EX-99.1 2 v081578_ex99-1.htm

Sterling Bancshares, Inc., News Release
July 24, 2007
Page 1

NEWS RELEASE
For More Information Contact:
For Release - July 24, 2007
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 SECOND QUARTER 2007 EARNINGS
Net Income of $13.1 Million or $0.18 per share

HOUSTON, TX, July 24, 2007 - Sterling Bancshares, Inc. (NASDAQ: SBIB) today reported net income of $13.1 million, or $0.18 per diluted share for the second quarter ended June 30, 2007, a 16% increase in net income when compared to the $11.3 million, or $0.16 per diluted share earned for the second quarter of 2006.

Net income for the six months ended June 30, 2007 was $25.0 million, or $0.34 per diluted share compared with $21.3 million, or $0.31 per diluted share for the same period in 2006.

The Company completed its acquisition of MBM Advisors, Inc. (MBM) on June 28, 2007. MBM is a Houston-based investment advisory and pension administration/consulting firm with approximately $700 million in assets under management. MBM currently has locations in Houston and Dallas, Texas. The results of operations for MBM will be included in the Company's financial results beginning in the third quarter of 2007.

"We are pleased with our results for the second quarter which are reflective of the continued execution of our expense management initiative, the successful systems and operational integration of Partners Bank of Texas and continued favorable trends in asset quality," commented J. Downey Bridgwater, Sterling's Chairman, President and Chief Executive Officer. "In addition to completing the operational integration of Partners Bank during the second quarter, we completed the acquisition of MBM Advisors which provides for increased opportunities to serve the owners of small and medium-sized businesses and their employees while enhancing our non-interest income."

Period-end total loans held for investment increased $65 million or 2% on a linked-quarter basis to $3.3 billion at June 30, 2007 and up $395 million or 14% since June 30, 2006. Average loans held for investment were $3.2 billion for the second quarter of 2007, up $177 million on a linked-quarter basis and up $421 million or 15% from the second quarter of 2006.
 
Period-end total deposits increased $75 million to $3.7 billion at June 30, 2007, up 2% on a linked-quarter basis and up $746 million or 25% since June 30, 2006. Average total deposits for the second quarter of 2007 were up $273 million or 8% linked-quarter and up $673 million or 23% from the second quarter of 2006.
 
 
Sterling Bancshares, Inc., News Release
July 24, 2007
Page 2
 
The Company's average loan and deposit balances for the second quarter of 2007 benefited from having completed the acquisition of Partners Bank on March 30, 2007. Partners Bank operated four banking centers in the Houston area and had assets of approximately $191 million, loans of $142 million, and deposits of $166 million at the date of acquisition.

Net charge-offs for the second quarter of 2007 were $1.0 million or 0.13% annualized of average total loans, compared to $1.2 million or 0.16% annualized for the second quarter of 2006. The allowance for loan losses at June 30, 2007 was $33.5 million and represented 1.01% of total period-end loans.

Net interest income for the second quarter of 2007 was $46.8 million, up $2.2 million or 5% linked-quarter. The Company's tax equivalent net interest margin decreased 9 basis points to 4.81% for the second quarter of 2007 compared to 4.90% for the first quarter of 2007 due primarily to a change in the mix and rate paid on interest-bearing deposits.

Noninterest income was $7.5 million in the second quarter of 2007, down $416 thousand on a linked-quarter basis and down $1.5 million as compared with the second quarter of 2006. During the second quarter of 2006, the Company sold a multi-tenant office building resulting in a gain of $1.1 million.

Noninterest expense for the second quarter of 2007 was $34.3 million, up $508 thousand on a linked-quarter basis and up $1.1 million as compared with the second quarter of 2006. Noninterest expense for the second quarter of 2007 included pre-tax acquisition costs of $166 thousand and $450 thousand related to an employee severance payment. Noninterest expense for the first quarter of 2007 included pre-tax acquisition costs of $754 thousand. The increase in noninterest expense on a linked-quarter basis was due primarily to the addition of Partners Bank on March 30, 2007 which resulted in additional expenses of approximately $1.5 million. The results of operations for Partners Bank were included in the Company's financial results for the entire second quarter of 2007. During the second quarter of 2006, remaining unamortized debt issuance costs totaling $1.3 million were written off and are included in other noninterest expense. Since the second quarter of 2006, the Company has completed two acquisitions resulting in overall increases in most expense categories. The Company's efficiency ratio improved to 61.76% for the second quarter of 2007 from 62.59% for the first quarter of 2007 and 62.55% for the second quarter of 2006.
 
