Sterling Financial Corporation of Spokane, Wash., Reports Third Quarter 2013 Earnings and Declares Quarterly Cash Dividend

  Sterling Financial Corporation of Spokane, Wash., Reports Third Quarter 2013
  Earnings and Declares Quarterly Cash Dividend

Business Wire

SPOKANE, Wash. -- October 24, 2013

Sterling Financial Corporation (NASDAQ:STSA) ("Sterling") today announced its
operating results for the quarter ended September30, 2013. Sterling recorded
net income of $21.0 million, or $0.33 per diluted common share, compared to
$27.8 million, or $0.44 per diluted common share, for the quarter ended
June30, 2013, and $30.6 million, or $0.49 per diluted common share, for the
quarter ended September30, 2012.

Following are selected financial highlights for the third quarter of 2013:

  *Gross loans expanded by 9 percent (annualized).
  *Deposits expanded by 14 percent (annualized).
  *Loan delinquency ratio (60 days and over) was 0.73 percent, down from 0.92
    percent for the prior quarter.
  *A special dividend of $0.35 per share was paid on July 12, 2013, and a
    quarterly cash dividend of $0.20 per share was paid on August 20, 2013.
  *Sterling announced that it will merge with Umpqua Holdings Corporation,
    creating the largest community bank on the West Coast.

"Our third quarter operating results reflect a substantial reduction in
mortgage banking activity and elevated merger-related expenses," said Greg
Seibly, Sterling's president and chief executive officer. "With the exception
of these two items, our core banking performance was solid. We continued to
expand loans, reduce funding costs and improve asset quality metrics."

Operating Results

Net Interest Income

Sterling reported net interest income of $82.5 million for the quarter ended
September30, 2013, compared to $80.4 million for the prior quarter and $75.3
million for the quarter ended September30, 2012. The net interest margin (tax
equivalent) for the third quarter of 2013 was 3.59 percent, a decrease of 11
basis points from the prior quarter, and an increase of 16 basis points from
the third quarter of 2012. The decrease in net interest margin from the prior
quarter was a result of lower yields on loans.

                             Three Months Ended
                                September 30,   June 30,     September 30,
                                2013              2013           2012
                                (in thousands)
Net interest income             $  82,548         $ 80,414       $  75,308
Net interest margin (tax        3.59       %      3.70     %     3.43       %
equivalent)
Loan yield                      4.63       %      4.76     %     5.15       %
                                                                 
Funding costs:
Cost of deposits                0.35       %      0.37     %     0.53       %
Total funding liabilities       0.64       %      0.67     %     1.01       %
                                                                            

Total interest income was $96.4 million for the third quarter of 2013,
compared to $94.0 million for the prior quarter, and $96.0 million for the
same period a year ago. The $2.4 million increase in interest income over the
prior quarter was primarily due to higher average loan balances, which were up
$307.8 million, or 4 percent. The yield on loans was 4.63 percent for the
third quarter of 2013, compared to 4.76 percent for the prior quarter, and
5.15 percent for the third quarter of 2012.

For the third quarter of 2013, income from mortgage-backed securities ("MBS")
was up $746,000, or 10 percent, from the prior quarter, and down $2.3 million,
or 22 percent, from the third quarter of 2012. The year-over-year decline was
primarily due to lower average MBS balances.

Total interest expense was $13.9 million for the third quarter of 2013,
compared to $13.6 million for the prior quarter, and $20.7 million for the
third quarter of 2012. The decrease from the same period a year ago reflected
balance sheet repositioning activity undertaken during the fourth quarter of
2012. Additionally, deposit interest expense was down $2.9 million, or 33
percent, from the same period a year ago, reflecting the improved deposit mix
and lower overall deposit costs, which were down 18 basis points.

Noninterest Income

Noninterest income includes fees and service charges income, income from
mortgage banking operations, and other items such as gains on other loan
sales, BOLI income, net gains on branch divestitures, and gains on sales of
securities. During the third quarter of 2013, noninterest income was $31.9
million, compared to $42.0 million for the prior quarter and $46.7 million for
the third quarter of 2012.

Income from mortgage banking operations for the third quarter of 2013 was
$13.5 million, compared to $23.2 million for the prior quarter and $26.4
million for the third quarter of 2012. The decrease from the prior period is
attributable to lower residential mortgage banking activity, reflecting a 50
percent reduction in mortgage refinance originations.

                            Three Months Ended
                               September 30,   June 30,      September 30,
                               2013              2013            2012
                               (in thousands)
Residential loan sales         $  672,604        $ 791,942       $  728,642
Change in warehouse and        (198,389    )     7,419          36,018      
interest rate locks
Total mortgage banking         $  474,215       $ 799,361      $  764,660  
loan activity
                                                                 
Margin on residential          2.31        %     2.35      %     3.68        %
loan sales
                                                                             

Included in income from mortgage banking operations for the third quarter was
a $491,000 reversal of the valuation allowance on mortgage servicing rights. A
reversal of the valuation allowance on mortgage servicing rights of $2.8
million was recorded in the prior quarter and a write-down of $2.1 million was
recorded in the third quarter of 2012.

