EX-99.1 2 dex991.htm PRESS RELEASE Press Release

EXHIBIT 99.1

 

NEWS RELEASE

 

For More Information Contact:    For Release - October 21, 2004

J. Downey Bridgwater, President & Chief Executive Officer

        713-507-2670

Stephen Raffaele, Executive Vice President & Chief Financial Officer

        713-507-7408

     

 

STERLING BANCSHARES REPORTS THIRD QUARTER 2004 EARNINGS

 

HOUSTON, TX, October 21, 2004 – Sterling Bancshares, Inc. (NASDAQ: SBIB) today announced results for the third quarter ended September 30, 2004.

 

The Company reported net income of $6.5 million or $0.14 per diluted share for the third quarter of 2004 compared to $27.3 million or $0.61 per diluted share for the third quarter of 2003. Net income for the third quarter of 2003 included after-tax income of $19.9 million or $0.44 per diluted share from the Company’s mortgage-banking segment which was sold on September 30, 2003 and separately reported as discontinued operations. Income from continuing operations for the third quarter of 2003 was $7.4 million or $0.17 per diluted share.

 

For the nine months ended September 30, 2004, net income was $18.8 million or $0.42 per diluted share compared with $43.2 million or $0.97 per diluted share earned for the same period in 2003. Net income for the nine months ended September 30, 2004, includes after-tax net gains on the sales of securities of $3.0 million or $0.07 per diluted share and impairment charges on certain bank properties of $721 thousand or $0.02 per diluted share, net of taxes. Net income for the 2003 period included income from discontinued operations of $20.1 million or $0.45 per diluted share and an after-tax net gain on the sale of rural banking offices of $2.1 million or $0.05 per diluted share.

 

“I am pleased with the Company’s performance for the third quarter,” commented J. Downey Bridgwater, President and Chief Executive Officer. “Our earnings reflect an increase in our net interest margin, asset quality within our targeted ranges and growth in our loan portfolio as we focus on serving our new and existing customers. By continuing our focus on the owner-operated business market and generating quality loan growth, we believe that Sterling will continue to capitalize on the strengthening economy, growing Texas markets and rising interest rate environment,” he added.

 

The Company continued its expense management initiative during the quarter. Numerous expense reduction and alignment projects have been identified including the consolidation of smaller offices, disposition of unprofitable initiatives, modification of certain perquisite benefit programs and continued reductions of staffing levels through attrition. These projects are expected to continue to reduce the Company’s current noninterest expense base during the remainder of 2004 and allow for greater control of expense growth in 2005.

 

As one of these initiatives, the Company sold one unprofitable banking facility during the third quarter of 2004. This sale is expected to reduce noninterest expenses by $440 thousand annually. “With the increases in our net interest margin and higher revenues, we expect these expense

Sterling Bancshares, Inc. News Release

October 21, 2004

Page 2

 

initiatives to improve Sterling’s efficiency ratio to the mid-60% level by mid- to late-2005,” said Mr. Bridgwater. “Throughout the entire process of implementing these initiatives, we have maintained our focus on providing the high level of personal service that our customers expect,” he commented.

 

Net interest income was $34.3 million for the third quarter of 2004, an increase of $1.9 million from the second quarter of 2004. The net interest margin for the third quarter of 2004 was 4.75%, up 20 basis points from the second quarter of 2004 and up 17 basis points from the 4.58% margin for the third quarter of 2003. During the third quarter of 2004, the Federal Open Market Committee increased overnight interest rates by 50 basis points for a total increase of 75 basis points for the year.

 

Period-end loans increased $58.9 million to $2.2 billion at September 30, 2004, up 2.7% from June 30, 2004, or 10.8% linked-quarter annualized. On average, loans were up $16.3 million during the third quarter of 2004.

 

Average total deposits for the third quarter of 2004 were $2.4 billion, down $58.6 million on a linked-quarter basis. Average brokered deposits decreased $101.6 million from the second quarter of 2004 as the Company reduced brokered deposits in order to fully utilize increases in core deposits and pursue other more favorable borrowing alternatives. The Company’s average core deposits increased $35.8 million during the third quarter. Core deposits are a stable source of inexpensive funding for the Company. Noninterest-bearing deposits comprised 36.7% of total deposits at September 30, 2004, a ratio above most of the Company’s industry peers.

 

Overall, the allowance for credit losses at September 30, 2004 was $28.0 million and represented 1.26% of total period-end loans, flat compared to June 30, 2004. At September 30, 2004, the allowance was 232.45% of nonperforming loans. The provision for credit losses for the third quarter of 2004 was $2.1 million, down $2.0 million from $4.1 million for the third quarter of 2003.

