in the allowance from 2017Q1 is primarily attributable to a change in qualitative factors reducing the required reserve, partially offset by an increase in the allowance related to loan growth for the period..

* * * * * * *

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.

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.

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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 integrate 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.

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 has filed with the SEC a Registration Statement on Form S-4 that includes a preliminary Joint Proxy Statement of South State and Park Sterling and a Preliminary Prospectus of South State, as well as other relevant documents concerning the proposed transaction. Once the Registration Statement is declared effective by the SEC, Park Sterling and South State will mail a definitive Joint Proxy Statement/Prospectus to their respective shareholders. 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.

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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

don.truslow@parksterlingbank.com

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PARK STERLING CORPORATION

CONDENSED CONSOLIDATED INCOME STATEMENT

THREE MONTH RESULTS  

($ in thousands, except per share amounts)	June 30,		March 31,		December 31,		September 30,			June 30,
	2017		2017		2016		2016			2016
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)			(Unaudited)
Interest income
Loans, including fees	$	29,518	$	27,462	$	27,066	$	26,521		$	26,729
Taxable investment securities		2,985		2,935		2,793		2,583			2,640
Tax-exempt investment securities		135		135		135		137			137
Nonmarketable equity securities		219		198		163		151			153
Interest on deposits at banks		109		89		54		51			34
Federal funds sold		2		2		1		1			5
Total interest income		32,968		30,821		30,212		29,444			29,698
Interest expense
Money market, NOW and savings deposits		1,031		967		941		953			1,014
Time deposits		1,482		1,425		1,469		1,447			1,449
Short-term borrowings		922		501		361		345			251
Long-term debt		371		371		371		379			440
Subordinated debt		552		499		499		497			494
Total interest expense		4,358		3,763		3,641		3,621			3,648
Net interest income		28,610		27,058		26,571		25,823			26,050
Provision for loan losses		-		678		550		642			882
Net interest income after provision		28,610		26,380		26,021		25,181			25,168
Noninterest income
Service charges on deposit accounts		1,725		1,682		1,761		1,671			1,528
Mortgage banking income		775		961		765		1,015			873
Income from wealth management activities		689		649		682		739			863
Income from capital market activities		645		609		1,070		680			767
ATM and card income		751		714		713		730			776
Income from bank-owned life insurance		578		578		663		532			526
Gain (loss) on sale of securities available for sale		-		58		6		-			(87	)
Amortization of indemnification asset and true-up liability expense		-		-		-		(139	)		(25	)
Other noninterest income		255		217		185		219			154
Total noninterest income		5,418		5,468		5,845		5,447			5,375
Noninterest expenses
Salaries and employee benefits		11,388		11,483		11,480		11,755			11,774
Occupancy and equipment		2,924		2,907		3,577		3,111			3,041
Data processing and outside service fees		1,907		1,925		2,105		2,331			2,224
Legal and professional fees		1,650		783		869		978			950
Deposit charges and FDIC insurance		442		485		391		405			478
Loss on disposal of fixed assets		-		24		2,175		144			230
Communication fees		460		463		504		532			505
Postage and supplies		107		142		125		115			191
Loan and collection expense		210		117		57		425			273
Core deposit intangible amortization		454		454		458		458			458
Advertising and promotion		140		146		254		44			367
Net cost of operation of other real estate owned		240		175		11		(92	)		70
Other noninterest expense		1,527		1,538		3,019		906			1,385
Total noninterest expenses		21,449		20,642		25,025		21,112			21,946
Income before income taxes		12,579		11,206		6,841		9,516			8,597
Income tax expense		4,052		3,717		1,510		3,192			3,045
Net income	$	8,527	$	7,489	$	5,331	$	6,324		$	5,552
Earnings per common share, fully diluted	$	0.16	$	0.14	$	0.10	$	0.12		$	0.11
Weighted average diluted common shares		53,481,846		53,462,857		53,155,493		52,743,928			52,704,537

