Attached files
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| 8-K - FORM 8-K - Park Sterling Corp | c20521e8vk.htm |
| EX-99.1 - EXHIBIT 99.1 - Park Sterling Corp | c20521exv99w1.htm |
Exhibit 99.2
| Park Sterling Corporation 2011Q2 Earnings Conference Call July 28, 2011 |
| Forward Looking Statements This presentation 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, plans or forecasts of future events, results and condition, including expectations regarding the proposed merger with Community Capital Corporation ("Community Capital"), the general business strategy of engaging in bank mergers, organic growth and anticipated asset size, anticipated loan growth, refinement of the loan loss allowance methodology, recruiting of key leadership positions, decreases in construction and development loans and other changes in loan mix, changes in deposit mix, capital and liquidity levels, emerging regulatory expectations and measures, net interest income, credit trends and conditions, including loan losses, allowance, charge- offs, delinquency trends and nonperforming loan and asset levels, residential sales activity and other similar matters. These statements are not guarantees of future results or performance and by their nature involve certain risks and uncertainties that are based on management's beliefs and assumptions and on the information available to management at the time that these disclosures were prepared. Actual outcomes and results may differ materially from those expressed in, or implied by, any of these forward-looking statements. You should not place undue reliance on any forward-looking statement and should consider all of the following uncertainties and risks, as well as those more fully discussed in any of Park Sterling's filings with the SEC: failure of Community Capital's shareholders to approve the merger; failure to realize synergies and other financial benefits from the proposed merger within the expected time frame; increases in expected costs or difficulties related to integration of the Community Capital merger; inability to identify and successfully negotiate and complete additional combinations with potential merger partners or to successfully integrate such businesses into Park Sterling, including the company's ability to realize the benefits and cost savings from and limit any unexpected liabilities acquired as a result of any such business combination; the effects of negative economic conditions, including stress in the commercial real estate markets or delay or failure of recovery in the residential real estate markets; changes in consumer and investor confidence and the related impact on financial markets and institutions; changes in interest rates; failure of assumptions underlying the establishment of our allowance; deterioration in the credit quality of our loan portfolios or in the value of the collateral securing those loans; deterioration in the value of securities held in our investment securities portfolio; legal and regulatory developments; increased competition from both banks and nonbanks; changes in accounting standards, rules and interpretations, inaccurate estimates or assumptions in accounting and the impact on Park Sterling's financial statements; Park Sterling's ability to attract new employees; and management's ability to effectively manage credit risk, market risk, operational risk, legal risk, and regulatory and compliance risk. 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. 2 |
| Additional Information Certain financial measures contained herein represent non-GAAP financial measures. For more information about these non-GAAP financial measures and the presentation of the most directly comparable financial measures calculated in accordance with GAAP and accompanying reconciliations, see the appendix in this presentation. In connection with the proposed merger between Park Sterling and Community Capital Corporation ("Community Capital"), Park Sterling has filed with the Securities and Exchange Commission (the "SEC") a Registration Statement on Form S-4 that includes a preliminary Proxy Statement of Community Capital that also constitutes a Prospectus of Park Sterling, as well as other relevant documents concerning the proposed transaction. Once the Registration Statement is declared effective by the SEC, Community Capital will mail a definitive Proxy Statement/Prospectus to its shareholders. Shareholders are strongly urged to read the Registration Statement and the preliminary Proxy Statement/Prospectus regarding the proposed merger filed with the SEC, and other relevant documents that will be filed with the SEC, as well as any amendments or supplements to those documents (including the definitive Proxy Statement/Prospectus) as they become available, because