Sterling Bancshares Reports Fourth Quarter 2009 Results

Jan 21, 2010, 07:00 ET from Sterling Bancshares, Inc.

HOUSTON, Jan. 21 /PRNewswire-FirstCall/ -- Sterling Bancshares, Inc. (Nasdaq: SBIB) today reported net income of $1.7 million, or $0.02 per diluted common share for the fourth quarter ended December 31, 2009 compared to a net loss of $24.7 million or $0.30 per diluted common share for the third quarter of 2009.

Net loss for the year ended December 31, 2009 was $13.0 million compared to net income of $38.6 million for 2008.  Net loss applicable to common shareholders for the year ended December 31, 2009 was $22.3 million, or $0.28 per diluted common share which included total preferred dividends of $9.3 million, or $0.12 per diluted common share compared to net income of $38.2 million or $0.52 per diluted common share, earned in 2008.  

Key items and metrics for the quarter include the following:

  • Average deposit growth of 13.4% for the fourth quarter of 2009 compared to the same period in 2008;
  • Average loan to deposit ratio decreased from 105% for the fourth quarter of 2008 to 80.3% for the same period in 2009;
  • Period-end allowance for credit losses to period-end loans increased to 2.39% at December 31, 2009 from 1.34% at December 31, 2008 and from 2.18% at September 30, 2009;
  • Completed sale of $16 million in nonperforming loans related to Semgroup (a previously disclosed energy loan relationship);
  • Realized securities gains and losses resulting in a net loss of $1.8 million (sold all below investment grade securities); and
  • Recorded acquisition costs of $980 thousand during the fourth quarter of 2009 related to the terminated First Bank acquisition.

"Our 2009 results were impacted by an extremely difficult economic environment.  Elevated credit costs, historically low interest rates, and low loan demand significantly reduced our profitability this past year," commented J. Downey Bridgwater, Sterling's Chairman, President, and Chief Executive Officer.  "While our fourth quarter results are an improvement from the third quarter, they are still not where we want them to be.  Going forward, we will continue to proactively identify negative trends within our portfolio and take actions necessary to minimize future loan losses."

Average deposits increased $65.8 million to $4.1 billion at December 31, 2009, up 1.6% on a linked-quarter basis and up $485 million or 13.4% compared to December 31, 2008.  This deposit growth has further strengthened the Company's balance sheet by improving the average loan to deposit ratio to 80.3% for the fourth quarter of 2009, down from 105% for the same quarter in 2008.  

Average total loans decreased $173 million or 5.0% on a linked-quarter basis to $3.3 billion at December 31, 2009, and decreased $495 million or 13.0% since December 31, 2008.  The decline in loans during 2009 was primarily due to principal reductions in energy and construction and development loans.  

At December 31, 2009, nonperforming assets were $119 million or 2.42% of total assets compared to $107 million or 2.20% at September 30, 2009.  The increase in nonperforming loans was primarily due to the credit deterioration of certain nonowner occupied commercial real estate loans which migrated to nonperforming status and this increase was partially offset by the sale of approximately $20.0 million of nonperforming loans during the fourth quarter of 2009.

At December 31, 2009, the total allowance for credit losses was $77.6 million or 2.39% of period-end total loans, up from $50.8 million or 1.34% of period-end total loans at December 31, 2008, and from $72.9 million or 2.18% of period-end total loans at September 30, 2009.  The increase in the allowance for loan losses during 2009 was due in part to increases in both nonperforming and classified loans.  

Net charge-offs for the fourth quarter of 2009 were $6.3 million or 0.76% of average total loans, compared to $37.4 million or 4.27% of average total loans for the third quarter of 2009.  Net charge-offs for the year ended December 31, 2009 were $60.9 million or 1.72% of average total loans, up from $14.5 million or 0.40% for the same period in 2008.  The primary increase in net charge-offs during 2009 was due to the $15.9 million of charge-offs related to collateral-based nonperforming loans, $11.8 million related to the sale of certain nonperforming loans and an $11.6 million charge-off related to Semgroup (a previously disclosed nonperforming energy loan relationship) which had previously been provided for in our allowance for loan losses.  

