8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 28, 2008

STERLING BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

Texas	0-20750	74-2175590
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

2550 North Loop West, Suite 600

Houston, Texas 77092

(Address of Principal Executive Office and Zip Code)

(713) 466-8300

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02.RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On October 28, 2008, Sterling Bancshares, Inc. issued a press release announcing results for the quarterly period ended September 30, 2008. A copy of the press release is attached as Exhibit 99.1 hereto and is hereby incorporated herein by reference.

ITEM 9.01.FINANCIAL STATEMENTS AND EXHIBITS.

(d)Exhibits. The following materials are furnished as exhibits to this Current Report on Form 8-K:

Exhibit Number	Description of Exhibit
99.1	Press Release dated October 28, 2008.

As provided in General Instruction B.2 to Form 8-K, the information furnished in Item 2.02 and Exhibit 99.1 hereto shall not be deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing with the Securities and Exchange Commission, except as shall be expressly provided by specific reference in such filing.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: October 28, 2008	STERLING BANCSHARES, INC.
	By:	/s/ Zach L. Wasson
		Zach L. Wasson
		Executive Vice President and
		Chief Financial Officer

EXHIBIT INDEX

Exhibit Number	Description of Exhibit
99.1	Press Release dated October 28, 2008.

EX-99.1

EXHIBIT 99.1

NEWS RELEASE

For More Information Contact:	For Release - October 28, 2008
J. Downey Bridgwater, Chairman, President & Chief Executive Officer, (713) 507-2670 Zach L. Wasson, Executive Vice President & Chief Financial Officer, (713) 507-1297

STERLING BANCSHARES REPORTS THIRD QUARTER 2008 EARNINGS

HURRICANE IKE IMPACTS THIRD QUARTER RESULTS

· Net income of $7.1 million or $0.10 per share

· $0.03 charge related to Hurricane Ike (an additional loan loss provision of $2.7 million and $640 thousand in expenses were incurred in the third quarter related to Hurricane Ike)

· Nonperforming loans include one previously disclosed relationship totaling $29.2 million

· Net charge-offs were elevated due to certain non-performing auto dealer loans that were resolved in the third quarter of 2008 (approximately half of the total net charge-offs for the quarter)

· Considering participation in U.S. Treasury Department Capital Purchase Program

· Board of Directors approved a quarterly cash dividend of $0.055 per share of common stock, unchanged from prior quarter

HOUSTON, TX, October 28, 2008 – Sterling Bancshares, Inc. (NASDAQ: SBIB) today reported net income of $7.1 million, or $0.10 per diluted share for the third quarter ended September 30, 2008, compared to the $14.6 million or $0.20 per diluted share earned for the third quarter of 2007. Net income for the nine months ended September 30, 2008 was $29 million, or $0.39 per diluted share, compared to $39.6 million or $0.54 per diluted share for the same period in 2007.

“While the current economic conditions and our region’s recovery from Hurricane Ike certainly create significant challenges, they also provide considerable opportunities,” commented J. Downey Bridgwater, Sterling’s Chairman, President, and Chief Executive Officer. “There has been historic consolidation in the financial services industry during the last several months. In order to bolster our already strong capital levels and enable us to take advantage of opportunities that may result from these and other consolidations, we are currently considering participating in the Treasury Department's Capital Purchase Program which will allow us to sell senior preferred equity interests to the U.S. Treasury Department. Given the increased uncertainty in the economy and potential loan losses related to Hurricane Ike, we have increased our allowance for credit losses as a percentage of loans from 1.16% in the second quarter to 1.25% at the end of the third quarter.”

At September 30, 2008, management increased the allowance for loan losses to $45.2 million compared to $34.4 million at December 31, 2007. The Company recorded a provision for credit losses of $10.1 million for the third quarter of 2008 including approximately $2.7 million related to Hurricane Ike. Approximately $220 million of outstanding loans have been identified that have collateral located in the identified Hurricane Evacuation Zones near the coast which were the most severely affected areas. This provision represents the Company’s best estimate at this time of possible losses that may occur in these areas.

