STERLING FINANCIAL CORP /WA/ - FORM 8-K - EX-99.1 - RESULTS OF OPERATIONS AND FINANCIAL CONDITION

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8-K - FORM 8-K - STERLING FINANCIAL CORP /WA/	sfc8-kreq2eranddividend.htm
EX-99.2 - EARNINGS RELEASE SUPPLEMENT INVESTOR PRESENTATION - STERLING FINANCIAL CORP /WA/	q213earningsreleasesuppl.htm

Exhibit 99.1

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

SPOKANE, Wash. — (BUSINESS WIRE) — July 25, 2013 — Sterling Financial Corporation (NASDAQ:STSA) ("Sterling") today announced its operating results for the quarter ended June 30, 2013. For the quarter, Sterling recorded net income of $27.8 million, or $0.44 per diluted common share, compared to $22.7 million, or $0.36 per diluted common share, for the quarter ended March 31, 2013, and $320.9 million, or $5.13 per diluted common share, for the quarter ended June 30, 2012. As previously disclosed, the results for the prior year period include an income tax benefit of $288.8 million resulting from the release of the deferred tax asset valuation allowance.

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


•	Annualized organic loan growth of 14 percent.


•	Net interest margin (tax equivalent) of 3.70 percent, one basis point higher than the prior quarter.


•	Deposit costs were 37 basis points, two basis points lower than the prior quarter.


•	Completed the acquisition of the Puget Sound operations of Boston Private Bank & Trust Co.


•	Declared a $0.35 special dividend on June 17, 2013, and paid a quarterly cash dividend of $0.20 per share on May 20, 2013.

"From a performance perspective, the second quarter of 2013 was one of the best in Sterling's history," said Greg Seibly, Sterling's president and chief executive officer. "We had strong organic loan growth, lower funding costs, better efficiency and improved asset quality metrics. Our continued focus on these key operating objectives, combined with the positive impact from our investments in recently completed acquisitions, helped drive the improved financial results."

Operating Results

Net Interest Income

Sterling reported net interest income of $80.4 million for the quarter ended June 30, 2013, compared to $76.9 million for the prior quarter and $78.9 million for the quarter ended June 30, 2012. The net interest margin (tax equivalent) for the second quarter of 2013 was 3.70 percent, an increase of one basis point from the prior quarter, and an increase of 14 basis points from the second quarter of 2012.



	Three Months Ended
	June 30, 2013			March 31, 2013			June 30, 2012
	(in thousands)
Net interest income	$	80,414		$	76,894		$	78,910
Net interest margin (tax equivalent)	3.70		%	3.69		%	3.56		%
Loan yield	4.76		%	4.81		%	5.36		%

Funding costs:
Cost of deposits	0.37		%	0.39		%	0.58		%
Total funding liabilities	0.67		%	0.72		%	1.07		%

Total interest income was $94.0 million for the second quarter of 2013, compared to $90.8 million for the prior quarter, and $101.0 million for the same period a year ago. The increase over the prior quarter was primarily due to higher average loan balances, which were up $320.0 million, or 5 percent, contributing to an increase in interest income of $3.2 million. The yield on earning assets remained flat from the prior quarter at 4.32 percent, and was down from 4.52 percent for the second quarter of 2012.

For the second quarter of 2013, income from mortgaged backed securities ("MBS") was flat compared to the prior quarter, and down $5.6 million, or 43 percent, from the second quarter of 2012. The year-over-year decline was primarily due to lower average MBS balances as a result of balance sheet repositioning activity conducted during the year.

Total interest expense was $13.6 million for the second quarter of 2013, compared to $13.9 million for the prior quarter, and $22.1 million for the second quarter of 2012. The decrease from the prior quarter was primarily a result of a 10 basis point reduction in costs for time deposits. The decrease from the same period a year ago was the result of borrowing costs declining $4.6 million, or 38 percent, reflecting balance sheet repositioning activity undertaken during the fourth quarter of 2012. Additionally, deposit interest expense was down $3.9 million, or 39 percent, from the same period a year ago, reflecting the improved deposit mix and lower overall deposit costs, which were down 21 basis points.

