Unassociated Document

NEWS RELEASE

For More Information Contact:	For Release - January 29, 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 FOURTH QUARTER 2007 EARNINGS

Net Income of $13.4 Million or $0.18 per share

HOUSTON, TX, January 29, 2008 - Sterling Bancshares, Inc. (NASDAQ: SBIB) today reported net income of $13.4 million, or $0.18 per diluted share for the fourth quarter ended December 31, 2007, a 4.3% increase in net income when compared to the $12.8 million, or $0.18 per diluted share earned for the fourth quarter of 2006. Net income for the year ended December 31, 2007 was $53.0 million, or $0.72 per diluted share compared with $45.8 million, or $0.66 per diluted share earned for 2006.

“We are pleased to report record annual earnings with net income of $53 million for 2007, a 16% increase over the prior year,” commented J. Downey Bridgwater, Sterling’s Chairman, President and Chief Executive Officer. “It is a pleasure to be able to report record earnings at a time when there has been such uncertainty around the financial services industry. These results are reflective of the hard work of our bankers, our focus on our market segment and our metropolitan markets in Texas.”

“While nationally 2008 is predicted to be a challenging economic environment, we are fortunate to operate in what continues to be some of the better performing markets in the country. Sterling will continue to focus on our strategy of serving the banking needs of small to medium-sized businesses in metropolitan areas of Texas,” Bridgwater continued.

Period-end total loans held for investment increased $262 million or 8.5% to $3.3 billion at December 31, 2007 compared to December 31, 2006. Average loans held for investment were $3.3 billion for the fourth quarter of 2007, up $86.5 million on a linked-quarter basis and up $275 million or 9.0% from the fourth quarter of 2006.

Period-end total deposits increased $339 million to $3.7 billion at December 31, 2007 up 10.2% compared to December 31, 2006. Average total deposits for the fourth quarter of 2007 were up $23.6 million linked-quarter and up $370 million or 11.2% from the fourth quarter of 2006.

Net charge-offs for the fourth quarter of 2007 were $1.4 million, down from $2.1 million for the fourth quarter of 2006. Net charge-offs for the year ended December 31, 2007 were $2.9 million or 0.09% of average total loans, down from $5.7 million or 0.20% for 2006. The allowance for loan losses at December 31, 2007 was $34.4 million and represented 1.01% of total period-end loans.

Net interest income for the fourth quarter of 2007 was $47.2 million, up $67 thousand linked-quarter and up $1.8 million over the fourth quarter of 2006. For the year ended December 31, 2007, net interest income was $186 million, up $13.8 million compared to 2006. Noninterest income was $10.1 million in the fourth quarter of 2007, up $1.9 million as compared to the fourth quarter of 2006. This increase was due in part to the acquisition of MBM Advisors, Inc. whose results contributed $1.5 million in noninterest income for the fourth quarter of 2007. For the year ended December 31, 2007, noninterest income increased $5.0 million due partially to the completion of three acquisitions since September of 2006. Additionally, noninterest income for 2006 included gains totaling $1.8 million from the completion of three sale/leaseback transactions.

Sterling Bancshares, Inc., News Release

January 29, 2008

Page 2

Noninterest expense for the fourth quarter of 2007 was $36.1 million, up $1.7 million as compared with the fourth quarter of 2006. The Company completed two acquisitions since the fourth quarter of 2006 resulting in an increase in noninterest expense of approximately $2.1 million for the fourth quarter of 2007 compared to the fourth quarter of 2006. For the year ended December 31, 2007, noninterest expense was $139 million, up $8.2 million compared to 2006. The Company completed three acquisitions since September of 2006 which resulted in $10.6 million of additional noninterest expense for the year ended December 31, 2007. The Company's efficiency ratio improved to 62.71% for the fourth quarter of 2007 from 64.33% for the fourth quarter of 2006. On an annual basis the Company's efficiency ratio was 61.84% for 2007 compared to 63.79% for 2006.

As of December 31, 2007, Sterling had total assets of $4.5 billion, total loans of $3.4 billion and total deposits of $3.7 billion. Shareholders’ equity of $480 million at December 31, 2007 was 10.6% of total assets. Book value per common share at period-end was $6.56.

