Park Sterling Corporation Announces Record Operating Results for Fourth Quarter 2015
/EINPresswire.com/ -- CHARLOTTE, NC--(Marketwired - January 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 fourth quarter of 2015. Highlights at and for the three and twelve months ended December 31, 2015 include:
Three Month Highlights
- Net income of $3.8 million, or $0.09 per share, compared to $4.8 million, or $0.11 per share, in the quarter ended September 30, 2015
- Adjusted net income, which excludes merger-related expenses and gain or loss on sale of securities, increased $29,000 (1%) to a record $4.8 million, or $0.11 per share, compared to $4.8 million, or $0.11 per share, in the prior quarter
- Organic loan growth, excluding loans held for sale, of $41.7 million, or 10% annualized growth rate
- Nonperforming loans decreased 3 basis points to 0.47% of total loans from 0.50% at September 30, 2015
- Nonperforming assets decreased 13 basis points to 0.54% of total assets from 0.67% at September 30, 2015
- Tier 1 leverage ratio increased 8 basis points to 11.00% from 10.92% at September 30, 2015
- Declared quarterly cash dividend on common shares of $0.03 per share (January 2016)
- Completed merger with First Capital Bancorp, Inc. (January 2016)
Twelve Month Highlights
- Net income increased $3.7 million (29%) to a record $16.6 million, or $0.37 per share
- Adjusted net income, which excludes merger-related expenses and gain or loss on sale of securities, increased $2.6 million (17%) to a record $17.8 million, or $0.40 per share
- Organic loan growth, which excludes loans held for sale, of $161.1 million, or 10%
- Organic deposit growth of $101.3 million, or 5%
"We are pleased to report another record quarter marked by improved operating efficiency, solid loan growth, attractive asset quality and strong capital levels" said James C. Cherry, Chief Executive Officer. "For the three months ended December 31, 2015, we reported record adjusted net income of $4.8 million, or $0.11 per share, an increase of $29,000 compared to adjusted net income of $4.8 million, or $0.11 per share, reported last quarter. The ratio of adjusted operating expense, which excludes merger-related expenses and amortization of intangibles, to adjusted operating revenue, which excludes gain or loss on sale of securities, decreased 365 basis points to 67.84% for the three months, achieving our target of driving below 70% by year-end. The company posted 10% annualized organic loan growth, led by continued strong performance in our metropolitan markets which posted $33.4 million, or 14% annualized growth. Asset quality continued to improve from already attractive levels, as nonperforming loans to total loans decreased three basis points to 0.47% and nonperforming assets to total assets decreased thirteen basis points to 0.54%, compared to September 30, 2015. Finally, capitalization remained strong with tangible common equity to tangible assets at 9.93% and Tier 1 leverage ratio at 11.00%.
These strong fourth quarter results completed a record year for the company. For the twelve months ended December 31, 2015, we reported a 17% increase in adjusted net income, which excludes merger-related expenses and gain or loss on sale of securities, to a record $17.8 million, or $0.40 per share, compared to $15.2 million, or $0.34 per share, reported last year. Strong origination activity led to a $161.1 million, or 10%, increase in loans, excluding loans held for sale, and a $101.3 million, or 5%, increase in deposits.
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 $3.1 billion in total assets and 57 banking offices across Virginia, the Carolinas and North Georgia, and benefits from having almost 87% of total deposits based in markets with projected population growth rates above the national average.
On the capital management front, yesterday the board declared a quarterly dividend of $0.03 per common share, payable on February 23, 2016 to all shareholders of record as of the close of business on February 9, 2016. Future dividends will be subject to board approval. Additionally, during the fourth quarter we repurchased approximately 48,000 shares under our previously announced 2.2 million share repurchase program.
Overall, we are pleased to report these strong financial results as Park Sterling continues pursuing our vision of building a full-service regional community bank."
Financial Results
Income Statement - Three Months Ended December 31, 2015
Park Sterling reported a $1.0 million, or 21%, decrease in net income to $3.8 million, or $0.09 per share, for the three months ended December 31, 2015 ("2015Q4"). This compares to net income of $4.8 million, or $0.11 per share, for the three months ended September 30, 2015 ("2015Q3") and net income of $3.5 million, or $0.08 per share, for the three months ended December 31, 2014 ("2014Q4"). The decrease in net income from 2015Q3 resulted from $1.4 million in merger-related costs, higher provision expense to support organic loan growth and lower noninterest income due primarily to the absence of the prior quarter's $417,000 bank-owned life insurance ("BOLI") death benefit and $54,000 gain on sale of securities, which were partially offset by lower noninterest expense. The increase in net income from 2014Q4 resulted from higher noninterest income and lower noninterest expense, which were partially offset by lower net interest income and higher provision expense, as 2014Q4 had a net release of provision of $420,000 compared to provision expense of $409,000 in 2015Q4.
Park Sterling reported a $29,000, or 1%, increase in adjusted net income, which excludes merger-related expenses and gain or loss on sale of securities, to a record $4.8 million, or $0.11 per share, in 2015Q4. This compares to adjusted net income of $4.8 million, or $0.11 per share, in 2015Q3 and adjusted net income of $3.9 million, or $0.09 per share, in 2014Q4. Compared to 2015Q3, adjusted net income reflects lower noninterest expense partially offset by lower net interest income, lower noninterest income and higher provision expense. Compared to 2014Q4, adjusted net income reflects both higher noninterest income levels and lower noninterest expense, which were partially offset by lower net interest income and higher provision expense.
Net interest income totaled $20.0 million in 2015Q4, which represents a $387,000, or 2%, decrease from $20.4 million in 2015Q3. This decrease is attributable primarily to decreased yields on interest earning assets and increased cost of interest-bearing liabilities. Net interest income decreased $581,000, or 3%, from $20.6 million in 2014Q4, resulting again from decreased yields on interest earning assets and increased cost of interest-bearing liabilities. Average total earning assets decreased $3.9 million, or 0.2%, in 2015Q4 to $2.25 billion, compared to $2.26 billion in 2015Q2 and increased $145.3 million, or 7%, compared to $2.11 billion in 2014Q4. The decrease in average total earning assets in 2015Q4 from 2015Q3 resulted from a $23.9 million, or 35%, decrease in average other earning assets and a $4.9 million decrease in marketable securities. These decreases were partially offset by a $24.9 million, or 1%, increase in average loans (including loans held for sale) driven by organic growth. The increase in average total earning assets in 2015Q4 from 2014Q4 resulted primarily from an $13.8 million, or 3%, increase in average marketable securities and a $144.7 million, or 9%, increase in average loans (including loans held for sale), offset by a $13.1 million, or 23%, decrease in average other earning assets.
Net interest margin was 3.52% in 2015Q4, representing a 6 basis point decrease from 3.58% in 2015Q3 and a 35 basis point decrease from 3.87% in 2014Q4. The reduction in net interest margin from 2015Q3 resulted primarily from a 12 basis point decrease in yield on loans to 4.48%, driven by runoff in higher yielding seasoned loans, continued competitive pricing pressures and a $181,000 decrease in accelerated accretion resulting from the early payoff of an acquired performing loan that carried an amortizing premium purchase accounting fair market value interest rate adjustment. In addition, the cost of interest-bearing liabilities increased 5 basis points to 0.51%, driven by a full quarter of the high-yielding Richmond money market deposit account and a $30.0 million senior unsecured term loan incurred in December 2015 in anticipation of the merger with First Capital. The reduction in net interest margin from 2014Q4 resulted primarily from a 47 basis point decrease in yield on loans, due primarily to lower interest rates on new loans and a 9 basis point increase in the cost of interest-bearing liabilities.