Noninterest Income

Noninterest income includes income from mortgage banking operations, fees and service charges income, 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 second quarter of 2013, noninterest income was $42.0 million, compared to $37.6 million for the prior quarter and $44.7 million for the second quarter of 2012.

Income from mortgage banking operations for the second quarter of 2013 was $23.2 million, compared to $13.8 million for the prior quarter and $24.2 million for the second quarter of 2012. The increase from the prior period is attributable to higher margins and increased activity associated with residential mortgage banking. The margin on residential loan sales was 2.35 percent for the second quarter of 2013, up from 1.63 percent for the prior quarter.



	Three Months Ended
	June 30, 2013			March 31, 2013			June 30, 2012
	(in thousands)
Residential loan sales	$	791,942		$	787,377		$	576,545
Change in warehouse and interest rate locks	7,419			(136,948		)	220,252
Total mortgage banking loan activity	$	799,361		$	650,429		$	796,797

Margin on residential loan sales	2.35		%	1.63		%	3.07		%

Included in income from mortgage banking operations was a $2.8 million reversal of the valuation allowance on mortgage servicing rights, which was partially offset by a $1.0 million reduction in the fair value of a pool of portfolio residential mortgage loans. A similar reversal of the valuation allowance on mortgage servicing rights of $2.8 million was recorded in the prior quarter and a write-down of $1.1 million was recorded in the second quarter of 2012.

For the quarter ended June 30, 2013, fees and service charges income contributed $15.6 million to noninterest income, compared to $14.1 million for the prior quarter and $14.1 million for the second quarter of 2012. For the second quarter of 2013, gains on other loan sales were $1.2 million, compared to $25,000 for the prior quarter, and $2.8 million for the same period a year ago. The increase from the prior period is a result of increased SBA lending activity and associated loan sales.

For the second quarter of 2013, other noninterest income primarily consisted of the net gain on the sale of three branches. In the prior quarter, other noninterest income included a bargain purchase gain of $7.5 million in connection with the acquisition of Borrego Springs Bank.

For the second quarter of 2013 and the prior quarter, Sterling had no gains or losses on the sale of securities, compared to a gain of $9.3 million for the second quarter of 2012. During the same period a year ago, Sterling also recognized an other-than-temporary impairment charge of $6.8 million, and a prepayment of debt charge of $2.7 million; there were no similar charges in the first and second quarters of 2013.

Noninterest Expense

Noninterest expense was $81.7 million for the second quarter of 2013, compared to $81.9 million for the prior quarter and $87.6 million for the second quarter of 2012. Compared to the prior quarter, employee compensation and benefits increased by $3.4 million primarily due to acquisition related activity, annual merit increases, and incentive compensation accruals. This increase in compensation and benefits was offset by a $4.0 million reduction in other noninterest expenses, which include professional fees, legal settlements, advertising, insurance and data processing.

Additionally, other noninterest expense included merger and acquisition expenses of $2.3 million for the second quarter of 2013, $1.0 million for the prior quarter, and $2.3 million for the second quarter of 2012.

Income Taxes

During the quarter ended June 30, 2013, Sterling recognized income tax expense of $13.0 million, representing an effective tax rate of 32 percent. In the same period a year ago, Sterling recorded an income tax benefit of $288.8 million, which represented the release of substantially all of Sterling's deferred tax asset valuation allowance. As of June 30, 2013, the net deferred tax asset was $290.4 million, including $260.2 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. During 2010, in order to preserve the benefits of these tax losses, Sterling's shareholders approved a protective amendment to Sterling's restated articles of incorporation and Sterling's board of directors adopted a tax preservation rights plan, both of which restrict certain stock transfers that would result in an investor becoming an owner of 5 percent or more of Sterling's total outstanding common stock. The protective amendment and the rights plan are expected to expire on Aug. 27, 2013.