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PARK STERLING CORPORATION

CONDENSED CONSOLIDATED INCOME STATEMENT

SIX MONTH RESULTS 

($ in thousands, except per share amounts)	June 30,		June 30,
	2017		2016
	(Unaudited)		(Unaudited)
Interest income
Loans, including fees	$	56,980	$	53,853
Taxable investment securities		5,920		5,327
Tax-exempt investment securities		270		284
Nonmarketable equity securities		417		307
Interest on deposits at banks		198		76
Federal funds sold		4		13
Total interest income		63,789		59,860
Interest expense
Money market, NOW and savings deposits		1,998		2,032
Time deposits		2,907		2,847
Short-term borrowings		1,423		545
Long-term debt		742		850
Subordinated debt		1,051		940
Total interest expense		8,121		7,214
Net interest income		55,668		52,646
Provision for loan losses		678		1,438
Net interest income after provision		54,990		51,208
Noninterest income
Service charges on deposit accounts		3,407		3,017
Mortgage banking income		1,736		1,648
Income from wealth management activities		1,338		1,666
Income from capital market activities		1,254		835
ATM and card income		1,465		1,349
Income from bank-owned life insurance		1,156		1,514
Gain (loss) on sale of securities available for sale		58		(93	)
Amortization of indemnification asset and true-up liability expense		-		(172	)
Other noninterest income		472		338
Total noninterest income		10,886		10,102
Noninterest expenses
Salaries and employee benefits		22,871		24,792
Occupancy and equipment		5,831		6,166
Data processing and outside service fees		3,832		7,747
Legal and professional fees		2,433		1,675
Deposit charges and FDIC insurance		927		910
Loss on disposal of fixed assets		24		274
Communication fees		923		988
Postage and supplies		249		364
Loan and collection expense		327		310
Core deposit intangible amortization		908		916
Advertising and promotion		286		788
Net cost of operation of other real estate owned		415		336
Other noninterest expense		3,065		2,833
Total noninterest expenses		42,091		48,099
Income before income taxes		23,785		13,211
Income tax expense		7,769		4,919
Net income	$	16,016	$	8,292
Earnings per common share, fully diluted	$	0.30	$	0.16
Weighted average diluted common shares		53,458,705		52,650,886

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PARK STERLING CORPORATION

WEALTH MANAGEMENT ASSETS

($ in thousands) 

	June 30,		March 31,		December 31,		September 30,		June 30,
	2017		2017		2016		2016		2016
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Discretionary assets held	$	256,623	$	288,250	$	278,872	$	294,849	$	322,996
Non-discretionary assets held		27,274		44,996		36,522		28,476		32,173
Total wealth management assets	$	283,897	$	333,246	$	315,394	$	323,325	$	355,169

PARK STERLING CORPORATION

MORTGAGE ORIGINATION

($ in thousands) 

	for the three month period ended
	June 30,		March 31,		December 31,		September 30,		June 30,
	2017		2017		2016		2016		2016
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Mortgage origination - purchase	$	16,180	$	18,446	$	14,767	$	21,982	$	25,316
Mortgage origination - refinance		8,609		16,068		21,316		20,552		16,221
Mortgage origination - construction		22,441		16,823		18,535		19,440		18,403
Total mortgage origination	$	47,230	$	51,337	$	54,618	$	61,974	$	59,941

