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Sterling Financial Corporation (NASDAQ:STSA), a leading community bank in the western region, today announced results for the first quarter ended March 31, 2009, of a net loss of $20.4 million, reflecting a provision for credit losses of $65.9 million but not including the payment of $4.3 million in preferred dividends to the U.S. Department of the Treasury under its Capital Purchase Program. After the payment of preferred dividends, earnings available to common shareholders were negative $24.8 million, or $0.48 per common share. Earnings for the first quarter ended March 31, 2008, were $2.9 million, or $0.06 per common share, and reflected a provision for credit losses of $37.1 million. "Our core banking operations performed solidly in the quarter. Revenues were up 6% year over year. Our mortgage banking operations benefited from lower interest rates, which led to a significant increase in the volume of residential mortgage originations. Income from mortgage banking operations was up 115% from a year ago," stated Harold B. Gilkey, chairman and chief executive officer. "The elevated loan loss provision, while down significantly from the fourth quarter of 2008, reflects ongoing asset-quality challenges in the current economy."

Sterling's capital and liquidity positions remained strong at quarter end. Sterling's total risk-based capital ratio was 13.0% at March 31, 2009. Sterling had $3.08 billion of cash equivalents and securities on its balance sheet. "We made progress lowering our funding cost structure and, thereby, improved a number of our financial metrics. Core deposits rose 3% over the linked quarter; our net interest margin increased to 2.97% from 2.80% from the prior quarter; and, operating efficiency improved to 62.7%," commented Mr. Gilkey.

First-Quarter 2009 Highlights

• Total deposits increased 8% from a year ago to a record $8.49 billion.
• Net interest margin improved to 2.97% from 2.80% in the linked quarter.
• Income from mortgage banking operations rose 115% year over year.
• All capital ratios remain above "well-capitalized" levels.
• Total assets were $12.82 billion.
• Total loans receivable were $8.68 billion.
• Sterling expanded lending initiatives to benefit consumers and businesses.

Operating Results

Revenues

Sterling's revenues, comprised of net interest income and non-interest income, rose 6% to $120.5 million for the quarter ended March 31, 2009, from $113.2 million for the quarter ended March 31, 2008. Higher income from mortgage banking operations and net gains on the sale of securities were the primary drivers of year-over-year growth in revenues.

Net Interest Income

Sterling's net interest income was $87.7 million for the quarter ended March 31, 2009, compared with $83.3 million for the quarter ended December 31, 2008, and $92.1 million for the quarter ended March 31, 2008.

The 5% increase in Sterling's net interest income on a linked-quarter basis reflects a 17-basis-point expansion in its net interest margin on a tax equivalent basis to 2.97% from 2.80% in the fourth quarter of 2008. Average funding costs in the first quarter of 2009 were reduced by 41 basis points over the prior quarter. During this period, average funding costs declined more than the yield on interest earning assets, which contracted 28 basis points.

The year-over-year decrease of 5% in Sterling's net interest income primarily reflects a reduction in Sterling's net interest margin on a tax equivalent basis of 27 basis points to 2.97% from 3.24%. Sterling's higher level of non-performing assets, including non-accrual loans and other real estate owned (OREO), and its asset sensitivity, during a declining interest rate environment, were reasons for the decrease in net interest margin.

Non-Interest Income

Non-interest income primarily includes fees and service charges income, mortgage banking operations and other items such as bank-owned life insurance, loan servicing fees and OREO operations. In the first quarter of 2009, non-interest income rose 55% to $32.8 million from $21.2 million in the first quarter of 2008. The increase in non-interest income was driven by higher levels of income from mortgage banking operations and gains on the sales of securities.

Mortgage banking operations income in the first quarter of 2009 rose 115% to $13.3 million from $6.2 million in the first quarter of 2008, continuing the trend that started in the fourth quarter of 2008. For the first quarter of 2009, total residential mortgage originations were $710.6 million, with residential loan sales of $776.5 million, compared with originations of $411.1 million and loan sales of $335.5 million in the first quarter of 2008. "Our residential mortgage subsidiary, Golf Savings Bank, experienced a healthy annual increase in gain on loan sales during the quarter thanks to lower interest rates and programs designed to spur lending consistent with the U.S. Treasury�s Capital Purchase Program investment," commented Mr. Gilkey.

For the quarter ended March 31, 2009, fees and service charges income contributed $13.8 million to non-interest income, compared with $14.2 million in the first quarter of 2008. Fees and service charges income continues to reflect higher analyzed account fees, loan-related fees and transaction fees, offset by a decrease in fees related to Sterling's Balance Shield Program and lower commissions from Sterling's Wealth Management group. Income from certain fees and service charges is influenced by the number of transaction accounts. At quarter end, the total number of transaction accounts was up 2% year over year.