For the quarter ended September30, 2013, fees and service charges income
contributed $15.4 million to noninterest income, compared to $15.6 million for
the prior quarter and $14.7 million for the third quarter of 2012. For the
third quarter of 2013, gains on other loan sales were $1.1 million, compared
to $1.2 million for the prior quarter, and $476,000 for the same period a year
ago.

For the third quarter of 2013 and the prior quarter, Sterling recognized no
gains or losses on the sale of securities, compared to a gain of $3.1 million
for the third quarter of 2012.

Noninterest Expense

Noninterest expense was $85.3 million for the third quarter of 2013, compared
to $81.7 million for the prior quarter and $89.4 million for the third quarter
of 2012. Compared to the prior quarter, employee compensation and benefits
increased by $1.3 million, primarily due to acquisition-related activity and
new employees added in Southern California.

Other noninterest expense included merger and acquisition expenses of $3.9
million for the third quarter of 2013, compared to $2.3 million for the prior
quarter and $1.6 million for the third quarter of 2012.

Income Taxes

During the quarter ended September30, 2013, Sterling recognized income tax
expense of $8.1 million, representing an effective tax rate of 28 percent. The
effective tax rate for the nine months ended September30, 2013 was 30
percent. As of September30, 2013, the net deferred tax asset was $282.6
million, including $245.3 million of net operating loss and tax credit
carryforwards.

Balance Sheet

At September30, 2013, total loan balances were $7.15 billion, compared to
$7.00 billion at the end of the prior quarter, and $6.14 billion at
September30, 2012. During the third quarter of 2013, Sterling originated
$587.8 million of new portfolio loans (which exclude residential loans held
for sale), compared to $686.9 million for the prior quarter and $457.1 million
for the third quarter of 2012. For the third quarter of 2013, multifamily loan
originations remained strong and represented 29 percent of portfolio loan
originations; commercial banking loan originations, which include C&I and
owner occupied CRE, represented 25 percent of portfolio loan originations; and
residential and consumer loan originations represented 24 percent and 19
percent of portfolio loan originations, respectively.

Investments and mortgage-backed securities available for sale were $1.50
billion at September30, 2013, compared to $1.54 billion at the end of the
prior quarter, and $2.05 billion at September30, 2012. The decrease from a
year ago reflects the sale of securities to fund a $400 million reduction in
repurchase agreements.

At September30, 2013, total deposits were $6.85 billion, compared to $6.63
billion at the end of the prior quarter, and $6.74 billion at September30,
2012. The deposit composition is set forth in the following table:

               September 30,   June 30,        September 30,   Annual
                                                                        %
                  2013              2013              2012              Change
                  (in thousands)
Deposits:
Retail:
Transaction       $ 2,568,893       $ 2,454,910       $ 2,403,518       7   %
Savings and       2,311,030         2,282,055         2,191,517         5   %
MMDA
Time              1,316,745        1,414,239        1,717,720        (23 )%
deposits
Total             6,196,668         6,151,204         6,312,755         (2  )%
retail
Public            260,480           174,425           202,187           29  %
Brokered          397,294          302,830          224,968          77  %
Total             $ 6,854,442      $ 6,628,459      $ 6,739,910      2   %
deposits
Gross loans       104         %     106         %     91          %
to deposits
                                                                        

At September30, 2013, advances from the Federal Home Loan Bank were $1.03
billion, compared to $1.20 billion at the end of the prior quarter, and $155.4
million at September30, 2012. The increase over a year ago was due to the
funding of acquisitions, loan growth, and deposit outflow associated with
branch divestitures and runoff of high-rate CDs.

Credit Quality

During the third quarter of 2013, Sterling recognized net charge-offs of $1.2
million, compared to $5.1 million for the prior quarter and $6.0 million for
the same period a year ago. Sterling did not record a provision for credit
losses for the third quarter of 2013 or the prior quarter, compared to a
provision of $2.0 million for the third quarter of 2012. The allowance for
loan losses at September30, 2013 was $138.7 million, or 1.94 percent of total
loans, compared to $141.9 million, or 2.02 percent of total loans, at June30,
2013, and $154.3 million, or 2.51 percent of total loans, at September30,
2012.

At September30, 2013, nonperforming assets were $135.4 million, or 1.36
percent of total assets, compared to $169.2 million, or 1.70 percent of total
assets, at June30, 2013, and $259.0 million, or 2.73 percent of total assets,
at September30, 2012. At September30, 2013, the 60-day loan delinquency
ratio was 0.73 percent, compared to 0.92 percent at June30, 2013, and 1.96
percent at September30, 2012.

