10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

þ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the year ended DECEMBER 31, 2012

¨Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

For the transition period from     to     

Commission File Number 001-34696

STERLING FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Washington	91-1572822
(State of incorporation)	(I.R.S. Employer Identification No.)

111 North Wall Street, Spokane, Washington 99201

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (509) 358-8097

Securities registered pursuant to Section 12(b) of the Act:

Common Stock	Nasdaq
(Title of each class)	(Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act:

(Title of class) None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨  No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨  No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ  No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ  No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨ Accelerated filer þ Non-accelerated filer ¨ Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ¨  No þ

As of June 30, 2012, the aggregate market value of the common equity held by non-affiliates of the registrant, computed by reference to the average of the bid and asked prices on such date as reported by the NASDAQ Capital Market, was $674 million.

The number of shares outstanding of the registrant’s common stock as of January 31, 2013 was 62,247,254.

DOCUMENTS INCORPORATED BY REFERENCE

Specific portions of the registrant’s Proxy Statement for its 2013 annual meeting of shareholders are incorporated by reference into Part III hereof.

TABLE OF CONTENTS

December 31, 2012

PART I
Item 1	Business	1
Item 1A	Risk Factors	18
Item 1B	Unresolved Staff Comments	23
Item 2	Properties	23
Item 3	Legal Proceedings	23
Item 4	Mine Safety Disclosures	24
PART II		25
Item 5	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	25
Item 6	Selected Financial Data	27
Item 7	Management's Discussion and Analysis of Financial Condition and Results of Operations	29
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	52
Item 8	Financial Statements and Supplementary Data	52
Item 9	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	52
Item 9A	Controls and Procedures	52
Item 9B	Other Information	54
PART III		55
Item 10	Directors, Executive Officers and Corporate Governance	55
Item 11	Executive Compensation	55
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	55
Item 13	Certain Relationships and Related Transactions, and Director Independence	55
Item 14	Principal Accounting Fees and Services	55
PART IV		56
Item 15	Exhibits, Financial Statements Schedules	56
SIGNATURES		57

PART I

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For a discussion of the risks and uncertainties inherent in such statements, see “Business—Forward-Looking Statements” and “Risk Factors.”

Item 1.Business

General

Sterling Financial Corporation, with headquarters in Spokane, Washington, was organized under the laws of Washington State in 1992 as the bank holding company for Sterling Savings Bank, which commenced operations in 1983. References to “Sterling,” “the Company,” “we,” “our,” or “us” in this report are to Sterling Financial Corporation, a Washington corporation, and its consolidated subsidiaries on a combined basis, unless otherwise specified or the context otherwise requires. References to “Sterling Bank” refer to our subsidiary Sterling Savings Bank, a Washington state-chartered commercial bank that operates under the registered trade names of Sterling Bank and in California as Sonoma Bank. Sterling Bank offers retail and commercial banking products and services, mortgage lending and wealth management to individuals, small businesses, commercial organizations and corporations. As of December 31, 2012, Sterling had assets of $9.24 billion and operated 174 depository branches in Washington, Oregon, Idaho and California.

Recent Developments

Net income (loss) for the years ended December 31, 2012, 2011 and 2010 was $385.7 million, $39.1 million, and $(224.3) million, respectively. The 2012 annual net income included an income tax benefit of $292.0 million associated with the release of a deferred tax asset valuation allowance. The increase in income before income taxes over the periods presented reflects lower credit costs as a result of an improvement in asset quality. During 2012, Sterling paid cash dividends of $49.7 million, or $0.80 per share, compared with none being paid in 2011 or 2010. Dividends paid in 2012 included a special dividend of $0.35 per share.

On February 29, 2012, Sterling completed the acquisition of the operations of First Independent Bank (“First Independent”). The First Independent transaction added $350.0 million of loans, $695.9 million of deposits, and 14 branches in the Vancouver/Portland metro area.

On August 14, 2012, the United States Department of the Treasury (the “Treasury”) sold all of its shares in Sterling common stock in an underwritten public offering. On September 19, 2012, Sterling repurchased a warrant for 97,541 shares held by the Treasury. The stock and warrant had been issued to the Treasury on December 5, 2008, in connection with Sterling's participation in the Capital Purchase Program of the Troubled Asset Relief Program, and the stock was converted on August 26, 2010 to Sterling common stock.

On October 22, 2012, Sterling entered into a definitive agreement with American Heritage Holdings ("AHH"), the holding company for Borrego Springs Bank, N.A., to acquire AHH for cash consideration of $6.5 million. The transaction, which has been approved by the boards of directors of Sterling and AHH, is expected to provide a significant enhancement to Sterling’s small business government guaranteed lending and servicing capabilities. The shareholders of AHH have agreed to vote in favor of the transaction, which is subject to customary closing conditions and is expected to be completed during the first quarter of 2013.

On November 30, 2012, Sterling Bank completed the sale of its Montana operations to Eagle Bancorp Montana, Inc. ("Eagle") and its wholly owned subsidiary, American Federal Savings Bank. Under the terms of the agreement, Eagle paid Sterling Bank a premium of $7.0 million to acquire $180.9 million of deposits and $41.3 million of performing loans and certain other assets and liabilities.

On December 14, 2012, Sterling entered into a definitive agreement to acquire the Puget Sound operations of Boston Private Bank & Trust Company (“Boston Private”), a wholly owned subsidiary of Boston Private Financial Holdings, Inc. The Boston Private Puget Sound offices are located in Seattle, Bellevue and Redmond, Washington. As of December 31, 2012, these offices had aggregate loans of approximately $270 million and deposits of $200 million. The transaction, which is subject to regulatory approval and other customary closing conditions, is expected to be completed during the second quarter of 2013.

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Business Strategy

Sterling’s goal is to become one of America’s great community banks by offering customers a range of highly personalized financial products and services. This strategy centers on bringing the full product suite of a large regional institution to consumer and commercial customers with the personalized service of a local community bank. The four tenets of this philosophy are:

• Knowledgeable bankers—Employee development, training and compensation initiatives designed to enable our talented team of bankers to capably serve our customers across our footprint.

• Fair pricing—Offer a meaningful value proposition for our customers, while providing competitive funding and returns.

• Convenience and ease of use—We have retail banking and mortgage loan origination offices with customer-oriented hours of operations; automatic teller machines located throughout our footprint; and full-service internet banking and on-line bill pay.

• Competitive products and services—We offer a full range of consumer, small business, commercial, corporate, wealth management and mortgage banking products and services across our four-state footprint. Our treasury management products include an advanced and easy to use Remote Deposit Capture system that is comparable to those of the largest banks operating in our area.

Our banking model is built around core customer relationships, and reflects our belief that every customer deserves a banking relationship built on trust and a superior experience with every interaction. In addition to organic growth based upon the tenets outlined above, an integral part of Sterling’s strategy includes acquiring other financial institutions or branches thereof, or other substantial assets or deposit liabilities.

Profitability Drivers

The following strategies are integral to our profitability:

• Improving the mix and reducing the cost of deposits;

• Reducing our balance sheet risk through resolution of the remaining asset quality issues, while generating prudently underwritten loan growth;

• Building on our banking foundation by strengthening relationships with our customers; and

• Improving operating efficiency through effective management of non-interest expenses.

We continue to shift our deposit mix towards lower cost transaction, savings and money market deposit accounts (“MMDA”). An asset quality focus is reflected by our robust underwriting and credit approval functions, and the substantial improvement in asset quality metrics. We are focused on expanding full relationship banking products and services. In addition, initiatives directed towards controlling our expenses and improvements in operating efficiency are core to our profitability strategy. Sterling believes these strategies, combined with our initiatives to manage risk, will contribute to high quality, consistent earnings, and build shareholder value. The effect of these strategies on Sterling’s financial results is discussed further in Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”).

Segment Information

Sterling's operations are divided into two primary business segments that represent our core businesses:

• Community Banking - providing traditional banking services through the retail banking, private banking and commercial banking groups, including the originating and servicing of commercial real estate, owner occupied CRE and C&I loans.

• Home Loan Division - originating and selling residential real estate loans through its mortgage banking operations, on both a servicing-retained and servicing-released basis.

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In 2012, Sterling combined its Commercial Real Estate and Community Banking segments to improve the measurement and reporting of the segments' performance. Segment results for the 2011 comparable period have been recast to reflect the current period presentation. The 2010 comparable period is grouped according to the previous classifications, due to the impracticability of reclassification to current period presentation. The results of operations are reported by segment in Note 23 of “Notes to Consolidated Financial Statements.”

Lending Activities

A description of Sterling’s lending products and activities are as follows:

Commercial Real Estate Lending. Sterling offers commercial real estate loans for investor non-owner occupied, multifamily, and construction projects, collateralized by real property. Permanent fixed- and adjustable-rate loans on existing properties typically have maturities of three to 30 years. In general, commercial real estate loans involve a higher degree of risk than one- to four-family residential real estate loans, because they typically involve large loan balances to single borrowers or groups of related borrowers. Currently, the number of new, viable construction projects that meet Sterling’s underwriting standards is limited, due to the contraction in the housing market. The performance of commercial real estate loans is subject to certain risks not present in one- to four-family residential mortgage lending, including: excessive vacancy rates, inadequate operating cash flows, construction delays, cost overruns, insufficient values and environmental risks.

Commercial Lending. Sterling provides a full range of credit and financial services products to small- and medium-sized businesses. These products include commercial and industrial (“C&I”) lending such as: lines of credit, receivable and inventory financing, and equipment loans. These products also include term financing for owner occupied commercial real estate properties. These loans are at fixed or adjustable rate structures, typically with terms of 12 months to 15 years. Loans may be fully secured, partially secured or unsecured, based on certain credit criteria. The product line for businesses includes standardized products, including access to the Small Business Administration (“SBA”) guaranteed lending program, as well as customized solutions, including cash flow and treasury management services.

Consumer Lending. Consumer loans and lines of credit are originated directly through Sterling’s retail branches and private banking teams, and indirectly through Sterling’s dealer banking department. Sterling finances the purchase of consumer goods, including automobiles, boats and recreational vehicles, and lines of credit for personal use. Generally, consumer loans have fixed or adjustable rate structures, and are at terms ranging from six months to 10 years. Sterling also makes loans secured by borrowers’ savings accounts and equity loans collateralized by residential real estate. Equity loans may have maturities of up to 20 years.

One- to Four-Family Residential Lending. Sterling originates residential mortgages that are generally underwritten to conform with Fannie Mae and Freddie Mac guidelines, guidelines established by government insured loan programs (HUD or VA), or guidelines established by investors (correspondent banks). Loans are originated through Sterling’s network of retail mortgage offices and depository branches. Products include: a) fixed-rate residential mortgages; b) adjustable-rate residential mortgages (“ARMs”), which have interest rates that adjust annually with a fixed period of three, five, seven or 10 years and are indexed to a variety of market indices; and c) interest only residential mortgages underwritten to amortizing payment standards. Sterling focuses its residential lending efforts on originating traditional amortizing loans for owner occupied homes, second homes and investment properties. Generally, conventional and government guaranteed residential mortgage loans are originated for up to 80% of the appraised value or selling price of the mortgaged property, whichever is less. Borrowers must purchase mortgage insurance from approved third parties so that Sterling’s risk is limited to approximately 80% of the appraised value at origination on most loans with loan-to-value ratios in excess of 80%. Sterling’s residential lending programs are designed to comply with all applicable regulatory requirements.

Loan Servicing and Secondary Market Activities. Sterling sells mortgage loans on a servicing-retained basis to Fannie Mae and Freddie Mac, or on a servicing-released basis to correspondent banks. Loan servicing includes collecting and remitting loan payments, accounting for principal and interest, holding and disbursing escrow funds for the payment of real estate taxes and insurance premiums, contacting delinquent borrowers and supervising foreclosures in the event of unremedied defaults. For sales of loans on a servicing-retained basis, Sterling records a servicing asset, while for sales of loans on a servicing-released basis, Sterling receives a fee. Loans sold into the secondary market are sold with limited recourse against Sterling, meaning that Sterling may be obligated to repurchase or otherwise reimburse the investor for incurred losses on any loans that suffer an early payment default, are not underwritten in accordance with investor guidelines or are determined to have pre-closing borrower misrepresentations. Sterling maintains a reserve for unfunded credit commitments to cover the costs associated with these potential indemnification obligations.

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Sterling also purchases and sells nonresidential loans in the secondary market. Agents who present loans to Sterling for purchase are required to provide a processed loan package prior to commitment. Sterling then underwrites the loans in accordance with its established lending standards. Nonresidential loan sales provide Sterling with fee income, and assist with managing portfolio concentration risks.

Credit Quality Management

Details of Sterling’s problem asset classifications and allowance for credit losses are as follows:

Classified and Nonperforming Assets. To measure the quality of loans and other real estate owned (“OREO”), Sterling has established guidelines for classifying and determining provisions for anticipated losses. Sterling’s system employs the risk rating categories of “substandard,” “doubtful” and “loss” for its classified assets. Substandard assets have deficiencies, which give rise to the distinct possibility that Sterling will sustain some loss if the deficiencies are not corrected. Doubtful assets have the same weaknesses as substandard assets, and on the basis of currently existing facts, are also deemed to have a high probability of loss. The portion of the asset considered uncollectible and of such little value that it should not be included as an asset of Sterling is classified as a loss. In such cases, Sterling establishes a specific valuation reserve. Sterling periodically reviews junior lien loans for which the senior lien on the collateral is not held by Sterling, even if the loan is performing and not classified.

The credit administration group focuses on identifying and resolving potential problem credits before they become classified. When an asset becomes classified, management of the relationship is assumed by Sterling’s special assets department. Sterling actively engages the borrower and guarantor to remedy the situation by requesting updated financial information from the borrower(s) and guarantor(s) to determine a course of action. In addition, updated collateral values are obtained in order for Sterling’s management to perform evaluations for regulatory and decision making purposes and updated title information is obtained to determine the status of encumbrances on the collateral. When possible, Sterling will require the borrower to provide additional collateral. In conjunction with the receipt of additional collateral, Sterling will sometimes modify the terms of the loan. Often the modified terms of the loan are consistent with terms that Sterling would offer a new borrower. If the borrower is having financial difficulties and the modification of terms is considered concessionary, Sterling designates the loan as a “troubled debt restructure” and reports it as a nonperforming loan. A loan designated as a troubled debt restructuring may be returned to accrual status after the borrower performs in accordance with the modified loan terms, generally for a period of at least six months. A loan may have its troubled debt restructure status removed after at least one year of performance under the modified terms of the loan, unless the modification includes an interest rate concession that is below a market rate of interest for a loan with similar characteristics.

Sterling also may permit a borrower to sell the underlying collateral for less than the outstanding balance on the loan if the current collateral evaluation supports the offer price. These transactions are known as “short sales.” In such situations, Sterling typically requires the borrower to sign a new note or bring cash to closing for the resulting deficiency.

If Sterling and a borrower are unable to achieve an acceptable resolution, Sterling may take a deed in lieu of foreclosure or initiate foreclosure on the underlying collateral. Under such circumstances, Sterling also simultaneously evaluates legal action for recovery against the borrowers and guarantors. After obtaining the collateral, Sterling actively works to sell the collateral.

Allowance for Credit Losses. Sterling regularly reviews its classified assets for impairment. If a loan is determined to be impaired, Sterling performs a valuation analysis on the loan. Valuation analysis compares the estimated fair value (discounted cash flow analysis or collateral market value less selling costs, foreclosure costs and projected holding costs), and the book balance (loan principal and accrued interest or carrying value of OREO). For loans that are considered collateral-dependent, the difference between the fair value and the book value is generally charged off as a confirmed loss. During times of declining real estate values, a specific reserve may be recorded on collateral-dependent impaired loans to recognize market declines since the last appraisal. For certain non-collateral-dependent loans, Sterling generally establishes a specific reserve for the difference between fair value and book value of these loans, as the loss is not defined as a confirmed loss because it is not based solely on collateral values. Allowances are established and periodically adjusted, if necessary, based on the review of information obtained through on-site inspections, market analysis, appraisals and purchase offers.

Sterling maintains an allowance for credit losses at a level deemed appropriate by management to provide for probable losses related to specifically identified loans and probable losses in the remaining portfolio, as well as unfunded commitments. The allowance is based upon historical loss experience, loan migration analysis, delinquency trends, portfolio size, concentrations of

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risk, prevailing and anticipated economic conditions, industry experience, estimated collateral values, management’s assessment of credit risk inherent in the portfolio, specific problem loans and other relevant factors. The portfolio is grouped into standard industry categories for loans collectively evaluated for impairment based on characteristics such as loan class, borrower and collateral. Loan migration to loss data is used to determine the annual “probability of default.” The annual probability of default is adjusted for the estimated loss emergence period and may be further adjusted based on an assessment of qualitative factors. Sterling establishes the expected loss rate on loans using the losses on charged-off and foreclosed loans for the most recent 12 month period to estimate the amount that would be lost if a default were to occur, which is termed the “loss given default.” The adjusted probability of default is multiplied by the loss given default to calculate the expected losses for each loan class. The calculated expected loss is compared to the actual one and three year (annualized) losses. If the calculated expected loss rate is less than the actual one and three year loss rates, then the expected loss rate would be set at the greater of the actual one or three year loss rate.

Additions to the allowance, in the form of provisions, are reflected in current operating results, while charge-offs to the allowance are made when a loss is determined to be a confirmed loss. Because the allowance for credit losses is based on management’s estimate, ultimate losses may materially differ from the estimates.

Investments and Mortgage-Backed Securities ("MBS")

Sterling invests primarily in Freddie Mac, Fannie Mae and the Government National Mortgage Association ("Ginnie Mae") MBS. Sterling also has investments in municipal bonds and nonagency collateralized mortgage obligations. Such investments provide Sterling with a relatively liquid source of interest income and collateral, which can be used to secure borrowings and assist with managing the interest rate risk and credit risk of Sterling’s balance sheet.

Sources of Funds

Sterling’s primary sources of funds are: retail, public and brokered deposits; the collection of principal and interest from loans and MBS; the sale of loans into the secondary market in connection with Sterling’s mortgage banking activities and other loan sale activities; borrowings from the Federal Home Loan Bank ("FHLB") and the Federal Reserve; and borrowings from commercial banks (including repurchase agreements). The availability and volume of these funds are influenced significantly by prevailing interest rates and other economic conditions, as well as regulatory statutes. Borrowings may be used on a short-term basis to compensate for reductions in other sources of funds (such as deposit inflows at less than projected levels). Borrowings may also be used on a longer-term basis to support expanded lending activities and to match repricing intervals of assets.

Deposit Activities. Sterling offers a wide variety of deposit products and related services to businesses, individuals, and public sector entities throughout its primary market areas. Deposit accounts include noninterest bearing and interest bearing transaction (checking) accounts, savings accounts, MMDA, and certificates of deposit ("CDs"). Interest rates are established by management and are based on a competitive market analysis. The method of compounding varies from simple interest credited at maturity to daily compounding, depending on the type of account. With the exception of certain promotional CDs and variable-rate products, most CDs carry a fixed rate of interest for a defined term from the opening date of the account. Penalties are imposed if principal is withdrawn from most CDs prior to maturity.

Sterling competes with other financial institutions and financial intermediaries in attracting deposits. There is strong competition for transaction, money market and time deposit balances from commercial banks, credit unions and nonbank corporations, such as securities brokerage companies, mutual funds and other diversified companies, some of which have nationwide networks of offices. Many of Sterling’s marketing efforts have been directed toward attracting additional deposit customer relationships and balances. Sterling provides electronic banking products, including debit card, online banking, bill pay, merchant services and treasury management services, which include remote deposit capture. All of these products and services are intended to enhance customer relationships and attract and increase retail deposit balances.

Sterling supplements its retail deposit gathering by soliciting funds from public entities and through the acquisition of brokered deposits. Public funds are generally obtained by competitive bidding among qualifying financial institutions, and usually require Sterling to provide the public entities with collateral in the form of qualifying securities for any portion of the deposit that exceeds FDIC deposit insurance limits.

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Borrowings. Although deposits are Sterling’s primary source of funds, Sterling also uses other borrowings to supplement its deposit gathering efforts. These borrowings include advances from the FHLB, repurchase agreements, primary credits and term auction facilities from the Federal Reserve, and federal funds purchased. See “MD&A—Liquidity and Capital Resources.”

The FHLB of Seattle is part of a system that consists of 12 regional Federal Home Loan Banks that provide secured credit to financial institutions. As a condition of membership in the FHLB of Seattle, Sterling Bank is required to own stock of the FHLB of Seattle, with the amount determined as the greater of either a percentage of Sterling’s total mortgage related assets, or a percentage of Sterling’s total advances outstanding from the FHLB of Seattle. At December 31, 2012, Sterling Bank held more than the minimum FHLB of Seattle stock ownership requirement.

Sterling also borrows funds under repurchase agreements with major broker/dealers and financial entities pursuant to which it sells investments (generally, U.S. agency obligations and MBS) under an agreement to buy them back at a specified price at a later date. These agreements to repurchase are deemed to be borrowings collateralized by the investments and MBS sold. The use of repurchase agreements and other secured borrowings may expose Sterling to certain risks, including the possibility that additional collateral may have to be provided if the market value of the pledged collateral declines.

Subsidiaries

Sterling’s principal operating subsidiary is Sterling Bank. See exhibit 21.1 for a complete list of subsidiaries for Sterling and Sterling Bank.

Competition

Sterling faces strong competition, both in attracting deposits and in originating, purchasing and selling loans including our mortgage banking operations, from commercial banks, savings and loan associations, mutual savings banks, credit unions and other institutions, many of which have greater resources than Sterling. Sterling also faces strong competition in marketing financial products such as annuities, mutual funds and other financial products and in pursuing acquisition opportunities. Some or all of these competitive businesses operate in Sterling’s market areas. As of June 30, 2012, Sterling Bank’s deposit market share was as follows, as compiled from SNL, excluding the Montana branches that were sold on November 30, 2012:

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Washington					Oregon
County	Branches	Rank	Market Share		County	Branches	Rank	Market Share
Adams	2	3	23.3	%	Baker	1	1	28.6	%
Asotin	2	2	20.9	%	Benton	1	8	2.5	%
Benton	4	8	5.6	%	Clackamas	2	17	0.6	%
Clallam	2	11	3.9	%	Clatsop	2	6	6.9	%
Clark	14	2	14.9	%	Columbia	1	3	14.7	%
Columbia	1	1	28.7	%	Coos	5	2	26.4	%
Douglas	1	4	6.9	%	Curry	3	1	29.1	%
Franklin	1	8	5.8	%	Deschutes	4	10	2.7	%
Garfield	1	1	54.7	%	Douglas	1	7	1.3	%
Grant	2	5	8.7	%	Grant	1	3	23.8	%
Grays Harbor	5	4	11.3	%	Harney	1	3	22.6	%
King	14	15	1.1	%	Jackson	5	9	5.2	%
Kitsap	1	14	1.0	%	Josephine	2	12	3.0	%
Kittitas	2	4	13.1	%	Klamath	5	2	26.7	%
Klickitat	2	2	32.8	%	Lake	1	3	30.0	%
Lewis	4	2	17.8	%	Lane	5	14	1.3	%
Okanogan	2	2	23.1	%	Linn	1	10	2.5	%
Pierce	2	18	0.9	%	Malheur	3	3	22.5	%
Skamania	1	1	53.1	%	Marion	2	13	0.7	%
Snohomish	2	24	0.5	%	Multnomah	3	9	0.9	%
Spokane	9	4	11.7	%	Polk	1	7	5.6	%
Thurston	4	10	4.0	%	Tillamook	3	2	32.0	%
Walla Walla	3	5	5.1	%	Umatilla	3	7	5.6	%
Whatcom	3	11	2.8	%	Union	3	1	26.8	%
Whitman	2	7	3.3	%	Wallowa	1	2	25.0	%
					Washington	3	11	2.5	%
					Yamhill	2	9	2.9	%
Idaho					California
County	Branches	Rank	Market Share		County	Branches	Rank	Market Share
Ada	2	20	0.6	%	Contra Costa	2	17	0.4	%
Adams	1	2	37.6	%	Marin	2	13	0.8	%
Benewah	1	3	18.3	%	Sonoma	9	6	6.4	%
Idaho	3	1	50.8	%
Kootenai	3	11	3.1	%
Latah	3	2	25.6	%
Nez Perce	3	2	19.2	%
Valley	2	3	26.7	%

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Personnel

As of December 31, 2012, Sterling had 2,532 full-time equivalent employees. Employees are not represented by a collective bargaining unit.

Regulation

The following is a summary of some of the more significant provisions of laws applicable to Sterling and its subsidiaries. This regulatory framework is designed to protect depositors, federal deposit insurance funds and the banking system as a whole, and not to protect security holders. To the extent that the information describes statutory and regulatory provisions, it is qualified in its entirety by reference to those provisions. Further, such statutes, regulations and policies are continually under review by Congress and state legislatures, and federal and state regulators. A change in statutes, regulations or regulatory policies applicable to Sterling, including changes in interpretation or implementation thereof, could have a material effect on Sterling’s business.

General. As a bank holding company, Sterling is subject to regulation, examination and supervision by the Board of Governors of the Federal Reserve under the Bank Holding Company Act of 1956, as amended (the “BHCA”), and by the Washington Department of Financial Institutions (the "WDFI"). Our subsidiary Sterling Bank is a Washington state-chartered commercial bank, and its deposits are insured by the FDIC. It is subject to regulation, examination and supervision by the FDIC and the WDFI. Numerous federal and state laws, as well as regulations promulgated by the Federal Reserve, the FDIC and state banking regulators, govern almost all aspects of the operation of Sterling Bank, and Sterling’s non-bank subsidiaries are also subject to regulation by applicable federal and state regulators for the states in which they conduct business.

Bank Holding Company Regulation. The BHCA limits a bank holding company’s business to owning or controlling banks and engaging in other banking-related activities. Bank holding companies must obtain the Federal Reserve’s approval before they: (1) acquire direct or indirect ownership or control of any voting shares of any bank that results in total ownership or control, directly or indirectly, of more than 5% of the voting shares of such bank; (2) merge or consolidate with another bank holding company; or (3) acquire substantially all of the assets of any additional banks. Subject to certain state laws, such as age and contingency restrictions, a bank holding company that is adequately capitalized and adequately managed may acquire the assets of both in-state banks and out-of-state banks. With certain exceptions, the BHCA prohibits bank holding companies from acquiring direct or indirect ownership or control of voting shares in any company that is not a bank or a bank holding company unless the Federal Reserve determines that the activities of such company are incidental or closely related to the business of banking. If a bank holding company is well-capitalized and meets certain criteria specified by the Federal Reserve, it may engage de novo in certain permissible non-banking activities without prior Federal Reserve approval.

A number of provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), a few of which are described here, affect the regulation and operations of banks and bank holding companies. Pursuant to the Dodd-Frank Act, the FDIC is given back-up supervisory authority over bank holding companies engaging in conduct that poses a foreseeable and material risk to the Deposit Insurance Fund ("DIF"), and the Federal Reserve gains heightened authority to examine, prescribe regulations and take action with respect to all of a bank holding company’s subsidiaries. A newly created agency, the Office of Financial Research, has authority to collect data from all financial institutions for the purpose of studying threats to U.S. financial stability. Banks and bank holding companies with $10 billion or more in assets will also be required to conduct and publish the results of annual capital stress tests. In December 2011, the Federal Reserve released a proposed rule to implement this stress testing requirement, but the rule has not yet been finalized.

Holding companies of banks chartered under Washington law are subject to applicable provisions of Washington’s banking laws and to the examination, supervision and enforcement powers of the WDFI. Among other powers, the WDFI has the authority to issue and enforce cease and desist orders on such holding companies and to bring actions to remove their directors, officers and employees.

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Change in Control. Subject to certain exceptions, the BHCA and the Change in Bank Control Act, together with regulations promulgated thereunder, require Federal Reserve approval prior to any person or company acquiring “control” of a bank or bank holding company. Control is conclusively presumed to exist if an individual or company acquires 25% or more of any class of voting securities. Control is rebuttably presumed to exist if a person acquires 10% or more, but less than 25%, of any class of an institution’s voting securities and either that institution has registered securities under Section 12 of the Exchange Act or no other person owns a greater percentage of that class of voting securities immediately after the transaction. In certain cases, a company may also be presumed to have control under the Bank Holding Company Act if it acquires 5% or more of any class of voting securities.

On September 22, 2008, the Federal Reserve issued a policy statement on minority equity investments in banks and bank holding companies that permits investors—without triggering the various regulatory requirements associated with control—to (1) acquire up to 33% of the total equity of a target bank or bank holding company, subject to certain conditions including (but not limited to) the condition that the investing firm does not acquire 15% or more of any class of voting securities, and (2) designate at least one director to serve on the board of directors.

Pursuant to the Dodd-Frank Act, a bank holding company may acquire control of an out-of-state bank only if the bank holding company is well-capitalized and well-managed, and interstate merger transactions are prohibited unless the resulting bank would be well-capitalized and well-managed following the transaction. Washington state law requires that the WDFI be given notice at least 30 days in advance of any proposed change of control of a Washington state-chartered bank. Washington law defines "control" of an entity to mean directly or indirectly, alone or in concert with others, to own, control or hold the power to vote 25% or more of the outstanding stock or voting power of the entity.

Capital Requirements. The Federal Reserve has adopted guidelines pursuant to which it assesses the adequacy of capital in examining and supervising a bank holding company such as Sterling, and in analyzing applications under the BHCA. The FDIC has adopted similar guidelines to assess the adequacy of capital in state-chartered non-member banks such as Sterling Bank. These guidelines include quantitative measures that assign risk weightings to assets and off-balance sheet items and that define and set minimum regulatory capital requirements. The definitions of capital and the tests for measuring the adequacy of capital required by the Federal Reserve for bank holding companies and by the FDIC for state-chartered non-member banks are similar, but not identical.

In general, all bank holding companies are required to maintain a tier 1 leverage ratio of at least 3%, tier 1 risk-based capital ratio of at least 4%, and total risk-based capital ratio (the sum of tier 1 capital and tier 2 capital) of at least 8%.

Under FDIC regulations, all insured depository institutions are assigned to one of the following capital categories:

• Well-Capitalized—A well-capitalized insured depository institution: (1) has a total risk-based capital ratio of 10% or greater; (2) has a tier 1 risk-based capital ratio of 6% or greater; (3) has a leverage capital ratio of 5% or greater; and (4) is not subject to any order or written directive to meet and maintain a specific capital level for any capital measure.

• Adequately Capitalized—An adequately capitalized insured depository institution: (1) has a total risk-based capital ratio of 8% or greater; (2) has a tier 1 risk-based capital ratio of 4% or greater; and (3) has a leverage capital ratio of 4% or greater or a leverage capital ratio of 3% or greater if the institution is rated composite 1 under the CAMELS (Capital, Assets, Management, Earnings, Liquidity and Sensitivity to market risk) rating system.

• Undercapitalized—An undercapitalized insured depository institution: (1) has a total risk-based capital ratio of less than 8%; (2) has a tier 1 risk-based capital ratio of less than 4%; or (3) has a leverage capital ratio of less than 4%, or if the institution is rated a composite 1 under the CAMELS rating system, a leverage capital ratio of less than 3%.

• Significantly Undercapitalized—A significantly undercapitalized insured depository institution: (1) has a total risk-based capital ratio of less than 6%; (2) has a tier 1 risk-based capital ratio of less than 3%; or (3) a leverage capital ratio of less than 3%.

• Critically Undercapitalized—A critically undercapitalized institution: has a ratio of tangible equity to total assets that is equal to or less than 2%.

The regulations permit the appropriate federal banking regulator to downgrade an institution to the next lower category if the regulator determines that the institution is in an unsafe or unsound condition or that the institution has received and not corrected a less-than-satisfactory rating for any of the categories of asset quality, management, earnings or liquidity in its most recent examination. Supervisory actions by the appropriate federal banking regulator depend upon an institution’s classification

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within the five regulatory capital categories. For the purposes of these tests, tier 1 capital generally consists of common equity, retained earnings and a limited amount of qualifying preferred stock, less accumulated other comprehensive income (loss), goodwill and certain core deposit intangibles. Tier 2 capital consists of non-qualifying preferred stock, certain types of debt and a limited amount of other items.

In measuring the adequacy of risk-based capital, assets are weighted for risk at rates that range from zero percent to 100%. Certain assets, such as cash and U.S. government securities, have a zero percent risk weighting. Others, such as certain commercial and consumer loans, have a 100% risk weighting. Risk weightings and asset equivalent factors are also assigned for off-balance sheet items such as loan commitments. The various items are multiplied by the appropriate risk-weighting to determine risk-adjusted assets for the capital calculations. For the leverage ratio mentioned above, assets are not risk-weighted.

In December 2010, the Basel Committee published new capital standards commonly referred to as “Basel III.” On June 7, 2012, the Federal Reserve issued proposed capital regulations consistent with Basel III. The proposal includes a new capital standard consisting of common equity tier 1 capital, increases in the level of capital required to be held by financial institutions, and a requirement for a capital conservation buffer. Aspects of the proposal could introduce volatility to capital levels, such as the inclusion in tier 1 capital of unrealized gains and losses on available for sale securities. Revisions to risk weightings include application of a more risk-sensitive treatment to certain residential mortgage exposures, past due or nonaccrual loans, mortgage servicing rights and deferred tax assets. Trust preferred junior subordinated debentures would be phased out as a component of tier 1 capital. As of the date of this filing, final regulations have not been issued. If the proposed rule were in effect at December 31, 2012, it would not materially impact Sterling's and Sterling Bank's regulatory capital ratios.

As of December 31, 2012, Sterling and Sterling Bank’s capital levels were above those currently required to be deemed “well-capitalized.” As noted, capital requirements will likely be increasing over the next several years as a result of the implementation of the Dodd-Frank Act and the U.S. federal banking regulators’ implementation of the Basel III standards. If a depository institution fails to remain well-capitalized, it becomes subject to a variety of enforcement remedies that increase as the capital condition worsens.

Commitments to Subsidiary Bank. Under Federal Reserve policy, Sterling is expected to act as a source of financial strength to Sterling Bank, and to commit resources to support Sterling Bank in circumstances when we might not do so absent such policy. The Dodd-Frank Act requires this Federal Reserve policy to be implemented into formal regulations, which have not yet been proposed. Under the BHCA, the Federal Reserve may require a bank holding company to terminate any activity or relinquish control of a nonbank subsidiary, other than a nonbank subsidiary of a bank, upon the Federal Reserve’s determination that such activity or control constitutes a serious risk to the financial soundness or stability of any depository institution subsidiary. Further, the Federal Reserve has discretion to require a bank holding company to divest itself of any bank or nonbank subsidiaries if the Federal Reserve determines that any such divestiture may aid the depository institution’s financial condition. In addition, any capital loans by Sterling to Sterling Bank would be subordinate in right of payment to depositors and to certain other indebtedness of Sterling Bank.

If Sterling were to enter bankruptcy, any commitment by it to a federal bank regulatory agency to maintain the capital of Sterling Bank would generally be assumed by the bankruptcy trustee and entitled to a priority of payment. However, recent case law has held that, under certain circumstances, the assumption by the trustee and the priority of payment may be disallowed. It is not clear what impact, if any, this case law would have on our obligations in such an event.

Prompt Corrective Action. The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") established a system of prompt corrective action to resolve the problems of undercapitalized insured depository institutions. Under this system, the federal banking regulators are required to rate insured depository institutions on the basis of five capital categories as described above under "Capital Requirements." The federal banking regulators are also required to take mandatory supervisory actions and are authorized to take other discretionary actions with respect to insured depository institutions in the three undercapitalized categories, the severity of which will depend upon the capital category in which the insured depository institution is assigned. Generally, subject to a narrow exception, FDICIA requires the banking regulators to appoint a receiver or conservator for an insured depository institution that is critically undercapitalized. The federal banking regulations specify the relevant capital level for each category.

FDICIA generally prohibits a depository institution from making any capital distribution, including payment of a dividend, or paying any management fee to its holding company if the depository institution would thereafter be undercapitalized. See “Dividends.” “Undercapitalized” depository institutions are also subject to restrictions on borrowing from the Federal Reserve System, may not accept brokered deposits absent a waiver from the FDIC, and are subject to growth limitations. In addition, a

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depository institution’s holding company must guarantee a capital plan, up to an amount equal to the lesser of 5% of the depository institution’s assets at the time it becomes undercapitalized or the amount of the capital deficiency when the institution fails to comply with the plan. Federal banking regulators may not accept a capital plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution’s capital. If a depository institution fails to submit an acceptable plan, it is treated as if it is significantly undercapitalized.

“Significantly undercapitalized” depository institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets, and cessation of receipt of deposits from correspondent banks. “Critically undercapitalized” institutions are subject to the appointment of a receiver or conservator.

Washington state law gives the WDFI powers similar to those granted to the FDIC under the prompt corrective action provisions of FDICIA.

Dividends. Sterling is a legal entity separate and distinct from Sterling Bank and other subsidiaries. The principal source of funds for Sterling’s payment of dividends on its capital stock and principal and interest on its debt is dividends from Sterling Bank. Various federal and state statutory provisions and regulations limit the amount of dividends, if any, Sterling, Sterling Bank and certain other subsidiaries may pay without regulatory approval.

Under the Federal Reserve guidance reissued on February 24, 2009 the Federal Reserve may restrict Sterling’s ability to pay dividends on any class of capital stock or any other tier 1 capital instrument if it is not deemed to have a strong capital position. In addition, dividends may have to be reduced or eliminated if:

• Sterling’s net income available to shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends;

• Sterling Bank’s prospective rate of earnings retention is not consistent with the holding company’s capital needs and overall current and prospective financial condition; or

• Sterling will not meet, or is in danger of not meeting, Sterling’s minimum regulatory capital adequacy ratios.

The FDIC has the authority to prohibit Sterling Bank from engaging in unsafe or unsound practices in conducting its business, and the payment of dividends, depending on the Bank’s financial condition, could be deemed an unsafe or unsound practice. The ability of Sterling Bank to pay dividends in the future will continue to be influenced by bank regulatory capital guidelines, and is subject to regulatory approval. As of December 31, 2012, Sterling Bank had an accumulated deficit of $662.9 million, and is therefore not permitted to pay any dividends without prior WDFI approval.

FDICIA generally prohibits a depository institution from making any capital distribution, including payment of a dividend, or paying any management fee to its holding company if the institution would thereafter be undercapitalized. In addition, federal and state banking regulations applicable to us and our bank subsidiaries require minimum levels of capital that limit the amounts available for payment of dividends.

Deposit Insurance and Assessments. Deposits held by Sterling Bank are insured by the DIF as administered by the FDIC. The Dodd-Frank Act raised the standard maximum deposit insurance amount to $250,000 per depositor, per insured depository institution for each account ownership category. From December 31, 2010 to December 31, 2012, the Dodd-Frank Act provided unlimited FDIC insurance for all noninterest-bearing transaction accounts, regardless of amount.

The FDIC maintains the DIF by assessing each depository institution an insurance premium. The amount of the FDIC assessments paid by a DIF member institution is based on its relative risk of default as measured by the company’s FDIC supervisory rating, and other various measures, such as the level of brokered deposits, secured debt and debt issuer ratings.

In February 2011, the FDIC redefined the deposit insurance assessment base, and updated the assessment rates. The DIF assessment base rate currently ranges from 2.5 to 45 basis points for institutions that do not trigger factors for brokered deposits and unsecured debt, and higher rates for those that do trigger those risk factors. On October 9, 2012, the FDIC revised this guidance to clarify definitions used to identify concentrations in certain high risk assets of depository institutions with more than $10 billion in assets. This guidances will be effective April 1, 2013, and provides for higher premiums in cases where high risk assets are in excess of prescribed thresholds. The impact on Sterling is expected to be minimal.

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The Dodd-Frank Act effects further changes to the law governing deposit insurance assessments. There is no longer an upper limit for the reserve ratio designated by the FDIC each year, and the maximum reserve ratio may not be less than 1.35% of insured deposits, or the comparable percentage of the assessment base. Under prior law the maximum reserve ratio was 1.15%. The Dodd-Frank Act permits the FDIC until September 30, 2020 to raise the reserve ratio, which is currently negative, to 1.35%. The FDIC is required to offset the effect of increased assessments necessitated by the Dodd-Frank Act on insured depository institutions with total consolidated assets of less than $10 billion. The Dodd-Frank Act also eliminates requirements under prior law that the FDIC pay dividends to member institutions if the reserve ratio exceeds certain thresholds. In lieu of dividends, the FDIC will adopt lower rate schedules when the reserve ratio exceeds certain thresholds.

Transactions with Affiliates and Insiders. A variety of legal limitations restrict Sterling Bank from lending or otherwise supplying funds or in some cases transacting business with Sterling or its nonbank subsidiaries. Sterling Bank is subject to Sections 23A and 23B of the Federal Reserve Act and Federal Reserve Regulation W. Section 23A places limits on the amount of covered transactions which include loans or extensions of credit to, investments in or certain other transactions with, affiliates as well as the amount of advances to third parties collateralized by the securities or obligations of affiliates. The aggregate of all covered transactions is limited to 10% of the bank’s capital and surplus for any one affiliate and 20% for all affiliates. Furthermore, within the foregoing limitations as to amount, each covered transaction must meet specified collateral requirements ranging from 100% to 130%. Also, banks are prohibited from purchasing low quality assets from an affiliate.