they will contain important information regarding the proposed merger. A free copy of the Proxy Statement/Prospectus, as well as other filings containing information about Park Sterling and Community Capital, may be obtained after their filing at the SEC's Internet site (http://www.sec.gov). In addition, free copies of documents filed with the SEC may be obtained on the respective websites of Park Sterling and Community Capital at www.parksterlingbank.com and www.capitalbanksc.com. This communication does not constitute an offer to buy, or a solicitation to sell, shares of any security or the solicitation of any proxies from the shareholders of Park Sterling or Community Capital. Park Sterling and Community Capital and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from Community Capital's shareholders in connection with the proposed merger. Information about the directors and executive officers of Park Sterling and Community Capital and information about other persons who may be deemed participants in this solicitation will be included in the Proxy Statement/Prospectus. Information about Park Sterling's executive officers and directors can be found in Park Sterling's definitive proxy statement in connection with its 2011 Annual Meeting of Shareholders filed with the SEC on April 12, 2011. Information about Community Capital's executive officers and directors can be found in Community Capital's Amendment No.1 to its Annual Report on Form 10-K/A filed with the SEC on April 26, 2011. 3 |
| Second Quarter Highlights 4 Key Activities Financial Highlights Net loss narrowed by $127 thousand (4%) Excluding $632 thousand in merger expenses ($401 thousand, net of est. taxes)Asset quality continued to improvePositive migration in loan grades and mixNo accruing loans past due 30+ daysNonaccrual decreased $8.5 million (25%)Community Capital merger moving forward*Received regulatory approval for BHC mergerFinalizing integration plansFiled application to merge bank charters**Organic growth initiatives gaining groundOpened de novo branch in Charleston, SCOpened LPOs in Research Triangle and Greenville/SpartanburgAdded asset based lending capabilityTargeted C&I and Owner-Occupied lending increased $6.1 million (6%) (Unaudited, except 2010Q4 balance sheet; $ in thousands, except per share amounts.)* Planned Third Quarter closing subject to customary closing conditions including approval by Community Capital shareholders. ** Planned Fourth Quarter closing subject to regulatory approval and BHC merger. |
| Federal Reserve regulatory approvalState of South Carolina regulatory approvalShareholder approvalsTarget BHC merger closing late-2011Q3/early-2011Q4*Applied for bank charter merger effective 2011Q4** Strategic Update: Community Capital Merger Moving Forward 5 Merger Consummation Functional Area Target Design Line of Business Target Design "Day 1": Ensure core processes effective at close"Day 2": Position resources to support objectives (ongoing) Groups: Operations, IT, Risk Management, Finance, Compliance, Internal Audit, Human Resources "Day 1": Ensure businesses effective at close "Day 2": Position resources to serve customers, grow revenues and leverage new footprint and capabilities (ongoing) Groups: Retail, Commercial, Commercial Real Estate, ABL, Mortgage Banking, Cash Mgmt/ Treasury Services, Online Banking and Wealth Management S-4 Pro Forma Financial Information InProcess In Process (Unaudited, $ in thousands.)* Closing subject to customary closing conditions including approval by Community Capital shareholders. ** Planned Fourth Quarter closing subject to regulatory approval and BHC merger. |
| 6 Entered market 1st Quarter 2011Full branch office (June 2011)Fully staffed with three bankers, two CSRs, one underwriter Charleston, SC Opened September 2007Full branch officeFully staffed with four bankers, two CSRs Wilmington, NC Entered market 2nd Quarter 2011Loan production office (applying for full branch)Initially staffed with two bankers and one underwriter (anticipate additional hiring in 2011) Research Triangle, NC Opened October 2006Two branch officesFully staffed with thirteen bankers, three CSRs, four underwritersBase for all functional groups Charlotte, NC Entered market 2nd Quarter 2011Loan production office (applying for full branch)Initially staffed with two bankers (anticipate additional hiring in 2011) Greenville/Spartanburg , SC Hired 2nd Quarter 2011New product capabilityInitially staffed with banker, portfolio manager, collateral analyst and underwriter Asset Based Lending Strategic Update: Organic Growth Initiatives Gaining Ground |
