<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549


                                  ------------

                                  FORM 10 - Q/A

                                  ------------



[X]      Quarterly Report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934 for the Quarter ended September 30, 1997

[ ]      Transition Report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934


                         Commission File Number: 0-20750


                            STERLING BANCSHARES, INC.
             (Exact name of registrant as specified in its charter)


             Texas                           74-2175590
      ----------------------           ----------------------
     (State of Incorporation)         (IRS Employer ID Number)

                       15000 Northwest Freeway, Suite 200
                              Houston, Texas 77040
                     (Address of principal executive office)

                                  713-466-8300
                         (Registrant's telephone number)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
("Act") during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days

                                    Yes   X          No
                                         ----             ----


The number of shares outstanding of each class of the registrant's capital stock
as of September 30, 1997:


          Class of Stock                            Shares Outstanding
  -----------------------------                     ------------------
  Common Stock, Par Value $1.00                         13,743,308



<PAGE>   2


PART I.  FINANCIAL INFORMATION

ITEM I.  CONDENSED FINANCIAL STATEMENTS

                   STERLING BANCSHARES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                           September 30,           December 31,
                                                                       1997             1996          1996
                                                                    ------------------------------------------
                                                                              (Unaudited)

<S>                                                                  <C>            <C>            <C>        
ASSETS
Cash and due from banks                                              $    69,630    $    57,951    $    85,291
Federal funds sold                                                        16,384         27,593         40,563
Interest bearing deposits in financial institutions                          488         13,785             22
                                                                     -----------    -----------    -----------
         Total cash and cash equivalents                                  86,502         99,329        125,876

Investment securities:
     Available-for-sale                                                   81,432         57,179         57,382
     Held-to-maturity                                                    202,199        141,662        148,083
                                                                     -----------    -----------    -----------
         Total investment securities                                     283,631        198,841        205,465
Equity in unconsolidated subsidiary                                        2,365          2,167          2,316
Loans:
     Loans held for sale                                                  50,371         39,388         40,969
     Loans held for investment                                           618,595        483,350        513,356
                                                                     -----------    -----------    -----------
         Total loans                                                     668,966        522,738        554,325
         Allowance for credit losses                                      (7,363)        (7,127)        (7,053)
                                                                     -----------    -----------    -----------
         Total loans, net                                                661,603        515,611        547,272
Real estate acquired by foreclosure and certain other real estate          1,254          2,016          2,072
Premises and equipment, net                                               29,269         22,058         25,873
Goodwill                                                                   1,598          1,921          1,839
Accrued interest receivable and other assets                              15,011          9,925         11,617
                                                                     -----------    -----------    -----------
         Total assets                                                $ 1,081,233    $   851,868    $   922,330
                                                                     ===========    ===========    ===========


LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits:
     Noninterest-bearing                                             $   306,534    $   246,957    $   272,583
     Interest-bearing                                                    430,925        346,737        380,141
Certificates of deposit and other time deposits                          217,033        181,452        187,620
                                                                     -----------    -----------    -----------
         Total deposits                                                  954,492        775,146        840,344
Federal funds purchased and securities sold under
   agreements to repurchase                                               14,585          2,770          3,751
Accrued interest payable and other liabilities                             6,384          5,133          7,231
Notes payable and senior debentures                                         --            4,400          4,000
                                                                     -----------    -----------    -----------
         Total liabilities                                               975,461        787,449        855,326

Company-obligated mandatorily redeemable trust preferred securites
   of subsidiary trust                                                    28,750           --             --

Shareholders' equity:

   Preferred stock, $1 par value, 1 million shares authorized                177             49             88
   Common stock, $1 par value, 30 million shares authorized               13,743         13,622         13,635
   Capital surplus                                                        25,805         22,909         23,508
   Retained earnings                                                      37,488         28,234         29,998
   Net unrealized losses available-for-sale securities, net of tax          (191)          (395)          (225)
                                                                     -----------    -----------    -----------
         Total shareholders' equity                                       77,022         64,419         67,004
                                                                     -----------    -----------    -----------
         Total liabilities and shareholders' equity                  $ 1,081,233    $   851,868    $   922,330
                                                                     ===========    ===========    ===========
</TABLE>

            See Notes to Interim Consolidated Financial Statements



                                       2
<PAGE>   3


                   STERLING BANCSHARES, INC., AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF EARNINGS
                                 (In thousands)

<TABLE>
<CAPTION>

                                                                           Three Months                 Nine Months
                                                                        Ended September 30,          Ended September 30,
                                                                         1997         1996            1997          1996
                                                                      -----------------------       ----------------------
                                                                                          (Unaudited)

<S>                                                                    <C>          <C>             <C>           <C>     
Interest income:
    Loans, including fees                                              $ 16,059     $ 12,584        $ 44,595      $ 35,189
    Federal funds sold                                                      116          289           1,261           879
    Deposits in financial institutions                                      368          146             549           298
    Investment securities:
      Taxable                                                             4,100        2,667          10,318         8,157
      Tax-exempt                                                            275          278             829           844
                                                                       --------     --------        --------      --------
         Total interest income                                           20,918       15,964          57,552        45,367