Merger and Acquisition Update

On October 1, 2013, Sterling completed the acquisition of Newport Beach,
Calif.-based Commerce National Bank. At closing, Commerce National Bank had
assets of $249.6 million, gross loans of $164.8 million, and deposits of
$189.4 million. Total cash consideration for the transaction was $42.9
million.

On September 11, 2013, Sterling entered into a definitive agreement to merge
with Umpqua Holdings Corporation ("Umpqua"), headquartered in Portland,
Oregon. Upon completion of the merger, the company will operate under the
Umpqua Bank name and brand. The transaction is expected to be completed in the
first half of 2014, subject to shareholder and regulatory approval and other
customary closing conditions.

Cash Dividend Declaration

Sterling's board of directors has approved a quarterly cash dividend of $0.20
per common share, payable on November 19, 2013 to shareholders of record as of
November 5, 2013.

Third Quarter 2013 Earnings Conference Call

Sterling plans to host a conference call October 25, 2013 at 8:00 a.m. PDT to
discuss the company's financial results. An audio webcast of the conference
call can be accessed at Sterling's website
(www.sterlingfinancialcorporation.com). To access this audio presentation
call, click on the audio webcast icon. Additionally, the conference call may
be accessed by telephone. To participate in the conference call, domestic
callers should dial 212-287-1835 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 Sterling's website approximately one hour
following the conclusion of the call. The webcast replay will be offered
through November 26,2013.

                                                         
Sterling Financial
Corporation
CONSOLIDATED BALANCE
SHEETS
                                                       
(in thousands, except
per share amounts,           Sep 30, 2013      Jun 30, 2013      Sep 30, 2012
unaudited)
ASSETS:
Cash and due from            $ 349,679         $ 325,710         $ 263,884
banks
Investments and MBS          1,498,377         1,538,880         2,049,961
available for sale
Investments held to          175               185               1,716
maturity
Loans held for sale          245,783           307,511           320,823
Loans receivable, net        7,024,326         6,868,866         5,990,365
Other real estate            17,464            26,511            46,575
owned, net ("OREO")
Office properties and        100,370           98,483            92,987
equipment, net
Bank owned life              189,906           188,178           178,279
insurance ("BOLI")
Goodwill                     36,633            36,633            22,577
Other intangible             16,154            17,830            20,864
assets, net
Deferred tax asset,          282,561           290,377           280,373
net
Other assets                 222,908          240,409          204,033     
Total assets                 $ 9,984,336      $ 9,939,573      $ 9,472,437 
LIABILITIES:
Deposits                     $ 6,854,442       $ 6,628,459       $ 6,739,910
Advances from Federal        1,027,807         1,197,857         155,401
Home Loan Bank
Securities sold under        534,669           527,925           942,547
repurchase agreements
Other borrowings             245,298           245,297           245,293
Accrued expenses and         106,239          133,699          137,799     
other liabilities
Total liabilities            8,768,455        8,733,237        8,220,950   
SHAREHOLDERS' EQUITY:
Preferred stock              0                 0                 0
Common stock                 1,972,021         1,970,229         1,967,562
Accumulated other            29,919            30,751            75,263
comprehensive income
Accumulated deficit          (786,059    )     (794,644    )     (791,338    )
Total shareholders'          1,215,881        1,206,336        1,251,487   
equity
Total liabilities and        $ 9,984,336      $ 9,939,573      $ 9,472,437 
shareholders' equity
Book value per common        $ 19.51           $ 19.36           $ 20.14
share
Tangible book value          $ 18.66           $ 18.49           $ 19.44
per common share
Shareholders' equity         12.2        %     12.1        %     13.2        %
to total assets
Tangible common equity       11.7        %     11.7        %     12.8        %
to tangible assets (1)
Common shares
outstanding at end of        62,314,862        62,297,712        62,150,650
period
Common stock warrants        2,874,590         2,847,154         2,625,000
outstanding
                                                                             

(1) Common shareholders' equity less goodwill and other intangible assets,
divided by assets, less goodwill and other intangible assets.