Sterling Bancshares, Inc., News Release

October 28, 2008

Page 2

Nonperforming loans increased during the third quarter as the Company advanced the previously announced $9.2 million of additional funds related to SemGroup, an energy customer that is currently in Chapter 11 bankruptcy. Total exposure to SemGroup at the end of the third quarter totaled $29.2 million, representing nearly half of our total nonperforming loans. The SemGroup bankruptcy has proceeded as anticipated and is expected to be fully resolved during the second quarter of 2009. In addition to the further funding of SemGroup, a limited number of loans secured by commercial real estate moved to nonperforming status during the quarter. These loans are expected to have minimal losses due to the low loan to value of each of these real estate secured credits.

Net charge-offs for the third quarter of 2008 were $5.8 million or 0.62% of average total loans, compared to $2.2 million or 0.24% of average total loans, for the second quarter of 2008. Net charge-offs for the nine month period ended September 30, 2008 were $10.9 million or 0.40% of average total loans, up from $1.5 million or 0.06% for the same period in 2007. The increase in net charge-offs during the third quarter was primarily related to certain auto dealer loans that were identified at the end of the second quarter of 2008.

Period-end total loans increased $89.5 million or 2.4% on a linked-quarter basis to $3.7 billion at September 30, 2008 and up $371 million or 11.0% since September 30, 2007. Average total loans were $3.7 billion for the third quarter of 2008, up $77.8 million or 2.1% on a linked-quarter basis, and up $386 million or 11.6% from the third quarter of 2007. Loans held for sale at June 30, 2008 included certain commercial real estate loans and SBA guaranteed loans originated by the bank. Due to current market conditions, these loans are no longer classified as held for sale and are now considered as held for investment.

Average total deposits for the third quarter of 2008 were up $85.1 million or 2.4% on a linked-quarter basis, and down $8.6 million or 0.2% from the third quarter of 2007. Period-end total deposits decreased $120 million to $3.6 billion at September 30, 2008, down 3.3% on a linked-quarter basis, and down $87.6 million or 2.4% compared to September 30, 2007. At September 30, 2008, certificate and other time deposits decreased $59.2 million linked-quarter and $148 million compared to September 30, 2007, due to management’s decision to allow certain higher priced certificates of deposit to mature and be replaced by lower cost borrowings. Sterling has chosen to participate in the FDIC’s Temporary Liquidity Guarantee Program which allows funds in noninterest-bearing transaction deposit accounts to be fully FDIC-insured until December 31, 2009. The Company will incur a 10 basis point surcharge to these noninterest-bearing transaction deposit accounts not otherwise covered by the existing deposit insurance limit of $250 thousand.

Tax-equivalent net interest income for the third quarter of 2008 was $49.9 million, down $762 thousand or 1.5% linked-quarter, and up $2.5 million over the third quarter of 2007. Tax-equivalent net interest margin was 4.44% for the third quarter of 2008, down from 4.66% for the second quarter of 2008. The net interest margin was negatively impacted by increased competition for deposits as well as interest income forgone on nonperforming loans.

Noninterest income decreased $832 thousand in the third quarter of 2008 as compared to the third quarter of 2007. This decrease was due to a decline in loan sale activity during 2008. Noninterest income increased $5.3 million for the nine months ended September 30, 2008 compared to the same period in 2007. Customer service fees increased $1.4 million for the nine months ended September 30, 2008 compared to the same period in 2007 due primarily to an increase in account analysis fees. Wealth management fees increased $3.5 million for the nine months ended September 30, 2008 compared to the same period in 2007 due to the addition of MBM Advisors in June 2007.

Sterling Bancshares, Inc., News Release

October 28, 2008

Page 3

Noninterest expense increased $4 million for the third quarter of 2008 as compared with the third quarter of 2007. The Company incurred approximately $640 thousand in Hurricane Ike related expenses during the third quarter. Since the third quarter of 2007, the Company has completed one acquisition, which resulted in additional noninterest expense of $1.5 million for the third quarter of 2008 compared to the same quarter in 2007. Additionally, FDIC insurance costs increased approximately $500 thousand for the third quarter of 2008 as compared to the third quarter of 2007.