Interest expense:
    Demand and savings deposits                                           3,532        2,707           9,782         7,534
    Certificates and other time deposits                                  2,674        2,211           7,611         6,434
    Federal funds purchased and repurchase agreements                       448           42             621           267
    Senior debentures and notes payable                                       -           87             147           308
                                                                       --------     --------        --------      --------
         Total interest expense                                           6,654        5,047          18,161        14,543


         NET INTEREST INCOME                                             14,264       10,917          39,391        30,824        

            Provision for credit losses                                     695          587           2,095         1,718         
                                                                       --------     --------        --------      --------
         NET INTEREST INCOME AFTER PROVISION                             13,569       10,330          37,296        29,106    

Noninterest income:
    Customer service fees                                                 1,680        1,377           4,697         4,104    
    Earnings of unconsolidated subsidiary                                   144          167             199           167    
    Other                                                                   898          683           2,280         2,033    
                                                                       --------     --------        --------      --------
         Total noninterest income                                         2,722        2,227           7,176         6,304    

Noninterest expenses:
    Salaries and employee benefits                                        5,657        4,655          16,319        13,627    
    Net occupancy expense                                                   863          691           2,352         1,890    
    Equipment expense                                                       513          505           1,543         1,359    
    Losses and carrying costs of real estate acquired by foreclosure        153           27             201           129    
    Data processing                                                         565          277           1,584           803    
    Telephone                                                               221          168             647           521    
    Supplies                                                                327          164             649           476    
    Legal and professional fees                                             689          365           1,187           951    
    Minority interest expense                                               674            -             852             -    
    Other                                                                 1,544        1,158           4,907         3,158    
                                                                       --------     --------        --------      --------
         Total noninterest expenses                                      11,206        8,010          30,241        22,914    

         EARNINGS BEFORE INCOME TAXES                                     5,085        4,547          14,231        12,496    
            Provision for income taxes                                    1,675        1,448           4,703         3,918    
                                                                       --------     --------        --------      --------
         NET EARNINGS                                                  $  3,410     $  3,099        $  9,528      $  8,578
                                                                       ========     ========        ========      ========

         Primary earnings per share                                    $   0.24     $   0.22        $   0.66      $   0.61
                                                                       ========     ========        ========      ========

         Fully diluted earnings  per share                             $   0.23     $   0.22        $   0.66      $   0.61
                                                                       ========     ========        ========      ========
</TABLE>

           See Notes to Interim Consolidated Financial Statements.





                                       3
 
<PAGE>   4
                   STERLING BANCSHARES, INC., AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
<TABLE>
<CAPTION>

                                                                                                   Nine Months
                                                                                               Ended September 30,
                                                                                               1997           1996
                                                                                             ----------------------
                                                                                                  (Unaudited)

<S>                                                                                          <C>          <C>    
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net earnings                                                                            $   9,528    $   8,578
     Adjustments to reconcile net earnings to net cash provided by operating activities
        Amortization and accretion of premiums and discounts on investment securities, net          99          340
        Equity in undistributed earnings of unconsolidated subsidiary                             (199)        (167)
        Provision for credit losses                                                              2,095        1,718
        Gain on sale of available-for-sale investment securities                                  --            (42)
        Loss (gain) on sale of premises and equipment                                              115          (29)
        Writedown of real estate acquired by foreclosure                                             6           34
        Loss on sale of real estate acquired by foreclosure and repossessed assets                  49            1
        Depreciation and amortization                                                            2,413        2,007
        Mortgage loans originated for sale                                                    (355,661)     (78,858)
        Proceeds from sale of mortgage loans originated for sale                               346,188       47,552
        (Decrease) increase in accrued interest receivable and other assets                     (3,491)         651
        Decrease in accrued interest payable and other liabilities                                (847)        (552)
                                                                                             ---------    ---------
           Total adjustments                                                                    (9,233)     (27,345)
                                                                                             ---------    ---------
           Net cash (used in ) provided by operating activities                                    295      (18,767)

CASH FLOWS FROM INVESTING ACTIVITIES:
     Proceeds from maturity and paydowns of held-to-maturity investment securities              21,247       21,833
     Purchases of held-to-maturity investment securities                                       (75,415)        --
     Proceeds from sales of available-for-sale investment securities                              --         13,303
     Proceeds from maturity and paydowns of available-for-sale investment securities            19,257       16,800
     Purchases of available-for-sale investment securities                                     (43,223)     (34,958)
     Purchase of investment in unconsolidated subsidiary                                          --         (2,000)
     Redemption of preferred stock of unconsolidated subsidiary                                    150         --
     Net increase in loans                                                                    (106,704)     (52,427)
     Proceeds from sale of real estate acquired by foreclosure                                     514          417
     Capital additions to real estate acquired by foreclosure                                     --            (12)
     Proceeds from sale of premises and equipment                                                  195          131
     Purchase of premises and equipment                                                         (5,878)      (5,893)
                                                                                             ---------    ---------
           Net cash used in investing activities                                              (189,857)     (42,806)

