Unassociated Document

0001144204-08-041031.txt : 20080722 0001144204-08-041031.hdr.sgml : 20080722 20080722071553 ACCESSION NUMBER: 0001144204-08-041031 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20080722 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20080722 DATE AS OF CHANGE: 20080722 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STERLING BANCSHARES INC CENTRAL INDEX KEY: 0000891098 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 742175590 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-20750 FILM NUMBER: 08962403 BUSINESS ADDRESS: STREET 1: 2550 N. LOOP WEST STREET 2: SUITE 600 CITY: HOUSTON STATE: TX ZIP: 77092 BUSINESS PHONE: 7134668300 MAIL ADDRESS: STREET 1: 2550 N. LOOP WEST STREET 2: SUITE 600 CITY: HOUSTON STATE: TX ZIP: 77092 8-K 1 v120313_8k.htm Unassociated Document

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): July 22, 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 July 22, 2008, Sterling Bancshares, Inc. issued a press release announcing results for the quarterly period ended June 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 July 22, 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: July 22, 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 July 22, 2008.

EX-99.1 2 v120313_ex99-1.htm Unassociated Document EXHIBIT 99.1

NEWS RELEASE

For More Information Contact:	For Release - July 22, 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 SECOND QUARTER 2008 EARNINGS

Net Income of $10.3 Million or $0.14 per share

HOUSTON, TX, July 22, 2008 – Sterling Bancshares, Inc. (NASDAQ: SBIB) today reported net income of $10.3 million, or $0.14 per diluted share for the second quarter ended June 30, 2008, compared to the $13.1 million or $0.18 per diluted share earned for the second quarter of 2007.

Net income for the six months ended June 30, 2008 was $21.9 million, or $0.30 per diluted share compared with $25.0 million or $0.34 per diluted share for the same period in 2007.

“We recorded encouraging core operating results in the second quarter despite operating in an increasingly challenging nationwide banking environment,” commented J. Downey Bridgwater, Sterling's Chairman, President and Chief Executive Officer. “The combination of growth in loans and deposits, a stable net interest margin, noninterest income growth and a reduction in our efficiency ratio on both a linked quarter and a year over year basis demonstrates the strength and position of our franchise. Unfortunately, our results were negatively impacted at the end of the quarter by one large credit relationship, which accounted for $3.7 million in additional provision for the quarter and $20 million in additional nonperforming loans. This credit is an extremely unusual situation for us and is not representative of any systemic issues within the overall loan portfolio.”

During the second quarter of 2008, we recorded a total provision for credit losses of $8.2 million, an increase of $4.0 million over the prior quarter. This increase in provision was primarily related to one commercial credit relationship totaling $20 million, which has also driven the increase in our nonperforming loans. The Company has committed to fund additional proceeds of $9.2 million related to this borrower in July increasing the Company’s overall exposure to $29.2 million in the third quarter. The Company estimates approximately $600 thousand of provision will be recorded in the third quarter of 2008 related to this increased exposure. The borrower is an energy related business and the relationship is part of a shared national credit totaling approximately $2.4 billion that includes 39 of the largest and most sophisticated financial institutions in our industry. The borrower has indicated that it may file for Chapter 11 bankruptcy protection. As a result, we have recorded approximately $3.7 million of additional provision in the second quarter and we will reevaluate the provision after a full review of the relationship by the lead bank and their consultants. It is our belief that the company has significant, valuable energy and fixed assets, which should help to mitigate any significant future losses. Our energy portfolio represents approximately ten percent of our overall loan portfolio. Our remaining energy loans are currently performing as agreed and we do not anticipate any further issues in the portfolio. The energy sector continues to be very healthy and this single problem relationship is not indicative of any issues within this sector or our energy portfolio.

Sterling Bancshares, Inc., News Release

July 22, 2008

Page 2

The allowance for credit losses at June 30, 2008 was $42.6 million and represented 1.16% of total period-end loans. The Company provided $8.2 million for credit losses in the second quarter of 2008 compared with $4.2 million for the first quarter of 2008. Net charge-offs for the second quarter of 2008 were $2.2 million or 0.24% of average total loans, compared to $2.9 million or 0.34% of average total loans, for the first quarter of 2008. Net charge-offs for the six month period ended June 30, 2008 were $5.1 million or 0.29% of average total loans, up from $1.4 million or 0.09% for the same period in 2007.