8

PARK STERLING CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS  

($ in thousands)	June 30,			March 31,			December 31,			September 30,			June 30,
	2017			2017			2016*			2016			2016
	(Unaudited)			(Unaudited)						(Unaudited)			(Unaudited)
ASSETS
Cash and due from banks	$	35,508		$	40,081		$	34,162		$	35,066		$	33,348
Interest-earning balances at banks		55,862			32,997			48,882			38,540			34,955
Investment securities available for sale		403,602			423,345			402,501			405,010			393,131
Investment securities held to maturity		87,690			89,579			91,752			99,415			102,125
Nonmarketable equity securities		20,179			19,967			17,501			16,289			14,420
Federal funds sold		260			765			570			345			1,570
Loans held for sale		3,102			6,181			7,996			15,203			11,967
Loans - Non-covered		2,502,120			2,460,595			2,412,186			2,368,950			2,311,775
Loans - Covered		-			-			-			-			15,122
Allowance for loan losses		(12,702	)		(12,833	)		(12,125	)		(11,612	)		(10,873	)
Net loans		2,489,418			2,447,762			2,400,061			2,357,338			2,316,024
Premises and equipment, net		62,779			62,392			63,080			64,632			65,711
FDIC receivable for loss share agreements		-			-			-			-			1,164
Other real estate owned - non-covered		3,175			3,167			2,438			2,730			2,866
Other real estate owned - covered		-			-			-			-			380
Bank-owned life insurance		71,831			71,337			70,785			70,167			69,695
Deferred tax asset		20,790			21,250			25,721			26,947			28,985
Goodwill		63,317			63,317			63,317			63,030			63,197
Core deposit intangible		10,530			10,984			11,438			11,896			12,354
Other assets		12,956			15,632			15,192			20,330			22,183
Total assets	$	3,340,999		$	3,308,756		$	3,255,396		$	3,226,938		$	3,174,075
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand noninterest-bearing	$	554,399		$	524,380		$	521,295		$	505,591		$	496,195
Money market, NOW and savings		1,291,127			1,277,986			1,251,385			1,228,687			1,229,040
Time deposits		691,656			706,829			741,072			749,999			748,188
Total deposits		2,537,182			2,509,195			2,513,752			2,484,277			2,473,423
Short-term borrowings		345,000			340,000			285,000			280,000			200,000
Long-term debt		29,758			29,747			29,736			29,725			64,714
Subordinated debt		33,832			33,671			33,501			33,339			33,176
Accrued expenses and other liabilities		25,963			34,423			37,562			40,901			48,312
Total liabilities		2,971,735			2,947,036			2,899,551			2,868,242			2,819,625
Shareholders' equity:
Common stock		53,280			53,113			53,117			53,306			53,332
Additional paid-in capital		273,409			273,291			273,400			275,323			275,246
Retained earnings		44,375			37,977			32,608			29,409			25,219
Accumulated other comprehensive income (loss)		(1,800	)		(2,661	)		(3,280	)		658			653
Total shareholders' equity		369,264			361,720			355,845			358,696			354,450
Total liabilities and shareholders' equity	$	3,340,999		$	3,308,756		$	3,255,396		$	3,226,938		$	3,174,075
Common shares issued and outstanding		53,279,996			53,112,726			53,116,519			53,305,834			53,332,369

* Derived from audited financial statements.

9

PARK STERLING CORPORATION

SUMMARY OF LOAN PORTFOLIO

($ in thousands) 

	June 30,		March 31,		December 31,		September 30,		June 30,
	2017		2017		2016*		2016		2016
BY LOAN TYPE	(Unaudited)		(Unaudited)				(Unaudited)		(Unaudited)
Commercial:
Commercial and industrial	$	454,952	$	430,247	$	387,401	$	351,506	$	334,644
Commercial real estate (CRE) - owner-occupied		361,213		360,318		367,553		366,506		376,440
CRE - investor income producing		801,698		770,404		743,107		768,513		764,168
Acquisition, construction and development (AC&D) - 1-4 Family Construction		95,236		85,025		82,707		108,706		100,604
AC&D - Lots and land		92,761		98,339		105,362		88,620		94,686
AC&D - CRE construction		150,170		186,325		194,732		148,696		125,466
Other commercial		15,712		12,743		12,900		10,653		10,410
Total commercial loans		1,971,742		1,943,401		1,893,762		1,843,200		1,806,418
Consumer:
Residential mortgage		283,911		273,624		260,521		254,298		244,063
Home equity lines of credit		173,840		170,709		176,799		181,246		181,020
Residential construction		52,222		52,631		59,060		63,847		65,867
Other loans to individuals		17,133		16,936		18,905		23,281		26,575
Total consumer loans		527,106		513,900		515,285		522,672		517,525
Total loans		2,498,848		2,457,301		2,409,047		2,365,872		2,323,943
Deferred costs (fees)		3,272		3,294		3,139		3,078		2,954
Total loans, net of deferred costs (fees)	$	2,502,120	$	2,460,595	$	2,412,186	$	2,368,950	$	2,326,897

* Derived from audited financial statements.

	June 30,		March 31,		December 31,		September 30,		June 30,
	2017		2017		2016*		2016		2016
BY ACQUIRED AND NON-ACQUIRED	(Unaudited)		(Unaudited)				(Unaudited)		(Unaudited)
Acquired loans - performing	$	425,758	$	495,216	$	538,845	$	599,840	$	661,930
Acquired loans - purchase credit impaired		75,074		81,869		85,456		90,571		98,672
Total acquired loans		500,832		577,085		624,301		690,411		760,602
Non-acquired loans, net of deferred costs (fees)**		2,001,288		1,883,510		1,787,885		1,678,539		1,566,295
Total loans	$	2,502,120	$	2,460,595	$	2,412,186	$	2,368,950	$	2,326,897

* Derived from audited financial statements.

