Exhibit 99.1

Sterling Financial Corporation of Spokane, Wash. Reports Second-Quarter 2011 Earnings and Operating Results

SPOKANE, Wash.--(BUSINESS WIRE)--July 27, 2011--Sterling Financial Corporation (NASDAQ:STSA), the bank holding company of Sterling Savings Bank, today announced results for the quarter ended June 30, 2011. For the quarter, Sterling recorded net income attributable to common shareholders of $7.6 million, or $0.12 per common share, compared to $5.4 million, or $0.09 per common share, for the first quarter of 2011, and compared to a net loss of $58.2 million, or $73.91 per common share, for the second quarter of 2010 (per share amount adjusted for a 1-for-66 reverse stock split in November 2010).

Following are selected financial highlights for the second quarter of 2011:

• Loan originations were $883.0 million, a 41 percent increase over the linked quarter.
• Retail transaction, savings and MMDA account balances increased by $81.7 million, or 3 percent, for the quarter.
• Net interest margin expanded to 3.31 percent, improving 9 basis points for the quarter.
• Nonperforming assets declined by $131.3 million, or 21 percent, for the quarter.

Greg Seibly, Sterling’s president and chief executive officer, noted, “Sterling’s earnings growth for the quarter was a result of net interest margin expansion and growth of non-interest income. The margin expansion was a function of growth of the loan portfolio and the success of our deposit strategy, which reduced the cost of deposits by 10 basis points for the quarter. The loan growth was a result of higher loan production, which outpaced the significant reduction in nonperforming assets. Our production teams are continuing to generate momentum as we enter the second half of the year.”

Balance Sheet Management

Seibly continued, “During the second quarter, we made additional progress improving our mix of deposits by increasing checking account balances and reducing our reliance on CDs, while growing our loan portfolio in multifamily and commercial banking. Additionally, we repositioned a portion of the securities portfolio to manage interest rate risk and to prepare for funding of anticipated future loan growth.”

Loan originations were $883.0 million for the second quarter of 2011, up $254.6 million, or 41 percent from the linked quarter. Growth in loan originations came primarily within the multifamily portfolio, with multifamily originations expanding by $97.3 million, or 81 percent for the quarter. Other notable growth was achieved in commercial banking, with originations increasing by $74.8 million, or 138 percent, and in residential real estate, with originations increasing by $96.2 million, or 25 percent. These originations outpaced the continued runoff of construction loans, which contracted by $88.0 million, or 22 percent, during the quarter.

Sterling’s total deposits were $6.60 billion at June 30, 2011, down from $6.72 billion at March 31, 2011, and down from $7.24 billion at June 30, 2010. The decrease during the second quarter of 2011 reflects the expected reduction in retail CDs, as Sterling allowed certain higher-rate CDs to run off, improving the deposit mix and reducing funding costs. This run-off was partially offset by an increase in retail transaction, savings and MMDA accounts, which increased by $81.7 million over the linked quarter. Total funding costs declined to 1.31 percent for the second quarter of 2011, compared to 1.39 percent for the linked quarter and 1.71 percent for the same period a year ago.

At June 30, 2011, Sterling had total shareholders’ equity of $807.6 million, compared to $774.5 million at March 31, 2011, and $193.1 million at June 30, 2010. Sterling’s ratio of shareholders’ equity to total assets was 8.7 percent at June 30, 2011, compared to 8.3 percent at March 31, 2011. The tier 1 leverage ratio increased to 10.9 percent at June 30, 2011, from 10.6 percent at March 31, 2011, and tangible common equity to tangible assets increased to 8.6 percent at June 30, 2011, from 8.1 percent at March 31, 2011.

Operating Results

Net Interest Income

Sterling reported net interest income of $74.8 million for the quarter ended June 30, 2011, compared to $73.7 million in the linked quarter and $73.1 million for the same period a year ago.

Improvements in both net interest income and net interest margin during the quarter, as compared to the linked quarter, primarily reflect the decline in nonperforming assets, reduced deposit costs, and the increase in loan balances. The reversal of interest income from nonperforming loans reduced the net interest margin by 42 basis points for the second quarter of 2011, compared to 53 basis points for the linked quarter and 80 basis points for the same period a year ago.

Non-interest Income

For the second quarter of 2011, non-interest income was $34.3 million, compared to $30.0 million for the linked quarter and $41.2 million for the same period a year ago. For the quarter ended June 30, 2011, fees and service charges income contributed $12.9 million to non-interest income, compared to $12.6 million in the linked quarter and $14.2 million in the same period a year ago. The reduction in fees and service charges income from last year is primarily related to lower non-sufficient funds (NSF) fees and financial services commission income.

Income from mortgage banking operations for the second quarter of 2011 totaled $10.8 million, up from $10.3 million for the linked quarter, and down from $11.7 million from the same period a year ago, when the federal government was offering incentives to homebuyers. The table below presents residential loan originations and sales for the periods indicated.

For the quarter ended June 30, 2011, Sterling recorded a gain on sales of securities of $8.3 million, compared to $6.0 million for the linked quarter and $15.3 million for the same period a year ago.

Non-interest Expense

Non-interest expense was $91.6 million for the second quarter of 2011, compared to $88.3 million in the linked quarter and $97.3 million for the same period a year ago. The increase compared to the linked quarter was primarily the result of higher expenses related to other real estate owned (OREO), which increased by $3.1 million. The $5.7 million reduction of non-interest expense compared to the second quarter of last year primarily reflects lower Federal Deposit Insurance Corporation (FDIC) deposit insurance premiums.