 

At September 30, 2004, nonperforming assets were $16.3 million or 0.73% of total loans and foreclosed properties, an improvement of 28.1% since September 30, 2003. Net charge-offs for the third quarter of 2004 were $1.5 million or 0.27% annualized of average total loans, compared to $4.4 million or 0.65% annualized of average total loans in the third quarter of 2003.

 

Noninterest income was $6.8 million in the third quarter of 2004, down $683 thousand compared with the third quarter of last year. Noninterest expense for the third quarter of 2004 was $29.5 million, up $1.6 million as compared with the third quarter of 2003. This increase was primarily attributable to the operating expenses of two additional offices.

 

On September 30, 2003, the Company sold its mortgage-banking segment resulting in an after-tax gain of $22.1 million. The results of its operations and gain on sale are reported as income from discontinued operations. Separately, as a banking operation, Sterling Bank benefited by financing the mortgage-banking operation’s mortgage loans held for sale. Due to decisions made by the buyer, Sterling Bank lost the benefit of the mortgage warehouse shortly after completing the sale.

 

At September 30, 2004, Sterling had total assets of $3.2 billion, total loans of $2.2 billion and total deposits of $2.4 billion. Shareholders’ equity of $307 million at September 30, 2004 was 9.50% of total assets. Book value per common share at period-end was $6.84.

Sterling Bancshares, Inc. News Release

October 21, 2004

Page 3

 

Conference Call

 

Downey Bridgwater and Stephen Raffaele invite investors and analysts to listen to the Company’s third quarter earnings conference call that will be broadcast live via telephone and over the Internet on Thursday, October 21, 2004 at 11:00AM Eastern Time. To participate, please visit the Investor Relations section of the Company’s web site at www.banksterling.com or call (630) 691-2748. An audio archive of the call will be available on the web site beginning Friday, October 22, 2004.

 

Forward-Looking Statements

 

Except for historical information contained herein, this press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, including, but not limited to, the following: general business and economic conditions in the markets the Company serves may be less favorable than anticipated which could decrease the demand for loan, deposit and other financial services and increase loan delinquencies and defaults; changes in market rates and prices may adversely impact the value of securities, loans, deposits and other financial instruments; the Company’s liquidity requirements could be adversely affected by changes in its assets and liabilities; legislative or regulatory developments including changes in laws concerning taxes, banking, securities, insurance and other aspects of the financial securities industry; competitive factors may increase, including product and pricing pressures among financial services organizations; the effect of changes in accounting policies and practices, as may be adopted by regulatory agencies, as well as the Financial Accounting Standards Board and other accounting regulatory agencies; and changes in fiscal and governmental policies of the United States federal government could have an adverse effect on the Company’s business. Please also read the additional risks and factors described from time to time in the Company’s reports filed with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

 

About Sterling Bancshares

 

Sterling Bancshares, Inc., is a Houston-based bank holding company with total assets of $3.2 billion, which operates 36 banking offices in the greater metro areas of Houston, San Antonio, and Dallas, Texas. These cities are the 4th, 8th and 9th largest in the United States based on population. The Company’s common stock is traded through the NASDAQ National Market System under the symbol “SBIB”.

 

–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,
2004
     Jun. 30,
2004
     Sep. 30,
2003
     Sep. 30,
2004
     Sep. 30,
2003
  
Profitability                                         

Income from continuing operations

    $ 6,486     $ 7,073     $ 7,425     $ 18,793     $ 23,157  

Income from discontinued operations

    $ —       $ —       $ 19,916     $ —       $ 20,062  
    
 
 
 
 

Net income

    $ 6,486     $ 7,073     $ 27,341     $ 18,793     $ 43,219  

Earnings per common share from continuing operations (1)

                                         

Basic

    $ 0.14     $ 0.16     $ 0.17     $ 0.42     $ 0.53  

Diluted

    $ 0.14     $ 0.16     $ 0.17     $ 0.42     $ 0.52  

Earnings per common share from discontinued operations (1)

                                         

Basic

    $ —       $ —       $ 0.45     $ —       $ 0.45  

Diluted

    $ —       $ —       $ 0.44     $ —       $ 0.45  

Earnings per common share (1)

                                         

Basic

    $ 0.14     $ 0.16     $ 0.62     $ 0.42     $ 0.98  

Diluted

    $ 0.14     $ 0.16     $ 0.61     $ 0.42     $ 0.97  

Return on average common equity (2)

                                         

Total

      8.51 %     9.45 %     40.60 %     8.36 %     22.06 %

Continuing operations

      8.51 %     9.45 %     11.03 %     8.36 %     11.82 %

Return on average assets (2)

                                         