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

PARK STERLING CORPORATION

ALLOWANCE FOR LOAN LOSSES

THREE MONTH RESULTS 

($ in thousands)	June 30,			March 31,			December 31,			September 30,			June 30,
	2017			2017			2016*			2016			2016
	(Unaudited)			(Unaudited)						(Unaudited)			(Unaudited)
Beginning of period allowance	$	12,833		$	12,125		$	11,612		$	10,873		$	9,832
Loans charged-off		(329	)		(146	)		(223	)		(156	)		(94	)
Recoveries of loans charged-off		198			176			186			253			253
Net (charge-offs) recoveries		(131	)		30			(37	)		97			159
Provision expense		-			678			550			642			882
Benefit attributable to FDIC loss share agreements		-			-			-			-			-
Total provision expense charged to operations		-			678			550			642			882
Provision expense recorded through FDIC loss share receivable		-			-			-			-			-
End of period allowance	$	12,702		$	12,833		$	12,125		$	11,612		$	10,873
Net (charge-offs) recoveries	$	(131	)	$	30		$	(37	)	$	97		$	159
Net (charge-offs) recoveries to average loans (annualized)		-0.02	%		0.01	%		-0.01	%		0.02	%		0.03	%

* Derived from audited financial statements.

10

PARK STERLING CORPORATION

ACQUIRED LOANS

($ in thousands) 

	June 30,			March 31,			December 31,			September 30,			June 30,
ACQUIRED LOANS AND FAIR MARKET	2017			2017			2016*			2016			2016
VALUE (FMV) ADJUSTMENTS	(Unaudited)			(Unaudited)						(Unaudited)			(Unaudited)
Non-acquired loans	$	2,001,288		$	1,883,510		$	1,787,885		$	1,678,539		$	1,566,295
Purchased performing loans		428,404			498,314			542,269			604,000			666,894
Less: remaining FMV adjustments		(2,646	)		(3,098	)		(3,424	)		(4,160	)		(4,964	)
Purchased performing loans, net		425,758			495,216			538,845			599,840			661,930
Purchased credit impaired loans		94,613			104,416			109,805			115,736			124,985
Less: remaining FMV adjustments		(19,539	)		(22,547	)		(24,349	)		(25,165	)		(26,313	)
Purchased credit impaired loans, net		75,074			81,869			85,456			90,571			98,672
Total loans	$	2,502,120		$	2,460,595		$	2,412,186		$	2,368,950		$	2,326,897

	30-Jun			March 31,			December 31,			September 30,			June 30,
PURCHASED PERFORMING FMV	2017			2017			2016*			2016			2016
ADJUSTMENTS	(Unaudited)			(Unaudited)						(Unaudited)			(Unaudited)
Beginning FMV adjustment	$	(3,098	)	$	(3,424	)	$	(4,160	)	$	(4,964	)	$	(6,050	)
Accretion to interest income:
First Capital		304			236			503			623			777
All other mergers		148			90			233			181			309
Ending FMV adjustment	$	(2,646	)	$	(3,098	)	$	(3,424	)	$	(4,160	)	$	(4,964	)

	June 30,			March 31,			December 31,			September 30,			June 30,
	2017			2017			2016*			2016			2016
PCI FMV ADJUSTMENTS	(Unaudited)			(Unaudited)						(Unaudited)			(Unaudited)
Contractual principal and interest	$	109,655		$	119,970		$	125,512		$	133,223		$	143,701
Nonaccretable difference		(4,312	)		(7,142	)		(10,448	)		(11,529	)		(14,652	)
Expected cash flows as of the end of period		105,343			112,828			115,064			121,694			129,049
Accretable yield		(30,269	)		(30,959	)		(29,608	)		(31,123	)		(30,377	)
Ending basis in PCI loans- estimated fair value	$	75,074		$	81,869		$	85,456		$	90,571		$	98,672
Beginning accretable yield	$	(30,959	)	$	(29,608	)	$	(31,123	)	$	(30,377	)	$	(32,044	)
Loan system servicing income		1,318			1,413			1,389			1,532			1,434
Accretion to interest income		2,687			2,000			1,285			1,241			1,343
Reclass from non-accretable yield		(2,699	)		(3,802	)		(929	)		(2,691	)		(522	)
Other adjustments		(616	)		(962	)		(230	)		(828	)		(588	)
Period end accretable yield**	$	(30,269	)	$	(30,959	)	$	(29,608	)	$	(31,123	)	$	(30,377	)

* Derived from audited financial statements.