Period-end total loans held for investment increased $84.5 million or 2.4% on a linked-quarter basis to $3.5 billion at June 30, 2008 and up $292 million or 9.0% since June 30, 2007. Average loans held for investment were $3.5 billion for the second quarter of 2008, up $133 million or 3.9% on a linked-quarter basis and up $302 million or 9.3% from the second quarter of 2007.

Period-end total deposits increased $49.4 million to $3.7 billion at June 30, 2008, up 1.4% on a linked-quarter basis and down $36.5 million or 1.0% compared to June 30, 2007. Average total deposits for the second quarter of 2008 were down $39.4 million or 1.1% on a linked-quarter basis and down $52.3 million or 1.4% from the second quarter of 2007.

Tax-equivalent net interest income for the second quarter of 2008 was $50.6 million, up $2.3 million or 4.7% linked-quarter and up $3.5 million over the second quarter of 2007. Tax-equivalent net interest margin was 4.66% for the second quarter of 2008, which was consistent with the first quarter of 2008. This increase in net interest income was due in part, to a decrease in interest expense on interest-bearing deposits resulting from a decline in market interest rates and the strategic decision to utilize lower cost borrowings.

Noninterest income increased $3.4 million in the second quarter of 2008 as compared to the second quarter of 2007 and $6.1 million for the six months ended June 30, 2008 compared to the same period in 2007. Customer service fees increased $717 thousand for the second quarter of 2008 compared to the second quarter of 2007 and $1.1 million for the six months ended June 30, 2008 compared to the same period in 2007 due primarily to an increase in account analysis fees. Wealth management fees increased $1.7 million for the second quarter of 2008 compared to the second quarter of 2007 and $3.4 million for the six months ended June 30, 2008 compared to the same period in 2007 due to the addition of MBM Advisors in June 2007.

Noninterest expense for the second quarter of 2008 was $37.7 million, up $320 thousand on a linked-quarter basis. The Company acquired ten banking centers in February 2008 resulting in additional noninterest expense of approximately $375 thousand linked-quarter. Noninterest expense increased $3.4 million for the second quarter of 2008 as compared with the second quarter of 2007 and $6.9 million for the six month period ended June 30, 2008 compared to the same period in 2007. Since the second quarter of 2007, the Company has completed three acquisitions, which resulted in additional noninterest expense of $2.5 million for the second quarter of 2008 compared to the same quarter in 2007, and $5.1 million for the six month period ended June 30, 2008 compared to the same period in 2007. The Company’s efficiency ratio was 61.31% for the second quarter of 2008 compared to 62.34% for the first quarter of 2008 and 61.76% for the second quarter of 2007.

As of June 30, 2008, Sterling had total assets of $4.9 billion, total loans of $3.7 billion and total deposits of $3.7 billion. Shareholders’ equity of $495 million at June 30, 2008 was 10.1% of total assets. Book value per common share at period-end was $6.76.

Sterling Bancshares, Inc., News Release

July 22, 2008

Page 3

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, July 22, 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) 332-0718. An audio archive of the call will also be available on the web site beginning Wednesday, July 23, 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
	Jun. 30,			Mar. 31,			Jun. 30,
	2008			2008			2007			2008			2007
Profitability
Net Income	$	10,307		$	11,609		$	13,098		$	21,916		$	25,021

Earnings per common share (1)
Basic	$	0.14		$	0.16		$	0.18		$	0.30		$	0.35
Diluted	$	0.14		$	0.16		$	0.18		$	0.30		$	0.34

