Sterling Bancshares 8-K Sterling Bancshares Reports Third Quarter 2010 Results

NEWS RELEASE

For More Information Contact:	For Release  - October 28, 2010
Chris Reid, Vice President and Director of Investor Relations, (713) 507-2873

STERLING BANCSHARES REPORTS THIRD QUARTER 2010 RESULTS

HOUSTON, TX, October 28, 2010 – Sterling Bancshares, Inc. (Nasdaq: SBIB) today reported net income of $4.5 million, or $0.04 per diluted common share, for the third quarter ended September 30, 2010, as compared to a net loss of $24.7 million, or $0.30 for the third quarter of 2009.

Key items and metrics for the quarter include the following:

· Total nonperforming assets decreased $6 million, or 3.2% over the prior quarter;

· Period-end allowance for credit losses to period-end loans increased to 2.88% at September 30, 2010, from 2.18% at September 30, 2009;

· Provision for credit losses was $7.7 million for the third quarter of 2010, a reduction of $1.6 million on a linked-quarter basis;

· Tangible capital ratio was 9.13% and all regulatory capital ratios were in excess of those considered to be well-capitalized at September 30, 2010.

 “We are pleased to see stabilization in a number of our credit metrics during the third quarter, which contributed to our overall improved profitability,” commented J. Downey Bridgwater, Sterling’s Chairman, President, and Chief Executive Officer.  “Nonperforming loans, foreclosed real estate owned, and past due loans all decreased during the quarter.  We continue to see property values stabilize for the most part which has helped to decrease our credit costs over the last couple of quarters. ”

“The Texas economy continues to recover from the recession at a fairly modest pace,” continued Bridgwater.  “However, historically low interest rates combined with low loan demand has remained a headwind for revenue generation.  As the economic recovery continues and there is additional clarity from a political and regulatory perspective, we anticipate more of our business customers will start to invest in the future growth of their businesses.  Sterling is extremely well-positioned from a capital and liquidity standpoint to take advantage of these future opportunities as they arise.”

Total loans decreased $129 million or 4.3% on a linked-quarter basis to $2.9 billion at September 30, 2010, and decreased $481 million or 14.3% since September 30, 2009.  The decline in loans during the third quarter of 2010 was due in part to a decrease in commercial real estate and construction and development loans of $42.1 million and $42.0 million, respectively, resulting from the Company’s decision to reduce exposure to these loan categories.  The remaining decrease in loans was related to commercial and industrial loans which were impacted by continued low line-of-credit usage.

Average deposits decreased $61.1 million to $4.1 billion for the third quarter of 2010 compared to the second quarter of 2010.  On average, noninterest-bearing deposits increased $27.0 million or 2.3% for the third quarter of 2010 compared to the second quarter of 2010.  Due to continued growth in core deposits during the quarter, the Company was able to reduce higher-cost brokered and jumbo certificates of deposit by $58.8 on a million linked-quarter basis. Average total deposits increased $52.2 million or 1.2% for the third quarter of 2010 compared to the same quarter in 2009.

Sterling Bancshares, Inc., News Release

October 28, 2010

Page 2

At September 30, 2010, nonperforming assets were $178 million or 3.54% of total assets, compared to $184 million or 3.63% at June 30, 2010.  Potential problem loans were $170 million at September 30, 2010, an increase of $27.5 million over the prior quarter. The increase in potential problem loans during the third quarter of 2010 was due to a downgrade of certain non-owner occupied commercial real estate loans.  Accruing loans 30-89 days past due were $16.2 million at September 30, 2010, a decrease of $3.1 million compared to the prior quarter and $18.0 million compared to December 31, 2009.

At September 30, 2010, the total allowance for credit losses was $82.8 million or 2.88% of period-end total loans, up slightly from $82.5 million or 2.75% of period-end total loans at June 30, 2010, and up from $72.9 million or 2.18% of period-end total loans at September 30, 2009.

Net charge-offs for the third quarter of 2010 were $7.4 million or 1.01% of average total loans, compared to $6.3 million or 0.83% of average total loans for the second quarter of 2010.