CASH FLOWS FROM FINANCING ACTIVITIES:
     Net increase in deposit accounts                                                          114,148       88,022
     Net increase (decrease) in repurchase agreements/funds purchased                           10,834       (9,313)
     Repayments of notes payable                                                                (4,000)      (1,200)
     Proceeds from issuance of common stock                                                      1,252          573
     Proceeds from issuance of preferred stock                                                   1,226         --
     Dividends paid                                                                             (2,022)      (1,909)
     Proceeds on sale of trust preferred securities                                             28,750         --
     Repayment of senior debentures                                                               --           (200)
                                                                                             ---------    ---------
               Net cash provided by financing activities                                       150,188       75,973

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                           (39,374)      14,400

CASH AND CASH EQUIVALENTS:
     Beginning of period                                                                     $ 125,876    $  84,929
                                                                                             ---------    ---------
     End of period                                                                           $  86,502    $  99,329
                                                                                             =========    =========

</TABLE>

            See Notes to Interim Consolidated Financial Statements.



                                       4


<PAGE>   5
                  STERLING BANCSHARES, INC., AND SUBSIDIARIES
               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1997

(1)  Basis of Presentation:

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the rules and regulations of the Securities and
Exchange Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring items) considered necessary for a fair presentation have
been included. Operating results for the nine month period ended September 30,
1997, are not necessarily indicative of the results that may be expected for the
year ended December 31, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto included in the annual report on Form
10-K of Sterling Bancshares, Inc. (the "Company"), for the year ended December
31, 1996.

On September 30, 1997, the Company acquired First Houston Bancshares, Inc.
("First Houston") in exchange for 1,686,014 shares of the Company's common stock
for First Houston's outstanding common and preferred stock. The transaction has
been accounted for as a pooling of interests and previously issued financial
statements have been restated. There were no material adjustments to the net
assets of First Houston as a result of adopting the same accounting practices as
Sterling Bancshares, Inc., and its subsidiaries. At September 30, 1997, First
Houston had total assets of approximately $135 million and total deposits of
approximately $125 million. The effect of the pooling of interest on previously
reported operations is as follows:

<TABLE>
<CAPTION>

                                                  Three Months Ended                                   Nine Months Ended
                                                  September 30, 1996                                   September 30, 1996
                                       -------------------------------------------        ---------------------------------------
                                        Originally                                        Originally
                                         Reported       Combination       Restated         Reported       Combination   Restated
                                        ----------      -----------       --------        ----------      -----------   --------

<S>                                    <C>                <C>             <C>              <C>               <C>       <C>     
Interest income                          $13,681          $ 7,237          $20,918          $39,043          $ 6,324    $45,367
Interest expense                           4,236            2,418            6,654           12,295            2,248     14,543
                                         -------          -------          -------          -------          -------    -------
                                      
   NET INTEREST INCOME                     9,445            4,819           14,264           26,748            4,076     30,824
      Provision for credit losses            532              163              695            1,565              153      1,718
                                         -------          -------          -------          -------          -------    -------
                                      
   NET INTEREST INCOME                     8,913            4,656           13,569           25,183            3,923     29,106
      AFTER PROVISION                 
                                      
Noninterest income                         2,090              632            2,722            5,869              435      6,304
Noninterest expense                        6,904            4,302           11,206           19,783            3,131     22,914
                                         -------          -------          -------          -------          -------    -------
                                      
   EARNINGS BEFORE                         4,099              986            5,085           11,269            1,227     12,496
       INCOME TAXES                   
      Provision for income taxes           1,308              367            1,675            3,544              374      3,918
                                         -------          -------          -------          -------          -------    -------
                                      
   NET EARNINGS                          $ 2,791          $   619          $ 3,410          $ 7,725          $   853    $ 8,578
                                         =======          =======          =======          =======          =======    =======
                                      
   EARNINGS PER SHARE                    $  0.23                           $  0.23          $  0.63                     $  0.61
                                         =======                           =======          =======                     =======
                                      
Average common and common             
 equivalent shares outstanding            12,270                            14,519           12,255                      14,067
                                         =======                           =======          =======                     =======
</TABLE>


                                       5
<PAGE>   6

(2)  Earnings Per Common Share

Earnings per common share was computed based on the following (in thousands,
except per share amounts):


<TABLE>
<CAPTION>

                                                          Three Months Ended                Nine Months Ended
                                                            September 30,                      September 30,
                                                      1997              1996              1997            1996
                                                  -------------    -------------     -------------   --------------
<S>                                               <C>              <C>               <C>              <C>   
Weighted average:
  Common shares outstanding                         13,732             13,616            13,703          13,565
  Primary common share equivalents                     767                432               668             459
  Additional common share equivalents,            
      assuming full dilution                            61                 20                61              29
                                                    ======             ======            ======          ======
                                                    14,560             14,068            14,432          14,053
                                                    ======             ======            ======          ======
</TABLE>



         Note:  Common shares, common share equivalents, and earnings per share
         for 1996 have been adjusted to reflect the merger of First Houston and
         a three-for-two stock split effective February 24, 1997. See note (3)
         below for additional information regarding the stock split.

