Exhibit 99.1

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

SPOKANE, Wash.--(BUSINESS WIRE)--October 25, 2011--Sterling Financial Corporation (NASDAQ:STSA), the bank holding company of Sterling Savings Bank, today announced results for the quarter ended September 30, 2011. For the quarter, Sterling recorded net income available to common shareholders of $11.3 million, or $0.18 per diluted common share, compared to $7.6 million, or $0.12 per diluted common share, for the second quarter of 2011.

Sterling’s prior year third quarter results included a net loss of $48.0 million and a one-time, non-cash increase to income available to common shareholders of $84.3 million related to the conversion of preferred stock held by the U.S. Treasury into common shares in connection with Sterling’s $730 million recapitalization completed during that quarter. As a result, Sterling reported third quarter 2010 net income available to common shareholders of $33.6 million, or $1.31 per diluted common share (with the per share amount adjusted for a 1-for-66 reverse stock split in November 2010).

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

• Third consecutive quarter of positive earnings and earnings growth.
• Classified assets declined by $103.3 million, or 17 percent, for the quarter.
• Net interest margin expanded to 3.34 percent, improving 3 basis points for the quarter, and 57 basis points over the third quarter of 2010.
• Deposit funding costs declined 5 basis points as transaction, savings and money market deposit accounts (“MMDA”) average balances increased by $81.5 million, or 2 percent, compared to the linked quarter.
• Noninterest expenses declined by $5.0 million, or 5 percent, from the linked quarter and declined $7.6 million, or 8 percent from the third quarter of last year.
• Tier 1 leverage ratio increased to 11.1 percent.

Greg Seibly, Sterling’s president and chief executive officer noted, “This marks the third successive quarter of improved earnings growth. The results in the third quarter were driven by continued focus on our primary operating objectives: improving our deposit mix, reducing problem assets, originating quality loans and expense control. With lower levels of nonperforming assets, we were able to reduce the level of loan loss provision, OREO expense, and nonaccrual interest reversals from the linked quarter, all of which contributed to improved earnings during the quarter. Additionally, earnings benefited from higher income from mortgage banking operations and lower operating expenses, resulting in net income growth of $3.8 million, or 50 percent, over last quarter.”

Balance Sheet Management

Seibly continued, “We reported another quarter of solid loan originations. We were able to offset declines in the construction portfolio with expansion of the multifamily portfolio, which increased 22 percent for the quarter and more than doubled over the past 12 months. This is a result of a strategy implemented last year to bolster our loan portfolio with increased focus on the multifamily segment.”

Loan originations for the third quarter of 2011 were $893.6 million, including portfolio loan originations of $348.4 million, representing an increase in portfolio originations of 225 percent over the year-ago period. This growth in originations was primarily within the multifamily portfolio, with originations of $203.6 million for the third quarter of 2011, compared to zero in the third quarter of 2010. Commercial banking loan originations were $96.8 million during the third quarter of 2011, compared to $24.6 million in the third quarter of 2010, representing an increase of 294 percent. The impact of the strong originations on the total loan portfolio were partially offset by reductions due to resolutions of nonperforming loans.

During the quarter, Sterling continued its strategy of repositioning its deposit base by allowing higher-rate CDs to run off in order to reduce funding costs, resulting in a reduction of deposit costs of 41 basis points compared to the same period last year. Retail transaction, savings and MMDA account balances grew by 15 percent year-over-year, while retail time deposits, public deposits and brokered deposits, in the aggregate, declined by 23 percent.

At September 30, 2011, Sterling had total shareholders’ equity of $859.5 million, compared to $807.6 million at June 30, 2011, and $845.0 million at September 30, 2010. Sterling’s ratio of shareholders’ equity to total assets was 9.4 percent at September 30, 2011, compared to 8.7 percent at June 30, 2011. The Tier 1 leverage ratio increased to 11.1 percent at September 30, 2011, from 10.9 percent at June 30, 2011. Tangible common equity to tangible assets increased to 9.2 percent at September 30, 2011, from 8.6 percent at June 30, 2011.

Operating Results

Net Interest Income

Sterling reported net interest income of $74.8 million for the quarter ended September 30, 2011, unchanged from the linked quarter and up from $67.4 million for the same period a year ago.

Interest income on loans was $82.0 million for the third quarter of 2011, compared to $79.7 million for the linked quarter, reflecting higher loan yields. Contributing to the higher loan yields was the lower level of interest reversal on nonperforming loans. Reversal of interest income on nonperforming loans reduced the net interest margin by 26 basis points for the third quarter of 2011, compared to 42 basis points for the linked quarter and 70 basis points for the same period a year ago.

Interest income on mortgage backed securities was $16.7 million for the third quarter of 2011, compared to $19.9 million for the linked quarter. The reduction was a result of lower yields and lower balances due to the sale of longer duration, higher yielding securities during the linked quarter.

Interest expense of $26.5 million was down $1.0 million, or 4 percent, compared to the linked quarter. Total funding costs were 1.27 percent for the third quarter of 2011, compared to 1.31 percent for the second quarter of 2011, and 1.69 percent for the same period a year ago. The decrease is a result of replacing higher cost CDs with lower cost retail transaction accounts.