Section 23B, among other things, prohibits an institution from engaging in certain transactions with affiliates unless the transactions are on terms substantially the same, or at least as favorable to the bank, as those prevailing at the time for comparable transactions with nonaffiliated companies. Except for limitations on low quality asset purchases and transactions that are deemed to be unsafe or unsound, Regulation W generally excludes affiliated depository institutions from treatment as affiliates. Transactions between a bank and any of its subsidiaries that are engaged in certain financial activities may be subject to the affiliated transaction limits. The Federal Reserve also may designate bank subsidiaries as affiliates.

Banks are also subject to quantitative restrictions on extensions of credit to executive officers, directors, principal shareholders, and their related interests. In general, such extensions of credit (1) may not exceed certain dollar limitations, (2) must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with third parties and (3) must not involve more than the normal risk of repayment or present other unfavorable features. Certain extensions of credit also require the approval of a bank’s board of directors.

The Dodd-Frank Act expands the 23A and 23B affiliate transaction rules. Among other things, upon the statutory changes’ effective date, the scope of the definition of “covered transaction” under 23A will expand, collateral requirements will increase and certain exemptions will be eliminated.

Standards for Safety and Soundness. The Federal Deposit Insurance Act requires the federal bank regulators to prescribe the operational and managerial standards for all insured depository institutions relating to: (1) internal controls; (2) information systems and audit systems; (3) loan documentation; (4) credit underwriting; (5) interest rate risk exposure; and (6) asset quality.

The regulators also must prescribe standards for earnings, and stock valuation, as well as standards for compensation, fees and benefits. The Interagency Guidelines Prescribing Standards for Safety and Soundness set forth the safety and soundness standards used to identify and address problems at insured depository institutions before capital becomes impaired. Under the rules, if a regulator determines that a bank fails to meet any standards prescribed by the guidelines, the regulator may require the bank to submit an acceptable plan to achieve compliance, consistent with deadlines for the submission and review of such safety and soundness compliance plans.

Regulatory Examination. Federal and state banking regulators mandate that Sterling and Sterling Bank provide audited financial statements in compliance with minimum standards and procedures. Sterling and Sterling Bank must undergo regular on-site examinations by the appropriate banking agency. A bank regulator conducting an examination has complete access to the books and records of the examined institution. The results of the examination are confidential. The cost of examinations may be assessed against the examined institution as the agency deems necessary or appropriate.

State Law and Regulation. Sterling Bank, as a Washington state-chartered institution, is subject to regulation by the WDFI, which conducts regular examinations to ensure that its operations and policies conform with applicable law and safe and sound banking practices. Among other things, state law regulates the amount of credit that can be extended to any one borrower and the amount of money that can be invested in various types of assets. Sterling Bank generally cannot extend credit to any one borrower in an amount greater than 20% of Sterling Bank’s capital and surplus. State law also regulates the types of loans

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Sterling Bank can make. With the WDFI’s approval, Sterling Bank can currently invest up to 10% of its total assets or 50% of its net worth (whichever is less) in other corporations, whether or not such corporations are engaged in activities related to Sterling Bank’s business, but such authority is subject to restrictions imposed by federal law. Sterling Bank also operates depository branches within the states of Oregon, Idaho and California, and therefore, its operations in these states are subject to the supervision of the Oregon Department of Consumer and Business Services, the Idaho Department of Finance and the California Department of Financial Institutions, as applicable. Sterling and its subsidiaries are also required to comply with the applicable laws and regulations for the various states in which it does business.

Community Reinvestment Act. The Community Reinvestment Act (the "CRA") requires that the appropriate federal bank regulator evaluate the records of Sterling Bank in meeting the credit needs of its local community, including low and moderate income neighborhoods. These evaluations are considered by regulatory agencies in their review of applications to approve bank mergers, acquisitions, and new branches or facilities. Failure to adequately meet these criteria could result in additional requirements and limitations on the Bank. As of Sterling Bank's last CRA regulatory exam completed in May 2012, the rating was “satisfactory.”

Consumer Protection Regulations. Retail activities of banks are subject to a variety of statutes and regulations designed to protect consumers. The Dodd-Frank Act established the Consumer Financial Protection Bureau (the “CFPB”) that, together with the statute’s changes to consumer protection laws such as limits on debit card interchange fees and provisions on mortgage-related matters, will likely increase the compliance costs of consumer banking operations. Interest and other charges collected or contracted for by banks are subject to state usury laws and federal laws concerning interest rates. In January 2012, a director was appointed to lead the CFPB and the CFPB began exercising its full range of powers. The CFPB has exclusive authority to require reports and conduct examinations, for purposes of ensuring compliance with federal consumer financial laws and related matters, of insured depository institutions with more than $10 billion of assets. For insured depository institutions with assets of $10 billion or less, the CFPB can require reports and conduct examinations on a sample basis.

Loan operations are also subject to federal laws applicable to credit transactions, such as:

• the federal Truth-In-Lending Act and Regulation Z issued by the Federal Reserve, governing disclosures of credit terms to consumer borrowers;

• the Home Mortgage Disclosure Act and Regulation C issued by the Federal Reserve, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

• the Equal Credit Opportunity Act and Regulation B issued by the Federal Reserve, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

• the Fair Credit Reporting Act and Regulation V issued by the Federal Reserve, governing the use and provision of information to consumer reporting agencies;

• the Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and

• the guidance of the various federal agencies charged with the responsibility of implementing such federal laws.

Deposit operations also are subject to:

• the Truth in Savings Act and Regulation DD issued by the Federal Reserve, which requires disclosure of deposit terms to consumers;

• Regulation CC issued by the Federal Reserve, which relates to the availability of deposit funds to consumers;

• the Right to Financial Privacy Act, which imposes a duty to maintain the confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; and

• the Electronic Funds Transfer Act and Regulation E issued by the Federal Reserve, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of ATMs and other electronic banking services.

Commercial Real Estate Lending. Lending operations that involve concentrations of commercial real estate loans are subject to enhanced scrutiny by federal banking regulators. The regulators have advised financial institutions of the risks posed by

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commercial real estate lending concentrations. Such loans generally include land development, construction loans and loans secured by multifamily property, and nonfarm, nonresidential real property where the primary source of repayment is derived from rental income associated with the property. The guidance prescribes guidelines for examiners to help identify institutions that are potentially exposed to excessive risk concentrations and may warrant greater supervisory scrutiny.

The Dodd-Frank Act contains provisions on credit risk retention that require federal banking regulators to adopt regulations mandating the retention of 5% of the credit risk of certain loans transferred, sold or conveyed through issuances of asset-backed securities. Implementing regulations will provide for the allocation of the risk retention obligation between securitizers and originators of loans.

Branching. The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the “Interstate Act”) permits nationwide interstate banking and branching under certain circumstances. This legislation generally authorizes interstate branching and relaxes federal law restrictions on interstate banking. Currently, bank holding companies may purchase banks in any state, and states may not prohibit these purchases. Additionally, banks are permitted to merge with banks in other states, as long as the home state of neither merging bank has opted out under the legislation. The Interstate Act requires regulators to consult with community organizations before permitting an interstate institution to close a branch in a low-income area.

Washington enacted “opting in” legislation in accordance with the Interstate Act, allowing banks to engage in interstate merger transactions, subject to certain “aging” requirements. Once an out-of-state bank has acquired a bank within the state, either through merger or acquisition of all or substantially all of the bank’s assets, the out-of-state bank may open additional branches within the state. In addition, an out-of-state bank may establish a new branch in Washington or acquire a branch in Washington if the out-of-state bank’s home state gives Washington banks substantially the same or more favorable rights to establish and maintain branches in that state.

Anti-Tying Restriction. In general, a bank may not extend credit, lease, sell property, or furnish any services or fix or vary the consideration for products and services on the condition that (1) the customer obtain or provide some additional credit, property, or services from or to the bank or bank holding company or their subsidiaries, or (2) the customer not obtain some other credit, property, or services from a competitor, except to the extent reasonable conditions are imposed to assure the soundness of the credit extended. A bank may, however, offer combined-balance products and may otherwise offer more favorable terms if a customer obtains two or more traditional bank products. Also, certain foreign transactions are exempt from the general rule.

Anti-Money Laundering. Financial institutions must maintain anti-money laundering programs that include established internal policies, procedures, and controls; a designated compliance officer; an ongoing employee training program; and the periodic testing of the program. Sterling Bank is prohibited from entering into specified financial transactions and account relationships and must meet enhanced standards for due diligence in dealings with foreign financial institutions and foreign customers. We also must take reasonable steps to conduct enhanced scrutiny of account relationships to guard against money laundering and to report any suspicious transactions. Recent laws provide law enforcement authorities with increased access to financial information maintained by banks. Anti-money laundering requirements have been substantially strengthened as a result of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA Patriot Act”), enacted in 2001 and renewed in 2006 and extended, in part, in 2011. Bank regulators routinely examine institutions for compliance with these requirements and must consider compliance in connection with the regulatory review of applications.

The USA Patriot Act amended, in part, the Bank Secrecy Act and provides for the facilitation of information sharing among governmental entities and financial institutions for the purpose of combating terrorism and money laundering. The statute also creates enhanced information collection tools and enforcement mechanics for the U.S. government, including: (1) requiring standards for verifying customer identification at account opening; (2) promulgating rules to promote cooperation among financial institutions, regulators, and law enforcement entities in identifying parties that may be involved in terrorism or money laundering; (3) requiring reports by nonfinancial trades and businesses filed with the Treasury’s Financial Crimes Enforcement Network for transactions exceeding $10,000; and (4) mandating the filing of suspicious activities reports if a bank believes a customer may be violating U.S. laws and regulations. The statute also requires enhanced due diligence requirements for financial institutions that administer, maintain, or manage private bank accounts or correspondent accounts for non-U.S. persons.

The Federal Bureau of Investigation may send bank regulators lists of the names of persons suspected of involvement in terrorist activities. Sterling Bank may be subject to a request for a search of its records for any relationships or transactions with

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persons on those lists and may be required to report any identified relationships or transactions. Furthermore, the Office of Foreign Assets Control (“OFAC”) is responsible for helping to ensure that U.S. entities do not engage in transactions with certain prohibited parties, as defined by various Executive Orders and Acts of Congress. OFAC has sent, and will send, bank regulators lists of names of persons and organizations suspected of aiding, harboring or engaging in terrorist acts, known as Specially Designated Nationals and Blocked Persons. If we find a name on any transaction, account or wire transfer that matches the OFAC list, the account is frozen, a suspicious activity report is filed and the appropriate authorities are notified.

Privacy and Credit Reporting. Financial institutions are required to disclose their policies for collecting and protecting confidential customer information. Customers generally may prevent financial institutions from sharing nonpublic personal financial information with nonaffiliated third parties, with some exceptions, such as the processing of transactions requested by the consumer. Financial institutions generally may not disclose certain consumer or account information to any nonaffiliated third party for use in telemarketing, direct mail marketing or other marketing. Federal and state bank regulators have prescribed standards for maintaining the security and confidentiality of consumer information, and we are subject to such standards, as well as certain federal and state laws or standards for notifying consumers in the event of a security breach.

Sterling Bank utilizes credit bureau data for loan underwriting purposes. Use of such data is regulated under the Fair Credit Reporting Act and Regulation V on a uniform, nationwide basis, including credit reporting, prescreening, sharing of information between affiliates and the use of credit data. The Fair and Accurate Credit Transactions Act, which amended the Fair Credit Reporting Act, permits states to enact identity theft laws that are consistent with the conduct required by the provisions of that Act.

Enforcement Powers. Banks and their “institution-affiliated parties,” including directors, management, employees, agents, independent contractors and consultants, such as attorneys and accountants, and others who participate in the conduct of the institution’s affairs, are subject to potential civil and criminal penalties for violations of law, regulations or written orders of a government agency. Violations can include failure to timely file required reports, filing false or misleading information or submitting inaccurate reports. Civil penalties may be as much as $1 million a day for such violations and criminal penalties for some financial institution crimes may include imprisonment for 20 years. Regulators have flexibility to commence enforcement actions against institutions and institution-affiliated parties, and the FDIC has the authority to terminate deposit insurance. When issued by a banking regulator, cease-and-desist orders or other regulatory agreements may, among other things, require affirmative action to correct any harm resulting from a violation or practice, including restitution, reimbursement, indemnifications or guarantees against loss. A financial institution may also be ordered to restrict its growth, dispose of certain assets, rescind agreements or contracts, or take other actions determined to be appropriate by the ordering agency. Federal and state banking regulators also may remove a director or officer from an insured depository institution (or bar them from the industry) if a violation is willful or reckless.

Corporate Governance. The Dodd-Frank Act contains a number of provisions that require changes to financial institutions’ corporate governance and executive compensation practices, including proxy access for publicly-traded banks’ director nominations, clawback of incentive-based compensation from executive officers and increased disclosure on compensation arrangements. Publicly-traded bank holding companies with more than $10 billion in assets will also be required to have risk committees with a number of independent directors to be determined by the Federal Reserve and that include at least one risk management expert. The Federal Reserve released proposed rules to implement these risk committee requirements in December 2011, but the rules have not yet been finalized.

Monetary Policy and Economic Controls. Our earnings are affected by the policies of regulatory authorities, including the monetary policy of the Federal Reserve. An important function of the Federal Reserve is to promote orderly economic growth by influencing interest rates and the supply of money and credit. Among the methods that have been used to achieve this objective are open market operations in U.S. government securities, changes in the discount rate for bank borrowings, expanded access to funds for nonbanks and changes in reserve requirements against bank deposits. These methods are used in varying combinations to influence overall growth and distribution of bank loans, investments and deposits, interest rates on loans and securities, and rates paid for deposits. In recent years, in response to the financial crisis, the Federal Reserve has created several innovative programs to stabilize certain financial institutions and to ensure the availability of credit. The effects of the various Federal Reserve policies on our future business prospects and earnings cannot be predicted.

Depositor Preference Statute. Federal law provides that deposits and certain claims for administrative expenses and employee compensation against an insured depository institution are afforded priority over other general unsecured claims against such institution, including federal funds and letters of credit, in the liquidation or other resolution of the institution by any receiver.

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Environmental Laws. Hazards related to the environment have become a source of high risk and potentially unlimited liability for financial institutions relative to their loans. Contaminated properties owned by an institution’s borrowers may result in a drastic reduction in the value of the collateral securing the institution’s loans to such borrowers, high clean-up costs to the borrower affecting its ability to repay the loans, the subordination of any lien in favor of the institution to a state or federal lien securing clean-up costs, and liability to the institution for clean-up costs if it forecloses on the contaminated property or becomes involved in the management of the property. To minimize this risk, Sterling may require an environmental examination and report with respect to the property of any borrower or prospective borrower if circumstances affecting the property indicate a potential for contamination, taking into consideration the potential loss to the institution in relation to the burdens to the borrower. This examination must be performed by an engineering firm experienced in environmental risk studies and acceptable to the institution, with the costs of such examinations and reports being the responsibility of the borrower. These costs may be substantial and may deter a prospective borrower from entering into a loan transaction with Sterling. Sterling is not aware of any borrower who is currently subject to any environmental investigation or clean-up proceeding that is likely to have a material adverse effect on the financial condition or results of operations of Sterling.

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Forward-Looking Statements

This annual report on Form 10-K 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 report 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 report, 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 loans 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,” as updated periodically in Sterling’s filings with the SEC. Unless legally required, Sterling disclaims any obligation to update any forward-looking statements. You should consider any forward-looking statements in light of this explanation, and we caution you about relying on forward-looking statements.

Where You Can Find More Information

The periodic reports Sterling files with the SEC are available on Sterling’s website at www.SterlingFinancialCorporation.com after the reports are filed with the SEC. The SEC maintains a website located at www.sec.gov that also contains this information. The information on Sterling’s website and the SEC’s website is not part of this annual report on Form 10-K. Sterling will provide you with copies of these reports, without charge, upon request made to:

Investor Relations

Sterling Financial Corporation

111 North Wall Street

Spokane, Washington 99201

(509) 358-8097

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Item 1A.Risk Factors

Set forth below and elsewhere in this Annual Report on Form 10-K and in other documents we file with the SEC are risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements contained in this Annual Report on Form 10-K.

The risks described below are not the only ones facing our company. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. Our business, financial condition, results of operations or prospects could be materially and adversely affected by any of these risks. The trading price of, and market for, shares of Sterling common stock could decline due to any of these risks.

Our allowance for loan losses, or the amount of capital we hold, may be insufficient. We maintain an allowance for credit losses, with the level of the allowance reflecting estimates as to future losses. The determination of the appropriate level of the allowance for credit losses inherently involves a high degree of subjectivity and requires management to make significant estimates and judgments regarding current credit risks and future trends, all of which may undergo material changes. If our estimates prove to be incorrect, our allowance for credit losses may not be adequate to cover our actual loan losses. Bank regulatory agencies periodically review the adequacy of our allowance for credit losses as part of their examination process, and may require an increase therein. We are required to maintain a certain level of capital. The level of required capital to hold may change through new regulations such as Basel III. Also, the level of capital we hold changes, based on our financial performance, and balance sheet size and composition. We may be required to raise capital in the future, and it may be at a time that the capital is not available to us or not available at favorable terms.

Credit risk concentrations could have a material adverse effect on our business, financial condition, and results of operations. A large portion of our loan portfolio is secured by real estate, which is primarily located in the Pacific Northwest and California. In addition, a significant portion of our multifamily loans originated since 2011 are secured by properties located in the greater Los Angeles and San Francisco markets. Deterioration in the economic conditions or a prolonged delay in economic recovery in our primary market areas could result in the following consequences, any of which could materially and adversely affect our business: collateral for loans, especially real estate, may decline in value, in turn reducing customers’ borrowing power and the value of assets and collateral associated with our existing loans; loan delinquencies may increase; problem assets and foreclosures may increase; demand for our products and services may decrease; and access to low cost or noninterest bearing deposits may decrease.

Approximately 45% of our loan portfolio was comprised of commercial real estate loans as of December 31, 2012. Included in commercial real estate loans are investor real estate loans, which may have a higher degree of risk than some other loan types, as they typically are dependent on the cash flows generated from the underlying property. Commercial and consumer delinquency levels and real estate market values could affect our level of net charge-offs and provision for credit losses, which could have a material adverse effect on our business, financial condition and results of operations and prospects. Acts of nature, including earthquakes, floods and fires, which may cause uninsured damage and other loss of value to real estate that secures these loans, may also have a negative impact on our financial condition. In addition, we may face risks associated with our real estate lending under various federal, state and local environmental laws that impose certain requirements on the owner or operator of a property.

Interest rate risk is inherently present in our business. As a financial institution, the substantial majority of our assets and liabilities are subject to interest rate risk, which affects both the life and value of our interest earning assets and interest bearing liabilities, such as loans, investments and MBS, mortgage servicing rights, deposits and borrowings. The level of sensitivity for these interest earning assets and interest bearing liabilities to changes in interest rates is measured by duration, with duration mismatches combined with changes from both shifts and twists in the yield curve affecting both our future net interest income and the current economic value of Sterling’s equity. Exposure to interest rate risk may have an adverse effect on our profitability, financial condition and liquidity, including a decline in our net interest margin, fair value charges on certain assets, such as mortgage servicing rights and requests for additional collateral on certain of our secured borrowings. Increases in interest rates may shorten the life of certain of our liabilities, and we would have to replace these funds with alternative funds at a higher cost to us, or sell assets at potentially depressed values to meet the liquidity requirement. Decreases in interest rates may shorten the life of certain of our assets, and we would be faced with reinvesting the funds at lower rates or retiring certain of our funding liabilities at prices unfavorable to us.

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General economic conditions and developments affect our operating results and financial condition. Our business is affected by conditions outside our control, including the rate of economic growth in general, the level of unemployment, increases in inflation and the level of interest rates. Economic conditions affect the level of demand for and the profitability of our products and services. A slowdown in the general economic recovery, particularly in the Western United States, could negatively impact our business. The fiscal and monetary policies of the United States government, and its level of indebtedness may have an impact on interest rates and inflation, which may adversely affect our profitability and financial condition. Our profitability is greatly dependent upon our earning a positive interest spread between our loan and securities portfolio, and our funding deposits and borrowings. Changes in the level of interest rates, or a prolonged unfavorable interest rate environment, or a decrease in our level of deposits that increases our cost of funds could negatively affect our profitability and financial condition.

Our ability to realize the benefit of our deferred tax assets may be materially impaired. As of December 31, 2012, we had a net deferred tax asset of $292.1 million, including $274.0 million of net operating loss and tax credit carry-forwards. Our ability to use our deferred tax assets to offset future taxable income will be limited if we experience an “ownership change” as defined in Section 382 of the Code. Due to the complexity of Section 382 and the limited knowledge any public company has about the ownership of its publicly-traded stock, it is difficult to conclude with certainty at any given point in time whether an “ownership change” has occurred. Nonetheless, as a result of the recapitalization, we believe that Sterling is close to the “ownership change” threshold, but we do not believe that we have experienced an “ownership change.” Sterling has not obtained an opinion of counsel or any other interpretive guidance, such as a private letter ruling from the Internal Revenue Service (“IRS”), in determining that it has not undergone an “ownership change.”

In general, an ownership change will occur if there is a cumulative increase in our ownership by “5-percent shareholders” (as defined in the Code) that exceeds 50 percentage points over a rolling three-year period. A corporation that experiences an ownership change will generally be subject to an annual limitation on the use of its pre-ownership change deferred tax assets equal to the equity value of the corporation immediately before the ownership change, multiplied by the applicable long-term tax-exempt rate. While we have implemented measures to reduce the likelihood that future transactions in our common stock will result in an ownership change, such an ownership change could occur in the future, which would have a materially adverse effect on our results of operations, financial condition and shareholder value. More specifically, while Sterling has adopted a shareholder rights plan, as well as a protective amendment to its Restated Articles of Incorporation that are intended to discourage or prevent transfers of Sterling shares that would increase a shareholder’s ownership to 5% or more of our Common Stock or that would increase the percentage of our Common Stock owned by a shareholder already deemed to be a “5-percent shareholder,” these restrictions might not deter a shareholder from increasing its ownership interests beyond these limits. Such an increase could adversely affect our ownership change calculations.

Our calculations regarding our current cumulative change and the likelihood of a future ownership change are based on current law. Any change in applicable law may result in an ownership change. Likewise, the value attributed to our deferred tax asset is based on the statutory corporate income tax rates in effect as of December 31, 2012. Any future reductions in corporate tax rates may result in a significant decline in the value of our deferred tax asset.

We are currently subject to certain pending litigation, and may be subject to litigation in the future. A securities class action lawsuit has been filed against Sterling and certain of Sterling's current and former officers alleging that the defendants violated sections 10(b) and 20(a) of the U.S. Exchange Act and SEC Rule 10b-5 by making false and misleading statements concerning our business and financial results. This lawsuit is premised on allegations that: 1) the defendants failed to adequately disclose the extent of Sterling’s delinquent commercial real estate, construction and land development loans, properly record losses for impaired loans, properly reserve for loan losses, and properly account for goodwill and deferred tax assets, thereby causing Sterling’s stock price to be artificially inflated during the purported class period; or 2) the defendants failed to prevent Sterling from issuing improper financial statements, maintain a sufficient allowance for loan and lease losses, and establish effective credit risk management and oversight mechanisms. It is possible that additional suits will be filed with respect to these same matters that also name Sterling and/or its current and former officers and directors.

This lawsuit could divert the attention and resources of our management and cause us to incur significant expenses for legal fees and costs, including those associated with our advancement of fees and costs on behalf of our current and former officers and directors. We cannot predict the outcome of this lawsuit. Since the legal responsibility and financial impact with respect to this lawsuit and claims, if any, cannot currently be ascertained, we have not established any reserves for any potential liability relating to this lawsuit. An unfavorable outcome of this lawsuit could result in the payment of substantial damages in connection with a settlement or judgment and have a material adverse effect on our business, financial condition, results of operations or cash flows. See Item 3 “Legal Proceedings.”

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We are subject to extensive regulation, including Federal Reserve guidelines and rules, which may affect our business operations, required levels of capital and liquidity, including limitations on our ability to pay dividends.We are subject to extensive regulation under federal and state laws, including regulation and supervision by the Federal Reserve, FDIC, WDFI and the SEC. Sterling is also subject to the listing standards of the NASDAQ Capital Market. If our regulators determine that we have failed to comply with our regulatory requirements, including minimum capital levels, we may need to raise additional capital, which could result in the dilution of our existing shareholders, or reduce or eliminate our common stock dividend. We could become subject to regulatory enforcement actions, which could result in material limitations on our business operations.

The Dodd-Frank Act requires the federal banking agencies to establish stricter risk-based capital requirements and leverage limits for banks and bank holding companies, including the submission of annual capital plans for regulatory approval for banks larger than $50 billion in assets. In addition, Basel III may lead to significantly higher capital requirements and more restrictive leverage and liquidity ratios. The Federal Reserve has not released final rules to implement the Basel III requirements, and it is uncertain at this time whether the rules, when released, will apply Basel III's requirements to Sterling or Sterling Bank.

The level of our liquidity and our ability to repay indebtedness, pay dividends and repurchase shares depends upon the results of operations and financial condition of Sterling Bank. Sterling is a separate and distinct legal entity from its subsidiaries, and receives substantially all of its revenue from dividends paid by Sterling Bank. There are legal limitations on the extent to which Sterling Bank may extend credit, pay dividends or otherwise supply funds to, or engage in transactions with, Sterling. The inability to receive dividends from Sterling Bank would reduce liquidity available to Sterling, which could adversely affect Sterling's financial condition or Sterling's ability to pay dividends on its common stock.

Various statutory provisions restrict the amount of dividends Sterling Bank can pay to Sterling without regulatory approval. Sterling Bank may not pay cash dividends if those payments could reduce the amount of its capital below that necessary to meet the “adequately capitalized” level in accordance with regulatory capital requirements. It is also possible that, depending upon the financial condition of Sterling Bank and other factors, regulatory authorities could assert that payment of dividends or other payments, including payments to Sterling, is an unsafe or unsound practice. Under Washington banking law, Sterling Bank may not pay a dividend greater than its retained earnings without WDFI approval. As of December 31, 2012, Sterling Bank had an accumulated deficit of $662.9 million, and therefore, requires WDFI approval prior to paying a dividend.

The financial services industry is undergoing major changes, and we cannot anticipate the impact of future laws and regulations on our business. Regulation of the financial services industry is undergoing major changes. The Dodd-Frank Act significantly revises and expands the rulemaking, supervisory and enforcement authority of federal bank regulators. Although the statute will initially have a greater impact on larger institutions than regional bank holding companies such as Sterling, many of its provisions will apply to us at the outset.

The Dodd-Frank Act, among other things, limits the amount of debit card interchange fees that can be charged for banks over $10 billion of assets in size and Sterling’s assets are close to this level. The Dodd-Frank Act also imposes new stress testing and corporate governance requirements on banking entities with $10 billion of assets. If our assets rose above $10 billion, we would be subject to these requirements, which may reduce our profitability.

Some of these changes are effective immediately, though most will be phased in gradually. In addition, the statute in many instances calls for future rulemaking to implement its provisions, so the precise contours of the law and its effects on us cannot yet be fully understood. The provisions of the Dodd-Frank Act and the subsequent exercise by regulators of their revised and expanded powers thereunder could materially impact the profitability of our business, the value of assets we hold or the collateral available for our loans, require changes to business practices or force us to discontinue businesses and expose us to additional costs, taxes, liabilities, enforcement actions and reputational risk. Legislators and regulators are also considering a wide range of proposals beyond the Dodd-Frank Act that, if enacted, could result in major changes to the way banking operations are regulated.

Acquisitions present many risks, and we may not realize the financial and strategic goals that are contemplated. Our growth strategy includes an intent to acquire other banks. During the fourth quarter of 2012, we announced definitive agreements to acquire AHH and its subsidiary Borrego Springs Bank, N.A., and the Puget Sound operations of Boston Private. These transactions and any future acquisitions and related transition and integration activities may disrupt our ongoing business and divert management’s attention. In addition, an acquisition may not further our corporate strategy as we expected, we may pay more than the acquired banks or assets are ultimately worth or we may not integrate an acquired bank or assets as successfully as we expected, which could adversely affect our business, results of operations and financial condition. We may be adversely affected by liabilities (disclosed or undisclosed) or pre-existing contractual relationships that we assume and may also fail to

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anticipate or accurately estimate litigation or other exposure, unfavorable accounting consequences, increases in taxes due or a loss of anticipated tax benefits. Other potential adverse consequences include higher than anticipated costs associated with the acquired bank or assets or integration activities. The use of cash to pay for acquisitions may limit our use of cash for other potential activities, such as dividends. The use of equity securities to pay for acquisitions could significantly dilute existing shareholders. If we use debt to finance acquisitions, we may significantly increase our expenses, leverage and debt service requirements. The occurrence of any of these risks could have a material adverse effect on our business, results of operations, financial condition or cash flows, particularly in the case of a large acquisition or several concurrent acquisitions.

The liquidity of our common stock may be impeded by transfer restrictions. Immediately following our recapitalization in August 2010, approximately 98% of our common stock was held by investors subject to certain transfer restrictions. These restrictions are designed to prevent (a) any person from acquiring ownership, for relevant tax purposes, of 5% or more of our shares and (b) the disposition of shares by any person that owns 5% or more of our shares, subject to certain exceptions. We have also amended our Restated Articles of Incorporation to impose these transfer restrictions on all holders of our common stock. These restrictions may adversely affect the ability of certain shareholders to resell our common stock by rendering any transactions in violation of this prohibition void.

In addition, Sterling has adopted a shareholder rights plan (the “Rights Plan”), which is described in our Form 8-K filed on April 15, 2010. In December of 2010, we amended the Rights Plan to extend the expiration of the plan until August 26, 2013. The purpose of the Rights Plan is to minimize the likelihood of an “ownership change,” as defined in Section 382 of the Code, and thus to protect our ability to use our net operating loss carry-forward and certain built-in losses to offset future income. The Rights Plan provides an economic disincentive for any one person or group to become a Threshold Holder (as defined therein, generally an owner of 5% or more of our stock) and for any existing Threshold Holder to acquire more than a specified amount of additional shares, and so may adversely affect one’s ability to resell our common stock and negatively affect the trading price of our common stock. These restrictions may limit the ability of shareholders to resell Sterling shares.

These transfer restrictions and our Rights Plan may discourage, delay, or prevent a change in control of Sterling and make it more difficult for a potential acquirer to consummate an acquisition of Sterling. In addition, these provisions could limit the price that investors would be willing to pay in the future for our securities and may limit a shareholder’s ability to dispose of our securities by reducing the class of potential acquirers for such securities.

As a result of our 2010 recapitalization, a limited number of shareholders are substantial holders of our stock. As of January 31, 2013, certain Thomas H. Lee funds (collectively, “THL”) and Warburg Pincus Private Equity X, L.P. (“Warburg Pincus”) each beneficially owned approximately 23% of our outstanding common stock. Each has a representative on our Board of Directors. Accordingly, THL and Warburg Pincus have substantial influence over the election of directors to our board and over corporate policy, including decisions to enter into mergers or other extraordinary transactions. In pursuing its economic interests, THL and Warburg Pincus may make decisions with respect to fundamental corporate transactions that may not be aligned with the interests of other shareholders.

As a result of our 2010 recapitalization, a number of private placement investors, in addition to THL and Warburg Pincus, acquired, and may continue to hold, shares of our common stock that, for each investor, may approach 5% of our outstanding common stock. The large portion of our shares that are held by a relatively small number of shareholders could result in a material impact on the trading volume and price per share of our stock, if any of these shareholders decide to sell a significant portion of their holdings.

We may suffer substantial losses due to our agreements to indemnify certain investors against a broad range of potential claims. We have agreed to indemnify THL and Warburg Pincus, along with the other private placement investors in the 2010 recapitalization, for a broad range of claims, including any losses arising out of or resulting from any legal, administrative or other proceedings arising in connection with the recapitalization transactions. While these indemnities are capped at the aggregate amount of capital raised of $730 million, if all or some claims were successfully brought against Sterling, it could potentially result in significant losses.

We rely on certain key personnel, whose loss could materially adversely affect us. Certain of our employees and executives are key contributors to our financial success, including, but not limited to, the generation and identification of lending and deposit customer relationships, and the management of our company. Our ability to retain these individuals is a large factor in our ability to be successful, and any failure to do so could have a materially adverse effect on our business.

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We could be materially and adversely affected if we or any of our officers or directors fail to comply with bank and other laws and regulations. Sterling and Sterling Bank are subject to extensive regulation by U.S. federal and state regulatory agencies and face risks associated with investigations and proceedings by regulatory agencies, including those that we may believe to be immaterial. Like any corporation, we are also subject to risk arising from potential employee misconduct, including non-compliance with our policies. Any interventions by authorities may result in adverse judgments, settlements, fines, penalties, injunctions, suspension or expulsion of our officers or directors from the banking industry or other relief. In addition to the monetary consequences, these measures could, for example, impact our ability to engage in, or impose limitations on, certain of our businesses. The number of these investigations and proceedings, as well as the amount of penalties and fines sought, has increased substantially in recent years with regard to many firms in the industry. Significant regulatory action against us or our officers or directors could materially and adversely affect our business, financial condition or results of operations or cause us significant reputational harm.

We may have reduced access to wholesale funding sources. As a part of our liquidity management, we use a number of funding sources in addition to core deposit growth and repayments, maturities and sales of loans and investments. Our financial flexibility will be severely constrained if we are unable to maintain sufficient collateral or access to funding on acceptable terms. If we are required to rely more heavily on more expensive funding sources, and our revenues do not increase in proportion with our costs, our profitability will be impacted.

A decline in the value of our Federal Home Loan Bank (“FHLB”) common stock may occur, resulting in an other-than-temporary impairment (“OTTI”) charge which would cause our earnings and shareholders’ equity to decrease. We own common stock of the FHLB in order to qualify for membership in the FHLB system, which enables us to borrow funds under the FHLB advance program. The carrying value of our FHLB common stock was $97.5 million as of December 31, 2012, the substantial majority of which was with the FHLB of Seattle. The FHLB of Seattle has experienced losses from credit-related charges associated with projected losses on its investments in nonagency MBS, and is currently unable to pay dividends. FHLB stock does not have a readily determinable fair value and the equity ownership rights are more limited than would be the case for ownership rights in a public company. FHLB stock is viewed as a long term investment and is carried at cost.

Our business relies heavily on technology and our ability to manage the operational risks associated with technology. We depend on internal and outsourced technology to support all aspects of our business operations. Interruption or failure of these systems creates a risk of business loss as a result of adverse customer experiences, damage claims and civil fines. Risk management programs are expensive to maintain and will not protect us from all risks associated with maintaining the security of customer information, proprietary data, external and internal intrusions, disaster recovery and failures in the controls used by vendors. Our computer systems could be vulnerable to unforeseen problems. Because we conduct part of our business over the Internet and outsource several critical functions to third parties, operations will depend on our ability, as well as the ability of third-party service providers, to protect computer systems and network infrastructure against damage from fire, power loss, telecommunications failure, physical break-ins or similar catastrophic events. Any damage or failure that causes interruptions in operations could have a material adverse effect on our business, financial condition and results of operations.

In addition, a significant barrier to online financial transactions is the secure transmission of confidential information over public networks. Our Internet banking system relies on encryption and authentication technology to provide the security and authentication necessary to effect secure transmission of confidential information. Advances in computer capabilities, new discoveries in the field of cryptography or other developments could result in a compromise or breach of the algorithms our third-party service providers use to protect customer transaction data. If any such compromise of security were to occur, it could have a material adverse effect on our business, financial condition and results of operations.

We depend, and will continue to depend, to a significant extent, on a number of relationships with third-party service providers. Specifically, we receive core systems processing, residential mortgage servicing, essential web hosting and other Internet systems, and deposit and other transaction processing services from third-party service providers. If these third-party service providers experience difficulties or terminate their services, and we are unable to replace them with other service providers, our operations could be interrupted. If an interruption were to continue for a significant period of time, our business, financial condition and results of operations could be materially and adversely affected.

Our internal control systems could fail to detect certain events. We are subject to certain operational risks, including but not limited to data processing system failures and errors and customer or employee fraud. We maintain a system of internal controls to mitigate against such occurrences and maintain insurance coverage for such risks, but should such an event occur that is not prevented or detected by our internal controls, uninsured or in excess of applicable insurance limits, it could have a significant adverse impact on our business, financial condition or results of operations.

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We could be held responsible for environmental liabilities of properties we acquire. We may acquire real property for various reasons, including, for example, as a result of foreclosing on a defaulted mortgage loan to recover our investment, or in connection with acquiring the assets and operations of other banks. We may be subject to environmental liabilities related to the real property as a result of hazardous substances or wastes, contaminants, pollutants or sources thereof that may be discovered on such properties during our ownership or after a sale to a third party. The amount of environmental liability could exceed the value of the real property because we may be fully liable for the entire cost of any removal and clean-up on an acquired property, the cost of removal and clean-up may exceed the value of the property, and we may be unable to recover costs from any third party. In addition, we may find it difficult or impossible to sell the property prior to or following any environmental remediation.

The financial services industry in general is highly competitive. Our industry is highly competitive in regard to the pricing and features of existing products and services, growth opportunities from the acquisition of other companies in whole or in part, and the building of new customer relationships. A number of our competitors are significantly larger than we are and may have certain advantages from a greater access to capital and other resources, as well as larger lending limits and branch systems, and a wider array of banking services. Our growth and opportunities for growth are greatly affected by this competitive environment.

Item 1B.Unresolved Staff Comments

Not applicable.

Item 2.Properties

Sterling owns the building in which its headquarters are located in Spokane, Washington. As of December 31, 2012, Sterling also owned 98 of its 174 depository banking offices, while leasing the remainder of the properties. These facilities are located throughout Sterling’s banking network, primarily in the Pacific Northwest. Additionally, Sterling operates 45 non-depository loan production offices throughout the western United States, the majority of which are leased. The properties that Sterling occupies are used for corporate purposes across all of its business segments. See Note 7 of "Notes to Consolidated Financial Statements.”

Item 3.Legal Proceedings

Securities Class Action Litigation. On December 11, 2009, a putative securities class action was filed in the United States District Court for the Eastern District of Washington against Sterling and certain of our current and former officers. The court appointed a lead plaintiff on March 9, 2010. On June 18, 2010, the lead plaintiff filed a consolidated complaint (the “Complaint”). The Complaint purports to be brought on behalf of a class of persons who purchased or otherwise acquired Sterling's stock during the period from July 23, 2008 to October 15, 2009. The Complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by failing to disclose the extent of Sterling's delinquent commercial real estate, construction and land development loans, properly record losses for impaired loans, and properly reserve for loan losses, thereby causing Sterling's stock price to be artificially inflated during the purported class period. Plaintiffs seek unspecified damages and attorneys' fees and costs. Sterling believes the lawsuit is without merit and intends to defend against it vigorously. On August 30, 2010, Sterling moved to dismiss the Complaint. On March 2, 2011, after complete briefing, the court held a hearing on the motion to dismiss. The court has not yet issued an order on the motion, but indicated that it intends to do so in the near future. Failure by Sterling to obtain a favorable resolution of the claims set forth in the complaint could have a material adverse effect on our business, results of operations and financial condition. Currently, a loss resulting from these claims is not considered probable or reasonably estimable in amount.

ERISA Class Action Litigation. On January 20 and 22, 2010, two putative class action complaints were filed in the United States District Court for the Eastern District of Washington against Sterling, as well as certain of Sterling's current and former officers and directors. The two complaints were merged in a Consolidated Amended Complaint (the “Complaint”) filed on July 16, 2010 in the same court. The Complaint does not name all of the individuals named in the prior complaints, but it is expected that additional defendants will be added. The Complaint alleges that the defendants breached their fiduciary duties under sections 404 and 405 of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), with respect to the Sterling Savings Bank Employee Savings and Investment Plan (the “401(k) Plan”) and the FirstBank Northwest Employee Stock Ownership Plan (“ESOP”) (collectively, the "Plans”). Specifically, the Complaint alleges that the defendants breached their duties by investing assets of the Plans in Sterling's securities when it was imprudent to do so, and by investing such assets

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in Sterling securities when defendants knew or should have known that the price of those securities was inflated due to misrepresentations and omissions about Sterling's business practices. The business practices at issue include alleged over-reliance on risky construction loans; alleged inadequate loan reserves; alleged spiking increases in nonperforming assets, nonperforming loans, classified assets, and over 90-day delinquent loans; alleged inadequate accounting for rising loan payment shortfalls; alleged unsafe and unsound banking practices; and a capital base that was allegedly inadequate to withstand the significant deterioration in the real estate markets. The putative class periods are October 22, 2007 to the present for the 401(k) Plan class, and October 22, 2007 to November 14, 2008 for the ESOP class. The Complaint seeks damages of an unspecified amount and attorneys' fees and costs. On September 26, 2012, Sterling received a letter from the U.S. Department of Labor (the “Department of Labor”) containing similar allegations as those set forth in the Complaint, demanding that the violations alleged in the Department of Labor's letter be corrected and notifying Sterling that the Department of Labor may take legal action in connection with such allegations, including assessing a civil money penalty. Failure by Sterling to obtain a favorable resolution of the claims set forth in the Complaint or in the letter from the Department of Labor could have a material adverse effect on Sterling's business, results of operations, and financial condition. In January 2013, a tentative settlement was reached, pursuant to which Sterling agreed to pay $3.0 million to settle the claims. The settlement is subject to approval by the court and the Department of Labor.