(3)  Capital Stock

Common Stock

The Company paid first and second quarter cash dividends of $0.055 per share. On
July 21, 1997, the Company's board of directors declared a third quarter
dividend of $0.055 per share. This dividend was paid on August 11, 1997, to
shareholders of record on August 1, 1997.

As of September 30, 1997, an additional 881,251 shares of common stock were
issuable, subject to vesting restrictions, upon exercise of the Company's
outstanding employee stock options under the 1994 Stock Incentive Plan and the
1984 Stock Option Plan, and pursuant to outstanding subscriptions under the
Company's 1994 Employee Stock Purchase Plan.

The Company's Non-Employee Director Compensation Plan provides that payment of
outside directors will be effected by issuance of shares of the Company's stock
in lieu of cash fees. Accordingly, in April 1997 the Company issued 20,582
shares as payment in full of outside director fees for director and committee
service during the period April 1997 through March 1998, inclusive. The Company
expects to continue to pay stock compensation to outside directors during future
periods.

Preferred Stock

The Company's Board of Directors has designated four series of Convertible
Preferred Stock. Each of the four series has been issued in conjunction with the
opening of four new bank offices (see "Significant Developments" below on this
Form 10-Q). The conversion ratio of the Convertible Preferred Stock to Common
Stock will depend upon the performance of the new offices in reaching certain
defined deposit goals.

(4)  Trust Preferred Securities

In June 1997, the Company formed Sterling Bancshares Capital Trust I, a trust
formed under the laws of the State of Delaware, (the "Trust"). The Company is
the owner of all of the beneficial interest represented by common securities of
the Trust, and Bankers Trust Company is the Property Trustee. The Trust exists
for the exclusive purposes of issuing the Trust Preferred Securities (the "Trust
Securities") and investing the proceeds thereof in the 9.28% Junior Subordinated
Deferrable Interest Debentures (the "Junior Subordinated Debentures"), issued by
the Company, and certain other limited activities. The net proceeds to the
Company from the sale of the Junior Subordinated Debentures of approximately
$??.? million have been used to repay its outstanding long-term indebtedness of
$3.7 million with the balance being invested in short-term investment securities
until needed for other general corporate purposes (which could include the
financing of one or more future cash acquisitions by the Company).



                                       6
<PAGE>   7

(5)  Recent Accounting Standards

SFAS No. 128, "Earnings per Share" ("EPS") establishes standards for computing
and presenting EPS. It replaces the presentation of primary EPS with basic EPS.
It also requires dual presentation of basic and diluted EPS on the face of the
income statement for entities with complex capital structures and requires a
reconciliation of the basic EPS computation to the diluted EPS computation. This
statement is effective for financial statements issued for the periods ending
after December 15, 1997, including interim periods; earlier application is not
permitted and all prior period EPS data must be restated. The implementation of
SFAS No. 128 should have no material effect on the Company's reported EPS.

SFAS No. 130, "Reporting Comprehensive Income" requires that all components of
comprehensive income and total comprehensive income be reported on one of the
following (1) the statement of operations, (2) the statement of stockholders'
equity or (3) a new separate statement of comprehensive income. Comprehensive
income is comprised of net income and all changes to stockholders' equity,
except those due to investments by owners (changes in paid in capital) and
distributions to owners (dividends). This statement is effective for fiscal
years beginning after December 15, 1997. Earlier application is permitted. This
statement does not change the current accounting treatment for components of
comprehensive income and thus the implementation of SFAS No. 130 will have no
material impact on the Company's Consolidated Financial Statements.

SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information" requires public companies to report certain information about their
operating segments in their annual financial statements and quarterly reports
issued to shareholders. It also requires public companies to report certain
information about their products and service, the geographic areas in which they
operate, and their major customers. This statement is effective for fiscal years
beginning after December 15, 1997. Earlier application is encouraged.
Implementation of SFAS No. 131 should have no material effect on the Company's
Consolidated Financial Statements.


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

SIGNIFICANT DEVELOPMENTS

Expansion

During 1996, the Company opened two new community banking offices, the first in
the Upper Kirby district of central Houston, and the second in the Galleria area
of Houston. The Company opened its fourteenth banking office in the Cypress
Station area, north of the city, in January 1997.

On October 27, 1997, First Houston was dissolved and the Company merged Houston
National Bank into Sterling Bank, creating the Bank's fifteenth banking office.

FINANCIAL CONDITION

Investments in Subsidiaries

Sterling Bank, is a wholly-owned banking subsidiary. At September 30, 1997, the
Company also owned 100% of First Houston and its only subsidiary Houston
National Bank. In September 1996, the Company purchased a 40% equity and 44 %
voting interest in Sterling Capital Mortgage Company ("SCMC"), an originator and
servicer of single family residential mortgage loans headquartered in Houston,
Texas. The Company also owns a 100% beneficial interest in Sterling Bancshares
Capital Trust I.