Tax-equivalent net interest income for the fourth quarter of 2009 was $47.2 million, down $1.1 million on a linked-quarter basis. Tax-equivalent net interest margin was 4.11% for the fourth quarter of 2009, down 9 basis points from 4.20% for the third quarter of 2009.  

Noninterest income for the fourth quarter of 2009 decreased $3.6 million on a linked-quarter basis and decreased $4.2 million compared to the same period in 2008.  Net losses on securities for the fourth quarter of 2009 were $1.8 million due to realized losses of $7.2 million recorded on the sale of certain private-label CMOs.   The decision to sell these securities in 2009 was due to the significant credit downgrading of the securities which caused these securities to be classified as "substandard" assets by management.  These securities had a carrying value of $24.4 million at the time of sale.  These losses were partially offset by realized gains of $5.3 million on the sale of available-for-sale investments with a cost basis of $97.0 million which were sold as part of our routine portfolio management. Other noninterest income for the fourth quarter of 2009 decreased $1.8 million on a linked-quarter basis and $2.3 million compared to the same period in 2008.  During the fourth quarter of 2009, the Company recorded $1.4 million in losses on sale of $8.4 million of loans classified as held for sale.

Total noninterest expense decreased $585 thousand for the fourth quarter of 2009 as compared with the third quarter of 2009 and increased $373 thousand compared to the same period in 2008.  Salaries and benefits decreased $1.5 million on a linked-quarter basis and $2.4 million compared to the fourth quarter in 2008, as a result of the reduction of certain incentive compensation during the fourth quarter of 2009 and an ongoing expense reduction initiative.  Total noninterest expense increased $10.0 million for the year ended 2009, compared to the year ended 2008.  FDIC insurance premiums increased $6.3 million for 2009 compared to 2008 due in part to a special FDIC assessment of $2.3 million recorded in the second quarter of 2009.  In addition, the Company recorded $1.1 million of acquisition costs during 2009 related to the terminated First Bank branch acquisition.

As of December 31, 2009, Sterling had total assets of $4.9 billion, total loans of $3.2 billion and total deposits of $4.1 billion.  Shareholders' equity of $541 million at December 31, 2009, was 11.0% of total assets.  Book value per common share at period-end was $6.60.

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, January 21, 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) 332-0345.  An audio archive of the call will also be available on the web site beginning Friday, January 22, 2010.

A telephone replay of the conference call will be available beginning Thursday, January 21, 2010 at 12:00 p.m. until Thursday, January 28, 2010 at 11:59 p.m. Central Time by dialing (800) 475-6701. The access code for the replay is 140894.

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 Quarterly Reports for the quarters ended September 30, 2009, June 30, 2009, and March 31, 2009, and its 2008 Annual Report on Form 10-K each of 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 $4.9 billion, which operates 58 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

STERLING BANCSHARES, INC.

SELECTED FINANCIAL INFORMATION (Unaudited)

(dollars in thousands, except for per share data)

Page 4

Quarter Ended

Year Ended

Dec. 31,

Sep. 30,

Dec. 31,

2009

2009

2008

2009

2008

Profitability

Net income (loss)

$            1,736   

$         (24,724)  

$            9,613   

$         (12,974)  

$          38,619   

Net income (loss) applicable to common shareholders

$            1,736   

$         (24,724)  

$            9,215   

$         (22,316)  

$          38,221   

Earnings (loss) per common share (1)

   Basic

$              0.02   

$             (0.30)  

$              0.13   

$             (0.28)  

$              0.52   

   Diluted

$              0.02   

$             (0.30)  

$              0.13   

$             (0.28)  

$              0.52   

Return on average common equity (2)