Return on average common equity (2)		8.26	%		9.43	%		11.66	%		8.84	%		11.63	%

Return on average assets (2)		0.86	%		1.01	%		1.21	%		0.93	%		1.19	%

Net interest margin (3)		4.66	%		4.67	%		4.81	%		4.67	%		4.86	%

Efficiency Ratio (4):
Consolidated		61.31	%		62.34	%		61.76	%		61.81	%		62.16	%
Sterling Bank		59.49	%		60.18	%		59.31	%		59.83	%		59.88	%

Liquidity and Capital Ratios
Average loans to average deposits		102.02	%		96.75	%		91.08	%		99.37	%		92.09	%
Period-end stockholders' equity to total assets		10.07	%		10.46	%		10.08	%		10.07	%		10.08	%
Average stockholders' equity to average assets		10.38	%		10.75	%		10.38	%		10.56	%		10.27	%
Period-end tangible capital to total tangible assets		6.49	%		6.76	%		6.20	%		6.49	%		6.20	%
Tier 1 capital to risk-weighted assets		9.14	%		8.72	%		8.89	%		9.14	%		8.89	%
Total capital to risk-weighted assets		11.70	%		10.72	%		10.91	%		11.70	%		10.91	%
Tier 1 leverage ratio (Tier 1 capital to average assets)		8.20	%		8.46	%		8.41	%		8.20	%		8.41	%

Other Data
Shares used in computing earnings per common share
Basic shares		73,137			73,152			73,295			73,144			72,196
Diluted shares		73,419			73,405			73,783			73,412			72,702
End of period common shares outstanding		73,160			73,115			73,057			73,160			73,057
Book value per common share at period-end
Total	$	6.76		$	6.79		$	6.09		$	6.76		$	6.09
Tangible	$	4.19		$	4.21		$	3.59		$	4.19		$	3.59
Cash dividends paid per common share	$	0.055		$	0.055		$	0.0525		$	0.110		$	0.105
Common stock dividend payout ratio		39.06	%		34.69	%		29.35	%		36.74	%		30.26	%
Full-time equivalent employees		1,126			1,103			1,048			1,126			1,048
Number of banking centers		59			59			49			59			49

STERLING BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS (Unaudited)

(dollars in thousands)

Page 5

	Jun. 30,			Mar. 31,			Dec. 31,			Sep. 30,			Jun. 30,
	2008			2008			2007			2007			2007
ASSETS
Cash and cash equivalents	$	142,964		$	135,624		$	133,670		$	110,876		$	161,482
Trading assets		-			-			-			-			398
Available-for-sale securities, at fair value		568,329			531,572			476,690			464,789			433,325
Held-to-maturity securities, at amortized cost		175,635			176,902			180,086			176,847			177,075

Loans held for sale		112,614			90,274			78,447			54,699			71,380
Loans held for investment		3,542,994			3,458,476			3,339,837			3,319,652			3,251,164
Total loans		3,655,608			3,548,750			3,418,284			3,374,351			3,322,544
Allowance for loan losses		(41,651	)		(35,681	)		(34,446	)		(34,225	)		(33,450	)
Loans, net		3,613,957			3,513,069			3,383,838			3,340,126			3,289,094

Premises and equipment, net		40,311			40,027			27,905			26,624			26,408
Real estate acquired by foreclosure		4,293			4,042			3,683			2,713			3,064
Goodwill		173,104			172,686			168,815			166,130			165,711
Core deposits and other intangibles, net		15,031			15,617			15,971			16,562			17,172
Accrued interest receivable		18,712			18,558			19,701			20,520			19,811
Other assets		157,118			137,364			125,550			114,990			119,254
TOTAL ASSETS	$	4,909,454		$	4,745,461		$	4,535,909		$	4,440,177		$	4,412,794

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits:
Noninterest-bearing demand	$	1,135,296		$	1,100,919		$	1,092,210		$	1,082,037		$	1,144,049
Interest-bearing demand		1,409,220			1,464,937			1,403,227			1,340,746			1,332,469
Certificates and other time		1,149,819			1,079,061			1,178,274			1,238,980			1,254,338
Total deposits		3,694,335			3,644,917			3,673,711			3,661,763			3,730,856
Other borrowed funds		521,395			425,929			197,147			136,555			57,840
Subordinated debt		73,816			49,142			48,694			46,986			45,408
Junior subordinated debt		82,734			82,734			82,734			82,734			82,734
Accrued interest payable and other liabilities		42,640			46,369			53,364			49,104			50,977
Total liabilities		4,414,920			4,249,091			4,055,650			3,977,142			3,967,815

