UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A
(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

1043 East Morehead Street, Suite 201

Charlotte, North Carolina 28204

We are pleased to invite you to attend the 2016 Annual Meeting of Shareholders of Park Sterling Corporation. The Annual Meeting will be held at 4201 Congress Street, Suite 210, Charlotte, North Carolina, on Thursday, May 26, 2016 at 8:30 A.M., local time.

Details of the business to be conducted at the Annual Meeting are provided in the enclosed Notice of Annual Meeting of Shareholders and Proxy Statement, each of which we urge you to read carefully. In addition, enclosed is a proxy card and a copy of our Annual Report on Form 10-K for the year ended December 31, 2015.

Even if you plan to attend the Annual Meeting, I encourage you to review these proxy materials and vote your shares in advance of the Annual Meeting either by Internet or by mail. Instructions regarding Internet voting are included on the proxy card. If you choose to submit a proxy by mail, please mark, sign and date the proxy card and return it in the enclosed postage-paid envelope. If you attend the Annual Meeting and desire to revoke your proxy and vote in person, you may do so. In any event, you may revoke your proxy at any time before it is exercised as explained in the Proxy Statement.

Thank you for your interest in Park Sterling.

 Sincerely, 

James C. Cherry

Chief Executive Officer

PARK STERLING CORPORATION

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

to be held on

May 26, 2016

TO OUR SHAREHOLDERS:

The 2016 Annual Meeting of Shareholders (the “Annual Meeting”) of Park Sterling Corporation (the “Company”) will be held at 4201 Congress Street, Suite 210, Charlotte, North Carolina, on Thursday, May 26, 2015, at 8:30 A.M., local time, for the following purposes:

We have fixed March 24, 2016 as the record date for the determination of shareholders entitled to notice of and to vote at the Annual Meeting. Only holders of record of the Company’s Common Stock at the close of business on that date will be entitled to notice of and to vote at the Annual Meeting and any adjournments thereof.

You are cordially invited to attend the Annual Meeting in person. Whether or not you plan to attend the Annual Meeting, your vote is important, and we encourage you to review these proxy materials and vote your shares in advance of the Annual Meeting by Internet or by mail, as described in the accompanying Proxy Statement. You may also vote your shares in person at the Annual Meeting. To obtain directions to be able to attend the Annual Meeting and vote in person, please call Ralph W. Brewer at (704) 716-2134.

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be Held on May 26, 2016: the Proxy Statement, form of proxy and the Company’s 2015 Form 10-K which serves as its annual report to shareholders are available on the Company’s website at www.parksterlingbank.com, under Investor Relations.

By order of the Board of Directors

Ralph W. Brewer

Secretary

April [ ], 2016

PARK STERLING CORPORATION

1043 East Morehead Street, Suite 201

Charlotte, North Carolina 28204 

Proxy Statement

Annual Meeting of Shareholders

to be held on

May 26, 2016

This Proxy Statement is furnished in connection with the solicitation by the Board of Directors of Park Sterling Corporation (the “Company”) of proxies to be used at the 2016 Annual Meeting of Shareholders of the Company (the “Annual Meeting”) to be held on Thursday, May 26, 2016, at 8:30 A.M., local time, at 4201 Congress Street, Suite 210, Charlotte, North Carolina, and at any adjournment or adjournments thereof. These proxy materials are first being mailed or made available to shareholders on or about April [ ], 2016.

The entire cost of soliciting these proxies will be borne by the Company. In addition to the delivery of the proxy materials by mail, the Company may request banks, brokers and other record holders, or a proxy solicitor acting on its behalf, to send proxies and proxy materials to the beneficial owners of the Company’s common stock (the “Common Stock”) and secure their voting instructions and will reimburse them for their reasonable expenses in so doing. The Company has not engaged a proxy solicitor to solicit proxies from shareholders; however, the Company retains the right to do so if it deems such solicitation necessary. Furthermore, the Company may also use one or more of its regular employees, who will not be specially compensated, to solicit proxies from shareholders, either in person, by telephone, by e-mail, or by special letter.

Business to be Transacted

At the Annual Meeting, we will ask you to:

No other items are scheduled to be voted upon.

Who May Vote

Shareholders of record of Common Stock as of the close of business on March 24, 2016, the record date established by the Company’s Board of Directors, are entitled to notice of and to vote at the Annual Meeting and any adjournments thereof, either in person or by proxy. Each share of Common Stock is entitled to one vote on each matter expected to be presented at the Annual Meeting, including the election of directors. On the record date, there were 53,076,216 shares of Common Stock outstanding and entitled to vote at the Annual Meeting.

Voting Methods

You may vote at the Annual Meeting: (i) in person, (ii) by mail via your proxy card, or (iii) on the Internet in accordance with the instructions on your proxy card. If a bank, broker or other nominee (“broker”) holds your shares, you will receive voting instructions directly from the holder of record.

Voting by Proxy

The form of proxy solicited by the Board of Directors permits you to specify a choice between “for” and “withhold authority” to vote for each nominee for election as director, and a choice among “for,” “against,” and “abstain” with respect to each of the other matters to be acted upon at the Annual Meeting. All shares represented by valid proxies that the Company receives through this solicitation, and that are not revoked, will be voted according to your instructions on the proxy card or as instructed via the Internet. If you properly submit a proxy without giving specific voting instructions, your shares will be voted in accordance with the Board of Directors’ recommendations. If other matters properly come before the Annual Meeting, the persons appointed to vote the proxies will vote on these matters in accordance with their best judgment.

Revocability of Proxies

Even if you execute a proxy, you have the right to revoke it and change your vote by notifying us at any time before your proxy is voted. You may revoke a proxy at any time by submitting written notice of revocation to the Company’s Secretary before the proxy is exercised, by submitting a proxy having a later date, or by appearing at the Annual Meeting and voting in person. Unless so revoked, the shares of Common Stock represented by the valid proxies received pursuant to this solicitation will be voted in accordance with the specifications given therein.

Quorum and Vote Necessary for Action

Quorum. The presence of the holders of a majority of the outstanding shares of Common Stock entitled to vote at the Annual Meeting, present in person or represented by proxy, is necessary to constitute a quorum.

Broker Non-Votes. A broker holding shares in “street name” for a beneficial owner has discretion (but is not required) to vote the client’s shares with respect to “routine” matters if the client does not provide voting instructions. The broker, however, is not permitted to vote the client’s shares with respect to “non-routine” matters without voting instructions. A “broker non-vote” occurs when your broker submits a proxy for your shares but does not vote on a particular proposal because the broker does not have discretionary voting power for that item and has not received instructions from you. Broker non-votes, if any, will be counted for purposes of determining a quorum but will not be treated as votes cast and therefore will have no effect on the vote required for a particular matter.

“Routine” and “Non-routine” Matters. The ratification of the appointment of Dixon Hughes Goodman LLP as the Company’s independent registered public accounting firm for 2016 (Proposal 3) is considered a routine matter under applicable stock exchange rules. Therefore, even if your broker does not receive voting instructions from you, your broker is entitled (but not required) to vote your shares on this proposal. The election of directors (Proposal 1), the amendment to the Articles of Incorporation (Proposal 2) and the advisory “say on pay” vote (Proposal 4) are considered non-routine matters under applicable stock exchange rules, and your broker is not entitled to vote your shares on these proposals without your instructions.

Abstentions. If you abstain from voting on a particular matter, your vote will be counted for purposes of determining whether a quorum is present but will not be treated as a vote cast either for or against that matter.

Required Vote. Directors are elected by a plurality of the votes cast at the Annual Meeting. This means that with respect to the election of directors (Proposal 1), the nominees receiving the largest number of affirmative votes cast are elected as directors up to the maximum number of directors to be elected at the meeting. At the Annual Meeting, the maximum number of directors to be elected is five. You may vote “for” or “withhold authority” with respect to the election of directors. Only votes “for” are counted in determining whether a plurality has been cast in favor of a director. You may not cumulate votes in the election of directors.

Approval of the amendment to the Company’s Articles of Incorporation (Proposal 2) and approval of the ratification of the appointment of Dixon Hughes Goodman LLP (Proposal 3) each require the affirmative vote of the majority of the votes cast with respect to that matter at the Annual Meeting. “Say on pay” (Proposal 4) is an advisory vote that will not be binding on the Board of Directors. The Board of Directors will, however, strongly consider the outcome of this vote in determining the compensation of named executive officers.

BENEFICIAL OWNERSHIP OF COMMON STOCK

Principal Shareholders

The following table sets forth information with respect to the beneficial ownership of Common Stock as of March 24, 2016 by those persons known to the Company to be the beneficial owners of more than five percent of the Common Stock, based solely on the most recent Schedule 13D and 13G reports filed with the Securities and Exchange Commission (the “SEC”) and the information contained in those filings. Percentages are calculated based on shares outstanding as of March 24, 2016. The nature of beneficial ownership of the shares included is presented in the notes following the table.

Directors and Executive Officers

The following table sets forth information with respect to the beneficial ownership of Common Stock as of March 24, 2016 by all current directors and all nominees for director of the Company and the executive officers named in the Summary Compensation Table included later in this Proxy Statement, and of all current directors and executive officers of the Company as a group. Percentages are calculated based on the number of shares outstanding as of March 24, 2016. Except as otherwise indicated, the persons named in the table have sole voting and investment power over the shares included in the table.

PROPOSAL 1

ELECTION OF DIRECTORS

Our Articles of Incorporation and Bylaws provide that the Board of Directors will consist of at least six but not more than nineteen members. The exact number of directors is determined from time to time by the vote of a majority of directors. The directors are divided into three classes having staggered three-year terms. Each class of directors is as nearly equal in number as possible.

