Park Sterling Corp - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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8-K - FORM 8-K - Park Sterling Corp	pstb_8k-042513.htm
EX-99.2 - EXHIBIT 99.2 - Park Sterling Corp	ex99-2.htm

Exhibit 99.1

Park Sterling Corporation Announces

Record Operating Results for First Quarter 2013

Charlotte, NC – April 25, 2013 – 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 2013. Highlights at and for the three months ended March 31, 2013 include:

Highlights

·	Net income available to common shareholders increased 151% from prior quarter to $3.2 million, or $0.07 per share

·	Adjusted net income available to common shareholders, which excludes merger-related expenses, increased 7% from prior quarter to $3.8 million, or $0.09 per share

·	Net interest margin decreased to 4.15% from 4.36% at December 31, 2012

·	Adjusted net interest margin, which excludes accelerated accretion of net acquisition accounting fair market value adjustments, increased to 4.15% from 4.13% at December 31, 2012

·	Nonperforming loans decreased to 1.29% of total loans from 1.31% at December 31, 2012

·	Nonperforming assets decreased to 1.93% of total assets from 2.11% at December 31, 2012

·	Tangible common equity to tangible assets increased to 11.51% from 11.05% at December 31, 2012

·	Completed deployment of new data network utilizing a Citrix®-based private cloud solution

·	Completed conversion of former Citizens South Bank customers to Park Sterling’s Jack Henry SilverLake System® core operating platform

·	Well positioned to pursue discussions regarding potential additional strategic partnerships

“Park Sterling’s first quarter results confirm the progress achieved in executing our growth strategies,” said James C. Cherry, Chief Executive Officer. “We reported record operating results, with adjusted net income available to common shareholders, which excludes merger-related expenses, increasing 7% to $3.8 million, or $0.09 per share, for the three months ended March 31, 2013 compared to the fourth quarter of 2012. Our metropolitan markets continued to post strong results by generating $7.8 million in net loan originations during the period, representing a 7% annualized growth rate. We also posted continued growth and resulting record revenues in both our mortgage banking and wealth management operations. In addition, we benefited from surpassing our targeted $2.5 million in quarterly cost savings from the merger with Citizens South and remain well positioned to invest in future growth opportunities.

Asset quality continued to improve during the first quarter and remains a strength of our company. Nonperforming loans decreased as a percentage of total loans from 1.31% at December 31, 2012 to 1.29% at March 31, 2013. Nonperforming assets similarly decreased as a percentage of total assets from 2.11% to 1.93%. Approximately 58% of Park Sterling’s loans continue to carry acquisition accounting related net fair market value adjustments, which we believe will help buffer future results against potential loan losses. Adjusted allowance for loan losses, which combines our normal allowance and these loan marks, represented 4.54% of total loans at quarter-end. Annualized net charge-offs for the quarter represented a modest 0.05% of average loans, and we posted a net recovery of 0.08% when adjusting losses for the impact of acquisition accounting related to purchase credit impaired (PCI) loans. Finally, we posted a $428,000 net gain from the operation of OREO for the period, reflecting both continued improvement in our operating markets and prudent carrying values. We continue to believe this mixture of good asset quality and sound reserve levels, combined with our strong capital position and liquidity, provides an excellent foundation for future growth.

Also during the quarter, we implemented a new data network, utilizing a Citrix®-based private cloud solution, and completed conversion of the former Citizens South’s customer base to Park Sterling’s Jack Henry SilverLake® core operating platform. As a result of those successful efforts, Park Sterling is now well positioned to pursue discussions regarding potential additional strategic partnerships. We remain confident in our ability to unite with attractive, like-minded partners that share Park Sterling’s vision of building a full-service regional community bank across our target markets.”

Page 1 of 12

First Quarter 2013 Financial Results

Income Statement

Park Sterling reported a 151% increase in net income available to common shareholders to a record $3.2 million, or $0.07 per share, for the three months ended March 31, 2013 (“2013Q1”). This compares to net income of $1.3 million, or $0.03 per share, for the three months ended December 31, 2012 (“2012Q4”) and net income of $1.7 million, or $0.05 per share, for the three months ended March 31, 2012 (“2012Q1”). The increase from 2012Q4 resulted primarily from continued improvements in asset quality, as reflected in a lower provision for loan losses and a net gain from the operation of OREO, and the realization of additional merger cost savings. The increase from 2012Q1 resulted primarily from increased earning assets, higher net interest margin and higher noninterest income associated with the merger with Citizens South Banking Corporation, which was completed on October 1, 2012, combined with continued organic growth.

Park Sterling reported a 7% increase in adjusted net income available to common shareholders, which excludes merger related expenses, to a record $3.8 million, or $0.09 per share, for 2013Q1. This compares to adjusted net income available to common shareholders of $3.5 million, or $0.08 per share, for 2012Q4 and of $2.4 million, or $0.07 per share, for 2012Q1. The increase in adjusted net income available to common shareholders from 2012Q4 again reflects improvements in asset quality and additional cost savings, while the increase from 2012Q1 primarily reflects higher earning assets, net interest margin and noninterest income associated with the merger with Citizens South, combined with continued organic growth.