1.24%

(16.98)%

7.17%

(4.01)%

7.60%

Return on average assets (2)

0.14%

(1.97)%

0.76%

(0.26)%

0.80%

Tax equivalent net interest margin (3)

4.11%

4.20%

4.44%

4.22%

4.55%

Efficiency Ratio (4):

     Consolidated

70.60%

69.56%

64.46%

69.17%

63.04%

     Sterling Bank

67.64%

67.79%

62.33%

66.97%

61.03%

Liquidity and Capital Ratios

Average loans to average deposits

80.29%

85.86%

104.65%

88.83%

101.31%

Period-end stockholders' equity to total assets

10.95%

11.23%

12.66%

10.95%

12.66%

Average stockholders' equity to average assets

11.12%

11.60%

10.69%

11.92%

10.50%

Period-end tangible capital to total tangible assets

7.48%

7.70%

9.32%

7.48%

9.32%

Tier 1 capital to risk-weighted assets

11.61%

11.20%

12.14%

11.61%

12.14%

Total capital to risk-weighted assets

14.41%

13.95%

14.94%

14.41%

14.94%

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

8.89%

8.88%

10.57%

8.89%

10.57%

Other Data

Shares used in computing earnings (loss) per common share

   Basic shares

81,771   

81,707   

73,233   

78,696   

73,177   

   Diluted shares

82,019   

81,707   

73,451   

78,696   

73,488   

End of period common shares outstanding

81,853   

81,755   

73,260   

81,853   

73,260   

Book value per common share at period-end

$              6.60   

$              6.67   

$              7.17   

$              6.60   

$              7.17   

Cash dividends paid per common share

$            0.015   

$            0.055   

$            0.055   

$              0.18   

$              0.22   

Common stock dividend payout ratio 

70.74%

(18.19)%

41.94%

(106.36)%

41.72%

Full-time equivalent employees

1,012   

1,013   

1,116   

1,012   

1,116   

Number of banking centers

58   

60   

59   

58   

59   

STERLING BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS (Unaudited)

(dollars in thousands)

Page 5

Dec. 31,

Sep. 30,

Jun. 30,

Mar. 31,

Dec. 31,

2009

2009

2009

2009

2008

ASSETS

Cash and cash equivalents

$        246,215 

$        158,114 

$          74,736 

$        142,769 

$        113,163 

Available-for-sale securities, at fair value

846,216 

836,521 

766,536 

673,960 

633,357 

Held-to-maturity securities, at amortized cost

222,845 

162,990 

163,611 

169,973 

172,039 

Loans held for sale

11,778 

38,187 

1,642 

1,395 

1,524 

Loans held for investment

3,233,273 

3,312,520 

3,537,221 

3,727,368 

3,792,290 

   Total loans

3,245,051 

3,350,707 

3,538,863 

3,728,763 

3,793,814 

Allowance for loan losses

(74,732)

(70,059)

(53,075)

(56,703)

(49,177)

   Loans, net

3,170,319 

3,280,648 

3,485,788 

3,672,060 

3,744,637 

Premises and equipment, net

48,816 

49,128 

50,272 

50,738 

46,875 

Real estate acquired by foreclosure

16,763 

11,674 

8,095 

8,144 

5,625 

Goodwill

173,210 

173,210 

173,210 

173,210 

173,210 

Core deposits and other intangibles, net

11,626 

12,179 

12,744 

13,309 

13,874 

Accrued interest receivable

16,502 

16,142 

18,189 

18,285 

19,428 

Other assets

184,536 

158,912 

159,186 

152,383 

157,771 

TOTAL ASSETS

$     4,937,048 

$     4,859,518 

$     4,912,367 

$     5,074,831 

$     5,079,979 

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES:

Deposits:

   Noninterest-bearing demand

$     1,144,133 

$     1,094,346 

$     1,127,717 

$     1,173,745 

$     1,123,746 

   Interest-bearing demand

2,004,539 

1,874,746 

1,670,437 

1,586,754 

1,523,969 

   Certificates and other time

946,279 

1,038,362 

1,160,081 

1,173,958 

1,171,422 

      Total deposits

4,094,951 

4,007,454 

3,958,235 

3,934,457 

3,819,137 

Other borrowed funds

97,245 

99,486 

176,631 

278,274 

408,586 

Subordinated debt

77,338 

77,616 

77,028 

78,310 

78,335 

Junior subordinated debt

82,734 

82,734 

82,734 

82,734 

82,734 

Accrued interest payable and other liabilities

44,247 

46,716 

47,631 

53,942 

48,048 

   Total liabilities

4,396,515 

4,314,006 

4,342,259 

4,427,717 

4,436,840 

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY

Preferred stock

118,332 

118,012 

Common stock

83,721 

83,622 

83,552 

75,168 

75,128 

Capital surplus

170,848 

171,955 

170,708 

122,877 

121,918 

Retained earnings

295,909 

295,401 

324,619 

333,498 

332,009 

Treasury stock

(21,399)

(21,399)

(21,399)

(21,399)

(21,399)

Accumulated other comprehensive income, net of tax

11,454 

15,933 

12,628 

18,638 

17,471 

     Total shareholders' equity

540,533 

545,512 

570,108 

647,114 

643,139 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$     4,937,048 

$     4,859,518 

$     4,912,367 

$     5,074,831 

$     5,079,979 

STERLING BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(dollars in thousands, except for per share data)

Page 6

 Quarter Ended

Year Ended

Dec. 31,

Sep. 30,

Jun. 30,

Mar. 31,

Dec. 31,

2009

2009

2009

2009

2008

2009

2008

Interest income:

   Loans, including fees

$        46,876 

$        49,658 

$        51,691 

$        53,000 

$        58,387 

$      201,225 

$      241,157 

   Securities:

      Taxable

9,758 

9,286 

8,815 

8,558 

7,989 

36,417 

29,660 

      Non-taxable

929 

897 

890 

900 

907 

3,616 

3,632 

   Deposits in financial institutions

90 

64 

154 

10 

   Other interest-earning assets

19 

29 

26 

80 

165 

      Total interest income

57,672 

59,934 

61,422 

62,464 

67,286 

241,492 

274,624 

Interest expense:

   Demand and savings deposits

4,243 

4,403 

3,886 

3,492 

3,645 

16,024 

17,285 

   Certificates and other time deposits

4,577 

5,504 

6,503 

7,467 

8,041 

24,051 

37,443 

   Other borrowed funds

314 

346 

425 

812 

2,414 

1,897 

11,607 

   Subordinated debt

713 

748 

885 

979 

1,380 

3,325 

4,474 

   Junior subordinated debt

1,045 

1,082 

1,155 

1,204 

1,430 

4,486 

5,731 

       Total interest expense

10,892 

12,083 

12,854 

13,954 

16,910 

49,783 

76,540 

Net interest income

46,780 

47,851 

48,568 

48,510 

50,376 

191,709 

198,084 

Provision for credit losses

11,000 

56,131 

11,500 

9,000 

7,500 

87,631 

29,917 

Net interest income (loss) after provision for credit losses

35,780 

(8,280)

37,068 

39,510 

42,876 

104,078 

168,167 

Noninterest income:

   Customer service fees

3,722 

3,845 

3,752 

4,112 

3,865 

15,431 

15,771 

   Net gain (loss) on securities

(1,823)

(2)

15 

(57)

(1,806)

(244)

   Wealth management fees

2,049 

1,862 

1,840 

2,202 

2,028 

7,953 

8,984 

   Other

1,543 

3,402 

4,903 

4,469 

3,805 

14,317 

16,516 

      Total noninterest income

5,491 

9,113 

10,493 

10,798 

9,641 

35,895 

41,027 

Noninterest expense:

   Salaries and employee benefits

19,496 

21,005 

24,152 

22,277 

21,937 

86,930 

85,253 

   Occupancy

5,822 

5,967 

6,168 

5,869 

5,790 

23,826 

21,782 

   Technology

2,375 

2,495 

2,475 

2,505 

2,559 

9,850 

9,794 

   Professional fees

1,283 

1,065 

1,157 

1,197 

1,226 

4,702 

4,707 

   Postage, delivery and supplies

685 

700 

760 

721 

765 

2,866 

3,672 

   Marketing

443 

557 

499 

431 

781 

1,930 

2,545 

   Core deposits and other intangibles amortization

552 

565 

565 

565 

571 

2,247 

2,328 

   Acquisition costs

980 

154 

1,134 

562 

   FDIC insurance assessments

1,856 

1,741 

4,001 

1,232 

762 

8,830 

2,525 

   Other

5,998 

5,826 

4,244 

4,801 

4,726 

20,869 

20,042 

      Total noninterest expense

39,490 

40,075 

44,021 

39,598 

39,117 

163,184 

153,210 

Income (loss) before income taxes

1,781 

(39,242)

3,540 

10,710 

13,400 

(23,211)

55,984 

   Income tax provision (benefit)

45 

(14,518)

933 

3,303 

3,787 

(10,237)

17,365 

Net income (loss)

$          1,736 

$      (24,724)

$          2,607 

$          7,407 

$          9,613 

$      (12,974)

$        38,619 

   Preferred stock dividends

7,458 

1,884 

398 

9,342 

398 

Net income (loss) applicable to common shareholders

$          1,736 

$      (24,724)

$        (4,851)

$          5,523 

$          9,215 

$      (22,316)

$        38,221 

Earnings (loss) per common share (1):

     Basic

$            0.02 

$          (0.30)

$          (0.06)

$            0.08 

$            0.13 

$          (0.28)

$            0.52 

     Diluted

$            0.02 

$          (0.30)

$          (0.06)

$            0.08 

$            0.13 

$          (0.28)

$            0.52 

STERLING BANCSHARES, INC.

SELECTED FINANCIAL INFORMATION (Unaudited)

(dollars in thousands)

Page 7

Quarter Ended

Dec. 31,

Sep. 30,

2009

2009

Average Balance

Interest

Yield/Rate

Average Balance

Interest

Yield/Rate

Interest-Earning Assets:

Loans held for sale

$               38,844   

$             67   

0.68%

$                 1,607   

$             23   

5.68%

Loans held for investment:

     Taxable

3,257,590   

46,762   

5.70%

3,467,555   

49,586   

5.67%

     Non-taxable (3)

4,935   

69   

5.55%

5,080   

72   

5.60%

Securities:

     Taxable

964,807   

9,758   

4.01%

844,651   

9,286   

4.36%

     Non-taxable (3)

101,866   

1,360   

5.30%

97,858   

1,307   

5.30%

Deposits in financial institutions

163,195   

90   

0.22%

106,392   

64   

0.24%

Other interest-earning assets

26,825   

19   

0.28%

38,419   

29   

0.30%

     Total interest-earning assets

4,558,062   

58,125   

5.06%

4,561,562   

60,367   

5.25%

Noninterest-earning assets

421,810   

416,340   

Total Assets

$          4,979,872   

$          4,977,902   

Interest-Bearing Liabilities:

Deposits:

     Demand and savings

$          1,946,308   

$        4,243   

0.86%

$          1,837,612   

$        4,403   

0.95%

     Certificates and other time

1,007,691   

4,577   

1.80%

1,084,513   

5,504   

2.01%

Other borrowed funds

107,211   

314   

1.16%

145,625   

346   

0.94%

Subordinated debt

77,824   

713   

3.63%

77,232   

748   

3.84%

Junior subordinated debt

82,734   

1,045   

5.01%

82,734   

1,082   

5.19%

     Total interest-bearing liabilities

3,221,768   

10,892   

1.34%

3,227,716   

12,083   

1.49%

Noninterest-bearing sources:

     Noninterest-bearing liabilities

1,204,371   

1,172,556   

     Shareholders' equity

553,733   

577,630   

Total Liabilities and Shareholders' Equity

$4,979,872   

$4,977,902   

Tax Equivalent Net Interest Income and Margin (3)

        47,233

4.11%

        48,284

4.20%

Non-GAAP to GAAP Reconciliation:

Tax Equivalent Adjustment:

    Loans

               22

               23

    Securities

             431

             410

       Total tax equivalent adjustment

             453

             433

Net Interest Income

$      46,780

$      47,851

STERLING BANCSHARES, INC.

SELECTED FINANCIAL INFORMATION (Unaudited)

(dollars in thousands)

Page 8

Year Ended

2009

2008

Average Balance

Interest

Yield/Rate

Average Balance

Interest

Yield/Rate

Interest-Earning Assets:

Loans held for sale

$               11,335   

$             156   

1.37%

$                 71,050   

$         4,696   

6.61%

Loans held for investment:

     Taxable

3,532,002   

200,860   

5.69%

3,583,762   

236,259   

6.59%

     Non-taxable (3)

5,089   

306   

6.01%

3,637   

294   

8.09%

Securities:

     Taxable

820,887   

36,417   

4.44%

620,506   

29,660   

4.78%

     Non-taxable (3)

98,278   

5,262   

5.35%

97,328   

5,116   

5.26%

Deposits in financial institutions

86,673   

154   

0.18%

510   

10   

1.92%

Other interest-earning assets

28,703   

80   

0.28%

8,642   

165   

1.91%

     Total interest-earning assets

4,582,967   

243,235   

5.31%

4,385,435   

276,200   

6.30%

Noninterest-earning assets

421,964   

467,937   

Total Assets

$          5,004,931   

$            4,853,372   

Interest-Bearing Liabilities:

Deposits:

     Demand and savings

$          1,757,305   

$        16,024   

0.91%

$            1,416,594   

$       17,285   

1.22%

     Certificates and other time

1,105,055   

24,051   

2.18%

1,107,735   

37,443   

3.38%

Other borrowed funds

207,766   

1,897   

0.91%

542,413   

11,607   

2.14%

Subordinated debt

77,643   

3,325   

4.28%

62,128   

4,474   

7.20%

Junior subordinated debt

82,734   

4,486   

5.42%

82,734   

5,731   

6.93%

     Total interest-bearing liabilities

3,230,503   

49,783   

1.54%

3,211,604   

76,540   

2.38%

Noninterest-bearing sources:

     Noninterest-bearing liabilities

1,177,999   

1,132,123   

     Shareholders' equity

596,429   

509,645   

Total Liabilities and Shareholders' Equity

$          5,004,931   

$            4,853,372   

Tax Equivalent Net Interest Income and Margin (3)

193,452   

4.22%

199,660   

4.55%

Non-GAAP to GAAP Reconciliation:

Tax Equivalent Adjustment:

     Loans

97   

92   

     Securities

1,646   

1,484   

       Total tax equivalent adjustment

1,743   

1,576   

Net Interest Income

$      191,709   

$     198,084   

STERLING BANCSHARES, INC.