At June 30, 2007, Sterling had total assets of $4.4 billion, total loans of $3.3 billion and total deposits of $3.7 billion. Shareholders' equity of $445 million at June 30, 2007 was 10.0% of total assets. Book value per common share at period-end was $6.09.

Conference Call

Management will host a conference call for investors and analysts that will be broadcast live via telephone and over the Internet on Tuesday, July 24, 2007 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) 288-0329. An audio archive of the call will also be available on the web site beginning Wednesday, July 25, 2007.
 
 
Sterling Bancshares, Inc., News Release
July 24, 2007
Page 3
 
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 2006 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 $4.4 billion, which operates 49 banking centers in the greater metropolitan areas of Houston, San Antonio, and Dallas, Texas. These cities are the 4th, 7th and 9th largest in the United States, respectively, based on population. 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
  
   
Jun. 30,
  
Mar. 31,
 
Jun. 30,
          
   
2007
  
2007
  
2006
 
2007
 
2006
  
Profitability
                      
Net Income
  
$
13,098
  
$
11,923
  
$
11,269
  
$
25,021
  
$
21,301
  
                                 
Earnings per common share (1)
                                
   Basic
  
$
0.18
  
$
0.17
  
$
0.17
  
$
0.35
  
$
0.31
  
   Diluted
  
$
0.18
  
$
0.17
  
$
0.16
  
$
0.34
  
$
0.31
  
                                 
Return on average common equity (2)
    
11.66
%
  
11.60
%
  
13.10
%
  
11.63
%
  
12.54
%
                                 
Return on average assets (2)
    
1.21
%
  
1.18
%
  
1.19
%
  
1.19
%
  
1.14
%
                                 
Net interest margin (3)
    
4.81
%
  
4.90
%
  
5.01
%
  
4.86
%
  
4.96
%
                                 
Efficiency Ratio (4):
                                
     Consolidated
    
61.76
%
  
62.59
%
  
62.55
%
  
62.16
%
  
63.86
%
     Sterling Bank
    
59.31
%
  
60.48
%
  
60.21
%
  
59.88
%
  
61.31
%
                                 
Liquidity and Capital Ratios
                                
Average loans to average deposits
    
91.08
%
  
93.19
%
  
96.05
%
  
92.09
%
  
95.99
%
Period-end stockholders' equity to total assets
    
10.08
%
  
10.27
%
  
9.08
%
  
10.08
%
  
9.08
%
Average stockholders' equity to average assets
    
10.38
%
  
10.16
%
  
9.11
%
  
10.27
%
  
9.11
%
Period-end tangible capital to total tangible assets
    
6.20
%
  
6.52
%
  
6.91
%
  
6.20
%
  
6.91
%
Tier 1 capital to risk-weighted assets
    
8.89
%
  
9.11
%
  
9.19
%
  
8.89
%
  
9.19
%
Total capital to risk-weighted assets
    
10.91
%
  
11.18
%
  
11.41
%
  
10.91
%
  
11.41
%
Tier 1 leverage ratio (Tier 1 capital to average assets)
    
8.41
%
  
9.02
%
  
8.65
%
  
8.41
%
  
8.65
%
                                 
Other Data
                                
Shares used in computing earnings per common share
                                
   Basic shares
    
73,295
   
71,084
   
68,132
   
72,196
   
68,068
 
   Diluted shares
    
73,783
   
71,750
   
68,801
   
72,702
   
68,739
 
End of period common shares outstanding
    
73,057
   
73,401
   
68,116
   
73,057
   
68,116
 
                                 
Book value per common share at period-end
                                
   Total
  
$
6.09
  
$
6.07
  
$
5.05
  
$
6.09
  
$
5.05
  
   Tangible
  
$
3.59
  
$
3.70
  
$
3.76
  
$
3.59
  
$
3.76
  
Cash dividends paid per common share
  
$
0.0525
  
$
0.0525
  
$
0.047
  
$
0.105
  
$
0.093
  
Common stock dividend payout ratio 
    
29.35
%
  
31.26
%
  
28.20
%
  
30.26
%
  
29.79
%
Full-time equivalent employees
    
1,048
   
1,066
   
1,015
   
1,048
   
1,015
 
Number of banking centers
    
49
   
49
   
40
   
49
   
40
 
 
 
STERLING BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
(dollars in thousands)
Page 5