                                                                        
Sterling Financial
Corporation
CONSOLIDATED
STATEMENTS OF INCOME
                                                                       
(in thousands,
except per share           Three Months Ended                                 Nine Months Ended
amounts, unaudited)
                           Sep 30, 2013   Jun 30, 2013   Sep 30, 2012     Sep 30, 2013   Sep 30, 2012
INTEREST INCOME:
Loans                      $  86,099        $  84,436        $  83,110        $  251,722       $  248,488
Mortgage-backed            8,079            7,333            10,361           22,709           38,632
securities
Investments and cash       2,266           2,248           2,520           6,787           7,826      
Total interest             96,444          94,017          95,991          281,218         294,946    
income
INTEREST EXPENSE:
Deposits                   6,041            6,038            8,981            18,386           30,004
Borrowings                 7,855           7,565           11,702          22,976          36,371     
Total interest             13,896          13,603          20,683          41,362          66,375     
expense
Net interest income        82,548           80,414           75,308           239,856          228,571
Provision for credit       0               0               2,000           0               10,000     
losses
Net interest income        82,548          80,414          73,308          239,856         218,571    
after provision
NONINTEREST INCOME:
Fees and service           15,380           15,618           14,675           45,128           41,546
charges
Mortgage banking           13,494           23,180           26,410           50,468           69,135
operations
BOLI                       1,640            1,424            1,660            4,621            7,175
Gains on sales of          0                0                3,129            0                12,592
securities
Other-than-temporary
impairment losses on       0                0                0                0                (6,819     )
securities
Charge on prepayment       0                0                0                0                (2,664     )
of debt
Gains on other loan        1,135            1,194            476              2,354            3,887
sales
Other                      241             587             348             8,888           (1,826     )
Total noninterest          31,890          42,003          46,698          111,459         123,026    
income
NONINTEREST EXPENSE:
Employee
compensation and           47,058           45,803           45,636           135,297          139,502
benefits
OREO                       1,877            2,549            4,008            6,456            9,337
Occupancy and              9,959            9,567            11,034           29,385           32,253
equipment
Depreciation               3,358            3,058            2,918            9,350            8,754
Amortization of
other intangible           1,676            1,711            1,792            5,046            4,988
assets
Other                      21,406          18,990          24,020          63,407          70,830     
Total noninterest          85,334          81,678          89,408          248,941         265,664    
expense
Income before income       29,104           40,739           30,598           102,374          75,933
taxes
Income tax                 (8,056     )     (12,978    )     0               (30,887    )     288,842    
(provision) benefit
Net income                 $  21,048       $  27,761       $  30,598       $  71,487       $  364,775 
Earnings per common        $  0.34          $  0.45          $  0.49          $  1.15          $  5.87
share - basic
Earnings per common        $  0.33          $  0.44          $  0.49          $  1.13          $  5.81
share - diluted
Dividends declared         $  0.20          $  0.55          $  0.15          $  0.75          $  0.15
per share
Average common
shares outstanding -       62,309,270       62,289,437       62,139,833       62,280,542       62,110,498
basic
Average common
shares outstanding -       63,461,018       63,107,913       62,845,864       63,271,060       62,745,177
diluted
                                                                                                          

                                                                    
Sterling
Financial
Corporation
OTHER
SELECTED
FINANCIAL
DATA
                                                                   
(in
thousands,          Three Months Ended                                    Nine Months Ended
unaudited)
                    Sep 30, 2013    Jun 30, 2013    Sep 30, 2012      Sep 30, 2013    Sep 30, 2012
LOAN
ORIGINATIONS
AND
PURCHASES:
Loan
originations:
Residential
real estate:
For sale            $ 535,039         $ 799,682         $ 842,197         $ 1,967,626       $ 1,997,491
Permanent           142,837         118,023         77,650           358,174          152,947     
Total
residential         677,876           917,705           919,847           2,325,800         2,150,438
real estate
Commercial
real estate
("CRE"):
Investor CRE        8,539             22,894            14,889            45,875            37,535
Multifamily         169,868           280,435           144,560           636,217           552,241
Construction        8,767            6,931            776              17,428           2,444       
Total
commercial          187,174           310,260           160,225           699,520           592,220
real estate
Commercial:
Owner               59,403            39,380            53,541            159,260           111,833
occupied CRE
Commercial &
Industrial          85,495           103,964          102,255          272,556          206,310     
("C&I")
Total               144,898           143,344           155,796           431,816           318,143
commercial
Consumer            112,887          115,225          63,435           297,339          199,881     
Total loan          1,122,835        1,486,534        1,299,303        3,754,475        3,260,682   
originations
Total
portfolio
loan
originations        587,796          686,852          457,106          1,786,849        1,263,191   
(excludes
residential
real estate
for sale)
Loan
purchases:
Residential         51                0                 1,646             228               76,408
real estate
Commercial
real estate:
Investor CRE        1,100             67                0                 3,016             0
Multifamily         199              64               292              484              683         
Total
commercial          1,299             131               292               3,500             683
real estate
Commercial:
Owner               0                 0                 0                 1,071             0
occupied CRE
C&I                 24,164           21,000           0                45,164           0           
Total               24,164            21,000            0                 46,235            0
commercial
Consumer            5,758            20,451           41,567           26,209           52,307      
Total loan          31,272           41,582           43,505           76,172           129,398     
purchases
Total loan
originations        $ 1,154,107      $ 1,528,116      $ 1,342,808      $ 3,830,647      $ 3,390,080 
and purchases
PERFORMANCE
RATIOS:
Return on           0.84        %     1.17        %     1.28        %     1.00        %     5.18        %
assets
Return on           6.9         %     9.0         %     9.8         %     7.8         %     45.5        %
common equity
Efficiency          70.8        %     63.1        %     69.7        %     68.7        %     71.5        %
ratio^(1)
Noninterest
expense to          3.42        %     3.45        %     3.74        %     3.49        %     3.78        %
assets
Average             $ 9,886,459       $ 9,498,070       $ 9,520,530       $ 9,528,053       $ 9,398,143
assets
Average             $ 1,206,814       $ 1,241,314       $ 1,237,205       $ 1,224,295       $ 1,070,993
common equity
                                                                                                        