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

11

PARK STERLING CORPORATION

AVERAGE BALANCE SHEETS AND NET INTEREST ANALYSIS

THREE MONTHS 

($ in thousands)	June 30, 2017								June 30, 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)	$	2,478,976		$	29,518		4.78	%	$	2,298,569		$	26,729		4.68	%
Fed funds sold		874			2		0.92	%		3,848			5		0.52	%
Taxable investment securities		489,402			2,985		2.45	%		484,057			2,640		2.18	%
Tax-exempt investment securities		13,295			135		4.07	%		14,131			137		3.88	%
Other interest-earning assets		65,103			328		2.02	%		42,559			187		1.77	%
Total interest-earning assets		3,047,650			32,968		4.34	%		2,843,164			29,698		4.20	%
Allowance for loan losses		(12,862	)							(9,961	)
Cash and due from banks		36,678								35,011
Premises and equipment		62,750								66,029
Goodwill		63,317								63,509
Intangible assets		10,733								12,574
Other assets		108,476								124,705
Total assets	$	3,316,742							$	3,135,031
Liabilities and shareholders' equity
Interest-bearing liabilities:
Interest-bearing demand	$	480,120		$	87		0.07	%	$	426,427		$	81		0.08	%
Savings and money market		741,545			608		0.33	%		744,945			840		0.45	%
Time deposits - core		616,544			1,228		0.80	%		686,003			1,272		0.75	%
Brokered deposits		146,314			590		1.62	%		139,164			270		0.78	%
Total interest-bearing deposits		1,984,523			2,513		0.51	%		1,996,539			2,463		0.50	%
Short-term borrowings		340,934			922		1.08	%		163,132			251		0.62	%
Long-term debt		29,753			371		5.00	%		64,808			440		2.73	%
Subordinated debt		33,752			552		6.56	%		33,102			494		6.00	%
Total borrowed funds		404,439			1,845		1.83	%		261,042			1,185		1.83	%
Total interest-bearing liabilities		2,388,962			4,358		0.73	%		2,257,581			3,648		0.65	%
Net interest rate spread					28,610		3.61	%					26,050		3.55	%
Noninterest-bearing demand deposits		531,695								483,465
Other liabilities		29,602								41,480
Shareholders' equity		366,483								352,505
Total liabilities and shareholders' equity	$	3,316,742							$	3,135,031
Net interest margin							3.77	%							3.69	%

(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.

12

PARK STERLING CORPORATION

AVERAGE BALANCE SHEETS AND NET INTEREST ANALYSIS

SIX MONTHS 

($ in thousands)	June 30, 2017								June 30, 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)	$	2,451,502		$	56,980		4.69	%	$	2,286,696		$	53,853		4.74	%
Fed funds sold		870			4		0.93	%		5,372			13		0.49	%
Taxable investment securities		487,742			5,920		2.45	%		485,605			5,327		2.21	%
Tax-exempt investment securities		13,309			270		4.09	%		15,089			284		3.79	%
Other interest-earning assets		62,963			615		1.97	%		45,666			383		1.69	%
Total interest-earning assets		3,016,386			63,789		4.26	%		2,838,428			59,860		4.24	%
Allowance for loan losses		(12,571	)							(9,912	)
Cash and due from banks		36,836								35,885
Premises and equipment		62,891								66,271
Goodwill		63,317								62,783
Intangible assets		10,959								12,646
Other assets		109,969								127,727
Total assets	$	3,287,787							$	3,133,828
Liabilities and shareholders' equity
Interest-bearing liabilities:
Interest-bearing demand	$	472,498		$	173		0.07	%	$	426,610		$	168		0.08	%
Savings and money market		735,930			1,170		0.32	%		739,124			1,671		0.45	%
Time deposits - core		627,842			2,402		0.77	%		698,146			2,492		0.72	%
Brokered deposits		147,502			1,160		1.59	%		132,994			548		0.83	%
Total interest-bearing deposits		1,983,772			4,905		0.50	%		1,996,874			4,879		0.49	%
Short-term borrowings		319,917			1,423		0.90	%		177,417			545		0.62	%
Long-term debt		29,747			742		5.03	%		65,316			850		2.62	%
Subordinated debt		33,671			1,051		6.29	%		33,015			940		5.73	%
Total borrowed funds		383,335			3,216		1.69	%		275,748			2,335		1.70	%
Total interest-bearing liabilities		2,367,107			8,121		0.69	%		2,272,622			7,214		0.64	%
Net interest rate spread					55,668		3.57	%					52,646		3.60	%
Noninterest-bearing demand deposits		524,433								469,961
Other liabilities		33,420								40,714
Shareholders' equity		362,827								350,531
Total liabilities and shareholders' equity	$	3,287,787							$	3,133,828
Net interest margin							3.72	%							3.73	%