Net interest income totaled $17.7 million for 2013Q1, which represented a $1.8 million, or 9%, decrease from $19.5 million for 2012Q4, and a $6.0 million, or 51%, increase from $11.7 million for 2012Q1. Average earning assets decreased $50.6 million, or 3%, from 2012Q4 to $1.7 billion at 2013Q1, which included a $42.0 million, or 3%, decrease in average loans to $1.3 billion, driven by a drop in acquired loans (see “Balance Sheet” below). Average earning assets increased $718.6 million, or 71%, from 2012Q1, which included a $600.2 million, or 80%, increase in average loans, driven by the merger with Citizens South.

Net interest margin was 4.15% in 2013Q1, representing a 21 basis point decrease from 4.36% in 2012Q4 and a 50 basis point decrease from 4.65% in 2012Q1. Adjusted net interest margin, which excludes accelerated interest income, was 4.15% in 2013Q1, representing a 2 basis point improvement from 4.13% in 2012Q4 and an 8 basis point improvement from 4.07% in 2012Q1. Accelerated interest income, which totaled $1.0 million in 2012Q4 and $1.4 million in 2012Q1, primarily reflects accelerated accretion of credit and interest rate marks resulting from borrowers repaying performing acquired loans faster than required by their contractual terms and/or restructuring loans in such a way as to effectively result in a new loan under the contractual cash flow method of accounting, both of which result in the associated remaining credit and interest rate marks being fully accreted into interest income. There was no accelerated interest income in 2013Q1.

Provision for loan losses was $309,000 for 2013Q1, compared to $994,000 for 2012Q4 and $123,000 for 2012Q1. Results for 2013Q1 were driven by $436,000 of provision expense associated with acquired loans resulting from impairment in one of the company’s six PCI loan pools associated with the merger with Community Capital Corporation (Community Capital). Results for 2012Q4 included $906,000 of provision expense associated with acquired loans, comprised of a $676,000 impairment in two of the company’s six PCI loan pools associated with the merger with Community Capital and a $230,000 qualitative allowance associated with performing loans acquired in the merger with Citizens South.

Noninterest income decreased $240,000, or 6%, to $3.6 million for 2013Q1, compared to $3.8 million in 2012Q4. Mortgage banking income increased $153,000, or 19%, to a record $968,000, including $89,000 from revenue recognition associated with ASC 815-10-S99-1 (formerly Staff Accounting Bulletin 109), in part due to an increased pipeline of mortgage loans and origination capacity resulting from the merger with Citizens South. Income from wealth management activities increased $15,000, or 2%, to a record $708,000. These increases were, however, offset by decreases in service charges on deposit accounts, driven by lower NSF fees, and decreased other noninterest income, driven by lower claims on FDIC loss share agreements. ATM and card income also decreased during the period due, in part, to timing issues related to vendor conversion.

Page 2 of 12

Noninterest expenses decreased $4.2 million, or 21%, in 2013Q1 to $16.0 million, compared to $20.3 million in 2012Q4 and increased $5.0 million, or 46%, from $11.0 million in 2012Q1. Adjusted noninterest expenses, which excludes merger-related expenses of $836,000, $3.2 million and $930,000 for 2013Q1, 2012Q4 and 2012Q1, respectively, decreased $1.9 million, or 11%, to $15.1 million in 2013Q1 compared to $17.1 million in 2012Q4, and increased $5.1 million, or 51%, compared to $10.1 million in 2012Q1. The decrease in adjusted noninterest expenses from 2012Q4 resulted from a $623,000, or 7%, decrease in employee related expenses, reflecting continued cost reduction efforts following the merger with Citizens South, and a $1.6 million, or 137%, swing in OREO operating costs from an expense of $1.2 million to a gain of $428,000, reflecting continued success in resolving problem assets. The increase in adjusted noninterest expenses from 2012Q1 resulted primarily from the merger with Citizens South.

Balance Sheet

Total assets decreased $49.2 million, or 2%, to $1.98 billion at 2013Q1 compared to total assets of $2.03 billion at 2012Q4. Cash and equivalents decreased $61.9 million, or 34%, to $122.2 million during the quarter. Approximately $52.0 million of this decrease resulted from the redeployment of funds into the securities portfolio, which totaled $305.0 million at 2013Q1, and approximately $9.9 million was utilized to reduce higher-priced deposits. Total loans, which exclude loans held for sale, decreased $27.0 million, or 2%, to $1.3 billion at 2013Q1, including $91.9 million in covered loans. This decrease included a managed $18.3 million, or 8%, decline in less attractive PCI loans. The remainder of the decrease resulted from a decline in other acquired loans. Our metropolitan markets, which include Charlotte, Raleigh and Wilmington, North Carolina and Greenville and Charleston, South Carolina, generated net loan originations of $7.8 million during the quarter, representing a 7% annualized growth rate. This origination activity remains somewhat tempered by aggressive competition with respect to term structure and interest rates, as well as by continued general softness in the economy.

Loan mix did not shift materially during the first quarter. Total consumer loans remained at 31% of total loans at 2013Q1, with residential mortgages and home equity lines of credit remaining at 14% and 12% of total loans, respectively. The combination of commercial and industrial and owner-occupied real estate loans remained the largest category at 30% of total loans at 2013Q1, but declined from 31% of total loans at 2012Q4. Investor owned commercial real estate represented 28% of total loans compared to 27% at 2012Q4. Acquisition, construction and development (A,C&D) loans represented 11% of total loans compared to 10% at 2012Q4. Approximately 25% of this A,C&D exposure is held net of acquisition accounting fair market value adjustments on PCI loans.