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, January 29, 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) 332-0637. An audio archive of the call will also be available on the web site beginning Wednesday, January 30, 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 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 $4.5 billion, which operates 49 banking centers in the greater metropolitan areas of Houston, San Antonio, and Dallas, Texas. These cities are the 4^th, 7^th and 9^th 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 3

	Quarter Ended									Year Ended
	Dec. 31,			Sep. 30,			Dec. 31,
	2007			2007			2006			2007			2006
Profitability
Net Income	$	13,362		$	14,579		$	12,810		$	52,962		$	45,840

Earnings per common share (1)
Basic	$	0.18		$	0.20		$	0.18		$	0.73		$	0.67
Diluted	$	0.18		$	0.20		$	0.18		$	0.72		$	0.66

Return on average common equity (2)		11.15	%		12.67	%		12.47	%		11.77	%		12.66	%

Return on average assets (2)		1.18	%		1.32	%		1.22	%		1.22	%		1.18	%

Tax equivalent net interest margin (3)		4.62	%		4.74	%		4.81	%		4.77	%		4.90	%

Efficiency Ratio (4):
Consolidated		62.71	%		60.38	%		64.33	%		61.84	%		63.79	%
Sterling Bank		60.44	%		57.89	%		62.13	%		59.50	%		61.46	%

Liquidity and Capital Ratios
Average loans to average deposits		92.58	%		90.98	%		94.55	%		91.93	%		95.85	%
Period-end stockholders' equity to total assets		10.59	%		10.43	%		9.94	%		10.59	%		9.94	%
Average stockholders' equity to average assets		10.59	%		10.38	%		9.78	%		10.38	%		9.33	%
Period-end tangible capital to total tangible assets		6.79	%		6.58	%		6.74	%		6.79	%		6.74	%
Tier 1 capital to risk-weighted assets		9.05	%		8.89	%		8.64	%		9.05	%		8.64	%
Total capital to risk-weighted assets		11.10	%		10.91	%		10.72	%		11.10	%		10.72	%
Tier 1 leverage ratio (Tier 1 capital to average assets)		8.59	%		8.54	%		8.14	%		8.59	%		8.14	%

Other Data
Shares used in computing earnings per common share
Basic shares		73,047			73,029			71,027			72,659			68,834
Diluted shares		73,437			73,453			71,730			73,126			69,533
End of period common shares outstanding		73,159			73,026			71,001			73,159			71,001

Book value per common share at period-end
Total	$	6.56		$	6.34		$	5.76		$	6.56		$	5.76
Tangible	$	4.04		$	3.84		$	3.78		$	4.04		$	3.78
Cash dividends paid per common share	$	0.0525		$	0.0525		$	0.047		$	0.210		$	0.186
Common stock dividend payout ratio		28.69	%		26.29	%		25.83	%		28.77	%		27.99	%
Full-time equivalent employees		1,042			1,039			1,074			1,042			1,074
Number of banking centers		49			49			45			49			45

STERLING BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS (Unaudited)

(dollars in thousands)

Page 4

	Dec. 31,			Sep. 30,			Jun. 30,			Mar. 31,			Dec. 31,
	2007			2007			2007			2007			2006
ASSETS
Cash and cash equivalents	$	133,670		$	110,876		$	161,482		$	189,207		$	134,775
Interest-bearing deposits in financial institutions		-			-			-			99			198
Trading assets		-			-			398			85			-
Available-for-sale securities, at fair value		476,690			464,789			433,325			435,255			409,351
Held-to-maturity securities, at amortized cost		180,086			176,847			177,075			165,277			164,263

Loans held for sale		78,447			54,699			71,380			52,962			54,722
Loans held for investment		3,339,837			3,319,652			3,251,164			3,186,601			3,077,845
Total loans		3,418,284			3,374,351			3,322,544			3,239,563			3,132,567
Allowance for loan losses		(34,446	)		(34,225	)		(33,450	)		(33,487	)		(32,027	)
Loans, net		3,383,838			3,340,126			3,289,094			3,206,076			3,100,540

Premises and equipment, net		27,905			26,624			26,408			25,762			23,475
Real estate acquired by foreclosure		3,683			2,713			3,064			2,624			1,465
Goodwill		168,815			166,130			165,711			159,958			130,858
Core deposits and other intangibles, net		15,971			16,562			17,172			13,966			10,299
Accrued interest receivable		19,701			20,520			19,811			18,840			18,692
Other assets		125,550			114,990			119,254			118,161			123,643
TOTAL ASSETS	$	4,535,909		$	4,440,177		$	4,412,794		$	4,335,310		$	4,117,559