Total Assets

The total consolidated assets of the Company as of September 30, 1997, were
$1.08 billion, as compared to $851.87 million on the same date in 1996, an
increase of $228.13 million or 26.8%. The growth in total assets was due to a
combination of internal growth and the opening of de novo offices.



                                       7

<PAGE>   8

Federal Funds Sold and Federal Funds Purchased

The Bank had federal funds sold of $16.4 million at September 30, 1997.
Comparatively, the Bank had $27.6 million in federal funds sold on the same date
in 1996, a decrease of $11.2 million or 40.6%. This decrease was due to the
reinvestment of excess liquidity into investment securities during 1997.

Loans Held for Investment

As of September 30, 1997, loans held for investment were $618.6 million, as
compared to $483.4 million on the same date in 1996, an increase of $135.2
million or 28.0% due primarily to continued strong loan demand. When compared to
loans held for investment of $513.4 million on December 31, 1996, the September
30, 1997 loan balance represents a year-to-date $105.2 million increase in
internal loan production, net of payoffs, or an annualized percentage increase
of 27.4%. At September 30, 1997, loans held for investment as a percentage of
assets and deposits were 57.2% and 64.8%, respectively.

The following table summarizes the Bank's loan portfolio by type of loan as of
September 30, 1997 (in thousands):

<TABLE>
<CAPTION>
                                                  September 30,     Percent of 
                                                      1997            Total
                                                  -------------     ----------
<S>                                               <C>              <C>
Commercial, financial and industrial                $   234,040         37.83%
Real estate - commercial                                175,402         28.35%
Real estate - residential mortgage                       80,435         13.00%
Real estate - construction                               49,833          8.06%
Installment and other                                    80,727         13.05%
     Less unearned discount                              (1,842)        (0.30)%
                                                    -----------     ---------- 
         Total loans held for investment            $   618,595     $  100.00%
                                                    ===========     ==========
</TABLE>


Investment Securities

The Bank's investment portfolio as of September 30, 1997, totaled $283.6
million, as compared to $198.8 million on the same date in 1996. The increase of
$84.8 million or 42.7% is a result of the Bank's reinvestment of excess
liquidity in U.S. Agency and mortgage-backed securities. The Bank has designated
its total securities portfolio into (a) Held-to-maturity ("HTM") and (b)
Available-for-sale ("AFS"). As of September 30, 1997, the HTM portfolio totaled
$202.2 million. The AFS portfolio totaled $81.4 million and consisted of U.S
Treasury and Agency securities owned by First Houston and the Bank's portfolio
of investment assets which were held for reasons other than solely for
investment, such as the Bank's stock in the regional FHLB. The Bank tracks but
does not record market changes on its HTM portfolio. At September 30, 1997, the
market value of the HTM portfolio was $284.9 million.

Allowance for Credit Losses

Following is a summary of the changes in the allowance for credit losses for the
nine months ended September 30, 1997, and the relationship of the allowance to
total loans at September 30, 1997, and December 31, 1996 (in thousands):

<TABLE>
<S>                                                    <C>                           <C>
Allowance for credit losses, December 31, 1996                                       $ 7,053
Chargeoffs                                                                            (2,010)
Recoveries                                                                               225
Provision for credit losses                                                            2,095
                                                                                     -------
Allowance for credit losses, September 30, 1997                                      $ 7,363
                                                                                     =======

                                                         September 30,           December 31,
                                                              1997                  1996
                                                         -------------           ------------
Loans held for investment at period-end                  $     618,595           $    513,356
Allowance for credit losses                              $       7,363           $      7,053
Allowance as a percent of period-end loans                        1.19%                  1.37%

</TABLE>

                                       8
<PAGE>   9


In order to determine the adequacy of the allowance for credit losses,
management considers the risk classification and delinquency status of loans and
other factors. Management also establishes specific allowances for credits which
management believes require allowances greater than those allocated according to
their risk classification. An unallocated allowance is also established based on
the Bank's historical charge-off experience over the last ten years. The Bank
may reduce the provision for credit losses where appropriate. The Bank will
continue to monitor the adequacy of the allowance for credit losses to determine
the appropriate accrual for the Bank's bad debt expense.

Risk Elements

Non-performing, past due, and restructured loans are fully or substantially
secured by assets, with any excess of loan balances over collateral values
specifically allocated in the allowance for credit losses. Nine properties make
up the $1,254,000 of other real estate owned ("ORE") at September 30, 1997, the
largest of which is carried at $647,000 and consists of one commercial property
in north Houston. This property is included in ORE although it was not acquired
by foreclosure, but is a tract of unimproved land previously acquired by the
Bank for future expansion. No loss is anticipated. The Bank carries all
properties at the lower of the book value of the loan at foreclosure or the
current fair market value, less estimated closing costs.