In terms of accounting designations, PCI loans decreased $18.3 million, or 8%, during 2013Q1 to $216.0 million (16% of total loans), acquired performing loans decreased $58.4 million, or 10%, to $556.1 million (42% of total loans), and non-acquired loans increased $49.7 million, or 10%, to $557.6 million (42% of total loans). Non-acquired loans include certain renewed and/or restructured acquired performing loans that are redesignated as non-acquired, which accounts for the difference between growth in this accounting category and the earlier mentioned net growth in loan originations in our metropolitan markets. Acquired performing loans include a remaining $7.9 million net acquisition accounting fair market value adjustment, representing a 1.41% “mark,” and PCI loans include a remaining $17.6 million net acquisition accounting fair market value adjustment, representing a 16.13% “mark.” Period end accretable yield, which is an estimate of future interest income on a level-yield basis over the life of PCI loans, increased $2.8 million, or 7%, to $45.6 million at 2013Q1 due to an increase in expected cash flows.

Total deposits decreased $37.2 million, or 2%, to $1.59 billion at 2013Q1 compared to $1.63 billion at 2012Q4. Noninterest bearing demand deposits increased $13.4 million, or 6%, to $256.9 million (16% of total deposits) as a result of continued focus on this category. Money market, NOW and savings deposits decreased $25.2 million, or 3%, to $733.5 million (46% of total deposits), due in part to post-merger repricing strategies. Local time deposits decreased $18.1 million, or 3%, to $500.7 million (31% of total deposits), due again in part to post-merger repricing strategies. Finally, brokered deposits decreased $7.2 million, or 7%, to $103.8 million (7% of total deposits) as management elected not to renew maturing certificates.

Page 3 of 12

Total borrowings decreased $14.7 million, or 14%, to $87.1 million at 2013Q1 compared to $101.7 million at 2012Q4, due to a reduction in Federal Home Loan Bank (FHLB) advances. Borrowings at 2013Q1 included $55.0 million in FHLB borrowings, $14.8 million of acquired trust preferred securities, net of acquisition accounting fair market value adjustments, and $6.9 million of Tier 2-eligible subordinated debt.

Total shareholders’ equity increased $3.3 million, or 1%, to $279.0 million at 2013Q1 compared to $275.5 million at 2012Q4, driven by higher retained earnings. Total shareholders’ equity includes $20.5 million of preferred stock issued in association with the Citizens South merger upon conversion of its preferred stock previously issued to the United States Department of the Treasury in connection with its participation in the Small Business Lending Fund. The company’s ratio of tangible common equity to tangible assets increased to 11.51% at 2013Q1 from 11.05% at 2012Q4 as a result of the increase in equity and decrease in total assets. Similarly, the Tier 1 leverage ratio increased to 11.72% at 2013Q1 from 11.25% at 2012Q4.

A revision to the net acquisition accounting fair market value adjustments associated with the FDIC receivable for loss share agreements led to a $1.6 million, or 7%, increase in goodwill resulting from the merger with Citizens South to $24.7 million at 2013Q1 and 2012Q4, compared to the originally reported $23.1 million at 2012Q4. This revision reflects a measurement period adjustment to increase expected cash flows from the underlying covered loan and OREO portfolios, which suggests a reduced need for loss share reimbursements over the life of the agreements.

Asset Quality

Asset quality continued to improve in the first quarter and remains a point of strength for the company. Nonperforming loans decreased $708,000, or 4%, to $17.1 million at 2013Q1, or 1.29% of total loans, compared to $17.8 million at 2012Q4, or 1.31% of total loans. Nonperforming assets decreased $4.5 million, or 11%, to $38.4 million at 2013Q1, or 1.93% of total assets, compared to $42.9 million at 2012Q4, or 2.11% of total assets. Nonperforming assets include $7.7 million of covered OREO for which the company expects certain losses to be reimbursed under the FDIC loss share agreements. The company reported net charge-offs of $151,000, or 0.05% of average loans (annualized), in 2013Q1, compared to a net recovery of $390,000 in 2012Q4, or 0.11% of average loans (annualized). Excluding the recognition of previously expensed impairments on PCI loans, the company reported a net recovery of $264,000, or 0.08% of average loans (annualized), in 2013Q1.

The allowance for loan losses was $10.7 million, or 0.81% of total loans at 2013Q1, compared to $10.6 million, or 0.78% of total loans at 2012Q4. Adjusted allowance for loan losses, which includes the allowance for loan losses and net acquisition accounting fair market value adjustments for acquired performing and PCI loans, represented 4.54% of total loans at 2013Q1 compared to 4.74% at 2012Q4.

During the first quarter of 2011, and as contemplated in Park Sterling’s 2010 equity 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 stock awards vest one-third each when the share price reaches, for 30 consecutive days, $8.125, $9.10 and $10.40 per share, respectively). These performance thresholds have not yet been achieved. Accordingly, these additional shares have been excluded from earnings and tangible book value per share calculations.

