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Park Sterling Corporation Announces Results for First Quarter 2016


/EINPresswire.com/ -- CHARLOTTE, NC--(Marketwired - April 28, 2016) - Park Sterling Corporation (NASDAQ: PSTB), the holding company for Park Sterling Bank, today released unaudited results of operations and other financial information for the first quarter of 2016. Highlights at and for the three months ended March 31, 2016 include:

Three Month Highlights

  • Net income of $2.7 million, or $0.05 per share, compared to $3.8 million, or $0.09 per share, in the quarter ended December 31, 2015
  • Adjusted net income, which excludes merger-related expenses and gain or loss on sale of securities, increased $1.4 million (29%) to a record $6.2 million, or $0.12 per share, compared to $4.8 million, or $0.11 per share, in the prior quarter
  • Adjusted operating expenses to adjusted operating revenues fell to 65.44% in the quarter from 67.84% in the fourth quarter of 2015 due to the impact of First Capital and continued disciplined expense management
  • Loan growth, after the addition of First Capital and excluding loans held for sale, of $37.1 million, or 7% annualized growth rate
  • Nonperforming loans to total loans decreased 5 basis points to 0.42% from 0.47% at December 31, 2015
  • Nonperforming assets to total assets decreased 10 basis points to 0.44% from 0.54% at December 31, 2015
  • Tier 1 leverage ratio remained strong at 9.76% compared to 11.00% at December 31, 2015
  • Completed merger with First Capital Bancorp, Inc.
  • Declared quarterly cash dividend on common shares of $0.03 per share (April 2016)

"We are delighted to report strong operating results for the first quarter of 2016," said James C. Cherry, Chief Executive Officer. "For the quarter, we achieved higher profitability driven by steady loan growth, stable core margins, and increasing operating efficiency. Our financial condition continues to be solid as asset quality remains superior and both capital and liquidity levels continue to be strong. For the three months ended March 31, 2016, we reported record adjusted net income of $6.2 million, or $0.12 per share, an increase of $1.4 million compared to adjusted net income of $4.8 million, or $0.11 per share, reported in the prior quarter. The adjusted return on average assets was 0.79%, an increase from 0.66% in the first quarter of 2015 and 0.77% in the fourth quarter of 2015. The ratio of adjusted operating expense, which excludes merger-related expenses and amortization of intangibles, to adjusted operating revenue, which excludes gains or losses on sale of securities, improved 240 basis points to 65.44% for the first quarter, compared to the prior quarter. The company posted 7% annualized organic loan growth, led by continued strong performance in our metropolitan markets. Asset quality remained strong, as nonperforming loans to total loans were 0.42% and nonperforming assets to total assets were 0.44% at March 31, 2016. Finally, capitalization also remained strong with total common equity to total assets at 11.08%, tangible common equity to tangible assets at 8.87% and Tier 1 leverage ratio at 9.76%. 

We were very excited to complete our merger with First Capital Bancorp, Inc. on January 1, 2016, which included re-branding each of the eight new branches. Park Sterling is now even better positioned to compete in the attractive Richmond market given our strong local leadership team, experienced bankers, distinctive product capabilities, strong balance sheet and attractive branch network. The combined company today has approximately $3.2 billion in total assets and 57 banking offices across Virginia, the Carolinas and North Georgia, and benefits from having almost 88% of total deposits based in markets with projected population growth rates above the national average as reported by SNL.

On the capital management front, yesterday the board declared a quarterly dividend of $0.03 per common share, payable on May 24, 2016 to all shareholders of record as of the close of business on May 10, 2016. Future dividends will be subject to board approval. Additionally, during the first quarter we repurchased approximately 98,000 shares under our previously announced 2.2 million share repurchase program.

Overall, we are pleased to report these strong results as Park Sterling continues the commitment to build a full-service regional community bank." 

Financial Results

Income Statement - Three Months Ended March 31, 2016

Park Sterling reported net income of $2.7 million, or $0.05 per share, for the three months ended March 31, 2016 ("2016Q1"). This compares to net income of $3.8 million, or $0.09 per share, for the three months ended December 31, 2015 ("2015Q4") and net income of $3.8 million, or $0.09 per share, for the three months ended March 31, 2015 ("2015Q1"). The decrease in net income from 2015Q4 and 2015Q1 resulted primarily from $5.2 million in merger-related costs, included in which is $3.9 million of termination costs of First Capital's core processing contract. This increase in expenses was partially offset by an increase in net interest income and noninterest income associated with the merger of First Capital. 

Park Sterling reported adjusted net income, which excludes merger-related expenses and gain or loss on sale of securities, of $6.2 million, or $0.12 per share, in 2016Q1. This compares to adjusted net income of $4.8 million, or $0.11 per share, in 2015Q4 and adjusted net income of $3.9 million, or $0.09 per share, in 2015Q1. Compared to 2015Q4 and 2015Q1, adjusted net income reflects higher net interest income and higher noninterest income partially offset by higher noninterest expense, much of which is associated with the merger with First Capital and organic loan growth.

Net interest income totaled $26.6 million in 2016Q1, which represents a $6.6 million or 33%, increase from $20.0 million in 2015Q4 and a $6.2 million, or 30%, increase from $20.4 million in 2015Q1. Average total earning assets increased $581.3 million, or 26%, in 2016Q1 to $2.83 billion, compared to $2.25 billion in 2015Q4 and increased $677.7 million, or 31%, compared to $2.16 billion in 2015Q1. The increase in average total earning assets in 2016Q1 from 2015Q4 included an increase in average loans (including loans held for sale) of $568.9 million, or 33%, and an increase in average other earning assets of $11.1 million, or 25%, each as a result of the acquisition of First Capital. The increase in average total earning assets in 2016Q1 from 2015Q1 resulted primarily from a $672.3 million, or 42%, increase in average loans (including loans held for sale) as a result of organic growth and the acquisition of First Capital and a $10.6 million, or 2%, increase in average marketable securities, offset by a $5.3 million, or 9%, decrease in average other earning assets. 

Net interest margin was 3.78% in 2016Q1, representing a 26 basis point increase from 3.52% in 2015Q4 and a 6 basis point decrease from 3.84% in 2015Q1. The increase in net interest margin from 2015Q4 resulted primarily from a 32 basis point increase in yield on loans to 4.80%, driven by the recognition of the acquired performing fair value mark related to the acquisition of First Capital loans, strong fee income and the addition of higher yielding loans from First Capital. Offsetting the increase in yield on average earning assets, the cost of interest-bearing liabilities increased 12 basis points to 0.63%, driven by a full quarter of interest related to the $30.0 million senior unsecured term loan incurred in December 2015 and an increase in the cost of wholesale funding following the Federal Reserves' action to raise short-term interest rates. The reduction in net interest margin from 2015Q1 resulted primarily from a 4 basis point decrease in yield on loans, due primarily to lower interest rates on new loans partially offset by the recognition of the acquired performing fair value mark related to First Capital and a 22 basis point increase in the cost of interest-bearing liabilities.

The company reported $556,000 of provision expense in 2016Q1 to support organic loan growth, compared to $409,000 of provision recorded in 2015Q4, and a provision of $180,000 in 2015Q1. Allowance for loan loss levels decreased to 0.43% of total loans at 2016Q1 compared to 0.52% at 2015Q4 due to the addition of First Capital loans for which no allowance was booked in accordance with purchase accounting standards.