Adjusted net interest margin, which excludes accelerated accretion from net acquisition accounting fair market value adjustments, was 3.54% in 2015Q4, representing a 3 basis point decrease from 3.57% in 2015Q3 and a 31 basis point decrease from 3.85% in 2014Q4. Accelerated accretion of net acquisition accounting fair market value adjustments ($(112,000) in 2015Q4, $69,000 in 2015Q3 and $134,000 in 2014Q4) 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. Adjustments to accelerated accretion resulted in a $112,000 reduction in net interest income in 2015Q4 due to the early payoff of an acquired performing loan that carried an amortizing premium purchase accounting fair market value interest rate adjustment. The reduction in adjusted net interest margin from both 2015Q3 and 2014Q4 resulted primarily from the decrease in loan yields discussed above.
The company reported $409,000 of provision expense in 2015Q4 to support organic loan growth, compared to no provision recorded in 2015Q3, when net loan loss recoveries allowed the company to support organic loan growth without reported expense, and a net release of provision of $420,000 in 2014Q4. Allowance for loan loss levels increased to 0.52% of total loans at 2015Q4 compared to 0.51% at 2015Q3.
Noninterest income decreased $404,000, or 8%, to $4.5 million in 2015Q4, compared to $4.9 million in 2015Q3 and increased $1.2 million, or 35%, compared to $3.4 million in 2014Q4. The decrease from 2015Q3 was driven primarily by non-customer related activities, including (i) a $687,000, or 65%, decrease in BOLI income due to a lower death benefit ($0 in 2015Q4, $417,000 in 2015Q3, $0 in 2014Q3); and (ii) a $54,000 decrease in gain on sale of securities ($0 in 2015Q4, $54,000 in 2015Q3, $0 in 2014Q4). Noninterest income from customer-related activities increased compared to 2015Q3, including a $69,000, or 5%, increase in service charges on deposit accounts, a $199,000, or 84%, increase in income from capital market activities and a $110,000, or 20%, increase in ATM and card income when comparing 2015Q4 and 2015Q3. Partially offsetting these increases in customer-related activity was a $60,000, or 6%, decrease in income from wealth management activities. The increase in noninterest income from 2014Q4 reflects higher service charges on deposit accounts, higher income from capital market activities, higher income from wealth management activities and lower amortization on the FDIC loss share indemnification asset and true-up liability expense, offset partially by lower mortgage banking income.
Noninterest expenses decreased $57,000, or 0%, to $18.4 million in 2015Q4 compared to $18.4 million in 2015Q3, and decreased $945,000, or 5%, compared to $19.3 million in 2014Q4. Adjusted noninterest expenses, which exclude merger-related expenses ($1.4 million in 2015Q4, $31,000 in 2015Q3 and $712,000 in 2014Q4), decreased $1.4 million, or 8%, to $17.0 million in 2015Q4 compared to $18.4 million in 2015Q3, and decreased $1.6 million, or 9%, compared to $18.6 million in 2014Q4. Overall the decrease in adjusted noninterest expenses from 2015Q3 was due to a $764,000 decrease in salaries and compensation expense due to both lower headcount and a year-end incentive accrual adjustment, a $547,000 decrease in loss on sale of fixed assets related to additional branch closures recorded in 2015Q3 and a $186,000 decrease in net cost of operation of OREO. These decreases were partially offset by an increase of $56,000 in legal and professional fees, an $88,000 increase in occupancy and equipment expense and a $43,000 increase in loan and collection expenses.
The company's effective tax rate increased to 34.1% in 2015Q4, due in part to certain non-deductible merger-related expenses, compared to 30.5% in 2015Q3, which included the nontaxable BOLI death benefit. The company's effective tax rate increased compared to 31.2% in 2014Q4.
Income Statement - Twelve Months Ended December 31, 2015
Park Sterling reported a $3.7 million, or 29%, increase in net income for the twelve months ended December 31, 2015 ("FY2015") to $16.6 million, or $0.37 per share, compared to net income for the twelve months ended December 31, 2014 ("FY2014") of $12.9 million, or $0.29 per share. The increase in net income from FY2014 resulted from higher net interest income and noninterest income, offset partially by an increase in provision expense and noninterest expenses.
Net interest income totaled $81.4 million in FY2015, which represents a $3.7 million, or 5%, increase from $77.6 million in FY2014. This increase is primarily attributable to having higher average earning assets in 2015 as a result of both organic loan growth and the merger with Provident Community Bancshares, Inc. ("Provident Community") in May 2014. Net interest margin was 3.68% in FY2015, representing a 26 basis point decrease from 3.94% in FY2014. The reduction in net interest margin from FY2014 resulted primarily from a 51 basis point decrease in yield on loans, due to lower interest rates on new loans, offset by a 3 basis point decrease in the cost of interest-bearing liabilities.
The company reported $723,000 in provision for loan losses in FY2015, compared to a net release of provision of $1.3 million in FY2014. The current period provision was driven by organic loan growth as well as impairments in the company's PCI loan pools, as accounted for under ASC 310-30, while the prior year release of provision was the result of significant net recoveries and lower historic loss rates.
Noninterest income increased $4.3 million, or 31%, to $18.2 million in FY2015, compared to $14.0 million in FY2014. The increase from FY2014 reflects lower amortization on the FDIC loss share indemnification asset and true-up liability expense, higher service charges on deposit accounts, as well as higher income from each of mortgage banking, wealth management, and capital markets.
Noninterest expense increased $219,000, or 0%, in FY2015 to $74.2 million compared to $73.9 million in FY2014. The increase in noninterest expense from FY2014 resulted primarily from increased expenses as a result of organic growth, the merger with Provident Community and costs related to the closure of branches in 2015, partially offset by a decrease in merger-related expenses.
The company's effective tax rate increased slightly to 32.9% in FY2015 compared to 32.0% in FY2014.
Balance Sheet
Total assets increased $29.1 million, or 1%, to $2.51 billion at 2015Q4 compared to total assets of $2.49 billion at 2015Q3. Cash and equivalents increased $12.3 million, or 21%, to $70.5 million as a result of proceeds from the $30 million senior unsecured term loan incurred in December 2015 in anticipation of the First Capital merger. Total securities, including non-marketable securities, decreased $19.5 million, to $502.8 million. Total securities included one investment in a senior tranche of a collateralized loan obligation ("CLO") totaling $5.0 million in fair value at 2015Q4, with respect to which the collateral eligibility requirements have not yet been amended to comply with the new bank investment criteria under the Volcker Rule. The security had a net unrealized loss of $57,300 at 2015Q4 that could result in the company recognizing other-than-temporary impairment should it ultimately be determined not to comply with the Volcker Rule.