COMMITMENTS AND CONTINGENCIES		-			-			-			-			-

SHAREHOLDERS' EQUITY
Common stock		75,028			74,983			74,926			74,794			74,724
Capital surplus		112,402			111,267			110,367			108,964			108,238
Retained earnings		323,765			317,485			309,903			300,375			289,629
Treasury stock		(21,399	)		(21,399	)		(20,493	)		(20,493	)		(19,413	)
Accumulated other comprehensive income/(loss), net of tax		4,738			14,034			5,556			(605	)		(8,199	)
Total shareholders' equity		494,534			496,370			480,259			463,035			444,979
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	4,909,454		$	4,745,461		$	4,535,909		$	4,440,177		$	4,412,794

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,
	2008		2008		2007		2007		2007		2008		2007
Interest income:
Loans, including fees	$	60,082	$	63,052	$	66,229	$	67,033	$	65,489	$	123,134	$	126,839
Securities:
Taxable		7,408		6,549		6,522		6,111		5,755		13,957		11,216
Non-taxable		908		908		897		867		853		1,816		1,730
Trading assets		22		21		87		81		4		43		5
Federal funds sold		27		39		117		58		274		66		422
Deposits in financial institutions		5		3		2		9		7		8		24
Total interest income		68,452		70,572		73,854		74,159		72,382		139,024		140,236

Interest expense:
Demand and savings deposits		3,889		5,615		7,535		8,038		7,605		9,504		13,644
Certificates and other time deposits		8,662		11,977		14,610		14,809		13,922		20,639		26,272
Other borrowed funds		3,409		2,352		1,708		1,369		1,257		5,761		3,752
Subordinated debt		864		1,032		1,162		1,175		1,162		1,896		2,312
Junior subordinated debt		1,384		1,600		1,677		1,673		1,658		2,984		2,889
Total interest expense		18,208		22,576		26,692		27,064		25,604		40,784		48,869
Net interest income		50,244		47,996		47,162		47,095		46,778		98,240		91,367
Provision for credit losses		8,167		4,150		1,600		850		1,000		12,317		1,370
Net interest income after provision for credit losses		42,077		43,846		45,562		46,245		45,778		85,923		89,997

Noninterest income:
Customer service fees		4,148		3,876		3,795		3,629		3,431		8,024		6,903
Wealth management fees		2,363		2,338		2,192		2,186		672		4,701		1,284
Other noninterest income		4,359		4,501		4,148		4,818		3,415		8,860		7,265
Total noninterest income		10,870		10,715		10,135		10,633		7,518		21,585		15,452

Noninterest expense:
Salaries and employee benefits		20,865		20,759		20,949		20,634		19,768		41,624		39,456
Occupancy		5,360		5,265		4,692		4,706		4,606		10,625		8,968
Technology		2,305		2,330		2,439		2,260		2,095		4,635		4,144
Professional fees		1,215		1,009		1,068		1,068		1,078		2,224		2,023
Postage, delivery and supplies		963		1,073		954		903		943		2,036		1,754
Marketing		724		413		441		432		581		1,137		936
Core deposits and other intangibles amortization		586		585		590		610		517		1,171		937
Acquisition costs		-		562		-		-		166		562		920
Other		5,690		5,392		5,001		4,431		4,588		11,082		9,038
Total noninterest expense		37,708		37,388		36,134		35,044		34,342		75,096		68,176

Income before income taxes		15,239		17,173		19,563		21,834		18,954		32,412		37,273
Provision for income taxes		4,932		5,564		6,201		7,255		5,856		10,496		12,252

Net Income	$	10,307	$	11,609	$	13,362	$	14,579	$	13,098	$	21,916	$	25,021

Earnings per share (1):
Basic	$	0.14	$	0.16	$	0.18	$	0.20	$	0.18	$	0.30	$	0.35
Diluted	$	0.14	$	0.16	$	0.18	$	0.20	$	0.18	$	0.30	$	0.34

STERLING BANCSHARES, INC.