Noninterest income increased $204,000, or 5%, to $4.7 million in 2016Q1, compared to $4.5 million in 2015Q4 and increased $226,000, or 5%, compared to $4.5 million in 2015Q1. The increase from 2015Q4 was driven primarily by a $617,000, or 166%, increase in BOLI income due in part to death benefits received in 2016Q1 ($402,000 in 2016Q1, $0 in 2015Q4 and $272,000 in 2015Q1). Other increases include a $50,000, or 3%, increase in service charges on deposit accounts and a $76,000, or 11%, increase in mortgage banking income. Partially offsetting these increases was (i) an $84,000, or 9%, decrease in income from wealth management activities due to a decrease in assets under management for the period; (ii) a $369,000, or 84%, decrease in income from capital market activities due to fewer transactions and a higher credit valuation adjustment and (iii) a $74,000, or 11%, decrease in ATM and card income as transactions shift from non-PIN to PIN-based when comparing 2016Q1 and 2015Q4. The increase in noninterest income from 2015Q1 reflects higher BOLI death benefits as noted above, as well as higher service charges on deposit accounts and lower amortization on the FDIC loss share indemnification asset and true-up liability expense, offset partially by lower income from capital market activities and wealth management activities and lower mortgage banking income.

Noninterest expenses increased $7.8 million, or 42%, to $26.2 million in 2016Q1 compared to $18.4 million in 2015Q4, and increased $7.0 million, or 37%, compared to $19.1 million in 2015Q1. Adjusted noninterest expenses, which exclude merger-related expenses ($5.2 million in 2016Q1, $1.4 million in 2015Q4 and $122,000 in 2015Q1), increased $4.0 million, or 24%, to $21.0 million in 2016Q1 compared to $17.0 million in 2015Q4, and increased $1.9 million, or 10%, compared to $19.0 million in 2015Q1. Overall the increase in adjusted noninterest expenses from 2015Q4 was due primarily to a $2.7 million increase in salaries and compensation expense due to the addition of First Capital employees, as well as an increase in the incentive accrual in 2016Q1 as compared to 2015Q4, as the prior quarter included a year-end incentive accrual reduction. Other increases from 2015Q4 include occupancy and equipment expense, data processing expense, legal and professional fees, deposit charges and FDIC insurance expense, postage and supplies, advertising and promotion and core deposit intangibles, all of which were due primarily to the merger with First Capital. The net cost of operation of OREO also increased compared to 2015Q4, as 2016Q1 included a loss on the sale of a branch that had been transferred to OREO in 2015. The above increases were partially offset by a $157,000 decrease in loan and collection expenses and a $52,000 decrease in the loss on disposal of assets, as 2015Q4 included branch closure costs.

The company's effective tax rate increased to 40.6% in 2016Q1, due in part to certain non-deductible merger-related expenses and adjustments made to deferred tax assets for the true-up in tax rates and re-measurement due to the First Capital merger, compared to 34.1% in 2015Q4 and 32.5% in 2015Q1.

Balance Sheet

Total assets increased $639.5 million, or 25%, to $3.2 billion at 2016Q1 compared to total assets of $2.5 billion at 2015Q4 primarily as a result of the merger with First Capital. Cash and equivalents increased $10.9 million, or 15%, to $81.2 million and total securities, including non-marketable securities, increased $11.7 million, to $514.4 million. Total loans, excluding loans held for sale, increased $537.3 million, or 31% annualized, to $2.3 billion at 2016Q1 from 2015Q4. The company's metropolitan markets, which include Charlotte, Raleigh and Wilmington, North Carolina, Greenville and Charleston, South Carolina and Richmond, Virginia, reported a $550.3 million, or 57%, increase in total loans to $1.5 billion, due to the addition of First Capital which added $500 million in loans in the Richmond market, as well as continued success in origination efforts. The community markets reported a $13.5 million, or 4%, decrease in total loans to $349.0 million, primarily due to more limited attractive lending opportunities. The company's central business units, which primarily include mortgage, builder finance, private banking and special assets remained flat as growth in mortgage, private banking and builder finance offset reductions in special asset loans, including covered loans.

The merger with First Capital led to a shift in loan mix at 2016Q1 compared to 2015Q4. The combination of commercial and industrial and owner-occupied real estate loans decreased from 33.2% to 31.1% of total loans and investor-owned commercial real estate loans increased from 29.1% to 31.7% of total loans. Acquisition, construction and development loans increased to 14.2% from 9.4% of total loans. Total consumer loans decreased to 22.5% from 27.7% of total loans, with home equity lines of credit decreasing to 7.8% from 9.0% of total loans, residential mortgages decreasing from 12.9% to 10.3% of total loans and other consumer (including residential construction) decreasing from 5.8% to 4.3% of total loans. 

In terms of accounting designations, compared to 2015Q4: (i) non-acquired loans, which include certain renewed and/or restructured acquired performing loans that are re-designated as non-acquired, increased $80.1 million, or 6%, to $1.5 billion; (ii) acquired performing loans increased $446.1 million, or 159%, to $726.0 million; and (iii) purchase credit impaired ("PCI") loans increased $11.2 million, or 12%, to $106.1 million. At 2016Q1, noncovered performing acquired loans (which totaled $724.7 million) included a $6.0 million net acquisition accounting fair market value adjustment, representing a 0.82% "mark;" noncovered PCI loans (which totaled $91.2 million) included a $23.8 million adjustment, representing a 20.7% "mark;" and covered performing acquired and PCI loans (which totaled $16.3 million) included a $3.7 million adjustment, representing an 18.7% "mark."

Total deposits increased $545.3 million, or 28%, to $2.5 billion at 2016Q1, compared to $2.0 billion at 2015Q4 due primarily to the merger with First Capital. Noninterest bearing demand deposits increased $118.2 million, or 34%, to $469.0 million (19% of total deposits). Non-brokered money market, NOW and savings deposits increased $194.9 million, or 20%, to $1.2 billion (48% of total deposits). Time deposits less than $250,000 increased $151.3 million, or 37%, to $556.7 million (22% of total deposits) and time deposits greater than $250,000 increased $48.9 million, or 69%, to $119.9 million (5% of total deposits). Finally, brokered deposits increased $32.1 million, or 25%, to $160.5 million (6% of total deposits). Core deposits, which exclude time deposits greater than $250,000 and brokered deposits, represented 88.8% of total deposits at 2016Q1 and 89.8% of total deposits at 2015Q4.

Total borrowings increased $28.8 million, or 12%, to $268.0 million at 2016Q1 compared to $239.3 million at 2015Q4. Borrowings at 2016Q1 included $205.0 million in FHLB borrowings, $30.0 million in a senior unsecured term loan at the bank holding company level, and $33.0 million of acquired trust preferred securities, net of acquisition accounting fair market value adjustments.

Total shareholders' equity increased $64.8 million, or 23%, to $349.5 million at 2016Q1 compared to $284.7 million at 2015Q4. This increase primarily resulted from the issuance of 8,376,094 shares of common stock, valued at $61.3 million (based on the $7.32 per share closing price on the last trading day prior to consummation), as the stock component of the merger with First Capital. The company's ratio of tangible common equity to tangible assets decreased to 8.87% at 2016Q1 from 9.93% at 2015Q4. The company's Common Equity Tier 1 ("CET1") ratio decreased to 10.85% at 2016Q1 compared to 12.98% at 2015Q4 due to an increase in risk weighted assets. The company's Tier 1 leverage ratio was 9.76% at 2016Q1 compared to 11.00% at 2015Q4. 

Asset Quality

Asset quality remains a point of strength for the company. Nonperforming assets were $14.0 million at 2016Q1, or 0.44% of total assets, compared to $13.7 million at 2015Q4, or 0.54% of total assets, an increase of $292,000, or 2%. Nonperforming loans were $9.6 million at 2016Q1, and represented 0.42% of total loans, compared to $8.3 million at 2015Q4, or 0.47% of total loans, an increase of $1.3 million, or 16%. The increase in nonperforming loans was due primarily to two relationships. One of the relationships totaling $1.5 million became past due during the quarter; however a sales contract for the underlying collateral is in place and full resolution is anticipated in the near future. The company reported net recoveries of $212,000, or 0.04% of average loans (annualized), in 2016Q1, compared to net charge-offs of $87,000, or 0.02% of average loans (annualized), in 2016Q1. 

