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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