(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.

13

PARK STERLING CORPORATION

SELECTED RATIOS 

($ in thousands, except per share amounts)	June 30,			March 31,			December 31,			September 30,			June 30,
	2017			2017			2016			2016			2016
	Unaudited			Unaudited			Unaudited			Unaudited			Unaudited
ASSET QUALITY
Nonaccrual loans	$	9,373		$	9,613		$	8,819		$	8,623		$	5,185
Troubled debt restructuring (and still accruing)		2,457			2,486			2,892			2,549			2,582
Past due 90 days plus (and still accruing)		133			-			1,230			293			-
Nonperforming loans		11,963			12,099			12,941			11,465			7,767
OREO		3,175			3,167			2,438			2,730			3,246
Nonperforming assets		15,138			15,266			15,379			14,195			11,013
Past due 30-59 days (and still accruing)		677			430			1,175			1,104			985
Past due 60-89 days (and still accruing)		332			587			1,836			2,558			5,800
Nonperforming loans to total loans		0.48	%		0.49	%		0.54	%		0.48	%		0.33	%
Nonperforming assets to total assets		0.45	%		0.46	%		0.47	%		0.44	%		0.35	%
Allowance to total loans		0.51	%		0.52	%		0.50	%		0.49	%		0.47	%
Allowance to nonperforming loans		159.63	%		106.07	%		93.69	%		101.28	%		139.99	%
Allowance to nonperforming assets		114.10	%		84.06	%		78.84	%		81.80	%		98.73	%
Past due 30-89 days (accruing) to total loans		0.04	%		0.04	%		0.12	%		0.15	%		0.29	%
Net charge-offs (recoveries) to average loans (annualized)		-0.02	%		0.01	%		-0.01	%		0.02	%		0.03	%
CAPITAL
Book value per common share	$	6.98		$	6.86		$	6.75		$	6.84		$	6.77
Tangible book value per common share**	$	5.58		$	5.45		$	5.33		$	5.41		$	5.33
Common shares outstanding		53,279,996			53,112,726			53,116,519			53,305,834			53,332,369
Weighted average dilutive common shares outstanding		53,481,846			53,462,857			53,155,493			52,743,928			52,704,537
Common Equity Tier 1 (CET1) capital	$	300,698		$	293,743		$	288,594		$	287,518		$	282,721
Tier 1 capital		326,415			319,274			314,043			312,781			307,736
Tier 2 capital		12,703			12,888			12,125			11,615			10,914
Total risk based capital		339,118			332,162			326,168			324,396			318,650
Risk weighted assets		2,708,328			2,668,708			2,613,003			2,596,463			2,538,461
Average assets for leverage ratio		3,246,949			3,186,307			3,165,665			3,108,707			3,058,742
Common Equity Tier 1 (CET1) ratio		11.10	%		11.01	%		11.04	%		11.07	%		11.14	%
Tier 1 ratio		12.05	%		11.96	%		12.04	%		12.05	%		12.12	%
Total risk based capital ratio		12.52	%		12.45	%		12.48	%		12.49	%		12.55	%
Tier 1 leverage ratio		10.05	%		10.02	%		9.92	%		10.06	%		10.06	%
Tangible common equity to tangible assets**		9.04	%		8.89	%		8.84	%		9.00	%		9.00	%
LIQUIDITY
Net loans to total deposits		98.12	%		97.55	%		95.48	%		94.89	%		93.64	%
Reliance on wholesale funding		18.61	%		19.01	%		17.39	%		17.65	%		16.24	%
INCOME STATEMENT (THREE MONTH RESULTS; ANNUALIZED)
Return on Average Assets		1.03	%		0.93	%		0.66	%		0.79	%		0.71	%
Return on Average Common Equity		9.33	%		8.46	%		5.89	%		7.04	%		6.33	%
Net interest margin (non-tax equivalent)		3.77	%		3.68	%		3.58	%		3.54	%		3.69	%