* * * * * * * * * * * * * * *

Conference Call

A conference call will be held at 8:30 a.m., Eastern Time this morning (April 25, 2013). The conference call can be accessed by dialing (888) 317-6016 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.”

Page 4 of 12

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 10027637.

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 approximately $2 billion in assets, is the largest community bank in the Charlotte area and has 44 banking offices stretching across the Carolinas and into North Georgia. The bank serves professionals, individuals, and small and mid-sized businesses by offering a full array of financial services, including deposit, mortgage brokerage, cash management, consumer and business finance, and wealth management services. 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

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, including financial and other estimates and expectations regarding the merger with Citizens South Banking Corporation; the general business strategy of engaging in bank mergers, organic growth, branch openings and closings, expansion or addition of product capabilities, expected footprint of the banking franchise and anticipated asset size; anticipated loan growth; changes in loan mix and deposit mix; capital and liquidity levels; net interest income, provision expense, noninterest income and noninterest expenses; credit trends and conditions, including loan losses, allowance for loan loss, charge-offs, delinquency trends and nonperforming asset levels; the amount, timing and prices of share repurchases; and other similar matters. These forward-looking 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 Park Sterling 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 to realize synergies and other financial benefits from the Citizens South merger within the expected time frames; increases in expected costs or decreases in expected savings or difficulties related to integration of the 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 adequately estimate or 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 or soft economic conditions or a “double dip” recession, including stress in the commercial real estate markets or delay or failure of recovery in the residential real estate markets; the impact of deterioration of the United States credit standing; 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 allowances for loan losses; deterioration in the credit quality of the loan portfolio or in the value of the collateral securing those loans; deterioration in the value of securities held in the investment securities portfolio; fluctuations in the market price of the common stock, regulatory, legal and contractual requirements, other uses of capital, the company’s financial performance, market conditions generally or modification, extension or termination of the authorization by the board of directors, in each case impacting purchases of common stock; 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.

Forward-looking statements speak only as of the date they are made, and Park Sterling undertakes no obligation to update any forward-looking statement to reflect the impact of circumstances or events that arise after the date the forward-looking statement was made.

###

For additional information contact:

David Gaines

Chief Financial Officer

(704) 716-2134

david.gaines@parksterlingbank.com

Page 5 of 12

PARK STERLING CORPORATION

CONDENSED CONSOLIDATED INCOME STATEMENT

THREE MONTH RESULTS

($ in thousands, except per share amounts)

	March 31, 2013			December 31, 2012		September 30, 2012		June 30, 2012		March 31, 2012
	(Unaudited)			(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Interest income
Loans, including fees	$	18,140		$	20,269	$	10,346	$	10,416	$	12,110
Taxable investment securities		866			792		826		969		1,020
Tax-exempt investment securities		190			191		187		186		185
Nonmarketable equity securities		48			80		22		28		64
Interest on deposits at banks		62			79		34		28		10
Federal funds sold		17			11		16		15		8
Total interest income		19,323			21,422		11,431		11,642		13,397
Interest expense
Money market, NOW and savings deposits		407			491		339		333		326
Time deposits		608			777		632		720		821
Short-term borrowings		6			7		-		-		3
FHLB advances		137			143		149		148		161
Subordinated debt		429			472		340		341		367
Total interest expense		1,587			1,890		1,460		1,542		1,678
Net interest income		17,736			19,532		9,971		10,100		11,719
Provision for loan losses		309			994		7		899		123
Net interest income after provision		17,427			18,538		9,964		9,201		11,596
Noninterest income
Service charges on deposit accounts		764			879		324		299		314
Mortgage banking income		968			815		662		540		461
Income from wealth management activities		708			693		665		661		599
ATM and card income		598			664		207		223		228
Income from bank-owned life insurance		381			450		294		260		259
Gain on sale of securities available for sale		-			-		989		489		-
Other noninterest income		149			307		177		91		94
Total noninterest income		3,568			3,808		3,318		2,563		1,955
Noninterest expenses
Salaries and employee benefits		8,778			11,041		6,314		5,871		6,118
Occupancy and equipment		1,908			1,942		928		910		820
Data processing and outside service fees		1,653			1,599		784		696		1,291
Legal and professional fees		893			1,077		1,181		614		312
Deposit charges and FDIC insurance		487			473		261		250		291
Communication fees		432			319		198		196		232
Postage and supplies		329			360		112		124		196
Loan and collection expense		326			248		434		295		244
Core deposit intangible amortization		257			257		102		102		102
Advertising and promotion		220			367		144		108		161
Net cost of operation of other real estate owned		(428	)		1,167		964		809		522
Other noninterest expense		1,176			1,403		781		860		714
Total noninterest expenses		16,031			20,253		12,203		10,835		11,003
Income before income taxes		4,964			2,093		1,079		929		2,548
Income tax expense		1,724			771		459		251		825
Net income		3,240			1,322		620		678		1,723
Preferred dividends		51			51		-		-		-
Net income available to common shares	$	3,189		$	1,271	$	620	$	678	$	1,723

Earnings per common share, fully diluted	$	0.07		$	0.03	$	0.02	$	0.02	$	0.05
Weighted average diluted common shares		44,069,053			44,025,874		32,138,554		32,120,402		32,075,398