Balance Sheet

On May 10, 2013, Sterling completed the acquisition of the Puget Sound operations of Boston Private Bank & Trust Co. ("Boston Private"), which added $278.5 million of performing loans and $168.2 million of deposits.

At June 30, 2013, total loan balances were $7.00 billion, compared to $6.48 billion at the end of the prior quarter, and $6.08 billion at June 30, 2012. During the second quarter of 2013, Sterling originated $686.9 million of new portfolio loans (which exclude residential loans held for sale), compared to $512.2 million for the prior quarter and $458.6 million for the second quarter of 2012. Excluding loan purchases and the loans acquired in the Boston Private transaction during the quarter, loans expanded at an annualized rate of 14 percent. Multifamily loan originations remained strong and represented 41 percent of portfolio loan originations for the second quarter of 2013. C&I loan originations were $104.0 million for the second quarter of 2013, compared to $83.1 million for the prior quarter, and $50.1 million for the same period a year ago.

Investments and mortgage-backed securities available for sale were $1.54 billion at June 30, 2013, compared to $1.47 billion at the end of the prior quarter, and $2.12 billion at June 30, 2012. The decrease from a year ago reflects the sale of securities to fund a $450 million reduction in repurchase agreements.

At June 30, 2013, total deposits were $6.63 billion, compared to $6.60 billion at the end of the prior quarter, and $6.80 billion at June 30, 2012. The decrease from a year ago was a result of expected runoff in retail time deposits and public deposits, which were reduced by $397.8 million and $94.8 million, respectively. These decreases were partially offset by growth in transaction deposits, which expanded by $218.9 million, or 10 percent.

The deposit composition is set forth in the following table:



										Annual % Change
	June 30, 2013			March 31, 2013			June 30, 2012			Annual % Change
	(in thousands)
Deposits:
Retail:
Transaction	$	2,454,910		$	2,466,361		$	2,235,991		10	%
Savings and MMDA	2,282,055			2,262,774			2,182,969			5	%
Time deposits	1,414,239			1,485,029			1,812,000			(22	)%
Total retail	6,151,204			6,214,164			6,230,960			(1	)%
Public	174,425			169,961			269,191			(35	)%
Brokered	302,830			213,713			296,623			2	%
Total deposits	$	6,628,459		$	6,597,838		$	6,796,774		(2	)%
Gross loans to deposits	106		%	98		%	90		%

At June 30, 2013, advances from the Federal Home Loan Bank were $1.20 billion, compared to $541.3 million at the end of the prior quarter, and $205.5 million at June 30, 2012. The increase over the prior quarter was to fund acquisitions, deposit outflow associated with branch divestitures, loan growth, and to replace high-rate CD runoff. The new advances for the second quarter of 2013 have a weighted average cost of 33 basis points.

Credit Quality

During the second quarter of 2013, Sterling recognized net charge-offs of $5.1 million, compared to $4.7 million for the prior quarter and $5.0 million for the same period a year ago. Sterling did not record a provision for credit losses for the second quarter of 2013 or the prior quarter, compared to a provision of $4.0 million for the second quarter of 2012. The allowance for loan losses at June 30, 2013 was $141.9 million, or 2.02 percent of total loans, compared to $149.7 million, or 2.31 percent of total loans, at March 31, 2013, and $158.2 million, or 2.60 percent of total loans, at June 30, 2012.

At June 30, 2013, nonperforming assets were $169.2 million, or 1.70 percent of total assets, compared to $212.2 million, or 2.29 percent of total assets, at March 31, 2013, and $321.1 million, or 3.35 percent of total assets, at June 30, 2012.

Acquisition Update

On May 2, 2013, Sterling announced that it has signed a definitive agreement to acquire Newport Beach, Calif.-based Commerce National Bank. As of March 31, 2013, Commerce National Bank had assets of$242.7 million, loans of $146.3 million, deposits of $211.4 million, and shareholders equity of $30.1 million. Subject to the receipt of regulatory approvals and the satisfaction of other customary closing conditions, the transaction is expected to close during the fourth quarter of 2013.