Total

      0.82 %     0.91 %     3.16 %     0.80 %     1.69 %

Continuing operations

      0.82 %     0.91 %     0.86 %     0.80 %     0.91 %

Net interest margin

      4.75 %     4.55 %     4.58 %     4.63 %     4.72 %

Efficiency ratio

      71.86 %     69.77 %     64.63 %     71.25 %     62.88 %
Liquidity and Capital Ratios                                         

Average loans to average deposits

      90.36 %     87.56 %     108.42 %     88.41 %     103.44 %

Period-end shareholders’ equity to total assets

      9.50 %     9.62 %     9.19 %     9.50 %     9.19 %

Average shareholders’ equity to average assets

      9.67 %     9.61 %     7.78 %     9.54 %     7.69 %

Period-end tangible capital to total tangible assets

      7.66 %     7.69 %     7.65 %     7.66 %     7.65 %

Tier 1 capital to risk-weighted assets

      12.34 %     12.58 %     11.91 %     12.34 %     11.91 %

Total capital to risk-weighted assets

      15.23 %     15.46 %     14.92 %     15.23 %     14.92 %

Tier 1 leverage ratio (Tier 1 capital to average assets)

      10.42 %     10.30 %     9.23 %     10.42 %     9.23 %
Other Data                                         

Shares used in computing earnings per common share

                                         

Basic

      44,881       44,796       44,202       44,793       44,097  

Diluted

      45,360       45,234       44,852       45,259       44,765  

End of period common shares outstanding

      44,917       44,853       44,232       44,917       44,232  

Book value per common share at period-end

                                         

Total

    $ 6.84     $ 6.62     $ 6.49     $ 6.84     $ 6.49  

Tangible

    $ 5.40     $ 5.18     $ 5.31     $ 5.40     $ 5.31  

Cash dividends paid per common share

    $ 0.050     $ 0.050     $ 0.045     $ 0.150     $ 0.135  

Common stock dividend payout ratio

      34.59 %     31.66 %     7.27 %     35.74 %     13.77 %

Full-time equivalent employees

      994       1,024       985       994       985  

Number of banking offices

      36       37       35       36       35  

STERLING BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS (Unaudited)

(dollars in thousands)

Page 5

 

    

Sep. 30,

2004

    

Jun. 30,

2004

     Mar. 31,
2004
    

Dec. 31,

2003

    

Sep. 30,

2003

  
ASSETS                                         

Cash and cash equivalents

    $ 94,802     $ 131,489     $ 118,240     $ 136,764     $ 134,133  

Interest-bearing deposits in financial institutions

      1,175       1,600       1,324       1,358       1,338  

Trading assets

      123,880       92,751       137,623       172,825       131,597  

Available-for-sale securities, at fair value

      531,702       473,787       542,636       522,936       312,005  

Held-to-maturity securities, at amortized cost

      78,087       45,385       39,053       42,157       45,973  

Loans held for sale

      7,036       13,895       10,730       26,308       311,729  

Loans held for investment

      2,219,397       2,153,589       2,137,245       2,130,731       2,010,253  
    
 
 
 
 

Total loans

      2,226,433       2,167,484       2,147,975       2,157,039       2,321,982  

Allowance for credit losses

      (27,959 )     (27,329 )     (26,609 )     (30,722 )     (31,350 )
    
 
 
 
 

Loans, net

      2,198,474       2,140,155       2,121,366       2,126,317       2,290,632  

Premises and equipment, net

      41,683       43,679       48,572       48,541       44,845  

Real estate acquired by foreclosure

      3,731       2,608       1,497       2,124       2,669  

Goodwill

      62,480       62,480       62,480       62,933       50,354  

Core deposit intangible, net

      1,954       2,078       2,202       2,326       1,757  

Accrued interest receivable

      10,986       10,787       12,203       12,046       11,549  

Other assets

      85,095       83,409       76,089       76,553       99,077  
    
 
 
 
 
TOTAL ASSETS    $ 3,234,049     $ 3,090,208     $ 3,163,285     $ 3,206,880     $ 3,125,929  
    
 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY                                         

LIABILITIES:

                                         

Deposits:

                                         

Noninterest-bearing demand

    $ 879,125     $ 845,874     $ 862,729     $ 834,313     $ 961,877  

Interest-bearing demand

      919,822       977,943       911,983       929,577       862,271  

Certificates and other time deposits

      593,236       664,788       731,640       654,479       592,114  
    
 
 
 
 

Total deposits

      2,392,183       2,488,605       2,506,352       2,418,369       2,416,262  

Other borrowed funds

      377,750       149,750       201,950       324,160       231,956  

Notes payable

      —         —         —         —         17,028  

Subordinated debt

      47,360       45,254       48,319       46,533       47,453  

Junior subordinated debt (3)