Total loans, excluding loans held for sale, increased $41.7 million, or 10% annualized, to $1.74 billion at 2015Q4 from 2015Q3. The company's metropolitan markets, which include Charlotte, Raleigh and Wilmington, North Carolina, Greenville and Charleston, South Carolina and Richmond, Virginia, reported a $33.9 million, or 14% annualized, increase in total loans to $971.9 million, due to continued success in origination efforts. The community markets reported a $13.5 million, or 14% annualized, decrease in total loans to $362.5 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, reported a $21.3 million, or 22% annualized, increase in total loans to $407.4 million, as growth in mortgage, private banking and builder finance more than offset reductions in special asset loans, including covered loans.
The company's loan mix shifted slightly at 2015Q4 compared to 2015Q3. The combination of commercial and industrial and owner-occupied real estate loans increased from 31.8% to 33.2% of total loans and investor-owned commercial real estate loans decreased from 30.3% to 29.1% of total loans. Acquisition, construction and development loans decreased to 9.4% from 9.5% of total loans. Total consumer loans decreased to 28.3% of total loans, with home equity lines of credit decreasing to 9.1% from 9.3% of total loans, residential mortgages decreasing from 13.2% to 12.9% of total loans and other consumer (including residential construction) increasing from 5.9% to 6.3% of total loans.
In terms of accounting designations, compared to 2015Q3: (i) non-acquired loans, which include certain renewed and/or restructured acquired performing loans that are re-designated as non-acquired, increased $69.5 million, or 21% annualized, to $1.37 billion; (ii) acquired performing loans decreased $20.2 million, or 27% annualized, to $279.9 million; and (iii) purchase credit impaired ("PCI") loans decreased $7.6 million, or 30% annualized, to $94.9 million. At 2015Q4, noncovered performing acquired loans (which totaled $278.5 million) included a $2.1 million net acquisition accounting fair market value adjustment, representing a 0.74% "mark;" noncovered PCI loans (which totaled $79.3 million) included a $22.1 million adjustment, representing a 21.78% "mark;" and covered performing acquired and PCI loans (which totaled $17.1 million) included a $4.0 million adjustment, representing an 19.03% "mark."
Total deposits increased $5.8 million, or 0%, to $1.95 billion at 2015Q4, compared to $1.95 billion at 2015Q3. Noninterest bearing demand deposits decreased $20.0 million, or 5%, to $350.8 million (18% of total deposits) due primarily to seasonal factors. Non-brokered money market, NOW and savings deposits increased $17.9 million, or 2%, to $997.0 million (51% of total deposits). Time deposits less than $250,000 increased $2.2 million, or 1%, to $405.4 million (21% of total deposits) and time deposits greater than $250,000 increased $13.6 million, or 24%, to $71.0 million (4% of total deposits). Finally, brokered deposits decreased $8.0 million, or 6%, to $128.4 million (7% of total deposits). Core deposits, which exclude time deposits greater than $250,000 and brokered deposits, represented 89.8% of total deposits at 2015Q4 and 90.0% of total deposits at 2015Q3.
Total borrowings increased $30.2 million, or 14%, to $239.3 million at 2015Q4 compared to $209.1 million at 2015Q3. Borrowings at 2015Q4 included $185.0 million in FHLB borrowings, $30.0 million in a new senior unsecured term loan at the bank holding company level incurred in consideration of the First Capital merger, and $24.3 million of acquired trust preferred securities, net of acquisition accounting fair market value adjustments.
Total shareholders' equity increased $499,000, or 0.2%, to $284.7 million at 2015Q4 compared to $284.2 million at 2015Q3, driven by an increase in retained earnings, as partially offset by higher unrealized losses related to available-for-sale securities and balance sheet interest rate hedges. The company's ratio of tangible common equity to tangible assets decreased to 9.93% at 2015Q4 from 10.02% at 2015Q3.
On January 1, 2015, the Basel III federal regulatory standards became effective. As permitted for regulated institutions that are not designated as "advanced approach" banking organizations (those with assets greater than $250 billion or with foreign exposures greater than $10 billion), the company made a one-time, permanent election to opt out of the requirement to include most components of accumulated other comprehensive income ("AOCI") in regulatory capital. The company's Common Equity Tier 1 ("CET1") ratio decreased to 12.98% at 2015Q4 compared to 13.21% at 2015Q3 due to an increase in risk weighted assets. The company's Tier 1 leverage ratio was 11.00% at 2015Q4 compared to 10.92% at 2015Q3.
Asset Quality
Asset quality remains a point of strength for the company. Nonperforming assets decreased $2.9 million, or 18%, to $13.7 million at 2015Q4, or 0.54% of total assets, compared to $16.6 million at 2015Q3, or 0.67% of total assets. Nonperforming loans decreased $228,000, or 3%, to $8.3 million at 2015Q4, and represent 0.47% of total loans, compared to $8.5 million at 2015Q3, or 0.50% of total loans. The company reported net charge-offs of $87,000, or 0.02% of average loans (annualized), in 2015Q4, compared to recoveries of $294,000, or 0.07% of average loans (annualized), in 2015Q3.
The allowance for loan losses increased $322,000, or 4%, to $9.1 million, or 0.52% of total loans, at 2015Q4, compared to $8.7 million, or 0.51% of total loans, at 2015Q3. The increase in allowance included (i) a $27,000, or 1%, decrease in the quantitative component, resulting from lower historic loss rates, (ii) a $484,000, or 8%, increase in the qualitative component, reflecting management's judgment of inherent loss in the loan portfolio not represented in historic loss rates, and (iii) a $135,000, or 41%, decrease in specific reserves on impaired loans. Overall the increase in the allowance was due to loan growth, partially offset by a decrease in historic loss rates as well as continued improvement in nonperforming loans.
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 stock awards, of which 554,400 remained outstanding at 2015Q3, 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 (January 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 10078029.