(1) The efficiency ratio is noninterest expense, excluding OREO and
amortization of other intangible assets, divided by net interest income (tax
equivalent) plus noninterest income, excluding gains on sales of securities,
other-than-temporary impairment losses on securities, charge on prepayment of
debt, gain on branch divestitures and bargain purchase gain.

                                                         
Sterling Financial
Corporation
OTHER SELECTED
FINANCIAL DATA
                                                       
(in thousands,               Sep 30, 2013      Jun 30, 2013      Sep 30, 2012
unaudited)
INVESTMENT PORTFOLIO
DETAIL:
Available for sale:
MBS                          $ 1,305,456       $ 1,343,181       $ 1,825,448
Municipal bonds              192,749           195,530           205,405
Other                        172              169              19,108      
Total                        $ 1,498,377      $ 1,538,880      $ 2,049,961 
Held to maturity:
Tax credits                  $ 175            $ 185            $ 1,716     
Total                        $ 175            $ 185            $ 1,716     
LOAN PORTFOLIO DETAIL:
Residential real             $ 1,052,381       $ 964,872         $ 818,323
estate
Commercial real
estate:
Investor CRE                 1,125,477         1,172,433         1,274,774
Multifamily                  2,029,820         1,962,919         1,359,506
Construction                 52,929           69,796           99,553      
Total commercial real        3,208,226         3,205,148         2,733,833
estate
Commercial:
Owner occupied CRE           1,404,006         1,411,576         1,304,224
C&I                          681,666          636,727          517,588     
Total commercial             2,085,672         2,048,303         1,821,812
Consumer                     807,964          783,601          768,359     
Gross loans receivable       7,154,243         7,001,924         6,142,327
Deferred loan fees,          8,781             8,891             2,317
net
Allowance for loan           (138,698    )     (141,949    )     (154,279    )
losses
Net loans receivable         $ 7,024,326      $ 6,868,866      $ 5,990,365 
DEPOSITS DETAIL:
Noninterest bearing          $ 1,818,194       $ 1,702,022       $ 1,709,612
transaction
Interest bearing             750,699           752,888           693,906
transaction
Savings and MMDA             2,542,631         2,424,615         2,286,832
Time deposits                1,742,918        1,748,934        2,049,560   
Total deposits               $ 6,854,442      $ 6,628,459      $ 6,739,910 
Number of transaction
accounts (whole
numbers):
Noninterest bearing          180,027           180,477           194,997
transaction accounts
Interest bearing             46,113           46,677           49,678      
transaction accounts
Total transaction            226,140          227,154          244,675     
accounts
                                                                             

                                                          
Sterling Financial
Corporation
OTHER SELECTED FINANCIAL
DATA
                                                        
(in thousands, unaudited)       Sep 30, 2013     Jun 30, 2013     Sep 30, 2012
ALLOWANCE FOR CREDIT
LOSSES:
Allowance - loans,              $  141,949       $  149,673       $  158,244
beginning of quarter
Provision                       (2,100     )     (2,600     )     2,000
Charge-offs:
Residential real estate         (752       )     (1,107     )     (1,641     )
Commercial real estate:
Investor CRE                    (1,124     )     (1,970     )     (2,329     )
Multifamily                     (90        )     (51        )     (463       )
Construction                    (5         )     (615       )     (2,106     )
Total commercial real           (1,219     )     (2,636     )     (4,898     )
estate
Commercial:
Owner occupied CRE              (905       )     (2,237     )     (1,544     )
C&I                             (146       )     (275       )     (514       )
Total commercial                (1,051     )     (2,512     )     (2,058     )
Consumer                        (1,466     )     (1,503     )     (1,882     )
Total charge-offs               (4,488     )     (7,758     )     (10,479    )
Recoveries:
Residential real estate         309              342              137
Commercial real estate:
Investor CRE                    363              2                694
Multifamily                     15               0                347
Construction                    1,026           1,284           2,532      
Total commercial real           1,404            1,286            3,573
estate
Commercial:
Owner occupied CRE              577              295              236
C&I                             741             326             305        
Total commercial                1,318            621              541
Consumer                        306             385             263        
Total recoveries                3,337           2,634           4,514      
Net charge-offs                 (1,151     )     (5,124     )     (5,965     )
Allowance - loans, end of       138,698          141,949          154,279
quarter
Reserve for unfunded
commitments, beginning of       9,505            7,990            7,952
quarter
Provision                       2,100            2,600            0
Charge-offs                     (1,064     )     (1,085     )     (181       )
Reserve for unfunded
commitments, end of             10,541          9,505           7,771      
quarter
Total credit allowance          $  149,239      $  151,454      $  162,050 
Net charge-offs to
average loans                   0.06       %     0.29       %     0.37       %
(annualized)
Loan loss allowance to          1.94       %     2.02       %     2.51       %
loans
Total credit allowance to       2.08       %     2.16       %     2.64       %
loans
Loan loss allowance to          118        %     99         %     73         %
nonperforming loans
Total credit allowance to       127        %     106        %     76         %
nonperforming loans
                                                                             