Tax-equivalent net interest income for the third quarter of 2010 was $42.6 million, down $655 thousand on a linked-quarter basis. Tax-equivalent net interest margin was 3.68% for the third quarter of 2010, down six basis points from 3.74% for the second quarter of 2010.  Net interest income and margin during the third quarter of 2010 were negatively impacted by a decrease in average loans and a reduction in interest income from the interest rate hedge that was fully amortized during the third quarter.

Noninterest income for the third quarter of 2010 was $9.5 million, an increase of $965 thousand on a linked-quarter basis.  This increase in noninterest income was due in part to a decrease in losses on loans classified as held for sale.  During the second quarter of 2010, the Company recorded losses on loans classified as held for sale of $418 thousand.  The Company did not record any losses on loans classified as held for sale during the third quarter of 2010.

Total noninterest expense for the third quarter of 2010 was $37.8 million, a decrease of $3.0 million on a linked-quarter basis.  The decrease in noninterest expense was primarily due to gains from sales of other real estate owned net of carrying costs of $414 thousand recorded during the third quarter of 2010 compared to net losses and carrying costs of $1.4 million in the second quarter of 2010.

As of September 30, 2010, Sterling had total assets of $5.0 billion, total loans of $2.9 billion and total deposits of $4.1 billion.  Shareholders’ equity of $627 million at September 30, 2010, was 12.4% of total assets.  Book value per common share at period-end was $6.15.

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 Thursday, October 28, 2010 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) 332-0335.  An audio archive of the call will also be available on the web site beginning Friday, October 29, 2010.

A telephone replay of the conference call will be available beginning Thursday, October 28, 2010 at 12:00 p.m. until Thursday, November 4, 2010 at 11:59 p.m. Central Time by dialing (800) 475-6701.  The access code for the replay is 173152.

Sterling Bancshares, Inc., News Release

October 28, 2010

Page 3

Forward-Looking Statements

This news release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements involve risks and uncertainties and are based on beliefs and assumptions of management at the time that this release was prepared.  The Company does not assume any obligation to update the forward-looking statements.  There are several factors, many beyond the Company’s control, that could cause results to differ significantly from expectations including:  adverse changes in the loan portfolio and the resulting credit risk-related losses and expenses; potential inadequacy of the allowance for credit losses; the ability to maintain or improve origination volumes; competitive influences on product pricing; 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 2009 Annual Report on Form 10-K which has been filed with the Securities and Exchange Commission and is 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 $5.0 billion, which operates 56 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
	Sep. 30,			Jun. 30,			Sep. 30,
	2010			2010			2009			2010			2009
Profitability
Net income	$	4,455		$	596		$	(24,724	)	$	(1,197	)	$	(14,710	)
Net income available to common shareholders	$	4,455		$	596		$	(24,724	)	$	(1,197	)	$	(24,052	)
Earnings per common share (1)
Basic	$	0.04		$	0.01		$	(0.30	)	$	(0.01	)	$	(0.31	)
Diluted	$	0.04		$	0.01		$	(0.30	)	$	(0.01	)	$	(0.31	)
Return on average common equity (2)		2.80	%		0.38	%		(16.98	)%		(0.26	)%		(5.77	)%
Return on average assets (2)		0.35	%		0.05	%		(1.97	)%		(0.03	)%		(0.39	)%
Net interest margin (3)		3.68	%		3.74	%		4.20	%		3.81	%		4.26	%
Efficiency Ratio (4):
Consolidated		72.53	%		78.77	%		69.56	%		75.86	%		68.73	%
Sterling Bank		70.74	%		76.40	%		67.79	%		73.58	%		66.76	%
Liquidity and Capital Ratios
Average loans to average deposits		71.63	%		73.39	%		85.86	%		74.51	%		91.82	%
Period-end stockholders' equity to total assets		12.44	%		12.30	%		11.23	%		12.44	%		11.23	%
Average stockholders' equity to average assets		12.53	%		12.28	%		11.60	%		12.15	%		12.18	%
Period-end tangible capital to total tangible assets		9.13	%		9.01	%		7.70	%		9.13	%		7.70	%
Tier 1 capital to risk-weighted assets		15.23	%		14.45	%		11.20	%		15.23	%		11.20	%
Total capital to risk-weighted assets		17.88	%		17.04	%		13.95	%		17.88	%		13.95	%
Tier 1 leverage ratio (Tier 1 capital to average assets)		10.53	%		10.32	%		8.88	%		10.53	%		8.88	%
Other Data
Shares used in computing earnings per common share
Basic shares		101,934			101,898			81,707			97,487			77,659
Diluted shares		102,212			102,144			81,707			97,487			77,659
End of period common shares outstanding		101,952			101,927			81,755			101,952			81,755
Book value per common share at period-end	$	6.15		$	6.13		$	6.67		$	6.15		$	6.67
Cash dividends paid per common share	$	0.015		$	0.015		$	0.055		$	0.045		$	0.165
Common stock dividend payout ratio		34.35	%		256.65	%		(18.19	)%		(358.14	)%		(85.45	)%
Full-time equivalent employees		986			991			1,013			986			1,013
Number of banking centers		56			57			60			56			60