The allowance for loan losses increased $768,000, or 8%, to $9.8 million, or 0.43% of total loans, at 2016Q1, compared to $9.1 million, or 0.52% of total loans, at 2015Q4. The increase in allowance included (i) a $762,000, or 33%, decrease in the quantitative component, resulting from lower historic loss rates due to a net recovery in 2016Q1 and (ii) a $1.5 million, or 23%, increase in the qualitative component, reflecting management's judgment of inherent loss in the loan portfolio not represented in historic loss rates.

During the first quarter of 2011, and as contemplated in Park Sterling Bank's 2010 public offering, 568,260 shares of restricted stock were issued but will not vest until the company's share price achieves certain performance thresholds above the equity offering price (these restricted shares vest one-third each when the share price reaches, for 30 consecutive days, $8.125, $9.10 and $10.40 per share, respectively). The performance thresholds of the remaining restricted shares have not yet been achieved (436,590 of these restricted shares remained outstanding at 2016Q1). Accordingly, these additional shares have been excluded from earnings and tangible book value per share calculations. As of March 31, 2016, 131,670 of these shares have either been forfeited or vested in accordance with agreements between the Company and its executive officers.

Conference Call

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

A replay of the webcast will be available on www.parksterlingbank.com under Investor Relations, "Investor Presentations" shortly following the call. A replay of the conference call can be accessed approximately one hour after the call by dialing (877) 344-7529 and requesting conference number 10083664.

About Park Sterling Corporation
Park Sterling Corporation, the holding company for Park Sterling Bank, is headquartered in Charlotte, North Carolina. Park Sterling, a regional community-focused financial services company with $3.2 billion in assets, is the largest community bank headquartered in the Charlotte area and has 57 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℠." 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, adjusted net income, adjusted net interest margin, adjusted operating revenues, adjusted noninterest income, adjusted noninterest expenses, adjusted operating expense, adjusted allowance for loan losses, and related ratios and per share measures, including adjusted return on average assets and adjusted return on average equity, as used throughout this release, are non-GAAP financial measures. For additional information, see "Reconciliation of Non-GAAP Financial Measures" in the accompanying tables.

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

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

                                                                                                
                    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,  
                                       2016        2015        2015         2015        2015     
                                    (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) 
                                    ----------- ----------- ----------- ----------- ----------- 
                    Interest income                                                             
                      Loans,                                                                    
                       including                                                                
                       fees         $    27,124 $    19,284 $    19,475 $    19,667 $    19,111 
                      Taxable                                                                   
                       investment                                                               
                       securities         2,687       2,677       2,636       2,508       2,791 
                      Tax-exempt                                                                
                       investment                                                               
                       securities           147         146         152         143         138 
                      Nonmarketable                                                             
                       equity                                                                   
                       securities           154         109         142         122         127 
                      Interest on                                                               
                       deposits at                                                              
                       banks                 42          22          23          18          18 
                      Federal funds                                                             
                       sold                   8           1           1           -           - 
                                    ----------- ----------- ----------- ----------- ----------- 
                        Total                                                                   
                         interest                                                               
                         income          30,162      22,239      22,429      22,458      22,185 
                                    ----------- ----------- ----------- ----------- ----------- 
                    Interest                                                                    
                     expense                                                                    
                      Money market,                                                             
                       NOW and                                                                  
                       savings                                                                  
                       deposits           1,017         743         654         532         520 
                      Time deposits       1,398         903         841         752         707 
                      Short-term                                                                
                       borrowings           294         205          90          76          76 
                      Long-term                                                                 
                       debt                 410          55         134         131         128 
                      Subordinated                                                              
                       debt                 446         358         348         351         328 
                                    ----------- ----------- ----------- ----------- ----------- 
                        Total                                                                   
                         interest                                                               
                         expense          3,565       2,264       2,067       1,842       1,759 
                                    ----------- ----------- ----------- ----------- ----------- 
                        Net                                                                     
                         interest                                                               
                         income          26,597      19,975      20,362      20,616      20,426 
                    Provision for                                                               
                     loan losses            556         409           -         134         180 
                                    ----------- ----------- ----------- ----------- ----------- 
                        Net                                                                     
                         interest                                                               
                         income                                                                 
                         after                                                                  
                         provision       26,041      19,566      20,362      20,482      20,246 
                    Noninterest                                                                 
                     income                                                                     
                      Service                                                                   
                       charges on                                                               
                       deposit                                                                  
                       accounts           1,489       1,439       1,370       1,107       1,019 
                      Mortgage                                                                  
                       banking                                                                  
                       income               775         699         700         956         951 
                      Income from                                                               
                       wealth                                                                   
                       management                                                               
                       activities           803         887         947         906         862 
                      Income from                                                               
                       capital                                                                  
                       market                                                                   
                       activities            68         437         238         394         398 
                      ATM and card                                                              
                       income               573         647         537         629         694 
                      Income from                                                               
                       bank-owned                                                               
                       life                                                                     
                       insurance            988         371       1,058         553         768 
                      Gain (loss)                                                               
                       on sale of                                                               
                       securities                                                               
                       available                                                                
                       for sale              (6)          -          54           -           - 
                      Amortization                                                              
                       of                                                                       
                       indemnifica-                                                             
                       tion asset                                                                
                       and true-up                                                              
                       liability                                                                
                       expense             (147)       (165)       (162)       (165)       (394)
                      Other                                                                     
                       noninterest                                                              
                       income               184         208         185         (88)        203 
                                    ----------- ----------- ----------- ----------- ----------- 
                        Total                                                                   
                         noninterest                                                             
                         income           4,727       4,523       4,927       4,292       4,501 
                                    ----------- ----------- ----------- ----------- ----------- 
                    Noninterest                                                                 
                     expenses                                                                   
                      Salaries and                                                              
                       employee                                                                 
                       benefits          13,018       9,541       9,952      10,021      10,431 
                      Occupancy and                                                             
                       equipment          3,125       2,680       2,591       2,491       2,555 
                      Data                                                                      
                       processing                                                               
                       and outside                                                              
                       service fees       5,523       1,669       1,668       1,640       1,648 
                      Legal and                                                                 
                       professional                                                             
                       fees                 725       1,471         472         660         798 
                      Deposit                                                                   
                       charges and                                                              
                       FDIC                                                                     
                       insurance            432         413         401         433         392 
                      Loss on                                                                   
                       disposal of                                                              
                       fixed assets          44          50         597         113         237 
                      Communication                                                             
                       fees                 483         480         501         541         578 
                      Postage and                                                               
                       supplies             173          99         123         116         149 
                      Loan and                                                                  
                       collection                                                               
                       expense               37         194         151         242         154 
                      Core deposit                                                              
                       intangible                                                               
                       amortization         458         347         347         347         347 
                      Advertising                                                               
                       and                                                                      
                       promotion            421         271         313         304         374 
                      Net cost of                                                               
                       operation of                                                             
                       other real                                                               
                       estate owned         266         (23)        163         232          35 
                      Other                                                                     
                       noninterest                                                              
                       expense            1,448       1,170       1,140       1,092       1,441 
                                    ----------- ----------- ----------- ----------- ----------- 
                        Total                                                                   
                         noninterest                                                             
                         expenses        26,153      18,362      18,419      18,232      19,139 
                                    ----------- ----------- ----------- ----------- ----------- 
                        Income                                                                  
                         before                                                                 
                         income                                                                 
                         taxes            4,615       5,727       6,870       6,542       5,608 
                    Income tax                                                                  
                     expense              1,874       1,952       2,092       2,273       1,825 
                                    ----------- ----------- ----------- ----------- ----------- 
                        Net income  $     2,741 $     3,775 $     4,778 $     4,269 $     3,783 
                                    =========== =========== =========== =========== =========== 
                                                                                                