SELECTED FINANCIAL INFORMATION (Unaudited)

(dollars in thousands)

Page 9

Quarter Ended

Dec. 31,

Sep. 30,

Jun. 30,

Mar. 31,

Dec. 31,

2009

2009

2009

2009

2008

Condensed Average Balance Sheet

Loans held for sale

$          38,844

$            1,607

$            2,714

$             1,876

$               684

Loans held for investment

3,262,525

3,472,635

3,639,453

3,780,147

3,795,340

     Total loans

3,301,369

3,474,242

3,642,167

3,782,023

3,796,024

Available-for-sale securities, at fair value

897,733

779,792

689,541

635,423

573,073

Held-to-maturity securities, at amortized cost

168,940

162,717

168,155

171,245

173,584

Deposits in financial institutions

163,195

106,392

281

257

273

Other interest-earning assets

26,825

38,419

39,534

9,740

4,093

     Total interest-earning assets

4,558,062

4,561,562

4,539,678

4,598,688

4,547,047

Goodwill

173,210

173,210

173,210

173,210

173,210

Core deposits and other intangibles, net

11,890

12,463

13,028

13,587

14,158

All other noninterest-earning assets

236,710

230,667

265,404

286,454

301,516

     Total assets

$     4,979,872

$     4,977,902

$     4,991,320

$      5,071,939

$     5,035,931

Noninterest-bearing demand deposits

$     1,158,023

$     1,124,076

$     1,117,335

$      1,130,230

$     1,116,607

Interest-bearing deposits:

     Interest-bearing demand deposits

1,946,308

1,837,612

1,674,468

1,565,770

1,407,482

     Jumbo certificates of deposits

576,984

614,418

658,983

651,798

634,499

     Regular certificates of deposit

264,388

287,243

308,842

306,686

306,224

     Brokered certificates of deposit

166,319

182,852

207,609

195,936

162,654

          Total deposits

4,112,022

4,046,201

3,967,237

3,850,420

3,627,466

Other borrowed funds

107,211

145,625

216,342

365,408

667,933

Subordinated debt

77,824

77,232

77,701

77,820

75,354

Junior subordinated debt

82,734

82,734

82,734

82,734

82,734

Accrued interest payable and other liabilities

46,348

48,480

41,548

45,698

44,340

     Total liabilities

4,426,139

4,400,272

4,385,562

4,422,080

4,497,827

Common equity

553,733

577,630

561,540

531,736

510,965

Preferred equity

-

-

44,218

118,123

27,139

Total shareholders' equity

553,733

577,630

605,758

649,859

538,104

     Total liabilities and shareholders' equity

$     4,979,872

$     4,977,902

$     4,991,320

$      5,071,939

$     5,035,931

Dec. 31,

Sep. 30,

Jun. 30,

Mar. 31,

Dec. 31,

2009

2009

2009

2009

2008

Period-end Loans:

Loans held for sale

$          11,778

$          38,187

$            1,642

$             1,395

$            1,524

Loans held for investment:

   Commercial and industrial

806,542

823,797

930,445

1,060,572

1,107,519

   Real Estate:

      Commercial

1,669,118

1,703,629

1,768,824

1,788,488

1,765,843

      Construction and development

360,444

394,819

458,386

499,262

545,303

      Residential mortgage

344,838

335,007

323,520

320,021

309,665

   Consumer/other

52,331

55,268

56,046

59,025

63,960

Loans held for investment

3,233,273

3,312,520

3,537,221

3,727,368

3,792,290

Total period-end loans

$     3,245,051

$     3,350,707

$     3,538,863

$      3,728,763

$     3,793,814

Period-End Deposits:

Noninterest-bearing demand

$     1,144,133

$     1,094,346

$     1,127,717

$      1,173,745

$     1,123,746

Interest-bearing demand

2,004,539

1,874,746

1,670,437

1,586,754

1,523,969

Certificates and other time deposits:

        Jumbo

549,588

594,590

644,965

666,722

660,427

        Regular

252,682

273,721

306,988

301,047

317,719

        Brokered

144,009

170,051

208,128

206,189

193,276

Total period-end deposits

$     4,094,951

$     4,007,454

$     3,958,235

$      3,934,457

$     3,819,137

STERLING BANCSHARES, INC.