STERLING BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS (Unaudited)

(dollars in thousands)

Page 5

	Sep. 30,			Jun. 30,			Mar. 31,			Dec. 31,			Sep. 30,
	2010			2010			2010			2009			2009
ASSETS
Cash and cash equivalents	$	366,590		$	359,388		$	361,199		$	246,215		$	158,114
Available-for-sale securities, at fair value		1,169,519			1,069,964			920,082			846,216			836,521
Held-to-maturity securities, at amortized cost		280,215			280,658			267,503			222,845			162,990
Loans held for sale		7,123			6,509			18,055			11,778			38,187
Loans held for investment		2,862,952			2,992,370			3,096,261			3,233,273			3,312,520
Total loans		2,870,075			2,998,879			3,114,316			3,245,051			3,350,707
Allowance for loan losses		(80,754	)		(80,983	)		(76,646	)		(74,732	)		(70,059	)
Loans, net		2,789,321			2,917,896			3,037,670			3,170,319			3,280,648
Premises and equipment, net		48,507			47,812			47,396			48,816			49,128
Real estate acquired by foreclosure		14,571			18,151			17,282			16,763			11,674
Goodwill		173,210			173,210			173,210			173,210			173,210
Core deposits and other intangibles, net		10,004			10,540			11,077			11,626			12,179
Accrued interest receivable		14,356			14,951			15,462			16,502			16,142
Other assets		173,328			183,429			192,498			184,536			158,912
TOTAL ASSETS	$	5,039,621		$	5,075,999		$	5,043,379		$	4,937,048		$	4,859,518
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits:
Noninterest-bearing demand	$	1,248,321		$	1,266,781		$	1,167,602		$	1,144,133		$	1,094,346
Interest-bearing demand		2,014,207			1,962,854			2,031,399			2,004,539			1,874,746
Certificates and other time deposits		840,683			921,495			925,427			946,279			1,038,362
Total deposits		4,103,211			4,151,130			4,124,428			4,094,951			4,007,454
Other borrowed funds		106,546			100,770			99,012			97,245			99,486
Subordinated debt		78,624			78,247			77,737			77,338			77,616
Junior subordinated debt		82,734			82,734			82,734			82,734			82,734
Accrued interest payable and other liabilities		41,704			38,722			39,944			44,247			46,716
Total liabilities		4,412,819			4,451,603			4,423,855			4,396,515			4,314,006
COMMITMENTS AND CONTINGENCIES		-			-			-			-			-
SHAREHOLDERS' EQUITY
Common stock		103,820			103,795			103,745			83,721			83,622
Capital surplus		238,536			238,186			237,439			170,848			171,955
Retained earnings		290,429			287,503			288,436			295,909			295,401
Treasury stock		(21,399	)		(21,399	)		(21,399	)		(21,399	)		(21,399	)
Accumulated other comprehensive income, net of tax		15,416			16,311			11,303			11,454			15,933
Total shareholders' equity		626,802			624,396			619,524			540,533			545,512
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	5,039,621		$	5,075,999		$	5,043,379		$	4,937,048		$	4,859,518