Cash Dividend Declaration

Sterling's board of directors has approved a quarterly cash dividend of $0.20 per common share, payable on Aug. 20, 2013 to shareholders of record as of Aug. 6, 2013.

Second Quarter 2013 Earnings Conference Call

Sterling plans to host a conference call July 26, 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 517-308-9210 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 Aug. 26, 2013.

Sterling Financial Corporation
CONSOLIDATED BALANCE SHEETS



(in thousands, except per share amounts, unaudited)	Jun 30, 2013			Mar 31, 2013			Jun 30, 2012
ASSETS:
Cash and due from banks	$	325,710		$	297,210		$	454,692
Investments and MBS available for sale	1,538,880			1,471,563			2,119,008
Investments held to maturity	185			195			1,726
Loans held for sale	307,511			295,505			226,907
Loans receivable, net	6,868,866			6,334,560			5,926,575
Other real estate owned, net ("OREO")	26,511			29,056			55,801
Office properties and equipment, net	98,483			96,594			86,556
Bank owned life insurance ("BOLI")	188,178			185,953			176,593
Goodwill	36,633			22,577			22,577
Other intangible assets, net	17,830			17,866			22,656
Deferred tax asset, net	290,377			288,764			285,141
Other assets	240,409			216,593			221,281
Total assets	$	9,939,573		$	9,256,436		$	9,599,513
LIABILITIES:
Deposits	$	6,628,459		$	6,597,838		$	6,796,774
Advances from Federal Home Loan Bank	1,197,857			541,259			205,470
Securities sold under repurchase agreements	527,925			531,066			1,006,324
Other borrowings	245,297			245,295			245,292
Accrued expenses and other liabilities	133,699			103,973			124,859
Total liabilities	8,733,237			8,019,431			8,378,719
SHAREHOLDERS' EQUITY:
Preferred stock	0			0			0
Common stock	1,970,229			1,969,070			1,966,307
Accumulated other comprehensive income	30,751			56,076			67,102
Accumulated deficit	(794,644		)	(788,141		)	(812,615		)
Total shareholders' equity	1,206,336			1,237,005			1,220,794
Total liabilities and shareholders' equity	$	9,939,573		$	9,256,436		$	9,599,513
Book value per common share	$	19.36		$	19.86		$	19.65
Tangible book value per common share	$	18.49		$	19.21		$	18.92
Shareholders' equity to total assets	12.1		%	13.4		%	12.7		%
Tangible common equity to tangible assets (1)	11.7		%	13.0		%	12.3		%
Common shares outstanding at end of period	62,297,712			62,275,581			62,124,551
Common stock warrants outstanding	2,847,154			2,749,044			2,722,541