Noninterest expense increased $10.9 million for the nine month period ended September 30, 2008 compared to the same period in 2007. The increase in noninterest expense was due to three acquisitions completed since March of 2007 resulting in additional noninterest expense of $6.6 million, increased FDIC insurance costs of approximately $1.5 million and $640 thousand in Hurricane Ike related expenses for the nine month period ended September 30, 2008 compared to the same period in 2007.

As of September 30, 2008, Sterling had total assets of $4.9 billion, total loans of $3.7 billion and total deposits of $3.6 billion. Shareholders’ equity of $502 million at September 30, 2008 was 10.1% of total assets. Book value per common share at period-end was $6.85.

Conference Call

Management of Sterling will host a conference call for investors and analysts that will be broadcast live via telephone and over the Internet on Tuesday, October 28, 2008 at 11:00 a.m. Eastern Time. To participate, visit the Investor Relations section of the Company’s web site at http://www.banksterling.com or call (612) 234-9960. An audio archive of the call will also be available on the web site beginning Wednesday, October 29, 2008.

Forward-Looking Statements

This news release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve risks and uncertainties and are based on beliefs and assumptions of management at the time that this release was prepared. The Company does not assume any obligation to update the forward-looking statements. There are several factors, many beyond the Company’s control, that could cause results to differ significantly from expectations including: adverse changes in the loan portfolio and the resulting credit risk-related losses and expenses; potential inadequacy of the allowance for credit losses; the ability to maintain or improve origination volumes; competitive influences on product pricing; and the ability to integrate acquisitions and realize expected cost savings and revenue enhancements. Additional factors can be found in the Company's 2007 Annual Report on Form 10-K filed with the Securities and Exchange Commission and available at the Securities and Exchange Commission’s web site (www.sec.gov).

About Sterling Bancshares

Sterling Bancshares, Inc. is a Houston-based bank holding company with total assets of $4.9 billion, which operates 59 banking centers in the greater metropolitan areas of Houston, San Antonio, Dallas and Fort Worth, Texas. The Company’s common stock is traded through the NASDAQ Global Select Market under the symbol “SBIB”. For more information on Sterling Bancshares, please visit the Company’s web site at http://www.banksterling.com.

–Tables to follow–

STERLING BANCSHARES, INC.

SELECTED FINANCIAL INFORMATION (Unaudited)

(dollars in thousands, except for per share data)

Page 4

	Quarter Ended									Year-to-date
	Sep. 30,			Jun. 30,			Sep. 30,
	2008			2008			2007			2008			2007
Profitability
Net Income	$	7,090		$	10,307		$	14,579		$	29,006		$	39,600
Earnings per common share (1)
Basic	$	0.10		$	0.14		$	0.20		$	0.40		$	0.55
Diluted	$	0.10		$	0.14		$	0.20		$	0.39		$	0.54
Return on average common equity (2)		5.61	%		8.26	%		12.67	%		7.75	%		11.99	%
Return on average tangible common equity (2)		9.43	%		13.69	%		21.72	%		12.86	%		19.73	%
Return on average assets (2)		0.57	%		0.86	%		1.32	%		0.81	%		1.24	%
Return on average tangible assets (2)		0.63	%		0.92	%		1.41	%		0.87	%		1.32	%
Net interest margin (3)		4.44	%		4.66	%		4.74	%		4.59	%		4.82	%
Efficiency Ratio (4):
Consolidated		64.08	%		61.31	%		60.38	%		62.57	%		61.54	%
Sterling Bank		62.14	%		59.49	%		57.89	%		60.59	%		59.18	%
Liquidity and Capital Ratios
Average loans to average deposits		101.77	%		102.02	%		90.98	%		100.19	%		91.70	%
Period-end stockholders' equity to total assets		10.14	%		10.07	%		10.43	%		10.14	%		10.43	%
Average stockholders' equity to average assets		10.20	%		10.38	%		10.38	%		10.44	%		10.31	%
Period-end tangible capital to total tangible assets		6.60	%		6.49	%		6.58	%		6.60	%		6.58	%
Tier 1 capital to risk-weighted assets		9.18	%		9.14	%		8.89	%		9.18	%		8.89	%
Total capital to risk-weighted assets		11.82	%		11.70	%		10.91	%		11.82	%		10.91	%
Tier 1 leverage ratio (Tier 1 capital to average assets)		8.15	%		8.20	%		8.54	%		8.15	%		8.54	%
Other Data
Shares used in computing earnings per common share
Basic shares		73,186			73,137			73,029			73,158			72,476
Diluted shares		73,525			73,419			73,453			73,475			72,970
End of period common shares outstanding		73,219			73,160			73,026			73,219			73,026
Book value per common share at period-end
Total	$	6.85		$	6.76		$	6.34		$	6.85		$	6.34
Tangible	$	4.29		$	4.19		$	3.84		$	4.29		$	3.84
Cash dividends paid per common share	$	0.055		$	0.055		$	0.0525		$	0.165		$	0.158
Common stock dividend payout ratio		56.83	%		39.06	%		26.29	%		41.65	%		28.80	%
Full-time equivalent employees		1,119			1,126			1,039			1,119			1,039
Number of banking centers		59			59			49			59			49