   
Jun. 30,
 
Mar. 31,
 
Dec. 31,
  
Sep. 30,
 
Jun. 30,
  
   
2007
  
2007
  
2006
  
2006
 
2006
  
ASSETS
                      
Cash and cash equivalents
  
$
161,482
  
$
189,207
  
$
134,775
  
$
146,442
  
$
106,531
  
Interest-bearing deposits in financial institutions
    
-
   
99
   
198
   
21,666
   
99
 
Trading assets
    
398
   
85
   
-
   
-
   
-
 
Available-for-sale securities, at fair value
    
433,325
   
435,255
   
409,351
   
527,806
   
455,122
 
Held-to-maturity securities, at amortized cost
    
177,075
   
165,277
   
164,263
   
167,243
   
120,153
 
                                 
Loans held for sale
    
71,380
   
52,962
   
54,722
   
72,789
   
24,215
 
Loans held for investment
    
3,251,164
   
3,186,601
   
3,077,845
   
3,030,344
   
2,856,661
 
   Total loans
    
3,322,544
   
3,239,563
   
3,132,567
   
3,103,133
   
2,880,876
 
Allowance for loan losses
    
(33,450
)
  
(33,487
)
  
(32,027
)
  
(34,146
)
  
(31,882
)
   Loans, net
    
3,289,094
   
3,206,076
   
3,100,540
   
3,068,987
   
2,848,994
 
                                 
Premises and equipment, net
    
26,408
   
25,762
   
23,475
   
42,115
   
37,169
 
Real estate acquired by foreclosure
    
3,064
   
2,624
   
1,465
   
1,764
   
1,171
 
Goodwill
    
165,711
   
159,958
   
130,858
   
129,131
   
85,026
 
Core deposits and other intangibles, net
    
17,172
   
13,966
   
10,299
   
10,728
   
3,162
 
Accrued interest receivable
    
19,811
   
18,840
   
18,692
   
18,576
   
15,002
 
Other assets
    
119,254
   
118,161
   
123,643
   
129,666
   
117,491
 
TOTAL ASSETS
  
$
4,412,794
  
$
4,335,310
  
$
4,117,559
  
$
4,264,124
  
$
3,789,920
  
                                 
LIABILITIES AND SHAREHOLDERS' EQUITY
                                
LIABILITIES:
                                
Deposits:
                                
   Noninterest-bearing demand
  
$
1,144,049
  
$
1,132,744
  
$
1,058,135
  
$
1,045,416
  
$
1,033,743
  
   Interest-bearing demand
    
1,332,469
   
1,320,245
   
1,229,313
   
1,207,722
   
1,032,465
 
   Certificates and other time
    
1,254,338
   
1,202,715
   
1,047,163
   
1,065,372
   
918,167
 
      Total deposits
    
3,730,856
   
3,655,704
   
3,334,611
   
3,318,510
   
2,984,375
 
Short-term borrowings
    
57,840
   
32,439
   
220,675
   
372,250
   
330,700
 
Subordinated debt
    
45,408
   
46,467
   
46,135
   
46,018
   
44,358
 
Junior subordinated debt
    
82,734
   
82,734
   
56,959
   
56,959
   
52,836
 
Accrued interest payable and other liabilities
    
50,977
   
72,547
   
49,894
   
70,611
   
33,637
 
   Total liabilities
    
3,967,815
   
3,889,891
   
3,708,274
   
3,864,348
   
3,445,906
 
                                 
COMMITMENTS AND CONTINGENCIES
    
-
    
-
    
-
    
-
    
-
  
                                 
SHAREHOLDERS' EQUITY
                                
Common stock
    
74,724
   
74,526
   
71,938
   
71,839
   
68,679
 
Capital surplus
    
108,238
   
106,926
   
80,927
   
79,822
   
40,674
 
Retained earnings
    
289,629
   
280,375
   
272,179
   
262,678
   
254,125
 
Treasury stock
    
(19,413
)
  
(13,150
)
  
(10,902
)
  
(8,540
)
  
(6,111
)
Accumulated other comprehensive loss, net of tax
    
(8,199
)
  
(3,258
)
  
(4,857
)
  
(6,023
)
  
(13,353
)
     Total shareholders' equity
    
444,979
   
445,419
   
409,285
   
399,776
   
344,014
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
  
$
4,412,794
  
$
4,335,310
  
$
4,117,559
  
$
4,264,124
  
$
3,789,920
  
 
 
STERLING BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(dollars in thousands, except for per share data)
Page 6
 
   
 Quarter Ended
  
Year-to-date
  
   
Jun. 30,
  
Mar. 31,
  
Dec. 31,
  
Sep. 30,
  
Jun. 30,
          
   
2007
  
2007
 
2006
 
2006
 
2006
  
2007
 
2006
  
Interest income:
                                            
