Sterling Banks, Inc. Reports Third Quarter 2008 Operating Profit

MOUNT LAUREL, N.J., Oct. 23 /PRNewswire-FirstCall/ -- Sterling Banks, Inc.
(Nasdaq: STBK), the bank holding company of Sterling Bank, a locally focused
community oriented full service commercial bank which operates through eleven
retail branches that are located in New Jersey'sBurlington and Camden
Counties, reported income before taxes of $139,000 for the third quarter of
2008, compared to a loss before income tax benefit of $142,000 for the third
quarter of 2007. Third quarter 2008 net income amounted to $79,000, compared
to a net loss of $94,000 for the third quarter of 2007. On a basic and
diluted per share basis, the net income for the third quarter of 2008 was $.01
per share and the net loss for the third quarter 2007 was $0.02 per share. For
the nine months ended September 30, 2008 and 2007, the net loss was $405,000
and $141,000, respectively. On a basic and diluted per share basis, the net
loss for the nine months ended September 30, 2008 and 2007 was $0.07 and $0.03
per share, respectively.
During the third quarter of 2008, the Company experienced an increase in
net interest income, which reflects an ongoing improvement over a series of
operating quarters in the net interest margin and is highlighted as follows:
3rd Q 2007 4th Q 2007 1st Q 2008 2nd Q 2008 3rd Q 2008
3.39% 3.44% 3.50% 3.75% 4.00%

This progress is reflective of recent marketplace interest rate trends,
which have resulted in the emergence of a normalized yield curve. In
addition, management initiatives have carefully focused on improving the net
interest margin as the interest rate environment transitions from an inverted
yield curve, a very difficult setting for financial institutions of our type
and size, to a more normal interest rate environment.
Progress in enhancing the net interest margin resulted in an improvement
in net interest income before provision for loan losses, to $3,343,000 during
the third quarter of 2008 as compared to $3,237,000 during the third quarter
of 2007. During the third quarter of 2008, the Company recorded a $105,000
provision for loan losses. There was no provision for loan losses during the
third quarter of 2007. Noninterest income for the third quarter of 2008
totaled $283,000, compared to noninterest income of $223,000 during the third
quarter of 2007. Noninterest expenses decreased $220,000, or 6%, primarily
because of a decrease in personnel expenses as a result of synergies realized
related to the merger with Farnsworth Bancorp, which occurred during 2007, and
management's initiatives centered on a reduction of expense levels throughout
the organization.
For the nine months ended September 30, 2008, the Company's net interest
income after the provision for loan losses decreased by $168,000, or 2%,
compared to the 2007 nine month period, primarily as a result of recording a
$505,000 provision to enhance the reserve for possible future loan losses
during 2008 as compared to a loan loss provision of $101,000 during the nine
month 2007 operating period. Noninterest income for the nine months ended
September 30, 2008 amounted to $795,000, an increase of $169,000, or 27%,
compared to the nine months ended 2007. Noninterest expenses increased
$428,000, or 4%, for the nine month period, primarily as a result of the
merger with Farnsworth Bancorp in March 2007 and the added costs of opening a
newly constructed retail facility in Delran Township, NJ, in June 2007.
During the current operating quarter, Sterling Bank sought to aggressively
control and manage nonperforming loans. Sterling Bank has historically
experienced very low levels of delinquent loans, nonperforming loans, and loan
charge-offs. The intensifying slowdown in overall economic activity has
brought with it higher levels of nonperforming loans. Since inception in 1990,
Sterling Bank has been a stable and dependable source of financing of local
real estate development. The current economic situation is one of
considerable disruption, and normal marketplace activity is greatly
restrained. These situations have impacted borrowers in Sterling Bank's
residential spot construction loan portfolio. These loans, which represent
approximately 19% of total loans, are generally made to individuals and small
local builders, and have experienced elevated levels of delinquency, and in
some cases default. At this point in the current credit cycle, all other loan
sectors are performing at normal levels, and asset quality assessment
initiatives continue to conclude that risk is limited to acceptable
parameters. Management has, and will continue to, monitor the loan portfolio
diligently and address deterioration in borrower condition in the most
appropriate fashion.
Loans on nonaccrual status totaled $8.1 million as of September 30, 2008,
an increase of $2.0 million, or 33%, from loans on nonaccrual status of $6.1
million on September 30, 2007. The following table shows the level of
nonaccruals at each quarter end as the current cycle of economic uncertainty
has progressively evolved in the industry:
09/30/07 12/31/07 03/31/08 06/30/08 09/30/08
$6.1 million $4.5 million $5.5 million $6.7 million $8.1 million

Loans included in this classification are considered either adequately
collateralized and/or appropriately reserved for expected future losses, and
are in various stages of collection, although no assurance can be made that we
will realize full recovery in the event of possible foreclosure and subsequent
sale of collateral. Vigorous credit underwriting procedures have been
consistently adhered to and, in several cases, collateral in addition to
project specific collateral is included under loan agreements. Significant
disruption in normal end loan markets has affected the timing of project
completion in some instances.
Total assets of the Company amounted to $388 million as of September 30,
2008, a decrease of $28 million, or 7%, from total assets of $416 million as
of September 30, 2007. Loans outstanding totaled $302 million as of September
30, 2008, a decrease of $11 million, or 3%, from total loans of $313 million
as of September 30, 2007. Deposits totaled $321 million as of September 30,
2008, a decrease of $43 million, or 12%, from total deposits of $364 million
as of September 30, 2007. These results reflect efforts by management to
reduce the general level of risk on the balance sheet and to improve the
efficiency of the balance sheet.