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits:
Noninterest-bearing demand	$	1,092,210		$	1,082,037		$	1,144,049		$	1,132,744		$	1,058,135
Interest-bearing demand		1,403,227			1,340,746			1,332,469			1,320,245			1,229,313
Certificates and other time		1,178,274			1,238,980			1,254,338			1,202,715			1,047,163
Total deposits		3,673,711			3,661,763			3,730,856			3,655,704			3,334,611
Other borrowed funds		197,147			136,555			57,840			32,439			220,675
Subordinated debt		48,694			46,986			45,408			46,467			46,135
Junior subordinated debt		82,734			82,734			82,734			82,734			56,959
Accrued interest payable and other liabilities		53,364			49,104			50,977			72,547			49,894
Total liabilities		4,055,650			3,977,142			3,967,815			3,889,891			3,708,274

COMMITMENTS AND CONTINGENCIES		-			-			-			-			-

SHAREHOLDERS' EQUITY
Common stock		74,926			74,794			74,724			74,526			71,938
Capital surplus		110,367			108,964			108,238			106,926			80,927
Retained earnings		309,903			300,375			289,629			280,375			272,179
Treasury stock		(20,493	)		(20,493	)		(19,413	)		(13,150	)		(10,902	)
Accumulated other comprehensive income/(loss), net of tax		5,556			(605	)		(8,199	)		(3,258	)		(4,857	)
Total shareholders' equity		480,259			463,035			444,979			445,419			409,285
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	4,535,909		$	4,440,177		$	4,412,794		$	4,335,310		$	4,117,559

STERLING BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(dollars in thousands, except for per share data)

Page 5

	Quarter Ended												Year Ended
	Dec. 31,		Sep. 30,		Jun. 30,			Mar. 31,		Dec. 31,
	2007		2007		2007			2007		2006			2007		2006
Interest income:
Loans, including fees	$	66,229	$	67,033	$	65,489		$	61,350	$	62,884		$	260,101	$	227,083
Securities:
Taxable		6,522		6,111		5,755			5,461		5,824			23,849		23,886
Non-taxable		897		867		853			877		922			3,494		2,622
Trading assets		87		81		4			1		53			173		696
Federal funds sold		117		58		274			148		121			597		261
Deposits in financial institutions		2		9		7			17		59			35		183
Total interest income		73,854		74,159		72,382			67,854		69,863			288,249		254,731

Interest expense:
Demand and savings deposits		7,535		8,038		7,605			6,039		6,003			29,217		17,934
Certificates and other time deposits		14,610		14,809		13,922			12,350		12,097			55,691		37,671
Other borrowed funds		1,708		1,369		1,257			2,495		4,008			6,829		17,273
Subordinated debt		1,162		1,175		1,162			1,150		1,141			4,649		4,476
Junior subordinated debt		1,677		1,673		1,658			1,231		1,218			6,239		5,571
Total interest expense		26,692		27,064		25,604			23,265		24,467			102,625		82,925
Net interest income		47,162		47,095		46,778			44,589		45,396			185,624		171,806
Provision for credit losses		1,600		850		1,000			370		-			3,820		4,058
Net interest income after provision for credit losses		45,562		46,245		45,778			44,219		45,396			181,804		167,748

Noninterest income:
Customer service fees		3,795		3,629		3,431			3,472		3,641			14,327		12,850
Net gain (loss) on trading assets		-		2		(1	)		1		-			2		(302	)
Net gain (loss) on the sale of securities		3		-		-			-		(358	)		3		(358	)
Net gain on sale of loans		206		1,208		73			504		524			1,991		1,326
Other		6,131		5,794		4,015			3,957		4,397			19,897		17,701
Total noninterest income		10,135		10,633		7,518			7,934		8,204			36,220		31,217

Noninterest expense:
Salaries and employee benefits		20,949		20,634		19,768			19,688		19,706			81,039		76,046
Occupancy		4,692		4,706		4,606			4,362		4,153			18,366		16,075
Technology		2,439		2,260		2,095			2,049		2,098			8,843		6,882
Professional fees		1,068		1,068		1,078			945		1,841			4,159		6,147
Postage, delivery and supplies		954		903		943			811		861			3,611		3,355
Marketing		441		432		581			355		644			1,809		2,412
Core deposits and other intangibles amortization		590		610		517			420		428			2,137		1,012
Acquisition costs		-		-		166			754		-			920		638
Other		5,001		4,431		4,588			4,450		4,737			18,470		18,619
Total noninterest expense		36,134		35,044		34,342			33,834		34,468			139,354		131,186