The number of directors currently is fixed at twelve. Each director also currently serves as a director of Park Sterling Bank, the Company’s wholly owned banking subsidiary (the “Bank”).

The terms of five directors expire at the Annual Meeting, three of whom (Leslie M. Baker, Larry W. Carroll and Ben R. Rudisill, II) are serving three-year terms that expire in 2016 and two of whom (Grant G. Grayson and Robert G. Whitten) were appointed to the Board of Directors in January 2016 to fill vacancies created on the Board in connection with the merger of First Capital Bancorp, Inc. (“First Capital”) into the Company on January 1, 2016. The Board of Directors has nominated these five directors for re-election by the shareholders. Mr. Grayson and Mr. Whitten, who are standing for election at the Annual Meeting for the first time, initially were identified by the board of directors of First Capital as potential candidates for appointment to the Board of Directors in connection with the merger and are recommended by the Nominating and Governance Committee of the Board of Directors. Upon election, Mr. Baker, Mr. Carroll, Mr. Grayson and Mr. Rudisill will serve until the 2019 Annual Meeting of Shareholders and Mr. Whitten will serve until the 2018 Annual Meeting of Shareholders or, in each case, his earlier resignation or retirement or until a successor is elected and qualifies to serve. Although the Board of Directors expects that each of the nominees will be available for election, if a vacancy in the slate of nominees is caused by death or other unexpected occurrence, the persons named as proxies in the accompanying form of proxy may vote for a substitute nominee proposed by the Board of Directors.

Proxies may not be voted for a number of persons greater than the number of nominees.

The Board of Directors recommends a vote FOR each of LESLIE M. BAKER, JR., LARRY W. CARROLL, GRANT S. GRAYSON, BEN R. RUDISILL, II, and ROBERT G. WHITTEN for election as directors of the Company. Properly submitted proxies will be voted FOR election of Mr. Baker, Mr. Carroll, Mr. Grayson, Mr. Rudisill, and Mr. Whitten unless otherwise specified.

Board of Directors

The names, ages and principal occupations (which have continued for at least the past five years unless otherwise indicated) and certain other information, including the specific experience, qualifications, attributes or skills that led to the conclusion that such person should serve as a director of the Company, with respect to each of the nominees and continuing directors are set forth below.

Nominees for Terms Expiring in 2019

Leslie M. Baker, Jr. Mr. Baker, age 73, retired as Chairman of the Board of Wachovia Corporation in 2003. He previously served as President and Chief Executive Officer, Chief Operating Officer, President of the North Carolina bank, Chief Credit Officer, and Manager of the International Division of Wachovia. Mr. Baker is a founder of the National Museum of the Marine Corps and a member of the board of trustees of the Marine Corp Heritage Foundation. Past board affiliations include Marsh & McLennan Companies, Inc., the Federal Advisory Council of the Federal Reserve, International Monetary Conference, Financial Services Roundtable, American Bankers Association, Carolina Power & Light, Novant Health and Acuity Brands. As the former chief executive officer of a successful regional and super-regional bank, Mr. Baker brings exceptional knowledge of all aspects of managing and overseeing our Company to the Board of Directors. In addition, Mr. Baker brings a keen interest in both economic analysis and corporate governance to the Board of Directors, as well as experience as a public company director. Mr. Baker currently serves as Chairman of the Board of Directors and has been a director of the Company (or, prior to the Company’s formation as holding company, the Bank) since the Bank’s initial public offering in 2010 (the “Public Offering”).

Larry W. Carroll. Mr. Carroll, age 64, has been the President of Carroll Financial Associates, Inc., a financial planning and investment management firm, since 1980. He currently serves on the Board of Directors of Carroll Financial Associates, Inc. and the Board of Directors of Capitala Investment Corp., a North Carolina-based publicly traded business development corporation. He previously served on the Board of Trustees of Wingate University and the Board of Directors of the Cultural and Heritage Foundation. Prior to the Public Offering, Mr. Carroll also served as Chairman of the Board of Directors of the Bank. He began his career as a public accountant with KPMG LLC (USA). Mr. Carroll brings expertise in the financial services industry and capital markets to the Board of Directors, including a deep understanding of the wealth management business. His experience as a public accountant is important to our Audit Committee and Board of Directors, and his successful entrepreneurial experience is supportive of the Company’s organic growth strategy. In addition, his deep knowledge of and connections to community banking in the Carolinas is important to the Company’s acquisition strategy. Mr. Carroll has been a director of the Company (or, prior to the Company’s formation as holding company, the Bank) since 2006.

Grant S. Grayson. Mr. Grayson, age 63, has been a shareholder in the law firm of LeClairRyan, since November 2009. Prior to November 2009, Mr. Grayson was a partner in the law firm of Cantor Arkema, P.C. Mr. Grayson served on the First Capital board of directors as Chairman of the Board from 1998 until its merger with the Company in January 2016. Mr. Grayson’s knowledge of First Capital’s business, history, organization and executive management will provide the Park Sterling board of directors with insight into the effective integration of the First Capital operations. In addition, Mr. Grayson will be able to provide valuable guidance regarding merger activities, government and community relations, interactions with industry group and professional associations and business development efforts. Mr. Grayson has been a director of the Company since 2016.

Ben R. Rudisill, II. Mr. Rudisill, age 72, has served as the President of Rudisill Enterprises, Inc., a beverage distributor and food broker, since founding the company in 1976. Mr. Rudisill served as a director of Citizens South Banking Corporation (“Citizens South”) from 1977 until its merger with the Company in October 2012, and served as Chairman of Citizens South from May 2012 until the merger and prior to that as Vice Chairman since January 1998. Mr. Rudisill also served as Chairman of Citizens South Bank from May 2009 to October 2012. Mr. Rudisill currently serves as a director of the U.S. National Whitewater Center, a director of Covenant Village, Inc., and a director of Linville Golf Club. Past board affiliations include the Public Service Company of North Carolina, the Duke University Fuqua School of Business, and Lenoir Rhyne College. During his tenure as a director of Citizens South and since becoming a member of the Board of Directors, Mr. Rudisill has developed knowledge of both the banking industry in general and Citizens South’s and the Company’s business, history, organization and executive management which, together with his personal understanding of many of the markets that we serve, has enhanced his ability to serve the Board of Directors. In addition, Mr. Rudisill brings entrepreneurial experience that is supportive of the Company’s organic growth strategy. Mr. Rudisill has been a director of the Company since October 2012.

Nominee for Term Expiring in 2018

Robert G. Whitten. Mr. Whitten, age 61, is co-owner and president of Whitten Brothers Holding Company, which owns and operates two automobile dealerships in the metropolitan Richmond area. Mr. Whitten has been involved in the automobile business for over thirty-six years. Mr. Whitten’s business experience gives him extensive insights into the customers who live in the market areas in which First Capital operated and the economic developments affecting these communities. In addition, through his tenure on the First Capital board of directors from 2012 until the First Capital merger, Mr. Whitten has developed knowledge of First Capital’s business, history, organization and executive management, which, together with his personal understanding of many of the markets in which First Capital operated, will be a significant resource as Park Sterling integrates the First Capital operations. Mr. Whitten has been a director of the Company since January 2016.

Continuing Directors with Terms Expiring in 2017

Walter C. Ayers. Mr. Ayers, age 74, is the retired President and Chief Executive Officer of the Virginia Bankers Association, a position in which he served for 24 years until his retirement at the end of 2006. Past board affiliations include the American Bankers Professional Fidelity and Insurance Company, the American Bankers Insurance Association, and Bay Banks of Virginia, Inc. Mr. Ayers also served as a member of the American Bankers Association’s Communications Counsel, Government Relations Council, Deposit Insurance Reform Task Force, and the State Association Division Executive Committee. He is most recently served on the Board of Trustees of Ferrum College. He brings extensive knowledge of community and regional banking, particularly in the Commonwealth of Virginia, including strategic, financial and regulatory considerations, to the Board of Directors. His knowledge of and relationships with banks in Virginia are expected to support the Company’s growth ambitions in that market. He also brings national experience with banking-related industry associations and government relations. In addition, as a former director of Bay Banks of Virginia, Inc., Mr. Ayers brings community bank and public company board experience. Mr. Ayers has been a director of the Company (or, prior to the Company’s formation as holding company, the Bank) since the Public Offering.

Jean E. Davis. Ms. Davis, age 60, retired as the head of Operations, Technology and e-Commerce of Wachovia Corporation in 2006, a position that she held since 2001. She previously served as the Head of Operations and Technology, Head of Human Resources, Head of Retail Banking, and in several office executive, regional executive and corporate banking roles for Wachovia. She is currently serves as chairperson of Safe Alliance, a 501(c)(3) in Charlotte, NC and as chairperson of the Charlotte Latin School Board of Trustees. She is also currently a member of the Board of Children and Family Services Center in Charlotte, NC. Ms. Davis previously served as a member of the Financial Services Roundtable, the Board of Trustees of University of North Carolina at Greensboro, the Board of Visitors of the University of North Carolina at Chapel Hill, the Board of Directors of the YMCA of Greater Charlotte and the Board of United Family Services. Ms. Davis brings extensive knowledge of bank operations and technology, as well as human resources, to the Board of Directors, both of which are important to the Company’s long-term success. In addition, she brings a strong background in retail banking, merger due diligence and merger integration experience. Ms. Davis has been a director of the Company since March 2011.