      82,475       82,475       82,475       82,475       82,475  

Accrued interest payable and other liabilities

      26,916       26,860       24,329       42,747       43,625  
    
 
 
 
 

Total liabilities

      2,926,684       2,792,944       2,863,425       2,914,284       2,838,799  

COMMITMENTS AND CONTINGENCIES

      —         —         —         —         —    

SHAREHOLDERS’ EQUITY

                                         

Convertible preferred stock

      20       20       20       20       20  

Common stock

      44,917       44,853       44,756       44,642       44,232  

Capital surplus

      51,565       50,853       50,036       48,953       46,329  

Retained earnings

      209,893       205,651       200,818       197,819       193,928  

Accumulated other comprehensive income, net of tax

      970       (4,113 )     4,230       1,162       2,621  
    
 
 
 
 

Total shareholders’ equity

      307,365       297,264       299,860       292,596       287,130  
    
 
 
 
 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

    $ 3,234,049     $ 3,090,208     $ 3,163,285     $ 3,206,880     $ 3,125,929  
    
 
 
 
 

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,
2004
     Jun. 30,
2004
    Mar. 31,
2004
    Dec. 31,
2003
    Sep. 30,
2003
    Sep. 30,
2004
    Sep. 30,
2003

Interest income:

                                                  

Loans, including fees

    $ 34,635     $ 33,023    $ 33,234    $ 32,766    $ 40,396    $ 100,892    $ 121,592

Securities:

                                                  

Taxable

      5,560       4,977      5,020      3,864      2,162      15,557      7,087

Non-taxable

      520       464      455      489      529      1,439      1,773

Trading assets

      1,084       991      1,462      977      857      3,537      2,590

Federal funds sold

      25       23      20      63      27      68      113

Deposits in financial institutions

      13       16      15      16      17      44      53
    
 
  
  
  
  
  

Total interest income

      41,837       39,494      40,206      38,175      43,988      121,537      133,208
    
 
  
  
  
  
  

Interest expense:

                                                  

Demand and savings deposits

      1,239       1,080      953      1,016      987      3,272      3,736

Certificates and other time deposits

      3,006       3,275      3,365      3,094      3,461      9,646      11,514

Other borrowed funds

      1,047       586      681      504      1,491      2,314      4,417

Notes payable

      —         —        —        128      137      —        457

Subordinated debt

      678       620      595      598      589      1,893      1,305

Junior subordinated debt (3)

      1,616       1,587      1,591      1,592      1,590      4,794      4,787
    
 
  
  
  
  
  

Total interest expense

      7,586       7,148      7,185      6,932      8,255      21,919      26,216
    
 
  
  
  
  
  

Net interest income

      34,251       32,346      33,021      31,243      35,733      99,618      106,992

Provision for credit losses

      2,115       2,781      3,500      3,000      4,150      8,396      14,698
    
 
  
  
  
  
  

Net interest income after provision for credit losses

      32,136       29,565      29,521      28,243      31,583      91,222      92,294
    
 
  
  
  
  
  

Noninterest income:

                                                  

Customer service fees

      3,589       3,688      3,921      3,853      4,061      11,198      12,361

Net gain on the sale of banking offices

      —         —        —        277      —        —        3,240

Net gain on the sale of securities

      310       4,128      143      531      —        4,581      374

Net gain (loss) on the sale of trading assets

      (192 )     154      348      154      405      310      1,032

Other

      3,088       2,807      2,805      2,614      3,012      8,700      8,834
    
 
  
  
  
  
  

Total noninterest income

      6,795       10,777      7,217      7,429      7,478      24,789      25,841
    
 
  
  
  
  
  

Noninterest expense:

                                                  

Salaries and employee benefits

      17,510       17,175      17,687      15,609      16,583      52,372      49,916

Occupancy expense

      3,945       3,743      3,597      3,656      3,996      11,285      11,708

Technology

      1,643       1,537      1,388      1,452      1,289      4,568      3,718

Professional fees

      1,333       1,395      1,062      1,324      1,317      3,790      3,300

Postage, delivery and supplies

      746       816      875      838      831      2,437      2,636

Marketing

      250       539      386      418      195      1,175      1,080

Core deposit intangible amortization

      125       124      124      126      111      373      339

Other

      3,943       4,756      3,943      4,469      3,607      12,642      10,827
    
 
  
  
  
  
  

Total noninterest expense

      29,495       30,085      29,062      27,892      27,929      88,642      83,524
    
 
  
  
  
  
  

Income before income taxes

      9,436       10,257      7,676      7,780      11,132      27,369      34,611

Provision for income taxes

      2,950       3,184      2,442      2,583      3,707      8,576      11,454
    
 
  