STERLING BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS (Unaudited)

(dollars in thousands)

Page 5

	Sep. 30,			Jun. 30,			Mar. 31,			Dec. 31,			Sep. 30,
	2008			2008			2008			2007			2007
ASSETS
Cash and cash equivalents	$	113,070		$	142,964		$	135,624		$	133,670		$	110,876
Available-for-sale securities, at fair value		543,545			568,329			531,572			476,690			464,789
Held-to-maturity securities, at amortized cost		174,434			175,635			176,902			180,086			176,847
Loans held for sale		322			112,614			90,274			78,447			54,699
Loans held for investment		3,744,772			3,542,994			3,458,476			3,339,837			3,319,652
Total loans		3,745,094			3,655,608			3,548,750			3,418,284			3,374,351
Allowance for loan losses		(45,222	)		(41,651	)		(35,681	)		(34,446	)		(34,225	)
Loans, net		3,699,872			3,613,957			3,513,069			3,383,838			3,340,126
Premises and equipment, net		41,195			40,311			40,027			27,905			26,624
Real estate acquired by foreclosure		4,562			4,293			4,042			3,683			2,713
Goodwill		173,210			173,104			172,686			168,815			166,130
Core deposits and other intangibles, net		14,444			15,031			15,617			15,971			16,562
Accrued interest receivable		17,968			18,712			18,558			19,701			20,520
Other assets		164,929			157,118			137,364			125,550			114,990
TOTAL ASSETS	$	4,947,229		$	4,909,454		$	4,745,461		$	4,535,909		$	4,440,177
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits:
Noninterest-bearing demand	$	1,085,882		$	1,135,296		$	1,100,919		$	1,092,210		$	1,082,037
Interest-bearing demand		1,397,614			1,409,220			1,464,937			1,403,227			1,340,746
Certificates and other time		1,090,624			1,149,819			1,079,061			1,178,274			1,238,980
Total deposits		3,574,120			3,694,335			3,644,917			3,673,711			3,661,763
Other borrowed funds		668,069			521,395			425,929			197,147			136,555
Subordinated debt		74,266			73,816			49,142			48,694			46,986
Junior subordinated debt		82,734			82,734			82,734			82,734			82,734
Accrued interest payable and other liabilities		46,145			42,640			46,369			53,364			49,104
Total liabilities		4,445,334			4,414,920			4,249,091			4,055,650			3,977,142
COMMITMENTS AND CONTINGENCIES		-			-			-			-			-
SHAREHOLDERS' EQUITY
Common stock		75,086			75,028			74,983			74,926			74,794
Capital surplus		113,611			112,402			111,267			110,367			108,964
Retained earnings		326,826			323,765			317,485			309,903			300,375
Treasury stock		(21,399	)		(21,399	)		(21,399	)		(20,493	)		(20,493	)
Accumulated other comprehensive income/(loss), net of tax		7,771			4,738			14,034			5,556			(605	)
Total shareholders' equity		501,895			494,534			496,370			480,259			463,035
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	4,947,229		$	4,909,454		$	4,745,461		$	4,535,909		$	4,440,177

STERLING BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(dollars in thousands, except for per share data)