(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 amounts, unaudited)	Three Months Ended									Six Months Ended
	Jun 30, 2013			Mar 31, 2013			Jun 30, 2012			Jun 30, 2013			Jun 30, 2012
INTEREST INCOME:
Loans	$	84,436		$	81,187		$	85,537		$	165,623		$	165,378
Mortgage-backed securities	7,333			7,297			12,936			14,630			28,271
Investments and cash	2,248			2,273			2,517			4,521			5,306
Total interest income	94,017			90,757			100,990			184,774			198,955
INTEREST EXPENSE:
Deposits	6,038			6,307			9,921			12,345			21,023
Borrowings	7,565			7,556			12,159			15,121			24,669
Total interest expense	13,603			13,863			22,080			27,466			45,692
Net interest income	80,414			76,894			78,910			157,308			153,263
Provision for credit losses	0			0			4,000			0			8,000
Net interest income after provision	80,414			76,894			74,910			157,308			145,263
NONINTEREST INCOME:
Fees and service charges	15,618			14,130			14,131			29,748			26,871
Mortgage banking operations	23,180			13,794			24,181			36,974			42,725
BOLI	1,424			1,557			3,769			2,981			5,515
Gains on sales of securities	0			0			9,321			0			9,463
Other-than-temporary impairment losses on securities	0			0			(6,819		)	0			(6,819		)
Charge on prepayment of debt	0			0			(2,664		)	0			(2,664		)
Gains on other loan sales	1,194			25			2,811			1,219			3,411
Other	587			8,060			11			8,647			(2,174		)
Total noninterest income	42,003			37,566			44,741			79,569			76,328
NONINTEREST EXPENSE:
Employee compensation and benefits	45,803			42,436			46,485			88,239			93,866
OREO	2,549			2,030			3,337			4,579			5,329
Occupancy and equipment	9,567			9,859			10,932			19,426			21,219
Depreciation	3,058			2,934			2,923			5,992			5,836
Amortization of other intangible assets	1,711			1,659			1,791			3,370			3,196
Other	18,990			23,011			22,139			42,001			46,810
Total noninterest expense	81,678			81,929			87,607			163,607			176,256
Income before income taxes	40,739			32,531			32,044			73,270			45,335
Income tax (provision) benefit	(12,978		)	(9,853		)	288,842			(22,831		)	288,842
Net income	$	27,761		$	22,678		$	320,886		$	50,439		$	334,177
Earnings per common share - basic	$	0.45		$	0.36		$	5.17		$	0.81		$	5.38
Earnings per common share - diluted	$	0.44		$	0.36		$	5.13		$	0.80		$	5.33
Dividends declared per share	$	0.55		$	0.00		$	0.00		$	0.55		$	0.00
Average common shares outstanding - basic	62,289,437			62,242,183			62,112,936			62,265,941			62,095,670
Average common shares outstanding - diluted	63,107,913			63,004,784			62,610,054			63,076,481			62,648,152

Sterling Financial Corporation
OTHER SELECTED FINANCIAL DATA



(in thousands, unaudited)	Three Months Ended									Six Months Ended
	Jun 30, 2013			Mar 31, 2013			Jun 30, 2012			Jun 30, 2013			Jun 30, 2012
LOAN ORIGINATIONS AND PURCHASES:
Loan originations:
Residential real estate:
For sale	$	799,682		$	632,905		$	578,418		$	1,432,587		$	1,155,294
Permanent	118,023			97,314			46,569			215,337			75,297
Total residential real estate	917,705			730,219			624,987			1,647,924			1,230,591
Commercial real estate ("CRE"):
Investor CRE	22,894			14,442			16,190			37,336			22,646
Multifamily	280,435			185,914			234,971			466,349			407,681
Construction	6,931			1,730			845			8,661			1,668
Total commercial real estate	310,260			202,086			252,006			512,346			431,995
Commercial:
Owner occupied CRE	39,380			60,477			29,937			99,857			58,292
Commercial & Industrial ("C&I")	103,964			83,097			50,069			187,061			104,055
Total commercial	143,344			143,574			80,006			286,918			162,347
Consumer	115,225			69,227			79,991			184,452			136,446
Total loan originations	1,486,534			1,145,106			1,036,990			2,631,640			1,961,379
Total portfolio loan originations (excludes residential real estate for sale)	686,852			512,201			458,572			1,199,053			806,085
Loan purchases:
Residential real estate	0			177			37,734			177			74,762
Commercial real estate:
Investor CRE	67			1,849			0			1,916			0
Multifamily	64			221			251			285			391
Total commercial real estate	131			2,070			251			2,201			391
Commercial:
Owner occupied CRE	0			1,071			0			1,071			0
C&I	21,000			0			0			21,000			0
Total commercial	21,000			1,071			0			22,071			0
Consumer	20,451			0			10,740			20,451			10,740
Total loan purchases	41,582			3,318			48,725			44,900			85,893
Total loan originations and purchases	$	1,528,116		$	1,148,424		$	1,085,715		$	2,676,540		$	2,047,272
PERFORMANCE RATIOS:
Return on assets	1.17		%	1.00		%	13.74		%	1.09		%	7.20		%
Return on common equity	9.0		%	7.5		%	138.7		%	8.2		%	73.7		%
Efficiency ratio⁽¹⁾	63.1		%	72.5		%	66.1		%	67.6		%	72.4		%
Noninterest expense to assets	3.45		%	3.61		%	3.75		%	3.53		%	3.80		%
Average assets	$	9,498,070		$	9,191,962		$	9,390,288		$	9,345,854		$	9,336,413
Average common equity	$	1,241,314		$	1,226,911		$	930,377		$	1,235,353		$	912,353

