Sterling Bancshares Takes Actions to Reduce Nonperforming Loans and Increase Allowance for Credit Losses

HOUSTON, Nov. 2 /PRNewswire-FirstCall/ -- On November 2, 2009 Sterling Bancshares, Inc. , in order to sell certain nonperforming loans and further strengthen its allowance for loan losses, determined that it was necessary to record an additional loan loss provision in the amount of $28.6 million for the third quarter of 2009, or $0.23 per diluted share at September 30, 2009. This additional provision resulted in a total provision for credit losses of $56.1 million and $76.6 million for the three and nine months ended September 30, 2009, respectively. The net loss applicable to common shareholders for the third quarter of 2009 was $24.7 million, or $0.30 per diluted common share and $24.1 million, or $0.31 per diluted common share for the nine months ended September 30, 2009.

"We have taken steps to significantly reduce our total nonperforming loans and increase our allowance for loan losses thereby better positioning our balance sheet for future growth and profitability," said J. Downey Bridgwater, Sterling's Chairman, President, and CEO. "We were able to take these actions due to our strong capital levels."

Subsequent to announcing third quarter results on October 22, 2009, management has taken several actions to reduce nonperforming loans and further build the allowance for loan losses recorded as of September 30, 2009. The further build-up in allowance and corresponding increase in provision for loan losses was primarily driven by the following three decisions by management:

-- Execution of a definitive agreement to sell $19 million in net book value loans related to Semgroup (a previously disclosed nonperforming energy loan relationship); -- Execution of a letter of intent to sell approximately $32 million in net book value commercial real estate loans out of our national SBA/Commercial Real Estate Portfolio; and -- Revision of certain accounting estimates used in determining the adequacy of our allowance for loan losses.

As a result of the above proposed loan sales, management determined that it was appropriate to provide $13.6 million in additional provision in order to record these loans at their underlying and agreed upon sales price. Management charged-off a portion of these loans against the related allowance for credit losses and reclassified these loans as held for sale at September 30, 2009. The amount of nonperforming loans that are part of these proposed loan sales totaled $42 million at September 30, 2009 and assuming both loan sale transactions are consummated, the company's nonperforming loans would be further reduced by approximately $30 million or an additional 90 basis points during the fourth quarter. These loan sales are expected to close in the fourth quarter of 2009.

Management concluded that in light of the two proposed loan sale transactions discussed above, the deterioration in the real estate market, and the continuing uncertainty in the economy, it was appropriate to revise certain accounting estimates used in determining the adequacy of the allowance for loan losses to better reflect current conditions. The application of these accounting estimates resulted in the Company recording an additional $15 million in provision for credit losses in the third quarter of 2009.

Sterling has built its total allowance for credit losses to loans as of September 30, 2009 to $72.9 million or 2.18% of period-end loans, up from $54.2 million or 1.53% of period-end loans linked-quarter.

Sterling's capital position remains strong with a tangible capital ratio of 7.70% at the end of the third quarter. At September 30, 2009, tier 1 capital to risk-weighted assets was 11.20%, and total capital to risk-weighted assets stood at 13.95%, both well above regulatory minimums to be considered well-capitalized.

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, November 3, 2009 at 9:00 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) 332-0342. An audio archive of the call will also be available on the web site beginning Wednesday, November 4, 2009.

A telephone replay of the conference call will be available beginning Tuesday, November 3, 2009 at 10:30 a.m. until Tuesday, November 10, 2009 at 11:59 p.m. Central Time by dialing (800) 475-6701. The access code for the replay is 122236.

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; the ability to integrate acquisitions and realize expected cost savings and revenue enhancements, effects of changes in interest rates on net interest margin and changes in federal and state regulations and laws. Additional factors can be found in the Company's 2008 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 60 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.