Additionally, Sterling is involved in ongoing litigation, primarily related to its normal business operations. When establishing a liability for contingent litigation losses, Sterling determines a range of potential losses for each matter that is both probable and estimable, and records the amount it considers to be the best estimate within the range. For these matters and others where an unfavorable outcome is reasonably possible but not probable, there is no estimable range of possible losses. Sterling believes that the eventual outcome from these cases will not, individually or in the aggregate, have a material adverse effect on its consolidated financial position.

Item 4.Mine Safety Disclosures

Not applicable.

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PART II

Item 5.Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Sterling’s common stock is listed on the NASDAQ Capital Market under the symbol “STSA.” As of January 31, 2013, Sterling’s common stock was held by 1,312 shareholders of record. The following table sets forth certain per share information for Sterling’s common stock for the periods indicated:

	2012 Quarters Ended
	December 31		September 30		June 30		March 31
Dividends declared per common share	$	0.65	$	0.15	$	0.00	$	0.00
Dividends paid per common share	0.65		0.15		0.00		0.00
Market price per common share:
High	23.22		23.00		21.18		21.94
Low	19.56		18.75		17.19		16.66
Quarter end	20.90		22.27		18.89		20.88
	2011 Quarters Ended
	December 31		September 30		June 30		March 31
Dividends declared per common share	$	0.00	$	0.00	$	0.00	$	0.00
Dividends paid per common share	0.00		0.00		0.00		0.00
Market price per common share:
High	16.90		17.48		19.00		22.62
Low	12.18		11.61		15.50		16.30
Quarter end	16.70		12.38		16.07		16.75

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Information concerning securities authorized for issuance under equity compensation plans is set forth under the caption “Equity Compensation Plan Information” in Sterling’s Proxy Statement and is incorporated herein by reference. The following graph, which is “furnished,” not “filed,” compares the cumulative return of our common stock during the five years ended December 31, 2012, with the Russell 2000 Index and the SNL Bank NASDAQ Index. The presentation assumes an initial investment of $100 and the reinvestment of dividends.

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Item 6.Selected Financial Data

The following selected financial data is derived from Sterling’s audited financial statements. The information below is not necessarily indicative of our future results of operations and should be read in conjunction with Item 1A, “Risk Factors,” Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K in order to fully understand the factors that may affect the comparability of the information presented below.

	Years Ended December 31,
	2012			2011			2010			2009			2008
Income Statement Data:	(in thousands, except per share amounts)
Interest income	$	389,200		$	404,292		$	445,133		$	599,347		$	715,062
Interest expense	84,522			109,097			161,106			255,370			355,510
Net interest income	304,678			295,195			284,027			343,977			359,552
Provision for credit losses	10,000			30,000			250,229			681,371			333,597
Net interest income (loss) after provision for credit losses	294,678			265,195			33,798			(337,394		)	25,955
Noninterest income	154,253			126,328			136,965			123,814			91,895
Noninterest expense before impairment charge	355,253			352,390			395,045			369,974			305,517
Goodwill impairment	0			0			0			227,558			223,765
Total noninterest expense	355,253			352,390			395,045			597,532			529,282
Income (loss) before income taxes	93,678			39,133			(224,282		)	(811,112		)	(411,432		)
Income tax (provision) benefit (1)	292,043			0			0			(26,982		)	75,898
Net income (loss)	385,721			39,133			(224,282		)	(838,094		)	(335,534		)
Preferred stock dividend	0			0			(11,598		)	(17,369		)	(1,208		)
Other shareholder allocations (2)	0			0			(520,263		)	0			0
Net income (loss) applicable to common shareholders	$	385,721		$	39,133		$	(756,143	)	$	(855,463	)	$	(336,742	)
Earnings (loss) per common share:
Basic (3)	$	6.21		$	0.63		$	(53.05	)	$	(1,087.41	)	$	(429.70	)
Diluted (3)	6.14			0.63			(53.05		)	(1,087.41		)	(429.70		)
Dividends declared per common share (3)	$	0.80		$	0.00		$	0.00		$	0.00		$	19.80
Weighted average shares outstanding:
Basic (3)	62,122,862			61,955,659			14,253,869			786,701			783,662
Diluted (3)	62,772,079			62,231,208			14,253,869			786,701			783,662
Other Data:
Book value per common share (3)	$	19.58		$	14.16		$	12.45		$	36.80		$	1,075.14
Tangible book value per common share (3)	$	18.91		$	13.96		$	12.17		$	9.21		$	752.98
Return on average assets	4.10		%	0.42		%	(2.21		)%	(6.81		)%	(2.65		)%
Return on average common equity	35.8		%	4.8		%	(297.2		)%	(129.8		)%	(28.8		)%
Dividend payout ratio	13		%	0		%	0		%	0		%	*
Shareholders' equity to total assets	13.2		%	9.6		%	8.1		%	3.0		%	8.9		%
Tangible common equity to tangible assets (4)	12.8		%	9.4		%	8.0		%	0.1		%	4.7		%
Efficiency ratio (5)	71.1		%	74.7		%	81.9		%	69.1		%	61.7		%
Tax equivalent net interest margin	3.46		%	3.29		%	2.83		%	2.92		%	3.08		%
Nonperforming assets to total assets	2.28		%	4.01		%	8.83		%	9.08		%	4.77		%
Employees (full-time equivalents)	2,532			2,496			2,498			2,641			2,481
Depository branches	174			175			178			178			178

27

	As of December 31,
	2012			2011			2010			2009			2008
Balance Sheet Data:	(in thousands)
Total assets	$	9,236,910		$	9,193,237		$	9,493,169		$	10,877,423		$	12,790,716
Loans receivable, net	6,101,749			5,341,179			5,379,081			7,344,199			8,807,094
Investments and MBS - available for sale	1,513,157			2,547,876			2,825,010			2,160,325			2,639,290
Investments - held to maturity	206			1,747			13,464			17,646			175,830
Deposits	6,436,117			6,485,818			6,911,007			7,775,190			8,350,407
FHLB advances	605,330			405,609			407,211			1,337,167			1,726,549
Securities sold under repurchase agreements and funds purchased	586,867			1,055,763			1,032,512			1,049,146			1,163,023
Other borrowings	245,294			245,290			245,285			248,281			248,276
Shareholders' equity	1,217,923			878,557			770,767			323,249			1,141,036
Regulatory Capital Ratios:
Sterling:
Tier 1 leverage ratio	12.1		%	11.4		%	10.1		%	3.5		%	9.2		%
Tier 1 risk-based capital ratio	17.5		%	17.8		%	16.2		%	4.9		%	11.7		%
Total risk-based capital ratio	18.7		%	19.1		%	17.5		%	7.9		%	13.0		%
Tier 1 common capital ratio	13.6		%	13.8		%	12.4		%	3.6		%	9.3		%
Sterling Bank:
Tier 1 leverage ratio	12.0		%	11.1		%	9.8		%	4.2		%	8.3		%
Tier 1 risk-based capital ratio	17.2		%	17.4		%	15.7		%	5.9		%	10.6		%
Total risk-based capital ratio	18.5		%	18.7		%	17.0		%	7.3		%	11.8		%

* Not meaningful.

(1) The income tax benefit during 2012 was from the release of a deferred tax asset valuation allowance.

(2) The August 26, 2010 conversion of Series C preferred stock into common stock resulted in an increase in income available to common shareholders. The October 22, 2010 conversion of Series B and D preferred stock into common stock resulted in a decrease in income available to common shareholders.

(3) Reflects the 1-for-66 reverse stock split in November 2010.

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

(5) The efficiency ratio is noninterest expense, excluding OREO and amortization of core deposit intangibles, divided by net interest income (tax equivalent) plus noninterest income, excluding gain on sales of securities, other-than-temporary impairment losses on securities, charge on prepayment of debt and net gain on MT branch divestiture.

28

Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and Notes thereto presented elsewhere in this report. This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For a discussion of the risks and uncertainties inherent in such statements, see “Business—Forward-Looking Statements” and “Risk Factors.”

Overview

Net income (loss) for the years ended December 31, 2012, 2011 and 2010 was $385.7 million, $39.1 million, and $(224.3) million, respectively. The 2012 annual net income included an income tax benefit of $292.0 million associated with the release of a deferred tax asset valuation allowance. The increase in income before income taxes over the periods presented reflects lower credit costs as a result of an improvement in asset quality. During 2012, Sterling paid cash dividends of $49.7 million, or $0.80 per share, compared with none being paid in 2011 or 2010. Dividends paid in 2012 included a special dividend of $0.35 per share.

On February 29, 2012, Sterling completed the acquisition of the operations of First Independent Bank (“First Independent”). The First Independent transaction added $350.0 million of loans, $695.9 million of deposits, and 14 branches in the Vancouver/Portland metro area.

On August 14, 2012, the United States Department of the Treasury (the “Treasury”) sold all of its shares in Sterling common stock in an underwritten public offering. On September 19, 2012, Sterling repurchased a warrant for 97,541 shares held by the Treasury. The stock and warrant had been issued to the Treasury on December 5, 2008, in connection with Sterling's participation in the Capital Purchase Program of the Troubled Asset Relief Program, and the stock was converted on August 26, 2010 to Sterling common stock.

On October 22, 2012, Sterling entered into a definitive agreement with American Heritage Holdings ("AHH"), the holding company for Borrego Springs Bank, N.A., to acquire AHH for cash consideration of $6.5 million. The transaction, which has been approved by the boards of directors of Sterling and AHH, is expected to provide a significant enhancement to Sterling’s small business government guaranteed lending and servicing capabilities. The shareholders of AHH have agreed to vote in favor of the transaction, which is subject to customary closing conditions and is expected to be completed during the first quarter of 2013.

On November 30, 2012, Sterling Bank sold its Montana operations to Eagle Bancorp Montana, Inc. ("Eagle") and its wholly owned subsidiary, American Federal Savings Bank. Under the terms of the agreement, Eagle paid Sterling Bank a premium of $7.0 million to acquire $180.9 million of deposits and $41.3 million of performing loans and certain other assets and liabilities.

On December 14, 2012, Sterling entered into a definitive agreement to acquire the Puget Sound operations of Boston Private Bank & Trust Company (“Boston Private”), a wholly owned subsidiary of Boston Private Financial Holdings, Inc. The Boston Private Puget Sound offices are located in Seattle, Bellevue and Redmond, Washington. As of December 31, 2012, these offices had aggregate loans of approximately $270 million and deposits of $200 million. The transaction, which is subject to regulatory approval and other customary closing conditions, is expected to be completed during the second quarter of 2013.

Results of Operations

The most significant component of earnings for Sterling is net interest income, which is the difference between interest income, earned primarily from loans, MBS and investment securities, and interest expense on deposits and borrowings. Net interest spread refers to the difference between the yield on interest earning assets and the rate paid on interest bearing liabilities. Net interest margin refers to net interest income divided by total average interest earning assets and is influenced by the level and relative mix of interest earning assets and interest bearing liabilities. The following table sets forth, on a tax equivalent basis, information with regard to Sterling’s net interest income, net interest spread and net interest margin:

29

	Years Ended December 31,
	2012						2011						2010
	Average Balance		Interest Income/ Expense		Yields/ Rates		Average Balance		Interest Income/ Expense		Yields/ Rates		Average Balance			Interest Income/ Expense		Yields/ Rates
ASSETS:	(in thousands)
Loans:
Mortgage	$	3,834,111	$	188,563	4.92	%	$	3,484,108	$	177,992	5.11	%	$	4,188,338		$	185,214	4.42	%
Commercial and consumer	2,572,469		143,392		5.57	%	2,481,470		144,892		5.84	%	2,951,479			174,896		5.93	%
Total loans (1)	6,406,580		331,955		5.18	%	5,965,578		322,884		5.41	%	7,139,817			360,110		5.04	%
MBS (2)	1,890,314		47,442		2.51	%	2,375,515		71,216		3.00	%	2,004,864			74,806		3.73	%
Investments and cash (2)	520,590		13,971		2.68	%	676,677		14,659		2.17	%	965,615			15,005		1.55	%
FHLB stock	98,893		0		0.00	%	99,531		0		0.00	%	100,409			0		0.00	%
Total interest earning assets	8,916,377		393,368		4.41	%	9,117,301		408,759		4.48	%	10,210,705			449,921		4.41	%
Noninterest earning assets (3)	494,185						186,238						(42,376		)
Total average assets	$	9,410,562					$	9,303,539					$	10,168,329
LIABILITIES and EQUITY:
Deposits:
Interest bearing transaction	$	657,231	334		0.05	%	$	503,091	504		0.10	%	$	809,351		1,918		0.24	%
Savings and MMDA	2,261,858		3,912		0.17	%	1,994,335		7,004		0.35	%	1,656,816			10,180		0.61	%
Time deposits	2,250,999		33,451		1.49	%	3,063,679		52,126		1.70	%	3,774,891			82,609		2.19	%
Total interest bearing deposits	5,170,088		37,697		0.73	%	5,561,105		59,634		1.07	%	6,241,058			94,707		1.52	%
Borrowings	1,470,244		46,825		3.18	%	1,703,782		49,463		2.90	%	2,309,294			66,399		2.88	%
Total interest bearing liabilities	6,640,332		84,522		1.27	%	7,264,887		109,097		1.50	%	8,550,352			161,106		1.88	%
Noninterest bearing transaction	1,559,828		0		0.00	%	1,093,252		0		0.00	%	999,857			0		0.00	%
Total funding liabilities	8,200,160		84,522		1.03	%	8,358,139		109,097		1.31	%	9,550,209			161,106		1.69	%
Other noninterest bearing liabilities	131,860						126,435						172,338
Total average liabilities	8,332,020						8,484,574						9,722,547
Total average equity	1,078,542						818,965						445,782
Total average liabilities and equity	$	9,410,562					$	9,303,539					$	10,168,329
Net interest income and spread (4)			$	308,846	3.14	%			$	299,662	2.98	%				$	288,815	2.53	%
Net interest margin (4)					3.46	%					3.29	%						2.83	%
Deposits:
Total interest bearing deposits	$	5,170,088	$	37,697	0.73	%	$	5,561,105	$	59,634	1.07	%	$	6,241,058		$	94,707	1.52	%
Noninterest bearing transaction	1,559,828		0		0.00	%	1,093,252		0		0.00	%	999,857			0		0.00	%
Total deposits	$	6,729,916	$	37,697	0.56	%	$	6,654,357	$	59,634	0.90	%	$	7,240,915		$	94,707	1.31	%

(1) Includes gross nonaccrual loans.

(2) Does not include market value adjustments on available for sale securities.

(3) Includes charge-offs on nonperforming loans (“confirmed losses”) and the allowance for loan losses.

(4) Interest income on certain loans and securities are presented gross of their applicable tax savings using a 37% effective tax rate.

30

Changes in Sterling’s net interest income are a function of changes in both rates and volumes of interest-earning assets and interest-bearing liabilities. Volume refers to the dollar level of interest-earning assets and interest-bearing liabilities. The following table presents the composition of the change in net interest income, on a tax equivalent basis, for the periods presented. Interest income from municipal loans and bonds is presented gross of applicable tax savings. For each category of interest-earning assets and interest-bearing liabilities, the following table provides information on changes attributable to:

• Volume—changes in volume multiplied by comparative period rate;

• Rate—changes in rate multiplied by comparative period volume; and

• Rate/volume—changes in rate multiplied by changes in volume.

	December 31, 2012												December 31, 2011
	Increase (Decrease) Due to:												Increase (Decrease) Due to:
							Rate/												Rate/
	Volume			Rate			Volume			Total			Volume			Rate			Volume			Total
Interest income:	(in thousands)
Loans:
Mortgage	$	17,881		$	(6,642	)	$	(668	)	$	10,571		$	(31,142	)	$	28,754		$	(4,834	)	$	(7,222	)
Commercial and consumer	5,313			(6,573		)	(240		)	(1,500		)	(27,851		)	(2,561		)	408			(30,004		)
Total loans	23,194			(13,215		)	(908		)	9,071			(58,993		)	26,193			(4,426		)	(37,226		)
MBS	(14,546		)	(11,598		)	2,370			(23,774		)	13,830			(14,702		)	(2,718		)	(3,590		)
Investment and cash equivalents	(3,381		)	3,500			(807		)	(688		)	(4,579		)	6,092			(1,859		)	(346		)
Total interest income	5,267			(21,313		)	655			(15,391		)	(49,742		)	17,583			(9,003		)	(41,162		)
Interest expense:
Deposits	(4,193		)	(19,086		)	1,342			(21,937		)	(14,216		)	(23,851		)	2,994			(35,073		)
Borrowings	(6,780		)	(4,800		)	8,942			(2,638		)	(17,410		)	642			(168		)	(16,936		)
Total interest expense	(10,973		)	(23,886		)	10,284			(24,575		)	(31,626		)	(23,209		)	2,826			(52,009		)
Changes in net interest income on a tax equivalent basis	$	16,240		$	2,573		$	(9,629	)	$	9,184		$	(18,116	)	$	40,792		$	(11,829	)	$	10,847

2012 versus 2011

Net Interest Income. Sterling's net interest income for the year ended December 31, 2012 compared with the year ended December 31, 2011 increased $9.5 million, as funding costs declined more than interest income. Interest income from mortgage backed securities declined $23.8 million, offsetting an increase in interest income on loans of $9.1 million. Interest expense declined $24.6 million, mainly from the lower cost of deposits.

The average balance of mortgage backed securities declined $485.2 million, or 20% during 2012, reflecting prepayments and sales. The decline in the yield on MBS over the period was due to prepayments and sales of securities with higher yields than new securities purchased and the average yield of the portfolio, reflecting market conditions and balance sheet management, including the management of prepayment and interest rate risk in the MBS portfolio.

The increase in interest income from higher average loan balances was partially offset by yield compression. Average loan balances increased $441.0 million, or 7% during 2012, reflecting growth from loan originations and purchases, and loans acquired in the First Independent transaction, net of repayments. Similar to MBS, the loan portfolio's average yield declined during 2012, as new loan production was at rates below that of maturities and repayments, and adjustable rate loans repriced downward. These reductions in yield were partially offset by the decline in the level of nonperforming loans and discount accretion on acquired loans.

31

During 2012, the composition of deposits shifted, including a decrease of $812.7 million, or 27% in the average balance of time deposits, and an increase of $466.6 million, or 43% in noninterest bearing transaction accounts. This change in deposit mix contributed to the 34 basis point decline in the cost of deposits.

Provision for Credit Losses. Sterling recorded a provision for credit losses of $10.0 million for the year ended December 31, 2012, as compared with $30.0 million in 2011. The reduced level of credit loss provisioning reflects improvement in asset quality as evidenced by the decline in nonperforming loans and charge-offs. Net charge-offs were $30.6 million during 2012, a decline of 69% over 2011. Charge-offs for unfunded commitments during 2012 included approximately $4 million in connection with a mortgage repurchase settlement with a financial institution.

Noninterest Income. Noninterest income was as follows for the years presented:

	Years Ended December 31,
	2012			2011			% change
	(in thousands)
Fees and service charges	$	55,773		$	50,073		11	%
Mortgage banking operations	96,909			52,376			85	%
Loan servicing fees	383			(3,213		)	*
BOLI	8,625			6,448			34	%
Gains on sales of securities, net	23,835			16,236			47	%
Other-than-temporary impairment losses on securities	(6,819		)	0			*
Charge on prepayment of debt	(35,342		)	0			*
Gains (losses) on assets	6,515			(85		)	*
Gains on other loan sales	4,372			4,442			(2	)%
Other	2			51			(96	)%
Total noninterest income	$	154,253		$	126,328		22	%

* Results are not meaningful.

The increase in income from mortgage banking operations reflected higher margins on loan sales and volumes of residential lending. Historically low interest rates on home loans has resulted in an elevated level of refinancing activity, while expansion in the margin on loans sales reflects conditions in the mortgage market.

The growth in fees and service charges was primarily due to increased activity related to the deposit accounts and trust business acquired in the First Independent transaction. The fluctuation in loan servicing fees reflects valuation adjustments on mortgage servicing rights. BOLI income during 2012 included a $2.4 million gain relating to a death benefit.

During 2012, Sterling incurred prepayment penalties of $35.3 million related to the prepayment of $300 million of repurchase agreements. Security sales during 2012 included the management of prepayment and interest rate risk in the portfolio, as well as the sale of securities that were serving as collateral for the repurchase agreement borrowings that were prepaid. Other activity in the securities portfolio included the recognition of an other-than-temporary impairment charge of $6.8 million related to a single issuer trust preferred security during the second quarter of 2012. The security was sold during the fourth quarter at a gain of $2.5 million.

The gain on the sale of assets during 2012 included a gain before associated selling expenses of $9.1 million recognized in conjunction with the Montana divestiture. Gains on the sale of other loans related to the sale of nonperforming loans, multifamily, and SBA loans.

32

The following table presents components of mortgage banking operations for the years presented:

	Years Ended December 31,
	2012			2011
	(in thousands)
Residential loan sales	$	2,648,502		$	2,059,351
Change in warehouse and interest rate locks	303,668			(41,886		)
Total mortgage banking activity	$	2,952,170		$	2,017,465
Margin on residential loan sales	3.20		%	2.45		%

Noninterest Expense. Noninterest expense was as follows for the years presented:

	Years Ended December 31,
	2012		2011		% change
	(in thousands)
Employee compensation and benefits	$	189,025	$	171,643	10	%
OREO operations	11,829		41,500		(71	)%
Occupancy and equipment	42,930		39,878		8	%
Data processing	27,091		24,171		12	%
FDIC insurance	7,493		14,328		(48	)%
Professional fees	16,691		13,902		20	%
Depreciation	11,690		12,184		(4	)%
Advertising	12,688		10,017		27	%
Travel and entertainment	5,756		5,420		6	%
Merger and acquisition	11,976		1,012		1,083	%
Amortization of other intangible assets	6,780		4,851		40	%
Other	11,304		13,484		(16	)%
Total noninterest expense	$	355,253	$	352,390	1	%

Employee compensation and benefits during 2012 included severance costs related to a reduction in force, an increase in commissions due to growth in mortgage banking and multifamily originations, and growth from the First Independent transaction. The reduction in OREO expenses was related to the decline in nonperforming assets and the stabilization of collateral values. The decline in Federal Deposit Insurance Corporation ("FDIC") insurance expense was due to a lower risk based assessment rate being applicable. Advertising expense during 2012 included costs related to the rebranding of Sterling Savings Bank as Sterling Bank, with no rebranding charges recognized in the comparative periods. Merger and acquisition expense for the 2012 periods reflected costs associated with the First Independent transaction, including system conversion costs, professional fees, employee severance and contingent consideration from the earn-out provision. As of December 31, 2012, we had $15.4 million accrued for the First Independent contingent consideration, with a maximum of an additional $1.6 million to be recognized in 2013. Other noninterest expense during 2012 included a refund of $1.9 million for Washington State Business and Occupation tax, and a charge of $2.0 million in connection with a tentative settlement related to a previously disclosed ERISA class action complaint. In 2011, other noninterest expense included $3.5 million of legal settlement expense.

Income Tax Provision. During 2012, Sterling recorded a $292.0 million income tax benefit, which was the result of reversing the deferred tax asset valuation allowance. Sterling did not recognize any federal or state income tax expense during 2011. As of December 31, 2012, the net deferred tax asset was $292.1 million, including $274.0 million of net operating loss and tax credit carry-forwards. As of December 31, 2011, Sterling had a fully reserved net deferred tax asset of $327.4 million, including $285.0 million of net operating loss and tax credit carry-forwards.

33

2011 versus 2010

Net Interest Income. Sterling’s net interest income was $295.2 million for the year ended December 31, 2011, an increase of 4% compared with $284.0 million for the year ended December 31, 2010, reflecting the decline in nonperforming loans and lower funding costs, partially offset by lower average loan balances. Net interest margin expanded to 3.29% for the year ended December 31, 2011, compared with 2.83% for 2010, due to the decline in nonperforming loans and the reduced cost of deposits. The reversal of interest income on nonperforming loans reduced the net interest margin by 37 basis points for 2011, compared with a reduction of 76 basis points for 2010.

Provision for Credit Losses. Sterling recorded provisions for credit losses of $30.0 million for the year ended December 31, 2011, compared with $250.2 million for 2010. The reduced level of credit loss provisioning reflects improvement in asset quality as evidenced by the decline in nonperforming loans and charge-offs.

Noninterest Income. Noninterest income was as follows for the years presented:

	Years Ended December 31,
	2011			2010			% change
	(in thousands)
Fees and service charges	$	50,073		$	54,740		(9	)%
Mortgage banking operations	52,376			62,564			(16	)%
Loan servicing fees	(3,213		)	3,762			(185	)%
BOLI	6,448			7,307			(12	)%
Gains on sales of securities, net	16,236			25,745			(37	)%
Charge on prepayment of debt	0			(11,296		)	*
Gains on other loan sales	4,442			(4,928		)	(190	)%
Gains (losses) on assets	(85		)	(1,309		)	(94	)%
Other	51			380			(87	)%
Total noninterest income	$	126,328		$	136,965		(8	)%

* Results are not meaningful.

The reduction in fees and service charges income was primarily related to lower non-sufficient funds fees. The decline in income from mortgage banking operations reflected a lower level of residential loan originations and sales. Fluctuation in loan servicing fees is mainly attributable to market value adjustments to mortgage servicing rights and growth in the balance of the loan servicing portfolio. Due to a decline in prevailing interest rates, Sterling recorded a fair value valuation adjustment of $6.2 million to write down its mortgage servicing rights during 2011, compared with a recovery of previous valuation adjustments of $1.1 million in 2010. Losses on portfolio loan sales during 2010 included $3.4 million on the sale of $218.5 million of consumer indirect auto loans, with 2011 activity primarily related to the management of credit concentrations and premium capture. During 2010, a charge of $11.3 million was incurred on the early repayment of FHLB borrowings.

The following table presents components of mortgage banking operations for the years presented:

	Years Ended December 31,
	2011			2010
	(in thousands)
Residential loan sales	$	2,059,351		$	2,455,144
Change in warehouse and interest rate locks	(41,886		)	(62,807		)
Total mortgage banking activity	$	2,017,465		$	2,392,337
Margin on residential loan sales	2.45		%	2.40		%

34

Noninterest Expense. Noninterest expense was as follows for the years presented:

	Years Ended December 31,
	2011		2010		% change
	(in thousands)
Employee compensation and benefits	$	171,643	$	168,793	2	%
OREO operations	41,500		62,578		(34	)%
Occupancy and equipment	39,878		39,643		1	%
Data processing	24,171		23,116		5	%
FDIC insurance	14,328		32,088		(55	)%
Professional fees	13,902		22,394		(38	)%
Depreciation	12,184		13,391		(9	)%
Advertising	10,017		11,536		(13	)%
Travel and entertainment	5,420		3,975		36	%
Amortization of other intangible assets	4,851		4,898		(1	)%
Merger and acquisition	1,012		358		183	%
Other	13,484		12,275		10	%
Total noninterest expense	$	352,390	$	395,045	(11	)%

* Results are not meaningful.

The decrease in noninterest expense during 2011 was primarily due to lower OREO expenses, lower insurance expense from FDIC premiums, and lower professional fees. During 2010, professional fees included services related to the recapitalization. During 2011, Sterling converted to a new core operating system. Other noninterest expense for 2011 included a charge of $3.5 million recognized to establish a reserve for the settlement of a class action claim.

Income Tax Provision. During 2011 and 2010, Sterling did not recognize any federal or state tax expense or benefit, as the income tax provision was offset by changes in the deferred tax valuation allowance. As of December 31, 2011, the reserved net deferred tax asset was $327.4 million, including $285.0 million of net operating loss and tax credit carry-forwards.

Financial Position

Assets. At December 31, 2012, Sterling’s assets were $9.24 billion, an increase of $43.7 million from $9.19 billion at December 31, 2011. During 2012, growth in the loan portfolio and the release of the deferred tax asset valuation allowance was mostly offset by the decline in the securities portfolio.

Investments and MBS. Sterling’s investment and MBS portfolio at December 31, 2012 was $1.51 billion, compared with $2.55 billion at December 31, 2011, a decline of 41%. The decline reflects a reduction in repurchase agreement borrowings that were collateralized by securities, and the management of prepayment and interest rate risk in the portfolio. As of December 31, 2012, the weighted average life of the MBS portfolio was 3.3 years, and its effective duration was 2.4%. This compares with a weighted average life of 3.8 years, and an effective duration of 3.1% at December 31, 2011. On December 31, 2012, the investments and MBS portfolio had a net unrealized gain of $60.9 million versus $62.2 million at December 31, 2011.

35

	December 31,
	2012		2011		2010
	(in thousands)
MBS	$	1,308,838	$	2,320,934	$	2,602,610
Municipal bonds	204,306		207,456		201,143
Other	219		21,233		34,721
Total	$	1,513,363	$	2,549,623	$	2,838,474
Available for sale	$	1,513,157	$	2,547,876	$	2,825,010
Held to maturity	206		1,747		13,464
Total	$	1,513,363	$	2,549,623	$	2,838,474

The following table provides the carrying value and weighted average yield of Sterling’s investment and MBS portfolio by contractual maturity. Actual maturities for MBS will differ from contractual maturities by the level of prepayments experienced on the underlying mortgages.

	December 31, 2012
	One Year or Less			After One through Five Years			After Five through Ten Years			After Ten Years			Total
	(in thousands)
MBS
Balance	$	0		$	3,057		$	30,991		$	1,274,790		$	1,308,838
Weighted average yield	0.00		%	4.42		%	3.06		%	2.51		%	2.53		%
Municipal bonds
Balance	$	0		$	209		$	42,988		$	161,109		$	204,306
Weighted average yield (1)	0.00		%	4.55		%	4.43		%	4.57		%	4.54		%
Other
Balance	$	0		$	0		$	0		$	219		$	219
Weighted average yield	0.00		%	0.00		%	0.00		%	0.00		%	0.00		%
Total carrying value	$	0		$	3,266		$	73,979		$	1,436,118		$	1,513,363
Weighted average yield	0.00		%	4.42		%	3.86		%	2.74		%	2.80		%

⁽¹⁾ The weighted average yield on municipal bonds are not presented on a tax-equivalent basis.

36

Loans Receivable. The following table sets forth the composition of Sterling’s loan portfolio by class of loan at the dates indicated:

	2012					2011					2010					2009					2008
	Amount			%		Amount			%		Amount			%		Amount			%		Amount			%
	(in thousands)
Residential real estate	$	806,722		13	%	$	688,020		12	%	$	758,410		13	%	$	839,170		11	%	$	867,384		10	%
Commercial real estate ("CRE"):
Investor CRE	1,219,847			20		1,275,667			23		1,314,657			24		1,403,560			18		1,364,885			15
Multifamily	1,580,289			25		1,001,479			18		517,022			9		517,408			7		477,615			5
Construction	74,665			1		174,608			3		525,668			9		1,516,108			20		2,534,695			28
Total CRE	2,874,801			46		2,451,754			44		2,357,347			42		3,437,076			45		4,377,195			48
Commercial:
Owner occupied CRE	1,276,591			20		1,272,461			24		1,238,744			23		1,424,980			18		1,534,282			17
Commercial & Industrial ("C&I")	540,499			9		431,693			8		531,682			9		876,964			11		997,876			11
Total commercial	1,817,090			29		1,704,154			32		1,770,426			32		2,301,944			29		2,532,158			28
Consumer	754,621			12		674,961			12		744,068			13		1,116,522			15		1,248,520			14
Gross loans receivable	6,253,234			100	%	5,518,889			100	%	5,630,251			100	%	7,694,712			100	%	9,025,257			100	%
Deferred loan fees, net	2,860					(252		)			(4,114		)			(7,070		)			(9,798		)
Allowance for loan losses	(154,345		)			(177,458		)			(247,056		)			(343,443		)			(208,365		)
Loans receivable, net	$	6,101,749				$	5,341,179				$	5,379,081				$	7,344,199				$	8,807,094

Net loans acquired in the First Independent transaction during the first quarter of 2012 were $350.0 million. During 2012, Sterling originated $1.82 billion of loans for its portfolio, compared to $1.39 billion during 2011. During 2012, multifamily loan balances grew $578.8 million, or 58%, and C&I loan balances grew by $108.8 million, or 25%. Also during 2012, residential real estate loans grew by $118.7 million, or 17%, and consumer loans grew by $79.7 million, or 12%. Loan purchases of $76.7 million of residential loans, and $71.6 million of consumer loans, supplemented new production, contributing to the growth in loan balances in 2012.

37

The following table sets forth the loan loss allowance by category and the percentage of loans in each category to total loans:

	December 31,
	2012				2011				2010				2009				2008
	Allowance for loan losses		Loans to total loans		Allowance for loan losses		Loans to total loans		Allowance for loan losses		Loans to total loans		Allowance for loan losses		Loans to total loans		Allowance for loan losses		Loans to total loans
	(in thousands)
Residential real estate	$	19,847	13	%	$	15,197	12	%	$	17,307	13	%	$	28,319	11	%	$	8,147	10	%
Commercial real estate:
Investor CRE	23,469		20	%	55,876		23	%	49,362		23	%	42,296		18	%	13,712		15	%
MultiFamily	14,433		25	%	13,491		18	%	9,668		9	%	8,984		7	%	4,795		5	%
Construction	10,192		1	%	22,355		3	%	65,877		10	%	185,222		19	%	118,279		28	%
Total CRE	48,094		46	%	91,722		44	%	124,907		42	%	236,502		44	%	136,786		48	%
Commercial:
Owner occupied CRE	22,340		20	%	20,636		23	%	34,282		23	%	28,248		19	%	11,008		17	%
C&I	19,534		9	%	17,410		8	%	22,669		9	%	30,887		11	%	29,019		11	%
Total commercial	41,874		29	%	38,046		31	%	56,951		32	%	59,135		30	%	40,027		28	%
Consumer	25,602		12	%	13,427		12	%	14,645		13	%	19,198		15	%	14,608		14	%
Unallocated	18,928		n/a		19,066		n/a		33,246		n/a		289		n/a		8,797		n/a
	$	154,345	100	%	$	177,458	100	%	$	247,056	100	%	$	343,443	100	%	$	208,365	100	%

38

The following table presents a roll-forward of the allowance for credit losses for the periods presented:

	Years Ended December 31,
	2012			2011			2010			2009			2008
Allowance for credit losses	(in thousands)
Allowance - loans, beginning balance	$	177,458		$	247,056		$	343,443		$	208,365		$	111,026
Provision	7,500			28,500			250,591			690,738			318,585
Charge-offs:
Residential real estate	(5,203		)	(18,553		)	(37,347		)	(31,401		)	(6,187		)
Commercial real estate
Investor CRE	(14,840		)	(25,779		)	(26,943		)	(25,947		)	0
Multifamily	(1,138		)	(1,703		)	(18,039		)	(3,510		)	(30		)
Construction	(11,407		)	(45,896		)	(238,596		)	(420,539		)	(178,033		)
Total commercial real estate	(27,385		)	(73,378		)	(283,578		)	(449,996		)	(178,063		)
Commercial
Owner occupied CRE	(14,078		)	(19,177		)	(22,482		)	(24,786		)	(9,238		)
C&I	(2,927		)	(9,192		)	(18,683		)	(45,085		)	(20,015		)
Total commercial	(17,005		)	(28,369		)	(41,165		)	(69,871		)	(29,253		)
Consumer	(9,144		)	(8,869		)	(14,765		)	(15,396		)	(9,821		)
Total charge-offs	(58,737		)	(129,169		)	(376,855		)	(566,664		)	(223,324		)
Recoveries
Residential real estate	1,075			1,419			2,131			306			66
Commercial real estate
Investor CRE	4,338			2,629			259			0			0
Multifamily	611			1,853			189			5			0
Construction	11,992			16,583			20,213			6,803			221
Total commercial real estate	16,941			21,065			20,661			6,808			221
Commercial
Owner occupied CRE	3,926			1,523			1,052			348			69
C&I	4,718			5,233			4,164			1,875			86
Total commercial	8,644			6,756			5,216			2,223			155
Consumer	1,464			1,831			1,869			1,667			1,636
Total recoveries	28,124			31,071			29,877			11,004			2,078
Net charge-offs	(30,613		)	(98,098		)	(346,978		)	(555,660		)	(221,246		)
Allowance - loans, ending balance	154,345			177,458			247,056			343,443			208,365
Allowance - unfunded commitments, beginning balance	10,029			10,707			11,967			21,334			6,306
Provision	2,500			1,500			(360		)	(9,367		)	15,012
Charge-offs	(4,527		)	(2,178		)	(900		)	0			16
Allowance - unfunded commitments, ending balance	8,002			10,029			10,707			11,967			21,334
Total credit allowance	$	162,347		$	187,487		$	257,763		$	355,410		$	229,699
Allowance on specific impaired loans	$	8,463		$	16,305		$	37,654		$	27,129		$	1,980
Net charge-offs to average loans	0.48		%	1.64		%	4.86		%	6.17		%	2.37		%
Loan loss allowance to loans	2.47		%	3.22		%	4.39		%	4.46		%	2.31		%

39

See Note 4 of the Notes to Consolidated Financial Statements for further details by loan segment for changes in the allowance for credit losses. The decline in the allowance for credit losses from December 31, 2011 reflects a reduction in the level of classified loans.

The following table sets forth the contractual principal repayments of Sterling’s loan portfolio, as well as sensitivities of these loans to changes in interest rates. Demand loans, loans having no stated repayment schedule and no stated maturity, and overdrafts are reported as due in one year or less. Loan balances do not include undisbursed loan proceeds, deferred loan origination costs and fees, or allowances for credit losses.

					Principal Payments Contractually Due in Fiscal Years
	Balance Outstanding at December 31, 2012				2013				2014-2017				Thereafter
	fixed		variable		fixed		variable		fixed		variable		fixed		variable
	(in thousands)
Residential real estate	$	373,628	$	433,094	$	111,880	$	19,594	$	94,413	$	46,906	$	167,335	$	366,594
Commercial real estate:
Investor CRE	379,214		840,633		108,896		122,894		190,998		312,031		79,320		405,708
Multifamily	74,321		1,505,968		12,286		47,853		20,934		177,026		41,101		1,281,089
Construction	22,749		51,916		20,991		47,903		696		1,589		1,062		2,424
Total commercial real estate	476,284		2,398,517		142,173		218,650		212,628		490,646		121,483		1,689,221
Commercial:
Owner occupied CRE	417,142		859,449		55,055		138,688		206,962		291,224		155,125		429,537
C&I	202,070		338,429		68,515		231,101		107,496		81,131		26,059		26,197
Total commercial	619,212		1,197,878		123,570		369,789		314,458		372,355		181,184		455,734
Consumer	389,207		365,414		62,617		11,366		183,352		64,774		143,238		289,274
Total	$	1,858,331	$	4,394,903	$	440,240	$	619,399	$	804,851	$	974,681	$	613,240	$	2,800,823

40

The following table sets forth Sterling’s loan originations and purchases for the periods indicated, excluding loans acquired upon completion of the First Independent transaction:

	Years Ended December 31,
	2012		2011		2010		2009		2008
Loan originations:	(in thousands)
Residential real estate:
For sale	$	2,901,407	$	2,009,654	$	2,454,874	$	2,284,240	$	1,134,211
Permanent	228,048		89,240		107,679		763,140		330,462
Total residential real estate	3,129,455		2,098,894		2,562,553		3,047,380		1,464,673
CRE:
Investor CRE	63,986		42,551		98,172		176,256		326,853
Multifamily	813,495		720,192		29,369		82,696		170,975
Construction	8,931		19,557		20,084		64,660		602,051
Total CRE	886,412		782,300		147,625		323,612		1,099,879
Commercial:
Owner occupied CRE	158,411		158,347		50,428		131,919		265,594
C&I	296,575		217,723		80,548		186,625		276,384
Total commercial	454,986		376,070		130,976		318,544		541,978
Consumer	255,459		138,203		87,817		291,602		516,940
Total loan originations	4,726,312		3,395,467		2,928,971		3,981,138		3,623,470
Total portfolio loan originations (excludes residential real estate for sale)	1,824,905		1,385,813		474,097		1,696,898		2,489,259
Loan purchases:
Residential real estate	76,736		13,417		0		0		0
CRE:
Investor CRE	2,345		48,584		0		0		0
Multifamily	932		2,896		82,702		0		0
Total CRE	3,277		51,480		82,702		0		0
Commercial owner occupied CRE	5,038		74,716		0		0		0
Consumer	71,620		0		0		0		0
Total loan purchases	156,671		139,613		82,702		0		0
Total loan originations and purchases	$	4,882,983	$	3,535,080	$	3,011,673	$	3,981,138	$	3,623,470

Residential loan originations grew by $1.03 billion, or 49% during 2012, fueled by historically low interest rates. During 2012, CRE originations grew by $104.1 million, or 13%; commercial originations grew by $78.9 million, or 21%; and consumer originations increased by $117.3 million, or 85%. Residential loan purchases during 2012 were comprised primarily of adjustable rate mortgages. Consumer loan purchases were comprised of fixed rate auto loans. The loan purchases offered favorable yields compared to MBS.

41

The following table presents classified assets, which are comprised of loans risk rated as substandard, doubtful or loss, and OREO.