(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, unaudited)	Jun 30, 2013			Mar 31, 2013			Jun 30, 2012
INVESTMENT PORTFOLIO DETAIL:
Available for sale:
MBS	$	1,343,181		$	1,268,330		$	1,897,310
Municipal bonds	195,530			203,063			203,537
Other	169			170			18,161
Total	$	1,538,880		$	1,471,563		$	2,119,008
Held to maturity:
Tax credits	$	185		$	195		$	1,726
Total	$	185		$	195		$	1,726
LOAN PORTFOLIO DETAIL:
Residential real estate	$	964,872		$	857,864		$	785,482
Commercial real estate:
Investor CRE	1,172,433			1,163,821			1,324,917
Multifamily	1,962,919			1,725,403			1,311,247
Construction	69,796			71,213			111,550
Total commercial real estate	3,205,148			2,960,437			2,747,714
Commercial:
Owner occupied CRE	1,411,576			1,372,949			1,309,587
C&I	636,727			533,955			504,396
Total commercial	2,048,303			1,906,904			1,813,983
Consumer	783,601			752,292			736,397
Gross loans receivable	7,001,924			6,477,497			6,083,576
Deferred loan fees, net	8,891			6,736			1,243
Allowance for loan losses	(141,949		)	(149,673		)	(158,244		)
Net loans receivable	$	6,868,866		$	6,334,560		$	5,926,575
DEPOSITS DETAIL:
Noninterest bearing transaction	$	1,702,022		$	1,705,835		$	1,539,786
Interest bearing transaction	752,888			760,526			696,205
Savings and MMDA	2,424,615			2,391,062			2,270,395
Time deposits	1,748,934			1,740,415			2,290,388
Total deposits	$	6,628,459		$	6,597,838		$	6,796,774
Number of transaction accounts (whole numbers):
Noninterest bearing transaction accounts	180,477			178,642			192,644
Interest bearing transaction accounts	79,809			51,854			50,617
Total transaction accounts	260,286			230,496			243,261

Sterling Financial Corporation
OTHER SELECTED FINANCIAL DATA



(in thousands, unaudited)	Jun 30, 2013			Mar 31, 2013			Jun 30, 2012
ALLOWANCE FOR CREDIT LOSSES:
Allowance - loans, beginning of quarter	$	149,673		$	154,345		$	161,273
Provision	(2,600		)	0			2,000
Charge-offs:
Residential real estate	(1,107		)	(1,019		)	(157		)
Commercial real estate:
Investor CRE	(1,970		)	(2,730		)	(6,577		)
Multifamily	(51		)	(36		)	0
Construction	(615		)	(157		)	(2,904		)
Total commercial real estate	(2,636		)	(2,923		)	(9,481		)
Commercial:
Owner occupied CRE	(2,237		)	(1,505		)	(3,164		)
C&I	(275		)	(83		)	(442		)
Total commercial	(2,512		)	(1,588		)	(3,606		)
Consumer	(1,503		)	(1,644		)	(1,643		)
Total charge-offs	(7,758		)	(7,174		)	(14,887		)
Recoveries:
Residential real estate	342			180			673
Commercial real estate:
Investor CRE	2			10			3,459
Multifamily	0			95			1
Construction	1,284			950			2,164
Total commercial real estate	1,286			1,055			5,624
Commercial:
Owner occupied CRE	295			157			1,249
C&I	326			763			1,922
Total commercial	621			920			3,171
Consumer	385			347			390
Total recoveries	2,634			2,502			9,858
Net charge-offs	(5,124		)	(4,672		)	(5,029		)
Allowance - loans, end of quarter	141,949			149,673			158,244
Reserve for unfunded commitments, beginning of quarter	7,990			8,002			10,028
Provision	2,600			0			2,000
Charge-offs	(1,085		)	(12		)	(4,076		)
Reserve for unfunded commitments, end of quarter	9,505			7,990			7,952
Total credit allowance	$	151,454		$	157,663		$	166,196
Net charge-offs to average loans (annualized)	0.29		%	0.28		%	0.32		%
Loan loss allowance to loans	2.02		%	2.31		%	2.60		%
Total credit allowance to loans	2.16		%	2.43		%	2.73		%
Loan loss allowance to nonperforming loans	99		%	82		%	60		%
Total credit allowance to nonperforming loans	106		%	86		%	63		%