Income before income taxes		19,563		21,834		18,954			18,319		19,132			78,670		67,779
Provision for income taxes		6,201		7,255		5,856			6,396		6,322			25,708		21,939

Net Income	$	13,362	$	14,579	$	13,098		$	11,923	$	12,810		$	52,962	$	45,840

Earnings per share (1):
Basic	$	0.18	$	0.20	$	0.18		$	0.17	$	0.18		$	0.73	$	0.67
Diluted	$	0.18	$	0.20	$	0.18		$	0.17	$	0.18		$	0.72	$	0.66

STERLING BANCSHARES, INC.

SELECTED FINANCIAL INFORMATION (Unaudited)

(dollars in thousands)

Page 6

	Quarter Ended
	Dec. 31,						Sep. 30,
	2007						2007
	Average Balance		Interest		Yield/Rate		Average Balance		Interest		Yield/Rate
Interest-Earning Assets:
Loans held for sale	$	66,897	$	1,336		7.92%	$	73,295	$	1,539		8.33
Loans held for investment:
Taxable		3,338,002		64,850		7.71%		3,251,368		65,449		7.99%
Non-taxable (3)		3,012		61		8.05%		3,145		63		7.93%
Securities:
Taxable		555,203		6,522		4.66%		531,609		6,111		4.56%
Non-taxable (3)		95,345		1,205		5.02%		92,297		1,159		4.98%
Trading assets		8,686		87		3.97%		8,470		81		3.77%
Federal funds sold		10,565		117		4.40%		4,915		58		4.69%
Deposits in financial institutions		183		2		4.37%		690		9		5.38%
Total interest-earning assets		4,077,893		74,180		7.22%		3,965,789		74,469		7.45%

Noninterest-earning assets		408,815						432,469
Total Assets	$	4,486,708					$	4,398,258

Interest-Bearing Liabilities:
Deposits:
Demand and savings	$	1,348,767	$	7,535		2.22%	$	1,320,136	$	8,038		2.42%
Certificates and other time		1,246,118		14,610		4.65%		1,243,924		14,809		4.72%
Other borrowed funds		148,982		1,708		4.55%		104,579		1,369		5.19%
Subordinated debt		47,637		1,162		9.68%		46,078		1,175		10.12%
Junior subordinated debt		82,734		1,677		8.04%		82,734		1,673		8.02%
Total interest-bearing liabilities		2,874,238		26,692		3.68%		2,797,451		27,064		3.84%

Noninterest-bearing sources:
Noninterest-bearing liabilities		1,137,265						1,144,447
Shareholders' equity		475,205						456,360
Total Liabilities and Shareholders' Equity	$	4,486,708					$	4,398,258

Tax Equivalent Net Interest Income and Margin (3)				47,488		4.62%				47,405		4.74%

Tax Equivalent Adjustment:
Loans				18						18
Securities				308						292
Total tax equivalent adjustment				326						310
Net Interest Income			$	47,162					$	47,095

STERLING BANCSHARES, INC.

SELECTED FINANCIAL INFORMATION (Unaudited)

(dollars in thousands)

Page 7

	Year Ended
	2007						2006
	Average Balance		Interest		Yield/Rate		Average Balance		Interest		Yield/Rate
Interest-Earning Assets:
Loans held for sale	$	62,232	$	4,982		8.01%	$	30,400	$	2,427		7.98%
Loans held for investment:
Taxable		3,221,523		254,931		7.91%		2,867,308		224,490		7.83%
Non-taxable (3)		3,344		265		7.92%		2,734		237		8.66%
Securities:
Taxable		523,589		23,849		4.55%		535,589		23,886		4.46%
Non-taxable (3)		92,928		4,699		5.06%		69,175		3,574		5.17%
Trading assets		4,396		173		3.93%		11,881		696		5.85%
Federal funds sold		13,061		597		4.58%		5,371		261		4.87%
Deposits in financial institutions		734		35		4.78%		3,970		183		4.61%
Total interest-earning assets		3,921,807		289,531		7.38%		3,526,428		255,754		7.25%

Noninterest-earning assets		412,478						353,321
Total Assets	$	4,334,285					$	3,879,749