Sterling recognized net expenses on OREO of $4.5 million in the first quarter of 2009, compared with $106,000 in the first quarter of 2008. The elevation in OREO expenses during the quarter reflects a decline in asset values subsequent to acquisition as well as write-downs to align valuations with pending OREO sales.

For the first quarter of 2009, Sterling reported other income of $8.5 million, which was primarily comprised of net gains on the sale of securities. This compares with other expense of $399,000 for the first quarter of 2008.

Non-Interest Expenses

Non-interest expenses rose 5% to $75.5 million in the first quarter of 2009 from $72.1 million in the first quarter of 2008. Excluding Federal Deposit Insurance Corporation (FDIC) deposit insurance premiums, which rose by $2.5 million, non-interest expenses increased 1% year over year. The small increase in non-interest expenses reflects improved operating efficiencies and tight cost controls. During the quarter, Sterling began realizing the benefits of systemic process improvements relating to the closure of two item processing centers following the complete rollout of remote teller capture systems. On a year-over-year basis, the number of full-time equivalent employees decreased by 39 to 2,518. ''Our efforts to improve our cost structure and increase operating efficiency are reflected in our operating efficiency ratio, which improved to 62.7% from 63.7% over the last year," Mr. Gilkey said.

Lending

Reflecting less demand for credit in a slowing economy, loan originations during the first quarter of 2009 declined 10% to $970.5 million from year-ago levels. Consistent with Sterling's strategic goal of reducing construction loans as a percent of its total loan portfolio, total construction originations decreased to $18.3 million during the quarter compared with $264.3 million during the same quarter a year ago. Stimulated by historically low mortgage rates, residential mortgage originations climbed 73% from the year-ago period to $710.6 million.

Loan originations relative to the fourth quarter of 2008 rose 35%. This sequential increase reflects Sterling's effort, since December 2008, to expand and enhance lending initiatives to support and restore economic growth and development in the communities it serves with capital raised through the U.S. Department of the Treasury's Capital Purchase Program. Sterling's lending initiatives focus on funding affordable housing, small business loans and financing programs to support business growth.

At March 31, 2009, Sterling's loans receivables were $8.68 billion, compared with $8.81 billion at the end of the fourth quarter of 2008, and $9.12 billion at March 31, 2008. The contraction in Sterling's loan portfolio reflects management's strategic decision to lower the amount of residential construction loans in its asset mix. At the end of the first quarter of 2009, residential construction represented 15% of Sterling's loan portfolio, compared with 21% at the end of the first quarter of 2008. Over last year, residential construction loans decreased by $611.5 million to $1.33 billion at March 31, 2009.

Credit Quality

In the first quarter of 2009, Sterling recorded a $65.9 million provision for credit losses, compared with $228.5 million for the linked quarter, and $37.1 million for the same period a year ago. This provision stems from higher levels of classified assets and higher loss rates. Classified assets include non-performing loans and OREO. As of March 31, 2009, classified assets were $1.07 billion, compared with $984.9 million at December 31, 2008, and $402.8 million at March 31, 2008. "Construction assets represent 70% of total classified assets. During the first quarter, we observed a slowdown in the growth rate of classified construction assets, while weakness in the overall economy has contributed to moderately increased levels of classified assets in our commercial banking, commercial real estate and non-owner occupied residential portfolios. We have taken steps to contain further growth of classified assets in these loan segments. The success of our efforts will depend, in part, on the stabilization of our local economies," observed Mr. Gilkey.

At March 31, 2009, non-performing assets totaled $670.0 million, compared with $610.7 million at December 31, 2008, and $223.1 million at March 31, 2008. The linked-quarter growth of non-performing assets was 10%, representing a deceleration in the rate of quarterly growth, which, had ranged between 36% and 65% over the previous four quarters. Sterling believes that the slowing growth rates of classified and non-performing assets, mainly related to construction, reflects the cumulative efforts of its construction credit team, which has been in place for more than one year to identify, manage and resolve stressed assets. The process of resolving problem assets involves restructuring loans; obtaining additional collateral; repossessing problem assets and evaluating loans in relation to fair market value. Cumulatively, Sterling has written down its non-performing assets by $244.0 million as of March 31, 2009, compared with write-downs of $207.7 million as of December 31, 2008 and $4.2 million as of March 31, 2008. At March 31, 2009, non-performing assets include $46.7 million of restructured loans that are performing in accordance with their new terms and are accruing interest, compared with $29.5 million as of December 31, 2008, and none as of March 31, 2008. OREO, net of allowances, was $83.6 million at quarter end, compared with $62.3 million in the linked quarter, and $13.0 million in the year-ago quarter. OREO is included in non-performing assets.