| 7 Disclosure Policy: Management generally will not comment on specific M&A opportunities prior to execution of a merger agreement, nor on new hire opportunities prior to announcement. Charleston Columbia Greenville/Spartanburg Wilmington Charlotte Research Triangle Piedmont Triad Richmond Hampton Roads Mergers and Acquisitions Organic Growth Near-term focus on successfully launching de novo offices and new asset based lending product lineAnticipate leveraging acquired product capabilities across existing footprint Future initiatives expected to focus on Richmond, Hampton Roads, Piedmont Triad and/or Columbia ... Park Sterling well positioned with capital, liquidity and talent to pursue organic growth Near-term focus on ensuring successful consummation of Community Capital partnershipPipeline of opportunities across Virginia and the Carolinas remains extremely activeRegulatory and economic environment likely to continue increasing pressure on community banks for some time ... Park Sterling actively pursuing additional mergers and acquisitions Strategic Update: Ongoing Market Opportunities |
| 8 Portfolio Mix by Loan Type ($) (Unaudited, except 2010Q4; $ in thousands)(Loan type distribution shown before deferred loan fees) Asset Quality: Improved Profile by Loan Type C&D exposure declined $12.2 million (15%)Now 19% of loans compared to 24% in 2010Q4Down $88.2 million (56%) from 2008Q4 peakGaining traction in targeted growth areasCombined C&I and Owner-Occupied increased $6.1 million (6%)Weekly pipelines and committee activities improving Total 2011Q2 $380.6 million |
| 9 Loan Portfolio by Risk Grade (Unaudited; $ in thousands)(Loan grade distribution shown before deferred loan fees) Risk Grades: 5 - Lowest Pass, 6 - Special Mention, 7 - Substandard Asset Quality: Improved Profile by Risk Grade Low pass grades (RG5) and watch loan (RG6-7) decreased $27 million (23%) to $88.5 millionNow 23% of total loans compared to 30%High pass grades (RG1-4) increased $19.7 million (7%) from 2011Q1Now 77% of loans compared to 70%Comprised of upgrades and new loansRatio of downgrades to upgrades of 1.05xCompared to 5.71x in 2011Q2Compared to 16.61x in 2010Q4 Risk Grade Changes |
| 10 Potential Problem Assets by Classification ($) (Unaudited, except 2010Q4; $ in thousands) Asset Quality: Significantly Reduced Problem Assets Continued positive trend of reducing problem assetsNo loans 30-89 days past due and still accruing No loans 90+ days past due and still accruingNew $1.6 million LHFS Under contract with expected closing 2011Q3TDRs increased $0.8 million (67%) Represents successfully remediated loanNonaccrual loans decreased $8.5 million (25%)~ 57% current on all contractual paymentsOREO increased $1.9 million (122%)Normal migration/ remediation of problem assets |
| 11 Asset Quality: Peer Group Comparisons (with adjustment for LHFS) Peer group percentiles include depository institutions headquartered in Virginia and the Carolinas with $750 million to $4 billion in total assets. (Source: SNL) NPLs to Total Loans (%) NPAs to Total Assets (%) NPAs to Tangible Equity + ALLL (%) Annualized NCOs to Average Loans (%) PSTB (adj) excludes $1.6 million nonperforming loan held for sale that is under contract with an expected closing 2011Q3 and associated $1.6 million 2011Q2 charge-off to FMV. |
| 12 Allowance for loan losses decreased $0.5 million (4%), consistent with reduced risk in portfolioQuantitative component declined $0.6 million (7%) due to improved risk gradesQualitative component held at 0.525% of portfolio (represent 17% of total)Specific reserves increased by $91 thousand (represent 17% of total)Provision expense decreased $1.2 million (27%) and net charge-offs $1.4 million (27%) NCOs include $1.7 million mark for LHFS Five-Quarter Roll Forward Analysis Asset Quality: Allowance for Loan Losses (Unaudited, except 2010Q4; $ in thousands) Allowance / Total Loans (%) Peer group percentiles include depository institutions headquartered in Virginia and the Carolinas with $750 million to $4 billion in total assets. (Source: SNL) Components of Allowance ($) |
| Financial Review: Balance Sheet: Earning Assets 13 (Unaudited, except 2010Q4 balance sheet; $ in thousands.) Period End Earning Assets Earning assets decreased $20.3 million (3%)Allowed balance sheet to contract with roll-off of brokered CDs and higher priced CD specialReduced lower yielding cash and Fed funds balancesReinvested cash moved from Bank with formation of BHC in 2011Q1Loans decreased $7.8 million (2%) $1.6 million transfer of nonaccrual loan to LHFS$12.2 million reduction in C&D exposures Partially offset by $6.1 million increase in C&I and Owner- Occupied Total new loan production of $19.4 million compared to $9.5 million in 2011Q1 |