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 $3.1 billion in assets as of January 1, 2016, 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 with respect to Park Sterling; 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) December 31, September 30, June 30, March 31, December 31,
2015 2015 2015 2015 2014
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- ----------- -----------
Interest income
Loans,
including
fees $ 19,284 $ 19,475 $ 19,667 $ 19,111 $ 19,482
Taxable
investment
securities 2,677 2,636 2,508 2,791 2,598
Tax-exempt
investment
securities 146 152 143 138 138
Nonmarketable
equity
securities 109 142 122 127 108
Interest on
deposits at
banks 22 23 18 18 22
Federal funds
sold 1 1 - - -
----------- ----------- ----------- ----------- -----------
Total
interest
income 22,239 22,429 22,458 22,185 22,348
----------- ----------- ----------- ----------- -----------
Interest
expense
Money market,
NOW and
savings
deposits 743 654 532 520 538
Time deposits 903 841 752 707 725
Short-term
borrowings 205 90 76 76 -
Long-term debt 55 134 131 128 179
Subordinated
debt 358 348 351 328 350
----------- ----------- ----------- ----------- -----------
Total
interest
expense 2,264 2,067 1,842 1,759 1,792
----------- ----------- ----------- ----------- -----------
Net interest
income 19,975 20,362 20,616 20,426 20,556
Provision for
loan losses 409 - 134 180 (420)
----------- ----------- ----------- ----------- -----------
Net interest
income after
provision 19,566 20,362 20,482 20,246 20,976
Noninterest
income
Service
charges on
deposit
accounts 1,439 1,370 1,107 1,019 1,109
Mortgage
banking
income 699 700 956 951 922
Income from
wealth
management
activities 887 947 906 862 869
Income from
capital
market
activities 437 238 394 398 149
ATM and card
income 647 537 629 694 727
Income from
bank-owned
life
insurance 371 1,058 553 768 491
Gain (loss) on
sale of
securities
available for
sale - 54 - - -
Amortization
of
indemnificati
on asset and
true-up
liability
expense (165) (162) (165) (394) (1,224)
Other
noninterest
income 208 185 (88) 203 308
----------- ----------- ----------- ----------- -----------
Total
noninterest
income 4,523 4,927 4,292 4,501 3,351
----------- ----------- ----------- ----------- -----------
Noninterest
expenses
Salaries and
employee
benefits 9,541 9,952 10,021 10,431 10,386
Occupancy and
equipment 2,680 2,591 2,491 2,555 2,627
Data
processing
and outside
service fees 1,669 1,668 1,640 1,648 1,652
Legal and
professional
fees 1,471 472 660 798 816
Deposit
charges and
FDIC
insurance 413 401 433 392 442
Loss on
disposal of
fixed assets 50 597 113 237 2
Communication
fees 480 501 541 578 519
Postage and
supplies 99 123 116 149 146
Loan and
collection
expense 194 151 242 154 461
Core deposit
intangible
amortization 347 347 347 347 348
Advertising
and promotion 271 313 304 374 474
Net cost of
operation of
other real
estate owned (23) 163 232 35 215
Other
noninterest
expense 1,170 1,140 1,092 1,441 1,219
----------- ----------- ----------- ----------- -----------
Total
noninterest
expenses 18,362 18,419 18,232 19,139 19,307
----------- ----------- ----------- ----------- -----------
Income before
income taxes 5,727 6,870 6,542 5,608 5,020
Income tax
expense 1,952 2,092 2,273 1,825 1,564
----------- ----------- ----------- ----------- -----------
Net income $ 3,775 $ 4,778 $ 4,269 $ 3,783 $ 3,456
=========== =========== =========== =========== ===========
Earnings per
common share,
fully diluted $ 0.09 $ 0.11 $ 0.10 $ 0.09 $ 0.08
Weighted
average
diluted common
shares 44,322,428 44,287,019 44,301,895 44,326,833 44,323,628
PARK STERLING CORPORATION
CONDENSED CONSOLIDATED INCOME STATEMENT
TWELVE MONTH RESULTS
($ in thousands, except per share amounts) December 31, December 31,
2015 2014*
(Unaudited)
------------- -------------
Interest income
Loans, including fees $ 77,537 $ 74,867
Taxable investment securities 10,612 9,318
Tax-exempt investment securities 579 631
Nonmarketable equity securities 500 362
Interest on deposits at banks 82 118
Federal funds sold 2 1
------------- -------------
Total interest income 89,312 85,297
------------- -------------
Interest expense
Money market, NOW and savings deposits 2,449 2,270
Time deposits 3,202 3,155
Short-term borrowings 528 86
Long-term debt 367 513
Subordinated debt 1,385 1,631
------------- -------------
Total interest expense 7,931 7,655
------------- -------------
Net interest income 81,381 77,642
Provision (release) for loan losses 723 (1,286)
------------- -------------
Net interest income after provision 80,658 78,928
Noninterest income
Service charges on deposit accounts 4,934 3,881
Mortgage banking income 3,306 2,641
Income from wealth management activities 3,602 3,200
Income from capital market activities 1,467 646
ATM and card income 2,507 2,632
Income from bank-owned life insurance 2,749 2,688
Gain on sale of securities available for
sale 54 180
Amortization of indemnification asset and (3,790
true-up liability expense (886) )
Other noninterest income 510 1,875
------------- -------------
Total noninterest income 18,243 13,953
------------- -------------
Noninterest expenses
Salaries and employee benefits 39,945 39,538
Occupancy and equipment 10,317 10,409
Data processing and outside service fees 6,625 6,449
Legal and professional fees 3,402 3,486
Deposit charges and FDIC insurance 1,639 1,491
Loss on disposal of fixed assets 996 400
Communication fees 2,099 1,974
Postage and supplies 488 667
Loan and collection expense 740 1,350
Core deposit intangible amortization 1,389 1,269
Advertising and promotion 1,263 1,494
Net cost of operation of other real estate
owned 406 817
Other noninterest expense 4,844 4,590
------------- -------------
Total noninterest expenses 74,153 73,934
------------- -------------
Income before income taxes 24,748 18,947
Income tax expense 8,142 6,058
------------- -------------
Net income $ 16,606 $ 12,889
============= =============
Earnings per common share, fully diluted $ 0.37 $ 0.29
Weighted average diluted common shares 44,304,888 44,247,000
* Derived from audited financial statements
PARK STERLING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands)
December 31, September 30, June 30, March 31, December 31,
2015 2015 2015 2015** 2014*
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- ----------- -----------
ASSETS
Cash and due
from banks $ 53,840 $ 16,096 $ 17,042 $ 17,402 $ 16,549
Interest-
earning
balances at
banks 16,451 41,230 26,940 45,396 34,356
Investment
securities
available for
sale 384,934 401,820 402,489 382,946 375,683
Investment
securities
held to
maturity 106,458 109,072 111,633 108,918 115,741
Nonmarketable
equity
securities 11,366 11,377 13,500 11,163 11,532
Federal funds
sold 235 920 360 325 485
Loans held for
sale 4,943 5,145 10,701 9,987 11,602
Loans - Non-
covered 1,724,164 1,681,227 1,637,115 1,576,760 1,538,354
Loans - Covered 17,651 18,897 20,348 38,092 42,339
Allowance for
loan losses (9,064) (8,742) (8,468) (8,590) (8,262)
----------- ----------- ----------- ----------- -----------
Net loans 1,732,751 1,691,382 1,648,995 1,606,262 1,572,431
----------- ----------- ----------- ----------- -----------
Premises and
equipment, net 55,658 56,948 58,979 58,796 59,247
FDIC receivable
for loss share
agreements 943 1,190 1,209 2,333 3,964
Other real
estate owned -
non-covered 4,211 7,087 8,904 8,570 8,979
Other real
estate owned -
covered 1,240 1,056 884 1,713 3,011
Bank-owned life
insurance 58,633 58,286 57,823 57,494 57,712
Deferred tax
asset 28,971 29,711 32,137 33,314 35,696
Goodwill 29,197 29,197 29,197 29,197 29,197
Core deposit
intangible 9,571 9,918 10,265 10,612 10,960
Other assets 14,862 14,699 12,822 13,436 12,085
----------- ----------- ----------- ----------- -----------
Total assets $ 2,514,264 $ 2,485,134 $ 2,443,880 $ 2,397,864 $ 2,359,230
=========== =========== =========== =========== ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits:
Demand
noninterest-
bearing $ 350,836 $ 370,815 $ 347,162 $ 341,488 $ 321,019
Money market,
NOW and
savings 1,062,046 1,041,502 988,847 1,008,743 988,954
Time deposits 539,780 534,541 538,932 533,906 541,381
----------- ----------- ----------- ----------- -----------
Total deposits 1,952,662 1,946,858 1,874,941 1,884,137 1,851,354
Short-term
borrowings 185,000 130,000 180,000 125,000 125,000
Long-term debt 30,000 55,000 55,000 55,000 55,000
Subordinated
debt 24,262 24,092 23,922 23,752 23,583
Accrued
expenses and
other
liabilities 37,636 44,979 30,274 30,857 29,188
----------- ----------- ----------- ----------- -----------
Total
liabilities 2,229,560 2,200,929 2,164,137 2,118,746 2,084,125
Shareholders'
equity:
Common stock 44,854 44,909 44,911 44,877 44,860
Additional
paid-in
capital 222,596 222,587 222,271 223,139 222,819
Retained
earnings 20,117 17,692 14,261 11,338 8,901
Accumulated
other
comprehensive
loss (2,863) (983) (1,700) (236) (1,475)
----------- ----------- ----------- ----------- -----------
Total
shareholders'
equity 284,704 284,205 279,743 279,118 275,105
----------- ----------- ----------- ----------- -----------
Total
liabilities
and
shareholders'
equity $ 2,514,264 $ 2,485,134 $ 2,443,880 $ 2,397,864 $ 2,359,230
=========== =========== =========== =========== ===========
Common shares
issued and
outstanding 44,854,509 44,909,447 44,910,686 44,877,194 44,859,798
* Derived from audited financial statements.