Page 6

	Quarter Ended											Year-to-date
	Sep. 30,			Jun. 30,		Mar. 31,		Dec. 31,		Sep. 30,
	2008			2008		2008		2007		2007		2008			2007
Interest income:
Loans, including fees	$	59,636		$	60,082	$	63,052	$	66,229	$	67,033	$	182,770		$	193,872
Securities:
Taxable		7,714			7,408		6,549		6,522		6,111		21,671			17,327
Non-taxable		909			908		908		897		867		2,725			2,597
Trading assets		21			22		21		87		81		64			86
Federal funds sold		32			27		39		117		58		98			480
Deposits in financial institutions		2			5		3		2		9		10			33
Total interest income		68,314			68,452		70,572		73,854		74,159		207,338			214,395
Interest expense:
Demand and savings deposits		4,136			3,889		5,615		7,535		8,038		13,640			21,682
Certificates and other time deposits		8,763			8,662		11,977		14,610		14,809		29,402			41,081
Other borrowed funds		3,432			3,409		2,352		1,708		1,369		9,193			5,121
Subordinated debt		1,198			864		1,032		1,162		1,175		3,094			3,487
Junior subordinated debt		1,317			1,384		1,600		1,677		1,673		4,301			4,562
Total interest expense		18,846			18,208		22,576		26,692		27,064		59,630			75,933
Net interest income		49,468			50,244		47,996		47,162		47,095		147,708			138,462
Provision for credit losses		10,100			8,167		4,150		1,600		850		22,417			2,220
Net interest income after provision for credit losses		39,368			42,077		43,846		45,562		46,245		125,291			136,242
Noninterest income:
Customer service fees		3,882			4,148		3,876		3,795		3,629		11,906			10,532
Net gain (loss) on securities		(187	)		-		-		3		-		(187	)		-
Wealth management fees		2,255			2,363		2,338		2,192		2,186		6,956			3,470
Other		3,851			4,359		4,501		4,145		4,818		12,711			12,083
Total noninterest income		9,801			10,870		10,715		10,135		10,633		31,386			26,085
Noninterest expense:
Salaries and employee benefits		21,692			20,865		20,759		20,949		20,634		63,316			60,090
Occupancy		5,367			5,360		5,265		4,692		4,706		15,992			13,674
Technology		2,600			2,305		2,330		2,439		2,260		7,235			6,404
Professional fees		1,257			1,215		1,009		1,068		1,068		3,481			3,091
Postage, delivery and supplies		871			963		1,073		954		903		2,907			2,657
Marketing		627			724		413		441		432		1,764			1,368
Core deposits and other intangibles amortization		586			586		585		590		610		1,757			1,547
Acquisition costs		-			-		562		-		-		562			920
Other		5,997			5,690		5,392		5,001		4,431		17,079			13,469
Total noninterest expense		38,997			37,708		37,388		36,134		35,044		114,093			103,220
Income before income taxes		10,172			15,239		17,173		19,563		21,834		42,584			59,107
Provision for income taxes		3,082			4,932		5,564		6,201		7,255		13,578			19,507
Net Income	$	7,090		$	10,307	$	11,609	$	13,362	$	14,579	$	29,006		$	39,600
Earnings per share (1):
Basic	$	0.10		$	0.14	$	0.16	$	0.18	$	0.20	$	0.40		$	0.55
Diluted	$	0.10		$	0.14	$	0.16	$	0.18	$	0.20	$	0.39		$	0.54

STERLING BANCSHARES, INC.

SELECTED FINANCIAL INFORMATION (Unaudited)

(dollars in thousands)