The largest loan segment of non-performing assets continues to be construction, including residential, commercial and multifamily. Non-performing construction loans, representing 79.4% of total non-performing assets, increased 10%, or by $47.4 million, to $532.3 million for the first quarter of 2009 from the fourth quarter of 2008. Of the $47.4 million increase, residential construction made up $43.0 million, commercial construction contributed $7.5 million, while multifamily construction declined $3.1 million.

During the first quarter, Sterling introduced a lending incentive plan to increase sales velocity of newly constructed homes currently financed by Sterling. Under the program, qualified homebuyers may select between a rate as low as 3.875% on a 30-year conventional mortgage or a 3% contribution, up to $20,000, from Sterling that can be used for closing costs or rate buy-downs on FHA, VA or conventional loans. For the quarter, Sterling closed 52 loans with aggregate sales of $18 million, or an average selling price of approximately $353,000 per loan under this program. Sterling anticipates continued success with this program during the second quarter of 2009. �Our homebuyer incentive program is an exciting new approach that our construction credit team is using to resolve problem assets and stem future growth of non-performing assets," commented Mr. Gilkey.

Non-performing commercial real estate assets, which includes multifamily, increased to $25.3 million from $12.5 million over the linked quarter. During the quarter, some of Sterling's commercial real estate credits, especially in the northern California market, experienced a slowdown in lease-ups, which affected the borrowers� cash flows and ability to meet debt service requirements.

In Sterling's other loan categories such as residential mortgage, commercial banking and consumer, the year-over-year change in non-performing assets generally reflects the slowdown in the economy.

At March 31, 2009, the allowance for credit losses totaled $230.3 million, or 2.59% of total loans, compared with $229.7 million, or 2.55% of total loans at December 31, 2008, and $151.3 million, or 1.63% of total loans at March 31, 2008. During the quarter, Sterling recognized total net charge-offs of $65.2 million, the majority of which is related to non-performing construction loans. The year-to-date ratio of net charge-offs to average loans was 0.70%, compared with 2.37% last quarter, and 0.03% in the comparable period last year. Management believes the allowance is adequate given its current analysis of the loan portfolio and the relative mix and risk of loan products. Sterling will continue to evaluate the level of allowance relative to credit conditions in each of its markets. "The resolution process is beginning to lead to a slowing in the growth of classified assets as well as some recoveries from the disposition of OREO. We anticipate continued progress in upcoming quarters. Still, it will take several more quarters for our credit administration team to fix, repair and manage problem assets," said Mr. Gilkey.

The accompanying table shows an analysis of Sterling's non-performing assets by loan category and geographic region for the current, prior and year-ago quarters.

� � � � � � NON-PERFORMING ASSET ANALYSIS ($ in thousands) 3/31/2009 12/31/2008 3/31/2008 Amt � % of Gross NPAs � Amt � % of Gross NPAs � Amt � % of Gross NPAs Residential construction (by location) Portland, OR $ 118,524 18 % $ 117,350 19 % $ 7,567 3 % Puget Sound 83,711 12 % 73,878 12 % 23,356 10 % S. California 64,818 10 % 67,824 11 % 28,032 13 % Boise, ID 37,921 6 % 23,356 4 % 37,338 17 % Utah 26,823 4 % 29,586 5 % 15,372 7 % Bend, OR 26,114 4 % 22,136 4 % 20,927 9 % Vancouver, WA 23,945 4 % 14,486 2 % 19,943 9 % Other � 71,527 � � 11 % � 61,722 � � 10 % � 15,894 � � 8 %

Total residential construction

453,383 68 % 410,338 67 % 168,429 76 % � Commercial construction (a) 78,888 12 % 74,501 12 % 9,847 4 % � Commercial banking 56,118 8 % 61,520 10 % 31,481 14 % � Residential real estate 50,420 8 % 46,043 8 % 3,900 2 % � Commercial real estate (a) 25,276 4 % 12,510 2 % 6,582 3 % � Consumer � 5,866 � � 1 % � 5,753 � � 1 %

�

� 2,845 � � 1 % Total gross NPAs (b) $ 669,951 100 % $ 610,665 100 % $ 223,084 100 % � Specific reserves � (16,970 ) � (19,535 ) � (19,084 ) � Total net NPAs (b) $ 652,981 � $ 591,130 � $ 204,000 � � (a) Includes multifamily. � (b) Includes confirmed loss amounts of $185.0 million for 3/31/09, $163.9 million for 12/31/08, and $0.0 million for 3/31/08.