Sterling Financial Corporation
OTHER SELECTED FINANCIAL DATA



(in thousands, unaudited)	Jun 30, 2013			Mar 31, 2013			Jun 30, 2012
ASSET QUALITY:
Past 90 days due and accruing	$	0		$	0		$	0
Nonaccrual loans	80,387			113,647			176,220
Restructured loans	62,344			69,484			89,120
Total nonperforming loans	142,731			183,131			265,340
OREO	26,511			29,056			55,801
Total nonperforming assets	169,242			212,187			321,141
Specific reserve on nonperforming loans	(4,829		)	(9,726		)	(10,196		)
Net nonperforming assets	$	164,413		$	202,461		$	310,945
Guaranteed portion of nonperforming loans	$	19,427		$	20,840		$	13,170
Nonperforming loans to loans	2.04		%	2.83		%	4.36		%
Nonperforming assets to assets	1.70		%	2.29		%	3.35		%
Loan delinquency ratio (60 days and over)	0.92		%	1.61		%	2.60		%
Classified assets	$	161,440		$	214,802		$	327,336
Classified assets to assets	1.62		%	2.32		%	3.41		%
Nonperforming assets by collateral type:
Residential real estate	$	42,548		$	44,954		$	46,781
Commercial real estate:
Investor CRE	32,934			49,138			80,436
Multifamily	2,065			5,244			26,508
Construction	28,423			31,867			68,082
Total commercial real estate	63,422			86,249			175,026
Commercial:
Owner occupied CRE	53,857			69,165			81,640
C&I	3,764			5,289			12,526
Total commercial	57,621			74,454			94,166
Consumer	5,651			6,530			5,168
Total nonperforming assets	$	169,242		$	212,187		$	321,141
REGULATORY CAPITAL RATIOS:
Sterling Financial Corporation
Tier 1 leverage ratio	12.2		%	12.8		%	12.2		%
Tier 1 risk-based capital ratio	16.3		%	17.8		%	17.3		%
Total risk-based capital ratio	17.6		%	19.0		%	18.6		%
Tier 1 common capital ratio	12.9		%	14.1		%	13.6		%
Sterling Bank:
Tier 1 leverage ratio	12.0		%	12.6		%	12.0		%
Tier 1 risk-based capital ratio	16.1		%	17.5		%	17.1		%
Total risk-based capital ratio	17.3		%	18.8		%	18.4		%
OTHER:
FTE employees at end of period (whole numbers)	2,541			2,487			2,523