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PARK STERLING CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in thousands)

	March 31, 2013			December 31, 2012*			September 30, 2012			June 30, 2012			March 31, 2012
	(Unaudited)						(Unaudited)			(Unaudited)			(Unaudited)
ASSETS
Cash and due from banks	$	19,249		$	36,716		$	47,115		$	15,898		$	18,016
Interest-earning balances at banks		51,861			101,431			37,256			29,795			15,567
Investment securities available-for-sale		299,073			245,571			186,802			222,221			232,464
Nonmarketable equity securities		5,913			7,422			4,599			5,470			8,510
Federal funds sold		51,155			45,995			22,165			29,455			20,085
Loans held for sale		11,659			14,147			6,095			5,331			8,055
Loans - Non-covered		1,237,813			1,255,019			708,283			712,506			727,862
Loans - Covered		91,936			101,688			-			-			-
Allowance for loan losses		(10,749	)		(10,591	)		(9,207	)		(9,431	)		(9,556	)
Net loans		1,319,000			1,346,116			699,076			703,075			718,306

Premises and equipment, net		57,596			57,222			26,729			24,619			24,371
FDIC receivable for loss share agreements		15,340			18,697			-			-			-
Other real estate owned - non-covered		13,597			18,427			13,028			14,744			16,674
Other real estate owned - covered		7,654			6,646			-			-			-
Bank-owned life insurance		46,546			46,133			26,945			26,689			26,456
Deferred tax asset		40,843			42,629			29,087			29,841			30,143
Goodwill		24,717			24,717			622			622			649
Core deposit intangible		9,401			9,658			3,715			3,817			3,920
Other assets		9,967			11,267			6,954			7,542			7,535

Total assets	$	1,983,571		$	2,032,794		$	1,110,188		$	1,119,119		$	1,130,751

LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits:
Demand noninterest-bearing	$	256,931		$	243,495		$	165,899		$	158,838		$	148,929
Money market, NOW and savings		733,493			758,763			341,788			332,648			329,633
Time deposits		604,397			629,746			323,988			350,548			377,875
Total deposits		1,594,821			1,632,004			831,675			842,034			856,437

Short-term borrowings		10,368			10,143			1,135			1,678			852
FHLB advances		55,000			70,000			55,000			55,000			55,000
Subordinated debt		21,692			21,573			12,592			12,494			12,396
Accrued expenses and other liabilities		22,705			23,372			13,982			13,727			13,250
Total liabilities		1,704,586			1,757,092			914,384			924,933			937,935

Shareholders' equity:
Preferred stock		20,500			20,500			-			-			-
Common stock		44,648			44,576			32,707			32,707			32,644
Additional paid-in capital		221,450			220,996			173,826			173,318			172,873
Accumulated deficit		(10,379	)		(13,568	)		(14,839	)		(15,459	)		(16,137	)
Accumulated other comprehensive income		2,766			3,198			4,110			3,620			3,436
Total shareholders' equity		278,985			275,702			195,804			194,186			192,816

Total liabilities and shareholders' equity	$	1,983,571		$	2,032,794		$	1,110,188		$	1,119,119		$	1,130,751

Common shares issued and outstanding		44,648,165			44,575,853			32,706,627			32,706,627			32,643,627

* Derived from audited financial statements. Revised to reflect measurement period adjustments to goodwill.

Page 7 of 12

PARK STERLING CORPORATION

SUMMARY OF LOAN PORTFOLIO

($ in thousands)

	March 31, 2013			December 31, 2012*			September 30, 2012			June 30, 2012			March 31, 2012
BY LOAN TYPE	(Unaudited)						(Unaudited)			(Unaudited)			(Unaudited)
Commercial:
Commercial and industrial	$	118,796		$	119,132		$	70,155		$	67,821		$	72,094
Commercial real estate - owner-occupied		285,353			299,417			161,360			161,467			166,064
Commercial real estate - investor income producing		367,434			371,956			206,808			197,368			193,641
Acquisition, construction and development		140,869			140,661			81,027			86,612			87,065
Other commercial		4,894			5,628			13,059			13,486			13,518
Total commercial loans		917,346			936,794			532,409			526,754			532,382

Consumer:
Residential mortgage		180,368			188,532			58,062			66,876			75,377
Home equity lines of credit		156,802			163,625			82,690			83,661			86,029
Residential construction		55,205			52,811			25,872			25,559			24,670
Other loans to individuals		20,237			15,554			9,839			10,119			9,635
Total consumer loans		412,612			420,522			176,463			186,215			195,711
Total loans		1,329,958			1,357,316			708,872			712,969			728,093
Deferred costs (fees)		(209	)		(609	)		(589	)		(463	)		(231	)
Total loans, net of deferred costs (fees)	$	1,329,749		$	1,356,707		$	708,283		$	712,506		$	727,862

* Derived from audited financial statements.