SELECTED FINANCIAL INFORMATION (Unaudited)

(dollars in thousands)

Page 7

	Quarter Ended
	Jun. 30,						Mar. 31,
	2008						2008
		Average Balance		Interest	Yield/Rate			Average Balance		Interest	Yield/Rate
Interest-Earning Assets:
Loans held for sale	$	94,801	$	1,540	6.53	%	$	78,331	$	1,384	7.11	%
Loans held for investment:
Taxable		3,538,656		58,510	6.65	%		3,404,998		61,626	7.28	%
Non-taxable (3)		2,321		46	7.89	%		2,974		61	8.27	%
Securities:
Taxable		622,794		7,408	4.78	%		567,343		6,549	4.64	%
Non-taxable (3)		96,814		1,285	5.34	%		97,411		1,251	5.17	%
Trading assets		4,395		22	1.98	%		4,395		21	1.91	%
Federal funds sold		5,593		27	1.99	%		4,990		39	3.13	%
Deposits in financial institutions		1,010		5	1.94	%		437		3	3.01	%
Total interest-earning assets		4,366,384		68,843	6.34	%		4,160,879		70,934	6.86	%

Noninterest-earning assets		471,081						442,538
Total Assets	$	4,837,465					$	4,603,417

Interest-Bearing Liabilities:
Deposits:
Demand and savings	$	1,417,453	$	3,889	1.10	%	$	1,430,887	$	5,615	1.58	%
Certificates and other time		1,056,022		8,662	3.30	%		1,125,983		11,977	4.28	%
Other borrowed funds		595,081		3,409	2.30	%		323,622		2,352	2.92	%
Subordinated debt		49,511		864	7.02	%		49,272		1,032	8.42	%
Junior subordinated debt		82,734		1,384	6.73	%		82,734		1,600	7.78	%
Total interest-bearing liabilities		3,200,801		18,208	2.29	%		3,012,498		22,576	3.01	%

Noninterest-bearing sources:
Noninterest-bearing liabilities		1,134,548						1,095,966
Shareholders' equity		502,116						494,953
Total Liabilities and Shareholders' Equity	$	4,837,465					$	4,603,417

Tax Equivalent Net Interest Income and Margin (3)				50,635	4.66	%				48,358	4.67	%

Tax Equivalent adjustment:
Loans				14						19
Securities				377						343
Total tax equivalent adjustment				391						362
Net Interest Income			$	50,244					$	47,996

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	$	86,566	$	2,925		6.79	%	$	54,238	$	2,107		7.83	%
Loans held for investment:
Taxable		3,471,827		120,136		6.96	%		3,147,148		124,632		7.99	%
Non-taxable (3)		2,648		106		8.10	%		3,614		141		7.87	%
Securities:
Taxable		595,068		13,957		4.72	%		503,444		11,216		4.49	%
Non-taxable (3)		97,113		2,536		5.25	%		92,020		2,334		5.11	%
Trading assets		4,395		43		1.94	%		145		5		7.16	%
Federal funds sold		5,291		66		2.53	%		18,471		422		4.61	%
Deposits in financial institutions		723		8		2.26	%		1,036		24		4.61	%
Total interest-earning assets		4,263,631		139,777		6.59	%		3,820,116		140,881		7.44	%

Noninterest-earning assets		456,810							404,179
Total Assets	$	4,720,441						$	4,224,295

Interest-Bearing Liabilities:
Deposits:
Demand and savings	$	1,424,169	$	9,504		1.34	%	$	1,273,383	$	13,644		2.16	%
Certificates and other time		1,091,002		20,639		3.80	%		1,136,877		26,272		4.66	%
Other borrowed funds		459,351		5,761		2.52	%		142,041		3,752		5.33	%
Subordinated debt		49,392		1,896		7.72	%		46,179		2,312		10.10	%
Junior subordinated debt		82,734		2,984		7.25	%		70,772		2,889		8.23	%
Total interest-bearing liabilities		3,106,648		40,784		2.64	%		2,669,252		48,869		3.69	%