** Non-GAAP financial measure

14

Non-GAAP Financial Measures

Tangible assets, tangible common equity, tangible book value, adjusted average tangible common equity, adjusted net income, adjusted noninterest income, adjusted operating revenues, adjusted noninterest expense, adjusted operating expenses, adjusted allowance for loan losses, and related ratios and per share measures, including adjusted return on average assets and adjusted return on average equity, as used throughout this release, are non-GAAP financial measures. Management uses (i) tangible assets, tangible common equity, 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	June 30,			March 31,			December 31,			September 30,			June 30,
($ in thousands, except per share amounts)	2017			2017			2016			2016			2016
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Adjusted net income
Net income (as reported)	$	8,527		$	7,489		$	5,331		$	6,324		$	5,552
Plus: merger-related expenses		923			-			2,984			1,487			1,268
Less: (gain) loss on sale of securities		-			(58	)		(6	)		-			87
Less: tax impact of merger-related expenses and (gain) loss on sale of securities		(236	)		20			(1,004	)		(499	)		(464	)
Adjusted net income	$	9,214		$	7,451		$	7,305		$	7,312		$	6,443
Divided by: weighted average diluted shares		53,481,846			53,462,857			53,155,493			52,743,928			52,704,537
Adjusted net income per share		0.17			0.14			0.14			0.14			0.12
Estimated tax rate for adjustment		25.57	%		34.48	%		33.71	%		33.56	%		34.24	%
Adjusted noninterest income
Noninterest income (as reported)	$	5,418		$	5,468		$	5,845		$	5,447		$	5,375
Less: (gain) loss on sale of securities		-			(58	)		(6	)		-			87
Adjusted noninterest income	$	5,418		$	5,410		$	5,839		$	5,447		$	5,462
Adjusted noninterest expenses
Noninterest expenses (as reported)	$	21,449		$	20,642		$	25,025		$	21,112		$	21,946
Less: merger-related expenses		(923	)		-			(2,984	)		(1,487	)		(1,268	)
Adjusted noninterest expenses	$	20,526		$	20,642		$	22,041		$	19,625		$	20,678
Adjusted operating expense
Noninterest expenses (as reported)	$	21,449		$	20,642		$	25,025		$	21,112		$	21,946
Less: merger-related expenses		(923	)		-			(2,984	)		(1,487	)		(1,268	)
Less: amortization of intangibles		(454	)		(454	)		(458	)		(458	)		(458	)
Adjusted operating expense	$	20,072		$	20,188		$	21,583		$	19,167		$	20,220
Adjusted operating revenues
Net Interest Income (as reported)	$	28,610		$	27,058		$	26,571		$	25,823		$	26,050
Plus: noninterest income (as reported)		5,418			5,468			5,845			5,447			5,375
Less: (gain) loss on sale of securities		-			(58	)		(6	)		-			87
Adjusted operating revenues	$	34,028		$	32,468		$	32,410		$	31,270		$	31,512
Adjusted efficiency ratio
Adjusted operating expense	$	20,072		$	20,188		$	21,583		$	19,167		$	20,220
Divided by: adjusted operating revenues		34,028			32,468			32,410			31,270			31,512
Adjusted efficiency ratio		58.99	%		62.18	%		66.59	%		61.30	%		64.17	%
Efficiency ratio		63.03	%		63.46	%		77.20	%		67.52	%		69.84	%
Adjusted return on average assets
Adjusted net income	$	9,214		$	7,451		$	7,305		$	7,312		$	6,443
Divided by: average assets		3,316,742			3,258,510			3,229,299			3,186,799			3,135,031
Multiplied by: annualization factor		4.01			4.06			3.98			3.98			4.02
Adjusted return on average assets		1.11	%		0.93	%		0.90	%		0.91	%		0.83	%
Return on average assets		1.03	%		0.93	%		0.66	%		0.79	%		0.71	%

15

Adjusted return on average equity
Adjusted net income	$	9,214		$	7,451		$	7,305		$	7,312		$	6,443
Divided by: average common equity		366,483			359,130			359,985			357,577			352,505
Multiplied by: annualization factor		4.01			4.06			3.98			3.98			4.02
Adjusted return on average equity		10.08	%		8.41	%		8.07	%		8.14	%		7.35	%
Return on average equity		9.33	%		8.46	%		5.89	%		7.04	%		6.33	%