Balance Sheet and Capital Management

At March 31, 2009, Sterling's total assets were $12.82 billion, compared with total assets of $12.79 billion at December 31, 2008, and $12.69 billion at March 31, 2008. The total value of Sterling's cash equivalents and investment-grade securities was $3.08 billion at March 31, 2009, up from $2.96 billion at December 31, 2008, and $2.50 billion at March 31, 2008. As of March 31, 2009, Sterling had additional borrowing capacity of $3.1 billion through the Federal Home Loan Bank of Seattle, reverse repurchase agreements, and primary-credit and term-auction facilities from the Federal Reserve Bank. Sterling's total deposits rose to a record $8.49 billion, representing an 8% increase over the first quarter of last year and a 7% increase annualized over the linked quarter. "Sterling has experienced both growth of deposits and a favorable shift in the mix of its deposit base. Sterling also is participating in the FDIC's voluntary expanded insurance program, which provides, without charge to depositors, full guarantee on non-interest bearing transaction accounts held by any depositor, regardless of dollar amount," stated Mr. Gilkey.

At March 31, 2009, Sterling's tangible book value per share was $10.99, down from $11.41 at the end of the fourth quarter of 2008, and down from $13.68 at the end of the first quarter of 2008. Both the year-over-year and linked-quarter decreases in tangible book value primarily reflect the net loss resulting from a higher provision for credit losses.

Sterling's ratio of tangible shareholders' equity to tangible assets was 6.91% at the end of the first quarter of 2009, compared with 7.07% at the end of the fourth quarter of 2008, and 5.81% at the end of the first quarter of 2008. Risk-based capital ratios continue to exceed the "well-capitalized" requirements. At March 31, 2009, Sterling's total risk-based capital ratio was 13.0%, and above the regulatory minimum "well-capitalized" requirement of 10.0%.

First-Quarter 2009 Earnings Conference Call

Sterling will host a conference call for investors the morning of April 24, 2009, at 8:00 a.m. PDT to discuss the company's financial results. A live audio webcast of the conference call can be accessed at the company's website, www.sterlingfinancialcorporation-spokane.com. To access this audio presentation call, click on the audio webcast icon. Additionally, investors may listen to the live conference call by telephone. To participate in the conference call, domestic callers should dial 517-308-9194 approximately five minutes before the scheduled start time. You will be asked by the operator to identify yourself and provide the password "STERLING" to enter the call. A webcast replay of the conference call will be available on the company's website approximately one hour following the completion of the call. The webcast replay will be offered through June 15, 2009.

About Sterling Financial Corporation

Sterling Financial Corporation of Spokane, Washington, is the bank holding company for Sterling Savings Bank, a commercial bank, and Golf Savings Bank, a savings bank focused on single-family mortgage originations. Both banks are state chartered and federally insured. Sterling offers banking products and services, mortgage lending, construction financing and investment products to individuals, small businesses, commercial organizations and corporations. As of March 31, 2009, Sterling Financial Corporation had assets of $12.82 billion and operated more than 175 depository branches throughout Washington, Oregon, Idaho, Montana and California. Visit Sterling's website at www.sterlingfinancialcorporation-spokane.com.

Forward-Looking Statements

This release contains forward-looking statements, which are not historical facts and pertain to Sterling's future operating results. These forward-looking statements are within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may include, but are not limited to, statements about Sterling's plans, objectives, expectations and intentions and other statements contained in this release that are not historical facts. When used in this release, the words "expects," "'anticipates,'' ''intends,'' ''plans,'' ''believes,'' ''seeks,'' ''estimates'' and similar expressions are generally intended to identify forward-looking statements. These forward-looking statements are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond Sterling's control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ materially from the results discussed in these forward-looking statements because of numerous possible risks and uncertainties. These include but are not limited to: the possibility of continued adverse economic developments that may, among other things, increase default and delinquency risks in Sterling's loan portfolios; shifts in interest rates that may result in lower interest rate margins; shifts in the demand for Sterling's loan and other products; lower-than-expected revenue or cost savings in connection with acquisitions; changes in accounting policies; changes in the monetary and fiscal policies of the federal government; and changes in laws, regulations and the competitive environment.