                    Earnings per                                                                
                     common share,                                                              
                     fully diluted  $      0.05 $      0.09 $      0.11 $      0.10 $      0.09 
                    Weighted                                                                    
                     average                                                                    
                     diluted common                                                             
                     shares          52,599,584  44,322,428  44,287,019  44,301,895  44,326,833 
                                                                                                
                    
                                                                                                
                    PARK STERLING CORPORATION                                                   
                    CONDENSED CONSOLIDATED BALANCE SHEETS                                       
                    ($ in                                                     
                     thousands)     March 31, December 31, September 30,  June 30,   March 31,  
                                      2016        2015*        2015        2015       2015**    
                                   (Unaudited)             (Unaudited)  (Unaudited) (Unaudited) 
                                   ----------- ----------- ------------ ----------- ----------- 
                    ASSETS                                                                      
                    Cash and due                                                                
                     from banks    $    34,038 $    53,840 $     16,096 $    17,042 $    17,402 
                    Interest-                                                                   
                     earning                                                                    
                     balances at                                                                
                     banks              47,143      16,451       41,230      26,940      45,396 
                    Investment                                                                  
                     securities                                                                 
                     available for                                                              
                     sale              396,863     384,934      401,820     402,489     382,946 
                    Investment                                                                  
                     securities                                                                 
                     held to                                                                    
                     maturity          104,459     106,458      109,072     111,633     108,918 
                    Nonmarketable                                                               
                     equity                                                                     
                     securities         13,118      11,366       11,377      13,500      11,163 
                    Federal funds                                                               
                     sold               11,271         235          920         360         325 
                    Loans held for                                                              
                     sale                7,593       4,943        5,145      10,701       9,987 
                    Loans - Non-                                                                
                     covered         2,262,294   1,724,164    1,681,227   1,637,115   1,576,760 
                    Loans -                                                                     
                     Covered            16,849      17,651       18,897      20,348      38,092 
                    Allowance for                                                               
                     loan losses        (9,832)     (9,064)      (8,742)     (8,468)     (8,590)
                                   ----------- ----------- ------------ ----------- ----------- 
                      Net loans      2,269,311   1,732,751    1,691,382   1,648,995   1,606,262 
                                   ----------- ----------- ------------ ----------- ----------- 
                                                                                                
                    Premises and                                                                
                     equipment,                                                                 
                     net                65,494      55,658       56,948      58,979      58,796 
                    FDIC                                                                        
                     receivable                                                                 
                     for loss                                                                   
                     share                                                                      
                     agreements          1,477         943        1,190       1,209       2,333 
                    Other real                                                                  
                     estate owned                                                               
                     - non-covered       3,425       4,211        7,087       8,904       8,570 
                    Other real                                                                  
                     estate owned                                                               
                     - covered             985       1,240        1,056         884       1,713 
                    Bank-owned                                                                  
                     life                                                                       
                     insurance          69,202      58,633       58,286      57,823      57,494 
                    Deferred tax                                                                
                     asset              30,088      28,971       29,711      32,137      33,314 
                    Goodwill            63,707      29,197       29,197      29,197      29,197 
                    Core deposit                                                                
                     intangible         12,813       9,571        9,918      10,265      10,612 
                    Other assets        22,750      14,862       14,699      12,822      13,436 
                                   ----------- ----------- ------------ ----------- ----------- 
                                                                                                
                      Total assets $ 3,153,737 $ 2,514,264 $  2,485,134 $ 2,443,880 $ 2,397,864 
                                   =========== =========== ============ =========== =========== 
                                                                                                
                    LIABILITIES                                                                 
                     AND                                                                        
                     SHAREHOLDERS'                                                              
                     EQUITY                                                                     
                                                                                                
                    Deposits:                                                                   
                    Demand                                                                      
                     noninterest-                                                               
                     bearing       $   469,046 $   350,836 $    370,815 $   347,162 $   341,488 
                    Money market,                                                               
                     NOW and                                                                    
                     savings         1,255,848   1,062,046    1,041,502     988,847   1,008,743 
                    Time deposits      773,089     539,780      534,541     538,932     533,906 
                                   ----------- ----------- ------------ ----------- ----------- 
                      Total                                                                     
                       deposits      2,497,983   1,952,662    1,946,858   1,874,941   1,884,137 
                                                                                                
                    Short-term                                                                  
                     borrowings        170,000     185,000      130,000     180,000     125,000 
                    Long-term debt      65,000      30,000       55,000      55,000      55,000 
                    Subordinated                                                                
                     debt               33,014      24,262       24,092      23,922      23,752 
                    Accrued                                                                     
                     expenses and                                                               
                     other                                                                      
                     liabilities        38,229      37,636       44,979      30,274      30,857 
                                   ----------- ----------- ------------ ----------- ----------- 
                      Total                                                                     
                       liabilities   2,804,226   2,229,560    2,200,929   2,164,137   2,118,746 
                                                                                                
                    Shareholders'                                                               
                     equity:                                                                    
                      Common stock      53,038      44,854       44,909      44,911      44,877 
                      Additional                                                                
                       paid-in                                                                  
                       capital         274,706     222,596      222,587     222,271     223,139 
                      Retained                                                                  
                       earnings         21,263      20,117       17,692      14,261      11,338 
                      Accumulated                                                               
                       other                                                                    
                       comprehen-                                                              
                       sive income 
                       (loss)              504      (2,863)        (983)     (1,700)       (236)
                                   ----------- ----------- ------------ ----------- ----------- 
                      Total                                                                     
                       shareholders'                                                              
                       equity          349,511     284,704      284,205     279,743     279,118 
                                   ----------- ----------- ------------ ----------- ----------- 
                                                                                                
                    Total                                                                       
                     liabilities                                                                
                     and                                                                        
                     shareholders'                                                              
                     equity        $ 3,153,737 $ 2,514,264 $  2,485,134 $ 2,443,880 $ 2,397,864 
                                   =========== =========== ============ =========== =========== 
                                                                                                
                      Common                                                                    
                       shares                                                                   
                       issued and                                                               
                       outstanding  53,038,020  44,854,509   44,909,447  44,910,686  44,877,194 
                                                                                                
                    * Derived from audited financial statements.                                
                    ** Revised to reflect measurement period adjustments to goodwill.           
                                                                                                
                    
                                                                                                
                    PARK STERLING CORPORATION                                                   
                    SUMMARY OF LOAN PORTFOLIO                                                   
                    ($ in thousands)                                                            
                                                  December    September                         
                                     March 31,      31,         30,       June 30,    March 31, 
                                       2016        2015*        2015        2015        2015    
                    BY LOAN TYPE    (Unaudited)             (Unaudited)  (Unaudited) (Unaudited)
                                    ----------- ----------- ------------ ----------- -----------
                    Commercial:                                                                 
                      Commercial                                                                
                       and                                                                      
                       industrial   $   334,027 $   246,907 $    211,741 $   189,356 $   186,295
                      Commercial                                                                
                       real estate                                                              
                       (CRE) -                                                                  
                       owner-                                                                   
                       occupied         374,428     331,222      328,327     330,853     337,739
                      CRE -                                                                     
                       investor                                                                 
                       income                                                                   
                       producing        723,539     506,110      514,118     498,190     470,555
                      Acquisition,                                                              
                       construction                                                             
                       and                                                                      
                       development                                                              
                       (AC&D) - 1-4                                                             
                       Family                                                                   
                       Construction      97,614      32,262       27,299      31,500      28,650
                      AC&D - Lots                                                               
                       and land          88,492      44,411       47,948      48,680      50,372
                      AC&D - CRE                                                                
                       construction     136,561      87,452       85,643      86,570      84,116
                      Other                                                                     
                       commercial        10,167       8,601        8,830       7,212       5,931
                                    ----------- ----------- ------------ ----------- -----------
                        Total                                                                   
                         commercial                                                             
                         loans        1,764,828   1,256,965    1,223,906   1,192,361   1,163,658
                                    ----------- ----------- ------------ ----------- -----------
                                                                                                
