Fitch Revises Outlook on Sterling Bancshares, Inc. to Positive; IDRs Affirmed at 'BBB-/F3'

Business Wire, Feb 1, 2008

NEW YORK -- Fitch Ratings revises the Rating Outlook for Sterling Bancshares, Inc. (Nasdaq:SBIB) and its banking subsidiary Sterling Bank to Positive from Stable. Fitch has also affirmed the long- and short-term Issuer Default Ratings (IDRs) for both companies at 'BBB-/F3'. A full list of ratings appears below.

The Outlook Revision is based on the company's recent significant improvement in credit risk management which has been reflected in improved asset quality metrics and lower credit costs. While Fitch expects the credit environment to be challenging, we believe that the company has made significant strides in its practices which should ensure relative asset quality performance remains stronger than past periods. Further, SBIB's markets continue to outperform the national economy. Should SBIB successfully navigate a more challenging credit environment while maintaining or improving financial performance and balance sheet fundamentals, Fitch anticipates resolving the outlook with an upgrade, and returning to a Stable outlook.

SBIB operates in the major TX metropolitan markets and serves owner-operated businesses. The company's commercial relationships generally lead to good levels of core deposits, which fund its largely commercial loan portfolio. The earning asset mix, combined with sold deposit funding supports a solid net interest margin (NIM) and good profitability. Management has invested in building its fee-based businesses, a strategy Fitch views favorably, as greater revenue diversification would lessen the company's reliance on spread-related income.

The maintenance of good balance sheet fundamentals, including liquidity and capital levels, will be a factor in Fitch's resolution of the outlook with an upgrade. Further diversification in revenue and credit risk would also be positively viewed by Fitch. Solid profitability, relatively modest dividend payout ratio and modest buy-back activity bode well for capital generation and retention.

Sterling Bancshares, Inc.

--Long-term IDR 'BBB-'

--Short-term IDR 'F3'

--Individual rating 'B/C'

--Support '5'

--Support Floor Rating 'NF'

The Ratings Outlook is revised to Positive from Stable.

Sterling Bank (Texas)

--Long-term IDR 'BBB-';

--Long-term Deposits 'BBB';

--Short-term IDR 'F3';

--Short-term Deposits 'F3'.

--Individual 'B/C',

--Support '5',

--Support Floor 'NF'

The Ratings Outlook is revised to Positive from Stable.

Sterling Bancshares Capital Trust II and III

--Trust Preferred 'BB'

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.