� Sterling Financial Corporation CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts, unaudited) � Mar 31, � Dec 31, � Mar 31, 2009 2008 2008 ASSETS: Cash and due from banks $ 167,937 $ 140,295 $ 181,333

Investments and mortgage-backed securities ("MBS") available for sale

2,733,541 2,639,290 2,143,950 Investments held to maturity 174,790 175,830 172,874 Loans receivable, net 8,683,919 8,807,094 9,119,942 Loans held for sale (at fair value: $160,261, $112,191 and $67,048) 162,148 112,777 110,481 Other real estate owned, net ("OREO") 83,557 62,320 13,027 Office properties and equipment, net 93,322 93,195 92,218 Bank owned life insurance ("BOLI") 158,944 157,236 152,794 Goodwill, net 227,558 227,558 451,249 Other intangible assets, net 25,501 26,725 30,401 Prepaid expenses and other assets, net � 308,410 � � 348,396 � � 222,884 � Total assets $ 12,819,627 � $ 12,790,716 � $ 12,691,153 � � LIABILITIES: Deposits $ 8,488,034 $ 8,350,407 $ 7,840,784 Advances from Federal Home Loan Bank 1,573,618 1,726,549 1,915,789 Repurchase agreements and fed funds 1,222,162 1,163,023 1,333,505 Other borrowings 248,277 248,276 248,273 Accrued expenses and other liabilities � 165,904 � � 161,425 � � 161,416 � Total liabilities � 11,697,995 � � 11,649,680 � � 11,499,767 � � SHAREHOLDERS' EQUITY: Preferred stock 292,524 291,964 0 Common stock 52,400 52,134 51,863 Additional paid-in capital 909,586 909,386 894,679 Accumulated comprehensive loss: Unrealized loss on investments and MBS (1) (13,504 ) (17,866 ) (10,591 ) Retained earnings � (119,374 ) � (94,582 ) � 255,435 � Total shareholders' equity � 1,121,632 � � 1,141,036 � � 1,191,386 � Total liabilities and shareholders' equity $ 12,819,627 � $ 12,790,716 � $ 12,691,153 � Book value per common share $ 15.82 $ 16.29 $ 22.97 Tangible book value per common share (2) $ 10.99 $ 11.41 $ 13.68 Common shares outstanding at end of period 52,399,631 52,134,030 51,863,067 Shareholders' equity to total assets 8.75 % 8.92 % 9.39 % Tangible shareholders' equity to tangible assets (3) 6.91 % 7.07 % 5.81 % Tangible common shareholders' equity to tangible assets (4) 4.58 % 4.74 % 5.81 % � (1) Net of deferred income taxes. � (2) Common equity less goodwill and other intangible assets divided by common shares outstanding. � (3) Shareholders' equity less goodwill and other intangible assets divided by assets less goodwill and other intangible assets. � (4) Excludes preferred equity from tangible shareholders' equity to tangible assets ratio. � Sterling Financial Corporation CONSOLIDATED STATEMENTS OF INCOME (LOSS) (in thousands, except per share amounts, unaudited) �

Three Months Ended

Mar 31, � Dec 31, � Mar 31, 2009 2008 2008 INTEREST INCOME: Loans $ 126,238 $ 137,216 $ 162,120 Mortgage-backed securities 29,880 27,559 24,499 Investments and cash � 3,328 � � 4,335 � � 2,364 � Total interest income � 159,446 � � 169,110 � � 188,983 � � INTEREST EXPENSE: Deposits 48,314 56,928 62,870 Borrowings � 23,469 � � 28,844 � � 34,026 � Total interest expense � 71,783 � � 85,772 � � 96,896 � Net interest income 87,663 83,338 92,087 Provision for credit losses � (65,865 ) � (228,517 ) � (37,143 ) Net interest income after provision � 21,798 � � (145,179 ) � 54,944 � � NONINTEREST INCOME: Fees and service charges 13,840 14,377 14,151 Mortgage banking operations 13,308 6,792 6,198 Loan servicing fees 218 (855 ) (148 ) OREO (4,478 ) (19,545 ) (106 ) BOLI 1,406 711 1,466 Other � 8,539 � � 949 � � (399 ) Total noninterest income � 32,833 � � 2,429 � � 21,162 � � NONINTEREST EXPENSES: Employee compensation and benefits 40,188 37,259 40,890 Occupancy and equipment 11,242 11,070 11,532 Amortization of core deposit intangibles 1,225 1,224 1,226 Other � 22,855 � � 20,103 � � 18,459 � Noninterest expenses before impairment charge 75,510 69,656 72,107 Goodwill impairment � 0 � � 223,765 � � 0 � Total noninterest expenses � 75,510 � � 293,421 � � 72,107 � Income (loss) before income taxes (20,879 ) (436,171 ) 3,999 Income tax benefit (provision) � 436 � � 81,088 � � (1,123 ) Net income (loss) (20,443 ) (355,083 ) 2,876 Preferred stock dividend � (4,347 ) � (1,208 ) � 0 � Net income (loss) applicable to common shareholders $ (24,790 ) $ (356,291 ) $ 2,876 � Earnings per common share - basic $ (0.48 ) $ (6.87 ) $ 0.06 Earnings per common share - diluted $ (0.48 ) $ (6.87 ) $ 0.06 Core earnings (1) $ (24,790 ) $ (132,526 ) $ 2,876 Core earnings per common share - basic (1) $ (0.48 ) $ (2.56 ) $ 0.06 Core earnings per common share - diluted (1) $ (0.48 ) $ (2.56 ) $ 0.06 Average common shares outstanding - basic 51,896,149 51,848,814 51,526,332 Average common shares outstanding - diluted 51,896,149 51,848,814 51,786,038 � (1) See Exhibit A. � Sterling Financial Corporation OTHER SELECTED FINANCIAL DATA (in thousands, unaudited) � Three Months Ended Mar 31, � Dec 31, � Mar 31, 2009 2008 2008 LOAN ORIGINATIONS: Residential real estate $ 710,564 $ 341,043 $ 411,116 Multifamily real estate 36,774 39,026 41,386 Commercial real estate 19,168 74,989 64,517 Construction: Residential 7,244 33,984 192,361 Multifamily 0 13,050 0 Commercial � 11,035 � � 35,350 � � 71,920 � Total construction 18,279 82,384 264,281 Consumer - direct 48,547 48,815 81,603 Consumer - indirect 30,753 30,935 71,681 Commercial banking � 106,437 � � 102,672 � � 148,685 � Total loan origination volume $ 970,522 � $ 719,864 � $ 1,083,269 � � PERFORMANCE RATIOS: Return on assets -0.65 % -11.04 % 0.09 % Return on assets, core (1) -0.65 % -4.08 % 0.09 % Return on common equity -11.9 % -128.0 % 1.0 % Return on common equity, core (1) -11.9 % -47.6 % 1.0 % Return on common tangible equity (2) -17.0 % -224.7 % 1.6 % Return on common tangible equity, core (1)(2) -17.0 % -83.6 % 1.6 % Operating efficiency 62.7 % 342.1 % 63.7 % Operating efficiency, core (1) 62.7 % 81.2 % 63.7 % Non interest expense to assets 2.40 % 9.12 % 2.33 % Non interest expense to assets, core (1) 2.40 % 2.17 % 2.33 % Average assets $ 12,769,750 $ 12,794,718 $ 12,444,665 Average common equity $ 846,417 $ 1,107,158 $ 1,192,461 Average common tangible equity (2) $ 592,601 $ 630,831 $ 709,139 � REGULATORY CAPITAL RATIOS: Sterling Financial Corporation: Tier 1 leverage (to average assets) 9.1 % 9.2 % 8.1 % Tier 1 (to risk-weighted assets) 11.7 % 11.7 % 9.7 % Total (to risk-weighted assets) 13.0 % 13.0 % 11.0 % Sterling Savings Bank: Tier 1 leverage (to average assets) 8.5 % 8.3 % 8.1 % Tier 1 (to risk-weighted assets) 10.8 % 10.6 % 9.6 % Total (to risk-weighted assets) 12.1 % 11.8 % 10.9 % � OTHER: Sales of financial products $ 28,899 $ 36,879 $ 49,725 FTE employees at end of period (whole numbers) 2,518 2,481 2,557 � (1) See Exhibit A. � (2) Average common tangible equity is average common equity less average net goodwill and other intangible assets. � Sterling Financial Corporation OTHER SELECTED FINANCIAL DATA (in thousands, unaudited) � Mar 31, � Dec 31, � Mar 31, 2009 2008 2008 LOAN PORTFOLIO DETAIL: Residential real estate $ 894,886 $ 867,384 $ 761,887 Multifamily real estate 508,799 477,615 407,673 Commercial real estate 1,386,631 1,364,885 1,247,472 Construction: Residential 1,326,239 1,455,860 1,937,713 Multifamily 290,636 324,818 288,629 Commercial � 740,014 � � 754,017 � � 786,412 � Total construction 2,356,889 2,534,695 3,012,754 Consumer - direct 842,001 859,222 800,048 Consumer - indirect 378,075 389,298 402,520 Commercial banking � 2,534,836 � � 2,532,158 � � 2,647,969 � Gross loans receivable 8,902,117 9,025,257 9,280,323 Deferred loan fees, net (9,213 ) (9,798 ) (15,372 ) Allowance for losses on loans � (208,985 ) � (208,365 ) � (145,009 ) Net loans receivable $ 8,683,919 � $ 8,807,094 � $ 9,119,942 � � Sterling Financial Corporation OTHER SELECTED FINANCIAL DATA (in thousands, unaudited) � Mar 31, � Dec 31, � Mar 31, 2009 2008 2008 ALLOWANCE FOR CREDIT LOSSES: Allowance - loans, beginning of quarter $ 208,365 $ 177,307 $ 111,026 Provision 65,865 228,517 37,143 Net charge-offs (65,245 ) (182,459 ) (3,222 ) Transfers � 0 � � (15,000 ) � 62 � Allowance - loans, end of quarter � 208,985 � � 208,365 � � 145,009 � Allowance - unfunded commitments, beginning of quarter 21,334 6,365 6,306 Provision 0 9 21 Charge-offs 0 (40 ) 0 Transfers � 0 � � 15,000 � � (62 ) Allowance - unfunded commitments, end of quarter � 21,334 � � 21,334 � � 6,265 � Total credit allowance $ 230,319 � $ 229,699 � $ 151,274 � Net charge-offs to average net loans (annualized) 2.84 % 7.80 % 0.14 % Net charge-offs to average net loans (ytd) 0.70 % 2.37 % 0.03 % Loan loss allowance to total loans 2.35 % 2.31 % 1.57 % Total credit allowance to total loans 2.59 % 2.55 % 1.63 % Loan loss allowance to nonperforming loans 36.7 % 39.3 % 69.0 %