Jeffrey S. Kane. Mr. Kane, age 62, retired as Senior Vice President in charge of the Charlotte Office of the Federal Reserve Bank of Richmond in 2009, which included overall responsibility for Fifth District Cash Operations, Reserve Accounts and Loans functions. He was previously responsible for Banking Supervision and Regulation for the Fifth District, and began his banking career as a lending officer at the Bank of Virginia. Mr. Kane brings extensive experience in bank regulatory matters to the Board of Directors. This includes significant knowledge of supervisory matters, soundness considerations, regulatory compliance, application approval and central bank operations. Mr. Kane also brings strong knowledge of commercial and retail banking markets in the Carolinas and Virginia, from a regulatory perspective, to the Board of Directors. His past involvement with education initiatives for bank directors is also valuable to our Board of Directors. Mr. Kane has been a director of the Company (or, prior to the Company’s formation as holding company, the Bank) since the Public Offering.

Kim S. Price. Mr. Price, age 60, is the retired President and Chief Executive Officer of Citizens South and Citizens South Bank, a position in which he served for 15 years until his retirement in October 2012 in connection with the merger of Citizens South into the Company. He currently serves as a director of both the Daniel Stowe Botanical Garden and the Community Foundation of Gaston County. Past board affiliations include Citizens South Banking Corporation and Citizens South Bank as well as the Gaston County Economic Development Corporation. As the former chief executive officer of Citizens South, Mr. Price brings both exceptional knowledge of managing and overseeing a successful community bank as well as local market experience to the Board of Directors. In addition, Mr. Price has local experience with banking-related industry associations and government relations, and deep knowledge of and connections with community banks in North Carolina, which is supportive of the Company’s growth strategies. Mr. Price currently serves as Vice Chairman of the Board of Directors and has been a director of the Company since October 2012.

Continuing Directors with Terms Expiring in 2018

James C. Cherry. Mr. Cherry, age 65, has served as Chief Executive Officer of the Company since its formation and of the Bank since the Public Offering. He retired as the Chief Executive Officer for the Mid-Atlantic Banking Region at Wachovia Corporation in 2006, and previously served as President of Virginia Banking, Head of Trust and Investment Management, and in various positions in North Carolina banking including Regional Executive, Area Executive, City Executive, Corporate Banking and Loan Administration Manager, and Retail Banking Branch Manager for Wachovia. Mr. Cherry was formerly Chairman of the Virginia Bankers Association. He is currently a director of Armada Hoffler Properties Inc., a Virginia-based publicly traded real estate company. Mr. Cherry’s extensive experience in commercial and retail banking operations, credit administration, product management and merger integration at Wachovia, which was focused in the Carolinas and Virginia, provides the Board of Directors with significant expertise important to the oversight of the Company and expansion into its target markets. Mr. Cherry has been a director of the Company (or, prior to the Company’s formation as holding company, the Bank) since the Public Offering.

Patricia C. Hartung. Ms. Hartung, age 62, has served as the Executive Director of the Upper Savannah Council of Governments since March 1990, and previously as its Assistant Director. Ms. Hartung served as Chairman of Community Capital Corporation (“Community Capital”) from 2007 until its merger with the Company in November 2011, and was a director of Community Capital since its formation in 1988. Ms. Hartung is currently a director of the National Association of Development Organizations, a director of Provident Business Financial Services and a director of Francis Marion University. During her tenure as a director of Community Capital and since becoming a member of the Board of Directors, Ms. Hartung has developed knowledge of both the banking industry in general and Community Capital’s and the Company’s business, history, organization, and executive management which, together with her personal understanding of many of the markets that we serve, has enhanced her ability to serve the Board of Directors. In addition, as former Chairman of Community Capital, Ms. Hartung brings community bank and public company board experience. Ms. Hartung has been a director of the Company since November 2011.

Thomas B. Henson. Mr. Henson, age 61, is founder and CEO of American Spirit Media, LLC. American Spirit owns seven network affiliated television stations in the Southeast and Midwest. Mr. Henson is also a private investor and has formed and managed various investment firms. Beginning in 1980, Mr. Henson was an attorney with Robinson Bradshaw & Hinson, P.A., specializing in mergers and acquisitions. Mr. Henson is currently a director of Cato Corporation, a North Carolina-based publicly traded specialty retailer. Mr. Henson brings valuable experience negotiating and closing mergers and acquisitions, which is an important component of the Company’s growth strategy, to the Board of Directors, as well as securities law knowledge and a legal background and interest in corporate governance, which are valuable to the Board of Directors in governing a public company. Mr. Henson has been a director of the Company (or, prior to the Company’s formation as holding company, the Bank) since 2006.

No nominee for director, director or executive officer of the Company has a family relationship as close as first cousin with any other nominee for director, director or executive officer of the Company.

Compensation of Directors

The table below summarizes the total compensation paid to or earned by directors of the Company during the fiscal year ended December 31, 2015.

The table below sets forth the number of unexercised stock options and the number of unvested shares of restricted stock held by our non-employee directors as of December 31, 2015.

Cash Retainer and Meeting Fees for Independent Directors. Under the Company’s director compensation policy, (i) the Chairman of the Board of Directors is paid an annual $50,000 fee, payable monthly, for service as Chairman; (ii) the chairman of the Audit Committee and the chairman of the Loan and Risk Committee of the Board of Directors are each paid an annual $35,000 fee, payable monthly, for service as chairmen of their respective committees; and (iii) each other independent director is paid an annual $30,000 fee, payable monthly, for service as a director of the Company. In addition, each of the Chairman and each independent director is paid a meeting fee of $750 for each Board of Directors meeting attended, whether in person or by telephone, and a meeting fee of $250 for each committee meeting attended, whether in person or by telephone, when such committee meetings are not scheduled concurrent to a full meeting of the Board of Directors.

Long-Term Incentive Plan Compensation. Directors are eligible for awards under the Park Sterling Corporation 2014 Long-Term Incentive Plan (the “2014 LTIP”), pursuant to which nonstatutory stock options, stock appreciation rights and other stock-based awards (including, without limitation, restricted stock awards) can be awarded to directors from time to time, in the discretion of the Board of Directors and the Nominating and Governance Committee. Equity awards granted to directors during the fiscal year ended December 31, 2015 are disclosed in the table above.

Nonqualified Deferred Compensation. Directors are eligible to participate in the Park Sterling Bank Deferred Compensation Plan (the “Deferred Compensation Plan”), which provides directors the ability to defer Board fees, with deferred amounts credited with interest at the Wall Street Journal prime rate, with a floor of at least 0.50%. For more information, see “Compensation of Executive Officers – Nonqualified Deferred Compensation.”

Predecessor Company Benefits. Prior to the merger of Citizens South with the Company, Citizens South Bank entered into nonqualified deferred compensation and income continuation agreements for the benefit of certain of its directors, including Ben R. Rudisill, II. Mr. Rudisill’s agreement provides him with an annual benefit of $78,816, payable in monthly installments for a period of 10 years, to Mr. Rudisill upon his retirement from service on or after attaining age 70 or to Mr. Rudisill’s beneficiaries upon his death. Benefits under the agreement are forfeited if Mr. Rudisill’s service is terminated for cause.

Also prior to the merger, Citizens South Bank entered into nonqualified director retirement agreements for certain of its directors, including Mr. Rudisill. Mr. Rudisill’s agreement provides for an annual benefit of $8,000, payable to Mr. Rudisill in monthly installments for a period of 15 years upon his termination of service on or after attaining age 70. In the event of Mr. Rudisill’s pre-retirement death or death before all payments under the agreement have been made to him, monthly benefits are provided for his designated beneficiary or beneficiaries. If Mr. Rudisill dies without a valid beneficiary designation, his surviving spouse will be his beneficiary, or if none, then the benefits will be paid to his personal representative. Benefits under the agreement are forfeited if Mr. Rudisill’s service is terminated for cause.

Also prior to the merger, Citizens South entered into Endorsement Split Dollar Agreements with certain executives, including Kim S. Price, which Park Sterling assumed in connection with, and agreed to continue to maintain after, the merger. Mr. Price is 100% vested in his life insurance benefit under the policy. Under the Endorsement Split Dollar Agreement, upon Mr. Price’s death, Mr. Price’s designated beneficiaries will be paid a death benefit equal to the death proceeds under the policy minus the cash surrender value of the policy. The cash surrender value of the policy will be paid to Park Sterling. No premiums were paid by or on behalf of Park Sterling with respect to this policy during 2015.

Non-Competition Agreement and Consulting Agreement. Effective at the time of the merger of Citizens South with the Company in 2012, Kim S. Price entered into a Consulting Agreement and a Non-Competition Agreement with the Company and the Bank. Pursuant to the Consulting Agreement, Mr. Price performs consulting services as the Company and Bank may reasonably request, including supporting merger activities, government relations, community relations, industry group association and business development efforts for a period of five years following the merger. Pursuant to the Non-Competition Agreement, Mr. Price has agreed not to compete with the Company and the Bank for a period of the longer of three years or the consulting period following the merger for the benefit of any business within 25 miles of any office of Citizens South or the Company as of the closing date of the merger. During such three- to five-year period, Mr. Price has also agreed not to solicit any customers of the Company or the Bank, disparage the Company or the Bank or offer employment to any employee of the Company or Bank or any of their subsidiaries or affiliates that would cause such person(s) to terminate employment and accept employment with or provide services to any business that competes with the Company or Bank. In exchange for the consulting services, the Company and the Bank have agreed to pay Mr. Price $250,000 per year payable in equal monthly installments. In exchange for the non-competition agreement, the Company and the Bank agreed to pay Mr. Price $1,500,000, with $775,000 paid by lump sum at the closing date of the merger and $725,000 paid on the first anniversary of the closing date of the merger. Mr. Price has been determined by the Nominating and Governance Committee to be a non-independent director in accordance with the independence standards of NASDAQ in light of these payments.