	March 31, 2013		December 31, 2012		September 30, 2012		June 30, 2012		March 31, 2012
BY ACQUIRED AND NON-ACQUIRED**	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Acquired loans - performing	$	556,135	$	614,518	$	246,267	$	262,104	$	285,174
Acquired loans - purchase credit impaired		215,968		234,282		42,823		48,045		55,843
Total acquired loans		772,103		848,800		289,090		310,149		341,017
Non-acquired loans, net of deferred costs (fees)		557,646		507,907		419,193		402,357		386,845
Total loans	$	1,329,749	$	1,356,707	$	708,283	$	712,506	$	727,862

** 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, 2013			December 31, 2012			September 30, 2012			June 30, 2012			March 31, 2012
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Beginning of period allowance	$	10,591		$	9,207		$	9,431		$	9,556		$	10,154
Provision for loan losses		309			994			7			899			123
Loans charged-off		(782	)		(330	)		(1,102	)		(1,262	)		(828	)
Recoveries of loans charged-off		631			720			871			238			107
End of period allowance		10,749			10,591			9,207			9,431			9,556

Net charge-offs (recoveries)	$	151		$	(390	)	$	231		$	1,024		$	721
Net charge-offs (recoveries) to average loans (annualized)		0.05	%		-0.11	%		0.13	%		0.56	%		0.39	%

Page 8 of 12

PARK STERLING CORPORATION

AVERAGE BALANCE SHEETS AND NET INTEREST ANALYSIS

THREE MONTHS

($ in thousands)	March 31, 2013								March 31, 2012
	Average			Income/		Yield/			Average			Income/		Yield/
	Balance			Expense		Rate			Balance			Expense		Rate (3)
Assets
Interest-earning assets:
Loans with fees (1)(2)	$	1,346,603		$	18,140		5.46	%	$	746,433		$	12,110		6.53	%
Fed funds sold		46,081			17		0.15	%		13,116			8		0.25	%
Taxable investment securities		244,899			866		1.41	%		214,467			1,020		1.90	%
Tax-exempt investment securities		17,896			190		4.25	%		17,824			185		4.15	%
Other interest-earning assets		76,887			110		0.58	%		21,920			74		1.36	%

Total interest-earning assets		1,732,366			19,323		4.52	%		1,013,760			13,397		5.32	%

Allowance for loan losses		(11,716	)							(9,833	)
Cash and due from banks		30,111								17,059
Premises and equipment		57,388								24,509
Goodwill		23,346								461
Intangible assets		9,487								3,954
Other assets		137,162								82,262

Total assets	$	1,978,144							$	1,132,172

Liabilities and shareholders' equity
Interest-bearing liabilities:
Interest-bearing demand	$	304,179		$	90		0.12	%	$	78,571		$	64		0.33	%
Savings and money market		435,943			317		0.29	%		246,726			262		0.43	%
Time deposits - core		506,557			330		0.26	%		235,657			423		0.72	%
Time deposits - brokered		107,324			278		1.05	%		145,251			398		1.10	%
Total interest-bearing deposits		1,354,003			1,015		0.30	%		706,205			1,147		0.65	%
Federal Home Loan Bank advances		55,167			137		1.01	%		58,297			161		1.11	%
Subordinated debt		21,628			429		8.04	%		12,363			367		11.94	%
Other borrowings		9,146			6		0.27	%		2,501			3		0.48	%
Total borrowed funds		85,941			572		2.70	%		73,161			531		2.92	%

Total interest-bearing liabilities		1,439,944			1,587		0.45	%		779,366			1,678		0.87	%

Net interest rate spread					17,736		4.08	%					11,719		4.45	%

Noninterest-bearing demand deposits		240,263								145,724
Other liabilities		19,203								14,446
Shareholders' equity		278,734								192,636

Total liabilities and shareholders' equity	$	1,978,144							$	1,132,172

Net interest margin							4.15	%							4.65	%
Net interest margin (fully tax-equivalent) (4)							4.19	%							4.69	%

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

(2)	Interest income and yields for the three months ended March 31, 2013 and 2012 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.

(4)	Fully tax-equivalent basis at 34.40% and 32.39% tax rate at March 31, 2013 and 2012, respectively, for nontaxable securities and loans.

Page 9 of 12

PARK STERLING CORPORATION

SELECTED RATIOS

($ in thousands, except per share amounts)	March 31, 2013			December 31, 2012			September 30, 2012			June 30, 2012			March 31, 2012
	Unaudited			Unaudited			Unaudited			Unaudited			Unaudited
ASSET QUALITY
Nonaccrual loans	$	9,725		$	10,374		$	9,792		$	16,757		$	17,703
Troubled debt restructuring		7,383			7,367			7,390			3,428			3,451
Past due 90 days plus (and still accruing)		2			77			164			131			698
Nonperforming loans		17,110			17,818			17,346			20,316			21,852
OREO		21,251			25,073			13,028			14,744			16,674
Nonperforming assets		38,361			42,891			30,374			35,060			38,526
Past due 30-59 days (and still accruing)		1,250			607			1,040			992			742
Past due 60-89 days (and still accruing)		521			121			561			74			764

Nonperforming loans to total loans		1.29	%		1.31	%		2.45	%		2.85	%		3.00	%
Nonperforming assets to total assets		1.93	%		2.11	%		2.74	%		3.13	%		3.41	%
Allowance to total loans		0.81	%		0.78	%		1.30	%		1.32	%		1.31	%
Allowance to nonperforming loans		62.82	%		59.44	%		53.08	%		46.42	%		43.73	%
Allowance to nonperforming assets		28.02	%		24.69	%		30.31	%		26.90	%		24.80	%
Past due 30-89 days (accruing) to total loans		0.13	%		0.05	%		0.23	%		0.15	%		0.21	%
Net charge-offs (recoveries) to average loans (annualized)		0.05	%		-0.11	%		0.13	%		0.56	%		0.39	%