   Loans, including fees
  
$
65,489
  
$
61,350
  
$
62,884
  
$
58,158
  
$
55,265
  
$
126,839
  
$
106,041
  
   Securities:
                                            
      Taxable
    
5,755
   
5,461
   
5,824
   
5,902
   
6,011
   
11,216
   
12,160
 
      Non-taxable
    
853
   
877
   
922
   
549
   
564
   
1,730
   
1,151
 
   Trading assets
    
4
   
1
   
53
   
73
   
270
   
5
   
570
 
   Federal funds sold
    
274
   
148
   
121
   
55
   
43
   
422
   
85
 
   Deposits in financial institutions
    
7
   
17
   
59
   
34
   
32
   
24
   
90
 
      Total interest income
    
72,382
   
67,854
   
69,863
   
64,771
   
62,185
   
140,236
   
120,097
 
                                             
Interest expense:
                                            
   Demand and savings deposits
    
7,605
   
6,039
   
6,003
   
4,971
   
3,883
   
13,644
   
6,960
 
   Certificates and other time deposits
    
13,922
   
12,350
   
12,097
   
9,898
   
8,542
   
26,272
   
15,676
 
   Short-term borrowings
    
1,257
   
2,495
   
4,008
   
4,690
   
4,413
   
3,752
   
8,575
 
   Subordinated debt
    
1,162
   
1,150
   
1,141
   
1,155
   
1,125
   
2,312
   
2,180
 
   Junior subordinated debt
    
1,658
   
1,231
   
1,218
   
1,152
   
1,409
   
2,889
   
3,201
 
       Total interest expense
    
25,604
   
23,265
   
24,467
   
21,866
   
19,372
   
48,869
   
36,592
 
Net interest income
    
46,778
   
44,589
   
45,396
   
42,905
   
42,813
   
91,367
   
83,505
 
Provision for credit losses
    
1,000
   
370
   
-
   
895
   
1,837
   
1,370
   
3,163
 
Net interest income after provision for credit losses
    
45,778
   
44,219
   
45,396
   
42,010
   
40,976
   
89,997
   
80,342
 
                                             
Noninterest income:
                                            
   Customer service fees
    
3,330
   
3,375
   
3,547
   
3,313
   
3,061
   
6,705
   
5,638
 
   Net gain (loss) on trading assets
    
(1
)
  
1
   
-
   
-
   
(167
)
  
-
   
(302
)
   Net loss on the sale of securities
    
-
   
-
   
(358
)
  
-
   
-
   
-
   
-
 
   Net gain on sale of loans
    
73
   
504
   
524
   
292
   
205
   
577
   
510
 
   Other
    
4,116
   
4,054
   
4,491
   
3,899
   
5,920
   
8,170
   
9,663
 
      Total noninterest income
    
7,518
   
7,934
   
8,204
   
7,504
   
9,019
   
15,452
   
15,509
 
                                             
Noninterest expense:
                                            
   Salaries and employee benefits
    
19,768
   
19,688
   
19,706
   
18,843
   
18,822
   
39,456
   
37,497
 
   Occupancy expense
    
4,606
   
4,362
   
4,153
   
4,018
   
4,061
   
8,968
   
7,904
 
   Technology
    
2,095
   
2,049
   
2,098
   
1,695
   
1,615
   
4,144
   
3,089
 
   Professional fees
    
1,078
   
945
   
1,841
   
1,408
   
1,473
   
2,023
   
2,898
 
   Postage, delivery and supplies
    
943
   
811
   
861
   
801
   
903
   
1,754
   
1,693
 
   Marketing
    
581
   
355
   
644
   
675
   
709
   
936
   
1,093
 
   Core deposits and other intangibles amortization
    
517
   
420
   
428
   
195
   
194
   
937
   
389
 
   Acquisition costs
    
166
   
754
   
-
   
638
   
-
   
920
   
-
 
   Other
    
4,588
   
4,450
   
4,737
   
4,294
   
5,416
   
9,038
   
9,588
 
      Total noninterest expense
    
34,342
   
33,834
   
34,468
   
32,567
   
33,193
   
68,176
   
64,151
 
                                             
Income before income taxes
    
18,954
   
18,319
   
19,132
   
16,947
   
16,802
   
37,273
   
31,700
 
   Provision for income taxes
    
5,856
   
6,396
   
6,322
   
5,218
   
5,533
   
12,252
   
10,399
 
                                             
Net Income
  
$
13,098
  
$
11,923
  
$
12,810
  
$
11,729
  
$
11,269
  
$
25,021
  
$
21,301
  
                                             
Earnings per share (1):
                                            