Board Meetings; Attendance

The Board of Directors held eight regular meetings and three special meetings during 2015. Each director then serving attended at least 75% of the aggregate number of meetings of the Board of Directors and all committees of the Board of Directors on which he or she served during 2015.

Committees of the Board of Directors

The Board of Directors has a standing Executive Committee, Audit Committee, Compensation and Development Committee, Nominating and Governance Committee, Loan and Risk Committee, and Trust and Investment Management Committee, each of which operates under a charter that is included on the Company’s website at www.parksterlingbank.com. Information on the Company’s website does not form a part of this Proxy Statement. Current membership of the committees and number of meetings for these committees during 2015 are as follows:

The following is a brief description of each committee of the Board of Directors.

Audit Committee: The Audit Committee discharges the Board of Directors’ responsibility relating to the oversight of (i) the integrity of the financial statements and internal controls of the Company; (ii) the independent auditor’s qualifications and independence; (iii) the performance of the Company’s internal audit function and independent auditors; and (iv) compliance by the Company with legal and regulatory requirements. The Audit Committee, among other things, is responsible for the appointment, compensation and oversight of the independent auditors and review of the Company’s financial statements, audit reports, internal controls and internal audit procedures. The Audit Committee was established in accordance with Section 3(a)(58)(A) of the Exchange Act. Each member of the Audit Committee has been determined to be an independent director, in accordance with the independence standards of the SEC and NASDAQ applicable to audit committees.

Compensation and Development Committee: The Compensation and Development Committee (the “Compensation Committee”) is appointed by the Board of Directors to (i) review and approve the Company’s compensation and benefit programs; (ii) ensure the competitiveness of those programs; (iii) discharge the responsibilities of the Board of Directors relating to compensation of the Company’s Chief Executive Officer and other officers, as appropriate; and (iv) advise the Board of Directors on the development of and succession for key executives. The Chief Executive Officer works closely with the Compensation Committee to evaluate and recommend compensation for the other executive officers and other key employees. Each member of the Compensation Committee has been determined to be an independent director, in accordance with the independence standards of NASDAQ applicable to compensation committees.

The Compensation Committee may from time to time, in its sole discretion, engage a compensation consultant to conduct a review, on either a comprehensive or selected basis, of the competitiveness and effectiveness of the Company’s executive compensation program relative to market practices and business goals or engage legal counsel or other advisors to assist it in the performance of its duties, but only after taking into consideration factors relevant to such compensation consultant’s or other adviser’s independence as specified in the NASDAQ listing standards. Such compensation consultants or other advisors, when engaged, serve at the request of, and report directly to, the Compensation Committee. The Compensation Committee has the sole authority to approve such adviser’s fees and other terms and conditions of engagement, and the Company must pay the reasonable compensation of any compensation consultant or other advisor retained by the Compensation Committee.

Additional information on the process and procedures for executive compensation determinations, including the role of management and compensation consultants, is contained under the heading “Compensation Discussion and Analysis” below.

Nominating and Governance Committee: The Nominating and Governance Committee (i) reviews and recommends to the Board of Directors the appropriate size, functions and needs of the Board of Directors; (ii) reviews the qualifications of proposed director nominees and recommends such nominees to the Board of Directors; (iii) evaluates and recommends to the Board of Directors corporate governance practices applicable to the Company; (iv) reviews and makes recommendations to the Board of Directors regarding independent director compensation; (v) periodically reviews the duties and composition of the committees of the Board of Directors; and (vi) oversees the annual evaluation of the Board of Directors and its committees. The Nominating and Governance Committee also periodically reviews the functions of senior officers and reviews shareholder proposals and proposed responses, including consideration of director nominations from shareholders. A more detailed discussion regarding the process for nominating potential director candidates is included under the heading “Corporate Governance Matters – Process for Nominating Potential Director Candidates.” Each member of the Nominating and Governance Committee has been determined to be an independent director, in accordance with the independence standards of NASDAQ.

Loan and Risk Committee: The Loan and Risk Committee provides oversight of management’s responsibilities to assess and manage the Company’s risks including, but not limited to, risks related to the Company’s credit and lending activities and asset-liability management. This includes the Company’s credit, market, funding and liquidity, interest rate, operational, compliance, reputational, legal, and cyber security risks.

Executive Committee: The Executive Committee generally exercises all of the powers and authority of the Board of Directors in the management of the affairs of the Company in the interim between meetings of the Board of Directors. The Executive Committee is established with the expectation that it will not take material actions absent special circumstances. The Executive Committee has no power to authorize distributions, authorize issuance or acquisition of shares, approve shareholder actions, amend the Company’s articles of incorporation or bylaws or approve a merger.

Trust and Investment Management Committee: The Trust and Investment Management Committee is appointed by the Board of Directors to oversee senior management’s responsibilities to assess and manage the Company’s Investment Management and Trust Services Group Services. The Trust and Investment Management Committee provides oversight of the Company’s trust and investment management activities, including providing for (i) sound banking practices in the operation of a trust department; and (ii) safeguards for the protection of depositors, fiduciary beneficiaries, creditors, shareholders, and the public.

CORPORATE GOVERNANCE MATTERS

Director Independence

The Board of Directors determines which of our directors is independent. For a director to be considered independent under NASDAQ listing standards, the Board of Directors must affirmatively determine that the director meets the criteria for independence set forth from time to time in the NASDAQ listing standards.

The Board of Directors has evaluated the relationships between each current director (and his immediate family members and related interests) and the Company or the Bank and has determined each of the following directors is independent under the applicable NASDAQ listing standards: Walter C. Ayers, Leslie M. Baker, Jr. (Chairman of the Board), Larry W. Carroll, Jean E. Davis, Grant S. Grayson, Patricia C. Hartung, Thomas B. Henson, Jeffrey S. Kane, Ben R. Rudisill, II and Robert G. Whitten.

The Board of Directors has determined that James C. Cherry, Chief Executive Officer of the Company, is not independent because he is an executive officer of the Company. The Board of Directors has also determined that Kim S. Price, Vice Chairman of the Company, is not independent because of the Non-Competition Agreement and Consulting Agreement between Mr. Price, the Company and the Bank entered into at the time of the merger of Citizens South with the Company.

Audit Committee Financial Expert

The Board of Directors has determined that one member of the Audit Committee, Larry W. Carroll, qualifies as an “audit committee financial expert.” Mr. Carroll is “independent” as that term is defined in the NASDAQ listing standards and the SEC rules.

Executive Sessions of Independent Directors

Independent directors meet at regularly scheduled executive sessions, generally at the end of each regularly scheduled meeting of the Board of Directors, without the directors who are not independent. The independent Chairman of the Board of Directors presides over meetings of the non-management or independent directors.

Code of Ethics

The Company has adopted a written Code of Ethics for Senior Financial Officers (the “Senior Code of Ethics”) that applies to the Company’s Chief Executive Officer (the principal executive officer), Chief Financial Officer (the principal financial officer), Chief Accounting Officer (the principal accounting officer) and Treasurer. The Company has also adopted a Code of Ethics (the “Code of Ethics”) that applies to all employees, officers and directors of the Company as well as any subsidiary company officers that are executive officers of the Company. The Senior Code of Ethics and Code of Ethics are available on the Company’s website at www.parksterlingbank.com and print copies are available to any shareholder that requests a copy. Any amendments to the Senior Code of Ethics or Code of Ethics, or waivers of these policies, to the extent applicable to the Chief Executive Officer, the Chief Financial Officer, the Chief Accounting Officer and Treasurer, will be disclosed on the Company’s website promptly following the date of such amendment or waiver, as applicable. Information on the Company’s website does not form a part of this Proxy Statement.

Shareholder and Interested Party Communications with Directors

Shareholders and other interested parties may communicate directly with the entire Board of Directors, any committee of the Board of Directors, the chairman of any committee, any individual director, the independent directors, as a group, or any other group of directors by writing to: Park Sterling Corporation, 1043 East Morehead Street, Suite 201, North Carolina 28204, Attention: Secretary. Each such communication should specify the applicable addressee(s). The Company’s Board of Directors has instructed the Secretary to forward these communications to the addressee, and if no specific addressee is listed, to the Chairman of the Board of Directors.

Director Attendance at Annual Meeting

The Company believes that the Annual Meeting is an opportunity for shareholders to communicate directly with the Company’s directors. Consequently, each director is encouraged to attend the Annual Meeting of Shareholders. All of the persons who were members of the Board of Directors at the time of the Company’s 2015 Annual Meeting of Shareholders attended such meeting.

Process for Nominating Potential Director Candidates

The Nominating and Governance Committee is responsible for identifying and screening potential director candidates and recommending qualified candidates to the full Board of Directors for nomination. Director nominees are recommended to the Board of Directors from time to time, but at least annually, by the Nominating and Governance Committee for election by the shareholders. Nominees for director are selected on the basis of outstanding achievement in their personal careers, wisdom, broad experience, integrity, ability to make independent analytical inquiries, understanding of the business environment, forthrightness and willingness to devote adequate time to Board of Directors’ duties. Knowledge of the financial services industry, and banking in particular, is also considered. Nominees must also possess a willingness to challenge and stimulate management and the ability to work as part of a team in an environment of trust.

The Nominating and Governance Committee reviews the background and qualifications of each nominee to determine such nominee’s experience, competence and character and assesses such nominee’s potential contribution to the Board of Directors, taking into account the then-existing composition of the Board of Directors and such other factors as the Nominating and Governance Committee deems appropriate. The Board of Directors believes that the business experience of its directors has been, and continues to be, critical to our success.