Interest-Bearing Liabilities:
Deposits:
Demand and savings	$	1,304,168	$	29,217		2.24%	$	1,093,652	$	17,934		1.64%
Certificates and other time		1,191,393		55,691		4.67%		918,432		37,671		4.10%
Other borrowed funds		134,349		6,829		5.08%		345,138		17,273		5.00%
Subordinated debt		46,521		4,649		9.99%		45,522		4,476		9.83%
Junior subordinated debt		76,802		6,239		8.12%		64,210		5,571		8.68%
Total interest-bearing liabilities		2,753,233		102,625		3.73%		2,466,954		82,925		3.36%

Noninterest-bearing sources:
Noninterest-bearing liabilities		1,131,074						1,050,762
Shareholders' equity		449,978						362,033
Total Liabilities and Shareholders' Equity	$	4,334,285					$	3,879,749

Tax Equivalent Net Interest Income and Margin (3)				186,906		4.77%				172,829		4.90%

Tax Equivalent Adjustment:
Loans				77						71
Securities				1,205						952
Total tax equivalent adjustment				1,282						1,023
Net Interest Income			$	185,624					$	171,806

STERLING BANCSHARES, INC.

SELECTED FINANCIAL INFORMATION (Unaudited)

(dollars in thousands)

Page 8

	Quarter Ended
	Dec. 31,		Sep. 30,		Jun. 30,		Mar. 31,		Dec. 31,
	2007		2007		2007		2007		2006
Condensed Average Balance Sheet
Loans held for sale	$	66,897	$	73,295	$	54,986	$	53,481	$	64,172
Loans held for investment		3,341,014		3,254,513		3,238,611		3,061,937		3,066,432
Total loans		3,407,911		3,327,808		3,293,597		3,115,418		3,130,604
Available-for-sale securities, at fair value		472,239		446,721		440,994		421,069		455,512
Held-to-maturity securities, at amortized cost		178,309		177,185		163,471		165,294		166,048
Trading assets		8,686		8,470		216		72		4,360
Other earning assets		10,748		5,605		25,623		13,324		14,240
Total earning assets		4,077,893		3,965,789		3,923,901		3,715,177		3,770,764
Goodwill		166,177		165,879		160,141		131,507		129,715
Core deposits and other intangibles, net		16,271		16,874		13,787		10,166		10,509
All other non-interest earning assets		226,367		249,716		244,628		247,970		255,556
Total assets	$	4,486,708	$	4,398,258	$	4,342,457	$	4,104,820	$	4,166,544

Noninterest-bearing demand deposits	$	1,086,217	$	1,093,485	$	1,108,895	$	1,031,046	$	1,045,883
Interest bearing deposits:
Interest-bearing demand deposits		1,348,767		1,320,136		1,318,839		1,227,422		1,193,946
Jumbo certificates of deposit		789,006		758,509		732,260		654,466		635,943
Regular certificates of deposit		339,085		343,288		330,084		311,710		310,134
Brokered certificates of deposit		118,027		142,127		126,136		118,524		125,300
Total deposits		3,681,102		3,657,545		3,616,214		3,343,168		3,311,206
Other borrowed funds		148,982		104,579		96,024		188,569		299,667
Subordinated debt		47,637		46,078		46,232		46,125		46,288
Junior subordinated debt		82,734		82,734		82,734		58,678		56,960
Accrued interest payable and other liabilities		51,048		50,962		50,515		51,380		44,932
Total liabilities		4,011,503		3,941,898		3,891,719		3,687,920		3,759,053
Total shareholders' equity		475,205		456,360		450,738		416,900		407,491
Total liabilities and shareholders' equity	$	4,486,708	$	4,398,258	$	4,342,457	$	4,104,820	$	4,166,544

	Dec. 31,		Sep. 30,		Jun. 30,		Mar. 31,		Dec. 31,
	2007		2007		2007		2007		2006
Period-end Loans:
Loans held for sale	$	78,447	$	54,699	$	71,380	$	52,962	$	54,722
Loans held for investment:
Commercial and industrial		934,176		940,821		913,796		862,516		851,973
Real Estate:
Commercial		1,389,225		1,382,313		1,371,036		1,360,681		1,338,831
Construction and development		714,600		697,099		671,429		666,177		598,030
Residential mortgage		226,085		219,914		215,313		215,536		209,226
Consumer/other		75,751		79,505		79,590		81,691		79,785
Loans held for investment		3,339,837		3,319,652		3,251,164		3,186,601		3,077,845
Total period-end loans	$	3,418,284	$	3,374,351	$	3,322,544	$	3,239,563	$	3,132,567