Revised to reflect measurement period adjustments
to goodwill.
** Revised to reflect measurement period
adjustments to goodwill.
PARK STERLING CORPORATION
SUMMARY OF LOAN PORTFOLIO
($ in thousands)
December 31, September 30, June 30, March 31, December 31,
2015 2015 2015 2015 2014*
BY LOAN TYPE (Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- ----------- -----------
Commercial:
Commercial and
industrial $ 246,907 $ 211,741 $ 189,356 $ 186,295 $ 173,786
Commercial real
estate (CRE) -
owner-occupied 331,222 328,327 330,853 337,739 333,782
CRE - investor
income
producing 506,110 514,118 498,190 470,555 470,647
Acquisition,
construction
and
development
(AC&D) - 1-4
Family
Construction 32,262 27,299 31,500 28,650 29,401
AC&D - Lots and
land 44,411 47,948 48,680 50,372 55,443
AC&D - CRE
construction 87,452 85,643 86,570 84,116 71,590
Other
commercial 8,601 8,830 7,212 5,931 5,045
----------- ----------- ----------- ----------- -----------
Total
commercial
loans 1,256,965 1,223,906 1,192,361 1,163,658 1,139,694
----------- ----------- ----------- ----------- -----------
Consumer:
Residential
mortgage 223,884 224,110 214,850 209,384 205,150
Home equity
lines of
credit 157,378 157,430 156,960 154,415 155,297
Residential
construction 72,170 66,823 62,973 59,233 55,882
Other loans to
individuals 28,817 24,896 27,696 25,845 22,586
----------- ----------- ----------- ----------- -----------
Total consumer
loans 482,249 473,259 462,479 448,877 438,915
----------- ----------- ----------- ----------- -----------
Total loans 1,739,214 1,697,165 1,654,840 1,612,535 1,578,609
Deferred costs
(fees) 2,601 2,959 2,623 2,317 2,084
----------- ----------- ----------- ----------- -----------
Total loans,
net of
deferred
costs (fees) $ 1,741,815 $ 1,700,124 $ 1,657,463 $ 1,614,852 $ 1,580,693
=========== =========== =========== =========== ===========
* Derived from audited
financial statements.
December September December
31, 30, June 30, March 31, 31,
BY ACQUIRED AND
NON-ACQUIRED 2015 2015 2015 2015 2014*
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- ----------- -----------
Acquired loans -
performing $ 279,949 $ 300,102 $ 317,394 $ 341,078 $ 364,789
Acquired loans -
purchase credit
impaired 94,917 102,537 112,819 119,943 133,241
----------- ----------- ----------- ----------- -----------
Total acquired
loans 374,866 402,639 430,213 461,021 498,030
Non-acquired
loans, net of
deferred costs
(fees)** 1,366,949 1,297,485 1,227,250 1,153,831 1,082,663
----------- ----------- ----------- ----------- -----------
Total loans $ 1,741,815 $ 1,700,124 $ 1,657,463 $ 1,614,852 $ 1,580,693
=========== =========== =========== =========== ===========
* 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)
December 31, September 30, June 30, March 31, December 31,
2015 2015 2015 2015 2014
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- ----------- -----------
Beginning of
period
allowance $ 8,742 $ 8,468 $ 8,590 $ 8,262 $ 9,458
Loans charged-
off (237) (121) (572) (265) (984)
Recoveries of
loans charged-
off 150 415 245 413 208
----------- ----------- ----------- ----------- -----------
Net charge-
offs (87) 294 (327) 148 (776)
----------- ----------- ----------- ----------- -----------
Provision
expense
(release) 409 - 205 180 (420)
Benefit
attributable
to FDIC loss
share
agreements - - (71) - -
----------- ----------- ----------- ----------- -----------
Total
provision
expense
charged to
operations 409 - 134 180 (420)
Provision
expense
recorded
through FDIC
loss share
receivable - (20) 71 - -
----------- ----------- ----------- ----------- -----------
End of period
allowance $ 9,064 $ 8,742 $ 8,468 $ 8,590 $ 8,262
=========== =========== =========== =========== ===========
Net charge-offs
(recoveries) $ 87 $ (294)$ 327 $ (148)$ 776
Net charge-offs
(recoveries)
to average
loans
(annualized) 0.02% -0.07% 0.08% -0.04% 0.20%
PARK STERLING CORPORATION
AVERAGE BALANCE SHEETS AND NET INTEREST ANALYSIS
THREE MONTHS
December 31,
($ in thousands) 2015
-------------
Average Income/ Yield/
Balance Expense Rate (3)
------------- --------- --------
Assets
Interest-earning assets:
Loans and loans held for sale, net
(1)(2) $ 1,705,899 $ 19,284 4.48%
Fed funds sold 762 1 0.52%
Taxable investment securities 487,113 2,677 2.20%
Tax-exempt investment securities 14,794 146 3.95%
Other interest-earning assets 43,837 131 1.19%
------------- --------- --------
Total interest-earning assets 2,252,405 22,239 3.92%
Allowance for loan losses (8,809)
Cash and due from banks 30,518
Premises and equipment 56,299
Goodwill 29,197
Intangible assets 9,737
Other assets 111,636
-------------
Total assets $ 2,480,983
=============
Liabilities and shareholders' equity
Interest-bearing liabilities:
Interest-bearing demand $ 392,661 $ 61 0.06%
Savings and money market 590,993 614 0.41%
Time deposits - core 470,564 791 0.67%
Brokered deposits 132,821 180 0.54%
------------- --------- --------
Total interest-bearing deposits 1,587,039 1,646 0.41%
Short-term borrowings 159,458 205 0.51%
Long-term debt 4,565 55 4.78%
Subordinated debt 24,172 358 5.88%
------------- --------- --------
Total borrowed funds 188,195 618 1.30%
------------- --------- --------
Total interest-bearing liabilities 1,775,234 2,264 0.51%
------------- --------- --------
Net interest rate spread 19,975 3.41%
--------- --------
Noninterest-bearing demand deposits 379,413
Other liabilities 41,665
Shareholders' equity 284,671
-------------
Total liabilities and shareholders'
equity $ 2,480,983
=============
--------
Net interest margin 3.52%
========
December 31,
($ in thousands) 2014
-------------
Average Income/ Yield/
Balance Expense Rate (3)
------------- --------- --------
Assets
Interest-earning assets:
Loans and loans held for sale, net
(1)(2) $ 1,561,246 $ 19,482 4.95%
Fed funds sold 600 - 0.00%
Taxable investment securities 475,241 2,598 2.19%
Tax-exempt investment securities 12,845 138 4.30%
Other interest-earning assets 57,141 130 0.90%
------------- --------- --------
Total interest-earning assets 2,107,073 22,348 4.21%
Allowance for loan losses (9,440)
Cash and due from banks 21,788
Premises and equipment 59,342
Goodwill 29,752
Intangible assets 11,156
Other assets 122,986
-------------
Total assets $ 2,342,657
=============
Liabilities and shareholders' equity
Interest-bearing liabilities:
Interest-bearing demand $ 393,497 $ 63 0.06%
Savings and money market 533,748 418 0.31%
Time deposits - core 471,757 607 0.51%
Brokered deposits 139,942 175 0.50%
------------- --------- --------
Total interest-bearing deposits 1,538,944 1,263 0.33%
Short-term borrowings 2 - 0.00%
Long-term debt 149,457 179 0.48%
Subordinated debt 23,494 350 5.91%
------------- --------- --------
Total borrowed funds 172,953 529 1.21%
------------- --------- --------
Total interest-bearing liabilities 1,711,897 1,792 0.42%
------------- --------- --------
Net interest rate spread 20,556 3.79%
--------- --------
Noninterest-bearing demand deposits 328,534
Other liabilities 28,557
Shareholders' equity 273,669
-------------
Total liabilities and shareholders'
equity $ 2,342,657
=============
--------
Net interest margin 3.87%
========
(1) Nonaccrual loans are included in the average loan balances.