                    Consumer:                                                                   
                      Residential                                                               
                       mortgage         235,737     223,884      224,110     214,850     209,384
                      Home equity                                                               
                       lines of                                                                 
                       credit           177,594     157,378      157,430     156,960     154,415
                      Residential                                                               
                       construction      71,117      72,170       66,823      62,973      59,233
                      Other loans                                                               
                       to                                                                       
                       individuals       27,245      28,817       24,896      27,696      25,845
                                    ----------- ----------- ------------ ----------- -----------
                        Total                                                                   
                         consumer                                                               
                         loans          511,693     482,249      473,259     462,479     448,877
                                    ----------- ----------- ------------ ----------- -----------
                          Total                                                                 
                           loans      2,276,521   1,739,214    1,697,165   1,654,840   1,612,535
                      Deferred                                                                  
                       costs (fees)       2,622       2,601        2,959       2,623       2,317
                                    ----------- ----------- ------------ ----------- -----------
                          Total                                                                 
                           loans,                                                               
                           net of                                                               
                           deferred                                                             
                           costs                                                                
                           (fees)   $ 2,279,143 $ 1,741,815 $  1,700,124 $ 1,657,463 $ 1,614,852
                                    =========== =========== ============ =========== ===========
                                                                                                
                    * Derived from audited financial statements.                                                                 
                                                                                                
                                                                               
                                     March 31, December 31, September 30,  June 30,   March 31, 
                    BY ACQUIRED AND    2016        2015*        2015        2015        2015    
                     NON-ACQUIRED   (Unaudited)             (Unaudited)  (Unaudited) (Unaudited)
                                    ----------- ----------- ------------ ----------- -----------
                    Acquired loans                                                              
                     - performing   $   726,025 $   279,949 $    300,102 $   317,394 $   341,078
                    Acquired loans                                                              
                     - purchase                                                                 
                     credit                                                                     
                     impaired           106,105      94,917      102,537     112,819     119,943
                                    ----------- ----------- ------------ ----------- -----------
                      Total                                                                     
                       acquired                                                                 
                       loans            832,130     374,866      402,639     430,213     461,021
                    Non-acquired                                                                
                     loans, net of                                                              
                     deferred costs                                                             
                     (fees)**         1,447,013   1,366,949    1,297,485   1,227,250   1,153,831
                                    ----------- ----------- ------------ ----------- -----------
                      Total loans   $ 2,279,143 $ 1,741,815 $  1,700,124 $ 1,657,463 $ 1,614,852
                                    =========== =========== ============ =========== ===========
                                                                                                
                    * 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,  
                                    2016         2015         2015         2015        2015     
                                 (Unaudited) (Unaudited)   (Unaudited)  (Unaudited) (Unaudited) 
                                 ----------- ------------ ------------- ----------- ----------- 
                    Beginning of                                                                
                     period                                                                     
                     allowance   $     9,064 $      8,742 $       8,468 $     8,590 $     8,262 
                    Loans                                                                       
                     charged-off         (82)        (237)         (121)       (572)       (265)
                    Recoveries                                                                  
                     of loans                                                                   
                     charged-off         294          150           415         245         413 
                                 ----------- ------------ ------------- ----------- ----------- 
                      Net                                                                       
                       charge-                                                                  
                       offs              212          (87)          294        (327)        148 
                                 ----------- ------------ ------------- ----------- ----------- 
                                                                                                
                    Provision                                                                   
                     expense             556          409             -         205         180 
                    Benefit                                                                     
                     attributable                                                                
                     to FDIC                                                                  
                     loss share                                                                 
                     agreements            -            -             -         (71)          - 
                                 ----------- ------------ ------------- ----------- ----------- 
                      Total                                                                     
                       provision                                                                
                       expense                                                                  
                       charged                                                                  
                       to                                                                       
                       opera-                                                                
                       tions             556          409             -         134         180 
                    Provision                                                                   
                     expense                                                                    
                     recorded                                                                   
                     through                                                                    
                     FDIC loss                                                                  
                     share                                                                      
                     receivable            -            -           (20)         71           - 
                                 ----------- ------------ ------------- ----------- ----------- 
                      End of                                                                    
                       period                                                                   
                       allowance $     9,832 $      9,064 $       8,742 $     8,468 $     8,590 
                                 =========== ============ ============= =========== =========== 
                                                                                                
                    Net charge-                                                                 
                     offs                                                                       
                     (recover-                                                                
                     ies)        $      (212)$         87 $        (294)$       327 $      (148)
                    Net charge-                                                                 
                     offs                                                                       
                     (recoveries)                                                                       
                     to average                                                                    
                     loans
                    (annualized)       -0.04%        0.02%        -0.07%       0.08%      -0.04%
                                                                                                
                    
                                                                                                
                    PARK STERLING CORPORATION                                                   
                    AVERAGE BALANCE SHEETS AND NET INTEREST ANALYSIS                            
                    THREE MONTHS                                                                
                    ($ in            March 31,                     March 31,                    
                     thousands)        2016                          2015                       
                                    ----------                    ----------                    
                                     Average   Income/   Yield/    Average    Income/   Yield/  
                                     Balance   Expense  Rate (3)   Balance    Expense  Rate (3) 
                                    ---------- -------- --------  ----------  -------- -------- 
                    Assets                                                                      
                    Interest-                                                                   
                     earning                                                                    
                     assets:                                                                    
                     Loans and                                                                  
                      loans held                                                                
                      for sale, net                                                             
                      (1)(2)        $2,274,824 $ 27,124     4.80% $1,602,483  $ 19,111     4.84%
                     Fed funds sold      6,895        8     0.47%        460         -     0.00%
                     Taxable                                                                    
                      investment                                                                
                      securities       487,154    2,687     2.21%    479,731     2,791     2.33%
                     Tax-exempt                                                                 
                      investment                                                                
                      securities        16,047      147     3.66%     12,851       138     4.30%
                     Other                                                                      
                      interest-                                                                 
                      earning                                                                   
                      assets            48,772      196     1.62%     60,470       145     0.97%
                                    ---------- -------- --------  ----------  -------- -------- 
                                                                                                
                      Total                                                                     
                       interest-                                                                
                       earning                                                                  
                       assets        2,833,692   30,162     4.28%  2,155,995    22,185     4.17%
                                                                                                
                    Allowance for                                                               
                     loan losses        (9,864)                       (8,369)                   
                    Cash and due                                                                
                     from banks         36,758                        16,937                    
                    Premises and                                                                
                     equipment          66,514                        59,350                    
                    Goodwill            62,055                        29,240                    
                    Intangible                                                                  
                     assets             12,718                        10,778                    
                    Other assets       130,752                       119,575                    
                                    ----------                    ----------                    
                                                                                                
                      Total assets  $3,132,625                    $2,383,506                    
                                    ==========                    ==========                    
                                                                                                