  
  
  
  

Income from continuing operations

    $ 6,486     $ 7,073    $ 5,234    $ 5,197    $ 7,425    $ 18,793    $ 23,157

Income from discontinued operations before income taxes

      —         —        —        1,101      44,426      —        44,719

Provision for income taxes

      —         —        —        407      24,510      —        24,657
    
 
  
  
  
  
  

Income from discontinued operations:

      —         —        —        694      19,916      —        20,062
    
 
  
  
  
  
  

Net income

    $ 6,486     $ 7,073    $ 5,234    $ 5,891    $ 27,341    $ 18,793    $ 43,219
    
 
  
  
  
  
  

Earnings per share from continuing operations (1):

                                                  

Basic

    $ 0.14     $ 0.16    $ 0.12    $ 0.12    $ 0.17    $ 0.42    $ 0.53
    
 
  
  
  
  
  

Diluted

    $ 0.14     $ 0.16    $ 0.12    $ 0.12    $ 0.17    $ 0.42    $ 0.52
    
 
  
  
  
  
  

Earnings per share (1):

                                                  

Basic

    $ 0.14     $ 0.16    $ 0.12    $ 0.13    $ 0.62    $ 0.42    $ 0.98
    
 
  
  
  
  
  

Diluted

    $ 0.14     $ 0.16    $ 0.12    $ 0.13    $ 0.61    $ 0.42    $ 0.97
    
 
  
  
  
  
  

STERLING BANCSHARES, INC.

SELECTED FINANCIAL INFORMATION (Unaudited)

(dollars in thousands)

Page 7

 

     Quarter Ended
  
     Sep. 30, 2004
     Jun. 30, 2004
  
     Average
Balance
    Interest
    Yield/
Rate
     Average
Balance
    Interest
   

Yield/

Rate

  
Interest-Earning Assets:                                         

Loans held for sale

    $ 14,356    $ 304    8.43 %   $ 11,568    $ 187    6.50 %

Loans held for investment:

                                         

Taxable

      2,158,193      34,268    6.32 %     2,144,582      32,771    6.15 %

Non-taxable

      3,953      63    6.34 %     4,064      65    6.43 %

Securities:

                                         

Taxable

      520,018      5,560    4.25 %     529,652      4,977    3.78 %

Non-taxable

      49,108      520    4.21 %     42,817      464    4.36 %

Trading assets

      113,252      1,084    3.81 %     113,392      991    3.52 %

Federal funds sold

      6,980      25    1.43 %     9,709      23    0.94 %

Deposits in financial institutions

      1,471      13    3.58 %     1,874      16    3.39 %
    
  
  
 
  
  

Total interest-earning assets

      2,867,331      41,837    5.80 %     2,857,658      39,494    5.56 %

Noninterest-earning assets

      271,561                   276,848              
    
               
             

Total Assets

    $ 3,138,892                 $ 3,134,506              
    
               
             

Interest-Bearing Liabilities:

                                         

Deposits:

                                         

Demand and savings

    $ 959,840      1,239    0.51 %   $ 934,732      1,080    0.46 %

Certificates and other time

      614,241      3,006    1.95 %     713,283      3,275    1.85 %

Other borrowed funds

      270,682      1,047    1.54 %     212,123      586    1.11 %

Subordinated debt

      45,905      678    5.87 %     46,298      620    5.39 %

Junior subordinated debt (3)

      82,475      1,616    7.80 %     82,475      1,587    7.74 %
    
  
  
 
  
  

Total interest-bearing liabilities

      1,973,143      7,586    1.53 %     1,988,911      7,148    1.45 %

Noninterest-bearing sources:

                                         

Noninterest-bearing liabilities

      862,246                   844,394              

Shareholders’ equity

      303,503                   301,201              
    
               
             

Total Liabilities and Shareholders’ Equity

    $ 3,138,892                 $ 3,134,506              
    
               
             
           
  
        
  
Net Interest Income & Margin           $ 34,251    4.75 %          $ 32,346    4.55 %
           
  
        
  

STERLING BANCSHARES, INC.