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,		Jun. 30,		Mar. 31,			Dec. 31,			Sep. 30,
	2010		2010		2010			2009			2009			2010			2009
Interest income:
Loans, including fees	$	40,153	$	42,087	$	43,649		$	46,876		$	49,658		$	125,889		$	154,349
Securities:
Taxable		9,841		9,602		9,117			9,758			9,286			28,560			26,659
Non-taxable		1,013		915		925			929			897			2,853			2,687
Deposits in financial institutions		157		231		115			90			64			503			64
Other interest-earning assets		1		3		1			19			29			5			61
Total interest income		51,165		52,838		53,807			57,672			59,934			157,810			183,820
Interest expense:
Demand and savings deposits		3,583		4,319		4,212			4,243			4,403			12,114			11,781
Certificates and other time deposits		2,823		3,159		3,352			4,577			5,504			9,334			19,474
Other borrowed funds		784		768		448			314			346			2,000			1,583
Subordinated debt		747		705		687			713			748			2,139			2,612
Junior subordinated debt		1,071		1,040		1,028			1,045			1,082			3,139			3,441
Total interest expense		9,008		9,991		9,727			10,892			12,083			28,726			38,891
Net interest income		42,157		42,847		44,080			46,780			47,851			129,084			144,929
Provision for credit losses		7,716		9,336		22,936			11,000			56,131			39,988			76,631
Net interest income after provision for credit losses		34,441		33,511		21,144			35,780			(8,280	)		89,096			68,298
Noninterest income:
Customer service fees		3,728		3,591		3,488			3,722			3,845			10,807			11,709
Net gain (loss) on securities		43		17		20			(1,823	)		4			80			17
Wealth management fees		1,733		2,102		2,098			2,049			1,862			5,933			5,904
Other		3,986		2,815		931			1,543			3,402			7,732			12,774
Total noninterest income		9,490		8,525		6,537			5,491			9,113			24,552			30,404
Noninterest expense:
Salaries and employee benefits		20,722		20,453		20,503			19,496			21,005			61,678			67,434
Occupancy		5,566		5,709		5,790			5,822			5,967			17,065			18,004
Technology		2,267		2,332		2,417			2,375			2,495			7,016			7,475
Professional fees		1,452		1,372		2,005			1,283			1,065			4,829			3,419
Postage, delivery and supplies		661		719		708			685			700			2,088			2,181
Marketing		198		271		269			443			557			738			1,487
Core deposits & other intangibles amortization		537		537		549			552			565			1,623			1,695
Acquisition costs		-		-		-			980			154			-			154
FDIC insurance assessments		2,478		2,438		2,547			1,856			1,741			7,463			6,974
Other		3,899		6,975		4,165			5,998			5,826			15,039			14,871
Total noninterest expense		37,780		40,806		38,953			39,490			40,075			117,539			123,694
Income (loss) before income taxes		6,151		1,230		(11,272	)		1,781			(39,242	)		(3,891	)		(24,992	)
Income taxes provision (benefit)		1,696		634		(5,024	)		45			(14,518	)		(2,694	)		(10,282	)
Net income (loss)	$	4,455	$	596	$	(6,248	)	$	1,736		$	(24,724	)	$	(1,197	)	$	(14,710	)
Preferred stock dividends		-		-		-			-			-			-			9,342
Net income (loss) available to common shareholders	$	4,455	$	596	$	(6,248	)	$	1,736		$	(24,724	)	$	(1,197	)	$	(24,052	)
Earnings (loss) per common share (1):
Basic	$	0.04	$	0.01	$	(0.07	)	$	0.02		$	(0.30	)	$	(0.01	)	$	(0.31	)
Diluted	$	0.04	$	0.01	$	(0.07	)	$	0.02		$	(0.30	)	$	(0.01	)	$	(0.31	)

STERLING BANCSHARES, INC.

SELECTED FINANCIAL INFORMATION (Unaudited)

(dollars in thousands)