Page 7

	Quarter Ended
	Sep. 30,							Jun. 30,
	2008							2008
	Average Balance		Interest		Yield/Rate			Average Balance		Interest		Yield/Rate
Interest-Earning Assets:
Loans held for sale	$	110,721	$	1,756		6.31	%	$	94,801	$	1,540		6.53	%
Loans held for investment:
Taxable		3,598,381		57,815		6.39	%		3,538,656		58,510		6.65	%
Non-taxable (3)		4,472		95		8.46	%		2,321		46		7.89	%
Securities:
Taxable		642,152		7,714		4.78	%		622,794		7,408		4.78	%
Non-taxable (3)		97,607		1,284		5.23	%		96,814		1,285		5.34	%
Trading assets		4,348		21		1.92	%		4,395		22		1.98	%
Federal funds sold		6,774		32		1.88	%		5,593		27		1.99	%
Deposits in financial institutions		326		2		1.88	%		1,010		5		1.94	%
Total interest-earning assets		4,464,781		68,719		6.12	%		4,366,384		68,843		6.34	%
Noninterest-earning assets		469,002							471,081
Total Assets	$	4,933,783						$	4,837,465
Interest-Bearing Liabilities:
Deposits:
Demand and savings	$	1,410,719	$	4,136		1.17	%	$	1,417,453	$	3,889		1.10	%
Certificates and other time		1,145,196		8,763		3.04	%		1,056,022		8,662		3.30	%
Other borrowed funds		581,212		3,432		2.35	%		595,081		3,409		2.30	%
Subordinated debt		74,098		1,198		6.43	%		49,511		864		7.02	%
Junior subordinated debt		82,734		1,317		6.33	%		82,734		1,384		6.73	%
Total interest-bearing liabilities		3,293,959		18,846		2.28	%		3,200,801		18,208		2.29	%
Noninterest-bearing sources:
Noninterest-bearing liabilities		1,136,661							1,134,548
Shareholders' equity		503,163							502,116
Total Liabilities and Shareholders' Equity	$	4,933,783						$	4,837,465
Tax Equivalent Net Interest Income and Margin (3)				49,873		4.44	%				50,635		4.66	%
Tax equivalent adjustment:
Loans				30							14
Securities				375							377
Total tax equivalent adjustment				405							391
Net Interest Income			$	49,468						$	50,244

STERLING BANCSHARES, INC.

SELECTED FINANCIAL INFORMATION (Unaudited)

(dollars in thousands)

Page 8

	Year-to-date
	2008							2007
	Average Balance		Interest		Yield/Rate			Average Balance		Interest		Yield/Rate
Interest-Earning Assets:
Loans held for sale	$	94,677	$	4,681		6.60	%	$	60,660	$	3,646		8.04	%
Loans held for investment:
Taxable		3,514,320		177,950		6.76	%		3,182,270		190,081		7.99	%
Non-taxable (3)		3,260		202		8.27	%		3,456		204		7.89	%
Securities:
Taxable		610,877		21,671		4.74	%		512,936		17,327		4.52	%
Non-taxable (3)		97,278		3,820		5.25	%		92,113		3,493		5.07	%
Trading assets		4,379		64		1.94	%		2,950		86		3.88	%
Federal funds sold		5,789		98		2.27	%		13,903		480		4.62	%
Deposits in financial institutions		590		10		2.19	%		919		33		4.80	%
Total interest-earning assets		4,331,170		208,496		6.43	%		3,869,207		215,350		7.44	%
Noninterest-earning assets		460,904							413,713
Total Assets	$	4,792,074						$	4,282,920
Interest-Bearing Liabilities:
Deposits:
Demand and savings	$	1,419,654	$	13,640		1.28	%	$	1,289,139	$	21,682		2.25	%
Certificates and other time		1,109,199		29,402		3.54	%		1,172,951		41,081		4.68	%
Other borrowed funds		500,268		9,193		2.45	%		129,417		5,121		5.29	%
Subordinated debt		57,687		3,094		7.16	%		46,145		3,487		10.10	%
Junior subordinated debt		82,734		4,301		6.94	%		74,803		4,562		8.15	%
Total interest-bearing liabilities		3,169,542		59,630		2.51	%		2,712,455		75,933		3.74	%
Noninterest-bearing sources:
Noninterest-bearing liabilities		1,122,443							1,128,988
Shareholders' equity		500,089							441,477
Total Liabilities and Shareholders' Equity	$	4,792,074						$	4,282,920
Tax Equivalent Net Interest Income and Margin (3)				148,866		4.59	%				139,417		4.82	%
Tax equivalent adjustment:
Loans				63							59
Securities				1,095							896
Total tax equivalent adjustment				1,158							955
Net Interest Income			$	147,708						$	138,462

STERLING BANCSHARES, INC.

