HOUSTON, TX, January 22, 2004 -- Sterling Bancshares, Inc. (Nasdaq: SBIB) today announced results for the fourth quarter and full year ended December 31, 2003.

Net income for the quarter ended December 31, 2003 was $5.9 million or $0.13 per diluted share compared to $10.4 million, or $0.23 per diluted share earned in the fourth quarter of 2002.

Income from continuing operations for the fourth quarter of 2003 was $5.2 million or $0.12 per diluted share compared to $9.6 million, or $0.22 per diluted share earned during the same period of 2002. During the fourth quarter of 2003, income from discontinued operations was $694 thousand for $0.01 per diluted share.

"2003 was a year of transition for Sterling Bank. The strategic divestiture of Sterling Capital Mortgage Company allows us to focus all of our energy on growing the Sterling Bank franchise," commented J. Downey Bridgwater, President and Chief Executive Officer. "On October 31st, we completed the purchase of Plaza Bank of San Antonio utilizing capital from the sale of the mortgage company. I, along with all Sterling Bankers, look forward to continuing our success in 2004 of facilitating strategic acquisitions, opening new offices, and hiring experienced bankers within the Houston, Dallas, and San Antonio markets."

For the full year 2003, net income was $49.1 million or $1.10 per diluted share compared with $36.6 million, or $0.82 per diluted share earned in year 2002. Income from continuing operations for the year 2003 was $28.4 million or $0.64 per diluted share compared to $33.2 million, or $0.74 per diluted share earned during the same period of 2002. For the year 2003, income from discontinued operations was $20.8 million or $0.46 per diluted share.

Fourth Quarter Results

Net interest income was $32.8 million in the fourth quarter of 2003. The net interest margin for the fourth quarter of 2003 was 4.77% compared to 4.78% for the quarter ended September 30, 2003 and 5.34% for the quarter ended December 31, 2002. On a tax equivalent basis, the net interest margin for the fourth quarter of 2003 was 4.81% compared to 4.82% for the quarter ended September 30, 2003 and 5.39% for the fourth quarter of 2002.

Average loans held for investment were $2.1 billion for the fourth quarter of 2003, up 2.3% on a linked-quarter basis and up 9.3% from the fourth quarter of last year. Average total deposits for the fourth quarter of 2003 were $2.4 billion, down 10.2% from the fourth quarter of 2002. The decrease in deposits was due, in part, to the divestiture of five banking offices during 2003 wherein $151 million of deposits were included in those sales.

The allowance for credit losses at December 31, 2003 was $30.7 million and represented 1.42% of total loans. At December 31, 2002, the allowance for credit losses represented 1.03% of total loans.

Nonperforming assets were $36.2 million at December 31, 2003 or 1.68% of total loans and foreclosed properties. Net charge-offs in the fourth quarter of 2003 were $4.5 million or 0.85% (annualized) of average total loans, compared to $1.4 million or 0.22% (annualized) of average total loans in the fourth quarter of last year. The provision for credit losses was $3.0 million for the fourth quarter of 2003, up $450 thousand from $2.6 million in the fourth quarter of 2002.

Noninterest income was $7.4 million in the fourth quarter of 2003, down less than one percent on a linked-quarter basis and down 7.6% as compared with the fourth quarter of last year. Noninterest expense for the fourth quarter of 2003 was $29.4 million, down slightly on a linked-quarter basis and down 7.6% as compared with the fourth quarter of 2002.

At December 31, 2003, Sterling had total assets of $3.2 billion, total loans of $2.2 billion and total deposits of $2.4 billion. Shareholders' equity of $292.6 million represented 9.1% of total assets. Book value per share was $6.55.

Recent Highlights

For the second consecutive year, FORTUNE Magazine included Sterling Bank in its list of the 100 Best Companies to Work For. The Bank ranked 27th nationally in the magazine's 2004 survey of the best companies to work for in America. Sterling Bank was the highest ranked of Houston-based companies and third in Texas.

On September 30, 2003, the Company completed the sale of its mortgage-banking subsidiary, Sterling Capital Mortgage Company ("SCMC"). The total sales price was approximately $102 million, including a final sales price settlement during the fourth quarter of 2003. SCMC's operations were reported previously as the Company's mortgage-banking segment; which is now reported together with the gain on sale as discontinued operations.

Sterling expanded its franchise in the San Antonio market to eight offices with the October 31, 2003 completion of the acquisition of the South Texas Capital Group, Inc., a privately held bank holding company which operated three banking offices under the name of Plaza Bank. This acquisition increased our total assets in this strategic market by approximately $83.5 million.

Sterling Bank was awarded #5 overall in the American Society for Training & Development's 2003 BEST Awards Program. We were proud to be among the 23 organizations from the United States, Canada, Hong Kong, and India receiving an ASTD BEST Award.

About Sterling Bancshares

Sterling Bancshares, Inc., is a Houston-based bank holding company with assets of $3.2 billion operating 37 banking offices in the greater metro areas of Dallas, Houston, and San Antonio, Texas. Our common stock is traded through the Nasdaq National Market System under the symbol "SBIB".

In conjunction with our fourth quarter earnings release, Downey Bridgwater, President and Chief Executive Officer and Stephen Raffaele, Executive Vice President and Chief Financial Officer invite you to listen to our conference call that will be broadcast live via telephone and over the Internet on Thursday, January 22, 2004 at 11:00AM Eastern Time. To participate, please visit the Investor Relations section of the Company's web site at www.banksterling.com or call (847) 413-3401. An audio archive of the call will be available on the web site beginning on Friday, January 23, 2004.

Forward Looking Statement

Except for historical information contained herein, this press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, including, but not limited to, the following: general business and economic conditions in the markets the Company serves may be less favorable than anticipated which could decrease the demand for loan, deposit and other financial services and increase loan delinquencies and defaults; changes in market rates and prices may adversely impact the value of securities, loans, deposits and other financial instruments; the Company's liquidity requirements could be adversely affected by changes in its assets and liabilities; legislative or regulatory developments including changes in laws concerning taxes, banking, securities, insurance and other aspects of the financial securities industry; competitive factors may increase, including product and pricing pressures among financial services organizations; and changes in fiscal and governmental policies of the United States federal government could have an adverse effect on the Company's business. Please also read the additional risks and factors described from time to time in the Company's reports filed with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K/A for the year ended December 31, 2002.

Reconciliation of Certain Non-GAAP Measures

This press release contains financial information determined by methods other than in accordance with Generally Accepted Accounting Principles ("GAAP"). Management uses these non-GAAP measures in their analysis of the business and its performance. In particular, net interest income and net interest margin are calculated on a fully tax-equivalent basis ("FTE"). Management believes that these measures calculated on a FTE basis provide a useful picture of net interest income and net interest margin for comparative purposes. Net interest income and net interest margin on a FTE basis is determined by adjusting net interest income to reflect tax-exempt interest income on an equivalent before-tax basis. Non-GAAP information presented by other companies may not be comparable to that presented herein, since each company may define non-GAAP measures differently.

To view Sterling Bancshares, Inc. selected financial information (unaudited), visit http://www.shareholder.com/sbib/ReleaseDetail.cfm?ReleaseID=127072