The Bank defines potential problem loans as those loans not classified as
non-performing, but where information known by management indicates serious
doubt that the borrower will be able to comply with the present payment terms.
Management identifies these loans through its continuous loan review process and
defines potential problem loans as those loans classified as substandard,
doubtful, or loss, excluding all non-performing loans. As of September 30, 1997,
the Bank has no material foreign loans outstanding or loan concentrations. The
Bank, however, continues to monitor the potential risk of foreign borrowers and
concentrations of credit.

The following schedule summarizes consolidated non-performing loans,
non-performing assets and potential problem loans at year-end 1996 and at
September 30, 1997.

<TABLE>
<CAPTION>
                                                                September 30,        December 31,
                                                                    1997                 1996
                                                              -----------------    -----------------
                                                                          (In thousands)

<S>                                                                    <C>                  <C>    
Nonaccrual loans                                                        $ 3,190              $ 2,535
Restructured loans                                                           44                   45
Accruing loans past due 90 days or more                                     437                  231
                                                              -----------------    ----------------- 
    Total nonperforming loans                                             3,671                2,811 
ORE and other foreclosed assets                                           1,604                2,454 
                                                              -----------------    ----------------- 
    Total nonperforming assets                                          $ 5,275              $ 5,265 
                                                              =================    ================= 
                                                                                                     
Total nonperforming loans as a % of gross loans                           0.59%                0.62%
Total nonperforming assets as a % of total assets                         0.49%                0.67%

Potential problem loans                                                $ 14,850             $ 12,738
                                                              =================   ==================
</TABLE>



Premises and Equipment

The Bank's premises and equipment, net of depreciation, as of September 30,
1997, were $29.3 million, as compared to $22.1 million on the same date in 1996,
an increase of $7.2 million or 32.6%. This increase is due to the opening of two
banking offices since December of 1996, and the relocation of the Champions
office in March 1997, and the Highway 6 office in September 1997. In addition,
the Bank completed the installation of its new core processing system and teller
technology and has continued to upgrade its technology and telecommunications
equipment to keep pace with the Bank's volume growth and to position itself for
future growth.


                                       9
<PAGE>   10


Deposits

Total deposits as of September 30, 1997, were $954.5 million, as compared to
$775.1 million on the same date in 1996, an increase of $179.4 million or 23.1%,
resulting from growth in same location deposits, combined with the additional
deposits of the new banking offices. When compared to total deposits of $840.3
million on December 31, 1996, the amount at September 30, 1997, represents a
year-to-date increase of $114.2 million, as the strong deposit growth
experienced in 1996 continued through the three quarters of 1997.

Non-interest bearing demand deposits at September 30, 1997, were $306.5 million,
as compared to $247.0 million at September 30, 1996, an increase of $59.5
million or 24.1%. The percentage of non-interest bearing deposits to total
deposits as of September 30, 1997, continued strong at 32.1%.

Notes Payable

In June of 1997, the Bank repaid the remaining note payable of $3.6 million with
proceeds from the sale of its Trust Preferred Stock. During the first nine
months of 1997, the note accrued interest at a LIBOR-based rate of 7.6875%.


CAPITAL RESOURCES AND LIQUIDITY

Shareholders' Equity

The  following table displays the changes in shareholders' equity from December 
31, 1996,  to September  30,1997:  (in thousands)


<TABLE>
<S>                                                                <C>     
Equity, December 31, 1996                                          $ 67,004
  Net earnings                                                        9,528
  Sale of preferred stock                                             1,226
  Sale of common stock                                                1,217
  Cash dividends paid                                                (1,987)
  Net change in net unrealized losses on AFS securities                  34
                                                                   ========
Equity, September 30, 1997                                         $ 77,022
                                                                   ========
</TABLE>

The Company's risk based capital ratios remain above the levels designated as
"Well Capitalized" on September 30, 1997, with Tier-1 Capital, Total Risk-Based
Capital, and Leverage Capital Ratios of 13.44%, 15.42%, and 13.18%,
respectively.

Liquidity

Effective management of balance sheet liquidity is necessary to fund growth in
earning assets and to pay liability maturities, depository customers' withdrawal
requirements and shareholders' dividends. The Company has instituted
Asset/Liability Management policies, including but not limited to a computer
simulation model, to improve liquidity controls and to enhance its management of
interest rate risk and financial condition. The Company has numerous sources of
liquidity including a significant portfolio of shorter term assets, marketable
investment securities (excluding those presently classified as
"Held-to-maturity"), increases in customers' deposits, and access to borrowing
arrangements. Available borrowing arrangements maintained by the Bank include
informal federal funds lines with other commercial banks, an advancement
arrangement with the Federal Home Loan Bank ("FHLB"), and reverse repurchase
lines with other commercial banks and the FHLB.



                                       10


<PAGE>   11
RESULTS OF OPERATIONS

Net Income

Net income for the nine month period ended September 30, 1997, was $9.5 million
as compared to $8.6 million for the same period in 1996, an increase of
approximately $900,000 or 10.5%. For the nine months ended September 30, 1997,
net income was impacted by a special charge for acquisition and mergers costs of
approximately $826,000 and approximately $1,925,000 in additional expenses
incurred as a result of the opening of the three new banking offices since
August 1996.