For More Information Contact: J. Downey Bridgwater, Chairman, President and Chief Executive Officer, (713) 507-2670 Zach L. Wasson, Executive Vice President and Chief Financial Officer, (713) 507-1297 -Tables to follow- STERLING BANCSHARES, INC. SELECTED FINANCIAL INFORMATION (Unaudited) (dollars in thousands, except for per share data) Page 3 Quarter Ended Year-to-date ------------- ------------ Sep. 30, Jun. 30, Sep. 30, 2009 2009 2008 2009 2008 ---- ---- ---- ---- ---- Profitability Net income (loss) $(24,724) $2,607 $7,090 $(14,710) $29,006 Net income (loss) applicable to common shareholders $(24,724) $(4,851) $7,090 $(24,052) $29,006 Earnings (loss) per common share (1): Basic $(0.30) $(0.06) $0.10 $(0.31) $0.40 Diluted $(0.30) $(0.06) $0.10 $(0.31) $0.39 Return on average common equity (2) (16.98)% (3.46)% 5.61% (5.77)% 7.75% Return on average assets (2) (1.97)% 0.21% 0.57% (0.39)% 0.81% Tax equivalent net interest margin (3) 4.20% 4.33% 4.44% 4.26% 4.59% Efficiency Ratio (4): Consolidated 69.56% 70.54% 64.08% 68.73% 62.57% Sterling Bank 67.79% 68.37% 62.14% 66.76% 60.59% Liquidity and Capital Ratios Average loans to average deposits 85.86% 91.81% 101.77% 91.82% 100.19% Period-end stockholders' equity to total assets 11.23% 11.61% 10.14% 11.23% 10.14% Average stockholders' equity to average assets 11.60% 12.14% 10.20% 12.18% 10.44% Period-end tangible capital to total tangible assets 7.70% 8.13% 6.60% 7.70% 6.60% Tier 1 capital to risk- weighted assets 11.20% 11.08% 9.18% 11.20% 9.18% Total capital to risk- weighted assets 13.95% 13.72% 11.82% 13.95% 11.82% Tier 1 leverage ratio (Tier 1 capital to average assets) 8.88% 9.38% 8.15% 8.88% 8.15% Other Data Shares used in computing earnings per common share Basic shares 81,707 77,894 73,186 77,659 73,158 Diluted shares 81,707 77,894 73,525 77,659 73,475 End of period common shares outstanding 81,755 81,685 73,219 81,755 73,219 Book value per common share at period-end $6.67 $6.98 $6.85 $6.67 $6.85 Cash dividends paid per common share $0.055 $0.055 $0.055 $0.165 $0.165 Common stock dividend payout ratio (18.19)% 154.89% 56.83% (85.45)% 41.65% Full-time equivalent employees 1,013 1,038 1,119 1,013 1,119 Number of banking centers 60 61 59 60 59 STERLING BANCSHARES, INC. CONSOLIDATED BALANCE SHEETS (Unaudited) (dollars in thousands) Page 4 Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, 2009 2009 2009 2008 2008 ---- ---- ---- ---- ---- ASSETS Cash and cash equivalents $158,114 $74,736 $142,769 $113,163 $113,070 Available-for-sale securities, at fair value 836,521 766,536 673,960 633,357 543,545 Held-to-maturity securities, at amortized cost 162,990 163,611 169,973 172,039 174,434 Loans held for sale 38,187 1,642 1,395 1,524 322 Loans held for investment 3,312,520 3,537,221 3,727,368 3,792,290 3,744,772 --------- --------- --------- --------- --------- Total loans 3,350,707 3,538,863 3,728,763 3,793,814 3,745,094 Allowance for loan losses (70,059) (53,075) (56,703) (49,177) (45,222) ------- ------- ------- ------- ------- Loans, net 3,280,648 3,485,788 3,672,060 3,744,637 3,699,872 Premises and equipment, net 49,128 50,272 50,738 46,875 41,195 Real estate acquired by foreclosure 11,674 8,095 8,144 5,625 4,562 Goodwill 173,210 173,210 173,210 173,210 173,210 Core deposits and other intangibles, net 12,179 12,744 13,309 13,874 14,444 Accrued interest receivable 16,142 18,189 18,285 19,428 17,968 Other assets 158,912 159,186 152,383 157,771 164,929 ------- ------- ------- ------- ------- TOTAL ASSETS $4,859,518 $4,912,367 $5,074,831 $5,079,979 $4,947,229 ========== ========== ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES: Deposits: Noninterest- bearing demand $1,094,346 $1,127,717 $1,173,745 $1,123,746 $1,085,882 Interest- bearing demand 1,874,746 1,670,437 1,586,754 1,523,969 1,397,614 Certificates and other time 1,038,362 1,160,081 1,173,958 1,171,422 1,090,624 --------- --------- --------- --------- --------- Total deposits 4,007,454 3,958,235 3,934,457 3,819,137 3,574,120 Other borrowed funds 99,486 176,631 278,274 408,586 668,069 Subordinated debt 77,616 77,028 78,310 78,335 74,266 Junior subordinated debt 82,734 82,734 82,734 82,734 82,734 Accrued interest payable and other liabilities 46,716 47,631 53,942 48,048 46,145 ------ ------ ------ ------ ------ Total liabilities 4,314,006 4,342,259 4,427,717 4,436,840 4,445,334 COMMITMENTS AND CONTINGENCIES - - - - - SHAREHOLDERS' EQUITY Preferred stock - - 118,332 118,012 - Common stock 83,622 83,552 75,168 75,128 75,086 Capital surplus 171,955 170,708 122,877 121,918 113,611 Retained earnings 295,401 324,619 333,498 332,009 326,826 Treasury stock (21,399) (21,399) (21,399) (21,399) (21,399) Accumulated other comprehensive income, net of tax 15,933 12,628 18,638 17,471 7,771 ------ ------ ------ ------ ----- Total shareholders' equity 545,512 570,108 647,114 643,139 501,895 ------- ------- ------- ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,859,518 $4,912,367 $5,074,831 $5,079,979 $4,947,229 ========== ========== ========== ========== ========== STERLING BANCSHARES, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (dollars in thousands, except for per share data) Page 5 Quarter Ended ------------- Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, 2009 2009 2009 2008 2008 ---- ---- ---- ---- ---- Interest income: Loans, including fees $49,658 $51,691 $53,000 $58,387 $59,636 Securities: Taxable 9,286 8,815 8,558 7,989 7,714 Non-taxable 897 890 900 907 909 Deposits in financial institutions 64 - - - 2 Other interest- earning assets 29 26 6 3 53 --- --- --- --- --- Total interest income 59,934 61,422 62,464 67,286 68,314 ------ ------ ------ ------ ------ Interest expense: Demand and savings deposits 4,403 3,886 3,492 3,645 4,136 Certificates and other time deposits 5,504 6,503 7,467 8,041 8,763 Other borrowed funds 346 425 812 2,414 3,432 Subordinated debt 748 885 979 1,380 1,198 Junior subordinated debt 1,082 1,155 1,204 1,430 1,317 ----- ----- ----- ----- ----- Total interest expense 12,083 12,854 13,954 16,910 18,846 ------ ------ ------ ------ ------ Net interest income 47,851 48,568 48,510 50,376 49,468 Provision for credit losses 56,131 11,500 9,000 7,500 10,100 ------ ------ ----- ----- ------ Net interest income after provision for credit losses (8,280) 37,068 39,510 42,876 39,368 ------ ------ ------ ------ ------ Noninterest income: Customer service fees 3,845 3,752 4,112 3,865 3,882 Net gain (loss) on securities 4 (2) 15 (57) (187) Wealth management fees 1,862 1,840 2,202 2,028 2,255 Other 3,402 4,903 4,469 3,805 3,851 ----- ----- ----- ----- ----- Total noninterest income 9,113 10,493 10,798 9,641 9,801 ----- ------ ------ ----- ----- Noninterest expense: Salaries and employee benefits 21,005 24,152 22,277 21,937 21,692 Occupancy 5,967 6,168 5,869 5,790 5,367 Technology 2,495 2,475 2,505 2,559 2,600 Professional fees 1,065 1,157 1,197 1,226 1,257 Postage, delivery and