Noninterest Income

For the third quarter of 2011, noninterest income was $29.1 million, compared to $34.3 million for the linked quarter and $39.7 million for the same period a year ago. The decrease on a linked quarter basis was a result of Sterling not recording securities gains as no securities were sold during the third quarter of 2011, and of a fair value write down of the mortgage servicing rights asset.

For the quarter ended September 30, 2011, income from mortgage banking operations was $16.4 million, up from $10.8 million for the linked quarter, and down from $19.4 million from the same period a year ago. The increase over the linked quarter is a result of higher levels of mortgage refinance activity in the historically low interest rate environment. Similarly, due to a decline in prevailing interest rates, Sterling recorded a fair value write down of $5.1 million on its mortgage servicing rights asset, which resulted in negative loan servicing fees for the third quarter of 2011. The table below presents residential loan originations and sales for the periods indicated.

Fees and service charges income contributed $12.3 million to noninterest income for the third quarter of 2011, compared to $12.9 million in the linked quarter and $13.8 million in the same period a year ago. The reduction in fees and service charges income is primarily related to lower non-sufficient funds fees due to implementation of provisions related to the Dodd-Frank Act.

During the quarter ended September 30, 2011, Sterling did not record a gain on sales of securities, compared to a gain of $8.3 million during the linked quarter and $7.0 million for the same period a year ago.

For the quarter ended September 30, 2011, other noninterest income was $3.5 million, compared to $11,000 for the linked quarter, and a loss of $1.0 million for the third quarter a year ago. The difference is primarily the result of higher gains on sales of loans, primarily SBA loans, for the third quarter of 2011.

Noninterest Expense

Noninterest expense was $86.6 million for the third quarter of 2011, compared to $91.6 million in the linked quarter and $94.2 million for the same period a year ago. The decrease compared to the linked quarter was primarily the result of lower expenses related to other-real-estate-owned (OREO), which decreased by $3.7 million. The $7.6 million reduction of noninterest expense compared to the third quarter of last year primarily reflects lower expenses for professional fees and lower Federal Deposit Insurance Corporation deposit insurance premiums.

Included in other noninterest expense, data processing expense was $5.7 million for the third quarter of 2011, compared to $6.6 million for the linked quarter. During the linked quarter, Sterling completed the conversion to a new core operating system and is expected to support future growth and reduce associated operating expenses going forward. In connection with the core conversion, Sterling incurred $1.2 million of non-recurring implementation expenses for the third quarter of 2011 and $2.3 million for the second quarter of 2011.

Income Taxes

For the third 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 deferred tax asset. Sterling determined that it did not meet the required threshold as of September 30, 2011, and accordingly, a full valuation reserve was recorded against the net deferred tax asset. As of September 30, 2011, the reserved deferred tax asset was approximately $335 million, including approximately $288 million of net operating loss and tax credit carryforwards.

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

Seibly commented, “Our delinquencies, nonaccrual loans and classified assets are less than half of what they were a year ago. We continue our focus on getting asset quality issues behind us. During the third quarter, classified assets were reduced 17 percent, coming off the heels of the second quarter when they were reduced by 26 percent. We expect the pace of resolutions to continue through the remainder of the year.”

For the third quarter of 2011, Sterling reported a provision for credit losses of $6.0 million, compared to $10.0 million for the linked quarter and $60.9 million for the same period a year ago. Net charge-offs for the third quarter of 2011 declined to $29.9 million, compared to $33.4 million for the linked quarter, and $77.1 million for the same period a year ago. The loan loss allowance at September 30, 2011 was $186.2 million, or 3.32 percent, of total loans, compared to $212.1 million, or 3.79 percent, of total loans at June 30, 2011.

The reduction in the allowance as a percent of total loans reflects the continued improvement in asset quality metrics and charge-offs during the quarter. At September 30, 2011, classified assets were $500.5 million, a reduction of $103.3 million, or 17 percent, from June 30, 2011, and down $821.8 million, or 62 percent, from September 30, 2010. These reductions were a result of improved risk ratings, sales of OREO, and net charge-offs. Nonperforming assets were $434.7 million at September 30, 2011, compared to $497.5 million at June 30, 2011, and $965.8 million at September 30, 2010, representing reductions of 13 percent and 55 percent, respectively. At September 30, 2011, nonperforming assets as a percentage of total assets were 4.74 percent, compared to 5.38 percent at June 30, 2011, and 9.63 percent at September 30, 2010.

As of September 30, 2011, OREO, which is included in nonperforming assets, was $111.6 million, compared to $101.4 million at June 30, 2011 and $156.8 million at September 30, 2010. During the third quarter of 2011, Sterling sold 163 properties with a carrying value of $40.8 million.

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

Third Quarter 2011 Earnings Conference Call

Sterling plans to host a conference call October 26, 2011 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. 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 November 26, 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 September 30, 2011, Sterling Financial Corporation had assets of $9.18 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:
Cara Coon, 509-626-5348
cara.coon@sterlingsavings.com
or
Investors:
Patrick Rusnak, 509-227-0961
or
Daniel Byrne, 509-458-3711