Loan loss allowance to nonperforming loans excluding nonaccrual loans carried at fair value

86.4 % 86.5 % 69.0 % Total allowance to nonperforming loans 40.4 % 43.3 % 72.0 % � NONPERFORMING ASSETS: Past 90 days due $ 0 $ 0 $ 0 Nonaccrual loans 485,158 474,172 209,850 Restructured loans � 84,281 � � 56,618 � � 207 � Total nonperforming loans 569,439 530,790 210,057 OREO � 100,512 � � 79,875 � � 13,027 � Total nonperforming assets (NPA) 669,951 610,665 223,084 Specific reserve on nonperforming assets � (16,970 ) � (19,535 ) � (19,084 ) Net nonperforming assets $ 652,981 � $ 591,130 � $ 204,000 � Nonperforming loans to loans 6.40 % 5.89 % 2.26 % NPA to total assets 5.23 % 4.77 % 1.76 % Loan delinquency ratio (60 days and over) 5.24 % 4.86 % 2.38 % Classified assets $ 1,070,383 $ 984,875 $ 402,793 Classified assets/total assets 8.35 % 7.70 % 3.17 % � Nonperforming assets by collateral type: Residential real estate $ 50,420 $ 46,043 $ 3,900 Multifamily real estate 6,020 4,757 2,026 Commercial real estate 19,256 7,753 4,556 Construction: Residential 453,383 410,338 168,429 Multifamily 800 3,894 0 Commercial � 78,088 � � 70,607 � � 9,847 � Total Construction 532,271 484,839 178,276 Consumer - direct 5,302 5,053 2,037 Consumer - indirect 564 700 808 Commercial banking � 56,118 � � 61,520 � � 31,481 � Total nonperforming assets $ 669,951 � $ 610,665 � $ 223,084 � � DEPOSITS DETAIL: Interest-bearing transaction accounts $ 847,064 $ 449,060 $ 462,768 Noninterest-bearing transaction accounts 935,659 897,198 887,129 Savings and money market demand accounts 1,767,136 2,113,425 2,226,090 Time deposits � 4,938,175 � � 4,890,724 � � 4,264,797 � Total deposits $ 8,488,034 � $ 8,350,407 � $ 7,840,784 � Number of transaction accounts (whole numbers): Interest-bearing transaction accounts 44,425 45,083 47,140 Noninterest-bearing transaction accounts � 156,738 � � 154,038 � � 150,210 � Total transaction accounts � 201,163 � � 199,121 � � 197,350 � � Sterling Financial Corporation AVERAGE BALANCE AND RATE (in thousands, unaudited) � Three Months Ended March 31, 2009 � December 31, 2008 � March 31, 2008 Average Balance � Amount � Average Rate � Average Balance � Amount � Average Rate � Average Balance � Amount � Average Rate ASSETS: � � � Loans: Mortgage $ 5,533,645 $ 71,673 5.25 % $ 5,476,617 $ 79,623 5.78 % $ 5,436,297 $ 95,381 7.06 % Commercial and consumer � 3,787,020 � 54,696 5.86 % � 3,829,468 � 57,728 6.00 % � 3,833,230 � 66,881 7.02 % Total loans 9,320,665 126,369 5.50 % 9,306,085 137,351 5.87 % 9,269,527 162,262 7.04 % MBS 2,385,219 29,880 5.08 % 2,157,600 27,559 5.08 % 1,976,815 24,499 4.98 % Investments and cash � 432,956 � 4,368 4.09 % � 529,845 � 5,304 3.98 % � 306,443 � 3,193 4.19 % Total interest-earning assets 12,138,840 � 160,617 5.37 % 11,993,530 � 170,214 5.65 % 11,552,785 � 189,954 6.61 % Noninterest-earning assets � 630,910 � 801,188 � 891,880 Total average assets $ 12,769,750 $ 12,794,718 $ 12,444,665 � LIABILITIES and EQUITY: Deposits: Transaction $ 1,479,222 292 0.08 % $ 1,327,354 272 0.08 % $ 1,304,317 419 0.13 % Savings 1,953,228 5,555 1.15 % 2,099,436 10,207 1.93 % 2,236,228 13,780 2.48 % Time deposits � 4,922,202 � 42,467 3.50 % � 4,959,533 � 46,449 3.73 % � 4,169,033 � 48,671 4.70 % Total deposits 8,354,652 48,314 2.35 % 8,386,323 56,928 2.70 % 7,709,578 62,870 3.28 % Borrowings � 3,082,453 � 23,469 3.09 % � 3,145,202 � 28,844 3.65 % � 3,357,477 � 34,026 4.08 % Total interest-bearing liabilities 11,437,105 � 71,783 2.55 % 11,531,525 � 85,772 2.96 % 11,067,055 � 96,896 3.52 % Noninterest-bearing liabilities � 194,070 � 70,395 � 185,149 Total average liabilities 11,631,175 11,601,920 11,252,204 Total average equity � 1,138,575 � 1,192,798 � 1,192,461 Total average liabilities and equity $ 12,769,750 $ 12,794,718 $ 12,444,665 Tax equivalent net interest income and spread $ 88,834 2.82 % $ 84,442 2.69 % $ 93,058 3.09 % Tax equivalent net interest margin 2.97 % 2.80 % 3.24 % � � � Sterling Financial Corporation EXHIBIT A- RECONCILIATION SCHEDULE � � � � � � (in thousands, unaudited) Three Months Ended Mar 31, Dec 31, Mar 31, 2009 2008 2008 CORE EARNINGS: (1) Net income available to common shareholders $ (24,790 ) $ (356,291 ) $ 2,876 Goodwill impairment, net of tax � 0 � � 223,765 � � 0 � Core earnings $ (24,790 ) $ (132,526 ) $ 2,876 � � EARNINGS PER COMMON SHARE - BASIC, CORE: (1) Earnings per common share - basic $ (0.48 ) $ (6.87 ) $ 0.06 Goodwill impairment, net of tax � 0.00 � � 4.31 � � 0.00 � Core earnings per common share - basic $ (0.48 ) $ (2.56 ) $ 0.06 � � EARNINGS PER COMMON SHARE - DILUTED, CORE: (1) Earnings per common share - diluted $ (0.48 ) $ (6.87 ) $ 0.06 Goodwill impairment, net of tax � 0.00 � � 4.31 � � 0.00 � Core earnings per common share - diluted $ (0.48 ) $ (2.56 ) $ 0.06 � � RETURN ON ASSETS, CORE: (1) Return on assets -0.65 % -11.04 % 0.09 % Goodwill impairment, net of tax � 0.00 % � 6.96 % � 0.00 % Core return on assets � -0.65 % � -4.08 % � 0.09 % � RETURN ON COMMON EQUITY, CORE: (1) Return on common equity -11.9 % -128.0 % 1.0 % Goodwill impairment, net of tax � 0.0 % � 80.4 % � 0.0 % Core return on common equity � -11.9 % � -47.6 % � 1.0 % � RETURN ON COMMON TANGIBLE EQUITY, CORE: (1) Return on common tangible equity -17.0 % -224.7 % 1.6 % Goodwill impairment, net of tax � 0.0 % � 141.1 % � 0.0 % Core return on common tangible equity � -17.0 % � -83.6 % � 1.6 % � OPERATING EFFICIENCY RATIO, CORE: (1) Operating efficiency 62.7 % 342.1 % 63.7 % Goodwill impairment, net of tax � 0.0 % � (260.9 %) � 0.0 % Core operating efficiency � 62.7 % � 81.2 % � 63.7 % � NON INTEREST EXPENSE TO ASSETS, CORE: (1) Non interest expense to assets 2.40 % 9.12 % 2.33 % Goodwill impairment, net of tax � 0.00 % � (6.95 %) � 0.00 % Core non interest expense to assets � 2.40 % � 2.17 % � 2.33 % � (1) Core earnings excludes the 2008 charge related to the impairment of goodwill. Core earnings is a non-GAAP financial measure. Management believes that this presentation of non-GAAP information regarding core earnings provides useful information to investors regarding the registrant's financial condition and results of operations as core earnings are widely used for comparison purposes in the financial services industry.