supplies 700 760 721 765 871 Marketing 557 499 431 781 627 Core deposits and other intangibles amortization 565 565 565 571 586 Acquisition costs 154 - - - - FDIC insurance assessments 1,741 4,001 1,232 762 561 Other 5,826 4,244 4,801 4,726 5,436 ----- ----- ----- ----- ----- Total noninterest expense 40,075 44,021 39,598 39,117 38,997 ------ ------ ------ ------ ------ Income (loss) before income taxes (39,242) 3,540 10,710 13,400 10,172 Provision for income taxes (14,518) 933 3,303 3,787 3,082 ------- --- ----- ----- ----- Net income (loss) $(24,724) $2,607 $7,407 $9,613 $7,090 ======== ====== ====== ====== ====== Preferred stock dividends - 7,458 1,884 398 - --- ----- ----- --- --- Net income (loss) applicable to common shareholders $(24,724) $(4,851) $5,523 $9,215 $7,090 ======== ======= ====== ====== ====== Earnings (loss) per common share (1): Basic $(0.30) $(0.06) $0.08 $0.13 $0.10 ====== ====== ===== ===== ===== Diluted $(0.30) $(0.06) $0.08 $0.13 $0.10 ====== ====== ===== ===== ===== Year-to-date ------------ 2009 2008 ---- ---- Interest income: Loans, including fees $154,349 $182,770 Securities: Taxable 26,659 21,671 Non-taxable 2,687 2,725 Deposits in financial institutions 64 10 Other interest-earning assets 61 162 --- --- Total interest income 183,820 207,338 ------- ------- Interest expense: Demand and savings deposits 11,781 13,640 Certificates and other time deposits 19,474 29,402 Other borrowed funds 1,583 9,193 Subordinated debt 2,612 3,094 Junior subordinated debt 3,441 4,301 ----- ----- Total interest expense 38,891 59,630 ------ ------ Net interest income 144,929 147,708 Provision for credit losses 76,631 22,417 ------ ------ Net interest income after provision for credit losses 68,298 125,291 ------ ------- Noninterest income: Customer service fees 11,709 11,906 Net gain (loss) on securities 17 (187) Wealth management fees 5,904 6,956 Other 12,774 12,711 ------ ------ Total noninterest income 30,404 31,386 ------ ------ Noninterest expense: Salaries and employee benefits 67,434 63,316 Occupancy 18,004 15,992 Technology 7,475 7,235 Professional fees 3,419 3,481 Postage, delivery and supplies 2,181 2,907 Marketing 1,487 1,764 Core deposits and other intangibles amortization 1,695 1,757 Acquisition costs 154 562 FDIC insurance assessments 6,974 1,762 Other 14,871 15,317 ------ ------ Total noninterest expense 123,694 114,093 ------- ------- Income (loss) before income taxes (24,992) 42,584 Provision for income taxes (10,282) 13,578 ------- ------ Net income (loss) $(14,710) $29,006 ======== ======= Preferred stock dividends 9,342 - ----- --- Net income (loss) applicable to common shareholders $(24,052) $29,006 ======== ======= Earnings (loss) per common share (1): Basic $(0.31) $0.40 ====== ===== Diluted $(0.31) $0.39 ====== ===== STERLING BANCSHARES, INC. SELECTED FINANCIAL INFORMATION (Unaudited) (dollars in thousands) Page 6 Quarter Ended ------------- Sep. 30, 2009 ---- Average Balance Interest Yield/Rate --------------- -------- ---------- Interest-Earning Assets: Loans held for sale $1,607 $23 5.68% Loans held for investment: Taxable 3,467,555 49,586 5.67% Non-taxable (3) 5,080 72 5.60% Securities: Taxable 844,651 9,286 4.36% Non-taxable (3) 97,858 1,307 5.30% Deposits in financial institutions 106,392 64 0.24% Other interest-earning assets 38,419 29 0.30% ------ --- ---- Total interest-earning assets 4,561,562 60,367 5.25% Noninterest-earning assets 416,340 ------- Total Assets $4,977,902 ========== Interest-Bearing Liabilities: Deposits: Demand and savings $1,837,612 $4,403 0.95% Certificates and other time 1,084,513 5,504 2.01% Other borrowed funds 145,625 346 0.94% Subordinated debt 77,232 748 3.84% Junior subordinated debt 82,734 1,082 5.19% ------ ----- ---- Total interest-bearing liabilities 3,227,716 12,083 1.49% Noninterest-bearing sources: Noninterest-bearing liabilities 1,172,556 Shareholders' equity 577,630 ------- Total Liabilities and Shareholders' Equity $4,977,902 ========== ------ ---- Tax Equivalent Net Interest Income and Margin (3) 48,284 4.20% ==== Tax Equivalent Adjustment: Loans 23 Securities 410 --- Total tax equivalent adjustment 433 --- Net Interest Income $47,851 ======= Quarter Ended ------------- Jun. 30, 2009 ---- Average Balance Interest Yield/Rate --------------- -------- ---------- Interest-Earning Assets: Loans held for sale $2,714 $40 5.84% Loans held for investment: Taxable 3,634,159 51,598 5.69% Non-taxable (3) 5,294 77 5.87% Securities: Taxable 761,249 8,815 4.64% Non-taxable (3) 96,447 1,292 5.37% Deposits in financial institutions 281 - 0.00% Other interest-earning assets 39,534 26 0.26% ------ --- ---- Total interest-earning assets 4,539,678 61,848 5.46% Noninterest-earning assets 451,642 ------- Total Assets $4,991,320 ========== Interest-Bearing Liabilities: Deposits: Demand and savings $1,674,468 $3,886 0.93% Certificates and other time 1,175,434 6,503 2.22% Other borrowed funds 216,342 425 0.79% Subordinated debt 77,701 885 4.57% Junior subordinated debt 82,734 1,155 5.60% ------ ----- ---- Total interest-bearing liabilities 3,226,679 12,854 1.60% Noninterest-bearing sources: Noninterest-bearing liabilities 1,158,883 Shareholders' equity 605,758 ------- Total Liabilities and Shareholders' Equity $4,991,320 ========== ------ ---- Tax Equivalent Net Interest Income and Margin (3) 48,994 4.33% ==== Tax Equivalent Adjustment: Loans 24 Securities 402 --- Total tax equivalent adjustment 426 --- Net Interest Income $48,568 ======= STERLING BANCSHARES, INC. SELECTED FINANCIAL INFORMATION (Unaudited) (dollars in thousands) Page 7 Year-to-date ------------ 2009 ---- Average Balance Interest Yield/Rate --------------- -------- ---------- Interest-Earning Assets: Loans held for sale $2,064 $89 5.75% Loans held for investment: Taxable 3,624,478 154,098 5.68% Non-taxable (3) 5,141 237 6.16% Securities: Taxable 772,386 26,659 4.61% Non-taxable (3) 97,069 3,902 5.37% Deposits in financial institutions 60,885 64 0.14% Other interest-earning assets 29,336 61 0.28% ------ --- ---- Total interest-earning assets 4,591,359 185,110 5.39% Noninterest-earning assets 422,017 ------- Total Assets $5,013,376 ========== Interest-Bearing Liabilities: Deposits: Demand and savings $1,693,613 $11,781 0.93% Certificates and other time 1,137,866 19,474 2.29% Other borrowed funds 241,653 1,583 0.88% Subordinated debt 77,582 2,612 4.50% Junior subordinated debt 82,734 3,441 5.56% ------ ----- ---- Total interest-bearing liabilities 3,233,448 38,891 1.61% Noninterest-bearing sources: Noninterest-bearing liabilities 1,169,110 Shareholders' equity 610,818 ------- Total Liabilities and Shareholders' Equity $5,013,376 ========== ------- ---- Tax Equivalent Net Interest Income and Margin (3) 146,219 4.26% ==== Tax Equivalent Adjustment: Loans 75 Securities 1,215 ----- Total tax equivalent adjustment 1,290 ----- Net Interest Income $144,929 ======== Year-to-date ------------ 2008 ---- Average Balance Interest Yield/Rate --------------- -------- ---------- Interest-Earning Assets: Loans held for sale $94,677 $4,681 6.60% Loans held for investment: Taxable 3,514,320 177,950 6.76% Non-taxable (3) 3,260 202 8.27% Securities: Taxable 610,877 21,671 4.74% Non-taxable (3) 97,278 3,820 5.25% Deposits in financial institutions 590 10 2.26% Other interest-earning assets 10,168 162 2.13% ------ --- ---- Total interest-earning assets 4,331,170 208,496 6.43% Noninterest-earning assets 460,904 ------- Total Assets $4,792,074 ========== Interest-Bearing Liabilities: Deposits: Demand and savings $1,419,654 $13,640 1.28% Certificates and other time 1,109,199 29,402 3.54% Other borrowed funds 500,268 9,193 2.45% Subordinated debt 57,687 3,094 7.16% Junior subordinated debt 82,734 4,301 6.94% ------ ----- ---- Total interest-bearing liabilities 3,169,542 59,630 2.51% Noninterest-bearing sources: Noninterest-bearing liabilities 1,122,443 Shareholders' equity 500,089 ------- Total Liabilities and Shareholders' Equity $4,792,074 ========== ------- ---- Tax Equivalent Net Interest Income and Margin (3) 148,866 4.59% ==== Tax Equivalent Adjustment: Loans 63 Securities 1,095 ----- Total tax equivalent adjustment 1,158 ----- Net Interest Income $147,708 ======== STERLING BANCSHARES, INC. SELECTED FINANCIAL INFORMATION (Unaudited) (dollars in thousands) Page 8 Quarter Ended ------------- Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, 2009 2009 2009 2008 2008 ---- ---- ---- ---- ---- Condensed Average Balance Sheet Loans held for sale $1,607 $2,714 $1,876 $684 $110,721 Loans held for investment 3,472,635 3,639,453 3,780,147 3,795,340 3,602,853 --------- --------- --------- --------- --------- Total loans 3,474,242 3,642,167 3,782,023 3,796,024 3,713,574 Available-for-sale securities, at fair value 779,792 689,541 635,423 573,073 564,779 Held-to-maturity securities, at amortized cost 162,717 168,155 171,245 173,584 174,980 Deposits in financial institutions 106,392 281 257 273 326 Other interest- earning assets 38,419 39,534 9,740 4,093 11,122 ------ ------ ----- ----- ------ Total interest- earning assets 4,561,562 4,539,678 4,598,688 4,547,047 4,464,781 Goodwill 173,210 173,210 173,210 173,210 173,106 Core deposits and other intangibles, net 12,463 13,028 13,587 14,158 14,740 All other noninterest -earning assets 230,667 265,404 286,454 301,516 281,156 ------- ------- ------- ------- ------- Total assets $4,977,902 $4,991,320 $5,071,939 $5,035,931 $4,933,783 ========== ========== ========== ========== ========== Noninterest- bearing demand deposits $1,124,076 $1,117,335 $1,130,230 $1,116,607 $1,093,053 Interest bearing deposits: Interest- bearing demand deposits 1,837,612 1,674,468 1,565,770 1,407,482 1,410,719 Jumbo certificates of deposit 614,418 658,983 651,798 634,499 677,251 Regular certificates of deposit 287,243 308,842 306,686 306,224 316,567 Brokered certificates of deposit 182,852 207,609 195,936 162,654 151,378 ------- ------- ------- ------- ------- Total deposits 4,046,201 3,967,237 3,850,420 3,627,466 3,648,968 Other borrowed funds 145,625 216,342 365,408 667,933 581,212 Subordinated debt 77,232 77,701 77,820 75,354 74,098 Junior subordinated debt 82,734 82,734 82,734 82,734 82,734 Accrued interest payable and other liabilities 48,480 41,548 45,698 44,340 43,608 ------ ------ ------ ------ ------ Total liabilities 4,400,272 4,385,562 4,422,080 4,497,827 4,430,620 Common equity 577,630 