PARK STERLING CORPORATION

RECONCILIATION OF NON-GAAP MEASURES  

($ in thousands, except per share amounts)	June 30,			March 31,			December 31,			September 30,			June 30,
	2017			2017			2016			2016			2016
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Tangible common equity to tangible assets
Total assets	$	3,340,999		$	3,308,756		$	3,255,396		$	3,226,938		$	3,174,075
Less: intangible assets		(73,847	)		(74,301	)		(74,755	)		(74,926	)		(75,551	)
Tangible assets	$	3,267,152		$	3,234,455		$	3,180,641		$	3,152,012		$	3,098,524
Total common equity	$	369,264		$	361,720		$	355,845		$	358,696		$	354,450
Less: intangible assets		(73,847	)		(74,301	)		(74,755	)		(74,926	)		(75,551	)
Tangible common equity	$	295,417		$	287,419		$	281,090		$	283,770		$	278,899
Tangible common equity	$	295,417		$	287,419		$	281,090		$	283,770		$	278,899
Divided by: tangible assets		3,267,152			3,234,455			3,180,641			3,152,012			3,098,524
Tangible common equity to tangible assets		9.04	%		8.89	%		8.84	%		9.00	%		9.00	%
Common equity to assets		11.05	%		10.93	%		10.93	%		11.12	%		11.17	%
Tangible book value per share
Issued and outstanding shares		53,279,996			53,112,726			53,116,519			53,305,834			53,332,369
Less: unvested restricted stock awards		(375,056	)		(390,233	)		(405,732	)		(837,561	)		(969,991	)
Period end dilutive shares		52,904,940			52,722,493			52,710,787			52,468,273			52,362,378
Tangible common equity	$	295,417		$	287,419		$	281,090		$	283,770		$	278,899
Divided by: period end dilutive shares		52,904,940			52,722,493			52,710,787			52,468,273			52,362,378
Tangible common book value per share	$	5.58		$	5.45		$	5.33		$	5.41		$	5.33
Common book value per share	$	6.98		$	6.86		$	6.75		$	6.84		$	6.77
Adjusted return on average tangible common equity
Average common equity	$	366,483		$	359,130		$	359,985		$	357,577		$	352,505
Less: average intangible assets		(74,050	)		(74,504	)		(74,812	)		(75,196	)		(76,083	)
Average tangible common equity	$	292,433		$	284,626		$	285,173		$	282,381		$	276,422
Net income	$	8,527		$	7,489		$	5,331		$	6,324		$	5,552
Divided by: average tangible common equity		292,433			284,626			285,173			282,381			276,422
Multiplied by: annualization factor		4.01			4.06			3.98			3.98			4.02
Return on average tangible common equity		11.70	%		10.67	%		7.44	%		8.91	%		8.08	%
Adjusted net income	$	9,214		$	7,451		$	7,305		$	7,312		$	6,443
Divided by: average tangible common equity		292,433			284,626			285,173			282,381			276,422
Multiplied by: annualization factor		4.01			4.06			3.98			3.98			4.02
Adjusted return on average tangible common equity		12.64	%		10.62	%		10.19	%		10.30	%		9.37	%
Adjusted allowance for loan losses
Allowance for loan losses	$	12,702		$	12,833		$	12,125		$	11,612		$	10,873
Plus: acquisition accounting FMV adjustments to acquired loans		22,185			25,645			27,773			29,325			31,277
Adjusted allowance for loan losses	$	34,887		$	38,478		$	39,898		$	40,937		$	42,150
Divided by: total loans (excluding LHFS before FMV adjustments)	$	2,524,305		$	2,486,240		$	2,439,959		$	2,398,275		$	2,358,174
Adjusted allowance for loan losses to total loans		1.38	%		1.55	%		1.64	%		1.71	%		1.79	%
Allowance for loan losses to total loans		0.51	%		0.52	%		0.50	%		0.49	%		0.47	%

16

EX-99.2

Exhibit 99.2

 

Park Sterling Corporation Announces Quarterly

Cash Dividend on Common Shares

Charlotte, NC – July 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 August 25, 2017 to all shareholders of record as of the close of business on August 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