                                                          
Sterling Financial
Corporation
OTHER SELECTED FINANCIAL
DATA
                                                        
(in thousands, unaudited)       Sep 30, 2013     Jun 30, 2013     Sep 30, 2012
ASSET QUALITY:
Past due 90 days or more        $  0             $  0             $  0
and accruing
Nonaccrual loans                65,410           80,387           146,095
Restructured loans              52,556          62,344          66,343     
Total nonperforming loans       117,966          142,731          212,438
OREO                            17,464          26,511          46,575     
Total nonperforming             135,430          169,242          259,013
assets
Specific reserve on             (4,900     )    (4,829     )    (10,104    )
nonperforming loans
Net nonperforming assets        $  130,530     $  164,413     $  248,909 
Guaranteed portion of           $  13,818        $  19,427        $  13,544
nonperforming loans
Nonperforming loans to          1.65       %     2.04       %     3.46       %
loans
Nonperforming assets to         1.36       %     1.70       %     2.73       %
assets
Loan delinquency ratio          0.73       %     0.92       %     1.96       %
(60 days and over)
Classified assets               $  140,558       $  161,440       $  267,469
Classified assets to            1.41       %     1.62       %     2.82       %
assets
Nonperforming assets by
collateral type:
Residential real estate         $  38,720        $  42,548        $  44,822
Commercial real estate:
Investor CRE                    26,141           32,934           59,477
Multifamily                     1,927            2,065            9,221
Construction                    17,595          28,423          55,743     
Total commercial real           45,663           63,422           124,441
estate
Commercial:
Owner occupied CRE              43,581           53,857           71,448
C&I                             2,721           3,764           12,072     
Total commercial                46,302           57,621           83,520
Consumer                        4,745           5,651           6,230      
Total nonperforming             $  135,430      $  169,242      $  259,013 
assets
REGULATORY CAPITAL
RATIOS:
Sterling Financial
Corporation
Tier 1 leverage ratio           11.9       %     12.2       %     12.7       %
Tier 1 risk-based capital       15.5       %     16.3       %     17.6       %
ratio
Total risk-based capital        16.8       %     17.6       %     18.9       %
ratio
Tier 1 common capital           12.3       %     12.9       %     13.9       %
ratio
Sterling Bank:
Tier 1 leverage ratio           11.6       %     12.0       %     12.6       %
Tier 1 risk-based capital       15.1       %     16.0       %     17.5       %
ratio
Total risk-based capital        16.3       %     17.3       %     18.8       %
ratio
OTHER:
FTE employees at end of         2,564            2,541            2,527
period (whole numbers)
                                                                             