	December 31,
	2012			2011			2010			2009			2008
	(in thousands)
Residential real estate	$	26,915		$	30,918		$	104,467		$	128,561		$	34,333
CRE:
Investor CRE	70,044			75,304			173,444			154,859			37,890
Multifamily	8,964			15,995			43,331			44,258			16,741
Construction	17,800			98,773			375,647			949,877			667,732
Total CRE	96,808			190,072			592,422			1,148,994			722,363
Commercial:
Owner occupied CRE	58,119			94,660			149,567			202,804			68,728
C&I	6,006			21,029			72,558			66,717			75,020
Total commercial	64,125			115,689			222,125			269,521			143,748
Consumer	8,942			7,157			18,868			11,996			4,556
Total classified loans	196,790			343,836			937,882			1,559,072			905,000
OREO	25,042			81,910			161,653			83,272			62,320
Total classified assets	$	221,832		$	425,746		$	1,099,535		$	1,642,344		$	967,320
Classified loans/ total loans	3.1		%	6.2		%	16.7		%	20.3		%	10.0		%
Classified assets/ total assets	2.4		%	4.6		%	11.6		%	15.1		%	7.6		%

Classified assets declined $203.9 million, or 48% during the year ended December 31, 2012. Significant reductions in the classified construction loans, as well as OREO contributed to the overall decline in classified assets. Nonperforming assets include nonperforming loans and OREO, are summarized in the following table as of the dates indicated:

	December 31,
	2012			2011			2010			2009			2008
	(in thousands)
Past due 90 days or more and accruing	$	0		$	0		$	0		$	0		$	0
Nonaccrual loans	121,113			210,221			546,133			824,652			474,172
Restructured loans	64,216			76,939			108,504			71,279			56,618
Total nonperforming loans	185,329			287,160			654,637			895,931			530,790
OREO	25,042			81,910			161,653			83,272			62,320
Total nonperforming assets	210,371			369,070			816,290			979,203			593,110
Specific reserve - loans	(8,463		)	(16,305		)	(37,654		)	(27,129		)	(1,980		)
Net nonperforming assets	$	201,908		$	352,765		$	778,636		$	952,074		$	591,130
Nonperforming assets to total assets	2.28		%	4.01		%	8.60		%	9.00		%	4.64		%
Nonperforming loans to loans	2.96		%	5.20		%	11.64		%	11.65		%	5.89		%
Loan loss allowance to nonperforming loans	83		%	62		%	38		%	38		%	39		%

Nonperforming assets declined 43% during 2012, as a result of OREO sales and other asset resolution efforts outpacing new problem loans.

42

The following table presents a roll-forward of nonperforming loans for the periods indicated:

	Years Ended December 31,
	2012			2011			2010			2009			2008
Nonperforming loans:	(in thousands)
Beginning Balance	$	287,160		$	654,637		$	895,931		$	530,790		$	124,140
Additions	146,941			211,710			825,047			1,322,100			723,130
Charge-offs	(30,613		)	(98,098		)	(346,978		)	(555,660		)	(221,246		)
Paydowns and sales	(159,827		)	(205,456		)	(352,655		)	(244,850		)	(14,334		)
Foreclosures	(33,499		)	(177,881		)	(265,115		)	(156,449		)	(80,900		)
Upgrade to accrual	(24,833		)	(97,752		)	(101,593		)	0			0
Ending Balance	$	185,329		$	287,160		$	654,637		$	895,931		$	530,790

The following table presents a roll-forward of OREO for the periods indicated:

	Years Ended December 31,
	2012					2011					2010					2009					2008
	Amount			Number of Properties		Amount			Number of Properties		Amount			Number of Properties		Amount			Number of Properties		Amount			Number of Properties
OREO:	(Dollars in thousands)
Beginning Balance	$	81,910		143		$	161,653		439		$	83,272		203		$	62,320		120		$	11,075		14
Additions	33,499			117		177,881			463		265,115			821		156,449			388		80,900			132
Valuation adjustments	(5,812		)			(22,209		)			(36,759		)			(31,021		)			(17,628		)
Sales	(85,837		)	(214	)	(241,028		)	(759	)	(155,409		)	(585	)	(106,130		)	(305	)	(10,208		)	(26	)
Other changes	1,282					5,613					5,434					1,654					(1,819		)
Ending Balance	$	25,042		46		$	81,910		143		$	161,653		439		$	83,272		203		$	62,320		120

OREO declined 69% compared with December 31, 2011. The following table presents the property type composition of OREO as of the following dates:

	December 31,
	2012			2011			2010			2009			2008
	Amount		Number of Properties	Amount		Number of Properties	Amount		Number of Properties	Amount		Number of Properties	Amount		Number of Properties
OREO:	(Dollars in thousands)
Residential real estate	$	2,448	12	$	5,301	50	$	24,239	109	$	14,360	59	$	7,583	24
CRE:
Investor CRE	1,636		4	14,685		19	15,710		16	6,464		13	465		2
Multifamily	0		0	0		0	25		1	147		1	0		0
Construction	17,304		9	52,829		48	98,022		252	44,964		92	48,613		82
Commercial:
Owner occupied CRE	3,194		13	5,424		17	18,107		33	12,803		26	4,348		7
C&I	0		0	2,196		2	2,278		6	2,725		5	0		0
Consumer	460		8	1,475		7	3,272		22	1,809		7	1,311		5
Ending Balance	$	25,042	46	$	81,910	143	$	161,653	439	$	83,272	203	$	62,320	120

As of December 31, 2012, construction OREO was primarily comprised of one assisted living facility.

43

Deposits. The following table sets forth the composition of Sterling’s deposits at the dates indicated:

	December 31,
	2012				2011				2010
	Amount		%		Amount		%		Amount		%
	(in thousands)
Noninterest bearing transaction	$	1,702,740	26	%	$	1,211,628	19	%	$	992,368	15	%
Interest bearing transaction	732,038		11	%	521,037		8	%	497,395		7	%
Savings and MMDA	2,262,369		36	%	2,092,283		32	%	1,886,425		27	%
Time deposits	1,738,970		27	%	2,660,870		41	%	3,534,819		51	%
Total deposits	$	6,436,117	100	%	$	6,485,818	100	%	$	6,911,007	100	%

During 2012, total deposits declined 1%, with new deposit growth, including $695.9 million from the First Independent transaction, being offset by runoff in time deposits. The Montana divestiture on November 30, 2012 included the sale of approximately $182 million of deposits, 42% of which were time deposits. During 2012, transaction account balances increased 41%. At December 31, 2012, transaction account balances represented 38% of total deposits, compared with 27% as of December 31, 2011.

The following table shows the amounts and remaining maturities of time deposits that had balances of $100,000 or more as of period end:

	December 31, 2012
	(in thousands)
Three months or less	$	165,107
After three months through six months	99,941
After six months through twelve months	212,215
After twelve months	402,083
	$	879,346

Borrowings. In addition to deposits, Sterling uses other borrowings as sources of funds. The aggregate amount of other borrowings outstanding comprised of FHLB advances, repurchase agreements and junior subordinated debentures, was $1.44 billion as of December 31, 2012 compared with $1.71 billion at December 31, 2011, or a 16% decline. During 2012, Sterling prepaid $300 million of repurchase agreements. Prepayments and maturities were partially offset by new FHLB advances.

The following table presents the ending balances of Sterling’s borrowings as of the dates indicated:

	December 31,
	2012		2011		2010
	(in thousands)
FHLB advances:
Short-term	$	269,053	$	300,000	$	1,333
Long-term	336,277		105,609		405,878
Securities sold under repurchase agreements and funds purchased:
Short-term	86,867		205,763		32,512
Long-term	500,000		850,000		1,000,000
Junior subordinated debentures	245,294		245,290		245,285
Total borrowings	$	1,437,491	$	1,706,662	$	1,685,008

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Certain other information related to the short-term portion of Sterling’s borrowings as of and for the periods indicated is as follows:

	Years Ended December 31,
	2012			2011			2010
	(in thousands)
Maximum amount outstanding at any month-end during the period:
Short-term advances	$	269,053		$	301,325		$	600,160
Short-term repurchase agreements and funds purchased	265,595			205,763			35,231
Average amount outstanding during the period:
Short-term advances	161,231			229,512			246,061
Short-term repurchase agreements and funds purchased	$	209,521		$	90,008		$	27,738
Average rate during the period:
Short-term advances	1.33		%	0.29		%	2.41		%
Short-term repurchase agreements and funds purchased	2.72		%	1.85		%	0.46		%
Average rate as of the end of the period:
Short-term advances	0.96		%	0.28		%	5.97		%
Short-term repurchase agreements and funds purchased	1.18		%	3.08		%	0.33		%

Asset and Liability Management

The principal objective of Sterling’s asset and liability management activities is to provide optimum levels of net interest income ("NII") and stable sources of funding while maintaining acceptable levels of interest-rate risk and liquidity risk. The Asset/Liability Committee (“ALCO”) measures interest rate risk exposure primarily through interest rate shock simulations for both net interest income and the economic value of equity (“EVE”). Interest rate risk arises from mismatches in assets and liabilities, with mismatches due to differences in the timing of rate repricing for the various instruments, the amount or volume of the underlying assets and liabilities that are repricing, and by how much or the level at which the rate is repricing. The specific characteristics of the underlying assets and liabilities, including any embedded optionality, such as a prepayment option on a loan, influence these differences.

The net interest income interest rate shock simulation measures the effect of changes in interest rates on net interest income over 12 months. This simulation consists of measuring the change in net interest income over the next 12 months from the base case scenario, from which rates are shocked, in a parallel fashion, up and down. The base case uses the assumption of the existing balance sheet and existing interest rates. The simulation requires numerous assumptions, including relative levels of market interest rates, instantaneous and parallel shifts in the yield curve, loan prepayments and reactions of depositors to changes in interest rates, and should not be relied upon as being indicative of actual or future results. The analysis does not contemplate actions Sterling may undertake in response to changes in interest rates and market conditions. The results of this simulation are included in the following table for the periods presented:

	December 31, 2012	December 31, 2011
Change in Interest Rate in Basis Points (Rate Shock)	% Change in NII	% Change in NII
+300	2.0	(4.6	)
+200	1.8	(2.3	)
+100	1.0	(0.7	)
Static	0.0	0.0
-100	*	*

 * Results are not meaningful in a low interest rate environment.

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EVE simulation analysis measures risk in the balance sheet that might not be taken into account in the net interest income simulation. Whereas net interest income simulation highlights exposure over a relatively short time period of 12 months, EVE simulation analysis incorporates all cash flows over the estimated remaining life of all balance sheet positions. The EVE simulation analysis of the balance sheet, at a point in time, is defined as the discounted present value of asset cash flows minus the discounted value of liability cash flows. The difference between the present value of the asset and liability represents the EVE. As with net interest income, the base case simulation uses current market rates, from which rates are shocked up and down in a parallel fashion. As with the net interest income simulation model, EVE simulation analysis is based on key assumptions about the timing and variability of balance sheet cash flows. However, because the simulation represents much longer time periods, inaccuracy of assumptions may increase the variability of outcomes within the simulation. It also does not take into account actions management may undertake in response to anticipated changes in interest rates. The results of this simulation are included in the following table for the periods presented:

	December 31, 2012	December 31, 2011
Change in Interest Rate in Basis Points (Rate Shock)	% Change in EVE	% Change in EVE
+300	29.9	6.2
+200	23.8	8.9
+100	13.7	7.0
Static	0.0	0.0
-100	*	*

* Results are not meaningful in a low interest rate environment.

Sterling's modeled interest rate sensitivities during 2012 were affected by changes to its balance sheet, including a reduction in the size and duration of the securities portfolio, and a reduction in wholesale borrowings. Growth of core deposits and loans, both organic and through acquisition, also positively impacted the modeled results. 

Sterling has customer-related interest rate swap derivatives outstanding, with a total notional amount of $81.0 million of related swaps outstanding as of December 31, 2012. For a description, see Note 18 of Notes to Consolidated Financial Statements. As of December 31, 2012, Sterling has not entered into any other derivative transactions as part of managing its interest rate risk. However, Sterling continues to consider derivatives, including interest rate swaps, caps and floors as viable alternatives in the asset and liability management process.

Capital and Liquidity Management

Sterling's primary sources of funds are: retail, public and brokered deposits; the collection of principal and interest from loans and MBS; the sale of loans into the secondary market in connection with Sterling's mortgage banking and other loan sale activities; borrowings from the FHLB and the Federal Reserve; and borrowings from commercial banks (including repurchase agreements). Public deposits from states, municipalities, and other public entities generally require collateralization for some or all of the deposit amounts, depending on state and local requirements. Repurchase agreements allow Sterling to sell investments (generally U.S. agency securities and MBS) under an agreement to buy them back at a specified price at a later date. Repurchase agreements are considered collateralized obligations and may expose Sterling to certain risks not associated with other borrowings, including interest rate risk and the possibility that additional collateral may have to be provided if the market value of the pledged collateral declines. Sterling Bank's credit line with FHLB of Seattle provides for borrowings up to a percentage of its total assets, subject to collateralization requirements, with borrowing terms ranging from overnight to term advances. Sterling Bank actively manages its liquidity to maintain an adequate margin over the level necessary to support the funding of loans and deposit withdrawals. Liquidity may vary, depending on economic conditions, deposit fluctuations, loan funding needs and regulatory requirements.

The total value of Sterling's consolidated cash and equivalents and securities was $1.84 billion at December 31, 2012, compared with $3.04 billion at December 31, 2011, reflecting the reduction in available for sale securities. Total available liquidity as of December 31, 2012 was $2.93 billion, compared to $3.39 billion as of December 31, 2011. Total available liquidity as of December 31, 2012 included unpledged portions of cash and equivalents and securities of $506.5 million, available borrowing capacity from the FHLB, the Federal Reserve and correspondent banks of $1.96 billion, as well as loans held for sale of $466.0 million.

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Sterling, as a parent company-only, had cash of approximately $24.4 million and $44.6 million at December 31, 2012 and December 31, 2011, respectively. The parent company's significant cash flows primarily relate to capital investments in and capital distributions from Sterling Bank, capital distributions to shareholders, and interest payments on junior subordinated debentures. During the third quarter of 2009, Sterling elected to defer regularly scheduled interest payments on its junior subordinated debentures. In June 2012, Sterling paid in full the deferred accrued interest on the junior subordinated debentures in the amount of $19.6 million. On August 20, 2012, Sterling paid a quarterly cash dividend of $0.15 per common share, or an aggregate $9.3 million, to shareholders of record as of August 6, 2012. On November 20, 2012, Sterling paid a quarterly cash dividend of $0.15 per common share, or an aggregate $9.3 million, to shareholders of record as of November 6, 2012. On December 28, 2012, Sterling paid a quarterly cash dividend of $0.15 per common share, which was an acceleration of the dividend that otherwise would have been declared and paid in the first quarter of 2013, and a special dividend of $0.35 per common share, for an aggregate $31.1 million, to shareholders of record as of December 21, 2012. Sterling's ability to pay dividends is generally limited by its earnings, financial condition, capital, liquidity and regulatory requirements.  Sterling relies on Sterling Bank as its primary source of cash flow. Various federal and state statutory provisions and regulations limit the amount of dividends, if any, Sterling Bank may pay to Sterling without regulatory approval.

Off-Balance Sheet Arrangements

The following table represents Sterling’s on-and-off-balance sheet aggregate contractual obligations to make future payments as of December 31, 2012:

	Payments Due by Period
	Total		Less than 1 year		1 to 3 years		Over 3 to 5 years		More than 5 years		Indeterminate maturity
	(in thousands)
Deposits (1)	$	6,436,117	$	977,745	$	446,246	$	248,793	$	66,186	$	4,697,147
Borrowings (1)	1,437,491		355,920		155,550		573,196		352,825		0
Operating leases	78,268		14,012		23,021		14,522		26,713		0
Purchase obligations (2)	34,202		10,099		19,285		4,818		0		0
Other long-term liabilities (3)	29,460		1,477		3,167		3,356		21,460		0
Total	$	8,015,538	$	1,359,253	$	647,269	$	844,685	$	467,184	$	4,697,147

⁽¹⁾ Excludes interest payments. Deposits with indeterminate maturities are composed of transaction, savings and MMDA accounts.

⁽²⁾ Excludes recurring accounts payable amounts due in the first quarter of 2013.

⁽³⁾ Includes amounts associated with retirement and benefit plans and other compensation arrangements. The amounts represent the total future potential payouts assuming all current participants become fully vested in their respective plans or arrangements.

For discussion of commitments to extend credit, see Note 19 of “Notes to Consolidated Financial Statements.”

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Critical Accounting Policies

Sterling's accounting and reporting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) and to general practices within the banking industry. The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Allowance for Credit Losses. The allowance for credit losses is comprised of the allowance for loan losses and the reserve for unfunded credit commitments. In general, determining the amount of the allowance requires significant judgment and the use of estimates by management. Sterling maintains an allowance for loan losses to absorb probable losses in the loan portfolio based on a quarterly analysis of the portfolio and expected losses. This analysis is designed to determine an appropriate level and allocation of the allowance for losses among loan classes by considering factors affecting loan losses, including specific and confirmed losses, levels and trends in classified and nonperforming loans, historical loan loss experience, loan migration analysis, current national and local economic conditions, volume, growth and composition of the portfolio, regulatory guidance and other relevant factors. The reserve for unfunded credit commitments includes loss coverage for loan repurchases arising from mortgage banking activities. Management monitors the loan portfolio to evaluate the adequacy of the allowance. The allowance can increase or decrease each quarter based upon the results of management's analysis.

The portfolio is grouped into several industry segments for homogeneous loans based on characteristics such as loan type, borrower and collateral. Loan migration to loss data is used to determine the annual probability of default. The annual probability of default is adjusted for the estimated loss emergence period and may be further adjusted based on the assessment of qualitative factors. The estimated loss emergence period reflects an estimate of the time frame during which losses may be realized. Sterling establishes the expected loss rate on loans using the losses on charged-off and foreclosed loans from the most recent 12 months to estimate the amount that would be lost if a default were to occur, which is termed the “loss given default.” The probability of default is multiplied by the loss given default to calculate the expected losses for each loan class. The calculated expected loss is compared to the actual one and three year (annualized) losses. If the calculated expected loss rate is less than the actual one and three year loss rates, then the expected loss rate would be set at the greater of the actual one or three year loss rate.

Sterling may also maintain an unallocated allowance to provide for other credit losses that may exist in the loan portfolio that are not taken into consideration in establishing the probability of default and loss given default. The unallocated amount may generally be maintained at higher levels during times of economic uncertainty. The unallocated amount is reviewed at least quarterly based on credit and economic trends.

Individual loan reviews are based upon specific quantitative and qualitative criteria, including the size of the loan, loan quality ratings, value of collateral, repayment ability of borrowers and guarantors, as applicable, and historical experience factors. The historical experience factors utilized and allowances for homogeneous loans (such as residential mortgage loans and consumer loans) are collectively evaluated based upon historical loss experience, loan migration analysis, trends in losses and delinquencies, growth of loans in particular markets, and known changes in economic conditions in each particular lending market.

A loan is considered impaired when, based on current information and events, it is probable Sterling will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of delay, the reasons for the delay, the borrower's prior payment record, the ability and willingness of guarantors to make payments, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's obtainable market price or the fair value of collateral if the loan is collateral-dependent.

The fair value of the underlying collateral for real estate loans, which may or may not be collateral-dependent, is determined by using appraisals from qualified external sources. For commercial properties and residential development loans, the external appraisals are reviewed by qualified internal appraisal staff to ensure compliance with appropriate standards and technical accuracy. Appraisals are updated according to regulatory provisions for extensions or restructurings of commercial or residential real estate construction and permanent loans that have not performed within the terms of the original loan. Updated

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appraisals are also ordered for loans that have not been restructured, but that have stale valuation information, generally defined in the current market as information older than one year, and deteriorating credit quality that warrants classification as substandard.

The timing of obtaining appraisals may vary, depending on the nature and complexity of the property being evaluated and the general breadth of appraisal activity in the marketplace, but generally it is within 30 to 90 days of recognition of substandard status, following determination of collateral dependency, or in connection with a loan's maturity or a negotiation that may result in the restructuring or extension of a real estate secured loan. Delays in timing may occur to comply with actions such as a bankruptcy filing or provisions of an SBA guarantee.

Estimates of fair value may be used for substandard collateral-dependent loans at quarter end if external appraisals are not expected to be completed in time for determining quarter end results or to update values between appraisal dates to reflect recent sales activity of comparable inventory or pending property sales of the subject collateral. During periods of declining real estate values, Sterling may record a specific reserve for impaired loans for which an updated valuation analysis has not been completed within the last quarter. Estimates of value are not used to raise a value; however, estimates may be used to recognize deterioration of market values in quarters between appraisal updates. The judgment with respect to recognition of any provision or related charge-off for a confirmed loss also takes into consideration whether the loan is collateral-dependent or whether it is supported by sources of repayment or cash flow beyond the collateral that is being valued. For loans that are deemed to be collateral-dependent, the amount of charge-offs is determined in relation to the collateral's appraised value. For loans that are not deemed to be collateral-dependent, the amount of charge-offs may differ from the collateral's appraised value because there is additional support for the loan, such as cash flow from other sources.

The reserve for unfunded credit commitments includes loss exposure from Sterling's mortgage banking operations. Loans sold into the secondary market are sold with limited recourse to Sterling, meaning that Sterling may be obligated to repurchase any loans that are not underwritten in accordance with agency guidelines or have borrower misrepresentations.

While management uses available information to provide for loan losses, the ultimate collectability of a substantial portion of the loan portfolio and the need for future additions to the allowance will be influenced by changes in economic conditions and other relevant factors. There can be no assurance that the allowance for credit losses will be adequate to cover all losses, but management believes the allowance for credit losses was appropriate at December 31, 2012.

Income Taxes. Sterling estimates income taxes payable based on the amount it expects to owe various taxing authorities. Accrued income taxes represent the net estimated amount due to, or to be received from, taxing authorities. In estimating accrued income taxes, Sterling assesses the relative merits and risks of the appropriate tax treatment of transactions, taking into account the applicable statutory, judicial and regulatory guidance in the context of Sterling's tax position. Sterling also considers recent audits and examinations, as well as its historical experience in making such estimates. Although Sterling uses available information to record income taxes, underlying estimates and assumptions can change over time as a result of unanticipated events or circumstances. Penalties and interest associated with any potential estimate variances would be included in income tax expense in the consolidated financial statements.  

A deferred tax asset valuation allowance was established during 2009 due to the three year cumulative loss and uncertainty at that time regarding Sterling's ability to generate future taxable income. Reversal of the deferred tax asset valuation allowance occurred during the quarter ended June 30, 2012, which marked the sixth consecutive quarter of profitability for Sterling. Prior to reversing the allowance, management analyzed both positive and negative evidence that could affect the realization of the deferred tax asset. Based on the earnings performance trend and projections of income through 2013, improvement in asset quality, higher net interest margin and improvements in other key financial ratios, expectations of continued profitability, the length of the carry-forward period for its net operating losses and tax credits, an analysis of the reversal of existing temporary differences, and an evaluation of its loss carry-back ability and tax planning strategies, Sterling determined that it was more likely than not that the net deferred tax asset would be realized. This assessment was updated as of December 31, 2012, resulting in the same conclusion.

Income Recognition. Sterling recognizes interest income in accordance with generally accepted accounting principles. In the event management believes collection of all or a portion of contractual interest on a loan has become doubtful, which generally occurs when the loan is 90 days past due or when Sterling restructures a troubled loan, Sterling discontinues the accrual of interest, and any previously accrued interest recognized in income deemed uncollectible is reversed. Interest received on nonperforming loans is included in income only if principal recovery is reasonably assured. A nonperforming loan is restored to

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accrual status when it is brought current, has performed according to contractual terms for a reasonable period of time, generally six months, and the collectability of the total contractual principal and interest is no longer in doubt.

Investments and MBS. Assets in the investment and MBS portfolios are initially recorded at cost, which includes any premiums and discounts. Sterling amortizes premiums and discounts as an adjustment to interest income over the estimated life of the security. The cost of investment securities sold, and any resulting gain or loss, is based on the specific identification method. Sterling’s MBS are primarily in agency securities, with limited investments in nonagency obligations. The majority of the municipal bonds that Sterling holds are general obligation bonds, spread throughout Sterling’s footprint.

The loans underlying Sterling’s MBS are subject to the prepayment of principal. The rate at which prepayments are expected to occur in future periods impacts the amount of premium to be amortized in the current period. If prepayments in a future period are higher or lower than expected, then Sterling will need to amortize a larger or smaller amount of the premium to interest income in that future period.

Management determines the appropriate classification of investment securities at the time of purchase. Held-to-maturity securities are those securities that Sterling has the positive intent and ability to hold to maturity and are recorded at amortized cost. Available-for-sale securities are those securities that would be available to be sold in the future in response to Sterling’s liquidity needs, changes in market interest rates, and asset-liability management strategies, among other factors. Available-for-sale securities are reported at fair value, with unrealized holding gains and losses reported in shareholders’ equity as a separate component of other comprehensive income.

Management evaluates investment securities for other-than-temporary declines in fair value on a quarterly basis. If the fair value of investment securities falls below their amortized cost and the decline is deemed to be other-than-temporary, the securities will be written down to current market value, resulting in a loss. There were no investment securities that management identified as other-than-temporarily impaired ("OTTI") at December 31, 2012. As of December 31, 2012, Sterling expects the return of all principal and interest on all securities within its investment and MBS portfolio pursuant to the contractual terms, has the ability and intent to hold these investments, has no intent to sell securities that are deemed to have a market value impairment, and believes it is unlikely that it would be required to sell these investments before maturity or a recovery in market price occurs. Realized losses could occur in future periods due to a change in management’s intent to hold the investments to recovery, a change in management’s assessment of credit risk, or a change in regulatory or accounting requirements. During the second quarter of 2012, Sterling recognized an OTTI charge of $6.8 million on a single issuer trust preferred security. During the fourth quarter of 2012, the security was sold at a gain of $2.5 million.

Fair Value of Financial Instruments. Sterling’s available-for-sale securities portfolio totaled $1.51 billion and $2.55 billion as of December 31, 2012 and 2011, respectively, and were the majority of Sterling’s financial instruments that are carried at fair value. Month end security price valuations are provided by a third party pricing service. These valuations are based on market data using pricing models that vary by asset class and incorporate available current trade, bid and other market information, and for structured securities, cash flow and loan performance data. The pricing processes utilize benchmark curves, benchmarking of similar securities, sector groupings, and matrix pricing. Option adjusted spread models are also used to assess the impact of changes in interest rates and to develop prepayment scenarios. All models and processes used take into account market convention. Additional validation of provided pricing is performed by Sterling’s Investment Department using non-binding broker quotes, current trade executions provided by Bloomberg, and additional modeling of cash flow and prepayment analytics performed with Bloomberg analytics. Sterling also carries loans held for sale at fair value in order to match changes in the value of the loans with the value of the economic hedges on the loans without having to apply complex hedge accounting. The value of loans held for sale carried at fair value is determined based upon an analysis of investor quoted pricing inputs.

Other Real Estate Owned. Prior to foreclosure, Sterling considers all viable alternatives, checks with the proper authorities to ensure the existence of a valid and recorded lien on the property and determines the current market value of the collateral. Property and other assets acquired through foreclosure of defaulted mortgage or other collateralized loans are carried at fair value, less estimated costs to sell the property and other assets. The fair value of OREO is generally determined using “as is” or disposition values from appraisals obtained by independent appraisers.

An allowance for losses on OREO is designed to include amounts for estimated losses as a result of impairment in value of the real property after repossession. Sterling reviews its OREO for impairment in value at least quarterly or whenever events or circumstances indicate that the carrying value of the property or other assets may not be recoverable. In performing the review, if the fair value, less selling costs, is less than its carrying value, an impairment loss is recognized as a charge to operating expenses.

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Mortgage Servicing Rights. For “servicing-retained” loan sales, Sterling records an asset (mortgage servicing rights) related to the estimated future net revenue stream for servicing the sold loans. The value of mortgage servicing rights is estimated using a discounted cash flow methodology incorporating prepayment speeds, market interest rates, servicing costs, contractual interest rates on the loans being serviced, and the amount of other fee income generated over the servicing contract. Mortgage servicing rights are amortized in proportion to, and over the estimated period of the servicing revenues. To the extent the carrying value of mortgage servicing rights exceeds the subsequent fair value estimates, a valuation allowance is recognized. Subsequent recoveries in value are recognized up to the original carrying value of the mortgage servicing rights only to the extent of cumulative fair value charges.

Effects of Inflation and Changing Prices

A financial institution has an asset and liability structure that is interest-rate sensitive. As a holder of monetary assets and liabilities, an institution’s performance may be significantly influenced by changes in interest rates. Although changes in the prices of goods and services do not necessarily move in the same direction as interest rates, increases in inflation generally have resulted in increased interest rates, which may have an adverse effect on Sterling’s business.

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Item 7A.Quantitative and Qualitative Disclosures About Market Risk

For a discussion of Sterling’s market risks, see “Management’s Discussion and Analysis - Asset and Liability Management.”

Item 8.Financial Statements and Supplementary Data

The required information is contained immediately following Part IV of this Form 10-K.

Item 9.Changes in and Disagreements With Accountants and Financial Disclosure

There were no disagreements with Sterling’s independent accountants on accounting and financial disclosures.

Item 9A.Controls and Procedures

Sterling’s management, with the participation of Sterling’s principal executive officer and principal financial officer, has evaluated the effectiveness of Sterling’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934 (the “Exchange Act”) as of the end of the period covered by this report. Based on such evaluation, Sterling’s principal executive officer and principal financial officer have concluded that, as of the end of such period, Sterling’s disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by Sterling in the reports that it files or submits under the Exchange Act.

There were no changes in Sterling’s internal control over financial reporting that occurred during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, Sterling’s internal control over financial reporting.

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Sterling’s management, including the principal executive officer and principal financial officer, is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of Sterling’s management, Sterling conducted an evaluation of the effectiveness of its internal control over financial reporting based on the framework described in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO Criteria”). Based on management’s evaluation under the COSO Criteria, Sterling’s management has concluded that Sterling’s internal control over financial reporting was effective as of December 31, 2012.

The effectiveness of Sterling’s internal control over financial reporting as of December 31, 2012 has been audited by KPMG LLP, the independent registered public accounting firm that audited the financial statements included in Sterling’s annual report on Form 10-K, as stated in their report which is included herein.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Sterling Financial Corporation:

We have audited Sterling Financial Corporation and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Sterling Financial Corporation's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying management's report on internal control over financial reporting (Item 9A). Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Sterling Financial Corporation and subsidiaries as of December 31, 2012 and 2011, and the related consolidated statements of operations, comprehensive income (loss), shareholders' equity, and cash flows for the years then ended, and our report dated February 26, 2013 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Seattle, Washington

February 26, 2013

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Item 9B.Other Information

None.

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PART III

Item 10.Directors, Executive Officers and Corporate Governance

In response to this Item, the information set forth in Sterling’s Proxy Statement for its 2013annual meeting of shareholders, under the headings “Board of Sterling Financial Corporation,” “Executive Officers,” and “Section 16(a) Beneficial Ownership Reporting Compliance” is incorporated herein by reference.

Information concerning Sterling’s Audit Committee and the Audit Committee’s financial expert is set forth under the caption “Information Concerning the Board and Its Committees—Committees of the Board” in Sterling’s Proxy Statement and is incorporated herein by reference.

Sterling has adopted a Code of Ethics that applies to all Sterling employees and directors, including Sterling’s senior financial officers. The Code of Ethics is publicly available on Sterling’s website at www.sterlingfinancialcorporation.com/corporategovernance.

Item 11.Executive Compensation

In response to this Item, the information set forth in the Proxy Statement under the headings “Executive Compensation,” “Compensation and Governance Committee Report,” and “Compensation and Governance Committee Interlocks and Insider Participation” is incorporated herein by reference.

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

In response to this Item, the information set forth in the Proxy Statement under the headings “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” is incorporated herein by reference.

Item 13.Certain Relationships and Related Transactions, and Director Independence

In response to this Item, the information set forth in the Proxy Statement under the headings “Interests of Directors, Officers and Others in Certain Transactions” and “Corporate Governance—Affirmative Determinations Regarding Director Independence” is incorporated herein by reference.

Item 14.Principal Accounting Fees and Services

In response to this Item, the information set forth in the Proxy Statement under the headings “Independent Registered Public Accounting Firm” and “Pre-Approval of Audit and Non-Audit Services” is incorporated herein by reference.

55

PART IV

Item 15.Exhibits, Financial Statement Schedules

(a) Documents which are filed as a part of this report:

1. Financial Statements: The required financial statements are contained in this Form 10-K immediately following Part IV.

2. Financial Statement Schedules: Financial statement schedules have been omitted as they are not applicable or the information is included in the Consolidated Financial Statements.

3. Exhibits: The exhibits filed as part of this report and the exhibits incorporated herein by reference are listed in the Exhibit Index at page E-1.

(b) See (a)(3) above for all exhibits filed herewith.

(c) All schedules are omitted as the required information is not applicable or the information is presented in the Consolidated Financial Statements or related notes.

56

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	STERLING FINANCIAL CORPORATION
February 26, 2013		/s/ J. Gregory Seibly
		J. Gregory Seibly
		President, Chief Executive Officer and Director

POWER OF ATTORNEY

Each person whose signature appears below appoints J. Gregory Seibly, Patrick J. Rusnak and Andrew J. Schultheis, and each of them acting individually, as such person’s true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for such person and in such person’s name, place and stead, in any and all capacities, to sign the annual report on Form 10-K of Sterling Financial Corporation and any or all amendments thereto and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite or necessary to be done, as fully to all intents and purposes as such person might or would do in person, in and about the premises hereby ratifying and confirming all that said attorneys-in-fact and agents, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

February 26, 2013	/s/ J. Gregory Seibly
	J. Gregory Seibly
	President, Chief Executive Officer and Director
February 26, 2013	/s/ Patrick J. Rusnak
	Patrick J. Rusnak
	Executive Vice President and Chief Financial Officer
February 26, 2013	/s/ Robert G. Butterfield
	Robert G. Butterfield
	Senior Vice President, Controller, and Principal Accounting Officer
February 26, 2013	/s/ Leslie S. Biller
	Leslie S. Biller
	Chairman of the Board
February 26, 2013
	Howard P. Behar
	Director
February 26, 2013	/s/ Ellen R.M. Boyer
	Ellen R.M. Boyer
	Director

57

February 26, 2013	/s/ David A. Coulter
	David A. Coulter
	Director
February 26, 2013	/s/ Robert C. Donegan
	Robert C. Donegan
	Director
February 26, 2013
	C. Webb Edwards
	Director
February 26, 2013	/s/ William L. Eisenhart
	William L. Eisenhart
	Director
February 26, 2013	/s/ Robert H. Hartheimer
	Robert H. Hartheimer
	Director
February 26, 2013	/s/ Scott L. Jaeckel
	Scott L. Jaeckel
	Director
February 26, 2013	/s/ Michael F. Reuling
	Michael F. Reuling
	Director

58

Exhibit No.	Exhibit Index
3.1	Restated Articles of Incorporation of Sterling. Filed as Exhibit 4.1 to Sterling's Amendment No. 1 to the Registration Statement on Form S-3 dated May 8, 2009 and incorporated by reference herein.
3.2	Articles of Amendment of Restated Articles of Incorporation of Sterling increasing the authorized shares of common stock. Filed as Exhibit 4.2 to Sterling's Amendment No. 1 to the Registration Statement on Form S-3 dated September 21, 2009 and incorporated by reference herein.
3.3	Articles of Amendment to Sterling's Restated Articles of Incorporation designating Fixed Rate Cumulative Mandatorily Convertible Preferred Stock, Series C. Filed as Exhibit 3.1 to Sterling's Current Report on Form 8-K dated August 30, 2010 and incorporated by reference herein.
3.4	Articles of Amendment to Sterling's Restated Articles of Incorporation eliminating par value of Sterling Common Stock. Filed as Exhibit 3.2 to Sterling's Current Report on Form 8-K dated August 30, 2010 and incorporated by reference herein.
3.5	Articles of Amendment to Sterling's Restated Articles of Incorporation designating Fixed Rate Cumulative Mandatorily Convertible Preferred Stock, Series B. Filed as Exhibit 3.3 to Sterling's Current Report on Form 8-K dated August 30, 2010 and incorporated by reference herein.
3.6	Articles of Amendment to Sterling's Restated Articles of Incorporation designating Fixed Rate Cumulative Mandatorily Convertible Preferred Stock, Series D. Filed as Exhibit 3.4 to Sterling's Current Report on Form 8-K dated August 30, 2010 and incorporated by reference herein.
3.7	Articles of Amendment to Sterling's Restated Articles of Incorporation increasing the authorized shares of common stock. Filed as exhibit 3.7 to Sterling's Amendment No. 1 to the Registration Statement on Form S-1 dated November 3, 2010 and incorporated by reference herein.
3.8	Articles of Amendment to Sterling's Restated Articles of Incorporation reducing the authorized shares of common stock. Filed as Exhibit 3.1 to Sterling's Current Report on Form 8-K dated November 18, 2010 and incorporated by reference herein.
3.9	Articles of Amendment to Sterling's Restated Articles of Incorporation regarding certain transfer restrictions. Filed as Exhibit 3.9 to Sterling's Annual Report on Form 10-K for the year ended December 31, 2010 dated March 8, 2011 and incorporated by reference herein.
3.10	Amended and Restated Bylaws of Sterling. Filed as Exhibit 3.1 to Sterling's Current Report on Form 8-K dated April 25, 2011, and incorporated by referenced herein.
4.1	Reference is made to Exhibits 3.1 through 3.10.
4.2	Form of Common Stock Certificate. Filed as Exhibit 4.3 to Sterling's Registration Statement on Form S-3 dated July 20, 2009 and incorporated by reference herein.
4.3	Shareholder Rights Plan, dated as of April 14, 2010, between Sterling and American Stock Transfer & Trust Company, LLC, as Rights Agent, which includes the Form of Articles of Amendment to the Restated Articles of Incorporation of Sterling (Series E Participating Cumulative Preferred Stock) as Exhibit A, the Summary of Terms of the Rights Agreement as Exhibit B and the Form of Right Certificate as Exhibit C. Filed as Exhibit 4.1 to Sterling's Current Report on Form 8-K filed on April 15, 2010 and incorporated by reference herein.
4.4	First Amendment to Shareholder Rights Plan, dated as of December 8, 2010, between Sterling and American Stock Transfer & Trust Company, LLC, as Rights Agent. Filed as Exhibit 4.1 to Sterling's Current Report on Form 8-K filed on December 10, 2010 and incorporated by reference herein.
4.5	Form of Warrant to Purchase Shares of Sterling Common Stock, dated August 26, 2010 and issued to Thomas H. Lee Equity Fund VI, L.P., Thomas H. Lee Parallel Fund VI, L.P., Thomas H. Lee Parallel (DT) Fund VI, L.P. and THL Sterling Equity Investors, L.P. Filed as Exhibit 4.7 to Sterling's Registration Statement on Form S-1 dated September 24, 2010 and incorporated by reference herein.
4.6	Form of Warrant to Purchase Shares of Sterling Common Stock, dated August 26, 2010 and issued to Warburg Pincus Private Equity X, L.P. Filed as Exhibit 4.8 to Sterling's Registration Statement on Form S-1 dated September 24, 2010 and incorporated by reference herein.
4.7	Sterling has outstanding certain long-term debt. None of such debt exceeds ten percent of Sterling's total assets; therefore, copies of the constituent instruments defining the rights of the holders of such debt are not included as exhibits. Copies of instruments with respect to such long-term debt will be furnished to the Securities and Exchange Commission upon request.