     Basic
  
$
0.18
  
$
0.17
  
$
0.18
  
$
0.17
  
$
0.17
  
$
0.35
  
$
0.31
  
     Diluted
  
$
0.18
  
$
0.17
  
$
0.18
  
$
0.17
  
$
0.16
  
$
0.34
  
$
0.31
  
 
 
STERLING BANCSHARES, INC.
SELECTED FINANCIAL INFORMATION (Unaudited)
(dollars in thousands)
Page 7

   
Quarter Ended
  
   
Jun. 30,
  
Mar. 31,
  
   
2007
  
2007
  
   
Average Balance
 
Interest
 
Yield/Rate
 
Average Balance
 
Interest
 
Yield/Rate
  
Interest-Earning Assets:
                                      
Loans held for sale
  
$
54,986
  
$
1,102
    
8.04
%
$
53,481
  
$
1,005
    
7.62
%
Loans held for investment:
                                      
     Taxable
    
3,235,036
   
64,337
   
7.98
%
  
3,058,283
   
60,296
   
8.00
%
     Non-taxable (3)
    
3,575
   
70
   
7.85
%
  
3,654
   
69
   
7.66
%
Securities:
                                      
     Taxable
    
513,566
   
5,755
   
4.49
%
  
493,210
   
5,461
   
4.49
%
     Non-taxable (3)
    
90,899
   
1,147
   
5.06
%
  
93,153
   
1,187
   
5.17
%
Trading assets
    
216
   
4
   
6.72
%
  
72
   
1
   
8.48
%
Federal funds sold
    
24,975
   
274
   
4.41
%
  
11,895
   
148
   
5.05
%
Deposits in financial institutions
    
648
   
7
   
4.32
%
  
1,429
   
17
   
4.74
%
     Total interest-earning assets
    
3,923,901
   
72,696
   
7.43
%
  
3,715,177
   
68,184
   
7.44
%
                                       
Noninterest-earning assets
    
418,556
               
389,643
             
Total Assets
  
$
4,342,457
              
$
4,104,820
              
                                       
Interest-Bearing Liabilities:
                                      
Deposits:
                                      
     Demand and savings
  
$
1,318,839
  
$
7,605
    
2.31
%
$
1,227,422
  
$
6,039
    
2.00
%
     Certificates and other time
    
1,188,480
   
13,922
   
4.70
%
  
1,084,700
   
12,350
   
4.62
%
Short-term borrowings
    
96,024
   
1,257
   
5.25
%
  
188,569
   
2,495
   
5.37
%
Subordinated debt
    
46,232
   
1,162
   
10.08
%
  
46,125
   
1,150
   
10.11
%
Junior subordinated debt
    
82,734
   
1,658
   
8.04
%
  
58,678
   
1,231
   
8.51
%
     Total interest-bearing liabilities
    
2,732,309
   
25,604
   
3.76
%
  
2,605,494
   
23,265
   
3.62
%
                                       
Noninterest-bearing sources:
                                      
     Noninterest-bearing liabilities
    
1,159,410
               
1,082,426
             
     Shareholders' equity
    
450,738
               
416,900
             
Total Liabilities and Shareholders' Equity
  
$
4,342,457
              
$
4,104,820
              
                                       
Tax Equivalent Net Interest Income & Margin (3)
          
47,092
   
4.81
%
        
44,919
   
4.90
%
                                       
Tax equivalent adjustment:
                                      
Loans
          
20
               
20
       
Securities
          
294
               
310
       
Total tax equivalent adjustment
          
314
               
330
       
                                       
Net Interest Income
        
$
46,778
              
$
44,589
        
 
 
STERLING BANCSHARES, INC.
SELECTED FINANCIAL INFORMATION (Unaudited)
(dollars in thousands)
Page 8

   
Year-to-date
  
   
2007
  
2006
  
   
Average Balance
  
Interest
  
Yield/Rate
  
Average Balance
  
Interest
  
Yield/Rate
  
Interest-Earning Assets:
                                      
Loans held for sale
  
$
54,238
  
$
2,107
    
7.83
%
$
8,493
  
$
350
    
8.30
%
Loans held for investment:
                                      
     Taxable
    
3,147,148
   
124,632
   
7.99
%
  
2,771,636
   
105,614
   
7.68
%
     Non-taxable (3)
    