| Financial Review: Balance Sheet: Funded Debt and Capital 14 (Unaudited, except 2010Q4 balance sheet; $ in thousands.) Period End Funded Debt and Capital Funding profile continues to improveDemand deposits increased $5.1 million (14%)Continued focus for front-line personnelMMDA, NOW and Savings deposits increased $3.7 million (3%)Continue to test pricing in marketAllowed other CDs to decrease $21.7 million (12%)Elected not to renew special rate CD programAllowed brokered CDs to decrease $4.7 million (5%)Down $77.6 million (45%) from 2009Q1 peak |
| Financial Review: Capital Ratios Remain Strong 15 Tangible Common Equity / Tangible Assets (%) Leverage Ratio (%) Summary Peer group percentiles include depository institutions headquartered in Virginia and the Carolinas with $750 million to $4 billion in total assets. (Source: SNL) (Unaudited, except 2010Q4 balance sheet; $ in thousands amounts.) |
| Financial Review: Liquidity Ratios Remain Strong 16 Peer group percentiles include depository institutions headquartered in Virginia and the Carolinas with $750 million to $4 billion in total assets. (Source: SNL) (Unaudited, except 2010Q4 balance sheet; $ in thousands) (Wholesale Funding includes brokered CDs and FHLB borrowings.) Summary Liquidity Ratio (%) Wholesale Funding (%) |
| Financial Review: Net Interest Income 17 Net interest rate spread declined $184 thousand (5%) on a linked quarter basisDriven by $295 thousand (5%) decrease interest income due primarily to (i) $170 thousand lost income from matured portfolio hedge, and (ii) negative $88 thousand mark on forward-rate swap (will reverse with 2011Q4 loan closing)Partially offset by $112 thousand (7%) decrease in interest expense due to improved deposit mix and pricing (Unaudited, $ in thousands) |
| Financial Review: Noninterest Expense 18 Noninterest Expense Total noninterest expense increased $1.2 million (29%) from 2011Q1, including$77 thousand increase in non- cash stock expense$334 thousand increase related to de novo offices$557 thousand increase in merger one-time expensesHeadcount increased by 15 FTE (22%)Hiring shifting from back office to mid- and front office personnelAnticipate normalized quarterly noninterest expense, excluding unusual items (see table), to plateau over next two quarters (Unaudited, except 2010Q4 balance sheet; $ in thousands) |
| Outlook for Second Half 2011* 19 Earning Assets Expect continued pick-up in new loans from de novo offices (Charleston, Research Triangle, Greenville- Spartanburg) and new business line (ABL)Focus on C&I, CRE-Owner Occupied and CRE- Income ProducingAnticipate continued shift in loan mix away from C&D Booking some non-residential C&DExpect some improvement in net interest marginFocus on new loan pricing and reduction of drag from nonperforming loans Expenses Quarterly normalized operating expenses expected to plateau near current range over last six monthsAssumes only existing de novo offices (Charleston, Research Triangle, Greenville-Spartanburg), ramping into full run-rateAssumes only existing new product lines (ABL), ramping into full run-rateInfrastructure build-out essentially completedUnusual BHC and other "start-up" costs behind usContinue to estimate merger expenses of approximately $6.0 million$707 thousand already incurred Asset Quality Generally expect problem assets to continue trending downwardRecognizing results and/or pace may be uneven across individual categoriesGenerally expect lower NCOs and provision expense Subject to unexpected erosion in current economic and market conditions * Outlook applies to Park Sterling on a standalone basis without benefit of proposed merger with Community Capital Corporation. |
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| 21 Appendix: Reconciliation of Non-GAAP Measures (1) (Unaudited; $ in thousands) (1) Tangible assets, tangible common equity, tangible book value and related ratios, as used throughout this presentation, are non-GAAP financial measures. "Tangible assets" equals period end total assets less intangible assets. "Tangible common equity" equals period end common shareholders' equity less intangible assets. "Tangible book value per share" equals period end tangible common equity divided by period end dilutive common shares issued and outstanding. Special Note As contemplated during equity raise, Park Sterling awarded certain performance-based restricted shares to officers and directors following formation of bank holding companyThese 568,260 shares vest one-third each when stock price per share reaches the following performance thresholds for 30 consecutive trading days125% of offer price ($8.13)140% of offer price ($9.10)160% of offer price ($10.40)These anti-dilutive restricted shares are issued (and thereby have voting rights), but are not included in EPS or TBV per share calculations until they vest (and thereby have economic rights) |
| 22 Appendix: Problem Assets Trends by Loan Type (Unaudited, except 2010Q4; $ in thousands) |