                    Liabilities and                                                             
                     shareholders'                                                              
                     equity                                                                     
                    Interest-                                                                   
                     bearing                                                                    
                     liabilities:                                                               
                     Interest-                                                                  
                      bearing                                                                   
                      demand        $  426,795 $     85     0.08% $  407,900  $     67     0.07%
                     Savings and                                                                
                      money market     733,301      831     0.46%    517,344       395     0.31%
                     Time deposits                                                              
                      - core           710,289    1,219     0.69%    461,304       588     0.52%
                     Brokered                                                                   
                      deposits         126,824      280     0.89%    140,563       177     0.51%
                                    ---------- -------- --------  ----------  -------- -------- 
                      Total                                                                     
                       interest-                                                                
                       bearing                                                                  
                       deposits      1,997,209    2,415     0.49%  1,527,111     1,227     0.33%
                     Short-term                                                                 
                      borrowings       191,701      294     0.62%    151,222        76     0.20%
                     Long-term debt     65,824      410     2.51%     52,889       128     0.98%
                     Subordinated                                                               
                      debt              32,930      446     5.45%     23,664       328     5.62%
                                    ---------- -------- --------  ----------  -------- -------- 
                      Total                                                                     
                       borrowed                                                                 
                       funds           290,455    1,150     1.59%    227,775       532     0.95%
                                    ---------- -------- --------  ----------  -------- -------- 
                                                                                                
                      Total                                                                     
                       interest-                                                                
                       bearing                                                                  
                       liabilities   2,287,664    3,565     0.63%  1,754,886     1,759     0.41%
                                    ---------- -------- --------  ----------  -------- -------- 
                                                                                                
                    Net interest                                                                
                     rate spread                 26,597     3.65%               20,426     3.77%
                                               -------- --------              -------- -------- 
                                                                                                
                    Noninterest-                                                                
                     bearing demand                                                             
                     deposits          456,457                       319,414                    
                    Other                                                                       
                     liabilities        39,948                        31,019                    
                    Shareholders'                                                               
                     equity            348,556                       278,187                    
                                    ----------                    ----------                    
                                                                                                
                    Total                                                                       
                     liabilities                                                                
                     and                                                                        
                     shareholders'                                                              
                     equity         $3,132,625                    $2,383,506                    
                                    ==========                    ==========                    
                                                                                                
                                                        --------                       -------- 
                    Net interest                                                                
                     margin                                 3.78%                          3.84%
                                                        ========                       ======== 
                    
                                                                                                
                    (1) Nonaccrual loans are included in the average loan balances.             
                    (2) Interest income and yields for the three months ended March 31, 2016 and
                        2015 include accretion from acquisition accounting adjustments          
                        associated with acquired loans.                                         
                                                                                                
                    (3) Yield/ rate calculated on Actual/Actual day count basis, except for     
                        yield on investments which is calculated on a 30/360 day count basis.   
                                                                                                
                    
                                                                                                
                    PARK STERLING CORPORATION                                                   
                    SELECTED RATIOS                                                             
                    ($ in                                                                       
                     thousands,                                                                 
                     except per                                                                 
                     share                                                                      
                     amounts)     March 31,  December 31, September 30,  June 30,    March 31,  
                                    2016         2015         2015         2015        2015     
                                  Unaudited   Unaudited     Unaudited    Unaudited   Unaudited  
                                 ----------- ------------ ------------- ----------- ----------- 
                    ASSET                                                                       
                     QUALITY                                                                    
                      Nonaccrual                                                                
                       loans     $     6,595 $      4,326 $       5,342 $     5,545 $     6,397 
                      Troubled                                                                  
                       debt                                                                     
                       restruc-                                                                
                       turing (and                                                                
                       still                                                                    
                       accruing)       2,696        2,774         3,090       3,115       3,273 
                      Past due                                                                  
                       90 days                                                                  
                       plus (and                                                                
                       still                                                                    
                       accruing)         293        1,151            47           -          10 
                      Nonperform-                                                                
                       ing loans       9,584        8,251         8,479       8,660       9,680 
                      OREO             4,410        5,451         8,143       9,788      10,283 
                      Nonperform-                                                                
                       ing                                                                      
                       assets         13,994       13,702        16,622      18,448      19,963 
                      Past due                                                                  
                       30-59                                                                    
                       days (and                                                                
                       still                                                                    
                       accruing)         217        1,222         1,790       2,559       1,285 
                      Past due                                                                  
                       60-89                                                                    
                       days (and                                                                
                       still                                                                    
                       accruing)         499        1,340         3,753         481         457 
                                                                                                
                      Nonperform-                                                                
                       ing loans                                                                
                       to total                                                                 
                       loans            0.42%        0.47%         0.50%       0.52%       0.60%
                      Nonperform-                                                                
                       ing                                                                      
                       assets to                                                                
                       total                                                                    
                       assets           0.44%        0.54%         0.67%       0.75%       0.83%
                      Allowance                                                                 
                       to total                                                                 
                       loans            0.43%        0.52%         0.51%       0.51%       0.53%
                      Allowance                                                                 
                       to                                                                       
                       nonperform-                                                                
                       ing                                                                     
                       loans          102.59%      109.85%       103.10%      97.78%      88.74%
                      Allowance                                                                 
                       to                                                                       
                       nonperform-                                                                
                       ing                                                                     
                       assets          70.26%       66.15%        52.59%      45.90%      43.03%
                      Past due                                                                  
                       30-89                                                                    
                       days                                                                     
                       (accruing)                                                                
                       to                                                                     
                       total                                                                    
                       loans            0.03%        0.15%         0.33%       0.18%       0.11%
                      Net                                                                       
                       charge-                                                                  
                       offs                                                                     
                       (recover-                                                                
                       ies) to                                                                   
                       average                                                                  
                       loans                                                                    
                       (annual-       
                       ized)          -0.04%        0.02%        -0.07%       0.08%      -0.04%
                                                                                                
                    CAPITAL                                                                     
                      Book value                                                                
                       per                                                                      
                       common                                                                   
                       share     $      6.69 $       6.49 $        6.47 $      6.37 $      6.34 
                      Tangible                                                                  
                       book                                                                     
                       value per                                                                
                       common                                                                   
                       share**   $      5.22 $       5.60 $        5.58 $      5.47 $      5.44 
                      Common                                                                    
                       shares                                                                   
                       outstand-                                                                
                       ing        53,038,020   44,854,509    44,909,447  44,910,686  44,877,194 
                      Weighted                                                                  
                       average                                                                  
                       dilutive                                                                 
                       common                                                                   
                       shares                                                                   
                       outstand-                                                                
                       ing        52,599,584   44,322,428    44,287,019  44,301,895  44,326,833 
                                                                                                
                      Common                                                                    
                       Equity                                                                   
                       Tier 1                                                                   
                       (CET1)                                                                   
                       capital   $   275,490 $    251,807 $     249,289 $   245,328     242,197 
                      Tier 1                                                                    
                       capital       300,354      268,605       265,917     261,596 $   256,843 
                      Tier 2                                                                    
                       capital         9,832        9,064         8,742       8,577       8,836 
                      Total risk                                                                
                       based                                                                    
                       capital       310,186      277,669       274,659     270,173     265,679 
                      Risk                                                                      
                       weighted                                                                 
                       assets      2,478,547    1,939,417     1,887,065   1,844,540   1,707,551 
                      Average                                                                   
                       assets                                                                   
                       for                                                                      
                       leverage                                                                 
                       ratio       3,076,505    2,441,811     2,434,376   2,359,401   2,334,285 
                                                                                                