E-1

Exhibit No.	Exhibit Index
10.1	First Amendment to Second Amended and Restated Investment Agreement by and between Sterling and Thomas H. Lee Equity Fund VI, L.P., Thomas H. Lee Parallel Fund VI, L.P., Thomas H. Lee Parallel (DT) Fund VI, L.P. and THL Sterling Equity Investors, L.P. Filed as Exhibit 10.1 to Sterling's Current Report on Form 8-K dated August 20, 2010 and incorporated by reference herein.
10.2	First Amendment to the Investment Agreement by and between Sterling and Warburg Pincus Private Equity X, L.P. Filed as Exhibit 10.2 to Sterling's Current Report on Form 8-K dated August 20, 2010 and incorporated by reference herein.
10.3	Form of Subscription Agreement by and between Sterling and private placement investors. Filed as Exhibit 10.3 to Sterling's Current Report on Form 8-K dated August 20, 2010 and incorporated by reference herein.
10.4	Second Amended and Restated Investment Agreement, dated as of May 25, 2010, between Sterling and Thomas H. Lee Equity Fund VI, L.P., Thomas H. Lee Parallel Fund VI, L.P., and Thomas H. Lee Parallel (DT) Fund VI, L.P. Filed as Exhibit 10.1 to Sterling's Current Report on Form 8-K filed on May 27, 2010 and incorporated by reference herein.
10.5	Investment Agreement, dated as of May 25, 2010, between Sterling and Warburg Pincus Private Equity X, L.P. Filed as Exhibit 10.2 to Sterling's Current Report on Form 8-K filed on May 27, 2010 and incorporated by reference herein.
10.6	Amended and Restated Investment Agreement, dated as of May 25, 2010, between Sterling and Thomas H. Lee Equity Fund VI, L.P., Thomas H. Lee Parallel Fund VI, L.P., and Thomas H. Lee Parallel (DT) Fund VI, L.P. Filed as Exhibit 10.1 to Sterling's Current Report on Form 8-K filed on May 6, 2010 and incorporated by reference herein.
10.7	Investment Agreement, dated as of May 5, 2010, between Sterling and Thomas H. Lee Equity Fund VI, L.P., Thomas H. Lee Parallel Fund VI, L.P. and Thomas H. Lee Parallel (DT) Fund VI, L.P. Filed as Exhibit 10.1 to Sterling's Quarterly Report on Form 10-Q for the period ended March 31, 2010, dated May 3, 2010, and incorporated by reference herein.
10.8	Reference is made to Exhibits 4.3 and 4.4.
10.9	Letter Agreement by and between Sterling and Leslie S. Biller, dated January 25, 2013. Filed as Exhibit 10.1 to Sterling's Current Report on Form 8-K dated January 25, 2013 and incorporated by reference herein.
10.10	Offer Letter by and between Sterling and Patrick J. Rusnak, dated January 21, 2011. Filed as Exhibit 10.1 to Sterling's Current Report on Form 8-K dated February 17, 2011 and incorporated by reference herein.
10.11	Offer Letter by and between Sterling and David S. DePillo, dated October 19, 2010. Filed as Exhibit 10.6 to Sterling's Quarterly Report on Form 10-Q dated November 5, 2010 and incorporated by reference herein.
10.12	Sterling Financial Corporation Change in Control Plan. Filed as Exhibit 10.1 to Sterling's Current Report on Form 8-K dated March 14, 2012, and incorporated by reference herein.
10.13	Form of Sterling Financial Corporation Change of Control Plan Participation Agreement, effective March 12, 2012. Filed as Exhibit 10.2 to Sterling's Current Report on Form 8-K dated March 14, 2012, and incorporated by reference herein.
10.14	Sterling Financial Corporation 2011 Employee Stock Purchase Plan. Filed as Exhibit 99.1 to Sterling's Registration Statement on Form S-8 dated July 8, 2011 and incorporated by reference herein.
10.15	Sterling Financial Corporation 2010 Long-Term Incentive Plan. Filed as Exhibit 99.1 to Sterling's Registration Statement on Form S-8 dated December 9, 2010 and incorporated by reference herein.
10.16	Sterling Financial Corporation 2007 Long-Term Incentive Plan. Filed as Exhibit 99.1 to Sterling's Registration Statement on Form S-8 dated July 30, 2007 and incorporated by reference herein.
10.17	Sterling Financial Corporation 2003 Long-Term Incentive Plan. Filed as Exhibit 10.10 to Sterling's Annual Report on Form 10-K for the year ended December 31, 2009, dated March 16, 2010, and incorporated by reference herein.
10.18	Sterling Financial Corporation 2001 Long-Term Incentive Plan. Filed as Exhibit 10.9 to Sterling's Annual Report on Form 10-K for the year ended December 31, 2009, dated March 16, 2010, and incorporated by reference herein.
10.19	Sterling Financial Corporation 1998 Long-Term Incentive Plan. Filed as Exhibit 10.7 to Sterling's Annual Report on Form 10-K for the year ended December 31, 2009, dated March 16, 2010, and incorporated by reference herein.
10.20	Sterling Savings Bank Deferred Compensation Plan, effective date April 1, 2006. Filed herewith.

E-2

Exhibit No.	Exhibit Index
10.21	Sterling Financial Corporation Amended and Restated Deferred Compensation Plan, effective July 1, 1999. Filed as Exhibit 10.8 to Sterling's Annual Report on Form 10-K for the year ended December 31, 2009, dated March 16, 2010, and incorporated by reference herein.
10.22	Sterling Financial Corporation and Sterling Savings Bank Supplemental Executive Retirement Plan. Filed as Exhibit 10.12 to Sterling's Annual Report on Form 10-K for the year ended December 31, 2009, dated March 16, 2010, and incorporated by reference herein.
21.1	List of Subsidiaries of Sterling.
23.1	Consent of KPMG, LLP.
23.2	Consent of BDO USA, LLP.
24.1	Power of Attorney (included with signature page).
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
32.1	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.
32.2	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.
101.INS*	XBRL Instance Document. Furnished herewith.
101.SCH*	XBRL Taxonomy Extension Schema. Furnished herewith.
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase. Furnished herewith.
101.LAB*	XBRL Taxonomy Extension Label Linkbase. Furnished herewith.
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase. Furnished herewith.
*	Pursuant to Rule 406T of Regulation S-T, these interactive data files are furnished and not deemed filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under these sections.

E-3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Sterling Financial Corporation

We have audited the accompanying consolidated balance sheets of Sterling Financial Corporation and subsidiaries (the Company) as of December 31, 2012 and 2011, and the related consolidated statements of operations, comprehensive income (loss), shareholders' equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Sterling Financial Corporation and subsidiaries as of December 31, 2012 and 2011, and the results of their operations and their cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Sterling Financial Corporation and subsidiaries' internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 26, 2013 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

/s/ KPMG LLP

Seattle, Washington

February 26, 2013

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Sterling Financial Corporation

Spokane, Washington

We have audited the accompanying consolidated statements of operations, comprehensive income (loss), shareholders' equity, and cash flows of Sterling Financial Corporation for the year ended December 31, 2010. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and schedules. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of Sterling Financial Corporation for the year ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.

/s/ BDO USA, LLP

Spokane, Washington

March 8, 2011

F-2

STERLING FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except shares)

	December 31, 2012			December 31, 2011
ASSETS:
Cash and cash equivalents:
Interest bearing	$	173,962		$	382,330
Noninterest bearing	125,916			88,269
Total cash and cash equivalents	299,878			470,599
Restricted cash	31,672			20,629
Investments and mortgage-backed securities (“MBS”):
Available for sale	1,513,157			2,547,876
Held to maturity	206			1,747
Loans held for sale (at fair value: $465,983 and $223,638)	465,983			273,957
Loans receivable, net	6,101,749			5,341,179
Accrued interest receivable	28,019			32,826
Other real estate owned, net (“OREO”)	25,042			81,910
Properties and equipment, net	93,850			84,015
Bank-owned life insurance (“BOLI”)	179,828			174,512
Goodwill	22,577			0
Other intangible assets, net	19,072			12,078
Mortgage servicing rights, net	32,420			23,102
Deferred tax asset, net	292,082			0
Other assets, net	131,375			128,807
Total assets	$	9,236,910		$	9,193,237
LIABILITIES:
Deposits:
Noninterest bearing	$	1,702,740		$	1,211,628
Interest bearing	4,733,377			5,274,190
Total deposits	6,436,117			6,485,818
Advances from Federal Home Loan Bank (“FHLB”)	605,330			405,609
Securities sold under repurchase agreements	586,867			1,055,763
Junior subordinated debentures	245,294			245,290
Accrued interest payable	4,229			22,575
Accrued expenses and other liabilities	141,150			99,625
Total liabilities	8,018,987			8,314,680
SHAREHOLDERS’ EQUITY:
Preferred stock, 10,000,000 shares authorized; no shares outstanding	0			0
Common stock, 151,515,151 shares authorized; 62,207,529 and 62,057,645 shares outstanding, respectively	1,968,025			1,964,234
Accumulated other comprehensive income	60,712			61,115
Accumulated deficit	(810,814		)	(1,146,792		)
Total shareholders’ equity	1,217,923			878,557
Total liabilities and shareholders’ equity	$	9,236,910		$	9,193,237

See notes to consolidated financial statements.

F-3

STERLING FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share amounts)

	Years Ended December 31,
	2012			2011			2010
Interest income:
Loans	$	331,514		$	322,435		$	359,572
MBS	47,442			71,216			74,806
Investments and cash equivalents	10,244			10,641			10,755
Total interest income	389,200			404,292			445,133
Interest expense:
Deposits	37,697			59,634			94,707
Short-term borrowings	7,364			1,882			6,517
Long-term borrowings	39,461			47,581			59,882
Total interest expense	84,522			109,097			161,106
Net interest income	304,678			295,195			284,027
Provision for credit losses	10,000			30,000			250,229
Net interest income after provision for credit losses	294,678			265,195			33,798
Noninterest income:
Fees and service charges	55,773			50,073			54,740
Mortgage banking operations	96,909			52,376			62,564
Loan servicing fees	383			(3,213		)	3,762
BOLI	8,625			6,448			7,307
Gains on sales of securities	23,835			16,236			25,745
Other-than-temporary impairment credit losses on securities (1)	(6,819		)	0			0
Charge on prepayment of debt	(35,342		)	0			(11,296		)
Gains on other loan sales	4,372			4,442			(4,928		)
Gains (losses) on assets	6,515			(85		)	(1,309		)
Other	2			51			380
Total noninterest income	154,253			126,328			136,965
Noninterest expense	355,253			352,390			395,045
Income before income taxes	93,678			39,133			(224,282		)
Income tax (provision) benefit
Current	163			275			113
Deferred	291,880			(275		)	(113		)
Income tax benefit	292,043			0			0
Net income (loss)	385,721			39,133			(224,282		)
Preferred stock dividends and accretion	0			0			(11,598		)
Other shareholder allocations	0			0			(520,263		)
Net income (loss) available to common shareholders	$	385,721		$	39,133		$	(756,143	)
Earnings per share - basic	$	6.21		$	0.63		$	(53.05	)
Earnings per share - diluted	$	6.14		$	0.63		$	(53.05	)
Dividends declared per share	$	0.80		$	0.00		$	0.00
Weighted average shares outstanding - basic	62,122,862			61,955,659			14,253,869
Weighted average shares outstanding - diluted	62,772,079			62,231,208			14,253,869

⁽¹⁾ The other-than-temporary impairment recognized in earnings during 2012 did not have a portion recognized in accumulated other comprehensive income.

See notes to consolidated financial statements.

F-4

STERLING FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

	Years Ended December 31,
	2012			2011			2010
Net income (loss)	$	385,721		$	39,133		$	(224,282	)
Other comprehensive income (loss):
Change in unrealized gains on investments and MBS available for sale	16,119			86,140			(6,541		)
Realized net gains reclassified from other comprehensive income	(17,016		)	(18,462		)	(25,745		)
Less deferred income tax provision	494			(2,384		)	11,823
Net other comprehensive income (loss)	(403		)	65,294			(20,463		)
Comprehensive income (loss)	$	385,318		$	104,427		$	(244,745	)

See notes to consolidated financial statements.

F-5

STERLING FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(in thousands, except share amounts)

	Preferred Stock					Common Stock			Accumulated Other Comprehensive Income (Loss)			Retained Earnings (Deficit)			Total Shareholders' Equity
	Shares					Shares	Amount
Balance, January 1, 2010	303,000		$	294,136		791,077	$	962,874	$	16,284		$	(950,045	)	$	323,249
Accretion of preferred stock	0		1,248			0	0		0			(1,248		)	0
Shares issued in direct stock purchases	0		0			360	18		0			0			18
Shares of Series B and D preferred stock and common stock issued	7,300,000		604,592			4,424,242	75,074		0			0			679,666
Preferred stock beneficial conversion feature	0		(604,592		)	0	604,592		0			0			0
Shares issued from Series A preferred stock conversion into Series C preferred stock, and simultaneous conversion into common stock	(303,000	)	(295,384		)	5,738,636	315,248		0			0			19,864
Shares issued from Series B and D preferred stock conversion into common stock	(7,300,000	)	0			50,878,788	0		0			0			0
Change in unrealized gain or loss on investments and MBS available for sale, net of income tax	0		0			0	0		(20,463		)	0			(20,463		)
Preferred dividend	0		0			0	0		0			(10,350		)	(10,350		)
Equity based compensation and related tax amounts	0		0			85,740	3,065		0			0			3,065
Fractional shares issued in stock split	0		0			7,344	0		0			0			0
Net loss	0		0			0	0		0			(224,282		)	(224,282		)
Balance, December 31, 2010	0		0			61,926,187	1,960,871		(4,179		)	(1,185,925		)	770,767
Change in unrealized gain or loss on investments and MBS available for sale	0		0			0	0		65,294			0			65,294
Equity based compensation and related tax amounts	0		0			131,458	3,363		0			0			3,363
Net income	0		0			0	0		0			39,133			39,133
Balance, December 31, 2011	0		0			62,057,645	1,964,234		61,115			(1,146,792		)	878,557
Change in unrealized gain or loss on investments and MBS available for sale	0		0			0	0		(403		)	0			(403		)
Equity based compensation and related tax amounts	0		0			110,958	3,130		0			0			3,130
Employee stock purchase plan	0		0			38,926	661		0			0			661
Cash dividends paid to common shareholders	0		0			0	0		0			(49,743		)	(49,743		)
Net income	0		0			0	0		0			385,721			385,721
Balance, December 31, 2012	0		$	0		62,207,529	$	1,968,025	$	60,712		$	(810,814	)	$	1,217,923

See notes to consolidated financial statements.

F-6

STERLING FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
	Years Ended December 31,
	2012			2011			2010
Cash flows from operating activities:
Net income (loss)	$	385,721		$	39,133		$	(224,282	)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for credit losses	10,000			30,000			250,229
Net gain on sales of loans	(98,223		)	(61,097		)	(61,920		)
Net gain on sales of investments and MBS	(23,835		)	(16,236		)	(25,744		)
Net loss (gain) on mortgage servicing rights	216			6,179			(1,125		)
Other-than-temporary impairment credit losses on securities	6,819			0			0
Stock based compensation	3,130			3,363			3,181
Loss on OREO	247			16,628			26,664
Charge on prepayment of debt	35,342			0			11,296
Increase in cash surrender value of BOLI	(8,401		)	(6,213		)	(7,307		)
Depreciation and amortization	45,843			42,651			39,517
Deferred income tax provision (benefit)	(291,880		)	275			113
Change in:
Accrued interest receivable	8,337			1,261			9,782
Prepaid expenses and other assets	(24,098		)	(1,342		)	23,807
Accrued interest payable	(18,479		)	5,316			(4,986		)
Accrued expenses and other liabilities	29,548			(9,003		)	4,249
Proceeds from sales of loans originated for sale	2,728,418			2,076,393			2,485,664
Loans originated for sale	(2,915,204		)	(2,043,236		)	(2,455,895		)
Net cash (used in) provided by operating activities	(126,499		)	84,072			73,243
Cash flows from investing activities:
Change in restricted cash	(11,043		)	(4,948		)	(7,458		)
Net change in loans	(500,452		)	(285,736		)	1,125,793
Proceeds from sales of loans	139,356			91,456			324,328
Purchase of investment securities	(3,734		)	(10,357		)	(33,179		)
Proceeds from maturities of investment securities	20,588			2,012			5,500
Proceeds from sale of investment securities	199,966			30,987			17,534
Purchase of MBS	(287,849		)	(760,519		)	(2,325,488		)
Principal payments received on MBS	613,809			533,851			608,776
Proceeds from sales of MBS	679,208			555,353			1,039,143
Proceeds from BOLI death benefits	3,714			1,187			0
Office properties and equipment, net	(9,853		)	(15,881		)	(3,034		)
Improvements and other changes to OREO	(1,282		)	(5,613		)	(5,434		)
Proceeds from sales of OREO	91,402			246,609			165,504
Net change in cash and cash equivalents from acquisitions	121,098			0			0
Net cash provided by investing activities	$	1,054,928		$	378,401		$	911,985

See notes to consolidated financial statements.

F-7

STERLING FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS—cont. (in thousands)
	Years Ended December 31,
	2012			2011			2010
Cash flows from financing activities:
Net change in deposits	$	(745,620	)	$	(425,189	)	$	(864,183	)
Advances from FHLB	545,000			0			538,050
Repayment of advances from FHLB	(345,210		)	(1,519		)	(1,478,995		)
Net change in short term repurchase agreements	(18,896		)	23,251			(16,634		)
Payments under structured repurchase agreements	(485,342		)	0			0
Proceeds from stock issuance, net	661			0			683,334
Cash dividend paid	(49,743		)	0			0
Net cash used in financing activities	(1,099,150		)	(403,457		)	(1,138,428		)
Net change in cash and cash equivalents	(170,721		)	59,016			(153,200		)
Cash and cash equivalents, beginning of period	470,599			411,583			564,783
Cash and cash equivalents, end of period	$	299,878		$	470,599		$	411,583
Supplemental disclosures:
Cash paid (received) during the period for:
Interest	$	102,868		$	103,781		$	166,092
Income taxes, net	44			(250		)	(49,342		)
Noncash financing and investing activities:
Foreclosed real estate acquired in settlement of loans	33,499			177,881			265,115
Preferred stock cash dividend accrued	0			0			10,350
Conversion of preferred stock into common stock	0			0			295,384
Conversion of preferred stock accrued dividend into common stock	0			0			19,865
Conversion of Treasury warrant	0			0			3,669

See notes to consolidated financial statements.

F-8

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

1. Significant Accounting Policies:

Sterling Financial Corporation, with headquarters in Spokane, Washington, was organized under the laws of Washington State in 1992 as the bank holding company for Sterling Savings Bank, which commenced operations in 1983. References to “Sterling,” “the Company,” “we,” “our,” or “us” in this report are to Sterling Financial Corporation, a Washington corporation, and its consolidated subsidiaries on a combined basis, unless otherwise specified or the context otherwise requires. References to “Sterling Bank” refer to our subsidiary Sterling Savings Bank, a Washington state-chartered commercial bank that operates under the registered trade name of Sterling Bank and, in California, as Sonoma Bank. Sterling Bank offers retail and commercial banking products and services, mortgage lending and wealth management to individuals, small businesses, commercial organizations and corporations. As of December 31, 2012, Sterling had assets of $9.24 billion and operated 174 depository branches in Washington, Oregon, Idaho and California.

Basis of Presentation. The accompanying consolidated financial statements include the accounts of Sterling and its directly and indirectly wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Estimates. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of Sterling’s consolidated financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions, which could have a material effect on the reported amounts of Sterling’s consolidated financial position and results of operations.

Cash and Cash Equivalents. Cash equivalents include investments with a remaining maturity of three months or less at the date of purchase. Cash and cash equivalents are deposited with other banks and financial institutions in amounts that may at times exceed the federal insurance limit. Sterling evaluates the credit quality of these banks and financial institutions to mitigate its credit risk.

Restricted cash consists of noninterest bearing deposits maintained as a reserve at the Federal Reserve Bank, and cash collateral balances with correspondent banks.

Sterling occasionally purchases securities under agreements with other institutions to resell the same or similar securities. The amounts advanced under these agreements represent short-term loans and are reflected as interest bearing cash equivalents in the consolidated balance sheet. The securities underlying the agreements are comprised of mutual fund shares that are primarily invested in U.S. government securities.

Investments and MBS. Sterling classifies debt and equity securities as follows:

• Trading Securities. Debt or equity securities are classified as trading securities if acquired principally for the purpose of generating a profit from short-term fluctuations in price. As of December 31, 2012, Sterling did not hold any securities that it deems to be trading securities.

• Available for Sale. Debt and equity securities that are not classified as trading securities or held to maturity are classified as available for sale and are carried at fair value.

• Held to Maturity. These are investments that Sterling has the intent and ability to hold until maturity.

Premiums and discounts are amortized using the effective yield method over the weighted average life of the underlying security as estimated at time of purchase. Realized gains and losses on sales of investments and MBS are recognized in the statement of operations in the period sold using the specific identification method. FHLB stock is carried at cost, and is included in other assets.

F-9

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

Month end security price valuations are provided by a third party pricing service. These valuations are based on market data using pricing models that vary by asset class and incorporate available current trade, bid and other market information, and for structured securities, cash flow and loan performance data. The pricing processes utilize benchmark curves, benchmarking of similar securities, sector groupings, and matrix pricing. Option adjusted spread models are also used to assess the impact of changes in interest rates and to develop prepayment scenarios. All models and processes used take into account market convention.

Declines in the fair value of securities below their amortized cost that are other-than-temporary are reflected in earnings or other comprehensive income, as appropriate. For those debt securities whose fair value is less than their amortized cost basis, we consider our intent to sell the securities, whether it is more likely than not that we will be required to sell the securities before recovery, and whether or not we expect to recover our entire amortized cost basis in the investment. In making this assessment, considerations will include whether the issue is a government or government sponsored security, and whether or not rating downgrades have occurred. The assessment of other-than-temporary impairment includes an assessment of the carrying value of FHLB stock. FHLB stock is not a marketable security, and therefore, its value is primarily attributable to the borrowing capacity it provides.

Loans Receivable. Loans receivable that management of Sterling has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal balance net of unamortized origination and commitment fees, direct loan origination costs and an allowance for loan losses.

Interest income is recognized over the term of loans based on their unpaid principal balance. The accrual of interest on loans is discontinued when, in management’s opinion, a borrower may be unable to make payments as they become due, which generally occurs when a loan is 90 days past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. The interest payments received on these loans is accounted for on the cash basis or cost recovery method, until qualifying for a return to an accrual status. Loans return to an accrual status when all principal and interest is brought current, and future payments are reasonably assured.

Loans that were modified and recorded as troubled debt restructurings (“TDR’s”) occur when a borrower has financial difficulties and Sterling grants a concession that it would not otherwise consider. The concession can take the form of an interest rate or principal reduction or an extension of payments of principal or interest, or both. TDRs may be the result of granting extensions to troubled credits which have already been adversely classified. We grant such extensions to reassess the borrower’s financial status and develop a plan for repayment. We rarely forgive principal for TDRs, but in those situations where principal is forgiven, the entire amount of such principal forgiveness is immediately charged off, if not done so previously. We sometimes delay the timing on the repayment of a portion of principal (principal forbearance) and charge off any amounts not considered fully collectible. We also consider insignificant delays in payments when determining if a loan should be classified as a TDR. Loans designated as TDRs may be returned to accrual status after the borrower performs in accordance with the modified loan terms, generally for a period of at least six months. A loan may be removed from TDR status after at least one year of performance under the modified term of the loan, unless the modification includes an interest rate concession that is below a market rate of interest for a loan with similar characteristics. TDRs will continue to be evaluated for impairment for the remainder of their term.

Certain loans acquired may be deemed to exhibit evidence of credit deterioration since their origination. When it is considered probable that all contractually required principal and interest payments will not be collected, a loan will be considered a purchased credit impaired ("PCI") loan. The accounting for PCI loans is periodically updated for changes in cash flow expectations, and reflected in interest income over the life of the loans as accretable yield.

Allowance for Credit Losses. The allowance for credit losses is comprised of the allowance for loan losses and the reserve for unfunded credit commitments. In general, determining the amount of the allowance requires significant judgment and the use of estimates by management. Sterling maintains an allowance for loan losses to absorb probable losses in the loan portfolio based on a quarterly analysis of the portfolio and expected losses. This analysis is designed to determine an appropriate level and allocation of the allowance for losses among loan classes by considering factors affecting loan losses, including specific and confirmed losses, levels and trends in classified and nonperforming loans, historical loan loss experience, loan migration analysis, current national and local economic conditions, volume, growth and composition of the portfolio, regulatory guidance and other relevant factors. The reserve for unfunded credit commitments includes loss coverage for loan repurchases arising from mortgage banking activities. Management monitors the loan portfolio to evaluate the adequacy of the allowance. The allowance can increase or decrease each quarter based upon the results of management's analysis.

F-10

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

The portfolio is grouped into several industry segments for loans collectively evaluated for impairment based on characteristics such as loan type, borrower and collateral. Loan migration to loss data is used to determine the annual probability of default. The annual probability of default is adjusted for the estimated loss emergence period and may be further adjusted based on the assessment of qualitative factors. The estimated loss emergence period reflects an estimate of the time frame during which losses may be realized. Sterling establishes the expected loss rate on loans using the losses on charged-off and foreclosed loans from the most recent 12 months to estimate the amount that would be lost if a default were to occur, which is termed the “loss given default.” The probability of default is multiplied by the loss given default to calculate the expected losses for each loan class. The calculated expected loss for each loan class is compared to the actual one and three year (annualized) losses for each respective loan class. If the calculated expected loss rate is less than the actual one and three year loss rates, then the expected loss rate would be set at the greater of the actual one or three year loss rate.

Sterling may also maintain an unallocated allowance to provide for other credit losses that may exist in the loan portfolio that are not taken into consideration in establishing the probability of default and loss given default. The unallocated amount may generally be maintained at higher levels during times of economic uncertainty. The unallocated amount is reviewed at least quarterly based on credit and economic trends.

Individual loan reviews are based upon specific quantitative and qualitative criteria, including the size of the loan, loan quality ratings, value of collateral, repayment ability of borrowers and guarantors, as applicable, and historical experience factors. The historical experience factors utilized and allowances for homogeneous loans (such as residential mortgage loans and consumer loans) are collectively evaluated based upon historical loss experience, loan migration analysis, trends in losses and delinquencies, growth of loans in particular markets, and known changes in economic conditions in each particular lending market.

A loan is considered impaired when, based on current information and events, it is probable Sterling will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of delay, the reasons for the delay, the borrower's prior payment record, the ability and willingness of guarantors to make payments, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's obtainable market price or the fair value of collateral if the loan is collateral-dependent.

The fair value of the underlying collateral for real estate loans, which may or may not be collateral-dependent, is determined by using appraisals from qualified external sources. For commercial properties and residential development loans, the external appraisals are reviewed by qualified internal appraisal staff to ensure compliance with appropriate standards and technical accuracy. Appraisals are updated according to regulatory provisions for extensions or restructurings of commercial or residential real estate construction and permanent loans that have not performed within the terms of the original loan. Updated appraisals are also ordered for loans that have not been restructured, but that have stale valuation information, generally defined in the current market as information older than one year, and deteriorating credit quality that warrants classification as substandard.

The timing of obtaining appraisals may vary, depending on the nature and complexity of the property being evaluated and the general breadth of appraisal activity in the marketplace, but generally it is within 30 to 90 days of recognition of substandard status, following determination of collateral dependency, or in connection with a loan's maturity or a negotiation that may result in the restructuring or extension of a real estate secured loan. Delays in timing may occur to comply with actions such as a bankruptcy filing or provisions of an SBA guarantee.

Estimates of fair value may be used for substandard collateral-dependent loans at quarter end if external appraisals are not expected to be completed in time for determining quarter end results or to update values between appraisal dates to reflect recent sales activity of comparable inventory or pending property sales of the subject collateral. During periods of declining real estate values, Sterling may record an additional specific reserve for impaired loans for which an updated valuation analysis has not been completed within the last quarter. Estimates of value are not used to increase a value; however, estimates may be used to recognize deterioration of market values in quarters between appraisal updates. The judgment with respect to recognition of any provision or related charge-off for a confirmed loss also takes into consideration whether the loan is collateral-dependent or whether it is supported by sources of repayment or cash flow beyond the collateral that is being valued. For loans that are

F-11

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

deemed to be collateral-dependent, the amount of charge-off is determined in relation to the collateral's appraised value. For loans that are not deemed to be collateral-dependent, the amount of charge-off or specific reserve may differ from the collateral's appraised value because there is additional support for the loan, such as cash flow from other sources.

The reserve for unfunded credit commitments includes loss exposure from Sterling's mortgage banking operations. Loans sold into the secondary market are sold with limited recourse to Sterling, meaning that Sterling may be obligated to repurchase any loans that are not underwritten in accordance with agency guidelines or have borrower misrepresentations.

While management uses available information to provide for loan losses, the ultimate collectability of a substantial portion of the loan portfolio and the need for future additions to the allowance will be influenced by changes in economic conditions and other relevant factors. There can be no assurance that the allowance for credit losses will be adequate to cover all losses, but management believes the allowance for credit losses was appropriate at December 31, 2012.

Loans Held for Sale. Any loan that management determines will not be held to maturity is classified as held for sale. Residential loans held for sale are carried at fair value in order to match changes in the value of the loans with the value of the economic hedges on the loans without applying complex hedge accounting. The fair value of loans held for sale is determined based upon an analysis of investor quoted pricing inputs in the secondary market. Other loan types classified as held for sale are carried at the lower of cost or market.

Loan Origination and Commitment Fees. Loan origination fees, net of direct origination costs, are deferred and recognized as interest income using the effective yield method. If the related loan is sold, the remaining net amount, which is part of the basis of the loan, is considered in determining the gain or loss on sale.

Loan commitment fees are deferred until the expiration of the commitment period unless management believes there is a remote likelihood that the underlying commitment will be exercised, in which case the fees are amortized to fee income using the straight-line method over the commitment period. If a loan commitment is exercised, the deferred commitment fee is accounted for in the same manner as a loan origination fee. Deferred commitment fees associated with expired commitments are recognized as fee income.

Other Real Estate Owned. Prior to foreclosure, Sterling considers all viable alternatives, checks with the proper authorities to ensure the existence of a valid and recorded lien on the property and determines the current market value of the collateral. Property and other assets acquired through foreclosure of defaulted mortgage or other collateralized loans are recorded at fair value, less estimated costs to sell the property and other assets. The fair value of OREO is generally determined using “as is” or disposition values from appraisals obtained by independent appraisers.

An allowance for losses on OREO is designed to include amounts for estimated losses as a result of impairment in value of the real property after repossession. Sterling reviews its OREO for impairment in value at least quarterly or whenever events or circumstances indicate that the carrying value of the property or other assets may not be recoverable. In performing the review, if the fair value, less selling costs, is less than its carrying value, a specific reserve is established as a charge to noninterest expenses.

Property and Equipment. Property and equipment is carried at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the lesser of the estimated useful lives or the related lease terms of the assets. Expenditures for new property and equipment and major renewals or betterments are capitalized. Expenditures for repairs and maintenance are charged to expense as incurred. Upon sale or retirement, the cost and related accumulated depreciation are removed from the respective property or equipment accounts, and the resulting gains or losses are reflected in operations.

Goodwill and Other Intangible Assets. Goodwill represents the difference between the value of consideration paid and the fair value of the net assets received in a business combination. Sterling records impairment losses as charges to noninterest expense and adjustments to the carrying value of goodwill.

Goodwill is tested for impairment on an annual basis as of June 30, or more frequently as events occur, or as current circumstances and conditions warrant. A qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill, determines the extent to which further testing is required. If the qualitative analysis concludes that further analysis is required, that analysis would compare the fair value of each of the reporting units, including goodwill, to the respective carrying amounts.

F-12

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

Other intangible assets are comprised primarily of core deposit intangibles, as well as other identifiable intangibles related to First Independent's trust and wealth management business. Core deposit intangibles are amortized over the estimated useful life of the deposit relationship, which is generally eight to 10 years. Other intangible assets are periodically assessed for impairment when certain triggering events occur that indicate the possibility of impairment.

Mortgage Servicing Rights and Transfers of Financial Assets. Gains or losses on “servicing-retained” loan sale transactions generally include a component reflecting the differential between the contractual interest rate of the loan and the interest rate to be received by the investor. The present value of the estimated future profit for servicing the loans and changes in the fair value of any related derivatives,is also taken into account in determining the amount of gain or loss on the sale of these loans. For loans sold servicing-retained, the fair value of mortgage servicing rights is recorded as an asset, with their value estimated using a discounted cash flow methodology to arrive at the present value of future expected earnings from the servicing of the loans. Model inputs include prepayment speeds, market interest rates, servicing costs, contractual interest rates on the loans being serviced, and the amount of other fee income generated over the servicing contract. Mortgage servicing rights are amortized in proportion to, and over the estimated period of the servicing revenues. To the extent the carrying value of mortgage servicing rights exceeds the subsequent fair value estimates, a valuation allowance is recognized. Subsequent recoveries in value are recognized up to the original carrying value of the mortgage servicing rights only to the extent of cumulative valuation adjustments.

Loans sold into the secondary market are considered transfers of financial assets. These transfers are accounted for as sales when control over the asset has been surrendered, which is deemed to have occurred when: an asset does not have any claims to it by the transferor or their creditors, including in bankruptcy or other receivership situations; the transferee obtains the unconditional right to pledge or exchange the asset; or the transfer does not include a repurchase provision above the limited recourse provisions of these loan sales.

Income Taxes. Sterling estimates income taxes payable based on the amount it expects to owe various taxing authorities. Accrued income taxes represent the net estimated amount due to, or to be received from, taxing authorities. In estimating accrued income taxes, Sterling assesses the relative merits and risks of the appropriate tax treatment of transactions, taking into account the applicable statutory, judicial and regulatory guidance in the context of Sterling's tax position. Sterling also considers recent audits and examinations, as well as its historical experience in making such estimates. Although Sterling uses available information to record income taxes, underlying estimates and assumptions can change over time as a result of unanticipated events or circumstances. Penalties and interest associated with any potential estimate variances would be included in income tax expense in the consolidated financial statements.  

A deferred tax asset valuation allowance was established during 2009 due to the three year cumulative loss and uncertainty at that time regarding Sterling's ability to generate future taxable income. Reversal of the deferred tax asset valuation allowance occurred during the quarter ended June 30, 2012, which marked the sixth consecutive quarter of profitability for Sterling. Prior to reversing the allowance, management analyzed both positive and negative evidence that could affect the realization of the deferred tax asset. Based on the earnings performance trend and projections of income through 2013, improvement in asset quality, higher net interest margin and improvements in other key financial ratios, expectations of continued profitability, the length of the carry-forward period for its net operating losses and tax credits, an analysis of the reversal of existing temporary differences, and an evaluation of its loss carry-back ability and tax planning strategies, Sterling determined that it was more likely than not that the net deferred tax asset would be realized. This assessment was updated as of December 31, 2012, resulting in the same conclusion.

Earnings (Loss) Per Share. Earnings (loss) per share—basic is computed by dividing net income or loss available to common shareholders by the weighted average number of shares outstanding during the period. Earnings (loss) per share—diluted is computed by dividing net income or loss available to common shareholders by the weighted average number of shares outstanding, increased by the additional shares that would have been outstanding if all potentially dilutive and contingently issuable shares had been issued. The accounting standards codification requires a two-class method of computing earnings per share for entities that have participating securities such as Sterling’s unvested restricted shares. Application of the two-class method resulted in the equivalent earnings per share to the treasury method.

Stock-Based Compensation. Stock options and restricted stock issued as compensation are recorded as an expense, over the vesting term of the awards, at their estimated grant date fair value. The Black-Scholes option pricing model is used to estimate the fair value of stock options granted, while the value of restricted stock awards are recorded using the grant date market closing price of Sterling’s common stock.

F-13

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

Comprehensive Income (Loss). Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) is comprised of unrealized gains and losses on available for sale securities, and is a separate component of shareholders’ equity. Sterling reports and displays comprehensive income (loss) and its components (revenues, expenses, gains and losses) on its Statement of Comprehensive Income (Loss).

Derivatives and Hedging. Sterling enters into interest rate swap transactions with loan customers. The interest rate risk on these swap transactions is hedged by Sterling entering into offsetting interest rate swap agreements with various unaffiliated counterparties (“broker-dealers”). Both customer and broker-dealer related interest rate derivatives are carried at fair value, which includes consideration of counterparty credit risk.

As part of its mortgage banking activities, Sterling makes commitments to prospective borrowers on residential mortgage loan applications, which may have the interest rates locked for a period of 10 to 60 days or longer, if extended (“interest rate lock commitments”). The interest rate lock commitments fair valued below are net of the anticipated fallout. These interest rate lock commitments, and loans held for sale that have not been committed to investors, give rise to interest rate risk. Sterling hedges the interest rate risk arising from these mortgage banking activities by entering into forward sales agreements on MBS with third parties (“forward commitments”).

Reclassifications. Certain amounts in prior period financial statements have been reclassified to conform to the current year’s presentation. These reclassifications had no effect on the accumulated deficit or net income(loss) as previously reported.

During 2012, Sterling identified an error related to the classification of the loss on foreclosure amounts reported in the Consolidated Statement of Cash Flows for the quarter ended March 31, 2012, and for the years ended December 31, 2011 and 2010, and the interim periods therein. The loss on foreclosure amounts were previously included in the cash flows from operating activities in the "Loss on OREO" line item, instead of the cash flows from investing activities in the "Net change in loans" line item. In accordance with the SEC Staff Accounting Bulletin (SAB) No. 99, "Materiality," and SAB No. 108, "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements," management evaluated the materiality of the error from qualitative and quantitative perspectives and concluded that the error was immaterial to prior periods. Consequently, the Consolidated Statement of Cash Flows contained in this Report has been revised for the years ended December 31, 2011 and 2010. This change resulted in a decrease of $51.3 million and $66.1 million to cash flows from operating activities and an increase of the same amount to cash flows from investing activities for the years ended December 31, 2011 and 2010, respectively. This change did not affect net income(loss), the balance sheet, or shareholders' equity for any period.

Recent Accounting Pronouncements. In April 2011, the FASB issued Accounting Standards Update ("ASU") 2011-03, “Reconsideration of Effective Control for Repurchase Agreements.” This update to codification topic 860 revises the assessment of effective control for purposes of determining if a repurchase agreement should be accounted for as a sale, compared with a secured borrowing. ASU 2011-03 became effective for Sterling on January 1, 2012, and did not have a material effect on Sterling’s consolidated financial statements.

In May 2011, the FASB issued ASU 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS.” This update to codification topic 820 clarifies the application of existing fair value measurement and disclosure requirements, and implements changes to the codification that align U.S. GAAP and IFRS. This update became effective for Sterling on January 1, 2012, and did not have a material effect on Sterling's consolidated financial statements.

In September 2011, the FASB issued ASU 2011-08, “Intangibles-Goodwill and Other: Testing Goodwill for Impairment.” ASU 2011-08 is intended to simplify goodwill impairment testing by adding a qualitative review step to assess whether the required quantitative impairment analysis that exists today is necessary. Under the amended rule, a company will not be required to calculate the fair value of a business that contains recorded goodwill unless it concludes, based on the qualitative assessment, that it is more likely than not that the fair value of that business is less than its book value. If such a decline in fair value is deemed more likely than not to have occurred, then the quantitative goodwill impairment test that exists under current GAAP must be completed; otherwise, goodwill is deemed to be not impaired and no further testing is required until the next annual test date (or sooner if conditions or events before that date raise concerns of potential impairment in the business). The amended goodwill impairment guidance does not affect the manner in which a company estimates fair value. ASU 2011-08 became effective for Sterling on January 1, 2012, and did not have a material effect on Sterling’s consolidated financial statements.

F-14

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

In December 2011, the FASB issued ASU 2011-11, “Balance Sheet: Disclosures about Offsetting Assets and Liabilities.” ASU 2011-11 adds certain additional disclosure requirements about financial instruments and derivatives instruments that are subject to netting arrangements. The new disclosures are required for annual reporting periods beginning on or after January 1, 2013, and interim periods within those periods. This standard could add additional disclosures if applicable to Sterling. However, it is not expected to have a material impact on Sterling’s consolidated financial statements.

In July 2012, the FASB issued ASU 2012-02, "Testing Indefinite-Lived Intangible Assets for Impairment." ASU 2012-02, similar to ASU 2011-08, provided a qualitative assessment of determining if it is more likely than not that impairment has occurred, to establish the extent to which further testing is required. ASU 2012-02 will become effective for Sterling on January 1, 2013, and is not expected to have a material impact on Sterling’s consolidated financial statements.

2. Business Combination:

First Independent Bank. On February 29, 2012, Sterling Bank completed its acquisition of the operations of First Independent Bank ("First Independent"), by acquiring certain assets and assuming certain liabilities, including all deposits for a net purchase price of $40.6 million, comprised of $28.9 million of cash paid at closing and contingent consideration with a fair value of $11.7 million at acquisition date. As of December 31, 2012, the fair value of this contingent consideration was estimated at $15.4 million, with the increase, which was charged against earnings, due to favorable performance. The contingent consideration is payable in two installments at 12 and 18 months from the date of closing, in an amount ranging from zero to $17 million. The contingent consideration payments will be determined based on certain performance metrics relating to core deposit retention, loan charge-offs, and wealth management revenues. As a result of this transaction, Sterling now offers trust services, and has 14 additional branches in the Portland/Vancouver market. The following table summarizes the amounts recorded at closing:

	February 29, 2012
	(in thousands)
Cash and cash equivalents	$	150,045
Investments and MBS	187,465
Loans receivable, net	349,990
Goodwill	22,577
Core deposit intangible	11,974
Fixed assets	4,038
Other assets	10,886
Total assets acquired	$	736,975
Deposits	$	695,919
Other liabilities	409
Total liabilities assumed	696,328
Net assets acquired	$	40,647

The recorded goodwill of $22.6 million represents the inherent long-term value anticipated from synergies expected to be achieved as a result of the transaction. The amount recorded for goodwill includes subsequent adjustments, primarily from updated appraisals on fixed assets. The amount of goodwill deductible for income tax purposes is approximately equivalent to the recorded book value. The core deposit intangible has a weighted average amortization period of ten years and will be amortized on an accelerated basis.

F-15

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

The following table presents certain First Independent stand alone amounts and pro forma Sterling and First Independent combined amounts as if the transaction had occurred on January 1, 2011. Cost savings estimates are not included in the pro forma combined results, nor are certain credit impaired loans and associated losses excluded from the purchase and assumption transaction.

	First Independent (stand alone)		Pro Forma Combined
	Years Ended December 31,
	2012		2012		2011
	(in thousands, except per share data; unaudited)
Net interest income	$	20,145	$	311,159	$	326,916
Noninterest income	4,757		155,258		135,828
Net income	10,817		389,935		49,469
Earnings per share - basic	0.17		6.28		0.80
Earnings per share - diluted	$	0.17	$	6.21	$	0.79

Although the majority of First Independent's credit impaired loans were excluded from the transaction, certain loans acquired were deemed to exhibit evidence of credit deterioration since origination and therefore, were classified as impaired. The accounting for purchased impaired loans is periodically updated for changes in the loans' cash flow expectations, and reflected in interest income over the life of the loans as accretable yield. For purchased impaired loans, details as of the acquisition date were as follows:

	February 29, 2012
	(in thousands)
Contractual cash flows	$	24,408
Expected prepayments and credit losses	7,220
Expected cash flows	17,188
Present value of expected cash flows	15,265
Accretable yield	$	1,923

As of December 31, 2012, no allowance for credit losses was recorded in connection with these loans, and the unpaid principal balance and carrying amount of the purchased impaired loans were $18.2 million and $11.2 million, respectively. The following table presents a roll-forward of activity for the accretable yield for the purchased impaired loans:

	Year Ended December 31, 2012
	(in thousands)
Beginning balance	$	0
Additions	1,923
Accretion to interest income	(756		)
Reclassifications	165
Ending balance	$	1,332

As of February 29, 2012, the unpaid principal balance and contractual interest ("contractual cash flows") on purchased loans that had not exhibited evidence of credit deterioration was $403.8 million. Sterling estimated that $12.7 million of these cash flows would be uncollectable, resulting in a discount of $21.8 million being recorded on these loans.