561,540 531,736 510,965 503,163 Preferred equity - 44,218 118,123 27,139 - --- ------ ------- ------ --- Total shareholders' equity 577,630 605,758 649,859 538,104 503,163 ------- ------- ------- ------- ------- Total liabilities and shareholders' equity $4,977,902 $4,991,320 $5,071,939 $5,035,931 $4,933,783 ========== ========== ========== ========== ========== Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, 2009 2009 2009 2008 2008 ---- ---- ---- ---- ---- Period-end Loans: Loans held for sale $38,187 $1,642 $1,395 $1,524 $322 Loans held for investment: Commercial and industrial 823,797 930,445 1,060,572 1,107,519 1,094,767 Real Estate: Commercial 1,703,629 1,768,824 1,788,488 1,765,843 1,564,989 Construction and development 394,819 458,386 499,262 545,303 732,174 Residential mortgage 335,007 323,520 320,021 309,665 284,036 Consumer/other 55,268 56,046 59,025 63,960 68,806 ------ ------ ------ ------ ------ Loans held for investment 3,312,520 3,537,221 3,727,368 3,792,290 3,744,772 --------- --------- --------- --------- --------- Total period-end loans $3,350,707 $3,538,863 $3,728,763 $3,793,814 $3,745,094 ========== ========== ========== ========== ========== Period-End Deposits: Noninterest- bearing demand $1,094,346 $1,127,717 $1,173,745 $1,123,746 $1,085,882 Interest-bearing demand 1,874,746 1,670,437 1,586,754 1,523,969 1,397,614 Certificates and other time deposits: Jumbo 594,590 644,965 666,722 660,427 636,447 Regular 273,721 306,988 301,047 317,719 304,050 Brokered 170,051 208,128 206,189 193,276 150,127 ------- ------- ------- ------- ------- Total period-end deposits $4,007,454 $3,958,235 $3,934,457 $3,819,137 $3,574,120 ========== ========== ========== ========== ========== STERLING BANCSHARES, INC. SELECTED FINANCIAL INFORMATION (Unaudited) (dollars in thousands) Page 9 Quarter Ended ------------- Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, 2009 2009 2009 2008 2008 ---- ---- ---- ---- ---- Allowance For Credit Losses Allowance for loan losses at beginning of period $53,075 $56,703 $49,177 $45,222 $41,651 Charge-offs: Commercial, financial and industrial 3,895 13,523 1,960 1,764 3,713 Real estate, mortgage and construction 33,621 1,903 438 1,629 1,879 Consumer 318 331 460 648 657 --- --- --- --- --- Total charge-offs 37,834 15,757 2,858 4,041 6,249 ------ ------ ----- ----- ----- Recoveries: Commercial, financial and industrial 251 286 640 286 277 Real estate, mortgage and construction 23 180 98 5 28 Consumer 163 163 94 205 142 --- --- --- --- --- Total recoveries 437 629 832 496 447 --- --- --- --- --- Net charge-offs 37,397 15,128 2,026 3,545 5,802 Provision for loan losses 54,381 11,500 9,552 7,500 9,373 ------ ------ ----- ----- ----- Allowance for loan losses at end of period $70,059 $53,075 $56,703 $49,177 $45,222 ------- ------- ------- ------- ------- Allowance for unfunded loan commitments at beginning of period 1,102 1,102 1,654 1,654 927 Provision for losses on unfunded loan commitments 1,750 - (552) - 727 ----- --- ---- --- --- Allowance for unfunded loan commitments at end of period 2,852 1,102 1,102 1,654 1,654 ----- ----- ----- ----- ----- Total allowance for credit losses $72,911 $54,177 $57,805 $50,831 $46,876 ======= ======= ======= ======= ======= Nonperforming Assets Nonaccrual loans: Loans held for sale $29,472 $- $- $- $- Loans held for investment 65,515 114,069 102,450 87,491 70,538 Real estate acquired by foreclosure 11,674 8,095 8,144 5,625 4,562 Other