Noninterest-bearing sources:
Noninterest-bearing liabilities		1,115,258							1,121,131
Shareholders' equity		498,535							433,912
Total Liabilities and Shareholders' Equity	$	4,720,441						$	4,224,295

Tax Equivalent Net Interest Income and Margin (3)				98,993		4.67	%				92,012		4.86	%

Tax equivalent adjustment:
Loans				33							41
Securities				720							604
Total tax equivalent adjustment				753							645
Net Interest Income			$	98,240						$	91,367

STERLING BANCSHARES, INC.

SELECTED FINANCIAL INFORMATION (Unaudited)

(dollars in thousands)

Page 9

	Quarter Ended
	Jun. 30,		Mar. 31,		Dec. 31,		Sep. 30,		Jun. 30,
		2008		2008		2007		2007		2007
Condensed Average Balance Sheet
Loans held for sale	$	94,801	$	78,331	$	66,897	$	73,295	$	54,986
Loans held for investment		3,540,977		3,407,972		3,341,014		3,254,513		3,238,611
Total loans		3,635,778		3,486,303		3,407,911		3,327,808		3,293,597
Available-for-sale securities, at fair value		543,696		486,131		472,239		446,721		440,994
Held-to-maturity securities, at amortized cost		175,912		178,623		178,309		177,185		163,471
Trading assets		4,395		4,395		8,686		8,470		216
Other earning assets		6,603		5,427		10,748		5,605		25,623
Total earning assets		4,366,384		4,160,879		4,077,893		3,965,789		3,923,901
Goodwill		172,690		169,198		166,177		165,879		160,141
Core deposits and other intangibles, net		15,322		15,767		16,271		16,874		13,787
All other noninterest-earning assets		283,069		257,573		226,367		249,716		244,628
Total assets	$	4,837,465	$	4,603,417	$	4,486,708	$	4,398,258	$	4,342,457

Noninterest-bearing demand deposits	$	1,090,439	$	1,046,412	$	1,086,217	$	1,093,485	$	1,108,895
Interest-bearing deposits:
Interest-bearing demand deposits		1,417,453		1,430,887		1,348,767		1,320,136		1,318,839
Jumbo certificates of deposit		642,066		707,543		789,006		758,509		732,260
Regular certificates of deposit		302,790		327,624		339,085		343,288		330,084
Brokered certificates of deposit		111,166		90,816		118,027		142,127		126,136
Total deposits		3,563,914		3,603,282		3,681,102		3,657,545		3,616,214
Other borrowed funds		595,081		323,622		148,982		104,579		96,024
Subordinated debt		49,511		49,272		47,637		46,078		46,232
Junior subordinated debt		82,734		82,734		82,734		82,734		82,734
Accrued interest payable and other liabilities		44,109		49,554		51,048		50,962		50,515
Total liabilities		4,335,349		4,108,464		4,011,503		3,941,898		3,891,719
Total shareholders' equity		502,116		494,953		475,205		456,360		450,738
Total liabilities and shareholders' equity	$	4,837,465	$	4,603,417	$	4,486,708	$	4,398,258	$	4,342,457

	Jun. 30,		Mar. 31,		Dec. 31,		Sep. 30,		Jun. 30,
	2008		2008		2007		2007		2007
Period-end Loans:
Loans held for sale	$	112,614	$	90,274	$	78,447	$	54,699	$	71,380
Loans held for investment:
Commercial and industrial		1,008,410		980,884		934,176		940,821		913,796
Real Estate:
Commercial		1,473,843		1,432,905		1,389,225		1,382,313		1,371,036
Construction and development		728,217		731,833		714,600		697,099		671,429
Residential mortgage		258,600		237,715		226,085		219,914		215,313
Consumer/other		73,924		75,139		75,751		79,505		79,590
Loans held for investment		3,542,994		3,458,476		3,339,837		3,319,652		3,251,164
Total period-end loans	$	3,655,608	$	3,548,750	$	3,418,284	$	3,374,351	$	3,322,544