CAPITAL
Book value per common share	$	5.87		$	5.80		$	6.09		$	6.04		$	6.01
Tangible book value per common share**	$	5.09		$	5.02		$	5.96		$	5.90		$	5.87
Common shares outstanding		44,648,165			44,575,853			32,706,627			32,706,627			32,643,627
Average dilutive common shares outstanding		44,069,053			44,025,874			32,138,554			32,138,402			32,075,398

Tier 1 capital	$	223,307		$	219,060		$	165,345		$	162,167		$	161,337
Tier 2 capital		17,644			17,611			16,103			16,326			16,451
Total risk based capital		240,951			236,671			181,447			178,494			177,788
Risk weighted assets		1,436,350			1,452,229			774,035			769,382			786,703
Average assets for leverage ratio		1,906,061			1,947,156			1,074,410			1,087,079			1,092,468

Tier 1 ratio		15.55	%		15.08	%		21.36	%		21.08	%		20.51	%
Total risk based capital ratio		16.78	%		16.30	%		23.44	%		23.20	%		22.60	%
Tier 1 leverage ratio		11.72	%		11.25	%		15.39	%		14.92	%		14.77	%
Tangible common equity to tangible assets**		11.51	%		11.05	%		17.31	%		17.02	%		16.72	%

LIQUIDITY
Net loans to total deposits		82.71	%		82.48	%		84.06	%		83.50	%		83.87	%
Reliance on wholesale funding		11.35	%		12.27	%		22.24	%		23.02	%		23.98	%

INCOME STATEMENT (THREE MONTH RESULTS; ANNUALIZED)
Return on Average Assets		0.65	%		0.25	%		0.22	%		0.24	%		0.61	%
Return on Average Common Equity		5.01	%		1.96	%		1.26	%		1.40	%		3.60	%
Net interest margin (non-tax equivalent)		4.15	%		4.36	%		3.97	%		4.01	%		4.65	%

INCOME STATEMENT (ANNUAL RESULTS)
Return on Average Assets		n/a			0.32	%		n/a			n/a			n/a
Return on Average Equity		n/a			1.99	%		n/a			n/a			n/a
Net interest margin (non-tax equivalent)		n/a			4.27	%		n/a			n/a			n/a

** Non-GAAP financial measure

Page 10 of 12

Non-GAAP Financial Measures

Tangible assets, tangible common equity, tangible book value, adjusted net income available to common shareholders, adjusted net interest margin, adjusted noninterest income, adjusted noninterest expenses, adjusted allowance for loan losses, adjusted net charge-offs/ recoveries, 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) and adjusted net charge-offs/ recoveries (which exclude the impact of acquisition accounting related to PCI loans) to evaluate both its asset quality and asset quality trends, and to facilitate comparisons with peers; and (iii) adjusted net income, adjusted noninterest income and adjusted noninterest expenses (which exclude merger-related expenses and gain on sale of securities, as applicable), and adjusted net interest margin (which excludes accelerated accretion of net acquisition accounting fair market value adjustments), and adjusted return on average assets and adjusted return on average equity (which excludes merger-related expenses and gain on sale of securities) to evaluate core earnings and to facilitate comparisons with peers.

PARK STERLING CORPORATION

RECONCILIATION OF NON-GAAP MEASURES

($ in thousands, except per share amounts)

(three month and period end results unless otherwise stated)

	March 31, 2013			December 31, 2012			September 30, 2012			June 30, 2012			March 31, 2012
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Adjusted net income
Pretax income (as reported)	$	4,964		$	2,093		$	1,079		$	929		$	2,548
Plus: merger-related expenses		836			3,167			1,364			434			930
Less: gain on sale of securities		-			-			(989	)		(489	)		-
Adjusted pretax income		5,800			5,260			1,454			874			3,478
Tax expense		1,995			1,691			467			281			1,118
Adjusted net income	$	3,805		$	3,569		$	987		$	593		$	2,360
Preferred dividends		51			51			-			-			-
Adjusted net income available to common shareholders	$	3,754		$	3,518		$	987		$	593		$	2,360

Divided by: weighted average diluted shares		44,069,053			44,025,874			32,138,554			32,120,402			32,075,398
Adjusted net income available to common shareholders per share	$	0.09		$	0.08		$	0.03		$	0.02		$	0.07
Estimated tax rate		34.40	%		32.15	%		32.15	%		32.15	%		32.15	%

Adjusted net interest margin
Net interest income (as reported)	$	17,736		$	19,532		$	9,971		$	10,100		$	11,719
Less: accelerated mark accretion		-			(921	)		17			(277	)		(1,469	)
Less: other accelerated accretion		-			(121	)		-			-			-
Adjusted net interest income		17,736			18,490			9,988			9,823			10,250
Divided by: average earning assets		1,732,366			1,782,922			998,669			1,012,570			1,013,760
Mutliplied by: annualization factor		4.06			3.98			3.98			4.02			4.02
Adjusted net interest margin		4.15	%		4.13	%		3.98	%		3.90	%		4.07	%
Net interest margin		4.15	%		4.36	%		3.97	%		4.01	%		4.65	%