3,614
   
141
   
7.87
%
  
2,454
   
111
   
9.12
%
Securities:
                                      
     Taxable
    
503,444
   
11,216
   
4.49
%
  
547,892
   
12,160
   
4.48
%
     Non-taxable (3)
    
92,020
   
2,334
   
5.11
%
  
59,634
   
1,592
   
5.38
%
Trading assets
    
145
   
5
   
7.16
%
  
18,368
   
570
   
6.26
%
Federal funds sold
    
18,471
   
422
   
4.61
%
  
3,814
   
85
   
4.52
%
Deposits in financial institutions
    
1,036
   
24
   
4.61
%
  
3,997
   
90
   
4.55
%
     Total interest-earning assets
    
3,820,116
   
140,881
   
7.44
%
  
3,416,288
   
120,572
   
7.12
%
                                       
Noninterest-earning assets
    
404,179
               
342,948
             
Total Assets
  
$
4,224,295
              
$
3,759,236
              
                                       
Interest-Bearing Liabilities:
                                      
Deposits:
                                      
     Demand and savings
  
$
1,273,383
  
$
13,644
    
2.16
%
$
1,054,103
  
$
6,960
    
1.33
%
     Certificates and other time
    
1,136,877
   
26,272
   
4.66
%
  
839,583
   
15,676
   
3.77
%
Short-term borrowings
    
142,041
   
3,752
   
5.33
%
  
365,661
   
8,575
   
4.73
%
Subordinated debt
    
46,179
   
2,312
   
10.10
%
  
45,399
   
2,180
   
9.69
%
Junior subordinated debt
    
70,772
   
2,889
   
8.23
%
  
73,632
   
3,201
   
8.77
%
     Total interest-bearing liabilities
    
2,669,252
   
48,869
   
3.69
%
  
2,378,378
   
36,592
   
3.10
%
                                       
Noninterest-bearing sources:
                                      
     Noninterest-bearing liabilities
    
1,121,131
               
1,038,317
             
     Shareholders' equity
    
433,912
               
342,541
             
Total Liabilities and Shareholders' Equity
  
$
4,224,295
              
$
3,759,236
              
                                       
Tax Equivalent Net Interest Income & Margin (3)
          
92,012
   
4.86
%
        
83,980
   
4.96
%
                                       
Tax equivalent adjustment:
                                      
Loans
          
41
               
34
       
Securities
          
604
               
441
       
Total tax equivalent adjustment
          
645
               
475
       
                                       
Net Interest Income
        
$
91,367
              
$
83,505
        
 
 
STERLING BANCSHARES, INC.
SELECTED FINANCIAL INFORMATION (Unaudited)
(dollars in thousands)
Page 9

   
Quarter Ended
  
   
Jun. 30,
  
Mar. 31,
 
Dec. 31,
 
Sep. 30,
  
Jun. 30,
  
   
2007
 
2007
  
2006
  
2006
 
2006
  
Condensed Average Balance Sheet
                                
Loans held for sale
  
$
54,986
  
$
53,481
  
$
64,172
  
$
39,729
  
$
9,434
  
Loans held for investment
    
3,238,611
   
3,061,937
   
3,066,432
   
2,862,424
   
2,817,743
 
     Total loans
    
3,293,597
   
3,115,418
   
3,130,604
   
2,902,153
   
2,827,177
 
Available-for-sale securities, at fair value
    
440,994
   
421,069
   
455,512
   
454,972
   
474,554
 
Held-to-maturity securities, at amortized cost
    
163,471
   
165,294
   
166,048
   
127,565
   
122,563
 
Trading assets
    
216
   
72
   
4,360
   
6,642
   
17,969
 
Other earning assets
    
25,623
   
13,324
   
14,240
   
7,452
   
6,268
 
     Total earning assets
    
3,923,901
   
3,715,177
   
3,770,764
   
3,498,784
   
3,448,531
 
Goodwill
    
160,141
   
131,507
   
129,715
   
85,978
   
85,026
 
Core deposits and other intangibles, net
    
13,787
   
10,166
   
10,509
   
3,224
   
3,250
 
All other non-interest earning assets
    
244,628
   
247,970
   
255,556
   
242,068
   
249,339
 
     Total assets
  
$
4,342,457
  
$
4,104,820
  
$
4,166,544
  
$
3,830,054
  
$
3,786,146
  
                                 
Noninterest-bearing demand deposits
  
$
1,108,895
  
$
1,031,046
  
$
1,045,883
  
$
998,857
  
$
1,012,805
  
Interest bearing deposits:
                                