Period-End Deposits:
Noninterest-bearing demand	$	1,135,296	$	1,100,919	$	1,092,210	$	1,082,037	$	1,144,049
Interest-bearing demand		1,409,220		1,464,937		1,403,227		1,340,746		1,332,469
Certificates and other time deposits:
Jumbo		674,891		682,264		756,980		773,770		766,416
Regular		318,762		304,776		332,206		345,205		342,579
Brokered		156,166		92,021		89,088		120,005		145,343
Total period-end deposits	$	3,694,335	$	3,644,917	$	3,673,711	$	3,661,763	$	3,730,856

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,
	2008			2008			2007			2007			2007			2008			2007
Allowance For Credit Losses
Allowance for loan losses at beginning of period	$	35,681		$	34,446		$	34,225		$	33,450		$	33,487		$	34,446		$	32,027
Charge-offs:
Commercial, financial and industrial		2,210			1,721			876			540			1,316			3,931			1,851
Real estate, mortgage and construction		252			1,481			728			52			166			1,733			286
Consumer		351			303			547			478			279			654			604
Total charge-offs		2,813			3,505			2,151			1,070			1,761			6,318			2,741
Recoveries:
Commercial, financial and industrial		477			352			270			612			541			829			947
Real estate, mortgage and construction		23			61			8			3			34			84			36
Consumer		116			177			494			380			149			293			315
Total Recoveries		616			590			772			995			724			1,206			1,298
Net charge-offs		2,197			2,915			1,379			75			1,037			5,112			1,443
Allowance for credit losses associated with acquired institutions		-			-			-			-			-			-			1,496
Provision for loan losses		8,167			4,150			1,600			850			1,000			12,317			1,370
Allowance for loan losses at end of period	$	41,651		$	35,681		$	34,446		$	34,225		$	33,450		$	41,651		$	33,450

Reserve for unfunded loan commitments at beginning of period		927			927			927			927			927			927			927
Provision for losses on unfunded loan commitments		-			-			-			-			-			-			-
Reserve for unfunded loan commitments at end of period		927			927			927			927			927			927			927
Total allowance for credit losses	$	42,578		$	36,608		$	35,373		$	35,152		$	34,377		$	42,578		$	34,377

Nonperforming Assets
Nonperforming loans:
Nonaccrual	$	48,921		$	21,199		$	19,445		$	10,919		$	10,862		$	48,921		$	10,862
Restructured		-			764			769			772			772			-			772
Real estate acquired by foreclosure		4,293			4,042			3,683			2,713			3,064			4,293			3,064
Other repossessed assets		118			112			152			67			113			118			113
Total nonperforming assets	$	53,332		$	26,117		$	24,049		$	14,471		$	14,811		$	53,332		$	14,811

Accruing loans past due 90 days or more	$	2,224		$	944		$	1,304		$	1,477		$	1,533		$	2,224		$	1,533

Ratios
Period-end allowance for credit losses to period-end loans		1.16	%		1.03	%		1.03	%		1.04	%		1.03	%		1.16	%		1.03	%
Period-end allowance for loan losses to period-end loans		1.14	%		1.01	%		1.01	%		1.01	%		1.01	%		1.14	%		1.01	%
Period-end allowance for loan losses to nonperforming loans		85.14	%		162.46	%		170.41	%		292.74	%		287.52	%		85.14	%		287.52	%
Nonperforming loans to period-end loans		1.34	%		0.62	%		0.59	%		0.35	%		0.35	%		1.34	%		0.35	%
Nonperforming assets to period-end assets		1.09	%		0.55	%		0.53	%		0.33	%		0.34	%		1.09	%		0.34	%
Net charge-offs to average loans (2)		0.24	%		0.34	%		0.16	%		-			0.13	%		0.29	%		0.09	%

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 costs by tax equivalent basis net interest income plus noninterest income less net gain (loss) on sales of investment securities. Prior period amounts have been restated to reflect the current methodology.

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