              
Sterling
Financial
Corporation
AVERAGE
BALANCE AND
RATE
                  
(in
thousands,        Three Months Ended
unaudited)
                  Sep 30, 2013                               Jun 30, 2013                               Sep 30, 2012
                                  Interest                                 Interest                                 Interest    
                  Average           Income/        Yields/     Average           Income/        Yields/     Average           Income/        Yields/
                  Balance           Expense        Rates       Balance           Expense        Rates       Balance           Expense        Rates
ASSETS:
Loans:
Mortgage          $ 4,495,451       $ 49,689       4.42  %     $ 4,257,888       $ 48,278       4.54  %     $ 3,863,670       $ 47,757       4.94  %
Commercial
and               2,933,727        36,558        4.94  %     2,863,458        36,296        5.08  %     2,583,756        35,479        5.46  %
consumer
Total loans       7,429,178         86,247         4.63  %     7,121,346         84,574         4.76  %     6,447,426         83,236         5.15  %
MBS               1,313,728         8,079          2.46  %     1,218,352         7,333          2.41  %     1,762,950         10,361         2.35  %
Investments       404,134           3,132          3.07  %     379,665           3,125          3.30  %     529,407           3,392          2.55  %
and cash
FHLB stock        95,923           0             0.00  %     96,936           0             0.00  %     99,160           0             0.00  %
Total
interest          9,242,963         97,458        4.20  %     8,816,299         95,032        4.32  %     8,838,943         96,989        4.38  %
earning
assets
Noninterest
earning           643,496                                     681,771                                     681,587     
assets
Total
average           $ 9,886,459                                 $ 9,498,070                                 $ 9,520,530 
assets
LIABILITIES
and EQUITY:
Deposits:
Interest
bearing           $ 745,131         66             0.04  %     $ 748,977         68             0.04  %     $ 684,906         73             0.04  %
transaction
Savings and       2,489,950         865            0.14  %     2,396,010         806            0.13  %     2,284,749         884            0.15  %
MMDA
Time              1,769,741        5,110         1.15  %     1,743,611        5,164         1.19  %     2,168,056        8,024         1.47  %
deposits
Total
interest          5,004,822         6,041          0.48  %     4,888,598         6,038          0.50  %     5,137,711         8,981          0.70  %
bearing
deposits
Borrowings        1,777,268        7,855         1.75  %     1,543,552        7,565         1.97  %     1,358,348        11,702        3.43  %
Total
interest          6,782,090         13,896         0.81  %     6,432,150         13,603         0.85  %     6,496,059         20,683         1.27  %
bearing
liabilities
Noninterest
bearing           1,787,716        0             0.00  %     1,713,809        0             0.00  %     1,656,318        0             0.00  %
transaction
Total
funding           8,569,806         13,896        0.64  %     8,145,959         13,603        0.67  %     8,152,377         20,683        1.01  %
liabilities
Other
noninterest       109,839                                     110,797                                     130,948     
bearing
liabilities
Total
average           8,679,645                                    8,256,756                                    8,283,325
liabilities
Total
average           1,206,814                                   1,241,314                                   1,237,205   
equity
Total
average           $ 9,886,459                                 $ 9,498,070                                 $ 9,520,530 
liabilities
and equity
Net
interest
income and                          $ 83,562      3.39  %                       $ 81,429      3.47  %                       $ 76,306      3.11  %
spread (tax
equivalent)
Net
interest                                           3.59  %                                      3.70  %                                      3.43  %
margin (tax
equivalent)
                                                                                                                                             
Deposits:
Total
interest          $ 5,004,822       $ 6,041        0.48  %     $ 4,888,598       $ 6,038        0.50  %     $ 5,137,711       $ 8,981        0.70  %
bearing
deposits
Noninterest
bearing           1,787,716        0             0.00  %     1,713,809        0             0.00  %     1,656,318        0             0.00  %
transaction
Total             $ 6,792,538      $ 6,041       0.35  %     $ 6,602,407      $ 6,038       0.37  %     $ 6,794,029      $ 8,981       0.53  %
deposits
                                                                                                                                                   

About Sterling Financial Corporation

Sterling Financial Corporation (NASDAQ:STSA) of Spokane, Washington, is the
bank holding company for Sterling Savings Bank, a Washington state chartered
and federally insured commercial bank. Sterling Savings Bank does business as
Sterling Bank in Washington, Oregon and Idaho and as Argent Bank in
California, offering banking products and services, mortgage lending, and
trust and investment products to individuals, small businesses, corporations
and other commercial organizations. As of September30, 2013, Sterling
Financial Corporation had assets of $9.98 billion and operated depository
branches in Washington, Oregon, Idaho and California.Visit Sterling Financial
Corporation's website at www.sterlingfinancialcorporation.com.

Important Information For Investors And Shareholders

This communication does not constitute an offer to sell or the solicitation of
an offer to buy any securities or a solicitation of any vote or approval, nor
shall there be any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of such jurisdiction. Umpqua Holdings Corporation
("Umpqua") will file with the Securities and Exchange Commission ("SEC") a
registration statement on Form S-4 containing a joint proxy
statement/prospectus of Sterling Financial Corporation ("Sterling") and
Umpqua, and Sterling and Umpqua will each file other documents with respect to
the proposed merger. A definitive joint proxy statement/prospectus will be
mailed to shareholders of Sterling and Umpqua. Investors and security holders
of Sterling and Umpqua are urged to read the joint proxy statement/prospectus
and other documents that will be filed with the SEC carefully and in their
entirety when they become available because they will contain important
information. Investors and security holders will be able to obtain free copies
of the registration statement and the joint proxy statement/prospectus (when
available) and other documents filed with the SEC by Sterling or Umpqua
through the website maintained by the SEC at www.sec.gov. Copies of the
documents filed with the SEC by Sterling will be available free of charge on
Sterling’s website at www.sterlingfinancialcorporation.com or by contacting
Sterling’s Investor Relations Department at 509-358-8097. Copies of the
documents filed with the SEC by Umpqua will be available free of charge on
Umpqua’s website at www.umpquaholdingscorp.com or by contacting Umpqua’s
Investor Relations Department at 503-268-6675.