Page 7

	Quarter Ended
	Sep. 30,							Jun. 30,
	2010							2010
	Average Balance		Interest		Yield/Rate			Average Balance		Interest		Yield/Rate
Interest-Earning Assets:
Loans held for sale	$	5,390	$	28		2.06	%	$	11,454	$	54		1.90	%
Loans held for investment:
Taxable		2,930,124		40,122		5.43	%		3,036,770		41,994		5.55	%
Non-taxable (3)		295		4		5.52	%		4,260		57		5.34	%
Securities:
Taxable		1,286,050		9,841		3.04	%		1,125,517		9,602		3.42	%
Non-taxable (3)		112,188		1,497		5.30	%		100,192		1,347		5.39	%
Deposits in financial institutions		260,167		157		0.24	%		362,429		231		0.26	%
Other interest-earning assets		566		1		0.84	%		840		3		1.27	%
Total interest-earning assets		4,594,780		51,650		4.46	%		4,641,462		53,288		4.60	%
Noninterest-earning assets		438,522							444,933
Total Assets	$	5,033,302						$	5,086,395
Interest-Bearing Liabilities:
Deposits:
Demand and savings	$	2,003,914	$	3,583		0.71	%	$	2,027,133	$	4,319		0.85	%
Certificates and other time		870,041		2,823		1.29	%		934,941		3,159		1.36	%
Other borrowed funds		103,902		784		2.99	%		100,976		768		3.05	%
Subordinated debt		78,472		747		3.78	%		77,831		705		3.63	%
Junior subordinated debt		82,734		1,071		5.14	%		82,734		1,040		5.04	%
Total interest-bearing liabilities		3,139,063		9,008		1.14	%		3,223,615		9,991		1.24	%
Noninterest-bearing sources:
Noninterest-bearing liabilities		1,263,481							1,238,352
Shareholders' equity		630,758							624,428
Total Liabilities and Shareholders' Equity	$	5,033,302						$	5,086,395
Tax Equivalent Net Interest Income & Margin (3)				42,642		3.68	%				43,297		3.74	%
Non-GAAP to GAAP Reconciliation:
Tax Equivalent adjustment:
Loans				1							18
Securities				484							432
Total tax equivalent adjustment				485							450
Net Interest Income			$	42,157						$	42,847

STERLING BANCSHARES, INC.

SELECTED FINANCIAL INFORMATION (Unaudited)

(dollars in thousands)

Page 8

	Year-to-date
	2010							2009
	Average Balance		Interest		Yield/Rate			Average Balance		Interest		Yield/Rate
Interest-Earning Assets:
Loans held for sale	$	10,109	$	129		1.70	%	$	2,064	$	89		5.75	%
Loans held for investment:
Taxable		3,046,899		125,677		5.51	%		3,624,478		154,098		5.68	%
Non-taxable (3)		3,113		122		5.26	%		5,141		237		6.16	%
Securities:
Taxable		1,138,539		28,560		3.35	%		772,386		26,659		4.61	%
Non-taxable (3)		104,647		4,206		5.37	%		97,069		3,902		5.37	%
Deposits in financial institutions		272,475		503		0.25	%		60,885		64		0.14	%
Other interest-earning assets		1,268		5		1.01	%		29,336		61		0.28	%
Total interest-earning assets		4,577,050		159,202		4.65	%		4,591,359		185,110		5.39	%
Noninterest-earning assets		442,382							422,017
Total Assets	$	5,019,432						$	5,013,376
Interest-Bearing Liabilities:
Deposits:
Demand and savings	$	2,008,236	$	12,114		0.81	%	$	1,693,613	$	11,781		0.93	%
Certificates and other time		909,618		9,334		1.37	%		1,137,866		19,474		2.29	%
Other borrowed funds		101,602		2,000		2.63	%		241,653		1,583		0.88	%
Subordinated debt		78,012		2,139		3.67	%		77,582		2,612		4.50	%
Junior subordinated debt		82,734		3,139		5.07	%		82,734		3,441		5.56	%
Total interest-bearing liabilities		3,180,202		28,726		1.21	%		3,233,448		38,891		1.61	%
Noninterest-bearing sources:
Noninterest-bearing liabilities		1,229,222							1,169,110
Shareholders' equity		610,008							610,818
Total Liabilities and Shareholders' Equity	$	5,019,432						$	5,013,376
Tax Equivalent Net Interest Income & Margin (3)				130,476		3.81	%				146,219		4.26	%
Non-GAAP to GAAP Reconciliation:
Tax equivalent adjustment:
Loans				39							75
Securities				1,353							1,215
Total tax equivalent adjustment				1,392							1,290
Net Interest Income			$	129,084						$	144,929

STERLING BANCSHARES, INC.