F-16

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

The following table presents the related five-year projected accretion of the discount which will be recognized as an increase to interest income as of December 31, 2012:

	Amount
	(in thousands)
Years ended:
December 31, 2013	$	4,210
December 31, 2014	2,796
December 31, 2015	1,724
December 31, 2016	1,031
December 31, 2017	679

3. Investments and MBS:

The carrying and fair values of investments and MBS are summarized as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
December 31, 2012
Available for sale
MBS	$	1,263,786	$	45,052	$	0		$	1,308,838
Municipal bonds	188,467		16,452		(613		)	204,306
Other	5		8		0			13
Total	$	1,452,258	$	61,512	$	(613	)	$	1,513,157
Held to maturity
Tax credits	$	206	$	0	$	0		$	206
Total	$	206	$	0	$	0		$	206
December 31, 2011
Available for sale
MBS	$	2,265,207	$	55,760	$	(33	)	$	2,320,934
Municipal bonds	195,512		13,338		(1,394		)	207,456
Other	24,923		2		(5,439		)	19,486
Total	$	2,485,642	$	69,100	$	(6,866	)	$	2,547,876
Held to maturity
Tax credits	$	1,747	$	0	$	0		$	1,747
Total	$	1,747	$	0	$	0		$	1,747

F-17

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

Sterling’s MBS portfolio is comprised primarily of residential agency securities. Total sales of Sterling’s securities during the years ended December 31, 2012, 2011 and 2010 are summarized as follows:

	Proceeds from Sales		Gross Realized Gains		Gross Realized Losses
	(in thousands)
Years Ended:
December 31, 2012	$	879,174	$	24,024	$	189
December 31, 2011	586,340		18,771		2,535
December 31, 2010	1,056,677		35,546		9,804

The following table summarizes Sterling’s investments and MBS that had a market value below their amortized cost as of December 31, 2012 and December 31, 2011, segregated by those investments that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 months or longer:

	Less than 12 months					12 months or longer					Total
	Market Value		Unrealized Losses			Market Value		Unrealized Losses			Market Value		Unrealized Losses
	(in thousands)
December 31, 2012
MBS	$	0	$	0		$	0	$	0		$	0	$	0
Municipal bonds	0		0			12,921		(613		)	12,921		(613		)
Other	0		0			0		0			0		0
Total	$	0	$	0		$	12,921	$	(613	)	$	12,921	$	(613	)
December 31, 2011
MBS	$	1,419	$	(12	)	$	24,726	$	(21	)	$	26,145	$	(33	)
Municipal bonds	0		0			17,289		(1,394		)	17,289		(1,394		)
Other	0		0			19,479		(5,439		)	19,479		(5,439		)
Total	$	1,419	$	(12	)	$	61,494	$	(6,854	)	$	62,913	$	(6,866	)

The following table presents the amortized cost and fair value of available for sale and held to maturity securities as of December 31, 2012, grouped by contractual maturity. Actual maturities for MBS will differ from contractual maturities as a result of the level of prepayments experienced on the underlying mortgages.

	Held to maturity				Available for sale
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(in thousands)
Due within one year	$	0	$	0	$	0	$	0
Due after one year through five years	0		0		3,033		3,266
Due after five years through ten years	0		0		70,704		73,979
Due after ten years	206		206		1,378,521		1,435,912
Total	$	206	$	206	$	1,452,258	$	1,513,157

Management evaluates investment securities for other-than-temporary declines in fair value each quarter. If the fair value of investment securities falls below the amortized cost and the decline is deemed to be other-than temporary, the securities are written down to current market value, resulting in the recognition of an other-than-temporary impairment ("OTTI"). During the second quarter of 2012, Sterling recognized an OTTI charge of $6.8 million on a single issuer trust preferred security. The security was sold during the fourth quarter at a gain of $2.5 million.

F-18

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

The following table presents a roll-forward of OTTI for the periods presented:

	Years Ended December 31,
	2012			2011		2010
	(in thousands)
OTTI, beginning balance	$	0		$	0	$	0
Additions	6,819			0		0
Realized	(6,819		)	0		0
Ending Balance	$	0		$	0	$	0

4. Loans Receivable and Allowance for Credit Losses:

The following table presents the composition of Sterling’s loan portfolio as of the balance sheet dates:

	December 31, 2012			December 31, 2011
	(in thousands)
Residential real estate	$	806,722		$	688,020
Commercial real estate ("CRE"):
Investor CRE	1,219,847			1,275,667
Multifamily	1,580,289			1,001,479
Construction	74,665			174,608
Total CRE	2,874,801			2,451,754
Commercial:
Owner occupied CRE	1,276,591			1,272,461
Commercial & Industrial ("C&I")	540,499			431,693
Total commercial	1,817,090			1,704,154
Consumer	754,621			674,961
Gross loans receivable	6,253,234			5,518,889
Deferred loan costs (fees), net	2,860			(252		)
Allowance for loan losses	(154,345		)	(177,458		)
Net loans receivable	$	6,101,749		$	5,341,179

Gross loans pledged as collateral for borrowings from the FHLB and the Federal Reserve totaled $4.15 billion and $4.02 billion as of December 31, 2012 and December 31, 2011, respectively. As of December 31, 2012 and December 31, 2011, the unamortized portion of discounts on acquired loans was $21.3 million and $4.3 million, respectively.

F-19

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

The following table sets forth details by segment for Sterling’s loan portfolio and related allowance as of the balance sheet dates:

	Residential Real Estate		Commercial Real Estate		Commercial		Consumer		Unallocated		Total
	(in thousands)
December 31, 2012
Loans receivable, gross:
Individually evaluated for impairment	$	9,134	$	68,317	$	48,312	$	494	$	0	$	126,257
Collectively evaluated for impairment	797,588		2,806,484		1,768,778		754,127		0		6,126,977
Total loans receivable, gross	$	806,722	$	2,874,801	$	1,817,090	$	754,621	$	0	$	6,253,234
Allowance for loan losses:
Individually evaluated for impairment	$	365	$	3,182	$	4,916	$	0	$	0	$	8,463
Collectively evaluated for impairment	19,482		44,912		36,958		25,602		18,928		145,882
Total allowance for loan losses	$	19,847	$	48,094	$	41,874	$	25,602	$	18,928	$	154,345
December 31, 2011
Loans receivable, gross:
Individually evaluated for impairment	$	18,301	$	149,578	$	74,041	$	1,192	$	0	$	243,112
Collectively evaluated for impairment	669,719		2,302,176		1,630,113		673,769		0		5,275,777
Total loans receivable, gross	$	688,020	$	2,451,754	$	1,704,154	$	674,961	$	0	$	5,518,889
Allowance for loan losses:
Individually evaluated for impairment	$	872	$	11,170	$	4,206	$	57	$	0	$	16,305
Collectively evaluated for impairment	14,325		80,552		33,840		13,370		19,066		161,153
Total allowance for loan losses	$	15,197	$	91,722	$	38,046	$	13,427	$	19,066	$	177,458

F-20

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

The following tables present a roll-forward by segment of the allowance for credit losses for the periods presented:

	Residential Real Estate			Commercial Real Estate			Commercial			Consumer			Unallocated			Total
	(in thousands)
2012
Allowance for loan losses:
Beginning balance, January 1	$	15,197		$	91,722		$	38,046		$	13,427		$	19,066		$	177,458
Provisions	8,778			(33,184		)	12,189			19,855			(138		)	7,500
Charge-offs	(5,203		)	(27,385		)	(17,005		)	(9,144		)	0			(58,737		)
Recoveries	1,075			16,941			8,644			1,464			0			28,124
Ending balance, December 31	19,847			48,094			41,874			25,602			18,928			154,345
Reserve for unfunded credit commitments:
Beginning balance, January 1	3,828			2,321			1,796			1,787			297			10,029
Provisions	2,929			(1,916		)	1,010			331			146			2,500
Charge-offs	(4,527		)	0			0			0			0			(4,527		)
Recoveries	0			0			0			0			0			0
Ending balance, December 31	2,230			405			2,806			2,118			443			8,002
Total credit allowance	$	22,077		$	48,499		$	44,680		$	27,720		$	19,371		$	162,347
2011
Allowance for loan losses:
Beginning balance, January 1	$	17,307		$	124,907		$	56,951		$	14,645		$	33,246		$	247,056
Provisions	15,024			19,129			2,708			5,819			(14,180		)	28,500
Charge-offs	(18,553		)	(73,379		)	(28,369		)	(8,868		)	0			(129,169		)
Recoveries	1,419			21,065			6,756			1,831			0			31,071
Ending balance, December 31	15,197			91,722			38,046			13,427			19,066			177,458
Reserve for unfunded credit commitments:
Beginning balance, January 1	3,189			4,157			1,515			817			1,029			10,707
Provisions	2,817			(1,836		)	281			970			(732		)	1,500
Charge-offs	(2,178		)	0			0			0			0			(2,178		)
Recoveries	0			0			0			0			0			0
Ending balance, December 31	3,828			2,321			1,796			1,787			297			10,029
Total credit allowance	$	19,025		$	94,043		$	39,842		$	15,214		$	19,363		$	187,487

F-21

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

	Residential Real Estate			Commercial Real Estate			Commercial			Consumer			Unallocated			Total
2010
Allowance for loan losses:
Beginning balance, January 1	$	28,319		$	236,501		$	59,136		$	19,198		$	289		$	343,443
Provisions	24,204			151,323			33,764			8,343			32,957			250,591
Charge-offs	(37,347		)	(283,578		)	(41,165		)	(14,765		)	0			(376,855		)
Recoveries	2,131			20,661			5,216			1,869			0			29,877
Ending balance, December 31	17,307			124,907			56,951			14,645			33,246			247,056
Reserve for unfunded credit commitments:
Beginning balance, January 1	798			9,228			1,952			1,107			(1,118		)	11,967
Provisions	3,291			(5,071		)	(437		)	(290		)	2,147			(360		)
Charge-offs	(900		)	0			0			0			0			(900		)
Recoveries	0			0			0			0			0			0
Ending balance, December 31	3,189			4,157			1,515			817			1,029			10,707
Total credit allowance	$	20,496		$	129,064		$	58,466		$	15,462		$	34,275		$	257,763

F-22

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

In establishing the allowance for loan losses, Sterling groups its loan portfolio into segments for loans collectively evaluated for impairment. The groups are further segregated based on internal risk ratings. Both qualitative and quantitative data are considered in determining the probability of default and loss given default for each group of loans. The probability of default and loss given default are used to calculate an expected loss rate. The calculated expected loss for each loan class is compared to the actual one-year and three-year (annualized) losses. Beginning in 2012, if the calculated expected loss rate is less than the actual one and three year loss rates, then the expected loss rate would be set at the greater of the actual one or three year loss rate. If a loan is determined to be impaired, Sterling prepares an individual evaluation of the loan. The individual evaluation compares the present value of the expected future cash flows or the fair value of the underlying collateral to the recorded investment in the loan. The results of the individual impairment evaluation could determine the need to record a charge-off or establish a specific reserve.

Sterling assigns risk rating classifications to its loans. During the fourth quarter of 2012, the additional category of Marginal was added to the analysis to further enhance the model used to calculate the allowance for loan losses. These risk ratings are divided into the following groups:

Pass (excluding marginal) - the asset is considered of sufficient quality to preclude a Marginal rating. Pass assets generally are well protected by the current net worth and paying capacity of the obligor or by the value of the asset or underlying collateral.

Marginal - the asset is susceptible to deterioration if stressed from a cash flow or earnings shock, with liquidity and leverage possibly below industry norms. The borrower may have few reserves to cover debt service, besides current income. A business generating cash flows that service the debt may be dependent on the successful reception of new products in the marketplace.

Special Mention - the asset has potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or of Sterling's credit position at some future date. Special Mention assets are not adversely classified and do not expose Sterling to sufficient risk to warrant adverse classification.

Substandard - the asset is inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged, if any. Assets so classified have well-defined weaknesses. They are characterized by the distinct possibility that Sterling may sustain some loss if the deficiencies are not corrected.

Doubtful/Loss - the Doubtful asset has the weaknesses of those classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. An asset classified Loss is the portion of the asset that is considered uncollectible and/or of such little value that its continuance as an asset, without a charge-off or establishment of a specific reserve, is not warranted. This classification does not necessarily mean that an asset has absolutely no recovery or salvage value; but rather, it is not practical or desirable to defer writing off an asset that is no longer deemed to have financial value, even though partial recovery may be recognized in the future.

F-23

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

The following table presents credit quality indicators for Sterling’s loan portfolio grouped according to internally assigned risk ratings and performance status:

			Commercial Real Estate						Commercial
	Residential Real Estate		Investor CRE		Multifamily		Construction		Owner Occupied CRE		Commercial & Industrial		Consumer		Total		% of Total
	(in thousands)
December 31, 2012
Pass	$	714,346	$	599,660	$	1,486,824	$	10,946	$	678,916	$	349,674	$	723,698	$	4,564,064	73	%
Marginal	53,722		472,801		74,379		42,518		454,348		146,554		17,255		1,261,577		20	%
Special mention	11,739		77,342		10,122		3,401		85,228		38,874		4,864		231,570		4	%
Substandard	26,550		67,347		8,745		17,534		53,183		5,397		8,804		187,560		3	%
Doubtful/Loss	365		2,697		219		266		4,916		0		0		8,463		0	%
Total	$	806,722	$	1,219,847	$	1,580,289	$	74,665	$	1,276,591	$	540,499	$	754,621	$	6,253,234	100	%
Restructured	$	22,968	$	4,334	$	4,094	$	8,551	$	23,152	$	810	$	307	$	64,216	1	%
Nonaccrual	20,457		46,399		4,055		8,144		31,696		3,424		6,938		121,113		2	%
Nonperforming	43,425		50,733		8,149		16,695		54,848		4,234		7,245		185,329		3	%
Performing	763,297		1,169,114		1,572,140		57,970		1,221,743		536,265		747,376		6,067,905		97	%
Total	$	806,722	$	1,219,847	$	1,580,289	$	74,665	$	1,276,591	$	540,499	$	754,621	$	6,253,234	100	%
December 31, 2011
Pass	$	643,071	$	1,116,991	$	975,583	$	51,284	$	1,123,796	$	385,643	$	663,829	$	4,960,197	90	%
Special mention	14,031		83,372		9,901		24,578		54,009		25,334		4,166		215,391		4	%
Substandard	30,046		70,412		15,279		93,185		90,613		19,355		6,909		325,799		6	%
Doubtful/Loss	872		4,892		716		5,561		4,043		1,361		57		17,502		0	%
Total	$	688,020	$	1,275,667	$	1,001,479	$	174,608	$	1,272,461	$	431,693	$	674,961	$	5,518,889	100	%
Restructured	$	17,638	$	4,366	$	0	$	38,833	$	13,519	$	2,583	$	0	$	76,939	1	%
Nonaccrual	25,265		47,827		5,867		56,385		59,752		9,296		5,829		210,221		4	%
Nonperforming	42,903		52,193		5,867		95,218		73,271		11,879		5,829		287,160		5	%
Performing	645,117		1,223,474		995,612		79,390		1,199,190		419,814		669,132		5,231,729		95	%
Total	$	688,020	$	1,275,667	$	1,001,479	$	174,608	$	1,272,461	$	431,693	$	674,961	$	5,518,889	100	%

Note: Marginal loans are pass loans that were separated out in 2012 to better analyze loans with this rating.

F-24

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

Aging by class for Sterling’s loan portfolio as of December 31, 2012 and December 31, 2011 was as follows:

			Commercial Real Estate						Commercial
	Residential Real Estate		Investor CRE		Multifamily		Construction		Owner Occupied CRE		Commercial & Industrial		Consumer		Total		% of Total
	(in thousands)
December 31, 2012
30 - 59 days past due	$	5,800	$	10,565	$	707	$	611	$	10,543	$	2,690	$	4,028	$	34,944	1	%
60 - 89 days past due	1,576		1,042		479		0		3,300		376		1,796		8,569		0	%
> 90 days past due	20,507		34,196		3,436		8,243		20,883		1,954		4,717		93,936		2	%
Total past due	27,883		45,803		4,622		8,854		34,726		5,020		10,541		137,449		3	%
Current	778,839		1,174,044		1,575,667		65,811		1,241,865		535,479		744,080		6,115,785		97	%
Total Loans	$	806,722	$	1,219,847	$	1,580,289	$	74,665	$	1,276,591	$	540,499	$	754,621	$	6,253,234	100	%
> 90 days and accruing	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	0	%
December 31, 2011
30 - 59 days past due	$	5,718	$	3,354	$	1,523	$	11,830	$	19,967	$	1,741	$	4,167	$	48,300	1	%
60 - 89 days past due	4,585		3,954		193		879		4,233		520		2,258		16,622		0	%
> 90 days past due	20,207		33,759		3,178		68,024		40,987		7,871		5,054		179,080		3	%
Total past due	30,510		41,067		4,894		80,733		65,187		10,132		11,479		244,002		4	%
Current	657,510		1,234,600		996,585		93,875		1,207,274		421,561		663,482		5,274,887		96	%
Total Loans	$	688,020	$	1,275,667	$	1,001,479	$	174,608	$	1,272,461	$	431,693	$	674,961	$	5,518,889	100	%
> 90 days and accruing	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	0	%

F-25

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

The following table summarizes impaired loans by class as of December 31, 2012 and December 31, 2011:

					Book Balance
	Unpaid Principal Balance		Charge-Offs		Without Specific Reserve		With Specific Reserve		Specific Reserve
	(in thousands)
December 31, 2012
Residential real estate	$	49,816	$	6,391	$	43,060	$	365	$	365
CRE:
Investor CRE	59,099		8,366		33,540		17,193		2,697
Multifamily	9,554		1,405		6,873		1,276		219
Construction	31,040		14,345		15,421		1,274		266
Total CRE	99,693		24,116		55,834		19,743		3,182
Commercial:
Owner Occupied CRE	61,300		6,452		42,075		12,773		4,916
C&I	16,959		12,725		4,234		0		0
Total commercial	78,259		19,177		46,309		12,773		4,916
Consumer	7,671		426		7,245		0		0
Total	$	235,439	$	50,110	$	152,448	$	32,881	$	8,463
					Book Balance
	Unpaid Principal Balance		Charge-Offs		Without Specific Reserve		With Specific Reserve		Specific Reserve
	(in thousands)
December 31, 2011
Residential real estate	$	52,023	$	9,120	$	38,519	$	4,384	$	872
CRE:
Investor CRE	70,517		18,324		31,503		20,690		4,892
Multifamily	6,185		318		4,496		1,371		716
Construction	133,588		38,370		43,281		51,937		5,562
Total CRE	210,290		57,012		79,280		73,998		11,170
Commercial:
Owner Occupied CRE	89,604		16,333		48,194		25,077		4,043
C&I	25,497		13,618		11,207		672		163
Total commercial	115,101		29,951		59,401		25,749		4,206
Consumer	6,613		784		5,246		583		57
Total	$	384,027	$	96,867	$	182,446	$	104,714	$	16,305

F-26

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

The following table presents the average book balance and interest income recognized for impaired loans by class for the periods presented:

	Years Ended December 31,
	2012				2011
	Average Book Balance		Interest Income Recognized		Average Book Balance		Interest Income Recognized
	(in thousands)
Residential real estate	$	43,164	$	819	$	67,157	$	992
Investor CRE	51,463		1,595		79,139		2,245
Multifamily	7,007		441		14,704		804
Construction	55,956		1,708		215,436		1,401
Owner Occupied CRE	64,060		2,553		75,553		2,757
C&I	8,057		105		12,009		460
Consumer	6,537		8		6,901		0
Total	$	236,244	$	7,229	$	470,899	$	8,659

The following tables present loans that were modified and recorded as TDRs during the following periods:

	Years Ended December 31,
	2012					2011
	Number of Contracts	Pre-Modification Recorded Investment		Post-Modification Recorded Investment		Number of Contracts	Pre-Modification Recorded Investment		Post-Modification Recorded Investment
	(in thousands, except number of contracts)
Residential real estate	29	$	5,887	$	5,835	1	$	1,372	$	1,372
Investor CRE	1	1,302		1,302		8	3,271		3,282
Multifamily	3	2,955		2,945		0	0		0
Construction	4	10,062		9,194		3	23,701		24,348
Owner Occupied CRE	11	16,186		15,921		6	14,411		14,502
C&I	9	3,482		2,206		6	4,384		3,944
Consumer	3	468		472		0	0		0
Total (1)	60	$	40,342	$	37,875	24	$	47,139	$	47,448

⁽¹⁾ Amounts exclude specific loan loss reserves.

Substantially all TDRs are determined to be impaired prior to being restructured. As such, they are individually evaluated for impairment, unless they are considered homogeneous loans in which case they are collectively evaluated for impairment. As of December 31, 2012, Sterling had specific reserves of $2.1 million on TDRs which were restructured during the previous twelve months. There were 33 loans totaling $29.8 million that were removed from TDR status during this period, as they had met the conditions for removal by achieving twelve consecutive months of performance at market equivalent rates of interest.

F-27

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

The following tables show the post-modification recorded investment by class for TDRs restructured during the periods presented by the primary type of concession granted:

	Principal Deferral		Rate Reduction		Extension of Terms		Forgiveness of Principal and/or Interest		Total
	(in thousands)
Year Ended December 31, 2012
Residential Real Estate	$	407	$	5,428	$	0	$	0	$	5,835
Investor CRE	0		1,302		0		0		1,302
Multifamily	571		2,374		0		0		2,945
Construction	0		3,261		5,933		0		9,194
Owner CRE	6,219		9,393		0		309		15,921
C&I	0		1,317		183		706		2,206
Consumer	0		173		299		0		472
	$	7,197	$	23,248	$	6,415	$	1,015	$	37,875
Year Ended December 31, 2011
Residential Real Estate	$	0	$	1,372	$	0	$	0	$	1,372
Investor CRE	0		1,856		1,426		0		3,282
Multifamily	0		0		0		0		0
Construction	2,816		2,302		0		19,230		24,348
Owner CRE	10,159		0		0		4,343		14,502
C&I	576		3,368		0		0		3,944
Consumer	0		0		0		0		0
	$	13,551	$	8,898	$	1,426	$	23,573	$	47,448

Restructurings that result in the forgiveness of principal or interest are typically part of a bankruptcy settlement. There were no TDRs completed during the twelve month period ended December 31, 2012 that subsequently defaulted during this period. During the twelve month period ended December 31, 2011, there was one Investor CRE TDR completed that subsequently defaulted. The recorded investment at default for this TDR was $223,000.

F-28

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

5.  OREO:

At foreclosure, OREO is recorded at the fair value of the real estate, less the estimated costs to sell. The carrying value of OREO is periodically evaluated and, if necessary, an allowance is established to reduce the carrying value to net realizable value. Changes in OREO and the related allowance were as follows for the periods presented:

	Years Ended December 31,
	2012			2011			2010
	(in thousands)
OREO, gross:
Beginning balance, January 1	$	98,187		$	183,452		$	91,476
Additions	33,499			177,881			265,115
Sales	(85,837		)	(241,028		)	(155,409		)
Charge-offs	(18,534		)	(27,731		)	(23,164		)
Other changes	1,282			5,613			5,434
Ending balance, December 31	$	28,597		$	98,187		$	183,452
Allowance, OREO:
Beginning balance, January 1	$	16,277		$	21,799		$	8,204
Provision	5,812			22,209			36,759
Charge-offs	(18,534		)	(27,731		)	(23,164		)
Ending balance, December 31	$	3,555		$	16,277		$	21,799
OREO, net	$	25,042		$	81,910		$	161,653

6.  Loan Servicing:

Loans serviced for others are not included in the consolidated balance sheets. The following table presents an analysis of the changes in mortgage servicing rights and related allowance as of the dates indicated:

	2012			2011
	(in thousands)
Mortgage servicing rights, gross:
Beginning balance, January 1	$	30,409		$	21,720
Originated servicing	19,727			14,330
Amortization	(10,180		)	(5,641		)
Ending balance, December 31	39,956			30,409
Allowance, mortgage servicing rights:
Beginning balance, January 1	$	7,307		$	1,116
Additions	3,560			6,981
Recoveries	(3,331		)	(790		)
Ending balance, December 31	7,536			7,307
Mortgage servicing rights, net	$	32,420		$	23,102

F-29

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

The following table presents the unpaid principal balances of loans serviced for others as of the dates indicated:

	December 31,
	2012		2011
	(in thousands)
Balance of loans serviced for others
Residential	$	4,132,570	$	2,915,817
Commercial real estate	983,782		1,276,742
Commercial	132,903		116,724
Total	$	5,249,255	$	4,309,283

As of December 31, 2012, the residential portion of MSR was capitalized at approximately 71 basis points of the unpaid principal balance of residential loans serviced for others, compared with at 70 basis points as of December 31, 2011. Valuation inputs used in determining the fair value of MSR included:

	December 31,
	2012		2011
Key assumptions
Weighted average prepayment speed	18.3	%	19.4	%
Weighted average discount rate	10.1	%	10.2	%

7.  Property and Equipment:

The components of property and equipment are as follows:

	December 31,				Estimated
	2012		2011		Useful Life
	(in thousands)
Buildings and improvements	$	68,129	$	64,002	20-40 years
Furniture, fixtures, equipment and computer software	85,481		88,516		3-10 years
Leasehold improvements	17,893		19,267		5-20 years
	171,503		171,785
Less accumulated depreciation and amortization	(91,651)		(99,241)
	79,852		72,544
Land	13,998		11,471
Total property and equipment, net	$	93,850	$	84,015

8. Goodwill and Other Intangible Assets:

Goodwill represents the excess of a purchase price over the net assets acquired. The following table presents a roll-forward of Sterling's goodwill:

	Amount
Beginning balance, January 1, 2012	$	0
Acquired	22,577
Ending Balance, December 31, 2012	$	22,577

Goodwill acquired during 2012 was related to the First Independent transaction and has been allocated to the Community Banking segment. Goodwill is not amortized, but is reviewed for impairment at least annually. Other intangible assets at

F-30

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

December 31, 2012 were comprised of core deposit intangibles from various acquisitions, and other identifiable intangibles related to First Independent's trust and wealth management business.

The following table provides details of other intangible assets:

	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	(in thousands)
December 31, 2012
Core deposit intangibles	$	55,420	$	38,029	$	17,391
Other	1,800		119		1,681
December 31, 2011
Core deposit intangibles	43,446		31,368		12,078
Other	0		0		0

The following table provides the projected core deposit and other intangibles amortization expense for the next five years:

	Amount
	(in thousands)
Years ended:
December 31, 2013	$	6,430
December 31, 2014	3,339
December 31, 2015	2,361
December 31, 2016	1,271
December 31, 2017	1,178

9.  Deposits:

The following table sets forth the composition of Sterling’s deposits at the dates indicated:

	December 31,
	2012				2011
	Amount		%		Amount		%
	(in thousands)
Noninterest bearing transaction	$	1,702,740	26	%	$	1,211,628	19	%
Interest bearing transaction	732,038		11	%	521,037		8	%
Savings and MMDA	2,262,369		36	%	2,092,283		32	%
Time deposits	1,738,970		27	%	2,660,870		41	%
Total deposits	$	6,436,117	100	%	$	6,485,818	100	%

F-31

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

The following presents the contractual maturities of time deposits:

	December 31, 2012
	(in thousands)
Due within 1 year	$	977,745
Due in 1 to 2 years	326,849
Due in 2 to 3 years	119,397
Due in 3 to 4 years	219,706
Due in 4 to 5 years	29,087
Due after 5 years	66,186
	$	1,738,970

The following presents the contractual maturities of time deposits with a minimum balance of $100,000:

	December 31, 2012
	(in thousands)
Three months or less	$	165,107
After three months through six months	99,941
After six months through twelve months	212,215
After twelve months	402,083
	$	879,346

10.  Advances from Federal Home Loan Bank:

Sterling Bank has a secured credit line with the FHLB of Seattle. At December 31, 2012 and 2011, this credit line represented a total borrowing capacity of $1.93 billion and $1.86 billion, of which $1.32 billion and $1.56 billion was available, respectively. The advances from FHLB are repayable as follows:

	December 31, 2012				December 31, 2011
	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate
	(in thousands)
Due within 1 year	$	269,053	0.96	%	$	300,000	0.28	%
Due in 1 to 2 years	55,000		0.72		69,164		2.95
Due in 2 to 3 years	50,550		0.64		5,000		3.12
Due in 3 to 4 years	50,196		0.68		550		2.84
Due in 4 to 5 years	123,000		1.45		245		8.08
Due after 5 years	57,531		1.90		30,650		4.34
	$	605,330	1.08	%	$	405,609	1.09	%

Only member institutions have access to funds from the Federal Home Loan Banks. As a condition of membership, Sterling is required to hold FHLB stock. As of December 31, 2012 and 2011, Sterling held $97.5 million and $99.0 million of FHLB stock, respectively, which is included as a component of other assets on the consolidated balance sheet. The FHLB of Seattle has experienced losses from credit-related charges associated with projected losses on their investments in nonagency MBS, and is currently unable to pay dividends. FHLB stock does not have a readily determinable fair value and the equity ownership rights are more limited than would be the case for ownership rights in a public company. FHLB stock is viewed as a long term investment and as a restricted investment security carried at cost. Sterling has evaluated its FHLB stock held at December 31, 2012, and determined there was no other-than-temporary impairment. The FHLB was able to reestablish its ability to repurchase shares, and is currently repurchasing shares at par.

F-32

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

11.  Securities Sold Under Repurchase Agreements:

Sterling sells securities under agreements to repurchase the same or similar securities (“repurchase agreements”). Repurchase agreements are treated as financings, and the obligations to repurchase securities sold are reflected as a liability on the consolidated balance sheet. The securities underlying these agreements continue to be held by Sterling, but the title has been transferred to the counterparties to the agreements. The risk of default under such agreements is limited by the financial strength of these broker/dealers and the level of borrowings relative to the market value of pledged securities. At both December 31, 2012 and 2011, under the repurchase agreements, Sterling had pledged as collateral $738.6 million and $1.28 billion, respectively, of investments and MBS. The average balances of repurchase agreements were $959.5 million and $1.05 billion during the years ended December 31, 2012 and 2011, respectively. The maximum amount outstanding at any month end during these same periods was $1.07 billion and $1.06 billion, respectively.

At December 31, 2012 and 2011, borrowings under repurchase agreements are contractually repayable as follows. Actual repayments may vary due to default and call provisions:

	December 31, 2012				December 31, 2011
	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate
	(in thousands)
Due within 1 yr	$	86,867	1.20	%	$	205,763	3.08	%
Due within 2 yrs	0		0.00		100,000		3.00
Due within 3 yrs	50,000		2.47		0		0.00
Due within 4 yrs	0		0.00		150,000		3.76
Due within 5 yrs	400,000		4.08		100,000		3.97
Thereafter	50,000		2.62		500,000		3.90
	$	586,867	3.18	%	$	1,055,763	3.64	%

F-33

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

12. Junior Subordinated Debentures:

Sterling has raised regulatory capital through the formation of trust subsidiaries and has assumed similar obligations through mergers with other financial institutions. The trusts are business trusts in which Sterling owns all of the common equity. The proceeds from the sale of the securities were used to purchase junior subordinated debentures issued by Sterling. Sterling’s obligations under the junior subordinated debentures and related documents, taken together, constitute a full and unconditional guarantee by Sterling of the trusts’ obligations. The junior subordinated debentures are treated as debt of Sterling. The junior subordinated debentures mature 30 years after issuance, and are redeemable, subject to certain conditions. As of September 30, 2012, all of Sterling's junior subordinated debentures were redeemable at par, at their applicable quarterly or semiannual interest payment dates. During the third quarter of 2009, Sterling elected to defer regularly scheduled interest payments on its junior subordinated debentures. In June 2012, Sterling elected to resume regularly scheduled interest payments and as a result, the deferred accrued interest in the amount of $19.6 million was paid in full.

Details of the junior subordinated debentures are as follows:

				December 31, 2012
Subsidiary Issuer	Issue Date	Maturity Date	Next Interest Payment Date	Rate		Amount
						(in thousands)
Sterling Capital Trust IX	July 2007	Oct 2037	Jan 2013	1.76%		$	46,392
Sterling Capital Trust VIII	Sept 2006	Dec 2036	Mar 2013	1.94		51,547
Sterling Capital Trust VII	June 2006	June 2036	Mar 2013	1.83		56,702
Lynnwood Financial Statutory Trust II	June 2005	June 2035	Mar 2013	2.11		10,310
Sterling Capital Trust VI	June 2003	Sept 2033	Mar 2013	3.51		10,310
Sterling Capital Statutory Trust V	May 2003	June 2033	Mar 2013	3.56		20,619
Sterling Capital Trust IV	May 2003	May 2033	Feb 2013	3.46		10,310
Sterling Capital Trust III	April 2003	April 2033	Jan 2013	3.56		14,433
Lynnwood Financial Statutory Trust I	Mar 2003	Mar 2033	Mar 2013	3.46		9,437
Klamath First Capital Trust I	July 2001	July 2031	Jan 2013	4.48		15,234
				2.47%	*	$	245,294
* Weighted average rate.

F-34

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

13. Earnings Per Share:

The following table presents the computations for basic and diluted earnings per common share:

	Years Ended December 31,
	2012		2011		2010
	(in thousands, except shares and per share amounts)
Numerator:
Net income	$	385,721	$	39,133	$	(756,143	)
Denominator:
Weighted average shares outstanding - basic	62,122,862		61,955,659		14,253,869
Dilutive securities outstanding	649,217		275,549		0
Weighted average shares outstanding - diluted	62,772,079		62,231,208		14,253,869
Earnings per share - basic	$	6.21	$	0.63	$	(53.05	)
Earnings per share - diluted	$	6.14	$	0.63	$	(53.05	)
Antidilutive securities outstanding (weighted average):
Stock options	13,792		16,511		20,700
Warrants	0		0		954,754
Restricted shares	230		4,728		20,754
Total antidilutive securities outstanding	14,022		21,239		996,208

Sterling's dilutive securities outstanding include warrants held by certain investors. On September 19, 2012, Sterling repurchased a warrant for 97,541 shares held by the United States Department of the Treasury (“Treasury”). The warrant had been issued to Treasury on December 5, 2008, in connection with Sterling's participation in the Capital Purchase Program of the Troubled Asset Relief Program. Sterling repurchased the warrant for $825,000, which was cancelled upon repurchase. Treasury sold all of its Sterling common stock on August 14, 2012 in an underwritten public offering.

14. Noninterest Expense:

The following table details the components of Sterling’s noninterest expense:

	Years Ended December 31,
	2012		2011		2010
	(in thousands)
Employee compensation and benefits	$	189,025	$	171,643	$	168,793
OREO operations	11,829		41,500		62,578
Occupancy and equipment	42,930		39,878		39,643
Data processing	27,091		24,171		23,116
FDIC insurance	7,493		14,328		32,088
Professional fees	16,691		13,902		22,394
Depreciation	11,690		12,184		13,391
Advertising	12,688		10,017		11,536
Travel and entertainment	5,756		5,420		3,975
Merger and acquisition	11,976		1,012		358
Amortization of other intangible assets	6,780		4,851		4,898
Other	11,304		13,484		12,275
Total noninterest expense	$	355,253	$	352,390	$	395,045

F-35

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

15. Income Taxes:

During the year ended December 31, 2012, Sterling recorded a $292.0 million income tax benefit, which was the result of reversing the deferred tax asset valuation allowance. Sterling did not recognize any federal or state income tax expense during 2011. As of December 31, 2012, the net deferred tax asset was $292.1 million, including $274.0 million of net operating loss and tax credit carry-forwards. A valuation allowance of $1.8 million remains, relating to certain state tax credits that will likely expire unused. As of December 31, 2011, Sterling had a fully reserved net deferred tax asset of $327.4 million, including $285.0 million of net operating loss and tax credit carry-forwards.

A deferred tax asset valuation allowance was established during 2009 due to the three year cumulative loss and uncertainty at that time regarding Sterling's ability to generate future taxable income. Reversal of the deferred tax asset valuation allowance occurred during the quarter ended June 30, 2012, which marked the sixth consecutive quarter of profitability for Sterling. Prior to reversing the allowance, management analyzed both positive and negative evidence that could affect the realization of the deferred tax asset. Based on the earnings performance trend and projections of income through 2013, improvement in asset quality, higher net interest margin and improvements in other key financial ratios, expectations of continued profitability, the length of the carry-forward period for its net operating losses and tax credits, an analysis of the reversal of existing temporary differences, and an evaluation of its loss carry-back ability and tax planning strategies, Sterling determined that it was more likely than not that the net deferred tax asset would be realized. This assessment was updated as of December 31, 2012, resulting in the same conclusion. As a result, the deferred tax asset valuation allowance was $1.8 million at December 31, 2012, compared to $327.4 million at December 31, 2011.

The components of income tax expense (benefit) included in the consolidated statements of operations were as follows:

	Years Ended December 31,
	2012			2011			2010
	(in thousands)
Current income taxes:
Federal	$	(163	)	$	(248	)	$	(102	)
State	0			(27		)	(11		)
Total current income taxes	(163		)	(275		)	(113		)
Deferred income taxes:
Federal	(269,968		)	248			102
State	(21,912		)	27			11
Total deferred income taxes	(291,880		)	275			113
Total income tax (benefit) expense	$	(292,043	)	$	0		$	0

F-36

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

The tax effects of the principal temporary differences giving rise to deferred tax assets and liabilities were as follows:

	December 31,
	2012			2011
	(in thousands)
Deferred tax assets:
NOL carryforwards - federal	$	242,318		$	250,946
NOL carryforwards - state	21,443			22,110
Tax credits - federal	7,671			7,587
Tax credits - state	2,594			4,167
Allowance for losses on loans	61,385			75,393
Deferred compensation	10,760			12,485
Bonus accrual	4,670			2,138
Intangibles	2,284			6
Purchase accounting premiums and discounts	2,087			3,877
Nonaccrual loans	1,931			2,167
Deferred rent	1,119			1,063
Other	3,394			3,044
Total deferred tax assets	361,656			384,983
Deferred tax liabilities:
Unrealized gains on available-for-sale securities	22,627			22,670
FHLB Seattle dividends	16,325			16,486
Mortgage servicing rights	11,869			8,169
Fair value - loans held for sale	8,966			3,093
Deferred loan fees	5,867			5,162
Prepaid expenses	2,151			1,945
ASC 740 (FIN 48) - temporary differences	5			9
Total deferred tax liabilities	67,810			57,534
Valuation allowance	(1,764		)	(327,449		)
Net deferred tax asset	$	292,082		$	0

As of December 31, 2012, the net operating loss carry-forwards represented the tax effect of $692.3 million of federal operating loss carry-forwards, $442.4 million of state operating loss carry-forwards, federal tax credits of $7.7 million, and state tax credits of $2.6 million. These operating loss carry-forwards and tax credits expire between 2014 and 2031.

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 adopted a tax preservation rights plan, both of which restrict certain stock transfers that would result in an investor acquiring more than 4.95% of Sterling’s total outstanding common stock.

F-37

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

The following table summarizes the calculation of Sterling's effective tax rates for the periods presented:

	Years Ended December 31,
	2012		2011		2010
Income tax provision at the federal statutory rate	35.0	%	35.0	%	35.0	%
Tax effect of:
Deferred tax valuation allowance	(347.8	)%	(25.0	)%	(40.1	)%
State taxes, net of federal benefit	3.8	%	0.0	%	3.1	%
Tax-exempt interest	(2.5	)%	(6.3	)%	1.0	%
Bank owned life insurance	(3.2	)%	(5.8	)%	1.1	%
Tax credits	0.0	%	(1.6	)%	0.9	%
Other, net	3.2	%	3.7	%	(1.0	)%
Effective tax rate	(311.5	)%	0.0	%	0.0	%

The following is a reconciliation of the beginning and ending amount of unrecognized tax positions for the periods presented:

	2012			2011			2010
	(in thousands)
Balance at January 1	$	525		$	1,586		$	6,330
Additions - current year tax positions	70			75			65
Additions - prior year tax positions	0			0			0
Reductions - prior year tax positions	(183		)	(1,136		)	(4,809		)
Balance at December 31	412			525			1,586
Accrued interest and penalties, net of tax effect at December 31	100			103			140
Total liability for unrecognized tax positions at December 31	$	512		$	628		$	1,726

Sterling's tax positions for the years 2008 through 2012 remain subject to review by federal and state taxing authorities. Realization of $386,000 of unrecognized tax benefits would result in a favorable impact to the effective tax rate.