Sterling Bank's capital ratios were as follows on September 30, 2008:

Adequacy Well Capitalized
Minimum Minimum Actual

Tier 1 Leverage Ratio 4.0% 5.0% 9.11%
Tier 1 Risk-Based Capital Ratio 4.0% 6.0% 10.76%
Total Risk-Based Capital Ratio 8.0% 10.0% 11.76%

Robert H. King, President and CEO, noted that "from an operating
standpoint, Sterling Bank is well positioned at this stage of a very difficult
economic and credit cycle. Asset quality control and management efforts are
in place and working; risk mitigation and management initiatives are
functioning at acceptable levels; expense control efforts are taking hold, and
the results are being realized in improving performance. Further, there are
meaningful competitive changes that are evolving on a daily basis which will
provide far reaching opportunities in the direct markets in which we conduct
our business; we are encouraged by both our progress and the prospects."

Sterling Banks, Inc.
Consolidated Financial Highlights (unaudited)
As of, and for the nine months ended, September 30, 2008 and 2007

Three Months Ended Nine Months Ended
09/30/2008 09/30/2007 09/30/2008 09/30/2007

INCOME STATEMENT
Interest income $5,464,000 $6,774,000 $17,093,000 $19,358,000
Interest expense 2,121,000 3,537,000 7,417,000 9,918,000
Net interest
income 3,343,000 3,237,000 9,676,000 9,440,000
Provision for loan
losses 105,000 - 505,000 101,000
Net interest income
after provision
for loan losses 3,238,000 3,237,000 9,171,000 9,339,000
Noninterest income 283,000 223,000 795,000 626,000
Noninterest
expenses 3,382,000 3,602,000 10,588,000 10,160,000
Income (loss)
before taxes 139,000 (142,000) (622,000) (195,000)
Income tax expense
(benefit) 60,000 (48,000) (217,000) (54,000)
Net income (loss) $79,000 $(94,000) $(405,000) $(141,000)

PER SHARE DATA
Basic and Diluted
earnings (losses)
per share $0.01 $(0.02) $(0.07) $(0.03)
Dividends paid on
common shares $- $0.03 $ - $0.09

Average shares
outstanding
- Basic 5,843,362 5,843,362 5,843,362 5,619,967
Average shares
outstanding
- Diluted 5,849,335 5,843,362 5,843,362 5,619,967

BALANCE SHEET
Assets
Cash & due from
banks $10,516,000 $15,088,000
Federal funds sold 5,333,000 1,336,000
Total investment
securities 39,189,000 55,243,000
Restricted stock 2,448,000 1,796,000
Total loans 302,008,000 312,824,000
Allowance for loan
losses (3,015,000) (2,829,000)
Other assets 31,388,000 32,820,000
Total assets $387,867,000 $416,278,000

Liabilities
Total deposits $321,483,000 $364,244,000
Total borrowings 22,186,000 7,050,000
Other liabilities 1,335,000 1,607,000
Total liabilities 345,004,000 372,901,000
Shareholders' equity
Common stock 11,687,000 11,687,000
Additional paid-in capital 29,748,000 29,701,000
Retained earnings 1,544,000 2,313,000
Accumulated other
comprehensive losses (116,000) (324,000)
Total shareholders'
equity 42,863,000 43,377,000
Total liabilities and
shareholders' equity $387,867,000 $416,278,000

PERFORMANCE RATIOS
Book value per share $7.34 $7.42
Tangible book value
per share $4.82 $4.85
Return on
average assets 0.08% (0.09)% (0.14)% (0.05)%
Return on average
equity 0.74% (0.86)% (1.26)% (0.46)%
Net interest margin 4.00% 3.39% 3.74% 3.43%

Sterling Banks, Inc. is a bank holding company which commenced operations
in March 2007, with assets of $388 million as of September 30, 2008 and is
headquartered in Mount Laurel Township, Burlington County. Sterling Bank is a
community bank which commenced operations in December 1990 with the purpose of
serving consumers and small to medium-sized businesses in its market area.
Sterling Bank's main office is located in Mount Laurel, New Jersey, and its
ten other Community Banking Centers are located in Burlington and Camden
Counties in New Jersey. The Bank's deposits are insured to the applicable
regulatory limits per depositor by the Federal Deposit Insurance Corporation.
Sterling Bank is a member of the Federal Reserve System. The common stock of
Sterling Banks, Inc. is traded on the NASDAQ Capital Market under the symbol
"STBK". For additional information about Sterling Bank and Sterling Banks,
Inc. visit our website at http://www.sterlingnj.com.
This news release may contain certain forward-looking statements, such as
statements of the Company's plans, objectives, expectations, estimates and
intentions. Forward-looking statements may be identified by the use of words
such as "expects," "subject," "believe," "will," "intends," "will be" or
"would." These statements are subject to change based on various important
factors (some of which are beyond the Company's control). Readers should not
place undue reliance on any forward-looking statements (which reflect
management's analysis only as of the date of which they are given). These
factors include general economic conditions, trends in interest rates, the
ability of our borrowers to repay their loans, the ability of the Company to
manage the risk in its loan and investment portfolios, the ability of the
Company to reduce noninterest expenses and increase net interest income, its
growth, results of possible collateral collections and subsequent sales, and
results of regulatory examinations, among other factors. Sterling Banks, Inc.
cautions that the foregoing list of important factors is not exclusive.
Readers should carefully review the risk factors described in other documents
the Company files from time to time with the Securities and Exchange
Commission, including the Company's Annual Report on Form 10-KSB for the year
ended December 31, 2007, Quarterly Reports on Form 10-Q, and Current Reports
on Form 8-K.
SOURCE Sterling Banks, Inc.

Robert H. King, President, +1-856-273-5900, rking@sterlingnj.com, or R. Scott
Horner, Executive Vice President, +1-856-273-5900, shorner@sterlingnj.com,
both of Sterling Banks, Inc.