(2) Interest income and yields for the three months ended December 31, 2015
and 2014 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
AVERAGE BALANCE SHEETS AND NET INTEREST ANALYSIS
TWELVE MONTHS
December 31,
($ in thousands) 2015
-------------
Average Income/ Yield/
Balance Expense Rate (3)
------------- --------- --------
Assets
Interest-earning assets:
Loans and loans held for sale, net
(1)(2) $ 1,658,657 $ 77,537 4.67%
Fed funds sold 799 2 0.25%
Taxable investment securities 483,352 10,612 2.20%
Tax-exempt investment securities 14,222 579 4.07%
Other interest-earning assets 55,889 582 1.04%
------------- --------- --------
Total interest-earning assets 2,212,919 89,312 4.04%
Allowance for loan losses (8,700)
Cash and due from banks 19,982
Premises and equipment 58,100
Goodwill 29,211
Intangible assets 10,256
Other assets 114,647
-------------
Total assets $ 2,436,415
=============
Liabilities and shareholders' equity
Interest-bearing liabilities:
Interest-bearing demand $ 398,731 $ 259 0.06%
Savings and money market 549,713 1,945 0.35%
Time deposits - core 464,423 2,729 0.59%
Brokered deposits 136,489 718 0.53%
------------- --------- --------
Total interest-bearing deposits 1,549,356 5,651 0.36%
Short-term borrowings 142,890 528 0.37%
Long-term debt 55,480 367 0.66%
Subordinated debt 23,920 1,385 5.79%
------------- --------- --------
Total borrowed funds 222,290 2,280 1.03%
------------- --------- --------
Total interest-bearing liabilities 1,771,646 7,931 0.45%
------------- --------- --------
Net interest rate spread 81,381 3.59%
--------- --------
Noninterest-bearing demand deposits 349,373
Other liabilities 33,887
Shareholders' equity 281,509
-------------
Total liabilities and shareholders'
equity $ 2,436,415
=============
--------
Net interest margin 3.68%
========
December 31,
($ in thousands) 2014
-------------
Average Income/ Yield/
Balance Expense Rate (3)
------------- --------- --------
Assets
Interest-earning assets:
Loans and loans held for sale, net
(1)(2) $ 1,445,691 $ 74,867 5.18%
Fed funds sold 564 1 0.18%
Taxable investment securities 430,557 9,318 2.16%
Tax-exempt investment securities 20,887 631 3.02%
Other interest-earning assets 72,522 480 0.66%
------------- --------- --------
Total interest-earning assets 1,970,221 85,297 4.33%
Allowance for loan losses (9,535)
Cash and due from banks 18,187
Premises and equipment 58,330
Goodwill 27,709
Intangible assets 10,442
Other assets 123,973
-------------
Total assets $ 2,199,327
=============
Liabilities and shareholders' equity
Interest-bearing liabilities:
Interest-bearing demand $ 348,314 $ 294 0.08%
Savings and money market 509,640 1,934 0.38%
Time deposits - core 473,509 2,620 0.55%
Brokered deposits 150,497 577 0.38%
------------- --------- --------
Total interest-bearing deposits 1,481,960 5,425 0.37%
Short-term borrowings 42,726 86 0.20%
Long-term debt 52,247 513 0.98%
Subordinated debt 26,724 1,631 6.10%
------------- --------- --------
Total borrowed funds 121,697 2,230 1.83%
------------- --------- --------
Total interest-bearing liabilities 1,603,657 7,655 0.48%
------------- --------- --------
Net interest rate spread 77,642 3.85%
--------- --------
Noninterest-bearing demand deposits 301,127
Other liabilities 25,039
Shareholders' equity 269,504
-------------
Total liabilities and shareholders'
equity $ 2,199,327
=============
--------
Net interest margin 3.94%
========
(1) Nonaccrual loans are included in the average loan balances.