While the Company does not have a formal diversity policy with respect to the Board of Directors, the Board of Directors is committed to diversified membership and believes its membership should broadly reflect the communities served by the Company and the Bank as well as the strategic priorities of the Company, which include diversity of gender, race, ethnicity and experience. The Nominating and Governance Committee actively considers diversity in recruitment and nominations of directors. The current composition of our Board of Directors reflects those efforts. Going forward, the Nominating and Governance Committee will periodically review the composition of the Board of Directors to ensure it continues to meet the diversity goals, especially in line with the Company’s growth strategy into its target markets and subsequent accomplishments. The Nominating and Governance Committee uses its network of contacts when compiling a list of potential director candidates and may in the future engage outside consultants, such as professional search firms.

The Nominating and Governance Committee also will consider qualified nominees that are recommended by shareholders when such recommendations are submitted in accordance with Article II, Section 13 of the Company’s Bylaws, which the Board of Directors amended in March 2016. Shareholders may submit, in writing, the names and qualifications of potential director nominees to the Secretary, Park Sterling Corporation, 1043 East Morehead Street, Suite 201, Charlotte, NC 28204, for delivery to the Chair of the Nominating and Governance Committee for consideration. The written notice must include certain information about the proposed nominee and the shareholder submitting the nomination, including (i) with respect to the proposed nominee, the nominee’s name and address, the number of shares of stock owned of record and beneficially by such nominee, any derivative positions held of record or beneficially by such nominee related to, or the value of which is derived in whole or in part from, the value of the Company’s shares and whether and the extent to which any hedging, derivative or other transaction has been entered into by or on behalf of, or any other agreement, arrangement or understanding has been made, the effect or intent of which is to mitigate loss to, or to manage the risk or benefit from share price changes for, or to increase or decrease the voting power of, such nominee with respect to the Company’s shares, and all other information relating to such nominee that would be required to be disclosed in a proxy statement or other filings for a contested election (including the nominee’s written consent to being named as a nominee and to serving as a director if elected); and (ii) with respect to the shareholder submitting the nomination, the name and address of such shareholder as they appear on Company’s books, of any beneficial owner on whose behalf the nomination is being submitted, and of their respective affiliates and associates, the number of shares of stock owned of record or beneficially by any such person, any derivative positions held of record or beneficially by any such person related to, or the value of which is derived in whole or in part from, the value of the Company’s shares and whether and the extent to which any hedging, derivative or other transaction has been entered into by or on behalf of, or any other agreement, arrangement or understanding has been made, the effect or intent of which is to mitigate loss to, or to manage the risk or benefit from share price changes for, or to increase or decrease the voting power of, any such person with respect to the Company’s shares, a description of all agreements, arrangements or understandings with respect to the nomination between or among any such person, the proposed nominee and any other persons, any other information regarding any such person that would be required to be disclosed in a proxy statement or other filings for a contested election, and a representation that such shareholder is a record holder of the Company’s Common Stock entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to make such nomination. Article II, Section 13 of the Company’s Bylaws also requires that any such shareholder recommendation be received by the Company in accordance with the time frame described under the heading “Shareholder Proposals” below. A copy of the Company’s Bylaws is available upon written request to: Park Sterling Corporation, 1043 East Morehead Street, Suite 201, North Carolina 28204, Attention: Secretary.

Pursuant to its charter, the Nominating and Governance Committee (i) periodically reviews the Company’s corporate governance matters, including criteria for the selection of Board of Directors members to ensure that the criteria, including diversity, are being addressed appropriately and (ii) conducts an annual assessment of its performance and of the charter and recommends changes to the Board of Directors when necessary.

All nominees for election to the Board of Directors at the Annual Meeting have been recommended by the Nominating and Governance Committee. All such nominees are current directors of the Company.

Board Leadership Structure

The Board of Directors is committed to strong, independent leadership and believes that objective oversight of management performance is a critical aspect of effective corporate governance.  All but two of the members of the Board of Directors are independent directors. In addition, our key governance committees of the Board of Directors – Audit, Compensation and Development, and Nominating and Governance – are comprised solely of, and chaired by, independent directors.

Currently, the positions of Chairman of the Board and Chief Executive Officer of the Company are held by separate individuals, with James C. Cherry serving as Chief Executive Officer and Leslie M. Baker, Jr. serving as independent Chairman of the Board. The Board of Directors believes that at the current time this structure is appropriate for the Company, as it allows Mr. Cherry to focus on the Company’s strategy, business and operations, while enabling Mr. Baker to assist with Board-level matters and serve as a liaison between the Board of Directors and the Company’s management. The Board of Directors regularly deliberates and discusses its appropriate leadership structure and the role and responsibilities of the Chairman of the Board of Directors based upon the needs of the Company from time to time to provide effective, independent oversight of management.

Role in Risk Oversight

As the Company’s principal governing body, the Board of Directors has the ultimate responsibility for overseeing the Company’s risk management practices. On an ongoing basis, the Board of Directors identifies areas of risk that particularly affect the Company and assigns senior members of management to report to the Board of Directors on those areas of risk at regularly scheduled meetings of the Board of Directors. The areas of risk identified by the Board of Directors change from time to time based on business conditions and competitive considerations. The Board of Directors has also delegated certain risk management functions to its committees.

The primary roles and responsibilities of the Audit Committee are to assist the Board of Directors with the oversight of (i) the integrity of the financial statements and internal controls of the Company; (ii) the independent auditor’s qualifications and independence; (iii) the performance of the Company’s internal audit function and independent auditors; and (iv) compliance by the Company with legal and regulatory requirements. Under its charter, the Audit Committee, among other responsibilities and duties:

Additionally, the Loan and Risk Committee of the Board of Directors provides oversight of management’s responsibilities to assess and manage the Company’s risks, including, but not limited to, risks related to the credit and lending activities of the Company and the Bank and asset-liability management. This includes the Company’s credit, market, funding and liquidity, interest rate, operational, compliance, reputational, legal and cyber security risks. In addition, the full Board of Directors is invited to meetings of the Loan and Risk Committee. The Loan and Risk Committee, among other responsibilities and duties:

The Trust and Investment Management Committee provides oversight of the Company’s Investment Management and Trust Services Group Services, including associated fiduciary risks.

Stock Ownership of Directors

The Board of Directors has adopted a governance guideline pursuant to which each non-employee director is expected to beneficially own at least 5,000 shares of Common Stock throughout the full term of the director’s service. These shares may be acquired over a period of three years beginning with the date of initial election of the director. Currently, each of the eleven non-employee directors beneficially owns at least 5,000 shares of Common Stock. As discussed below in “Compensation Discussion and Analysis – Stock Ownership,” executive officers also are expected to own a minimum amount of Common Stock. See ”Beneficial Ownership of Common Stock” above for a specific listing of the amount of Common Stock beneficially owned by each member of the Board of Directors and each executive officer of the Company named in the Summary Compensation Table in this Proxy Statement. Directors and executive officers of the Company may not engage in speculative trading or hedging strategies with respect to Common Stock.

COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

The Company’s practice is to provide total compensation that attracts, retains and incentivizes the management talent needed to execute our business strategies, and that promotes both our short-term and long-term objectives. Achievement of short-term objectives is rewarded through annual cash incentives, while equity incentive awards encourage employees to focus on the Company’s long-term goals. These incentives are based on business and financial objectives considered by the Compensation Committee to be important to the Company and its shareholders, including execution of growth strategies, maintenance of asset quality, and generation of earnings growth, return on assets and return on equity, along with the Compensation Committee’s assessment of individual performance and contributions to the Company.

The Company’s compensation practices reflect our pay-for-performance philosophy, whereby a significant component of the total compensation paid to our Chief Executive Officer and other named executive officers (together, the “NEOs;” see “—Named Executive Officers” below) is variable and tied to corporate and individual performance. The Company advanced its growth strategies in 2015 by making investments in its markets. Additionally, earnings remained strong and asset quality continued to improve in 2015. This performance led the Compensation Committee to:

Named Executive Officers

The following table lists the Company’s NEOs, as set forth in the Summary Compensation Table under “Compensation of Executive Officers – 2015 Summary Compensation,” on whom this Compensation Discussion and Analysis is focused:

General Compensation Philosophy and Guiding Principles

The Company operates in the highly competitive financial services industry where attracting and retaining talented executives is critical to future success. For this reason, the Company has designed a competitive total compensation program that provides a mix of cash, annual incentive opportunities and equity-based compensation, when the Compensation Committee determines appropriate, along with retirement and other health and welfare programs. Together, these components create a pay-for-performance philosophy which is manifested in our compensation practices.

The Compensation Committee also considers how the individual elements of executive compensation and the executive compensation program as a whole could potentially encourage executives, either individually or as a group, to make excessively risky business decisions at the expense of long-term shareholder value. The Compensation Committee considers the following characteristics of the Company’s executive compensation program as factors that help mitigate risk:

The Company, Board of Directors and Compensation Committee pay careful attention to communications received from shareholders on executive compensation, including the non-binding advisory “say on pay” vote. At the Company’s 2015 Annual Meeting, our shareholders approved, by 80% of the votes cast, the non-binding advisory resolution on the 2014 compensation of NEOs submitted to shareholders in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). The favorable advisory vote was considered and reflected in the decision to maintain the overarching framework and balance for NEO compensation for 2015, but not for specific pay-level decisions. Based on the preference expressed by shareholders at the Company’s 2012 Annual Meeting, the Board of Directors currently has determined to have an annual advisory vote on NEO compensation until the next required nonbinding shareholder advisory vote on the frequency of our advisory “say on pay” vote is held.