SELECTED FINANCIAL INFORMATION (Unaudited)

(dollars in thousands)

Page 8

 

     Year-to-date
  
     Sep. 30, 2004
     Sep. 30, 2003
  
     Average
Balance
    Interest
    Yield/
Rate
     Average
Balance
    Interest
   

Yield/

Rate

  
Interest-Earning Assets:                                         

Loans held for sale

    $ 11,721    $ 619    7.06 %   $ 585,303    $ 23,844    5.45 %

Loans held for investment:

                                         

Taxable

      2,148,655      100,078    6.22 %     2,000,584      97,525    6.52 %

Non-taxable

      4,068      195    6.40 %     4,673      223    6.38 %

Securities:

                                         

Taxable

      525,889      15,557    3.95 %     252,001      7,087    3.76 %

Non-taxable

      44,491      1,439    4.32 %     53,940      1,773    4.39 %

Trading assets

      130,089      3,537    3.63 %     118,323      2,590    2.93 %

Federal funds sold

      9,193      68    0.98 %     14,311      113    1.06 %

Deposits in financial institutions

      1,608      44    3.68 %     1,262      53    5.61 %
    
  
  
 
  
  

Total interest-earning assets

      2,875,714      121,537    5.65 %     3,030,397      133,208    5.88 %

Noninterest-earning assets

      275,767                   382,751              
    
               
             

Total Assets

    $ 3,151,481                 $ 3,413,148              
    
               
             

Interest-Bearing Liabilities:

                                         

Deposits:

                                         

Demand and savings

    $ 945,246      3,272    0.46 %   $ 894,814      3,736    0.56 %

Certificates and other time

      682,133      9,646    1.89 %     684,051      11,514    2.25 %

Other borrowed funds

      243,632      2,314    1.27 %     466,660      4,417    1.27 %

Notes payable

      —        —      —         19,343      457    3.16 %

Subordinated debt

      46,437      1,893    5.45 %     30,620      1,305    5.70 %

Junior subordinated debt (3)

      82,475      4,794    7.76 %     82,475      4,787    7.76 %
    
  
  
 
  
  

Total interest-bearing liabilities

      1,999,923      21,919    1.46 %     2,177,963      26,216    1.61 %

Noninterest-bearing sources:

                                         

Noninterest-bearing liabilities

      850,962                   972,849              

Shareholders’ equity

      300,596                   262,336              
    
               
             

Total Liabilities and Shareholders’ Equity

    $ 3,151,481                 $ 3,413,148              
    
               
             
           
  
        
  

Net Interest Income & Margin

           $ 99,618    4.63 %          $ 106,992    4.72 %
           
  
        
  

STERLING BANCSHARES, INC.

SELECTED FINANCIAL INFORMATION (Unaudited)

(dollars in thousands)

Page 9

 

     Quarter Ended
    

Sep. 30,

2004

   

Jun. 30,

2004

    Mar. 31,
2004
   

Dec. 31,

2003

   

Sep. 30,

2003

Condensed Average Balance Sheet

                                   

Loans held for sale

    $ 14,356    $ 11,568    $ 9,210    $ 14,292    $ 621,113

Loans held for investment

      2,162,146      2,148,646      2,147,272      2,081,444      2,034,079
    
  
  
  
  

Total loans

      2,176,502      2,160,214      2,156,482      2,095,736      2,655,192

Securities

      569,126      572,469      569,559      459,945      302,940

Trading assets

      113,252      113,392      163,807      147,675      126,349

Other earning assets

      8,451      11,583      12,395      29,784      14,066
    
  
  
  
  

Total earning assets

      2,867,331      2,857,658      2,902,243      2,733,140      3,098,547

Goodwill

      62,481      62,480      62,715      57,955      50,354

Core deposit intangible, net

      2,010      2,142      2,266      2,481      1,815

Other assets

      207,070      212,226      213,956      218,450      249,423

Assets related to discontinued operations

      —        —        —        —        36,683
    
  
  
  
  

Total assets

    $ 3,138,892    $ 3,134,506    $ 3,181,180    $ 3,012,026    $ 3,436,822
    
  
  
  
  

Noninterest bearing deposits

    $ 834,566    $ 819,189    $ 808,109    $ 842,748    $ 913,403

Interest-bearing deposits:

                                   

Demand and savings

      959,840      934,732      941,006      908,949      877,274

Certificates and other time deposits

      554,830      552,292      559,189      558,757      546,814

Brokered deposits

      59,411      160,991      160,431      49,405      111,403
    
  
  
  
  

Total deposits

      2,408,647      2,467,204      2,468,735      2,359,859      2,448,894

Other borrowed funds

      270,682      212,123      247,794      172,627      527,771

Notes payable

      —        —        —        16,598      17,553

Subordinated debt

      45,905      46,298      47,112      46,607      46,356

Junior subordinated debt (3)

      82,475      82,475      82,475      82,475      82,475

Accrued interest payable and other liabilities

      27,680      25,205      38,012      44,272      10,390

Liabilities related to discontinued operations

      —        —        —        —        35,995
    
  
  
  
  

Total liabilities

      2,835,389      2,833,305      2,884,128      2,722,438      3,169,434

Shareholders’ equity

      303,503      301,201      297,052      289,588      267,388
    
  
  