(2) Interest income and yields for the nine months ended December 31, 2015
and 2014 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)
December 31, September 30, June 30, March 31, December 31,
2015 2015 2015 2015 2014
Unaudited Unaudited Unaudited Unaudited Unaudited
----------- ----------- ----------- ----------- -----------
ASSET QUALITY
Nonaccrual
loans $ 4,326 $ 5,342 $ 5,545 $ 6,397 $ 5,585
Troubled debt
restructuring
(and still
accruing) 2,774 3,090 3,115 3,273 3,289
Past due 90
days plus
(and still
accruing) 1,151 47 - 10 30
Nonperforming
loans 8,251 8,479 8,660 9,680 8,904
OREO 5,451 8,143 9,788 10,283 11,990
Nonperforming
assets 13,702 16,622 18,448 19,963 20,894
Past due 30-59
days (and
still
accruing) 1,222 1,790 2,559 1,285 619
Past due 60-89
days (and
still
accruing) 1,340 3,753 481 457 289
Nonperforming
loans to
total loans 0.47% 0.50% 0.52% 0.60% 0.56%
Nonperforming
assets to
total assets 0.54% 0.67% 0.75% 0.83% 0.89%
Allowance to
total loans 0.52% 0.51% 0.51% 0.53% 0.52%
Allowance to
nonperforming
loans 109.85% 103.10% 97.78% 88.74% 92.79%
Allowance to
nonperforming
assets 66.15% 52.59% 45.90% 43.03% 39.54%
Past due 30-89
days
(accruing) to
total loans 0.15% 0.33% 0.18% 0.11% 0.06%
Net charge-
offs
(recoveries)
to average
loans 0.02% -0.07% 0.08% -0.04% 0.20%
(annualized)
CAPITAL
Book value per
common share $ 6.49 $ 6.47 $ 6.37 $ 6.34 $ 6.26
Tangible book
value per
common
share** $ 5.60 $ 5.58 $ 5.47 $ 5.44 $ 5.35
Common shares
outstanding 44,854,509 44,909,447 44,910,686 44,877,194 44,859,798
Weighted
average
dilutive
common shares
outstanding 44,322,428 44,287,019 44,301,895 44,326,833 44,323,628
Common Equity
Tier 1 (CET1)
capital $ 251,807 $ 249,289 $ 245,328 $ 242,197 n/a
Tier 1 capital 268,605 265,917 261,596 256,843 $ 231,088
Tier 2 capital 9,064 8,742 8,577 8,836 8,469
Total risk
based capital 277,669 274,659 270,173 265,679 239,557
Risk weighted
assets 1,939,417 1,887,065 1,844,540 1,707,551 1,717,003
Average assets
for leverage
ratio 2,441,811 2,434,376 2,359,401 2,334,285 2,273,275
Common Equity
Tier 1 (CET1)
ratio 12.98% 13.21% 13.30% 14.18% n/a
Tier 1 ratio 13.85% 14.09% 14.18% 15.04% 13.46%
Total risk
based capital
ratio 14.32% 14.55% 14.65% 15.56% 13.95%
Tier 1
leverage
ratio 11.00% 10.92% 11.09% 11.00% 10.17%
Tangible
common equity
to tangible
assets** 9.93% 10.02% 9.99% 10.15% 10.13%
LIQUIDITY
Net loans to
total
deposits 88.74% 86.88% 87.95% 85.25% 84.93%
Reliance on
wholesale
funding 16.77% 16.02% 18.45% 16.55% 16.70%
INCOME
STATEMENT
(THREE MONTH
RESULTS;
ANNUALIZED)
Return on
Average
Assets 0.60% 0.77% 0.71% 0.64% 0.59%
Return on
Average
Common Equity 5.26% 6.71% 6.10% 5.52% 5.01%
Net interest
margin (non-
tax
equivalent) 3.52% 3.58% 3.78% 3.84% 3.87%
INCOME
STATEMENT
(ANNUAL
RESULTS)
Return on
Average
Assets 0.68% n/a n/a n/a 0.59%
Return on
Average
Equity 5.90% n/a n/a n/a 4.78%
Net interest
margin (non-
tax
equivalent) 3.68% n/a n/a n/a 3.94%
** Non-GAAP
financial
measure
Non-GAAP Financial Measures
Tangible assets, tangible common equity, tangible book value, adjusted net income, adjusted net interest margin, 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 net interest margin (which excludes accelerated accretion of net acquisition accounting fair market value adjustments and income from early redemption of investment securities), 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)
December 31, September 30, June 30, March 31, December 31,
2015 2015 2015 2015 2014
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- ----------- -----------
Adjusted net
income (three
months)
Pretax income
(as reported) $ 5,727 $ 6,870 $ 6,542 $ 5,608 $ 5,020
Plus: merger-
related
expenses 1,396 31 167 122 712
(gain) loss
on sale of
securities - (54) - - -
----------- ----------- ----------- ----------- -----------
Adjusted
pretax
income 7,123 6,847 6,709 5,730 5,732
Tax expense 2,332 2,085 2,331 1,867 1,786
----------- ----------- ----------- ----------- -----------
Adjusted net
income $ 4,791 $ 4,762 $ 4,378 $ 3,863 $ 3,946
=========== =========== =========== =========== ===========
Divided by:
weighted
average
diluted
shares 44,322,428 44,287,019 44,301,895 44,326,833 44,323,628
Adjusted net
income per
share $ 0.11 $ 0.11 $ 0.10 $ 0.09 $ 0.09
Estimated tax
rate for
adjustment 32.75 % 32.56 % 34.75 % 34.23 % 31.15 %
Adjusted net
income (twelve
months)
Pretax income
(as reported) $ 24,748 $ 18,947
Plus: merger-
related
expenses 1,715 3,616
(gain) loss
on sale of
securities (54) (180)
----------- -----------
Adjusted
pretax
income 26,409 22,383
Tax expense 8,615 7,202
----------- -----------
Adjusted net
income
available to
common
shareholders $ 17,794 $ 15,181
=========== ===========
Divided by:
weighted
average
diluted
shares 44,304,888 44,247,000
Adjusted net
income
available to
common
shareholders
per share $ 0.40 $ 0.34
Estimated tax
rate 32.62 % 32.18 %
Adjusted net
interest
margin
Net interest
income (as
reported) $ 19,975 $ 20,362 $ 20,616 $ 20,426 $ 20,556
Less:
accelerated
mark
accretion 112 (69) (52) (79) (134)
Less: income
from early
redemption of
investment
securities - - - (267) -
----------- ----------- ----------- ----------- -----------
Adjusted net
interest
income 20,087 20,293 20,564 20,080 20,422
Divided by:
average
earning
assets 2,252,405 2,256,303 2,185,439 2,155,995 2,107,073
Multiplied by:
annualization
factor 3.97 3.97 4.01 4.06 3.97
----------- ----------- ----------- ----------- -----------
Adjusted net
interest
margin 3.54% 3.57% 3.77% 3.78% 3.85%
=========== =========== =========== =========== ===========
Net interest
margin 3.52% 3.58% 3.78% 3.84% 3.87%
=========== =========== =========== =========== ===========
Adjusted
noninterest
income
Noninterest
income (as
reported) $ 4,523 $ 4,927 $ 4,292 $ 4,501 $ 3,351
Less: (gain)
loss on sale
of securities - (54) - - -
----------- ----------- ----------- ----------- -----------
Adjusted
noninterest
income $ 4,523 $ 4,873 $ 4,292 $ 4,501 $ 3,351
=========== =========== =========== =========== ===========
Adjusted
noninterest
income (twelve
months)
Noninterest
income (as
reported) $ 18,243 $ 13,953
Less: (gain)
loss on sale
of securities (54) (180)
----------- -----------
Adjusted
noninterest
income $ 18,189 $ 13,773
=========== ===========
Adjusted
noninterest
expenses
Noninterest
expenses (as
reported) $ 18,362 $ 18,419 $ 18,232 $ 19,139 $ 19,307
Less: merger-
related
expenses (1,396) (31) (167) (122) (712)
----------- ----------- ----------- ----------- -----------
Adjusted
noninterest
expenses $ 16,966 $ 18,388 $ 18,065 $ 19,017 $ 18,595
=========== =========== =========== =========== ===========
Adjusted
noninterest
expenses
(twelve
months)
Noninterest
expenses (as
reported) $ 74,153 $ 73,934
Less: merger-
related
expenses (1,715) (3,616)
----------- -----------
Adjusted
noninterest
expenses $ 72,438 $ 70,318