Components of Compensation

From year to year, the Compensation Committee utilizes some or all of the following compensation components when setting NEO pay:

Employment Agreements. At the time of, or soon after, the Bank’s Public Offering in 2010, the Bank entered into employment agreements with Messrs. Cherry, Kennedy and Gaines and Ms. Foster, in order to secure the services of these employees within the highly competitive financial services industry. These agreements were designed to provide the executives with a measure of predictability for the future that, in turn, supported the Bank’s efforts to attract and retain the necessary management talent to execute our business strategies. Such agreements also include non-compete and non-solicitation provisions that help protect the Company from the loss of revenues and/or employees in the event an executive is terminated. From time to time, we may consider the use of additional employment agreements with high performing and long-term senior employees as the Company deems necessary in order to balance individual financial goals of employees relative to the needs of the Company and its shareholders. On February 5, 2016, the Bank entered into an agreement and release with Mr. Gaines in connection with his stepping down as Chief Financial Officer, which replaces his existing employment agreement with the Bank. In addition, in March 2016 the Company entered into new employment agreements with Messrs. Cherry, and Kennedy and entered into an employment agreement with Donald K. Truslow, who was hired as Executive Vice President and Chief Financial Officer of the Company and the Bank effective February 8, 2016. For more information regarding these new employment agreements and Mr. Gaines’ agreement and release, see “—Compensation Actions After 2015”. For more information regarding the executive officers’ employment agreements generally, see “Compensation of Executive Officers – Employment Agreements”.

Benefits and Perquisites. The Company currently provides NEOs with limited perquisites and other personal benefits. These include, but may not be limited to, relocation allowances and reimbursement for temporary living and commuting expenses for NEOs relocating as part of their employment with the Company. While others in the financial services industry, including community banks, provide executives with perquisites such as personal or financial tax advice; personal travel using vehicles owned or leased by the company; personal use of other property owned or leased by the company; security provided at a personal residence or during personal travel; personal club memberships; and discounts on company services not generally available to employees, the Company does not currently provide any of these listed benefits to NEOs, as the Compensation Committee believes structuring the Company’s compensation around base salary, annual cash incentives and equity awards is more transparent to shareholders and promotes a more accurate assessment of NEO compensation levels.

The Company maintains various broad-based employee benefit plans that constitute a portion of the total compensation package available to all eligible employees, including our NEOs. These other employee benefits include:

The benefits our NEOs receive under the broad-based plans described above are determined by the same criteria applicable to all Company employees. In general, these benefits are designed to provide a safety net of protection against the financial catastrophes that can result from illness, disability or death. These benefits help keep the Company competitive in attracting and retaining employees. Benefits also help keep employees focused due to a lack of distractions related to obtaining health care, maintaining adequate savings for retirement and similar issues.

Executive Life Insurance. In 2011, the Company, acting through the Bank, purchased bank-owned life insurance that included, among certain other salaried employees, policies on the individual lives of Messrs. Cherry, Kennedy and Gaines and Ms. Foster. Under separate agreements with each insured party, including these executives, the insured party has the right to designate a beneficiary for up to a $100,000 death benefit. The full death benefit for each policy reverts to the Company should the insured party cease to be employed by the Company. The insured party has no right to sell, surrender or transfer ownership of the policy at any time, and has no right to designate a beneficiary upon termination of employment, whether by voluntary or involuntary means, and including retirement. The Company believes that the executive life insurance policies provide protection for the Company should an executive pass away during his or her employment, while also providing these executives with additional life insurance that helps them protect their families. The Company currently does not provide any post-retirement split dollar benefits to the NEOs. The purchase of bank-owned life insurance was only for persons employed at that time and no additional purchases have been made since 2011.

Executive Retirement Plan. The Company, acting through the Bank, maintains the Deferred Compensation Plan, which is designed to provide executives, including the NEOs, a greater ability to plan for their retirement. Accordingly, the Deferred Compensation Plan provides certain executives and directors, including the NEOs, the ability to defer base salary and bonus compensation (or, in the case of directors, Board fees). For more information, see “Compensation of Executive Officers – Nonqualified Deferred Compensation.”

2015 Compensation Events

The following section provides a summary of 2015 compensation events for the Company’s NEOs:

Base Salary Increases. The Compensation Committee did not make any adjustments to the NEOs’ base salaries in 2015, as it believed the existing salaries were competitive in light of market data and an increase was not required to further the Company’s business objectives.

Annual Bonuses. The Compensation Committee granted cash bonuses to certain employees, including the NEOs, from a reserve it created based on the Company’s annual adjusted earnings per share available to common shareholder (“Adjusted EPS”). The Compensation Committee utilized an earnings per share measure as the funding mechanism for the reserve based on its wide acceptance in the banking industry as a leading indicator of financial performance. The Compensation Committee determined, however, that reported net income available to common shareholders should be adjusted to exclude the effect of merger-related expenses and gain or loss on sale of securities, as adjusted net income better reflects core earnings and facilitates comparisons with peers.

Following the establishment of the reserve for 2015, the Compensation Committee selected and granted bonuses in 2016 to certain employees, including each of the NEOs, based on its determination of the Company’s success in achieving certain business and financial objectives during the year and the contribution of each NEO to that success, in accordance with the Company’s pay-for-performance philosophy. Mr. Gaines’ bonus was determined based upon his agreement and release with the Bank in connection with his stepping down as Executive Vice President and Chief Financial Officer. See “—Compensation Actions after 2015” below. With the exception of Mr. Gaines’ bonus, the actual bonuses awarded were entirely within the discretion of the Compensation Committee, which reviewed a variety of Company and individual factors when determining whether to give an employee a bonus and the amount of any such bonus.

The Compensation Committee awarded the following discretionary cash awards to NEOs for 2015: 

As mentioned above, discretionary bonuses are paid from a reserve that was created based on the Company’s achievement of certain Adjusted EPS metrics. As with base salaries, annual discretionary bonuses, if any, generally are awarded to the NEOs relative to their respective duties, responsibilities and contributions to the Company’s performance. For 2015, the award pool began funding at a $0.39 Adjusted EPS and increased based on Company performance up to a maximum award pool at a $0.55 Adjusted EPS. The reserve began at $1.2 million and the maximum reserve that could have been created was $4.0 million.

The Compensation Committee met in January 2016 and reviewed the Company’s 2015 performance, as outlined in the table below:

The calculated Adjusted EPS of $0.40 per share would have yielded a reserve of $1.8 million based on the Compensation Committee’s predetermined discretionary bonus funding scale. However, the Compensation Committee determined that the final reserve should be set at the higher amount of $2.1 million primarily due to the Company’s improved noninterest income and consistent expense management.

The creation of the reserve did not entitle any employee (including the NEOs) to any particular cash bonus. Instead, the Compensation Committee awarded discretionary bonuses from the amounts set aside in the reserve based on its evaluation of the Company’s and the employee’s 2015 performance. Moreover, the Compensation Committee was not under any obligation to pay the entire reserve in bonuses or to limit the reserve to the funding scale.

The Compensation Committee’s evaluation of Company performance in 2015 included:

When evaluating the individual performance of the NEOs, the Compensation Committee considered the individual’s overall performance and their contributions towards achieving the Company-wide performance measures described above.

The discretionary cash bonus awards shown in the table above reflect the Compensation Committee’s decision to reduce each of the 2015 incentive payments for Messrs. Cherry, Kennedy and Gaines and Ms. Foster by 9%, compared to their respective 2014 award levels, to facilitate increased incentive payment awards for certain of the Company’s origination bankers. Mr. Ladnier’s discretionary cash bonus is reflective of his duties, responsibilities and contributions relative to the other NEOs. The cash bonus for Mr. Gaines was determined in accordance with the provisions of the agreement and release with the Bank, described below under “—Compensation Actions After 2015.”

Long-Term Incentive Awards. In May 2015, the Compensation Committee granted equity awards in the form of restricted stock to the NEOs in the following amounts:

These shares of restricted stock vest in approximately equal one-third increments annually, over a period of three years, subject to the executive’s continued service with the Company or its affiliates and to accelerated vesting upon the executive’s termination by the Company without “cause” or resignation for “good reason.” For more information see “Potential Payments Upon Termination or Change of Control” below. Dividends are accrued with respect to the shares of restricted stock but are paid to the NEO only if and when the shares to which the dividends are attributable are vested. These multi-year grants are designed as long-term incentives and are intended to help align the NEOs’ long-term interests with those of our shareholders and to the tie actual vesting with continued service over the next three years. These awards are consistent with the Company’s pay-for-performance objectives.

Peer Group Analysis

Annually, the Compensation Committee reviews both internally or externally prepared reports to assist it in determining the market for executive compensation, and utilizes this information while setting compensation for the upcoming year. While the Compensation Committee believes the information in these reports is valuable, it presently does not utilize the reports as a benchmark to set executive compensation. The Compensation Committee does not currently believe it is appropriate to tie executive compensation directly to the compensation awarded by other companies or to a particular survey or group of surveys. Instead, the purpose of the reports, and the manner in which they are used by the Compensation Committee, is to provide a general understanding of current compensation practices and trends of similarly situated companies. No specific compensation decision for any individual was based on or justified by these reports. The reports contain information compiled from publicly available documents from the following peer financial institutions:

Decision-Making Practices

Role of Compensation and Development Committee. The Compensation Committee is responsible for oversight, review and administration of the Company’s compensation programs for all employees, including each of the NEOs. The Compensation Committee is composed entirely of non-management directors who are independent under the independence standards of NASDAQ applicable to compensation committees. It reviews all aspects of the compensation program for NEOs, including base salaries, annual cash bonuses, equity awards, perquisites, severance arrangements and other health and welfare benefits. It also approves the performance goals for any NEO compensation programs that use performance metrics, such as the Adjusted EPS funding mechanism used for the annual bonus reserve in 2015, and evaluates performance at the end of each performance period. The Compensation Committee approves base salary increases, annual bonuses, stock option awards, restricted stock awards and other long-term incentive award opportunities. The Compensation Committee does not have any pre-established plans regarding the amount of cash incentive or equity based award opportunities available to NEOs, if any. The Compensation Committee also sets the level and components of the compensation for the Chief Executive Officer and reviews and approves the compensation for the remaining NEOs. Beginning in 2015, the Compensation Committee currently expects that equity-based awards, if any, will generally be made on a regular award date in early May of each year. In addition, the Company occasionally may make equity-based awards other than on the annual award date, usually in connection with hiring a new key employee or in connection with a corporate transaction. We do not coordinate the timing of our awards with the release of material non-public information.