Adjusted noninterest income
Noninterest income (as reported)	$	3,568		$	3,808		$	3,318		$	2,563		$	1,955
Less: gain on sale of securities		-			-			(989	)		(489	)		-
Adjusted noninterest income	$	3,568		$	3,808		$	2,329		$	2,074		$	1,955

Adjusted noninterest expense
Noninterest expense (as reported)	$	16,031		$	20,253		$	12,203		$	10,835		$	11,003
Less: merger-related expenses		(836	)		(3,167	)		(1,364	)		(434	)		(930	)
Adjusted noninterest expense		15,195			17,086			10,839			10,401			10,073

Adjusted return on average assets
Adjusted net income available to common shareholders	$	3,754		$	3,518		$	987		$	593		$	2,360
Divided by: average assets		1,978,144			2,020,662			1,112,923			1,127,031			1,131,360
Mutliplied by: annualization factor		4.06			3.98			3.98			4.02			4.02
Adjusted return on average assets		0.77	%		0.69	%		0.35	%		0.21	%		0.84	%
Return on average assets		0.65	%		0.25	%		0.22	%		0.24	%		0.61	%

Adjusted return on average equity
Adjusted net income available to common shareholders	$	3,754		$	3,518		$	987		$	593		$	2,360
Divided by: average common equity		258,234			257,335			196,013			194,345			192,398
Mutliplied by: annualization factor		4.06			3.98			3.98			4.02			4.02
Adjusted return on average equity		5.90	%		5.44	%		2.00	%		1.23	%		4.93	%
Return on average equity		5.01	%		1.96	%		1.26	%		1.40	%		3.60	%

Page 11 of 12

PARK STERLING CORPORATION

RECONCILIATION OF NON-GAAP MEASURES

($ in thousands, except per share amounts)

(three month and period end results unless otherwise stated)

	March 31, 2013			December 31, 2012			September 30, 2012			June 30, 2012			March 31, 2012
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Tangible common equity to tangible assets
Total assets	$	1,983,571		$	2,032,794		$	1,110,188		$	1,119,119		$	1,130,751
Less: intangible assets		(34,118	)		(34,375	)		(4,337	)		(4,439	)		(4,569	)
Tangible assets	$	1,949,453		$	1,998,419		$	1,105,851		$	1,114,680		$	1,126,182

Total common equity	$	258,485		$	255,202		$	195,804		$	194,186		$	192,816
Less: intangible assets		(34,118	)		(34,375	)		(4,337	)		(4,439	)		(4,569	)
Tangible common equity	$	224,367		$	220,827		$	191,467		$	189,747		$	188,247

Tangible common equity	$	224,367		$	220,827		$	191,467		$	189,747		$	188,247
Divided by: tangible assets	$	1,949,453		$	1,998,419		$	1,105,851		$	1,114,680		$	1,126,182
Tangible common equity to tangible assets		11.51	%		11.05	%		17.31	%		17.02	%		16.72	%

Tangible book value per share
Issued and outstanding shares		44,648,165			44,575,853			32,706,627			32,706,627			32,643,627
Less: nondilutive restricted stock awards		(568,260	)		(568,260	)		(568,260	)		(568,260	)		(568,260	)
Period end dilutive shares		44,079,905			44,007,593			32,138,367			32,138,367			32,075,367

Tangible common equity	$	224,367		$	220,827		$	191,467		$	189,747		$	188,247
Divided by: period end dilutive shares		44,079,905			44,007,593			32,138,367			32,138,367			32,075,367
Tangible common book value per share	$	5.09		$	5.02		$	5.96		$	5.90		$	5.87

Adjusted allowance for loan losses
Allowance for loan losses	$	10,749		$	10,591		$	9,207		$	9,431		$	9,556
Plus: acquisition accounting net FMV adjustments to acquired loans		49,633			53,719			21,512			24,264			31,957
Adjusted allowance for loan losses	$	60,382		$	64,310		$	30,719		$	33,695		$	41,513
Divided by: total loans (excluding LHFS)	$	1,329,749		$	1,356,707		$	708,283		$	712,506		$	727,862
Adjusted allowance for loan losses to total loans		4.54	%		4.74	%		4.34	%		4.73	%		5.70	%

Adjusted net charge-offs/ recoveries
Net charge-offs (recoveries)	$	151		$	(390	)	$	231		$	1,024		$	721
Plus: impact of acquisition accounting related PCI loans		(415	)		-			-			-			-
Adjusted net charge-offs (recoveries)		(264	)		(390	)		231			1,024			721
Divided by: average loans		1,335,224			1,388,627			719,397			729,163			746,433
Mutliplied by: annualization factor		4.06			3.98			3.98			4.02			4.02
Adjusted net charge-offs (recoveries) (annualized)		-0.08	%		-0.11	%		0.13	%		0.56	%		0.39	%
Net charge-offs (recoveries) (annualized)		0.05	%		-0.11	%		0.13	%		0.56	%		0.39	%

Page 12 of 12

Park Sterling Corp - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - April 25, 2013

Attached files

Park Sterling Corp Reports