SELECTED FINANCIAL INFORMATION (Unaudited)

(dollars in thousands)

Page 10

Quarter Ended

Year-to-date

Dec. 31,

Sep. 30,

Jun. 30,

Mar. 31,

Dec. 31,

2009

2009

2009

2009

2008

2009

2008

Allowance For Credit Losses

Allowance for loan losses at beginning of period

$        70,059   

$        53,075   

$        56,703   

$        49,177   

$        45,222   

$        49,177   

$        34,446   

Charge-offs:

     Commercial, financial and industrial

1,536   

5,049   

13,523   

1,960   

1,764   

22,068   

9,408   

     Real estate, mortgage and construction

5,448   

32,464   

1,903   

438   

1,629   

40,253   

5,241   

     Consumer

477   

321   

331   

460   

648   

1,589   

1,959   

          Total charge-offs

7,461   

37,834   

15,757   

2,858   

4,041   

63,910   

16,608   

Recoveries:

     Commercial, financial and industrial

536   

251   

286   

640   

286   

1,713   

1,392   

     Real estate, mortgage and construction

488   

23   

180   

98   

5   

789   

117   

     Consumer

110   

163   

163   

94   

205   

530   

640   

          Total recoveries

1,134   

437   

629   

832   

496   

3,032   

2,149   

Net charge-offs

6,327   

37,397   

15,128   

2,026   

3,545   

60,878   

14,459   

Provision for loan losses

11,000   

54,381   

11,500   

9,552   

7,500   

86,433   

29,190   

Allowance for loan losses at end of period

$        74,732   

$        70,059   

$        53,075   

$        56,703   

$        49,177   

$        74,732   

$        49,177   

Allowance for unfunded loan commitments at beginning of period

2,852   

1,102   

1,102   

1,654   

1,654   

1,654   

927   

Provision for losses on unfunded loan commitments

-   

1,750   

-   

(552)  

-   

1,198   

727   

Allowance for unfunded loan commitments at end of period

2,852   

2,852   

1,102   

1,102   

1,654   

2,852   

1,654   

Total allowance for credit losses

$        77,584   

$        72,911   

$        54,177   

$        57,805   

$        50,831   

$        77,584   

$        50,831   

Nonperforming Assets

Nonperforming loans:

   Loans held for sale

$          9,896   

$        29,472   

$                -   

$                -   

$                -   

$          9,896   

$                -   

  Loans held for investment

92,668   

65,515   

114,069   

102,450   

87,491   

92,668   

87,491   

Real estate acquired by foreclosure

16,763   

11,674   

8,095   

8,144   

5,625   

16,763   

5,625   

Other repossessed assets

38   

33   

419   

144   

154   

38   

154   

Total nonperforming assets

$      119,365   

$      106,694   

$      122,583   

$      110,738   

$        93,270   

$      119,365   

$        93,270   

Restructured loans - accruing

$        69,857   

$        45,981   

$          2,828   

$                -   

$                -   

$        69,857   

$                -   

Accruing loans 30 to 89 days past due

$        34,243   

$        23,364   

$        30,131   

$        26,640   

$        30,492   

$        34,243   

$        30,492   

Accruing loans past due 90 days or more

$               41   

$             681   

$          2,112   

$          7,464   

$          8,448   

$               41   

$          8,448   

Ratios

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

2.39%

2.18%

1.53%

1.55%

1.34%

2.39%

1.34%

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

2.30%

2.09%

1.50%

1.52%

1.30%

2.30%

1.30%

Period-end allowance for loan losses to nonperforming loans

72.86%

73.76%

46.53%

55.35%

56.21%

72.86%

56.21%

Nonperforming loans to period-end loans

3.16%

2.83%

3.22%

2.75%

2.31%

3.16%

2.31%

Nonperforming assets to period-end assets

2.42%

2.20%

2.50%

2.18%

1.84%

2.42%

1.84%

Net charge-offs to average loans (2)

0.76%

4.27%

1.67%

0.22%

0.37%

1.72%

0.40%

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, 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.  

SOURCE Sterling Bancshares, Inc.



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