F-38

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

16. Stock Based Compensation:

The following table presents a summary of restricted stock and units activity during the periods:

	Shares		Weighted Average Grant Price
Balance, January 1, 2010	4,000		$	619.55
Granted	488,040		16.39
Vested	(121,935	)	23.05
Expired	0		0.00
Forfeited	(1,300	)	723.41
Outstanding, December 31, 2010	368,805		$	18.24
Balance, January 1, 2011	368,805		$	18.24
Granted	130,021		17.18
Vested	(163,680	)	18.50
Expired	0		0.00
Forfeited	(33,773	)	16.63
Outstanding, December 31, 2011	301,373		$	17.82
Balance, January 1, 2012	301,373		$	17.82
Granted	305,157		20.06
Vested	(142,727	)	19.44
Expired	0		0.00
Forfeited	(78,290	)	17.02
Outstanding, December 31, 2012	385,513		$	19.16

F-39

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

The following table presents a summary of stock option activity during the periods:

	Shares		Weighted Average Exercise Price
Balance, January 1, 2010	28,932		$	1,390.07
Granted	0		0.00
Exercised	0		0.00
Expired	(9,195	)	1,449.05
Forfeited	(817	)	1,469.48
Outstanding, December 31, 2010	18,920		$	1,357.97
Exercisable, December 31, 2010	14,655		$	1,497.94
Balance, January 1, 2011	18,920		$	1,357.97
Granted	0		0.00
Exercised	0		0.00
Expired	(2,600	)	1,231.98
Forfeited	(520	)	903.92
Outstanding, December 31, 2011	15,800		$	1,393.65
Exercisable, December 31, 2011	14,011		$	1,507.87
Balance, January 1, 2012	15,800		$	1,393.65
Granted	0		0.00
Exercised	0		0.00
Expired	(1,211	)	1,362.40
Forfeited	(2,190	)	1,184.58
Outstanding, December 31, 2012	12,399		$	1,433.63
Exercisable, December 31, 2012	11,996		$	1,447.69

The following table presents the weighted average remaining contractual life and the aggregate intrinsic value for stock options as of the dates indicated:

	Stock Options
	Outstanding			Exercisable
	Weighted Average Life	Intrinsic Value		Weighted Average Life	Intrinsic Value
December 31, 2012	1.3 years	$	0	1.2 years	$	0
December 31, 2011	2.1 years	0		2.1 years	0

As of December 31, 2012, a total of 5,382,896 shares remained available for grant under Sterling’s 2003, 2007 and 2010 Long-Term Incentive Plans. The stock options granted under these plans have terms of four, six, eight and 10 years. Stock based compensation expense recognized during the periods presented was as follows:

	Years Ended December 31,
	2012		2011		2010
	(in thousands)
Stock options	$	43	$	268	$	728
Restricted stock	3,765		3,595		2,435
Total	$	3,808	$	3,863	$	3,163

F-40

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

As of December 31, 2012, unrecognized equity compensation expense totaled $5.4 million as the underlying outstanding awards had not yet been earned. This amount will be recognized over a weighted average period of 2.1 years.

17. Shareholders’ Equity:

As of December 31, 2012 and 2011, Sterling had 10 million shares of preferred stock authorized, with no shares being issued and outstanding. As of December 31, 2012 and 2011, there were 151,515,151 shares of common stock authorized, with one class of common stock issued and outstanding at both dates. As of December 31, 2012, 62,207,529 shares of common stock were outstanding, and 62,176,628 were issued, compared with 62,057,645 outstanding, and 62,002,884 issued at December 31, 2011. The common stock has no par value. During 2010, a 1-for-66 reverse stock split was effected, which is reflected in prior period presentations within these financial statements.

During the third quarter of 2012, Sterling resumed the payment of quarterly dividends on its common stock. Dividends paid in 2012 also included a special dividend of $0.35 per share, as well as the acceleration of the first quarter of 2013 dividend. A total of $49.7 million, or $0.80 per share, of dividends were paid during 2012, compared with none being paid in 2011.

On August 14, 2012, the United States Department of the Treasury (“Treasury”) sold all of its shares in Sterling common stock in an underwritten public offering. On September 19, 2012, Sterling repurchased a warrant for 97,541 shares held by Treasury. The warrant and stock investment had been issued to Treasury on December 5, 2008, in connection with Sterling's participation in the Capital Purchase Program of the Troubled Asset Relief Program, and the stock was converted on August 26, 2010 to Sterling common stock.

As of December 31, 2012, there were 2,749,044 warrants outstanding, with an exercise price of $13.86. As of December 31, 2011, there were 2,625,000 warrants outstanding, with an exercise price of $14.52. These warrants were issued as part of the 2010 recapitalization, and have an expiration date of August 26, 2017. Adjustments to the number and exercise price of these outstanding warrants occurred in 2012 due to dividend distributions triggering an anti-dilutive provision.

18. Derivatives and Hedging:

Sterling enters into interest rate swap transactions with loan customers. The interest rate risk on these swap transactions is hedged by Sterling entering into offsetting interest rate swap agreements with various unaffiliated counterparties (“broker-dealers”). Both customer and broker-dealer related interest rate derivatives are carried at fair value, which includes consideration of counterparty credit risk.

As part of its mortgage banking activities, Sterling makes commitments to prospective borrowers on residential mortgage loan applications, which may have the interest rates locked for a period of 10 to 60 days or longer, if extended (“interest rate lock commitments”). The interest rate lock commitments are fair valued net of the anticipated fallout. These interest rate lock commitments, and loans held for sale that have not been committed to investors, give rise to interest rate risk. Sterling hedges the interest rate risk arising from these mortgage banking activities by entering into forward sales agreements on MBS with third parties (“forward commitments”). Residential mortgage loans held for sale that were not committed to investors were $419.1 million and $192.4 million as of December 31, 2012 and December 31, 2011, respectively.

F-41

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

The following table summarizes Sterling’s mortgage banking operations and interest rate swaps:

	December 31, 2012
			Fair Value
	Notional		Asset		Liability
	(in thousands)
Interest rate lock commitments, net	$	242,061	$	9,035	$	0
Forward commitments	531,000		0		1,881
Interest rate swaps - broker-dealer	44,846		0		2,144
Interest rate swaps - customer	36,158		2,148		0
	December 31, 2011
			Fair Value
	Notional		Asset		Liability
	(in thousands)
Interest rate lock commitments, net	$	181,456	$	5,558	$	0
Forward commitments	315,579		0		3,785
Interest rate swaps - broker-dealer	43,213		0		4,527
Interest rate swaps - customer	45,820		4,711		0

The fair value of these derivatives is included in other assets and liabilities, respectively. Gains and losses on Sterling’s mortgage banking derivative transactions are included in mortgage banking income, while gains and losses on Sterling’s interest rate swap agreements are included in other noninterest income. The following table sets forth these gains and losses:

	Years Ended December 31,
	2012			2011			2010
	(in thousands)
Mortgage banking operations	$	9,816		$	(10,297	)	$	(8,871	)
Other noninterest income	(553		)	61			110

19. Commitments and Contingencies:

Sterling is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to originate and purchase loans, provide funds under existing lines of credit, and include forward loan sale agreements to mortgage brokers. Commitments, which are disbursed subject to certain limitations, extend over various periods of time, with the majority of funds being disbursed within a twelve-month period. The undisbursed balances and other commitments as of the dates indicated are summarized as follows:

	December 31,
	2012		2011
	(in thousands)
Undisbursed loan funds - construction loans	$	16,499	$	17,617
Undisbursed lines of credit - commercial loans	524,065		309,560
Undisbursed lines of credit - consumer loans	399,691		403,112
Firm commitments to sell loans	28,485		14,760

As of December 31, 2012 and 2011, Sterling had approximately $17.5 million and $16.6 million of commercial and standby letters of credit outstanding, respectively. During the years ended December 31, 2012 and 2011, Sterling collected approximately $180,000 and $153,000 in fees from these off-balance sheet arrangements.

F-42

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

Future minimum rental commitments as of December 31, 2012, under non-cancelable operating leases with initial or remaining terms of more than one year, are as follows:

	Amount
	(in thousands)
Years ended:
December 31, 2013	$	14,012
December 31, 2014	12,723
December 31, 2015	10,298
December 31, 2016	8,157
December 31, 2017	6,365
Thereafter	26,713
	$	78,268

Rent expense recorded for the years ended December 31, 2012, 2011 and 2010 was $16.3 million, $15.2 million and $16.0 million, respectively.

Securities Class Action Litigation. On December 11, 2009, a putative securities class action was filed in the United States District Court for the Eastern District of Washington against Sterling and certain of our current and former officers. The court appointed a lead plaintiff on March 9, 2010. On June 18, 2010, the lead plaintiff filed a consolidated complaint (the “Complaint”). The Complaint purports to be brought on behalf of a class of persons who purchased or otherwise acquired Sterling's stock during the period from July 23, 2008 to October 15, 2009. The Complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by failing to disclose the extent of Sterling's delinquent commercial real estate, construction and land development loans, properly record losses for impaired loans, and properly reserve for loan losses, thereby causing Sterling's stock price to be artificially inflated during the purported class period. Plaintiffs seek unspecified damages and attorneys' fees and costs. Sterling believes the lawsuit is without merit and intends to defend against it vigorously. On August 30, 2010, Sterling moved to dismiss the Complaint. On March 2, 2011, after complete briefing, the court held a hearing on the motion to dismiss. The court has not yet issued an order on the motion, but indicated that it intends to do so in the near future. Failure by Sterling to obtain a favorable resolution of the claims set forth in the complaint could have a material adverse effect on our business, results of operations and financial condition. Currently, a loss resulting from these claims is not considered probable or reasonably estimable in amount.

ERISA Class Action Litigation. On January 20 and 22, 2010, two putative class action complaints were filed in the United States District Court for the Eastern District of Washington against Sterling, as well as certain of Sterling's current and former officers and directors. The two complaints were merged in a Consolidated Amended Complaint (the “Complaint”) filed on July 16, 2010 in the same court. The Complaint does not name all of the individuals named in the prior complaints, but it is expected that additional defendants will be added. The Complaint alleges that the defendants breached their fiduciary duties under sections 404 and 405 of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), with respect to the Sterling Savings Bank Employee Savings and Investment Plan (the “401(k) Plan”) and the FirstBank Northwest Employee Stock Ownership Plan (“ESOP”) (collectively, the "Plans”). Specifically, the Complaint alleges that the defendants breached their duties by investing assets of the Plans in Sterling's securities when it was imprudent to do so, and by investing such assets in Sterling securities when defendants knew or should have known that the price of those securities was inflated due to misrepresentations and omissions about Sterling's business practices. The business practices at issue include alleged over-reliance on risky construction loans; alleged inadequate loan reserves; alleged spiking increases in nonperforming assets, nonperforming loans, classified assets, and over 90-day delinquent loans; alleged inadequate accounting for rising loan payment shortfalls; alleged unsafe and unsound banking practices; and a capital base that was allegedly inadequate to withstand the significant deterioration in the real estate markets. The putative class periods are October 22, 2007 to the present for the 401(k) Plan class, and October 22, 2007 to November 14, 2008 for the ESOP class. The Complaint seeks damages of an unspecified amount and attorneys' fees and costs. On September 26, 2012, Sterling received a letter from the U.S. Department of Labor (the “Department of Labor”) containing similar allegations as those set forth in the Complaint, demanding that the violations alleged in the Department of Labor's letter be corrected and notifying Sterling that the Department of Labor may take legal action in connection with such allegations, including assessing a civil money penalty. Failure by Sterling to obtain a favorable resolution of the claims set forth in the Complaint or in the letter from the Department of Labor could have a material adverse effect on

F-43

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

Sterling's business, results of operations, and financial condition. In January 2013, a tentative settlement was reached, pursuant to which Sterling agreed to pay $3.0 million to settle the claims. The settlement is subject to approval by the court and the Department of Labor.

Additionally, Sterling is involved in ongoing litigation, primarily related to its normal business operations. When establishing a liability for contingent litigation losses, Sterling determines a range of potential losses for each matter that is both probable and estimable, and records the amount it considers to be the best estimate within the range. For these matters and others where an unfavorable outcome is reasonably possible but not probable, there is no estimable range of possible losses. For specific cases, including the ERISA class action litigation discussed above, Sterling has established an accrual of $5.5 million for potential settlement losses. The accrual is Sterling's best estimate of the liability after any potential insurance coverages for specific settlements that are estimable and probable as of December 31, 2012. Sterling believes that the eventual outcome from these cases will not, individually or in the aggregate, have a material adverse effect on its consolidated financial position.

American Heritage Holdings On October 22, 2012, Sterling entered into a definitive agreement with American Heritage Holdings ("AHH"), the holding company for Borrego Springs Bank, N.A., to acquire AHH for cash consideration of $6.5 million. The transaction, which has been approved by the boards of directors of Sterling and AHH. The shareholders of AHH have agreed to vote in favor of the transaction, which is subject to customary closing conditions and is expected to be completed during the first quarter of 2013.

Boston Private Bank and Trust Company On December 14, 2012, Sterling entered into a definitive agreement to acquire the Puget Sound operations of Boston Private Bank & Trust Company (“Boston Private”), a wholly owned subsidiary of Boston Private Financial Holdings, Inc. The Boston Private Puget Sound offices are located in Seattle, Bellevue and Redmond, Washington. As of December 31, 2012, these offices had aggregate loans of approximately $270 million and deposits of $200 million. The transaction, which is subject to regulatory approval and other customary closing conditions, is expected to be completed during the second quarter of 2013.

20. Benefit Plans:

Sterling maintains an employee savings plan under Section 401(k) of the Internal Revenue Code. Substantially all employees are eligible to participate in the plan subject to certain requirements. Under the plan, employees may elect to contribute up to 10% of their salary, and Sterling will make a matching contribution equal to 35% of the employee's contribution. Each employee may make a supplemental contribution of an additional 65% of their salary. All employee contributions vest immediately and, if applicable, employer contributions vest over the employee's first three years of employment. Employees have the option of investing their contributions among selected mutual funds and Sterling common stock. Sterling contributed $2.9 million during 2012 and $2.8 million during 2011 and 2010 to the employee savings plan.

Since 2002, Sterling has a supplemental executive retirement plan ("SERP"). The SERP is a nonqualified, unfunded plan that is designed to provide retirement benefits for certain key employees of Sterling. Sterling maintains and administers three additional SERPs from past acquisitions. These SERPs are all nonqualified, unfunded plans that were designed to provide retirement benefits for certain key employees and directors of the acquired companies. All amounts and benefits were established and accrued at acquisition either by previous service or change of control clauses. Sterling continues to administer these benefit plans, as necessary. Sterling had recognized $530,000, $531,000, and $505,000 for the years ended December 31, 2012, 2011 and 2010 in expenses related to the SERP. As of both December 31, 2012 and 2011, Sterling had $8.4 million accrued for the SERP.

In 2006, Sterling adopted a new nonqualified deferred compensation plan (the “2006 DCP”) which is primarily funded through employee deferral contributions. The 2006 DCP is designed to retain and attract key employees while serving as a vehicle to assist participants in deferring current compensation to a time when taxes may be at a more personally beneficial rate and aid in saving for long-term financial needs. Participation in the 2006 DCP is limited to Directors and a select group of management or highly compensated employees as determined by the plan Committee. No employer contributions have been made to the 2006 DCP. Sterling had $172,000, $94,000, and $132,000 of net expenses related to the 2006 DCP for the years ended December 31, 2012, 2011 and 2010, respectively. As of December 31, 2012 and 2011, Sterling had an accrued liability for the 2006 DCP of $4.3 million and $4.8 million, respectively.

During 2011, Sterling initiated an Employee Stock Purchase Plan ("ESPP"). Employees are eligible to participate in the ESPP, with purchases discounted from 0% - 15% (currently at 15%) from the closing price of Sterling's common stock on the last day of the semiannual offering period. During 2012, 38,926 shares were issued under the plan, leaving 1,961,074 shares available for future purchase as of December 31, 2012.

F-44

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

21. Fair Value:

Fair value estimates are determined as of a specific date using quoted market prices, where available, or various assumptions and estimates. As the assumptions underlying these estimates change, the fair value of the financial instruments will change. The use of assumptions and various valuation techniques, as well as the absence of secondary markets for certain financial instruments, will likely reduce the comparability of fair value disclosures between financial institutions. Accordingly, the aggregate fair value amounts presented do not represent and should not be construed to represent the full underlying value of Sterling.

The carrying amounts and fair values of financial instruments as of the periods indicated were as follows. Other assets are comprised of FHLB stock and derivatives, while other liabilities are comprised of derivatives:

		December 31, 2012				December 31, 2011
	Level	Carrying Amount		Fair Value		Carrying Amount		Fair Value
		(in thousands)
Financial assets:
Cash and cash equivalents	1	$	331,550	$	331,550	$	491,228	$	491,228
Investments and MBS:
Available for sale	2	1,513,157		1,513,157		2,547,876		2,547,876
Held to maturity	2	206		206		1,747		1,747
Loans held for sale	2	465,983		465,983		273,957		273,957
Loans receivable, net	3	6,101,749		6,154,296		5,341,179		5,347,555
Mortgage servicing rights, net	3	32,420		32,420		23,102		23,102
Other assets (1)	2	108,642		108,642		109,317		109,317
Financial liabilities:
Non-maturity deposits	2	4,697,147		4,697,147		3,824,948		3,824,948
Deposits with stated maturities	2	1,738,970		1,768,818		2,660,870		2,710,740
Borrowings	2	1,437,491		1,457,911		1,706,662		1,724,347
Other liabilities	2	4,025		4,025		9,212		9,212

(1) Other assets includes FHLB stock. As of December 31, 2012 and December 31, 2011, FHLB stock was carried at $97.5 million and $99.0 million, respectively.

Companies have the option of carrying financial assets and liabilities at fair value, which can be implemented on all or individually selected financial instruments. The framework for defining and measuring fair value requires that one of three valuation methods be used to determine fair market value: the market approach, the income approach or the cost approach. To increase consistency and comparability in fair value measurements and related disclosures, the standard also creates a fair value hierarchy to prioritize the inputs to these valuation methods into the following three levels:

• Level 1 inputs are a select class of observable inputs, based upon the quoted prices for identical instruments in active markets that are accessible as of the measurement date, and are to be used whenever available.

• Level 2 inputs are other types of observable inputs, such as quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are inactive; or other inputs that are observable or can be derived from or supported by observable market data. Level 2 inputs are to be used whenever Level 1 inputs are not available.

• Level 3 inputs are substantially unobservable, reflecting the reporting entity's own assumptions regarding what market participants would assume when pricing a financial instrument. Level 3 inputs are to be used only when Level 1 and Level 2 inputs are unavailable.

F-45

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

The methods and assumptions used to estimate the fair value of certain financial instruments are as follows:

Cash and Cash Equivalents.  The carrying value of cash and cash equivalents approximates fair value due to the relatively short-term nature of these instruments.

Investments and MBS.  The fair value of investments and MBS are provided by a third-party pricing service. These valuations are based on market data using pricing models that vary by asset class and incorporate available current trade, bid and other market information, and for structured securities, cash flow and loan performance data. The pricing processes utilize benchmark curves, benchmarking of similar securities, sector groupings, and matrix pricing. Option adjusted spread models are also used to assess the impact of changes in interest rates and to develop prepayment scenarios. All models and processes used take into account market convention.

Loans Held for Sale.  Sterling has elected to carry residential loans held for sale at fair value. The fair values of residential loans are based on investor quotes in the secondary market, determined by the fair value of options and commitments to sell or issue mortgage loans. The fair value election was made to match changes in the value of these loans with the value of their economic hedges. Loan origination fees, costs and servicing rights, which were previously deferred on these loans, are now recognized as part of the loan value at origination. Nonresidential loans held for sale are carried at the lower of cost or market (“LOCOM”) due to the frequency of these loan sale transactions, as well as the availability of market data for these loan types.

Loans Receivable.  The fair value of performing loans is estimated by discounting the cash flows using interest rates that consider the current credit and interest rate risk inherent in the loans and current economic and lending conditions and does not incorporate the exit price concept of fair value. The fair value of nonperforming collateral-dependent loans is estimated based upon the value of the underlying collateral. The fair value of other nonperforming loans is estimated by discounting management's current estimate of future cash flows using a rate estimated to be commensurate with the risks involved. Changes in the various inputs in the fair value of nonperforming loans will have a significant impact on the fair value.

Mortgage Servicing Rights.  The fair value of mortgage servicing rights is estimated using a discounted cash flow model to arrive at the net present value of expected earnings from the servicing of the loans. Model inputs include prepayment speeds, market interest rates, contractual interest rates on the loans being serviced, the amount of other fee income generated and other factors. The fair value of mortgage servicing rights is impacted by any changes in these inputs.

Deposits.  The fair values of deposits subject to immediate withdrawal such as interest and noninterest bearing checking, regular savings, and money market deposit accounts, are equal to the amounts payable on demand at the reporting date. Fair values for time deposits are estimated by discounting future cash flows using interest rates currently offered on time deposits with similar remaining maturities.  

Borrowings.  The carrying amounts of short-term borrowings under repurchase agreements, federal funds purchased, short-term FHLB advances and other short-term borrowings approximate their fair values due to the relatively short period of time between the origination of the instruments and the expected payment dates on the instruments. The fair value of long-term FHLB advances and other long-term borrowings is estimated using discounted cash flow analysis based on Sterling's current incremental borrowing rates for similar types of borrowing arrangements with similar remaining terms.

Derivatives.  Interest rate lock commitments and forward commitments valuations are estimated using quoted market prices for similar instruments. Fair values for the interest rate swaps are based on the present value differential between the fixed interest rate payments and the floating interest rate payments as projected by the forward interest rate curve, over the term of the swap, with the recorded amount net of any credit valuation adjustments. 

F-46

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents Sterling’s financial instruments that are measured at fair value on a recurring basis:

	Total		Level 1		Level 2		Level 3
	(in thousands)
December 31, 2012
Investment securities available for sale:
MBS	$	1,308,838	$	0	$	1,308,838	$	0
Municipal bonds	204,306		0		204,306		0
Other	13		0		13		0
Total investment securities available for sale	1,513,157		0		1,513,157		0
Loans held for sale	465,983		0		465,983		0
Other assets - derivatives	11,183		0		11,183		0
Total assets	$	1,990,323	$	0	$	1,990,323	$	0
Contingent consideration	$	15,442	$	0	$	0	$	15,442
Other liabilities - derivatives	4,025		0		4,025		0
Total liabilities	$	19,467	$	0	$	4,025	$	15,442
December 31, 2011
Investment securities available for sale:
MBS	$	2,320,934	$	0	$	2,320,934	$	0
Municipal bonds	207,456		0		207,456		0
Other	19,486		0		19,486		0
Total investment securities available for sale	2,547,876		0		2,547,876		0
Loans held for sale	223,638		0		223,638		0
Other assets - derivatives	10,269		0		10,269		0
Total assets	$	2,781,783	$	0	$	2,781,783	$	0
Other liabilities - derivatives	$	9,212	$	0	$	9,212	$	0

Contingent consideration represents the estimated liability for additional payments related to the First Independent transaction based on the application of a discounted cash flow methodology. The following table presents a roll-forward of contingent consideration. Valuation adjustments are included in noninterest expense within merger and acquisition expense.

	Year Ended
	December 31, 2012
	(in thousands)
Beginning balance	$	0
Additions	11,700
Valuation adjustments	3,742
Ending balance	$	15,442

F-47

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

Derivatives include mortgage banking interest rate lock and loan delivery commitments, interest rate swaps, and also at December 31, 2011 a common stock warrant carried as a derivative liability. See Note 18 for a further discussion of these derivatives. The difference between the aggregate fair value and the aggregate unpaid principal balance of loans held for sale that are carried at fair value were included in earnings as follows:

	Years Ended December 31,
	2012		2011
	(in thousands)
Mortgage banking operations	$	11,447	$	7,506

Assets and Liabilities Measured at Fair Value on a Non-recurring Basis

Sterling may be required to measure certain assets at fair value on a non-recurring basis from application of LOCOM accounting or write-downs of individual assets. The following table presents the carrying value for these assets as of the dates indicated:

	December 31, 2012
	Total Carrying Value		Level 1		Level 2		Level 3		Losses During the Year Ended December 31, 2012
	(in thousands)
Loans	$	172,172	$	0	$	0	$	172,172	$	(27,649	)
OREO	18,074		0		0		18,074		(1,296		)
Mortgage servicing rights	32,420		0		0		32,420		(230		)
	December 31, 2011								Losses During the Year Ended December 31, 2011
	Total Carrying Value		Level 1		Level 2		Level 3
	(in thousands)
Loans	$	268,837	$	0	$	0	$	268,837	$	(47,372	)
OREO	31,379		0		0		31,379		(10,860		)
Mortgage servicing rights	23,102		0		0		23,102		(6,191		)

The loans disclosed above represent the net balance of loans as of period end for which a charge-off or specific reserve has been recognized during the years ended December 31, 2012 and 2011, with these charges comprised of charge-offs and increases in the specific reserve. OREO represents the carrying value of properties for which a specific reserve was established during the periods presented as a result of updated appraisals subsequent to foreclosure. The appraisals may use comparable sales and income approach valuation methods and may be adjusted to reflect current market or property information. In addition to the loan and OREO losses disclosed above, charge-offs at foreclosure for properties held as of period end totaled $3.9 million and $20.9 million for the years ended December 31, 2012 and 2011, respectively. Fair value adjustments to the mortgage servicing rights were mainly due to market derived assumptions associated with mortgage prepayment speeds. Sterling carries its mortgage servicing rights at LOCOM, and they are accordingly measured at fair value on a non-recurring basis. Qualitative information regarding the fair value measurements for Level 3 financial instruments are as follows:

	December 31, 2012
	Method	Inputs
Loans	Income, Market, Comparable Sales, Discounted Cash Flows	External appraised values; probability weighting of broker price opinions; management assumptions regarding market trends or other relevant factors; selling and commission costs ranging from 4.5% to 9%. Amount and timing of cash flows based upon current discount rates.
OREO	Income, Market, Comparable Sales,	External appraised values; probability weighting of broker price opinions; management assumptions regarding market trends or other relevant factors; selling and commissions costs ranging from 4.5% to 9%.
Mortgage servicing rights	Discounted Cash Flow	Weighted average prepayment speed 18.3%; weighted average discount rate 10.1%

F-48

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

22. Regulatory Capital:

The following table sets forth the respective regulatory capital positions for Sterling and Sterling Bank:

	Actual				Adequately Capitalized				Well-Capitalized
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(in thousands)
As of December 31, 2012
Tier 1 leverage ratio
Sterling	$	1,115,834	12.1	%	$	367,909	4.0	%	$	459,886	5.0	%
Sterling Bank	1,100,443		12.0	%	368,053		4.0	%	460,066		5.0	%
Tier 1 risk-based capital ratio
Sterling	1,115,834		17.5	%	255,750		4.0	%	383,625		6.0	%
Sterling Bank	1,100,443		17.2	%	255,875		4.0	%	383,812		6.0	%
Total risk-based capital ratio
Sterling	1,196,773		18.7	%	511,499		8.0	%	639,374		10.0	%
Sterling Bank	1,181,421		18.5	%	511,749		8.0	%	639,687		10.0	%
As of December 31, 2011
Tier 1 leverage ratio
Sterling	1,045,761		11.4	%	366,048		4.0	%	457,560		5.0	%
Sterling Bank	1,019,016		11.1	%	366,018		4.0	%	457,523		5.0	%
Tier 1 risk-based capital ratio
Sterling	1,045,761		17.8	%	234,859		4.0	%	352,288		6.0	%
Sterling Bank	1,019,016		17.4	%	234,468		4.0	%	351,705		6.0	%
Total risk-based capital ratio
Sterling	1,120,563		19.1	%	469,718		8.0	%	587,147		10.0	%
Sterling Bank	1,093,697		18.7	%	468,936		8.0	%	586,171		10.0	%

23. Segment Information:

Sterling's operations are divided into two primary business segments that represent its core businesses:

• Community Banking - providing traditional banking services through the retail banking, private banking and commercial banking groups, including the originating and servicing of commercial real estate, owner occupied CRE and C&I loans.

• Home Loan Division - originating and selling residential real estate loans through its mortgage banking operations, on both a servicing-retained and servicing-released basis.

In 2012, Sterling combined its Commercial Real Estate and Community Banking segments to improve how it made decisions and measured the segments' performance. Segment results for the 2011 comparable period have been restated to reflect current period presentation. The 2010 comparable period is grouped according to the original classifications, due to the impracticability of reclassification to current period presentation.

F-49

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

	As of and for the Year Ended December 31, 2012
	Community Banking		Home Loan Division		Other and Eliminations			Total
	(in thousands)
Interest income	$	360,901	$	28,299	$	0		$	389,200
Interest expense	78,004		0		6,518			84,522
Net interest income	282,897		28,299		(6,518		)	304,678
Provision for credit losses	9,980		20		0			10,000
Noninterest income	46,433		108,391		(571		)	154,253
Noninterest expense	266,486		92,742		(3,975		)	355,253
Income (loss) before income taxes	$	52,864	$	43,928	$	(3,114	)	$	93,678
Total assets	$	8,754,170	$	477,127	$	5,613		$	9,236,910

	As of and for the Year Ended December 31, 2011
	Community Banking		Home Loan Division		Other and Eliminations			Total
	(in thousands)
Interest income	$	387,365	$	16,927	$	0		$	404,292
Interest expense	102,963		0		6,134			109,097
Net interest income	284,402		16,927		(6,134		)	295,195
Provision for credit losses	56,507		71		(26,578		)	30,000
Noninterest income	76,337		48,865		1,126			126,328
Noninterest expense	295,139		58,979		(1,728		)	352,390
Income (loss) before income taxes	$	9,093	$	6,742	$	23,298		$	39,133
Total assets	$	9,219,398	$	2,594	$	(28,755	)	$	9,193,237

	As of and for the Year Ended December 31, 2010
	Community Banking			Residential Construction Lending			Residential Mortgage Banking		Commercial Mortgage Banking		Other and Eliminations			Total
	(in thousands)
Interest income	$	393,754		$	34,559		$	13,243	$	3,573	$	4		$	445,133
Interest expense	128,294			18,967			7,742		0		6,103			161,106
Net interest income	265,460			15,592			5,501		3,573		(6,099		)	284,027
Provision for credit losses	177,232			64,767			8,230		0		0			250,229
Noninterest income	67,499			60			65,099		2,470		1,837			136,965
Noninterest expense	332,557			7,291			36,785		5,070		13,342			395,045
Income (loss) before income taxes	$	(176,830	)	$	(56,406	)	$	25,585	$	973	$	(17,604	)	$	(224,282	)
Total assets	$	7,643,294		$	25,562		$	1,811,601	$	6,340	$	6,372		$	9,493,169

F-50

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

24. Parent Company Only Financial Information:

The following parent company-only financial information should be read in conjunction with the other notes to consolidated financial statements. The accounting policies for the parent company-only financial statements are the same as those used in the presentation of the consolidated financial statements other than the parent company-only financial statements account for the parent company's investments in its subsidiaries under the equity method.

Parent Only Balance Sheets	December 31,		December 31,
	2012		2011
Assets:	(in thousands)
Cash and cash equivalents	$	24,443	$	44,602
Investments in subsidiaries:
Sterling Bank	1,417,025		1,089,820
Other subsidiaries	8,307		8,185
Receivable from subsidiaries	0		283
Other assets	20,755		1,158
Total assets	$	1,470,530	$	1,144,048
Liabilities and Shareholders' Equity:
Accrued expenses payable	$	3,072	$	4,111
Junior subordinated debentures	245,294		245,290
Due to affiliates	4,241		16,090
Shareholders' equity	1,217,923		878,557
Total liabilities and shareholders' equity	$	1,470,530	$	1,144,048

Parent Only Statements of Operations	Years Ended December 31,
(in thousands)	2012			2011			2010
	(in thousands)
Interest income	$	268		$	300		$	253
Interest expense	6,785			6,433			6,349
Net interest expense	(6,517		)	(6,133		)	(6,096		)
Equity in net earnings of subsidiary	380,294			50,961			(206,677		)
Noninterest expenses	5,385			5,699			11,568
Income before income taxes	368,392			39,129			(224,341		)
Income tax benefit	17,329			4			59
Net income (loss)	$	385,721		$	39,133		$	(224,282	)

F-51

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

Parent Only Statements of Cash Flows	Years Ended December 31,
	2012			2011			2010
	(in thousands)
Cash flows from operating activities:
Net income (loss)	$	385,721		$	39,133		$	(224,282	)
Adjustments to reconcile net income to net cash used in operating activities	(412,528		)	(42,051		)	214,128
Net cash used in operating activities	(26,807		)	(2,918		)	(10,154		)
Cash flows from investing activities:
Investments in subsidiaries, net	0			0			(650,000		)
Dividends from subsidiary	52,600			0			0
Net cash provided by (used in) investing activities	52,600			0			(650,000		)
Cash flows from financing activities:
Net proceeds from stock issuances	3,791			0			683,334
Dividends paid	(49,743		)	0			0
Net cash provided by (used in) financing activities	(45,952		)	0			683,334
Net change in cash and cash equivalents	(20,159		)	(2,918		)	23,180
Cash and cash equivalents, beginning of year	44,602			47,520			24,340
Cash and cash equivalents, end of year	$	24,443		$	44,602		$	47,520

25.  Quarterly Financial Data (Unaudited):

The following tables present Sterling's condensed operations on a quarterly basis for the years ended December 31, 2012 and 2011:

	2012 Quarters Ended
	March 31		June 30		September 30		December 31
	(in thousands, except per share amounts)
Interest income	$	97,965	$	100,990	$	95,991	$	94,254
Interest expense	23,612		22,080		20,683		18,147
Net interest income	74,353		78,910		75,308		76,107
Provision for credit losses	4,000		4,000		2,000		0
Net interest income after provision	70,353		74,910		73,308		76,107
Noninterest income	31,587		44,741		46,698		31,227
Noninterest expenses	88,649		87,607		89,408		89,589
Income before income taxes	13,291		32,044		30,598		17,745
Income tax benefit	0		288,842		0		3,201
Net income	13,291		320,886		30,598		20,946
Earnings per share - basic	$	0.21	$	5.17	$	0.49	$	0.34
Earnings per share - diluted	$	0.21	$	5.13	$	0.49	$	0.33
Weighted average shares outstanding - basic	62,078,404		62,112,936		62,139,833		62,159,683
Weighted average shares outstanding - diluted	62,682,987		62,610,054		62,845,864		62,867,030

F-52

STERLING FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

	2011 Quarters Ended
	March 31		June 30		September 30		December 31
	(in thousands, except per share amounts)
Interest income	$	103,237	$	102,347	$	101,379	$	97,329
Interest expense	29,494		27,540		26,543		25,520
Net interest income	73,743		74,807		74,836		71,809
Provision for credit losses	10,000		10,000		6,000		4,000
Net interest income after provision	63,743		64,807		68,836		67,809
Noninterest income	29,982		34,335		29,112		32,899
Noninterest expenses	88,308		91,587		86,620		85,875
Income before income taxes	5,417		7,555		11,328		14,833
Income tax benefit	0		0		0		0
Net income	5,417		7,555		11,328		14,833
Earnings per share - basic	$	0.09	$	0.12	$	0.18	$	0.24
Earnings per share - diluted	$	0.09	$	0.12	$	0.18	$	0.24
Weighted average shares outstanding - basic	61,930,783		61,943,851		61,958,183		61,989,094
Weighted average shares outstanding - diluted	62,335,212		62,312,224		62,041,203		62,194,011

F-53

EX-10.20

Exhibit 10.2

Sterling Savings Bank    

Deferred Compensation Plan

Master Plan Document

Effective April 1, 2006

1

Sterling Savings Bank

Deferred Compensation Plan

Master Plan Document

ARTICLE 1	Definitions	1
ARTICLE 2	Selection, Enrollment, Eligibility
2.1	Selection by Committee	7
2.2	Enrollment and Eligibility Requirements; Commencement of Participation	7
ARTICLE 3	Deferral Commitments/Company Contribution Amounts/ Company Restoration Matching Amounts/Vesting/Crediting/Taxes
3.1	Maximum Deferral	8
3.2	Timing of Deferral Elections; Effect of Election Form	8
3.3	Withholding and Crediting of Annual Deferral Amounts	10
3.4	Company Contribution Amount	10
3.5	Company Restoration Matching Amount	10
3.6	Vesting	11
3.7	Crediting/Debiting of Account Balances	11
3.8	FICA and Other Taxes	12
ARTICLE 4	Scheduled Distribution; Unforeseeable Emergencies
4.1	Scheduled Distribution	13
4.2	Postponing Scheduled Distributions	13
4.3	Other Benefits Take Precedence Over Scheduled Distributions	13
4.4	Unforeseeable Emergencies	14
ARTICLE 5	Retirement Benefit
5.1	Retirement Benefit	14
5.2	Payment of Retirement Benefit	15
ARTICLE 6	Termination Benefit
6.1	Termination Benefit	15
6.2	Payment of Termination Benefit	15
ARTICLE 7	Disability Benefit
7.1	Disability Benefit	15
7.2	Payment of Disability Benefit	16
ARTICLE 8	Death Benefit
8.1	Death Benefit	18
8.2	Payment of Death Benefit	18
ARTICLE 9	Beneficiary Designation
9.1	Beneficiary	18
9.2	Beneficiary Designation; Change; Spousal Consent	18
9.3	Acknowledgment	18
9.4	No Beneficiary Designation	18
9.5	Doubt as to Beneficiary	19
9.6	Discharge of Obligations	19
ARTICLE 10	Leave of Absence
10.1	Paid Leave of Absence	19
10.2	Unpaid Leave of Absence	19
ARTICLE 11	Termination of Plan, Amendment or Modification
11.1	Termination of Plan	19

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Deferred Compensation Plan

Master Plan Document

11.2	Amendment	20
11.3	Plan Agreement	20
11.4	Effect of Payment	20
ARTICLE 12	Administration
12.1	Committee Duties	20
12.2	Administration Upon Change in Control	20
12.3	Agents	21
12.4	Binding Effect of Decisions	21
12.5	Indemnity of Committee	21
12.6	Employer Information	21
ARTICLE 13	Other Benefits and Agreements
13.1	Coordination with Other Benefits	21
ARTICLE 14	Claims Procedures
14.1	Presentation of Claim	21
14.2	Notification of Decision	22
14.3	Review of a Denied Claim	22
14.4	Decision on Review	22
14.5	Disability Benefits	23
14.6	Legal Action	23
ARTICLE 15	Trust
15.1	Establishment of the Trust	23
15.2	Interrelationship of the Plan and the Trust	23
15.3	Distributions From the Trust	24
ARTICLE 16	Miscellaneous
16.1	Status of the Plan	24
16.2	Unsecured General Creditor	24
16.3	Employer's Liability	24
16.4	Nonassignability	24
16.5	Not a Contract of Employment	24
16.6	Furnishing Information	24
16.7	Terms	25
16.8	Captions	25
16.9	Governing Law	25
16.10	Notice	25
16.11	Successors	25
16.12	Spouse's Interest	25
16.13	Validity	25
16.14	Incompetent	25
16.15	Domestic Relations Orders	26
16.16	Distribution in the Event of Income Inclusion Under 409A	26
16.17	Deduction Limitation on Benefit Payments	26
16.18	Payment that would Jeopardize Ability of Employer to Continue as a Going Concern	26
16.19	Payment that would Violate Securities Laws or other Applicable Law	26
16.20	Insurance

ii

Sterling Savings Bank

Deferred Compensation Plan

Master Plan Document

STERLING SAVINGS BANK

DEFERRED COMPENSATION PLAN

Effective April 1, 2006

Purpose

The purpose of this Plan is to provide specified benefits to Directors and a select group of management or highly compensated Employees who contribute materially to the continued growth, development and future business success of Sterling Savings Bank, a Washington corporation, and any other Employer that sponsors this Plan. This Plan shall be unfunded for tax purposes and for purposes of Title I of ERISA.

ARTICLE 1

Definitions

For the purposes of this Plan, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following indicated meanings:

1.1 "Account Balance" shall mean, with respect to a Participant, an entry on the records of the Employer equal to the sum of the Participant's Annual Accounts. The Account Balance shall be a bookkeeping entry only and shall be utilized solely as a device for the measurement and determination of the amounts to be paid to a Participant, or his or her designated Beneficiary, pursuant to this Plan.

If a participant is both an Employee and a Director and participates in the Plan in each capacity, then separate Account Balances (and separate Annual Accounts, if applicable) shall be established for such Participant as a device for the measurement and determination of the (a) amounts deferred under the Plan that are attributable to the Participant's status as an Employee, and (b) amounts deferred under the Plan that are attributable to the Participant's status as a Director.

1.2 "Annual Account" shall mean, with respect to a Participant, an entry on the records of the Employer equal to (a) the sum of the Participant's Annual Deferral Amount, Company Contribution Amount and Company Restoration Matching Amount for any one Plan Year, plus (b) amounts credited or debited to such amounts pursuant to this Plan, less (c) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to the Annual Account for such Plan Year. The Annual Account shall be a bookkeeping entry only and shall be utilized solely as a device for the measurement and determination of the amounts to be paid to a Participant, or his or here designated Beneficiary, pursuant to this Plan.

1.3 "Annual Deferral Amount" shall mean that portion of a Participant's Base Salary, Bonus, Commissions and Director Fees that a Participant defers in accordance with Article 3 for any one Plan Year, without regard to whether such amounts are withheld and credited during such Plan Year.

1.4 "Annual Installment Method" means the method used to determine the amount of each payment due to a Participant who has elected to receive a benefit over a period of years in accordance with the applicable provisions of the Plan. The amount of each annual payment due to the Participant shall be calculated by multiplying the balance of the Participant's benefit by a fraction, the numerator of which is one and the denominator of which is the remaining number of annual payments due to Participant. The amount of the first annual payment shall be calculated as of the close of business on or around the Participant's Benefit Distribution Date, and the amount of each subsequent annual payment shall be calculated on or around the beginning of each Plan Year following such Benefit Distribution Date.