     Interest-bearing demand deposits
    
1,318,839
   
1,227,422
   
1,193,946
   
1,071,169
   
1,059,200
 
     Jumbo certificates of deposit
    
732,260
   
654,466
   
635,943
   
561,207
   
534,952
 
     Regular certificates of deposit
    
330,084
   
311,710
   
310,134
   
239,866
   
223,698
 
     Brokered certificates of deposit
    
126,136
   
118,524
   
125,300
   
119,542
   
112,686
 
          Total deposits
    
3,616,214
   
3,343,168
   
3,311,206
   
2,990,641
   
2,943,341
 
Short-term borrowings
    
96,024
   
188,569
   
299,667
   
350,233
   
354,102
 
Subordinated debt
    
46,232
   
46,125
   
46,288
   
44,999
   
44,784
 
Junior subordinated debt
    
82,734
   
58,678
   
56,960
   
52,925
   
64,887
 
Accrued interest payable and other liabilities
    
50,515
   
51,380
   
44,932
   
36,334
   
34,155
 
     Total liabilities
    
3,891,719
   
3,687,920
   
3,759,053
   
3,475,132
   
3,441,269
 
Total shareholders' equity
    
450,738
   
416,900
   
407,491
   
354,922
   
344,877
 
     Total liabilities and shareholders' equity
  
$
4,342,457
  
$
4,104,820
  
$
4,166,544
  
$
3,830,054
  
$
3,786,146
  
 
 
 
    
Jun. 30,
    
Mar. 31,
  
 
Dec. 31,
  
 
Sep. 30,
    
Jun. 30,
  
     
2007
    
2007
  
 
2006
 
  
2006
 
  
2006
  
Period-end Loans:
                                
Loans held for sale
  
$
71,380
  
$
52,962
  
$
54,722
  
$
72,789
  
$
24,215
  
Loans held for investment:
                                
   Commercial and industrial
    
913,796
   
862,516
   
851,973
   
798,928
   
808,751
 
   Real Estate:
                                
      Commercial
    
1,371,036
   
1,360,681
   
1,338,831
   
1,326,732
   
1,284,059
 
      Construction and development
    
671,429
   
666,177
   
598,030
   
601,429
   
520,129
 
      Residential mortgage
    
215,313
   
215,536
   
209,226
   
220,285
   
171,647
 
   Consumer/other
    
79,590
   
81,691
   
79,785
   
82,970
   
72,075
 
Loans held for investment
    
3,251,164
   
3,186,601
   
3,077,845
   
3,030,344
   
2,856,661
 
Total period-end loans
  
$
3,322,544
  
$
3,239,563
  
$
3,132,567
  
$
3,103,133
  
$
2,880,876
  
                                 
Period-End Deposits:
                                
Noninterest-bearing demand
  
$
1,144,049
  
$
1,132,744
  
$
1,058,135
  
$
1,045,416
  
$
1,033,743
  
Interest-bearing demand
    
1,332,469
   
1,320,245
   
1,229,313
   
1,207,722
   
1,032,465
 
Certificates and other time deposits:
                                
        Jumbo
    
766,416
   
749,285
   
610,330
   
633,745
   
564,365
 
        Regular
    
342,579
   
325,900
   
307,419
   
312,834
   
231,329
 
        Brokered
    
145,343
   
127,530
   
129,414
   
118,793
   
122,473
 
Total period-end deposits
  
$
3,730,856
  
$
3,655,704
  
$
3,334,611
  
$
3,318,510
  
$
2,984,375
  
 
 
STERLING BANCSHARES, INC.
SELECTED FINANCIAL INFORMATION (Unaudited)
(dollars in thousands)
Page 10

   
Quarter Ended
  
Year-to-date
  
   
Jun. 30,
  
Mar. 31,
  
Dec. 31,
 
Sep. 30,
 
Jun. 30,
      
 
  
   
2007
  
2007
  
2006
 
2006
 
2006
  
2007
 
2006
  
Allowance For Credit Losses
                                            
Allowance for loan losses at beginning of period
  
$
33,487
  
$
32,027
  
$
34,146
  
$
31,882
  
$
31,116
  
$
32,027
  
$
31,230
  
Charge-offs:
                                            
     Commercial, financial and industrial
    
1,316
   
535
   
1,493
   
458
   
1,393
   
1,851
   
2,421
 
     Real estate, mortgage and construction
    
166
   
120
   
1,637
   
798
   
439
   
286
   
1,444
 
     Consumer
    
279
   
325
   
420
   
413
   
253
   
604
   
366
 
          Total charge-offs
    
1,761
   
980
   
3,550
   
1,669
   
2,085
   
2,741
   
4,231
 
Recoveries:
                                            