                      Common                                                                    
                       Equity                                                                   
                       Tier 1                                                                   
                       (CET1)                                                                   
                       ratio           11.11%       12.98%        13.21%      13.30%        n/a 
                      Tier 1                                                                    
                       ratio           12.12%       13.85%        14.09%      14.18%      15.04%
                      Total risk                                                                
                       based                                                                    
                       capital                                                                  
                       ratio           12.51%       14.32%        14.55%      14.65%      15.56%
                      Tier 1                                                                    
                       leverage                                                                 
                       ratio            9.76%       11.00%        10.92%      11.09%      11.00%
                      Tangible                                                                  
                       common                                                                   
                       equity to                                                                
                       tangible                                                                 
                       assets**         8.87%        9.93%        10.02%       9.99%      10.15%
                                                                                                
                    LIQUIDITY                                                                   
                      Net loans                                                                 
                       to total                                                                 
                       deposits        90.85%       88.74%        86.88%      87.95%      85.25%
                      Reliance                                                                  
                       on                                                                       
                       wholesale                                                                
                       funding         15.50%       16.77%        16.02%      18.45%      16.55%
                                                                                                
                    INCOME STATEMENT (THREE MONTH RESULTS; ANNUALIZED)                          
                      Return on                                                                 
                       Average                                                                  
                       Assets           0.35%        0.60%         0.77%       0.71%       0.64%
                      Return on                                                                 
                       Average                                                                  
                       Common                                                                   
                       Equity           3.16%        5.26%         6.71%       6.10%       5.52%
                      Net                                                                       
                       interest                                                                 
                       margin                                                                   
                       (non-tax                                                                 
                       equiva-                                                                
                       lent)            3.78%        3.52%         3.58%       3.78%       3.84%
                                                                                                
                    ** Non-GAAP                                                                 
                     financial                                                                  
                     measure                                                                    
                                                                                                
                    

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

                                                                                                
                    PARK STERLING CORPORATION                                                   
                    RECONCILIATION OF NON-GAAP MEASURES                                         
                    ($ in thousands, except per share amounts)                                  
                                                                                                
                                                                               
                                 March 31,   December 31, September 30,  June 30,    March 31,  
                                   2016         2015         2015         2015         2015     
                                (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited) 
                                -----------  -----------  -----------  -----------  ----------- 
                    Adjusted net                                                                
                     income                                                                     
                     (three                                                                     
                     months)                                                                    
                     Pretax                                                                     
                      income (as                                                                
                      reported) $     4,615  $     5,727  $     6,870  $     6,542  $     5,608 
                     Plus:                                                                      
                      merger-                                                                   
                      related                                                                   
                      expenses        5,193        1,396           31          167          122 
                      (gain)                                                                    
                       loss on                                                                  
                       sale of                                                                  
                       securities         6            -          (54)           -            - 
                                -----------  -----------  -----------  -----------  ----------- 
                      Adjusted                                                                  
                       pretax                                                                   
                       income         9,814        7,123        6,847        6,709        5,730 
                     Tax expense      3,646        2,332        2,085        2,331        1,867 
                                -----------  -----------  -----------  -----------  ----------- 
                      Adjusted                                                                  
                       net                                                                      
                       income   $     6,168  $     4,791  $     4,762  $     4,378  $     3,863 
                                ===========  ===========  ===========  ===========  =========== 
                                                                                                
                     Divided by:                                                                
                      weighted                                                                  
                      average                                                                   
                      diluted                                                                   
                      shares     52,599,584   44,322,428   44,287,019   44,301,895   44,326,833 
                      Adjusted                                                                  
                       net                                                                      
                       income                                                                   
                       per share       0.12  $      0.11  $      0.11  $      0.10  $      0.09 
                     Estimated                                                                  
                      tax rate                                                                  
                      for                                                                       
                      adjustment     34.09 %      32.75 %      32.56 %      34.75 %      34.23 %
                                                                                                
                    Adjusted                                                                    
                     noninterest                                                                
                     income                                                                     
                     Noninterest                                                                
                      income (as                                                                
                      reported) $     4,727  $     4,523  $     4,927  $     4,292  $     4,501 
                     Less:                                                                      
                      (gain)                                                                    
                      loss on                                                                   
                      sale of                                                                   
                      securities          6            -          (54)           -            - 
                                -----------  -----------  -----------  -----------  ----------- 
                      Adjusted                                                                  
                       noninterest                                                                
                        income  $     4,733  $     4,523  $     4,873  $     4,292  $     4,501 
                                ===========  ===========  ===========  ===========  =========== 
                                                                                                
                    Adjusted                                                                    
                     noninterest                                                                
                     expenses                                                                   
                     Noninterest                                                                
                      expenses                                                                  
                      (as                                                                       
                      reported) $    26,153  $    18,362  $    18,419  $    18,232  $    19,139 
                     Less:                                                                      
                      merger-                                                                   
                      related                                                                   
                      expenses       (5,193)      (1,396)         (31)        (167)        (122)
                                -----------  -----------  -----------  -----------  ----------- 
                      Adjusted                                                                  
                       noninterest                                                              
                       expenses $    20,960  $    16,966  $    18,388  $    18,065  $    19,017 
                                ===========  ===========  ===========  ===========  =========== 
                                                                                                
                    Adjusted                                                                    
                     operating                                                                  
                     expense                                                                    
                     Noninterest                                                                
                      expenses                                                                  
                      (as                                                                       
                      reported) $    26,153  $    18,362  $    18,419  $    18,232  $    19,139 
                     Less:                                                                      
                      merger-                                                                   
                      related                                                                   
                      expenses       (5,193)      (1,396)         (31)        (167)        (122)
                     Less:                                                                      
                      amortization                                                              
                      of                                                                        
                      intangibles      (458)        (347)        (347)        (347)        (347)
                                -----------  -----------  -----------  -----------  ----------- 
                      Adjusted                                                                  
                       operating                                                                
                       expense  $    20,502  $    16,619  $    18,041  $    17,718  $    18,670 
                                ===========  ===========  ===========  ===========  =========== 
                                                                                                
                    Adjusted                                                                    
                     operating                                                                  
                     revenues                                                                   
                     Net                                                                        
                      Interest                                                                  
                      Income (as                                                                
                      reported) $    26,597  $    19,975  $    20,362  $    20,616  $    20,426 
                     Plus:                                                                      
                      noninterest                                                               
                      income (as                                                                
                      reported)       4,727        4,523        4,927        4,292        4,501 
                     Less:                                                                      
                      (gain)                                                                    
                      loss on                                                                   
                      sale of                                                                   
                      securities          6            -          (54)           -            - 
                                -----------  -----------  -----------  -----------  ----------- 
                      Adjusted                                                                  
                       operating                                                                
                       revenues $    31,330  $    24,498  $    25,235  $    24,908  $    24,927 
                                ===========  ===========  ===========  ===========  =========== 
                                                                                                
                    Adjusted                                                                    
                     operating                                                                  
                     expense to                                                                 
                     adjusted                                                                   
                     operating                                                                  
                     revenues                                                                   
                     Adjusted                                                                   
                      operating                                                                 
                      expense   $    20,502  $    16,619  $    18,041  $    17,718  $    18,670 
                     Divided by:                                                                
                      adjusted                                                                  
                      operating                                                                 
                      revenues       31,330       24,498       25,235       24,908       24,927 
                                -----------  -----------  -----------  -----------  ----------- 
                      Adjusted                                                                  
                       operating                                                                
                       expense                                                                  
                       to                                                                       
                       operating                                                                
                       revenues       65.44%       67.84%       71.49%       71.13%       74.90%
                                ===========  ===========  ===========  ===========  =========== 
                                                                                                