  
  

Total liabilities and shareholders’ equity

    $ 3,138,892    $ 3,134,506    $ 3,181,180    $ 3,012,026    $ 3,436,822
    
  
  
  
  
    

Sep. 30,

2004

   

Jun. 30,

2004

    Mar. 31,
2004
   

Dec. 31,

2003

   

Sep. 30,

2003

Period-end Loans:

                                   

Loans held for sale

    $ 7,036    $ 13,895    $ 10,730    $ 26,308    $ 311,729

Loans held for investment:

                                   

Commercial and industrial

      628,287      615,055      624,600      666,767      627,378

Real estate:

                                   

Commercial

      964,253      922,135      885,041      829,704      764,207

Construction and development

      340,916      326,382      323,978      327,368      320,724

Residential mortgage

      193,509      191,121      201,541      201,948      188,228

Consumer/other

      92,432      98,896      102,085      104,944      109,716
    
  
  
  
  

Loans held for investment

      2,219,397      2,153,589      2,137,245      2,130,731      2,010,253
    
  
  
  
  

Total period-end loans

    $ 2,226,433    $ 2,167,484    $ 2,147,975    $ 2,157,039    $ 2,321,982
    
  
  
  
  

Period-end Deposits:

                                   

Noninterest-bearing demand

    $ 879,125    $ 845,874    $ 862,729    $ 834,313    $ 961,877

Interest-bearing demand

      919,822      977,943      911,983      929,577      862,271

Certificates and other time deposits:

                                   

Jumbo

      344,560      341,691      339,023      386,914      326,027

Regular

      202,572      205,838      209,830      212,799      213,734

Brokered deposits

      46,104      117,259      182,787      54,766      52,353
    
  
  
  
  

Total period-end deposits

    $ 2,392,183    $ 2,488,605    $ 2,506,352    $ 2,418,369    $ 2,416,262
    
  
  
  
  

STERLING BANCSHARES, INC.

SELECTED FINANCIAL INFORMATION (Unaudited)

(dollars in thousands)

Page 10

 

     Quarter Ended
     Year-to-date
  
     Sep. 30,
2004
     Jun. 30,
2004
     Mar. 31,
2004
     Dec. 31,
2003
     Sep. 30,
2003
     Sep. 30,
2004
     Sep. 30,
2003
  

Allowance for Credit Losses

                                                         

Allowance for credit losses at beginning of period

    $ 27,329     $ 26,609     $ 30,722     $ 31,350     $ 31,574     $ 30,722     $ 27,248  

Charge-offs:

                                                         

Commercial, financial, and industrial

      1,570       1,906       5,574       4,282       2,514       9,050       6,315  

Real estate, mortgage and construction

      201       719       2,295       399       1,753       3,215       4,087  

Consumer

      355       218       499       271       661       1,072       1,319  
    
 
 
 
 
 
 

Total charge-offs

      2,126       2,843       8,368       4,952       4,928       13,337       11,721  
    
 
 
 
 
 
 

Recoveries:

                                                         

Commercial, financial, and industrial

      568       732       586       380       435       1,886       1,067  

Real estate, mortgage and construction

      6       9       91       6       9       106       151  

Consumer

      67       41       78       83       110       186       260  
    
 
 
 
 
 
 

Total recoveries

      641       782       755       469       554       2,178       1,478  
    
 
 
 
 
 
 

Net charge-offs

      1,485       2,061       7,613       4,483       4,374       11,159       10,243  

Allowance associated with acquired institution

      —         —         —         855       —         —         —    

Allowance sold with divestiture

      —         —         —         —         —         —         353  

Provision for credit losses

      2,115       2,781       3,500       3,000       4,150       8,396       14,698  
    
 
 
 
 
 
 

Allowance for credit losses at end of period

    $ 27,959     $ 27,329     $ 26,609     $ 30,722     $ 31,350     $ 27,959     $ 31,350  
    
 
 
 
 
 
 

Nonperforming Assets

                                                         

Nonperforming loans - nonaccrual

    $ 12,028     $ 10,806     $ 16,369     $ 33,887     $ 19,788     $ 12,028     $ 19,788  

Real estate acquired by foreclosure

      3,731       2,608       1,497       2,124       2,669       3,731       2,669  

Other repossessed assets

      552       273       1,189       169       237       552       237  
    
 
 
 
 
 
 

Total nonperforming assets

    $ 16,311     $ 13,687     $ 19,055     $ 36,180     $ 22,694     $ 16,311     $ 22,694  
    
 
 
 
 
 
 

Potential problem loans

    $ 62,417     $ 62,638     $ 66,055     $ 66,482     $ 72,984     $ 62,417     $ 72,984  
    
 
 