Net Interest Income

Net interest income for the nine month period ended September 30, 1997, was
$39.4 million, as compared to $30.8 million for the same period in 1996, an
increase of $8.6 million or 27.9%. The growth in net interest income is
attributable primarily to increases in average earning assets, enhanced by the
maintenance of a strong net interest margin. Average earning assets for
September 30, 1997, were $892.8 million, up $178.4 million, or 25.0% from $714.4
million for the same period in 1996. The yield on average earning assets for the
nine month period ended September 30, 1997, was 8.62%, as compared to 8.48% for
the same period in 1996, an increase of 14 basis points. This increase is due
primarily to an increase in the yield on investment securities as the Bank
reinvested its excess liquidity in higher yielding U.S. Agency and
mortgage-backed securities. In addition, the Bank increased its yield on loans
by 8 basis points, while also increasing the average balance by $123.9 million.
At September 30, 1997, total loans represented 67.6% of total interest earning
assets, compared to 67.1% for the same period in 1996. The cost of interest
bearing liabilities rose 17 basis points from 3.92% to 3.75% for the same
period. The Company's 5.84% net interest margin for the first nine months of
1997 remained flat from the 5.85% net interest margin registered during the same
period in 1996.

The data used in the analysis of the changes in net interest income is derived
from the daily average levels of earning assets and interest-bearing liabilities
as well as from the rates earned and paid on such amounts. The rates earned and
paid on each major type of asset and liability are shown beside the average
balance in the account for the period. The average yields on all
interest-earning assets and the average cost of all interest-bearing liabilities
also are summarized.




                                       11
<PAGE>   12


The following schedule gives a comparative analysis of the Company's daily
average interest-earning accounts and interest-bearing accounts for the
nine-month periods ended September 30, 1997 and 1996:



                   CONSOLIDATED AVERAGE BALANCE SHEET SCHEDULE
                   NET INTEREST INCOME AND NET INTEREST MARGIN

<TABLE>
<CAPTION>
                                                                             Nine Months Ended September 30,
                                                                                 (Dollars in thousands)
                                                                       1997                                   1996

                                                        Average                   Average       Average                  Average
                                                        Balance      Interest    Yield/Rate     Balance     Interest    Yield/Rate
                                                      ---------------------------------------   ----------------------------------
INTEREST EARNING ASSETS:
<S>                                                   <C>          <C>              <C>        <C>          <C>
Interest bearing deposits in financial institutions   $  13,577      $     549          5.41%  $    7,531    $     298      5.29%
Federal funds sold                                       31,019          1,261          5.44%      21,750          879      5.40%
Investment securities (taxable)                         223,115         10,318          6.18%     183,715        8,157      5.93%
Investment securities (tax-exempt)                       21,960            829          5.05%      22,268          844      5.06%
Loans, net of unearned discount (taxable)               602,261         44,544          9.89%     478,381       35,145      9.81%
Loans, net of unearned discount (tax-exempt)                891             51          7.65%         750           44      7.84%
                                                      ---------      ---------          ----   ----------    ---------      ----
  Total Interest Earning Assets                       $ 892,823      $  57,552          8.62%  $  714,395    $  45,367      8.48%

Noninterest Earning Assets:
Cash and due from banks                               $  67,361                                $  56,310   
Premises and equipment, net                              28,189                                   20,346   
Other assets                                             18,658                                   14,296   
Allowance for credit losses                              (7,384)                                  (6,786)  
                                                      ---------                                ---------
  Total Noninterest Earning Assets                    $ 106,824                                $  84,166   
                                                                                                           
  TOTAL ASSETS                                        $ 999,647                                $ 798,561   
                                                      =========                                =========
                                                                                               
INTEREST BEARING LIABILITIES:
Demand and savings deposits                           $ 417,671      $   9,782          3.13%  $ 330,715     $   7,534      3.04%
Certificates and other time deposits                    199,936          7,611          5.09%    174,781         6,434      4.92%
Other borrowings                                         16,670            621          4.98%      7,763           267      4.59%
Debentures and notes payable                              2,079            147          9.45%      5,093           308      8.08%
                                                      ---------      ---------          ----   ---------     ---------      ----
  Total Interest Bearing Liabilities                  $ 636,356      $  18,161          3.82%  $ 518,352     $  14,543      3.75%
                                                            
Noninterest Bearing Liabilities:                            
Demand deposits                                       $ 271,632                                $ 214,264
Other liabilities                                         6,411                                    4,526
Trust preferred securities                               12,848
Shareholders' equity                                     72,400                                   61,419
                                                      ---------                                ---------       
  Total Noninterest Bearing Liabilities               $ 363,291                                $ 280,209
                                                                                                        
  TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY          $ 999,647                                $ 798,561
                                                      =========                                =========