Sterling, Umpqua, their respective directors and executive officers and other
members of management and employees may be considered participants in the
solicitation of proxies in connection with the proposed transaction.
Information about the directors and executive officers of Sterling is set
forth in its Annual Report on Form 10-K for the year ended December 31, 2012,
which was filed with the SEC on February 27, 2013, its proxy statement for its
2013 annual meeting of stockholders, which was filed with the SEC on March 15,
2013, and its Current Reports on Form 8-K or 8-K/A, which were filed with the
SEC on January 28, 2013 (Item 1.01), March 4, 2013, May 2, 2013 (Item 5.07),
May 10, 2013, June 20, 2013 and August 9, 2013, respectively. Information
about the directors and executive officers of Umpqua is set forth in its
Annual Report on Form 10-K for the year ended December 31, 2012, which was
filed with the SEC on February 15, 2013, its Quarterly Reports on Form 10-Q
for the quarterly periods ended March 31, 2013 and June 30, 2013, which were
filed with the SEC on May 2, 2013 and August 6, 2013, respectively, its proxy
statement for its 2013 annual meeting of stockholders, which was filed with
the SEC on February 25, 2013, and its Current Reports on Form 8-K, which were
filed with the SEC on January 14, 2013, April 11, 2013 and April 22, 2013
(Item 5.07), respectively. Other information regarding the participants in the
proxy solicitations and a description of their direct and indirect interests,
by security holdings or otherwise, will be contained in the joint proxy
statement/prospectus and other relevant materials to be filed with the SEC
when they become available.

Cautionary Statement Regarding Forward-Looking Statements

This release contains certain "forward-looking statements" within the meaning
of the safe harbor provisions of the United States Private Securities
Litigation Reform Act of 1995. Forward-looking statements may be identified by
the use of words such as "anticipate," "may," "can," "believe," "expect,"
"project," "intend," "likely," "plan," "seek," "should," "would," "estimate"
and similar expressions and any other statements that predict or indicate
future events or trends or that are not statements of historical facts. These
forward-looking statements include, but are not limited to, statements about
Sterling’s plans, objectives, expectations, strategies and intentions and
other statements contained in this release that are not historical facts and
pertain to Sterling’s future operating results and capital position, including
Sterling’s ability to reduce future loan losses, improve its deposit mix,
execute its asset resolution initiatives, execute its lending initiatives,
contain costs and potential liabilities, realize operating efficiencies,
execute its business strategy, make dividend payments, compete in the
marketplace and provide increased customer support and service. All
forward-looking statements are subject to numerous risks and uncertainties.
Actual results may differ materially from the results discussed in these
forward-looking statements because such statements are inherently subject to
significant assumptions, risks and uncertainties, many of which are difficult
to predict and are generally beyond Sterling’s and Umpqua’s control. These
risks and uncertainties include, but are not limited to, the following:
changes in general economic conditions that may, among other things, increase
default and delinquency risks in Sterling’s loan portfolios; shifts in market
interest rates that may result in lower interest rate margins; shifts in the
demand for Sterling’s loan and other products; changes in the monetary and
fiscal policies of the federal government; changes in laws, regulations or the
competitive environment; exposure to material litigation; failure to obtain
the approval of shareholders of Sterling or Umpqua in connection with the
merger; the timing to consummate the proposed merger; the risk that a
condition to closing of the proposed merger may not be satisfied; the risk
that a regulatory approval that may be required for the proposed merger is not
obtained or is obtained subject to conditions that are not anticipated; the
parties’ ability to achieve the synergies and value creation contemplated by
the proposed merger, or lower-than-expected revenue or cost savings or other
issues in connection with mergers and acquisitions generally; the parties’
ability to promptly and effectively integrate the businesses of Sterling and
Umpqua; and the diversion of management time on issues related to the merger;
the failure to consummate or delay in consummating the merger for other
reasons. Sterling and Umpqua undertake no obligation (and expressly disclaim
any such obligation) to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or otherwise.
For additional information concerning factors that could cause actual
conditions, events or results to materially differ from those described in the
forward-looking statements, please refer to the factors set forth under the
headings "Risk Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in Sterling’s and Umpqua’s most recent
Form 10-K and 10-Q reports and to Sterling’s and Umpqua’s most recent Form 8-K
reports, which are available online at www.sec.gov. No assurances can be given
that any of the events anticipated by the forward-looking statements will
transpire or occur, or if any of them do so, what impact they will have on the
results of operations or financial condition of Sterling or Umpqua.

Contact:

Sterling Financial Corporation
Media contact:
Cara L. Coon, 509-626-5348
cara.coon@bankwithsterling.com
or
Investor contact:
Patrick Rusnak, 509-227-0961
patrick.rusnak@bankwithsterling.com
 
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