Period-End Deposits:
Noninterest-bearing demand	$	1,092,210	$	1,082,037	$	1,144,049	$	1,132,744	$	1,058,135
Interest-bearing demand		1,403,227		1,340,746		1,332,469		1,320,245		1,229,313
Certificates and other time deposits:
Jumbo		756,980		773,770		766,416		749,285		610,330
Regular		332,206		345,205		342,579		325,900		307,419
Brokered		89,088		120,005		145,343		127,530		129,414
Total period-end deposits	$	3,673,711	$	3,661,763	$	3,730,856	$	3,655,704	$	3,334,611

STERLING BANCSHARES, INC.

SELECTED FINANCIAL INFORMATION (Unaudited)

(dollars in thousands)

Page 9

	Quarter Ended										Year Ended
	Dec. 31,		Sep. 30,		Jun. 30,		Mar. 31,		Dec. 31,
	2007		2007		2007		2007		2006		2007		2006
Allowance For Credit Losses
Allowance for loan losses at beginning of period	$	34,225	$	33,450	$	33,487	$	32,027	$	34,146	$	32,027	$	31,230
Charge-offs:
Commercial, financial and industrial		876		540		1,316		535		1,493		3,267		4,372
Real estate, mortgage and construction		728		52		166		120		1,637		1,066		3,879
Consumer		547		478		279		325		420		1,629		1,199
Total charge-offs		2,151		1,070		1,761		980		3,550		5,962		9,450
Recoveries:
Commercial, financial and industrial		270		612		541		406		1,261		1,829		3,205
Real estate, mortgage and construction		8		3		34		2		71		47		79
Consumer		494		380		149		166		99		1,189		507
Total Recoveries		772		995		724		574		1,431		3,065		3,791
Net charge-offs		1,379		75		1,037		406		2,119		2,897		5,659
Allowance for credit losses associated with acquired institutions		-		-		-		1,496		-		1,496		2,152
Provision for loan losses		1,600		850		1,000		370		-		3,820		4,304
Allowance for loan losses at end of period	$	34,446	$	34,225	$	33,450	$	33,487	$	32,027	$	34,446	$	32,027

Reserve for unfunded loan commitments at beginning of period		927		927		927		927		927		927		1,173
Provision for losses on unfunded loan commitments		-		-		-		-		-		-		(246	)
Reserve for unfunded loan commitments at end of period		927		927		927		927		927		927		927
Total allowance for credit losses	$	35,373	$	35,152	$	34,377	$	34,414	$	32,954	$	35,373	$	32,954

Nonperforming Assets
Nonperforming loans:
Nonaccrual	$	19,445	$	10,919	$	10,862	$	12,269	$	10,611	$	19,445	$	10,611
Restructured		769		772		772		777		776		769		776
Real estate acquired by foreclosure		3,683		2,713		3,064		2,624		1,465		3,683		1,465
Other repossessed assets		152		67		113		191		404		152		404
Total nonperforming assets	$	24,049	$	14,471	$	14,811	$	15,861	$	13,256	$	24,049	$	13,256
Accruing loans past due 90 days or more	$	1,304	$	1,477	$	1,533	$	4,575	$	2,731	$	1,304	$	2,731

Ratios
Period-end allowance for credit losses to period-end loans		1.03%		1.04%		1.03%		1.06%		1.05%		1.03%		1.05%
Period-end allowance for loan losses to period-end loans		1.01%		1.01%		1.01%		1.03%		1.02%		1.01%		1.02%
Period-end allowance for loan losses to nonperforming loans		170.41%		292.74%		287.52%		256.69%		281.27%		170.41%		281.27%
Nonperforming loans to period-end loans		0.59%		0.35%		0.35%		0.40%		0.36%		0.59%		0.36%
Nonperforming assets to period-end assets		0.53%		0.33%		0.34%		0.37%		0.32%		0.53%		0.32%
Net charge-offs to average loans (2)		0.16%		-		0.13%		0.05%		0.27%		0.09%		0.20%

STERLING BANCSHARES, INC.

FOOTNOTES TO EARNINGS RELEASE

Page 10

(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 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.