NET INTEREST INCOME & MARGIN                                         $  39,391          5.90%                $  30,824      5.76%
                                                                     =========          ====                 =========      ====
                                                                                                                      
NET INTEREST INCOME & MARGIN (TAX EQUIVALENT)                        $  39,851          5.97%                $  31,287      5.85%
                                                                     =========          ====                 =========      ====
</TABLE>                                
                                       12
<PAGE>   13


Provision for Credit Losses

The provision for credit losses for the first nine months of 1997 was $2.1
million, as compared to $1.7 million for the same period in 1996, an increase of
$400,000 or 23.5%. After net charge-offs of $1.8 million and provisions for the
first nine months of 1997, the Bank's allowance for credit losses increased by
$310,000 from $7,053,000 on December 31, 1996, to $7,363,000 on September 30,
1997. Please refer to the earlier discussion of Allowances for Credit Losses and
Non-performing Loans for additional insight to management's approach and
methodology in estimating the allowance for credit losses.

Non-interest Income

Total non-interest income increased for the nine month period ended September
30, 1997, at $7.2 million, as compared to $6.3 million for the same period in
1996, an increase of $900,000 or 14.3%. The increase is due primarily to growth
in the Bank's deposit base, resulting in increased fee income.

Non-interest Expense

Non-interest expenses increased $7.3 million, or 31.9%, to $30.2 million for the
first nine months of 1997 as compared to $22.9 million for the same period in
1996. The increase is due to the additional expenses incurred by the startup of
three new banking offices in the last year, the costs associated with the merger
of First Houston, and the implementation of a new marketing strategy. The
following schedule summarizes the expenses, including salaries, associated with
these new initiatives (in thousands):

<TABLE>
<CAPTION>
                                                         September 30, 1997
                                                              Expense
                                                         ------------------
<S>                                                        <C>    
New initiatives:

    Three new banking offices                               $      1,925
    Technology                                                       460
    Marketing                                                        190
    Merger of First Houston                                          826
                                                            ------------
         Total expenses for new initiatives                 $      3,401
                                                            ============
</TABLE>
  
Salaries and employee benefits for the nine month period ended September 30,
1997, were $16.3 million, as compared to $13.6 million for the same period in
1996, an increase of $2.7 million or 19.9%. The increase is due to an increase
in the number of employees, caused primarily by additional staffing of the
central operations areas as well as the new Upper Kirby, Fountainview, and
Cypress Station offices. In addition, the Company also paid severance to those
employees not retained after the merger of First Houston. The remaining increase
in personnel costs may be attributed to normal merit and cost-of-living pay
increases, which averaged less than 3%.

For the nine months ended September 30, 1997, net occupancy expense and
equipment expense, including net gain or loss on sale of premises and equipment,
increased by a combined $646,000 over the prior period amounts. These increases
are attributed to the opening of the three new offices and the renovation of the
Mangum office. In conjunction with this renovation, the office sold its former
remote motor bank facility, which resulted in a loss of $130,000. Going forward,
this loss will be offset by the efficiencies resulting from combining a new
motor bank facility with the existing lobby facility.

Technology expense for the nine month period ended September 30, 1997, was $1.6
million as compared to $800,000 for the same period in 1996, an increase of
$800,000 or 100.0%. The increase is due to the installation of the Bank's local
and wide-area network during the third quarter of 1996 and the new core
processing system in the second quarter of 1997. In addition, the Company
incurred expenses associated with the merger of First Houston. The Bank expects
ongoing increases in its technology expenses for the remainder of the year as it
continues to implement its long-term technology strategy.



                                       13
<PAGE>   14

Other non-interest expense was $4.9 million for the nine month period ended
September 30, 1997, as compared to $3.2 million for the same period in 1996, an
increase of $1.7 million or 53.1%. The increase in other expenses is due
primarily to the costs associated with the merger of First Houston. In addition
the Bank experience increases in franchise taxes, Federal Reserve Bank check
processing charges, and marketing expenses associated with the implementation of
a new marketing initiative.


PART II. OTHER INFORMATION


ITEM 2.  CHANGES IN SECURITIES

There were no changes in securities during the period ending September 30, 1997.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders during the period
ending September 30, 1997.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

a)    Exhibits:

      Exhibit 11.  Computation of Earnings Per Share

        Included as Note (2) to Interim Consolidated Financial Statements on
        page 6 of this Form 10-Q

      Exhibit 27.  Financial Data Schedule

        The required Financial Data Schedule has been included as Exhibit 27 of
        the Form 10-Q filed electronically with the Securities and Exchange
        Commission.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused the report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                        Sterling Bancshares, Inc. 
                                             (Registrant)                    
                                                                             
                                                                             
                                                                             
                                        By: /s/ GEORGE MARTINEZ              
                                            ------------------------         
                                            George Martinez                  
                                            (Chief Executive Officer         
                                            and Principal Financial Officer) 
                                                                             


                                       14
<PAGE>   15

                                EXHIBIT INDEX


                        27 -- Financial Data Schedule