SELECTED FINANCIAL INFORMATION (Unaudited)

(dollars in thousands)

Page 9

	Quarter Ended
	Sep. 30,		Jun. 30,		Mar. 31,		Dec. 31,		Sep. 30,
	2010		2010		2010		2009		2009
Condensed Average Balance Sheet
Loans held for sale	$	5,390	$	11,454	$	13,572	$	38,844	$	1,607
Loans held for investment		2,930,419		3,041,030		3,181,345		3,262,525		3,472,635
Total loans		2,935,809		3,052,484		3,194,917		3,301,369		3,474,242
Available-for-sale securities, at fair value		1,113,780		953,742		860,466		897,733		779,792
Held-to-maturity securities, at amortized cost		284,458		271,967		241,894		168,940		162,717
Deposits in financial institutions		260,167		362,429		194,104		163,195		106,392
Other earning assets		566		840		2,418		26,825		38,419
Total earning assets		4,594,780		4,641,462		4,493,799		4,558,062		4,561,562
Goodwill		173,210		173,210		173,210		173,210		173,210
Core deposits and other intangibles, net		10,262		10,800		11,340		11,890		12,463
All other non-interest earning assets		255,050		260,923		259,198		236,710		230,667
Total assets	$	5,033,302	$	5,086,395	$	4,937,547	$	4,979,872	$	4,977,902
Noninterest-bearing demand	$	1,224,402	$	1,197,400	$	1,144,754	$	1,158,023	$	1,124,076
Interest bearing deposits:
Interest-bearing demand		2,003,914		2,027,133		1,993,546		1,946,308		1,837,612
Jumbo certificates of deposits		539,094		582,727		549,723		576,984		614,418
Regular certificates of deposit		227,490		233,592		241,649		264,388		287,243
Brokered certificates of deposit		103,457		118,622		133,101		166,319		182,852
Total deposits		4,098,357		4,159,474		4,062,773		4,112,022		4,046,201
Other borrowed funds		103,902		100,976		99,884		107,211		145,625
Subordinated debt		78,472		77,831		77,724		77,824		77,232
Junior subordinated debt		82,734		82,734		82,734		82,734		82,734
Accrued interest payable and other liabilities		39,079		40,952		40,216		46,348		48,480
Total liabilities		4,402,544		4,461,967		4,363,331		4,426,139		4,400,272
Total shareholders' equity		630,758		624,428		574,216		553,733		577,630
Total liabilities and shareholders' equity	$	5,033,302	$	5,086,395	$	4,937,547	$	4,979,872	$	4,977,902

	Sep. 30,		Jun. 30,		Mar. 31,		Dec. 31,		Sep. 30,
	2010		2010		2010		2009		2009
Period-end Loans:
Loans held for sale	$	7,123	$	6,509	$	18,055	$	11,778	$	38,187
Loans held for investment:
Commercial and industrial		597,205		658,141		697,998		806,542		823,797
Real Estate:
Commercial		1,590,081		1,632,213		1,672,562		1,669,118		1,703,629
Construction and development		268,691		310,689		330,855		360,444		394,819
Residential mortgage		362,404		343,894		346,400		344,838		335,007
Consumer/other		44,571		47,433		48,446		52,331		55,268
Loans held for investment		2,862,952		2,992,370		3,096,261		3,233,273		3,312,520
Total period-end loans	$	2,870,075	$	2,998,879	$	3,114,316	$	3,245,051	$	3,350,707
Period-End Deposits:
Noninterest-bearing demand	$	1,248,321	$	1,266,781	$	1,167,602	$	1,144,133	$	1,094,346
Interest-bearing demand		2,014,207		1,962,854		2,031,399		2,004,539		1,874,746
Certificates and other time deposits:
Jumbo		512,178		587,377		560,093		549,588		594,590
Regular		224,290		231,404		234,010		252,682		273,721
Brokered		104,215		102,714		131,324		144,009		170,051
Total period-end deposits	$	4,103,211	$	4,151,130	$	4,124,428	$	4,094,951	$	4,007,454

STERLING BANCSHARES, INC.