In making its decisions, the Compensation Committee may use several resources and tools, including the use of a compensation consultant or other advisor, peer financial institution evaluation and other analyses. The Chief Executive Officer also is involved in compensation determinations, including review of the compensation consultant’s recommendations, if any, and discussion of executive management compensation (including compensation for each NEO other than the Chief Executive Officer). The Company believes that the Chief Executive Officer is in the best possible position to assess the performance of the other NEOs, and he accordingly plays an important role in the compensation setting process. From time to time, the Chief Executive Officer also discusses his compensation package with the Compensation Committee. However, the Chief Executive Officer cannot be present during any voting or deliberation by the Compensation Committee on his compensation. Decisions about individual compensation components and total compensation for the NEOs, including those related to the Chief Executive Officer, are ultimately made by the Compensation Committee using its discretion and judgment, focusing primarily on the NEO’s performance and the Company’s overall performance. The Compensation Committee also considers the business environment in which the results were achieved and general comparisons to the overall performance of peer banks.

In addition, the Compensation Committee also reviews the total compensation of the NEOs relative to one another. The Compensation Committee believes that Mr. Cherry’s relatively higher compensation is appropriate in light of his expanded responsibilities as the Chief Executive Officer and the leadership, vision and strategy he has provided to the Company during his tenure. In addition, the Compensation Committee believes that the relatively similar compensation levels of Messrs. Kennedy and Gaines and Ms. Foster are appropriate in light of their shared responsibilities in managing the day-to-day activities of the Company, with modestly higher compensation awarded to Mr. Gaines given his added responsibilities related to merger and acquisition activities, and that the lower compensation level for Mr. Ladnier is appropriate in light of his assigned responsibilities relative to the other NEOs.

Compensation Consultant and Other Advisors. As described above under the heading “Committees of the Board of Directors – Compensation and Development Committee”, the Compensation Committee may from time to time, in its sole discretion, engage an independent compensation consultant to conduct a review, on either a comprehensive or selected basis, of the competitiveness and effectiveness of the Company’s executive compensation program relative to market practices and business goals or engage legal counsel or other advisors to assist it in the performance of its duties, but only after taking into consideration factors relevant to such compensation consultant’s or other adviser’s independence from management as specified in the NASDAQ listing standards. Such compensation consultants or other advisors, when engaged, serve at the request of, and report directly to, the Compensation Committee. The Compensation Committee has the sole authority to approve such adviser’s fees and other terms and conditions of engagement, and the Company must pay the reasonable compensation to any such compensation consultant or other adviser retained by the Compensation Committee.

The Compensation Committee did not engage an independent compensation consultant in 2015 in light of its belief that there were no material changes to the Company’s business strategy, the NEO composition, the Company’s peer group, or market practices outlined by the compensation consultant study conducted in 2014.

Determination of Individual Bonus Awards. The Company’s goal is to base individual bonus awards on a qualitative review of the NEO’s performance during the year relative to business and financial objectives. For bonuses in respect of 2015 results, the Compensation Committee determined the aggregate available annual bonus reserve based on the on the sliding scale approach described above under “—2015 Compensation Events – Annual Bonuses”. In addition to evaluating the aggregate funding mechanism, the Compensation Committee considered the following factors in determining individual NEO bonuses: (i) maintenance of acceptable asset quality, as measured by nonperforming loan levels, nonperforming asset levels, net charge-off levels and other relevant metrics; (ii) advancement of business objectives, including growth initiatives; and (iii) the individual contribution of each NEO to accomplishing these objectives. The Compensation Committee believes that review of corporate-wide metrics are appropriate performance measurements for the NEOs given that they align payment of bonuses to NEOs based on results that are important to the long-term interests of shareholders, offer broader perspective than metrics focused on individual operating businesses, and capture key drivers of financial and business performance.

Stock Ownership

The Board of Directors generally believes that the NEOs should accumulate meaningful equity stakes over time to further align their economic interests with the interests of shareholders, thereby promoting the Company’s objective of increasing shareholder value. The long-term incentives used by the Company also facilitate the acquisition of shares of the Company’s Common Stock by the NEOs. Pursuant to internal guidelines, each NEO is expected to beneficially own at least 10,000 shares of Common Stock throughout the full term of the NEO’s service as a member of executive management. Shares may be acquired over a period of three years beginning with the date of the initial election of the NEO to executive management. Currently, each of the NEOs beneficially owns the requisite number of shares, other than Mr. Ladnier who has until January 2017 to acquire the required ownership level.

Consistent with the Company’s compensation philosophy of rewarding the NEOs based on the long-term success of the Company, the Company’s Code of Ethics and Insider Trading Policy prohibit all employees, including the NEOs, from speculative trading in the Company’s Common Stock and place limitations on a NEO’s ability to conduct short-term trading, thus encouraging long-term ownership of the Company’s Common Stock. Additionally, pursuant to internal guidelines, NEOs are prohibited from entering into hedging strategies that protect against downside risk in the Company’s Common Stock.

Compensation Events After 2015

Base Salary Increases. Effective April 1, 2016, the Compensation Committee increased the base salaries of the NEOs as follows: Mr. Cherry -- $465,000; Mr. Kennedy -- $360,000; Ms. Foster -- $360,000; and Mr. Ladnier -- $220,000.

Gaines Agreement and Release. In connection with Mr. Gaines’ stepping down as Executive Vice President and Chief Financial Officer, on February 5, 2016, the Bank and Mr. Gaines entered into an Agreement and Release which replaces Mr. Gaines’ existing employment agreement with the Bank, which provided for Mr. Gaines to remain employed by the Bank through March 31, 2016. Pursuant to this agreement and release, which was entered into prior to the Compensation Committee’s determination of 2015 bonus compensation for the NEOs, Mr. Gaines will receive (i) severance pay equivalent to the base salary Mr. Gaines would have earned from March 31, 2016 through and including August 15, 2016 (or $136,875), plus (ii) bonus compensation for 2015 in an amount determined as a percentage of Mr. Gaines 2014 bonus compensation, with such percentage equal to the percentage that the Chief Executive Officer’s 2015 compensation represented relative to the Chief Executive Officer’s 2014 bonus compensation (subsequently determined to be $124,640). Such amounts will be payable to Mr. Gaines in a lump sum, subject to applicable withholdings and deductions, six months following the end of his employment on March 31, 2016. The agreement and release also provided for the immediate vesting on February 5, 2016 of 132,270 restricted stock awards. The agreement and release contains customary provisions regarding use of confidential information obtained during Mr. Gaines’ employment, the mutual release of claims, a mutual non-disparagement agreement effective for two years following the separation date, and a provision prohibiting the solicitation by Mr. Gaines, for twelve months following cessation of employment, of employees of the Bank with whom he had contact during the two years preceding cessation of employment.

Hiring of Mr. Truslow. In connection with the hiring of Mr. Truslow as Executive Vice President and Chief Financial Officer effective February 8, 2016, Mr. Truslow’s base salary was determined to be $350,000 and he was awarded 14,500 shares of restricted stock on March 1, 2016. These shares of restricted stock vest in approximately equal one-third increments annually over a period of three years.

New Employment Agreements. The Company also entered into employment agreements with Messrs. Cherry, Kennedy and Truslow on March 24, 2016 (the “2016 Employment Agreements”). The agreements with Messrs. Cherry and Kennedy replace their existing employment agreements. Each of the 2016 Employment Agreements is for a three-year initial term and automatically renews for additional one-year terms, absent notice from either party. The 2016 Employment Agreements generally provide for base salary, annual bonus opportunities and participation in the Company’s equity compensation program.

The 2016 Employment Agreements also remove the provisions found in the respective executives’ prior employment agreements (as applicable) that permitted the executive to voluntarily resign his employment without good reason within six months following a change in control and receive severance compensation. The 2016 Employment Agreements generally provide for severance in the event of a termination without cause or resignation for good reason equal to (i) two times the executive’s base salary, (ii) two times the executive’s highest bonus received during the three years prior to termination, and (iii) monthly COBRA payments.

Under the 2016 Employment agreements, in the event an executive is terminated without cause, resigns for good reason, or his 2016 Employment Agreement expires as a result of the buyer’s failure to renew its terms, each within the period beginning with the signing of a letter of intent or similar agreement that would result in a change of control transaction or within 12 months following a change of control (each a “CIC Termination”), the 2016 Employment Agreements provide such executive with the severance pay described above.  In addition, in the event of a CIC Termination, Mr. Cherry is entitled to an additional year of base salary and bonus compensation (measured at the highest bonus received during the three years prior to termination).

Additional information regarding the 2016 Employment Agreements has been disclosed in the Company’s Current Report on Form 8-K filed on March 24, 2016.

Tax and Accounting Considerations

Tax Considerations. Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and related regulations generally impose a $1 million cap on the deductibility of compensation paid to certain executive officers by a public corporation, unless an exception applies. One important exception is for qualified “performance-based compensation.” To the extent the Company determines it is in its interests, the Company’s compensation programs may be designed to meet the performance-based compensation exception under Section 162(m). However, the Company retains the flexibility to pay compensation that is not eligible for such exception if it is in the interest of the Company to do so.