=========== ===========
PARK STERLING CORPORATION
RECONCILIATION OF NON-GAAP MEASURES
($ in thousands, except per share
amounts)
December 31, September 30, June 30, March 31, December 31,
2015 2015 2015 2015 2014
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- ----------- -----------
Adjusted
operating
expense
Noninterest
expenses (as
reported) $ 18,362 $ 18,419 $ 18,232 $ 19,139 $ 19,307
Less: merger-
related
expenses (1,396) (31) (167) (122) (712)
Less:
amotization
of
intangibles (347) (347) (347) (347) (348)
----------- ----------- ----------- ----------- -----------
Adjusted
operating
expense $ 16,619 $ 18,041 $ 17,718 $ 18,670 $ 18,247
=========== =========== =========== =========== ===========
Adjusted
operating
expense
(twelve
months)
Noninterest
expenses (as
reported) $ 74,153 $ 73,934
Less: merger-
related
expenses (1,715) (3,616)
Less:
amotization
of
intangibles (1,389) (1,269)
----------- -----------
Adjusted
operating
expense $ 71,049 $ 69,049
=========== ===========
Adjusted
operating
revenues
Net Interest
Income (as
reported) $ 19,975 $ 20,362 $ 20,616 $ 20,426 $ 20,556
Plus:
noninterest
income (as
reported) 4,523 4,927 4,292 4,501 3,351
Less: (gain)
loss on sale
of securities - (54) - - -
----------- ----------- ----------- ----------- -----------
Adjusted
operating
revenues $ 24,498 $ 25,235 $ 24,908 $ 24,927 $ 23,907
=========== =========== =========== =========== ===========
Adjusted
operating
revenues
(twelve
months)
Net Interest
Income (as
reported) $ 81,381 $ 77,642
Plus:
noninterest
income (as
reported) 18,243 13,953
Less: (gain)
loss on sale
of securities (54) (180)
----------- -----------
Adjusted
operating
revenues $ 99,570 $ 91,415
=========== ===========
Adjusted
operating
expense to
adjusted
operating
revenues
Adjusted
operating
expense $ 16,619 $ 18,041 $ 17,718 $ 18,670 $ 18,247
Divided by:
adjusted
operating
revenues 24,498 25,235 24,908 24,927 23,907
----------- ----------- ----------- ----------- -----------
Adjusted
operating
expense to
operating
revenues 67.84% 71.49% 71.13% 74.90% 76.32%
=========== =========== =========== =========== ===========
Adjusted
operating
expense to
adjusted
operating
revenues
(twelve
months)
Adjusted
operating
expense $ 71,049 $ 69,049
Divided by:
adjusted
operating
revenues 99,570 91,415
----------- -----------
Adjusted
operating
expense to
operating
revenues 71.36% 75.53%
=========== ===========
Adjusted return
on average
assets
Adjusted net
income $ 4,791 $ 4,762 $ 4,378 $ 3,863 $ 3,946
Divided by:
average
assets 2,480,983 2,473,034 2,406,671 2,383,506 2,342,657
Multiplied by:
annualization
factor 3.97 3.97 4.01 4.06 3.97
----------- ----------- ----------- ----------- -----------
Adjusted
return on
average
assets 0.77% 0.76% 0.73% 0.66% 0.67%
=========== =========== =========== =========== ===========
Return on
average
assets 0.60% 0.77% 0.71% 0.64% 0.59%
=========== =========== =========== =========== ===========
Adjusted return
on average
equity
Adjusted net
income $ 4,791 $ 4,762 $ 4,378 $ 3,863 $ 3,946
Divided by:
average
common equity 284,671 282,426 280,676 278,187 273,669
Multiplied by:
annualization
factor 3.97 3.97 4.01 4.06 3.97
----------- ----------- ----------- ----------- -----------
Adjusted
return on
average
equity 6.68% 6.69% 6.26% 5.63% 5.72%
=========== =========== =========== =========== ===========
Return on
average
equity 5.26% 6.71% 6.10% 5.52% 5.01%
=========== =========== =========== =========== ===========
PARK STERLING CORPORATION
RECONCILIATION OF NON-GAAP MEASURES
($ in thousands, except per share
amounts)
(three month
and period end
results) December 31, June 30, June 30, March 31, December 31,
2015 2015 2015 2015 2014
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- ----------- -----------
Tangible common
equity to
tangible
assets
Total assets $ 2,514,264 $ 2,485,134 $ 2,443,880 $ 2,397,864 $ 2,359,230
Less:
intangible
assets (38,768) (39,115) (39,462) (39,852) (40,200)
----------- ----------- ----------- ----------- -----------
Tangible
assets $ 2,475,496 $ 2,446,019 $ 2,404,418 $ 2,358,012 $ 2,319,030
=========== =========== =========== =========== ===========
Total common
equity $ 284,704 $ 284,205 $ 279,743 $ 279,118 $ 275,105
Less:
intangible
assets (38,768) (39,115) (39,462) (39,852) (40,200)
----------- ----------- ----------- ----------- -----------
Tangible
common
equity $ 245,936 $ 245,090 $ 240,281 $ 239,266 $ 234,905
=========== =========== =========== =========== ===========
Tangible
common equity $ 245,936 $ 245,090 $ 240,281 $ 239,266 $ 234,905
Divided by:
tangible
assets $ 2,475,496 2,446,019 2,404,418 2,358,012 2,319,030
----------- ----------- ----------- ----------- -----------
Tangible
common
equity to
tangible
assets 9.93% 10.02% 9.99% 10.15% 10.13%
=========== =========== =========== =========== ===========
Common equity
to assets 11.32% 11.44% 11.45% 11.64% 11.66%
=========== =========== =========== =========== ===========
Tangible book
value per
share
Issued and
outstanding
shares 44,854,509 44,909,447 44,910,686 44,877,194 44,859,798
Less:
nondilutive
restricted
stock awards (959,305) (974,183) (985,531) (882,178) (921,097)
----------- ----------- ----------- ----------- -----------
Period end
dilutive
shares 43,895,204 43,935,264 43,925,155 43,995,016 43,938,701
=========== =========== =========== =========== ===========
Tangible
common equity $ 245,936 $ 245,090 $ 240,281 $ 239,266 $ 234,905
Divided by:
period end
dilutive
shares 43,895,204 43,935,264 43,925,155 43,995,016 43,938,701
----------- ----------- ----------- ----------- -----------
Tangible
common book
value per
share $ 5.60 $ 5.58 $ 5.47 $ 5.44 $ 5.35
=========== =========== =========== =========== ===========
Common book
value per
share $ 6.49 $ 6.47 $ 6.37 $ 6.34 $ 6.26
=========== =========== =========== =========== ===========
Adjusted
allowance for
loan losses
Allowance for
loan losses $ 9,064 $ 8,742 $ 8,468 $ 8,590 $ 8,262
Plus:
acquisition
accounting
FMV
adjustments
to acquired
loans 28,173 29,548 31,159 32,209 35,419
----------- ----------- ----------- ----------- -----------
Adjusted
allowance for
loan losses $ 37,237 $ 38,290 $ 39,627 $ 40,799 $ 43,681
=========== =========== =========== =========== ===========
Divided by:
total loans
(excluding
LHFS) $ 1,741,815 $ 1,700,124 $ 1,657,463 $ 1,614,852 $ 1,580,693
----------- ----------- ----------- ----------- -----------
Adjusted
allowance
for loan
losses to
total loans 2.14% 2.25% 2.39% 2.53% 2.76%
----------- ----------- ----------- ----------- -----------
Allowance for
loan losses
to total
loans 0.52% 0.51% 0.51% 0.53% 0.52%
=========== =========== =========== =========== ===========
For additional information contact:
David Gaines
Chief Financial Officer
(704) 716-2134
david.gaines@parksterlingbank.com
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