repossessed assets 33 419 144 154 234 --- --- --- --- --- Total nonperforming assets $106,694 $122,583 $110,738 $93,270 $75,334 ======== ======== ======== ======= ======= Restructured loans - accruing $27,110 $2,828 $- $- $- ======= ====== === === === Accruing loans 30 to 89 days past due $23,364 $30,131 $26,640 $30,492 $31,749 ======= ======= ======= ======= ======= Accruing loans past due 90 days or more $681 $2,112 $7,464 $8,448 $3,142 ==== ====== ====== ====== ====== Ratios Period-end allowance for credit losses to period-end loans 2.18% 1.53% 1.55% 1.34% 1.25% Period-end allowance for loan losses to period-end loans 2.09% 1.50% 1.52% 1.30% 1.21% Period-end allowance for loan losses to nonperforming loans 73.76% 46.53% 55.35% 56.21% 64.11% Nonperforming loans to period- end loans 2.83% 3.22% 2.75% 2.31% 1.88% Nonperforming assets to period- end assets 2.20% 2.50% 2.18% 1.84% 1.52% Net charge-offs to average loans (2) 4.27% 1.67% 0.22% 0.37% 0.62% Year-to-date ------------ 2009 2008 ---- ---- Allowance For Credit Losses Allowance for loan losses at beginning of period $49,177 $34,446 Charge-offs: Commercial, financial and industrial 19,378 7,644 Real estate, mortgage and construction 35,962 3,612 Consumer 1,109 1,311 ----- ----- Total charge-offs 56,449 12,567 ------ ------ Recoveries: Commercial, financial and industrial 1,177 1,106 Real estate, mortgage and construction 301 112 Consumer 420 435 --- --- Total recoveries 1,898 1,653 ----- ----- Net charge-offs 54,551 10,914 Provision for loan losses 75,433 21,690 ------ ------ Allowance for loan losses at end of period $70,059 $45,222 ------- ------- Allowance for unfunded loan commitments at beginning of period 1,654 927 Provision for losses on unfunded loan commitments 1,198 727 ----- --- Allowance for unfunded loan commitments at end of period 2,852 1,654 ----- ----- Total allowance for credit losses $72,911 $46,876 ======= ======= Nonperforming Assets Nonaccrual loans: Loans held for sale $29,472 $- Loans held for investment 65,515 70,538 Real estate acquired by foreclosure 11,674 4,562 Other repossessed assets 33 234 --- --- Total nonperforming assets $106,694 $75,334 ======== ======= Restructured loans - accruing $27,110 $- ======= === Accruing loans 30 to 89 days past due $23,364 $31,749 ======= ======= Accruing loans past due 90 days or more $681 $3,142 ==== ====== Ratios Period-end allowance for credit losses to period-end loans 2.18% 1.25% Period-end allowance for loan losses to period-end loans 2.09% 1.21% Period-end allowance for loan losses to nonperforming loans 73.76% 64.11% Nonperforming loans to period-end loans 2.83% 1.88% Nonperforming assets to period-end assets 2.20% 1.52% Net charge-offs to average loans (2) 2.01% 0.40% 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 efficiency ratio is calculated by dividing noninterest expense less acquisition costs, hurricane related costs and a one-time severance charge by tax equivalent basis net interest income plus noninterest income less net gain (loss) on investment securities.

Photo: http://www.newscom.com/cgi-bin/prnh/20080125/SBLOGOhttp://photoarchive.ap.orgPRN Photo Desk photodesk@prnewswire.comSterling Bancshares, Inc.

CONTACT: J. Downey Bridgwater, Chairman, President and Chief ExecutiveOfficer, +1-713-507-2670, or Zach L. Wasson, Executive Vice President andChief Financial Officer, +1-713-507-1297, both of Sterling Bancshares, Inc.

Web site: http://www.banksterling.com/