Sterling Financial Corporation

AVERAGE BALANCE AND RATE



(in thousands, unaudited)	Three Months Ended
	Jun 30, 2013						Mar 31, 2013						Jun 30, 2012
	Average Balance		Interest Income/ Expense		Yields/Rates		Average Balance		Interest Income/ Expense		Yields/Rates		Average Balance		Interest Income/ Expense		Yields/Rates
ASSETS:
Loans:
Mortgage	$	4,257,888	$	48,278	4.54	%	$	4,134,204	$	47,999	4.65	%	$	3,863,940	$	49,486	5.12	%
Commercial and consumer	2,863,458		36,296		5.08	%	2,667,145		33,304		5.06	%	2,540,930		36,147		5.72	%
Total loans	7,121,346		84,574		4.76	%	6,801,349		81,303		4.81	%	6,404,870		85,633		5.36	%
MBS	1,218,352		7,333		2.41	%	1,221,283		7,297		2.39	%	1,984,471		12,936		2.61	%
Investments and cash	379,665		3,125		3.30	%	433,022		3,151		2.95	%	549,590		3,422		2.50	%
FHLB stock	96,936		0		0.00	%	97,484		0		0.00	%	99,227		0		0.00	%
Total interest earning assets	8,816,299		95,032		4.32	%	8,553,138		91,751		4.32	%	9,038,158		101,991		4.52	%
Noninterest earning assets	681,771						638,824						352,130
Total average assets	$	9,498,070					$	9,191,962					$	9,390,288
LIABILITIES and EQUITY:
Deposits:
Interest bearing transaction	$	748,977	68		0.04	%	$	727,102	67		0.04	%	$	666,243	93		0.06	%
Savings and MMDA	2,396,010		806		0.13	%	2,341,096		758		0.13	%	2,285,426		1,025		0.18	%
Time deposits	1,743,611		5,164		1.19	%	1,718,381		5,482		1.29	%	2,380,453		8,803		1.49	%
Total interest bearing deposits	4,888,598		6,038		0.50	%	4,786,579		6,307		0.53	%	5,332,122		9,921		0.75	%
Borrowings	1,543,552		7,565		1.97	%	1,359,836		7,556		2.25	%	1,486,167		12,159		3.29	%
Total interest bearing liabilities	6,432,150		13,603		0.85	%	6,146,415		13,863		0.91	%	6,818,289		22,080		1.30	%
Noninterest bearing transaction	1,713,809		0		0.00	%	1,697,314		0		0.00	%	1,510,591		0		0.00	%
Total funding liabilities	8,145,959		13,603		0.67	%	7,843,729		13,863		0.72	%	8,328,880		22,080		1.07	%
Other noninterest bearing liabilities	110,797						121,322						131,031
Total average liabilities	8,256,756						7,965,051						8,459,911
Total average equity	1,241,314						1,226,911						930,377
Total average liabilities and equity	$	9,498,070					$	9,191,962					$	9,390,288
Net interest income and spread (tax equivalent)			$	81,429	3.47	%			$	77,888	3.41	%			$	79,911	3.22	%
Net interest margin (tax equivalent)					3.70	%					3.69	%					3.56	%

Deposits:
Total interest bearing deposits	$	4,888,598	$	6,038	0.50	%	$	4,786,579	$	6,307	0.53	%	$	5,332,122	$	9,921	0.75	%
Noninterest bearing transaction	1,713,809		0		0.00	%	1,697,314		0		0.00	%	1,510,591		0		0.00	%
Total deposits	$	6,602,407	$	6,038	0.37	%	$	6,483,893	$	6,307	0.39	%	$	6,842,713	$	9,921	0.58	%

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 and, in California, as Sonoma Bank and Borrego Springs Bank. Sterling offers banking products and services, mortgage lending, and trust and investment products to individuals, small businesses, corporations and other commercial organizations. As of June 30, 2013, Sterling had assets of $9.94 billion and operated depository branches in Washington, Oregon, Idaho and California. Visit Sterling's website at www.sterlingfinancialcorporation.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 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. 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: the possibility of adverse economic developments 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 and the competitive environment; lower-than-expected revenue or cost savings or other issues in connection with mergers and acquisitions; and exposure to material litigation. 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@bankwithsterling.com

Investor contact:

Patrick Rusnak, 509-227-0961

pat.rusnak@bankwithsterling.com

STERLING FINANCIAL CORP /WA/ - FORM 8-K - EX-99.1 - RESULTS OF OPERATIONS AND FINANCIAL CONDITION - July 25, 2013

Attached files

STERLING FINANCIAL CORP /WA/ Reports