During the second quarter of 2011, Sterling successfully completed the conversion to a new core operating system that is expected to support future growth and reduce associated operating expenses. In connection with the core conversion, Sterling incurred $2.3 million of non-recurring implementation expenses during the second quarter of 2011, compared to $1.5 million during the first quarter of 2011.

Income Taxes

During the second quarter of 2011, Sterling did not recognize any federal or state tax expense, as the income tax expense for the quarter was offset by a reduction in the deferred tax valuation allowance.

Sterling uses an estimate of future earnings and an evaluation of its loss carryback ability and tax planning strategies to determine whether it is more likely than not that it will realize the benefit of its net deferred tax asset. Sterling determined that it did not meet the required threshold as of June 30, 2011, and accordingly, a full valuation reserve was provided against the deferred tax asset. As of June 30, 2011, the reserved deferred tax asset was approximately $350 million, including approximately $279 million of net operating loss carry-forwards.

With regard to the deferred tax asset, the benefits of Sterling’s accumulated tax losses would be reduced in the event of an “ownership change,” as determined under Section 382 of the Internal Revenue Code. In order to preserve the benefits of these tax losses, during 2010, Sterling’s shareholders approved a protective amendment to the restated articles of incorporation and Sterling’s board adopted a tax preservation rights plan, both of which restrict certain stock transfers that would result in investors acquiring more than 4.95 percent of Sterling’s total outstanding common stock.

Credit Quality

For the second quarter of 2011, Sterling reported a provision for credit losses of $10.0 million, compared to $10.0 million for the linked quarter and $70.8 million for the same period a year ago. Net charge-offs for the second quarter of 2011 were $33.4 million, compared to $24.1 million for the linked quarter, and $101.8 million for the same period a year ago. The loan loss allowance at June 30, 2011 was $212.1 million, or 3.79 percent, of total loans, compared to $232.9 million, or 4.19 percent, of total loans at March 31, 2011.

The reduction in the allowance as a percent of total loans was warranted by the continued improvement in asset quality metrics during the quarter. At June 30, 2011, classified assets were $603.8 million, a reduction of $208.1 million, or 26 percent, from March 31, 2011, and down $782.8 million, or 56 percent, from June 30, 2010. These reductions were a result of improved risk ratings, sales of OREO, and net charge-offs. Nonperforming assets were $497.5 million at June 30, 2011, compared to $628.8 million at March 31, 2011, and $1.02 billion at June 30, 2010, representing reductions of 21 percent and 51 percent, respectively. At June 30, 2011, nonperforming assets as a percentage of total assets were 5.38 percent, compared to 6.72 percent at March 31, 2011, and 10.47 percent at June 30, 2010.

At the end of the second quarter of 2011, OREO, which is included in nonperforming assets, was $101.4 million, down 33 percent from $151.8 million at March 31, 2011. During the second quarter of 2011, Sterling sold 253 properties with a carrying value of $76.5 million.

Seibly commented, “We continue to experience favorable reductions in nonperforming assets and expect significant additional resolutions during the remainder of the year. Our asset quality metrics are the best we have reported in the last two years.”

The following table presents an analysis of Sterling’s nonperforming assets by loan category and geographic region as of the dates indicated.

Second-Quarter 2011 Earnings Conference Call

Sterling plans to host a conference call July 28, 2011 at 8:00 a.m. PT to discuss the company’s financial results. An audio webcast of the conference call can be accessed at Sterling’s website. 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 1-773-756-4806 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 completion of the call. The webcast replay will be offered through August 28, 2011.

About Sterling Financial Corporation

Sterling Financial Corporation of Spokane, Wash., is the bank holding company for Sterling Savings Bank, a state chartered and federally insured commercial bank. Sterling offers banking products and services, mortgage lending, and investment products to individuals, small businesses, commercial organizations and corporations. As of June 30, 2011, Sterling Financial Corporation had assets of $9.24 billion and operated 178 depository branches throughout Washington, Oregon, Idaho, Montana and California. Visit Sterling’s website at www.sterlingfinancialcorporation-spokane.com.

Forward-Looking Statements

This release contains forward-looking statements that are not historical facts and that are intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. These forward-looking statements may include, but are not limited to, statements about Sterling’s plans, objectives, expectations, strategy 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 complete recovery plans, and Sterling’s ability to reduce future loan losses, improve its deposit mix, execute its asset resolution initiatives, execute its lending initiatives, contain costs, realize operating efficiencies and provide increased customer support and service. When used in this release, the words “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions are generally intended to identify forward-looking statements. 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 control. These include but are not limited to: Sterling’s ability to execute on its business plan and maintain adequate liquidity; the possibility of continued adverse economic developments that may, among other things, increase default and delinquency risks in Sterling’s loan portfolios; shifts in interest rates that may result in lower interest rate margins; shifts in the demand for Sterling’s loan and other products; changes in accounting policies; changes in the monetary and fiscal policies of the federal government; changes in laws, regulations and the competitive environment; and Sterling’s ability to comply with regulatory actions and agreements. Other factors that could cause actual conditions, events or results to differ significantly from those described in the forward-looking statements may be found under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Sterling’s Annual Report on Form 10-K, as updated periodically in Sterling’s filings with the Securities and Exchange Commission. Unless legally required, Sterling disclaims any obligation to update any forward-looking statements.

CONTACT:
Sterling Financial Corporation
Media contact:
Cara Coon, 509-626-5348
cara.coon@sterlingsavings.com
or
Investor contacts:
Patrick Rusnak, 509-227-0961
or
Daniel Byrne, 509-458-3711