SELECTED FINANCIAL INFORMATION (Unaudited)

(dollars in thousands)

Page 9

	Quarter Ended
	Sep. 30,		Jun. 30,		Mar. 31,		Dec. 31,		Sep. 30,
	2008		2008		2008		2007		2007
Condensed Average Balance Sheet
Loans held for sale	$	110,721	$	94,801	$	78,331	$	66,897	$	73,295
Loans held for investment		3,602,853		3,540,977		3,407,972		3,341,014		3,254,513
Total loans		3,713,574		3,635,778		3,486,303		3,407,911		3,327,808
Available-for-sale securities, at fair value		564,779		543,696		486,131		472,239		446,721
Held-to-maturity securities, at amortized cost		174,980		175,912		178,623		178,309		177,185
Trading assets		4,348		4,395		4,395		8,686		8,470
Other earning assets		7,100		6,603		5,427		10,748		5,605
Total earning assets		4,464,781		4,366,384		4,160,879		4,077,893		3,965,789
Goodwill		173,106		172,690		169,198		166,177		165,879
Core deposits and other intangibles, net		14,740		15,322		15,767		16,271		16,874
All other non-interest earning assets		281,156		283,069		257,573		226,367		249,716
Total assets	$	4,933,783	$	4,837,465	$	4,603,417	$	4,486,708	$	4,398,258
Noninterest-bearing demand deposits	$	1,093,053	$	1,090,439	$	1,046,412	$	1,086,217	$	1,093,485
Interest bearing deposits:
Interest-bearing demand deposits		1,410,719		1,417,453		1,430,887		1,348,767		1,320,136
Jumbo certificates of deposit		677,251		642,066		707,543		789,006		758,509
Regular certificates of deposit		316,567		302,790		327,624		339,085		343,288
Brokered certificates of deposit		151,378		111,166		90,816		118,027		142,127
Total deposits		3,648,968		3,563,914		3,603,282		3,681,102		3,657,545
Other borrowed funds		581,212		595,081		323,622		148,982		104,579
Subordinated debt		74,098		49,511		49,272		47,637		46,078
Junior subordinated debt		82,734		82,734		82,734		82,734		82,734
Accrued interest payable and other liabilities		43,608		44,109		49,554		51,048		50,962
Total liabilities		4,430,620		4,335,349		4,108,464		4,011,503		3,941,898
Total shareholders' equity		503,163		502,116		494,953		475,205		456,360
Total liabilities and shareholders' equity	$	4,933,783	$	4,837,465	$	4,603,417	$	4,486,708	$	4,398,258
		Sep. 30,		Jun. 30,		Mar. 31,		Dec. 31,		Sep. 30,
		2008		2008		2008		2007		2007
Period-end Loans:
Loans held for sale	$	322	$	112,614	$	90,274	$	78,447	$	54,699
Loans held for investment:
Commercial and industrial		1,094,767		1,008,410		980,884		934,176		940,821
Real Estate:
Commercial		1,564,989		1,473,843		1,432,905		1,389,225		1,382,313
Construction and development		732,174		728,217		731,833		714,600		697,099
Residential mortgage		284,036		258,600		237,715		226,085		219,914
Consumer/other		68,806		73,924		75,139		75,751		79,505
Loans held for investment		3,744,772		3,542,994		3,458,476		3,339,837		3,319,652
Total period-end loans	$	3,745,094	$	3,655,608	$	3,548,750	$	3,418,284	$	3,374,351
Period-End Deposits:
Noninterest-bearing demand	$	1,085,882	$	1,135,296	$	1,100,919	$	1,092,210	$	1,082,037
Interest-bearing demand		1,397,614		1,409,220		1,464,937		1,403,227		1,340,746
Certificates and other time deposits:
Jumbo		636,447		674,891		682,264		756,980		773,770
Regular		304,050		318,762		304,776		332,206		345,205
Brokered		150,127		156,166		92,021		89,088		120,005
Total period-end deposits	$	3,574,120	$	3,694,335	$	3,644,917	$	3,673,711	$	3,661,763

STERLING BANCSHARES, INC.