 
 
 
 

Accruing loans past due 90 days or more

    $ 1,195     $ 3,987     $ 21     $ 35     $ 5,118     $ 1,195     $ 5,118  
    
 
 
 
 
 
 

Ratios

                                                         

Period-end allowance for credit losses to period-end loans

      1.26 %     1.26 %     1.24 %     1.42 %     1.35 %     1.26 %     1.35 %

Net charge-offs to average loans (2)

      0.27 %     0.38 %     1.42 %     0.85 %     0.65 %     0.69 %     0.53 %

Period-end allowance for credit losses to nonperforming loans

      232.45 %     252.91 %     162.56 %     90.66 %     158.43 %     232.45 %     158.43 %

Nonperforming assets to period-end loans, real estate acquired by foreclosure and other repossessed assets

      0.73 %     0.63 %     0.89 %     1.68 %     0.98 %     0.73 %     0.98 %

Nonperforming loans to period-end loans

      0.54 %     0.50 %     0.76 %     1.57 %     0.85 %     0.54 %     0.85 %

Nonperforming assets to period-end assets

      0.50 %     0.44 %     0.60 %     1.13 %     0.73 %     0.50 %     0.73 %

STERLING BANCSHARES, INC.

DISCONTINUED OPERATIONS INCOME STATEMENTS (Unaudited)

(dollars in thousands, except for per share data)

Page 11

 

     Quarter Ended
     Year-to-date
  
     Sep. 30,
2004
    Jun. 30,
2004
    Mar. 31,
2004
    Dec. 31,
2003
    Sep. 30,
2003
     Sep. 30,
2004
    Sep. 30,
2003
  

Net interest income after provision for credit losses

    $ —      $ —      $ —      $ —      $ (699 )   $ —      $ (4,407 )

Noninterest income:

                                                    

Gain on the sale of mortgage loans

      —        —        —        —        9,237       —        34,621  

Mortgage origination income

      —        —        —        —        6,228       —        23,823  

Gain on the sale of Sterling Capital Mortgage Company

      —        —        —        1,800      45,983       —        45,983  

Other

      —        —        —        —        2,889       —        8,064  
    
  
  
  
  
 
  

Total noninterest income

      —        —        —        1,800      64,337       —        112,491  
    
  
  
  
  
 
  

Noninterest expense:

                                                    

Salaries and employee benefits

      —        —        —        —        8,105       —        24,246  

Occupancy expense

      —        —        —        —        3,356       —        9,420  

Technology

      —        —        —        —        299       —        878  

Professional fees

      —        —        —        —        341       —        773  

Postage, delivery and supplies

      —        —        —        —        824       —        2,582  

Mortgage servicing rights amortization and impairment

      —        —        —        —        1,155       —        16,615  

Minority interest expense

      —        —        —        —        3       —        40  

Other

      —        —        —        699      5,129       —        8,811  
    
  
  
  
  
 
  

Total noninterest expense

      —        —        —        699      19,212       —        63,365  
    
  
  
  
  
 
  

Income from discontinued operations before income taxes

      —        —        —        1,101      44,426       —        44,719  

Provision for income taxes

      —        —        —        407      24,510       —        24,657  
    
  
  
  
  
 
  

Income from discontinued operations

    $  —      $ —      $ —      $ 694    $ 19,916     $ —      $ 20,062  
    
  
  
  
  
 
  

Earnings per share from discontinued operations:

                                                    

Basic

    $ —      $ —      $ —      $ 0.01    $ 0.45     $ —      $ 0.45  
    
  
  
  
  
 
  

Diluted

    $ —      $ —      $ —      $ 0.01    $ 0.44     $ —      $ 0.45  
    
  
  
  
  
 
  

STERLING BANCSHARES, INC.

FOOTNOTES TO EARNINGS RELEASE

Page 12

 

(1) Earnings per share in each quarter from continuing operations, discontinued operations and net income 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 and net income from continuing and discontinued operations earnings per share does not necessarily equal the full period and net income earnings per share.

 

(2) Interim periods annualized.

 

(3) On January 1, 2004, the Company adopted FIN 46R, Consolidation of Variable Interest Entities. Upon adoption, the trusts that previously issued the outstanding company-obligated mandatorily redeemable trust preferred securities were deconsolidated from the Company’s consolidated financial statements. Instead, the junior subordinated debentures issued by the Company to these subsidiary trusts are shown as liabilities in the consolidated balance sheets and interest expense associated with the junior subordinated debentures are shown in the consolidated statements of income. The consolidated financial statements and resultant interest yields and other financial ratios have been restated to reflect the adoption of FIN 46R. Adoption of FIN 46R did not affect previously reported amounts for net income or equity.