     Commercial, financial and industrial
    
541
   
406
   
1,261
   
777
   
782
   
947
   
1,167
 
     Real estate, mortgage and construction
    
34
   
2
   
71
   
3
   
2
   
36
   
5
 
     Consumer
    
149
   
166
   
99
   
143
   
145
   
315
   
265
 
          Total Recoveries
    
724
   
574
   
1,431
   
923
   
929
   
1,298
   
1,437
 
Net charge-offs
    
1,037
   
406
   
2,119
   
746
   
1,156
   
1,443
   
2,794
 
Allowance for credit losses associated with acquired institutions
    
-
   
1,496
   
-
   
2,152
   
-
   
1,496
   
-
 
Provision for loan losses
    
1,000
   
370
   
-
   
858
   
1,922
   
1,370
   
3,446
 
Allowance for loan losses at end of period
  
$
33,450
  
$
33,487
  
$
32,027
  
$
34,146
  
$
31,882
  
$
33,450
  
$
31,882
  
                                             
Reserve for unfunded loan commitments at beginning of period
    
927
   
927
   
927
   
890
   
975
   
927
   
1,173
 
Provision for losses on unfunded loan commitments
    
-
   
-
   
-
   
37
   
(85
)
  
-
   
(283
)
Reserve for unfunded loan commitments at end of period
    
927
   
927
   
927
   
927
   
890
   
927
   
890
 
Total allowance for credit losses
  
$
34,377
  
$
34,414
  
$
32,954
  
$
35,073
  
$
32,772
  
$
34,377
  
$
32,772
  
                                             
Nonperforming Assets
                                            
Nonperforming loans:
                                            
   Nonaccrual
  
$
10,862
  
$
12,269
  
$
10,611
  
$
14,750
  
$
12,395
  
$
10,862
  
$
12,395
  
   Restructured
    
772
   
777
   
776
   
-
   
-
   
772
   
-
 
Real estate acquired by foreclosure
    
3,064
   
2,624
   
1,465
   
1,764
   
1,171
   
3,064
   
1,171
 
Other repossessed assets
    
113
   
191
   
404
   
291
   
412
   
113
   
412
 
Total nonperforming assets
  
$
14,811
  
$
15,861
  
$
13,256
  
$
16,805
  
$
13,978
  
$
14,811
  
$
13,978
  
                                             
Potential problem loans
  
$
22,775
  
$
28,493
  
$
32,201
  
$
38,761
  
$
43,846
  
$
22,775
  
$
43,846
  
                                             
Accruing loans past due 90 days or more
  
$
1,533
  
$
4,575
  
$
2,731
  
$
308
  
$
543
  
$
1,533
  
$
543
  
                                             
Ratios
                                            
Period-end allowance for credit losses to period-end loans
    
1.03
%
  
1.06
%
  
1.05
%
  
1.13
%
  
1.14
%
  
1.03
%
  
1.14
%
Period-end allowance for loan losses to period-end loans
    
1.01
%
  
1.03
%
  
1.02
%
  
1.10
%
  
1.11
%
  
1.01
%
  
1.11
%
Period-end allowance for loan losses to nonperforming loans
    
287.52
%
  
256.69
%
  
281.27
%
  
231.50
%
  
257.21
%
  
287.52
%
  
257.21
%
Nonperforming assets to period-end loans and foreclosed assets
    
0.45
%
  
0.49
%
  
0.42
%
  
0.54
%
  
0.48
%
  
0.45
%
  
0.48
%
Nonperforming loans to period-end loans
    
0.35
%
  
0.40
%
  
0.36
%
  
0.48
%
  
0.43
%
  
0.35
%
  
0.43
%
Nonperforming assets to period-end assets
    
0.34
%
  
0.37
%
  
0.32
%
  
0.39
%
  
0.37
%
  
0.34
%
  
0.37
%
Net charge-offs to average loans (2)
    
0.13
%
  
0.05
%
  
0.27
%
  
0.10
%
  
0.16
%
  
0.09
%
  
0.20
%
 
 
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 the 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 Company revised its efficiency ratio which is calculated by dividing noninterest expense less acquisition costs, an employee severance payment, and Trust Preferred Securities debt issuance costs by tax equivalent basis net interest income plus noninterest income less net gain (loss) on sales of investment securities and less net gain on sale/leaseback transactions. Prior period amounts have been restated to reflect the current methodology.