                    Adjusted                                                                    
                     return on                                                                  
                     average                                                                    
                     assets                                                                     
                     Adjusted                                                                   
                      net                                                                       
                      income    $     6,168  $     4,791  $     4,762  $     4,378  $     3,863 
                     Divided by:                                                                
                      average                                                                   
                      assets      3,132,625    2,480,983    2,473,034    2,406,671    2,383,506 
                     Multiplied                                                                 
                      by:                                                                       
                      annualiza-                                                                
                      tion factor      4.02         3.97         3.97         4.01         4.06 
                                -----------  -----------  -----------  -----------  ----------- 
                      Adjusted                                                                  
                       return on                                                                
                       average                                                                  
                       assets          0.79%        0.77%        0.76%        0.73%        0.66%
                                ===========  ===========  ===========  ===========  =========== 
                      Return on                                                                 
                       average                                                                  
                       assets          0.35%        0.60%        0.77%        0.71%        0.64%
                                ===========  ===========  ===========  ===========  =========== 
                                                                                                
                                                                                                
                    PARK STERLING CORPORATION                                                   
                    RECONCILIATION OF NON-GAAP MEASURES                                         
                    ($ in thousands, except per share amounts)                                  
                                                                               
                                 March 31,   December 31, September 30,  June 30,    March 31,  
                                   2016         2015         2015         2015         2015     
                                (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited) 
                                -----------  -----------  -----------  -----------  ----------- 
                    Adjusted                                                                    
                     return on                                                                  
                     average                                                                    
                     equity                                                                     
                     Adjusted                                                                   
                      net                                                                       
                      income    $     6,168  $     4,791  $     4,762  $     4,378  $     3,863 
                     Divided by:                                                                
                      average                                                                   
                      common                                                                    
                      equity        348,556      284,671      282,426      280,676      278,187 
                     Multiplied                                                                 
                      by:                                                                       
                      annualiza-                                                                
                      tion factor      4.02         3.97         3.97         4.01         4.06 
                                -----------  -----------  -----------  -----------  ----------- 
                      Adjusted                                                                  
                       return on                                                                
                       average                                                                  
                       equity          7.12%        6.68%        6.69%        6.26%        5.63%
                                ===========  ===========  ===========  ===========  =========== 
                      Return on                                                                 
                       average                                                                  
                       equity          3.16%        5.26%        6.71%        6.10%        5.52%
                                ===========  ===========  ===========  ===========  =========== 
                                                                                                
                    Tangible                                                                    
                     common                                                                     
                     equity to                                                                  
                     tangible                                                                   
                     assets                                                                     
                     Total                                                                      
                      assets    $ 3,153,737  $ 2,514,264  $ 2,485,134  $ 2,443,880  $ 2,397,864 
                     Less:                                                                      
                      intangible                                                                
                      assets        (76,520)     (38,768)     (39,115)     (39,462)     (39,809)
                                -----------  -----------  -----------  -----------  ----------- 
                      Tangible                                                                  
                       assets   $ 3,077,217  $ 2,475,496  $ 2,446,019  $ 2,404,418  $ 2,358,055 
                                ===========  ===========  ===========  ===========  =========== 
                                                                                                
                     Total                                                                      
                      common                                                                    
                      equity    $   349,511  $   284,704  $   284,205  $   279,743  $   279,118 
                     Less:                                                                      
                      intangible                                                                
                      assets        (76,520)     (38,768)     (39,115)     (39,462)     (39,809)
                                -----------  -----------  -----------  -----------  ----------- 
                      Tangible                                                                  
                       common                                                                   
                       equity   $   272,991  $   245,936  $   245,090  $   240,281  $   239,309 
                                ===========  ===========  ===========  ===========  =========== 
                                                                                                
                     Tangible                                                                   
                      common                                                                    
                      equity    $   272,991  $   245,936  $   245,090  $   240,281  $   239,309 
                     Divided by:                                                                
                      tangible                                                                  
                      assets      3,077,217    2,475,496    2,446,019    2,404,418    2,358,055 
                                -----------  -----------  -----------  -----------  ----------- 
                      Tangible                                                                  
                       common                                                                   
                       equity to                                                                
                       tangible                                                                 
                       assets          8.87%        9.93%       10.02%        9.99%       10.15%
                                ===========  ===========  ===========  ===========  =========== 
                      Common                                                                    
                       equity to                                                                
                       assets         11.08%       11.32%       11.44%       11.45%       11.64%
                                ===========  ===========  ===========  ===========  =========== 
                                                                                                
                    Tangible                                                                    
                     book value                                                                 
                     per share                                                                  
                     Issued and                                                                 
                      outstanding                                                               
                      shares     53,038,020   44,854,509   44,909,447   44,910,686   44,877,194 
                     Less:                                                                      
                      nondilutive                                                                
                      restricted                                                                
                      stock                                                                     
                      awards       (785,658)    (959,305)    (974,183)    (985,531)    (882,178)
                                -----------  -----------  -----------  -----------  ----------- 
                      Period end                                                                
                       dilutive                                                                 
                       shares    52,252,362   43,895,204   43,935,264   43,925,155   43,995,016 
                                ===========  ===========  ===========  ===========  =========== 
                                                                                                
                     Tangible                                                                   
                      common                                                                    
                      equity    $   272,991  $   245,936  $   245,090  $   240,281  $   239,309 
                     Divided by:                                                                
                      period end                                                                
                      dilutive                                                                  
                      shares     52,252,362   43,895,204   43,935,264   43,925,155   43,995,016 
                                -----------  -----------  -----------  -----------  ----------- 
                      Tangible                                                                  
                       common                                                                   
                       book                                                                     
                       value per                                                                
                       share    $      5.22  $      5.60  $      5.58  $      5.47  $      5.44 
                                ===========  ===========  ===========  ===========  =========== 
                      Common                                                                    
                       book                                                                     
                       value per                                                                
                       share    $      6.69  $      6.49  $      6.47  $      6.37  $      6.34 
                                ===========  ===========  ===========  ===========  =========== 
                                                                                                
                    Adjusted                                                                    
                     allowance                                                                  
                     for loan                                                                   
                     losses                                                                     
                     Allowance                                                                  
                      for loan                                                                  
                      losses    $     9,832  $     9,064  $     8,742  $     8,468  $     8,590 
                     Plus:                                                                      
                      acquisition                                                               
                      accounting                                                                
                      FMV                                                                       
                      adjustments                                                                
                      to acquired                                                                  
                      loans          33,589       28,173       29,548       31,159       32,209 
                                -----------  -----------  -----------  -----------  ----------- 
                      Adjusted                                                                  
                       allowance                                                                
                       for loan                                                                 
                       losses   $    43,421  $    37,237  $    38,290  $    39,627  $    40,799 
                                ===========  ===========  ===========  ===========  =========== 
                     Divided by:                                                                
                      total                                                                     
                      loans                                                                     
                      (excluding                                                                
                      LHFS                                                                      
                      before FMV                                                                
                      adjust-                                                                
                      ments)    $ 2,312,732  $ 1,769,988  $ 1,729,672  $ 1,688,622  $ 1,647,061 
                                -----------  -----------  -----------  -----------  ----------- 
                      Adjusted                                                                  
                       allowance                                                                
                       for loan                                                                 
                       losses to                                                                
                       total                                                                    
                       loans           1.88%        2.10%        2.21%        2.35%        2.48%
                                -----------  -----------  -----------  -----------  ----------- 
                      Allowance                                                                 
                       for loan                                                                 
                       losses to                                                            
                       total                                                                    
                       loans           0.43%        0.52%        0.51%        0.51%        0.53%
                                ===========  ===========  ===========  ===========  =========== 
                                                                                                
                    

For additional information contact:
Donald K. Truslow
Chief Financial Officer
(704) 716-2134
don.truslow@parksterlingbank.com


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