SELECTED FINANCIAL INFORMATION (Unaudited)

(dollars in thousands)

Page 10

	Quarter Ended															Year-to-date
	Sep. 30,			Jun. 30,			Mar. 31,			Dec. 31,			Sep. 30,
	2010			2010			2010			2009			2009			2010			2009
Allowance For Credit Losses
Allowance for loan losses at beginning of period	$	80,983		$	76,646		$	74,732		$	70,059		$	53,075		$	74,732		$	49,177
Charge-offs:
Commercial, financial and industrial		1,034			1,687			1,968			1,536			5,049			4,689			19,378
Real estate, mortgage and construction		7,314			5,786			20,214			5,448			32,464			33,314			35,962
Consumer		285			205			262			477			321			752			1,109
Total charge-offs		8,633			7,678			22,444			7,461			37,834			38,755			56,449
Recoveries:
Commercial, financial and industrial		481			433			483			536			251			1,397			1,177
Real estate, mortgage and construction		633			845			821			488			23			2,299			301
Consumer		72			51			118			110			163			241			420
Total Recoveries		1,186			1,329			1,422			1,134			437			3,937			1,898
Net charge-offs		7,447			6,349			21,022			6,327			37,397			34,818			54,551
Provision for loan losses		7,218			10,686			22,936			11,000			54,381			40,840			75,433
Allowance for loan losses at end of period	$	80,754		$	80,983		$	76,646		$	74,732		$	70,059		$	80,754		$	70,059
Reserve for unfunded loan commitments at beginning of period	$	1,502		$	2,852		$	2,852		$	2,852		$	1,102		$	2,852		$	1,654
Provision for losses on unfunded loan commitments		498			(1,350	)		-			-			1,750			(852	)		1,198
Reserve for unfunded loan commitments at end of period		2,000			1,502			2,852			2,852			2,852			2,000			2,852
Total allowance for credit losses	$	82,754		$	82,485		$	79,498		$	77,584		$	72,911		$	82,754		$	72,911
Nonperforming Assets
Nonperforming loans:
Loans held for sale	$	1,665		$	3,491		$	10,883		$	9,896		$	29,472		$	1,665		$	29,472
Loans held for investment		162,096			162,669			125,025			92,668			65,515			162,096			65,515
Real estate acquired by foreclosure		14,571			18,151			17,282			16,763			11,674			14,571			11,674
Other repossessed assets		50			20			60			38			33			50			33
Total nonperforming assets	$	178,382		$	184,331		$	153,250		$	119,365		$	106,694		$	178,382		$	106,694
Restructured loans - accruing	$	17,495		$	15,001		$	10,675		$	69,857		$	45,981		$	17,495		$	45,981
Potential problem loans	$	169,646		$	142,123		$	172,020		$	187,513		$	131,950		$	169,646		$	131,950
Accruing loans 30 to 89 days past due	$	16,234		$	19,307		$	46,410		$	34,243		$	23,364		$	16,234		$	23,364
Accruing loans past due 90 days or more	$	953		$	441		$	306		$	41		$	681		$	953		$	681
Ratios
Period-end allowance for credit losses to period-end loans		2.88	%		2.75	%		2.55	%		2.39	%		2.18	%		2.88	%		2.18	%
Period-end allowance for loan losses to period-end loans		2.81	%		2.70	%		2.46	%		2.30	%		2.09	%		2.81	%		2.09	%
Period-end allowance for loan losses to nonperforming loans		49.31	%		48.74	%		56.40	%		72.86	%		73.76	%		49.31	%		73.76	%
Nonperforming loans to period-end loans		5.71	%		5.54	%		4.36	%		3.16	%		2.83	%		5.71	%		2.83	%
Nonperforming assets to period-end assets		3.54	%		3.63	%		3.04	%		2.42	%		2.20	%		3.54	%		2.20	%
Net charge-offs to average loans (2)		1.01	%		0.83	%		2.67	%		0.76	%		4.27	%		1.52	%		2.01	%

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. The Company presents net interest income on a tax-equivalent basis. Accordingly, net interest income from tax-exempt securities and loans is presented in the net interest income results on a basis comparable to taxable securities and loans. This non-GAAP financial measure allows management to assess the comparability of net interest income arising from both taxable and tax-exempt sources.

(4) The efficiency ratio is calculated by dividing noninterest expense less acquisition costs and a one-time severance charge by tax equivalent basis net interest income plus noninterest income less net gain (loss) on investment securities.