Accounting Considerations. As previously described, for the purposes of certifying the Company’s performance for incentive compensation purposes, the Compensation Committee may adjust the Company’s net income to ensure that the employees are fairly compensated for the actual growth of the Company and not as a result of extraordinary items and events.

Conclusion

The Compensation Committee reviews all components of the Company’s compensation practices for the NEOs. In designing the various components of the total compensation program, the Company intends to take care to select elements that are performance-based and to use a variety of performance metrics that, on the whole, will encourage the achievement of short and long-term shareholder value without motivating excessive risk-taking and while enabling the Company to retain its talented executives. The Company believes the total compensation for each NEO is reasonable and that the components of the Company’s compensation program for NEOs are consistent with market standards and with comparable programs of peer financial institutions. The compensation program for NEOs is based on the financial performance of the Company compared to both business and financial objectives. The Company believes this practice links NEO performance to the annual financial and operational results of the Company and the long-term financial interests of its shareholders. The Company further believes that the foregoing compensation philosophy is consistent with the Company’s corporate culture and objectives and has served and will continue to serve as a reasonable basis for administering the total compensation program of the Company.

COMPENSATION OF EXECUTIVE OFFICERS

2015 Summary Compensation

The following table summarizes the cash compensation paid, equity awards granted and other compensation awarded to the Company’s NEOs for each of the three years ended December 31, 2015, December 31, 2014, and December 31, 2013:

Summary Compensation Table

Total perquisites for each of the NEOs for 2015 were less than $10,000.

Grants of Plan-Based Awards 

The following table summarizes equity awards granted to the Company’s NEOs for the year ended December 31, 2015.

Employment Agreements

In connection with the Public Offering, the Bank entered into employment agreements with each of Messrs. Cherry, Kennedy and Gaines in August 2010 and entered into an employment agreement with Ms. Foster upon her hiring in November 2010. Each of these agreements was for an initial term of three years and is subject to automatic one-year renewals on each successive anniversary of the initial effective date unless either party provides timely notice of non-renewal. The agreements provide for certain payments in the event the executive’s employment is terminated by the Company without “cause,” the executive resigns for “good reason” or the executive is terminated following a “change of control.” The agreements also provide that the executive will not compete with the Bank in the banking business or solicit its customers or employees for a period of twelve months following termination of the executive’s employment, and are subject to a customary confidentiality obligation. For a discussion of these provisions see “— Potential Payments Upon Termination or Change of Control” below.

These agreements further provide for the following:

On February 5, 2016, the Bank entered into an agreement and release with Mr. Gaines, which replaces his existing employment agreement, in connection with his stepping down as Executive Vice President and Chief Financial Officer of the Company. In addition, on March 24, 2016, the Company entered into new employment agreements with Messrs. Cherry and Kennedy, and entered into an employment agreement with Mr. Truslow, the Company’s new Executive Vice President and Chief Financial Officer. For a description of these agreements, see “Compensation Discussion and Analysis – Compensation Events After 2015”.

Outstanding Equity Awards at Fiscal Year-End

The following table summarizes outstanding equity awards at December 31, 2015:

Option Exercises and Stock Vested

The following table summarizes option award exercises or stock award vesting for NEOs in 2015:

Pension Benefits

The Company currently does not provide any pension benefits to NEOs.

Nonqualified Deferred Compensation

The following table summarizes information about the participation of each NEO in the Park Sterling Bank Deferred Compensation Plan:

The Deferred Compensation Plan provides certain executives and directors, including the NEOs, the ability to defer base salary and bonus compensation (or, in the case of directors, Board fees). Amounts deferred under the Deferred Compensation Plan are credited with interest at the Wall Street Journal prime rate, with a floor of at least 0.50% interest. Participants in the Deferred Compensation Plan may elect to receive distributions of their deferrals at a specified date during their employment or upon termination of employment. Distributions are also made upon a participant’s death or disability or due to a participant’s unexpected hardship or a change in control of the Bank. If the NEO’s employment is terminated for “cause,” the NEO forfeits any interest credited to his or her account with respect to deferrals.

Potential Payments Upon Termination or Change of Control

As discussed above in “– Employment Agreements,” the Bank has entered into employment agreements with Messrs. Cherry, Kennedy, and Gaines and Ms. Foster that require us to provide compensation to them in connection with certain events related to the NEO’s termination of employment or change of control of the Company. The following discussion summarizes the provisions of the employment agreements that were in effect as of December 31, 2015. As described above, Mr. Gaines stepped down from his role as Executive Vice President and Chief Financial Officer on February 5, 2016, and the Company entered into new employment agreements with Messrs. Cherry and Kennedy, and entered into an employment agreement with Mr. Truslow, on March 24, 2016.

Accrued and Vested Benefits. Each of the NEOs may have accrued various benefits and awards under one or more of the Company’s compensation programs and benefits, including stock-based plans, broad-based employee benefit plans and the Deferred Compensation Plan. Certain of these benefits and awards are fully vested, and each of the NEOs would receive all of their vested benefits and awards if their employment with the Company ends for any reason. In addition, if an NEO’s employment is terminated for any reason, the NEO will be entitled to the payment of any amount earned and owing under his or her employment agreement, as applicable.

Each of Messrs. Cherry, Kennedy and Gaines and Ms. Foster has stock options granted under the Bank’s 2010 Employee Stock Option Plan and Bryan Kennedy also has stock options granted under the Bank’s 2006 Employee Stock Option Plan (together, the “Options”) which are fully exercisable and vested. Upon the termination of an NEO’s employment with the Company for any reason, all the NEO’s Options will be cancelled and forfeited, except in certain cases related to the NEO’s death, disability, retirement, resignation or termination by the Bank for other than an “immediate termination reason” (similar to “cause” under the employment agreements, described below). In such cases, the Options will remain exercisable for a specified period of time following the termination, ranging from a period of three months to the remaining term of the Options. Upon the effectiveness of the Company’s reorganization as the holding company for the Bank, the Company assumed the Options.

Termination without Cause. With respect to NEOs with an employment agreement, if the NEO’s employment is terminated by the Company or by the Bank without “cause,” under the agreement the NEO will be entitled (subject to any required six-month delay) to receive an amount equal to two times the NEO’s annual base salary at the highest rate in effect during the previous twelve months, payable monthly over two years. In addition, with respect to outstanding restricted stock awarded to NEOs under the 2010 LTIP or 2014 LTIP, if the NEO’s employment is terminated by the Company without “cause,” then (i) in the case of the special stock price performance-based restricted stock awards, the stock price performance goals will be deemed to have been satisfied as to all such shares of restricted stock, and (ii) in the case of restricted stock subject to time-based vesting, all such shares of restricted stock shall be deemed 100% vested, in each case as long as the NEO has provided continuous services to the Company or an affiliated entity since the grant date of the restricted stock.

For these purposes, “cause” means:

In addition, for NEOs with an employment agreement, “cause” also means a material breach of the employment agreement by the NEO which is not cured within 30 days of notice by the Company, including failure to perform duties and responsibilities required under the agreement.

Voluntary Termination with Good Reason. Each NEO has the right to terminate his or her employment voluntarily at any time for “good reason” either pursuant to an employment agreement or an applicable restricted stock award agreement. “Good reason” is generally defined in the employment agreements and the restricted stock award agreements to include material reductions in the NEO’s base salary or in the NEO’s authority, responsibilities or duties. If an NEO terminates employment for “good reason,” the NEO will be entitled to receive the termination compensation and other benefits described above under “Termination without Cause,” including the vesting of restricted stock as applicable.

Change of Control. With respect to NEOs with an employment agreement, if the NEO voluntarily resigns (with or without “good reason”) within six months following a “change of control,” the NEO will be entitled (subject to any required six-month delay) to receive an amount equal to two times the NEO’s annual base salary at the highest rate in effect during the previous twelve months, payable monthly over two years. For these purposes, “change of control” means a “change in the ownership or effective control of a corporation, or a change in the ownership of a substantial portion of the assets of a corporation” within the meaning of Section 409A of the Code, using 50 percent for purposes of determining an “effective change of control” and 85 percent for purposes of determining “a substantial portion of the assets of a corporation.” However, a “change of control” will not include a merger, reorganization, consolidation, share exchange or other transaction where the holders of the Common Stock continue to hold, directly or indirectly through a holding company or otherwise, shares of capital stock of the Company or other surviving company representing more than 50 percent of the value or ordinary voting power to elect directors of such company.

Release and Non-Disparagement Agreement. With respect to NEOs with an employment agreement, the payment of any amount under the agreement to an NEO in connection with a termination of employment is subject to the NEO’s execution of a release and non-disparagement agreement.

Non-Competition and Non-Solicitation Provisions. With respect to NEOs with an employment agreement, an NEO’s receipt of the severance or change of control payments described above is subject to the NEO’s compliance with the non-competition and non-solicitation provisions of the NEO’s employment agreement. These provisions generally prohibit the NEO, during the term of the agreement and for one year following termination of employment for any reason, from competing with the Bank or working for a competitor within the Bank’s banking footprint, from soliciting the Bank’s customers or actively pursuing potential customers with whom the NEO has had material contact, and from soliciting employees of the Bank with whom the NEO has had material contact. If an NEO breaches any of these provisions, the NEO is required to repay a pro rata portion of the amount otherwise payable to the NEO based on the period following the termination of employment during which the NEO complied with the covenants.

The potential payments to the NEOs under these agreements and other existing plans, awards and arrangements in the event of their termination of employment or a change in control as of December 31, 2015 are shown in the table below.