SELECTED FINANCIAL INFORMATION (Unaudited)

(dollars in thousands)

Page 10

	Quarter Ended															Year-to-date
	Sep. 30,			Jun. 30,			Mar. 31,			Dec. 31,			Sep. 30,
	2008			2008			2008			2007			2007			2008			2007
Allowance For Credit Losses
Allowance for loan losses at beginning of period	$	41,651		$	35,681		$	34,446		$	34,225		$	33,450		$	34,446		$	32,027
Charge-offs:
Commercial, financial and industrial		3,713			2,210			1,721			876			540			7,644			2,391
Real estate, mortgage and construction		1,879			252			1,481			728			52			3,612			338
Consumer		657			351			303			547			478			1,311			1,082
Total charge-offs		6,249			2,813			3,505			2,151			1,070			12,567			3,811
Recoveries:
Commercial, financial and industrial		277			477			352			270			612			1,106			1,559
Real estate, mortgage and construction		28			23			61			8			3			112			39
Consumer		142			116			177			494			380			435			695
Total Recoveries		447			616			590			772			995			1,653			2,293
Net charge-offs		5,802			2,197			2,915			1,379			75			10,914			1,518
Allowance for credit losses associated with acquired institutions		-			-			-			-			-			-			1,496
Provision for loan losses		9,373			8,167			4,150			1,600			850			21,690			2,220
Allowance for loan losses at end of period	$	45,222		$	41,651		$	35,681		$	34,446		$	34,225		$	45,222		$	34,225
Reserve for unfunded loan commitments at beginning of period		927			927			927			927			927			927			927
Provision for losses on unfunded loan commitments		727			-			-			-			-			727			-
Reserve for unfunded loan commitments at end of period		1,654			927			927			927			927			1,654			927
Total allowance for credit losses	$	46,876		$	42,578		$	36,608		$	35,373		$	35,152		$	46,876		$	35,152
Nonperforming Assets
Nonperforming loans:
Nonaccrual	$	70,538		$	48,921		$	21,199		$	19,445		$	10,919		$	70,538		$	10,919
Restructured		-			-			764			769			772			-			772
Real estate acquired by foreclosure		4,562			4,293			4,042			3,683			2,713			4,562			2,713
Other repossessed assets		234			118			112			152			67			234			67
Total nonperforming assets	$	75,334		$	53,332		$	26,117		$	24,049		$	14,471		$	75,334		$	14,471
Accruing loans past due 90 days or more	$	3,142		$	2,224		$	944		$	1,304		$	1,477		$	3,142		$	1,477
Ratios
Period-end allowance for credit losses to period-end loans		1.25	%		1.16	%		1.03	%		1.03	%		1.04	%		1.25	%		1.04	%
Period-end allowance for loan losses to period-end loans		1.21	%		1.14	%		1.01	%		1.01	%		1.01	%		1.21	%		1.01	%
Period-end allowance for loan losses to nonperforming loans		64.11	%		85.14	%		162.46	%		170.41	%		292.74	%		64.11	%		292.74	%
Nonperforming loans to period-end loans		1.88	%		1.34	%		0.62	%		0.59	%		0.35	%		1.88	%		0.35	%
Nonperforming assets to period-end assets		1.52	%		1.09	%		0.55	%		0.53	%		0.33	%		1.52	%		0.33	%
Net charge-offs to average loans (2)		0.62	%		0.24	%		0.34	%		0.16	%		-			0.40	%		0.06	%

STERLING BANCSHARES, INC.

FOOTNOTES TO EARNINGS RELEASE

Page 11

(1) Earnings per share in each quarter is computed individually using the weighted-average number of shares outstanding during that quarter while earnings per share for the full period is computed using the weighted-average number of shares outstanding during the year. Thus, the sum for all quarters does not necessarily equal the full period earnings per share.

(2) Interim periods annualized.

(3) Taxable-equivalent basis assuming a 35% tax rate.

(4) The efficiency ratio is calculated by dividing noninterest expense less acquisition and hurricane related costs by tax equivalent basis net interest income plus noninterest income less net gain (loss) on investment securities. Prior period amounts have been restated to reflect the current methodology.