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Deferred Compensation Plan

Master Plan Document

For purposes of this Plan, the right to receive a benefit payment in annual installments shall be treated as the entitlement to a single payment.

1.5 "Base Salary" shall mean the annual cash compensation relating to services performed during any calendar year, excluding distributions from nonqualified deferred compensation plans, bonuses, commissions, overtime, fringe benefits, stock options, relocation expenses, incentive payments, non-monetary awards, director fees and other fees, and automobile and other allowances paid to a Participant for employment services rendered (whether or not such allowances are included in the Employee's gross income). Base Salary shall be calculated before reduction for compensation voluntarily deferred or contributed by the Participant pursuant to all qualified or nonqualified plans of any Employer and shall be calculated to include amounts not otherwise included in the Participant's gross income under Code Sections 125, 402(e)(3), 402(h), or 403(b) pursuant to plans established by any Employer; provided, however, that all such amounts will be included in compensation only to the extent that had there been no such plan, the amount would have been payable in cash to the Employee. Base Salary does not include severance pay of any kind, including, but not limited to, severance pay that is paid out in installments.

1.6 "Beneficiary" shall mean one or more persons, trusts, estates or other entities, designated in accordance with Article 9, that are entitled to receive benefits under this Plan upon the death of a Participant.

1.7 "Beneficiary Designation Form" shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to designate one or more Beneficiaries.

1.8 "Benefit Distribution Date" shall mean the date upon which all or an objectively determinable portion of a Participant's vested benefits will become eligible for distribution. Except as otherwise provided in the Plan, a Participant's Benefit Distribution Date shall be determined based on the earliest to occur of an event or scheduled date set forth in Articles 4 through 8, as applicable.

1.9 "Board" shall mean the board of directors of the Company.

1.10 "Bonus" shall mean any compensation, in addition to Base Salary and Commissions, earned by a Participant during the Plan Year under any Employer's annual bonus and cash incentive plans.

1.11 "Change in Control" shall mean the occurrence of a "change in ownership," a "change ineffective control" or a "change in the ownership of a substantial portion of the assets" of a corporation, as determined in accordance with this Section.

In order for an event described below to constitute a Change in Control with respect to a Participant, except as otherwise provided in part (b)(ii) of this Section, the applicable event must relate to the corporation for which the Participant is providing services, the corporation that is liable for payment of the Participant's Account Balance (or all corporations liable for payment if more than one), as identified by the Committee in accordance with Treas. Reg. §1.409A-3(i)(5)(ii)(A)(2), or such other corporation identified by the Committee in accordance with Treas. Reg. §1.409A-3(i)(5)(ii)(A)(3).

In determining whether an event shall be considered a "change in ownership," a "change in the effective control" or a "change in the ownership of a substantial portion of the assets" of a corporation, the following provisions shall apply:

(a) A "change in ownership" of the applicable corporation shall occur on the date on which any one person, or more than one person acting as a group, acquires ownership of stock of such corporation that, together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of such corporation, as determined in accordance with Treas. Reg. §1.409A-3(i)(5)(v). If a person or group is

2

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Deferred Compensation Plan

Master Plan Document

considered either to own more than 50% of the total fair market value or total voting power of the stock of such corporation, or to have effective control of such corporation within the meaning of part (b) of this Section, and such person or group acquires additional stock of such corporation, the acquisition of additional stock by such person or group shall not be considered to cause a "change in the ownership" of such corporation.

(b) A "change in effective control" of the applicable corporation shall occur only on either of the following dates:

(i) The date on which any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of such corporation possessing 30% or more of the total voting power of the stock of such corporation, as determined in accordance with Treas. Reg. §1.409A-3(i)(5)(vi). If a person or group is considered to possess 30% or more of the total voting power of the stock of a corporation, and such person or group acquires additional stock by such corporation, the acquisition of additional stock by such person or group shall not be considered to cause a "change in effective control" of such corporation or

(ii) The date on which a majority of the members of the applicable corporation's board of director is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of such corporation's board of directors before the date of the appointment or election, as determined in accordance with Treas. Reg. §1.409A-3(i)(5)(vi). In determining whether the event described in the preceding sentence has occurred, the applicable corporation to which the event must relate shall only include a corporation identified in accordance with Treas. Reg. §1.409A-3(i)(5)(ii) for which no other corporation is a majority shareholder.

(c) A "change in the ownership of a substantial portion of the assets" of the applicable corporation shall occur on the date on which any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the corporation that have a total gross fair market value equal to more than 40% of the total gross fair market value of all for the assets of the corporation immediately before such acquisition or acquisitions, as determined in accordance with Treas. Reg. §1.409A-3(i)(5)(vii). A transfer of assets shall not be treated as a "change in the ownership of a substantial portion of the assets" when such transfer is made to an entity that is controlled by the shareholders of the transferor corporation, as determined in accordance with Treas. Reg. §1.409A-3(i)(5)(vii)(B).

1.12"Code" shall mean the Internal Revenue Code of 1986, as it may be amended from time to time.

1.13 "Commissions" shall mean the cash commissions earned by a Participant during a Plan Year, excluding bonuses or other additional incentives or awards earned by the Participant.

1.14"Committee" shall mean the committee described in Article 12.

1.15 "Company" shall mean Sterling Savings Bank, a Washington corporation, and any successor to all or substantially all of the Company's assets or business.

1.16 "Company Contribution Amount" shall mean, for any one Plan Year, the amount determined     in accordance with Section 3.4.

1.17 "Company Restoration Matching Amount" shall mean, for any one Plan Year, the amount determined in accordance with Section 3.5.

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Deferred Compensation Plan

Master Plan Document

1.18"Director" shall mean any member of the board of directors of any Employer.

1.19 "Director Fees" shall mean the annual fees payable in cash that are earned by a Director from any Employer, including retainer fees and meetings fees, as compensation for serving on the board of directors.

1.20 "Disability" or "Disabled" shall mean that a Participant is either (a) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (b) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident or health plan covering employees of the Participant's Employer. For purposes of this Plan, a Participant shall be deemed Disabled if determined to be totally disabled by the Social Security Administration. A Participant shall also be deemed disabled if determined to be disabled in accordance with the applicable disability insurance program of such Participant's Employer, provided that the definition of "disability" applied under such disability insurance program complies with the requirements of this Section.

1.21. "Election Form" shall mean the form, which may be in electronic format, established from time to time by the Committee that a Participant completes, signs and returns to the Committee to make an election under the Plan.

1.22"Employee" shall mean a person who is an employee of an Employer.

1.23"Employer(s)" shall be defined as follows:

(a) Except as otherwise provided in part (b) of this Section, the term "Employer" shall mean Sterling Financial Corporation, the Company and/or any subsidiaries of Sterling Financial Corporation (now in existence or hereafter formed or acquired) that have been selected by the Board to participate in the Plan and have adopted the Plan as a sponsor.

(b) For the purpose of determining whether a Participant has experienced a Separation from Service, the term "Employer" shall mean

(i) The entity for which the Participant performs services and with respect to which the legally binding right to compensation deferred or contributed under this Plan arises; and

(ii) All other entities with which the entity described above would be aggregated and treated as a single employer under Code Section 414(b) (controlled group of corporations) and Code Section 414(c) (a group of trades or business, whether or not incorporated, under common control), as applicable. In order to identify the group of entities described in the preceding sentence, the Committee shall use an ownership threshold of at least 50% as a substitute for the 80% minimum ownership threshold that appears in, and otherwise must be used when applying the applicable provisions of: (A) Code Section 1563 for determining a controlled group of corporations under Code section 414(b); and (B) Treas. Reg. §1.414(c)-2 for determining the trades or businesses that are under common control under Code Section 414(c).

1.24 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time.

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1.25 "401(k) Plan" shall mean, with respect to an Employer, a plan qualified under Code Section 401(a) that contains a cash or deferral arrangement described in Code Section 401(k), adopted by the Employer, as it may be amended from time to time, or any successor thereto.

1.26 "Participant" shall mean any Employee or Director (a) who is selected to participate in the Plan, (b) whose executed Plan Agreement, Election Form and Beneficiary Designation Form, which are accepted by the Committee, and (c) whose Plan Agreement has not terminated.

1.27 "Performance-Based Compensation" shall mean compensation the entitlement to or amount of which is contingent on the satisfaction of pre-established organizational or individual performance criteria relating to a performance period of at least 12 consecutive months, as determined by the Committee in accordance with Treas. Reg. §1.409A-1(e).

1.28 "Plan" shall mean the Sterling Savings Bank Deferred Compensation Plan, which shall be evidenced by this instrument, as may be amended from time to time, and by any other documents that together with this instrument define a Participant's rights to amounts credited to his or her Account Balance.

1.29 "Plan Agreement" shall mean a written agreement in the form prescribed by or acceptable to the Committee that evidences a Participant's agreement to the terms of the Plan and which may establish additional terms or conditions of Plan participation for a Participant. Unless otherwise determined by the Committee, the most recent Plan Agreement accepted with respect to a Participant shall supersede any prior Plan Agreements for such Participant. Plan Agreements may vary among Participants and may provide additional benefits not set forth in the Plan or limit the benefits otherwise provided under the Plan.

1.30 "Plan Year" shallmean a period beginning on January 1 of each calendar year and continuing through December 31 of such calendar year.

1.31 "Retirement", "Retire(s)" or "Retired" shall mean, with respect to a Participant who is an Employee, a Separation from Service on or after the earlier of the attainment of (a) the age 65 or (b) age 55 with 5 Years of Service,and shall mean with respect to a Participant who is a Director, a Separation from Service. If a Participant is both an Employee and a Director and participates in the Plan in each capacity, (a) the determination of whether the Participant qualifies for Retirement as an Employee shall be made when the Participant experiences a Separation from Service as an Employee and such determination shall only apply to the applicable Account Balance established in accordance with Section 1.1 for amounts deferred under the Plan as an Employee, and (b) the determination of whether the Participant qualifies for Retirement as a Director shall be made at the time the Participant experiences a Separation from Service as a Director and such determination shall only apply to the applicable Account Balance established in accordance with Section 1.1 for amounts deferred under the Plan as a Director.

1.32 "Separation from Service" shall mean a termination of services provided by a Participant to his or her Employer, whether voluntarily or involuntarily, other than by reason of death or Disability, as determined by the Committee in accordance with Treas. Reg. §1.409A-1(h). In determining whether a Participant has experienced a Separation from Service, the following provisions shall apply:

(a) For a Participant who provides services to an Employer as an Employee, except as otherwise provided in part (c) of this Section, a Separation from Service shall occur when such Participant has experienced a termination of employment with such Employer. A Participant shall be considered to have experienced a termination of employment when the facts and circumstances indicate that the Participant and his or her Employer reasonable anticipate that either (i) no further services will be performed for the Employer after a certain date, or (ii) that the level

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of bona fide services the Participant will perform for Employer after a certain date (whether as an Employee or as an independent contractor) will permanently decrease to no more than 20% of the average level of a bona fide services performed by such Participant (whether as an Employee or an independent contractor) over the immediately preceding 36-month period (or the full period of services to the Employer if the Participant has been providing services to the Employer less than 36 months).

If a Participant is on military leave, sick leave, or other bona fide leave of absence, the employment relationship between the participant and the Employer shall be treated as continuing intact, provided that the period of such leave does not exceed six months, or if longer, so long as the Participant retains a right to reemployment with the Employer under an applicable statue or by contract. If the period of a military leave, sick leave, or other bona fide leave of absence exceeds six months and the Participant does not retain a right to reemployment under an applicable statute or by contract, the employment relationship shall be considered to be terminated for purposes of this Plan as of the first day immediately following the end of such 6-month period. In applying the provisions of this paragraph, a leave of absence shall be considered a bona fide leave of absence only if there is a reasonable expectation that the Participant will return to perform services for the Employer.

(a) For a Participant who provides services to an Employer as an independent contractor, except as otherwise provided in part (c) of this Section, a Separation from Service shall occur upon the expiration of the contract (or in the case of more than one contract, all contracts) under which services are performed for such Employer, provided that the expiration of such contract(s) is determined by the Committee to constitute a good-faith and complete termination of the contractual relationship between the Participant and such Employer.

(c)For a Participant who provides services to an Employer as both an Employee and an independent contractor, a Separation from Service generally shall not occur until the Participant has ceased providing services for such Employer as both an Employee and as an independent contractor, as determined in accordance with the provisions set forth in parts (a) and (b) of this Section, respectively. Similarly, if a Participant either (i) ceases providing services for an Employer as an independent contractor and begins providing services for an Employer as an Employee, or (ii) ceases providing services for an Employer as an Employee and begins providing services for such Employer as an independent contractor, the Participant will not be considered to have experienced a Separation from Service until the Participant has ceased providing services for such Employer in both capacities, as determined in accordance with applicable provisions set forth in parts (a) and (b) of this Section.

Notwithstanding the foregoing provisions in this part (c), if a Participant provides services for an Employer as both an Employee and as a Director, to the extent permitted by Treas. Reg. §1.409A-1(h)(5) the services provided by such Participant as a Director shall not be taken into account in determining whether the Participant has experienced a Separation for Service as an Employee, and the services provided by such Participant as an Employee shall not be taken into account in determining whether the Participant has experienced a Separation from Service as a Director.

1.33 "Specified Employee" shall mean any Participant who is determined to be a "key employee" (as defined under Code Section 416(i) without regard to paragraph (5) thereof) for the applicable period, as determined annually by the Committee in accordance with Treas. Reg. §1.409A-1(i). In determining whether a Participant is a Specified Employee, the following provisions shall apply:

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(a) The Committee's identification of the individuals who fall within the definition of "key employee" under Code Section 416(i) (without regard to paragraph (5) thereof) shall be based upon the 12-month period ending on each December 31^st (referred to below as the "identification date"). In applying the applicable provisions of Code Section 416(i) to identifying such individuals, "compensation" shall be determined in accordance with the definition used by the Company for purposes of its qualified plan, the Employee Savings and Investment Plan & Trust; and

(b) Each Participant who is among the individuals identified as a "key employee" in accordance with part (a) of this Section shall be treated as a Specified Employee for purposes of this Plan if such Participant experiences a Separation from Service during the 12-month period that begins April 1^st following the applicable identification date.

1.34"Trust" shall mean one or more trusts established by the Company in accordance with Article 15.

1.35 "Unforeseeable Emergency" shall mean a severe financial hardship of the Participant resulting from (a) an illness or accident of the Participant, the Participant's spouse, the Participant's Beneficiary or the Participant's dependent (as defined in Code Section 152 without regard to paragraphs (b)(1), (b)(2) and (d)(1)(b) thereof), (b) a loss of the Participant's property due to casualty, or (c) such other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, all as determined by the Committee based on the relevant facts and circumstances.

1.36 "Years of Service" shall mean the total number of full years in which a Participant has been employed by one or more Employers. For purposes of this definition, a year of employment shall be a 365-day period (or 366-day period in the case of a leap year) that, for the first year of employment, commences on the Employee's date of hiring and that, for any subsequent year, commences on an anniversary of that hiring date. A partial year of employment shall not be treated as a Year of Service.

ARTICLE 2

Selection, Enrollment, Eligibility

2.1 Selection by Committee. Participation in the Plan shall be limited to Directors and, as determined by the Committee in its sole discretion, a select group of management or highly compensated Employees. From that group, the Committee shall select, in its sole discretion, those individuals who may actually participate in this Plan.

2.2 Enrollment and Eligibility Requirements; Commencement of Participation.

(a) As a condition to participation, each Director or selected Employee shall complete, execute and return to the Committee a Plan Agreement, an Election Form and a Beneficiary Designation Form, by deadline(s) established by the Committee in accordance with the applicable provisions of this Plan. In addition, the Committee shall establish from time to time such other enrollment requirements as it determines, in its sole discretion, are necessary.

(b) Each Director or selected Employee who is eligible to participate in the Plan shall commence participation in the Plan on the date that the Committee determines, in its sole discretion, that the Director or Employee has met all enrollment requirements set forth in this Plan and required by the Committee, including returning all required documents to the Committee within the specified time period.

(c) If a Director or an Employee fails to meet all requirements established by the Committee within the period required, that Director or Employee shall not be eligible to participate in the Plan during such Plan Year.

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ARTICLE 3

Deferral Commitments/Company Contribution Amounts/

Company Restoration Matching Amounts/Vesting/Crediting/Taxes

3.1 Maximum Deferral.

(a) Annual Deferral Amount. For each Plan Year, a Participant may elect to defer, as his or her Annual Deferral Amount, Base Salary, Bonus, Commissions and/or Director Fees up to the following maximum percentages for each deferral elected:

Deferral	Maximum Percentage
Base Salary	75%
Bonus	100%
Commissions	100%
Director Fees	100%

(b) Short Plan Year. Notwithstanding the foregoing, if a Participant first becomes a Participant after the first day of a Plan Year,then to the extent required by Section 3.2 and Code Section 409A and related Treasury Regulations, the maximum amount of the Participant's Base Salary, Bonus, Commission or Director Fees that may be deferred by the Participant for the Plan Year shall be determined by applying the percentages set forth in Section 3.1(a) to the portion of such compensation attributable to services performed after the date that the Participant's deferral election is made.

3.2 Timing of Deferral Elections; Effect of Election Form.

(a) General Timing Rule for Deferral Elections. Except as otherwise provided in this Section 3.2, in order for a Participant to make a valid election to defer Base Salary, Bonus, Commissions, and/or Directors Fees, the Participant must submit an Election Form on or before the deadline established by the Committee, which in no event shall be later than the December 31^st proceeding the Plan Year in which such compensation will be earned.

Any deferral election made in accordance with this Section 3.2(a) shall be irrevocable; provided, however, that if the Committee permits or requires Participants to make a deferral election by the deadline described above for an amount that qualifies as Performance-Based Compensation, the Committee may permit a Participant to subsequently change his or her deferral election for such compensation by submitting a new Election from in accordance with Section 3.2(c) below.

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(b) Timing of Deferral Election for Newly Eligible Plan Participants. A Director or selected Employee who first becomes eligible to participate in the Plan on or after the beginning of a Plan Year, as determined in accordance with Treas. Reg. §1.409A-2(a)(7)(ii) and the "plan aggregation" rules provided in Treas. Reg. §1.409A-1(c)(2), may be permitted to make an election to defer the portion of Base Salary, Bonus, Commissions and/or Directors Fees attributable to services to be performed after such election, provided that the Participant submits an Election Form on or before the deadline established by the Committee, which in no event shall be later than 30 days after the Participant first becomes eligible to participate in the Plan.

If a deferral election made in accordance with this Section 3.2(b) relates to compensation earned based upon a specific performance period, the amount eligible for deferral shall be equal to (i) the total amount of compensation for the performance period, multiplied by (ii) a fraction, the numerator of which is the number of days remaining in the service period after the Participant's deferral election is made, and the denominator of which is the total number of days in the performance period.

Any deferral election made in accordance with this Section 3.2(b) shall become irrevocable no later than the 30^th day after the date the Director or selected Employee becomes eligible to participate in the Plan.

(c) Timing of Deferral Elections for Performance-Based Compensation. Subject to the limitations described below, the Committee may determine that an irrevocable deferral election for an amount that qualifies as Performance-Based Compensation may be made by submitting an Election Form on or before the deadline established by the Committee, which in no event shall be later than six months before the end of the performance period.

In order for a Participant to be eligible to make a deferral election for Performance-Based Compensation in accordance with the deadline pursuant to this Section 3.2(c), the Participant must have performed services continuously from the later of (i) the beginning of the performance period for such compensation, or (ii) the date upon which the performance criteria for such compensation are established, through the date upon which the Participant makes the deferral election for such compensation. In no event shall a deferral election submitted under this Section 3.2(c) be permitted to apply to any amount of Performance Based Compensation that has become readily ascertainable.

(d) Timing Rule for Deferral of Compensation Subject to Risk of Forfeiture. With respect to compensation (i) to which a Participant has a legally binding right to payment in a subsequent year, and (ii) that it is subject to a forfeiture condition requiring the Participant's continued services for a period of at least 12 months from the date the Participant obtains the legally binding right, the Committee may, determine that an irrevocable deferral election for such compensation may be made by timely delivering an Election Form to the Committee in accordance with its rules and procedures, no later than the 30th day after the Participant obtains the legally binding right to the compensation, provided that the election is made at least 12 months in advance of the earliest date at which the forfeiture condition could lapse, as determined in accordance with Treas. Reg. §1.409A-2(a)(5).

Any deferral election(s) made in accordance with this Section 3.2(c) shall become irrevocable no later than the 30^th day after the Participant obtains the legally binding right to the compensations subject to such deferral election(s).

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3.3 Withholding and Crediting of Annual Deferral Amounts. For each Plan Year, the Base Salary portion of the Annual Deferral Amount shall be withheld from each regularly scheduled Base Salary payroll in equal amounts, as adjusted from time to time for increases and decreases in Base Salary. The Bonus, Commissions and/or Director Fees portion of the Annual Deferral Amount shall be withheld at the time the Bonus, Commissions or Director Fees are or otherwise would be paid to the Participant, whether or not this occurs during the Plan Year itself. Annual Deferral Amounts shall be credited to a Participant's Annual Account for such Plan Year at the time such amounts would otherwise have been paid to the Participant. In the event of a Participant's Separation from Service, death, or Disability prior to the end of a Plan Year, such year's Annual Deferral Amount shall only include deferrals made on amounts earned prior to such event.

3.4 Company Contribution Amount.

(a) For each Plan Year, an Employer may be required to credit amounts to a Participant's Annual Account in accordance with employment or other agreements entered into between the Participant and the Employer, which amounts shall be part of the Participant's Company Contribution Amount for that Plan Year. Such amounts shall be credited to the Participant's Annual Account for the applicable Plan Year on the date or dates prescribed by such agreements.

(b) For each Plan Year, an Employer, in its sole discretion, may, but is not required to, credit any amount it desires to any Participant's Annual Account under this Plan, which amount shall be part of the Participant's Company Contribution Amount for that Plan Year. The amount so credited to a Participant may be smaller or larger than the amount credited to any other Participant, and the amount credited to any Participant for a Plan Year may be zero, even though one or more other Participants receive a Company Contribution Amount for that Plan Year. The Company Contribution Amount described in this Section 3.4(b), if any, shall be credited to the Participant's Annual Account for the applicable Plan Year on a date or dates to be determined by the Committee.

(c) If not otherwise specified in the Participant's employment or other agreement entered into between the Participant and the Employer, the amount (or method or formula for determining the amount) of a Participant's Company Contribution Amount shall be set forth in writing in one or more documents, which shall be deemed to be incorporated into this Plan in accordance with Section 1.28, no later than the date on which such Company Contribution Amount is credited to the applicable Annual Account for the Participant.

3.5 Company Restoration Matching Amount. A Participant's Company Restoration Matching Amount for any Plan Year shall be an amount determined by the Committee to make up for certain limits applicable to the 401(k) Plan or other qualified plan for such Plan Year, as identified by the Committee, or for such other purposes as determined by the Committee in its sole discretion. The amount so credited to a Participant under this Plan for any Plan Year (a) may be smaller or larger than the amount credited to any other Participant, and (b) may differ from the amount credited to such Participant in the preceding Plan Year. The Participant's Company Restoration Matching Amount, if any, shall be credited to the Participant's Annual Account for the applicable Plan Year on a date or dates to be determined by the Committee. The amount (or the method or formula for determining the amount) of a Participant's Company Restoration Matching Amount shall be set forth in writing in one or more documents, which shall be deemed to be incorporated into this Plan in accordance with Section 1.28, no later than the date on which such Company Restoration Matching Amount is credited to the applicable Annual Account of the Participant.

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3.6 Vesting.

(a) A Participant shall at all times be 100% vested in the portion of his or her Account Balance attributable to Annual Deferral Amounts, plus amounts credited or debited on such amounts pursuant to Section 3.7.

(b) A Participant shall be vested in the portion of his or her Account Balance attributable to any Company Contribution Amounts, plus amounts credited or debited on such amounts pursuant to Section 3.7 in accordance with the vesting schedule(s) set forth in his or her Plan Agreement, employment agreement or any other agreement entered into between the Participant and his or her Employer.

(c) A Participant shall be vested in the portion of his or her Account Balance attributable to any Company Restoration Matching Amounts, plus amounts credited or debited on such amounts pursuant to Section 3.7, only to the extent that the Participant would be vested in such amounts under the provisions of the 401(k) Plan, as determined by the Committee in its sole discretion.

(d) Notwithstanding anything to the contrary contained in this Section 3.6, in the event of a Change in Control, or upon a Participant's Disability, Separation from Service on or after qualifying for Retirement, or death prior to Separation from Service, any amounts that are not vested in accordance with Section 3.6(b) or 3.6(c) above, shall immediately become 100% vested.

(e) Notwithstanding subsection 3.6(d) above, the vesting schedules described in Sections 3.6(b) or 3.6(c) above shall not be accelerated upon a Change in Control to the extent that the Committee determines that such acceleration would cause the deduction limitations of Section 280G of the Code to become effective. In the event of such a determination, the Participant may request independent verification of the Committee's calculations with respect to the application of Section 280G. In such case, the Committee must provide to the Participant within ninety (90) days of such a request an opinion from a nationally recognized accounting firm selected by the Participant (the "Accounting Firm"). The opinion shall state the Accounting Firm's opinion that any limitation in the vested percentage hereunder is necessary to avoid the limits of Section 280G and contain supporting calculations. The cost of such opinion shall be paid for by the Company.

(f) Section 3.6(e) shall not prevent the acceleration of the vesting schedules described in Sections 3.6(b) and 3.6(c) if such Participant is entitled to a "gross-up" payment, to eliminate the effect of the Code section 4999 excise tax, pursuant to his or her employment agreement or other agreement entered into between such Participant and the Employer.

3.7 Crediting/Debiting of Account Balances. In accordance with, and subject to, the rules and procedures that are established from time to time by the Committee, in its sole discretion, amounts shall be credited or debited to a Participant's Account Balance in accordance with the following rules:

(a) Measurement Funds. The Participant may elect one or more of the measurement funds selected by the Committee, in its sole discretion, which are based on certain mutual funds (the "Measurement Funds"), for the purpose of crediting or debiting additional amounts to his or her Account Balance. As necessary, the Committee may, in its sole discretion, discontinue, substitute or add a Measurement Fund. Each such action will take effect as of the first day of the first calendar quarter that begins at least 30 days after the day on which the Committee gives Participants advance written notice of such change.

(b) Election of Measurement Funds. A Participant, in connection with his or her initial deferral election in accordance with Section 3.2(b) above, shall elect, on the Election Form, one or more Measurement Fund(s) (as described in Section 3.7(a) above) to be used to determine the amounts to be credited or debited to his or her Account Balance. If a Participant does not elect any of the Measurement Funds as described in the previous sentence, the Participant's

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Account Balance shall automatically be allocated into the lowest-risk Measurement Fund, as determined by the Committee, in its sole discretion. The Participant may (but is not required to) elect, by submitting an Election Form to the Committee that is accepted by the Committee, to add or delete one or more Measurement Fund(s) to be used to determine the amounts to be credited or debited to his or her Account Balance, or to change the portion of his or her Account Balance allocated to each previously or newly elected Measurement Fund. If an election is made in accordance with the previous sentence, it shall apply as of the first business day deemed reasonably practicable by the Committee, in its sole discretion, and shall continue thereafter for each subsequent day in which the Participant participates in the Plan, unless changed in accordance with the previous sentence. Notwithstanding the foregoing, the Committee, in its sole discretion, may impose limitations on the frequency with which one or more of the Measurement Funds elected in accordance with this Section may be added or deleted by such Participant; furthermore, the Committee, in its sole discretion, may impose limitations on the frequency with which the Participant may change the portion of his or her Account Balance allocated to each previously or newly elected Measurement Fund.

(c) Proportionate Allocation. In making any election described in Section 3.7(b) above, the Participant shall specify on the Election Form, in increments of one percent (1%), the percentage of his or her Account Balance or Measurement Fund, as applicable, to be allocated/reallocated.

(d) Crediting or Debiting Method. The performance of each Measurement Fund (either positive or negative) will be determined on a daily basis based on the manner in which such Participant's Account Balance has been hypothetically allocated among the Measurement Funds by the Participant.

(e) No Actual Investment. Notwithstanding any other provision of this Plan that may be interpreted to the contrary, the Measurement Funds are to be used for measurement purposes only, and a Participant's election of any such Measurement Fund, the allocation of his or her Account Balance thereto, the calculation of additional amounts and the crediting or debiting of such amounts to a Participant's Account Balance shallnot be considered or construed in any manner as an actual investment of his or her Account Balance in any such Measurement Fund. In the event that the Company or the Trustee (as that term is defined in the Trust), in its own discretion, decides to invest funds in any or all of the investments on which the Measurement Funds are based, no Participant shall have any rights in or to such investments themselves. Without limiting the foregoing, a Participant's Account Balance shall at all times be a bookkeeping entry only and shall not represent any investment made on his or her behalf by the Company or the Trust; the Participant shall at all times remain an unsecured creditor of the Company.

3.8 FICA and Other Taxes.

(a) Annual Deferral Amounts. For each Plan Year in which an Annual Deferral Amount is being withheld from a Participant, the Participant's Employer(s) shall withhold from that portion of the Participant's Base Salary, Bonus and/or Commissions that is not being deferred, in a manner determined by the Employer(s), the Participant's share of FICA and other employment taxes on such Annual Deferral Amount. If necessary, the Committee may reduce the Annual Deferral Amount in order to comply with this Section 3.8.

(b) Company Restoration Matching Account and Company Contribution Amounts. When a Participant becomes vested in a portion of his or her Account Balance attributable to any Company Restoration Matching Amounts and/or Company Contribution Amounts, the Participant's Employer(s) shall withhold from that portion of the Participant's Base Salary,

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Bonus and/or Commissions that is not deferred, in a manner determined by the Employer(s), the Participant's share of FICA and other employment taxes on such amounts. If necessary, the Committee may reduce the vested portion of the Participant's Company Restoration Matching Amount or Company Contribution Amount, as applicable, in order to comply with this Section 3.8.

(c) Distributions. The Participant's Employer(s), or the trustee of the Trust, shall withhold from any payments made to a Participant under this Plan all federal, state and local income, employment and other taxes required to be withheld by the Employer(s), or the trustee of the Trust, in connection with such payments, in amounts and in a manner to be determined in the sole discretion of the Employer(s) and the trustee of the Trust.

ARTICLE 4

Scheduled Distribution; Unforeseeable Emergencies

4.1 Scheduled Distribution. In connection with each election to defer an Annual Deferral Amount, a Participant may elect to receive all or a portion of such Annual Deferral Amount and any Company Contribution Amounts, plus amounts credited or debited on that amount pursuant to Section 3.7, in the form of a lump sum payment, calculated as of the close of business on or around the Benefit Distribution Date designated by the Participant in accordance with this Section 4.1 (a "Scheduled Distribution"). The Benefit Distribution Date for the amount subject to a Scheduled Distribution election shall be the first day of any Plan Year designated by the Participant, which may be no sooner than three Plan Years after the end of the Plan Year to which the Participant's deferral election relates, unless otherwise provided on an Election Form approved by the Committee.

By way of example, if a Scheduled Distribution is elected for Annual Deferral Amounts that are earned in the Plan Year commencing January 1, 2008, the earliest Benefit Distribution Date that may be designated by a Participant would be January 1, 2012, and the Scheduled Distribution would be paid out during the 60-day period commencing immediately after such Benefit Distribution Date.

4.2 Postponing Scheduled Distributions. A Participant may elect to postpone a Scheduled Distribution described in Section 4.1 above, and have such amount paid out during a 60-day period commencing immediately after an allowable alternative Benefit Distribution Date designated in accordance with this Section 4.2. In order to make such an election, the Participant must submit an Election Form to the Committee in accordance with the following criteria:

(a) This election of the new Benefit Distribution Date shall have no effect until at least 12 months after the date on which the election is made;

(b) The new Benefit Distribution Date selected by the Participant for such Scheduled Distribution must be the first day of a Plan Year that is no sooner than five years after the previously designated Benefit Distribution Date; and

(c) The election must be made at least 12 months prior to the Participant's previously designated Benefit Distribution Date for such Scheduled Distribution.

For purposes of applying the provisions of this Section 4.2, a Participant's election to postpone a Scheduled Distribution shall not be considered to be made until the date on which the election becomes irrevocable. Such an election shall become irrevocable no later than the date that is 12 months prior to the Participant's previously designated Benefit Distribution Date for such Scheduled Distribution.

4.3 Other Benefits Take Precedence Over Scheduled Distributions. Should an event occur prior to any Benefit Distribution Date designated for a Scheduled Distribution that would trigger a benefit under Articles 5 through 8, as applicable, all amounts subject to a Scheduled Distribution election

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shall be paid in accordance with the other applicable provisions of the Plan and not in accordance with this Article 4.

4.4 Unforeseeable Emergencies.

(a) If a Participant experiences an Unforeseeable Emergency prior to the occurrence of a distribution event described in Articles 5 through 9, as applicable, the Participant may petition the Committee to receive a partial or full payout from the Plan. The payout, if any, from the Plan shall not exceed the lesser of (i) the Participant's vested Account Balance, calculated as of the close of business on or around the Benefit Distribution Date for such payout, as determined by the Committee in accordance with provisions set forth below, or (ii) the amount necessary to satisfy the Unforeseeable Emergency, plus amounts necessary to pay Federal, state, or local income taxes or penalties reasonably anticipated as a result of the distribution. A Participant shall not be eligible to receive a payout from the Plan to the extent that the Unforeseeable Emergency is or may be relieved (A) through reimbursement or compensation by insurance or otherwise, (B) by liquidation of the Participant's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship or (C) by cessation of deferrals under this Plan.

If the Committee, in its sole discretion, approves a Participant's petition for payout from the Plan, the Participant's Benefit Distribution Date for such payout shall be the date on which such Committee approval occurs and such payout shall be distributed to the Participant in a lump sum no later than 60 days after such Benefit Distribution Date. In addition, in the even of such approval the Participant's outstanding deferral elections under the Plan shall be cancelled.

(b) A Participant's deferral elections under this Plan shall also be cancelled to the extent the Committee determines such action is required for the Participant to obtain a hardship distribution from an Employer's 401(k) Plan pursuant to Treas. Reg. §1.401(k)-1(d)(3).

ARTICLE 5

Retirement Benefit

5.1 Retirement Benefit. If a Participant experiences a Separation from Service that qualifies as a Retirement, the Participant shall be eligible to receive his or her vested Account Balance in either a lump sum or annual installment payments, as elected by the Participant in accordance with Section 5.2 (the "Retirement Benefit"). A Participant's Retirement Benefit shall be calculated as of the close of business on or around the applicable Benefit Distribution Date for such benefit, which shall be the later of (i) the first business day of the Plan Year following the Plan Year in which the Participant Retires, or (ii) the last day of the six-month period immediately following the date on which the Participant Retires; provided, however, in the event the Participant changes his or her Retirement Benefit election in accordance with Section 5.2(b), his or her Benefit Distribution Date shall be postponed in accordance with Section 5.2(b).

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5.2 Payment of Retirement Benefit.

(a) A Participant, in connection with his or her commencement of participation in the Plan, shall elect on an Election Form to receive the Retirement Benefit in a lump sum or pursuant to an Annual Installment Method of up to fifteen 15 years. If a Participant does not make any elections with respect to the payment of the Retirement Benefit, then such Participant shall be deemed to have elected to receive the Retirement Benefit as a lump sum.

(b) A Participant may change the form of payment of the Retirement Benefit by submitting an Election Form to the Committee in accordance with the following criteria:

(i) The election shall have not take effect until at least 12 months after the date on which the election is made;

(ii) The new Benefit Distribution Date for Participant's Retirement Benefit shall be five years after the Benefit Distribution Date that would otherwise have been applicable to such benefit; and

(iii) The election must be made at least 12 months prior to the Benefit Distribution Date that would otherwise have been applicable to the Participant's Retirement Benefit.

For purposes of applying the provisions of this Section 5.2(b), a Participant's election to change the form of payment for the Retirement Benefit shall not be considered to be made until the date on which the election becomes irrevocable. Such election shall become irrevocable no later than the date that is 12 months prior to the Benefit Distribution Date that would otherwise have been applicable to the Participant's Retirement Benefit. Subject to the requirements of this Section 5.2(b), the Election Form most recently accepted by the Committee that has become effective shall govern the form of payout of the Participant's Retire-ment Benefit.

(a) The lump sum payment shall be made, or installment payments shall commence, no later than 60 days after the Participant's Benefit Distribution Date. Remaining installments, if any, shall be paid no later than 60 days after the first day of each Plan Year following the Plan Year in which the Participant's Benefit Distribution Date.

ARTICLE 6

Termination Benefit

6.1 Termination Benefit. If a Participant experiences a Separation from Service that does no qualify as a Retirement, the Participant shall receive his or her vested Account Balance in the form of a lump sum payment (the "Termination Benefit"). A Participant's Termination Benefit shall be calculated as of the close of business on or around the Benefit Distribution Date, for such benefit, which shall be the last day of the six-month period immediately following the date on which the Participant experiences a Separation from Services.

6.2 Payment of Termination Benefit. The Termination Benefit shall be paid to the no later than 60 days after the Participant's Benefit Distribution Date.

ARTICLE 7

Disability Benefit

7.1 Disability Benefit. If a Participant becomes Disabled prior to the occurrence of a distribution event described in Articles 5 though 6, as applicable, the Participant shall receive his or her vested Account Balance in the form of a lump sum payment (the "Disability Benefit"). The Disability Benefit shall

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be calculated as of the close of business on or around the Participant's Benefit Distribution Date for such benefit, which shall be the date on which the Participant becomes Disabled in accordance with the definition provided in Section 1.20.

7.2 Payment of Disability Benefit.The Disability Benefit shall be paid to the Participant no later than 60 days after the Participant's Benefit Distribution Date.

ARTICLE 8

Death Benefit

8.1 Death Benefit. In the event of a Participant's death prior to the complete distribution of his or her vested Account Balance, the Participant's Beneficiary(ies) shall receive the Participant's death benefit which will be equal to the Participant's unpaid vested Account Balance in a lump sum payment (the "Death Benefit"). The Death Benefit shall be calculated as of the close of business on or around the Benefit Distribution Date for such benefit, which shall the date on which the Committee is provided with proof that is satisfactory to the Committee of the Participant's death, if the Participant dies prior to the complete distribution of his or her vested Account Balance.

8.2 Payment of Death Benefit. The Death Benefit shall be paid to the Participant's Beneficiary(ies) no later than 60 days after the Participant's Benefit Distribution Date.

ARTICLE 9

Beneficiary Designation

9.1 Beneficiary. Each Participant shall have the right, at any time, to designate his or her Beneficiary(ies) (both primary as well as contingent) to receive any benefits payable under the Plan to a beneficiary upon the death of a Participant. The Beneficiary designated under this Plan may be the same as or different from the Beneficiary designation under any other plan of an Employer in which the Participant participates.

9.2 Beneficiary Designation; Change; Spousal Consent. A Participant shall designate his or her Beneficiary by completing and signing the Beneficiary Designation Form, and returning it to the Committee or its designated agent. A Participant shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Committee's rules and procedures, as in effect from time to time. If the Participant names someone other than his or her spouse as the primary Beneficiary, a spousal consent is required to be provided in a form designated by the Committee, executed by such Participant's spouse and returned to the Committee. Upon the acceptance by the Committee of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be canceled. The Committee shall be entitled to rely on the last Beneficiary Designation Form filed by the Participant and accepted by the Committee prior to his or her death.

9.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received and acknowledged in writing by the Committee or its designated agent.

9.4 No Beneficiary Designation. If a Participant fails to designate a Beneficiary as provided in Sections 9.1, 9.2 and 9.3 above or, if all designated Beneficia-ries predecease the Participant or die prior to complete distribution of the Participant's benefits, then the Participant's designated Beneficiary shall be deemed to be his or her surviving spouse. If the Participant has no surviving spouse, the benefits remaining under the Plan to be paid to a Beneficiary shall be payable to the executor or personal representative of the Participant's estate.

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9.5 Doubt as to Beneficiary. If the Committee has any doubt as to the proper Beneficiary to receive payments pursuant to this Plan, the Committee shall have the right, exercisable in its discretion, to cause the Participant's Employer to withhold such payments until this matter is resolved to the Committee's satisfaction.

9.6 Discharge of Obligations. The payment of benefits under the Plan to a Beneficiary shall fully and completely discharge all Employers and the Committee from all further obligations under this Plan with respect to the Participant, and that Participant's Plan Agreement shall terminate upon such full payment of benefits.

ARTICLE 10

Leave of Absence

10.1 Paid Leave of Absence. If a Participant is authorized by the Participant's Employer to take a paid leave of absence from the employment of the Employer, and such leave of absence does not constitute a Separation from Services (a) the Partici-pant shall continue to be considered eligible for the benefits provided under the Plan, and (b) the Annual Deferral Amountshall continue to be withheld during such paid leave of absence in accordance with Section 3.2.

10.2 Unpaid Leave of Absence. If a Participant is authorized by the Participant's Employer to take an unpaid leave of absence from the employ-ment of the Employer for any reason, and such leave of absence does not constitute a Separation from Service, such Participant shall continue to be eligible for the benefits provided under the Plan. During the unpaid leave of absence, the Participant shall not be allowed to make any additional deferral elections. However, if the Participant returns to employment, the Participant may elect to defer an Annual Deferral Amount for the Plan Year following his or her return to employment and for every Plan Year thereafter while a Participant in the Plan, provided such deferral elections are otherwise allowed and an Election Form is delivered to and accepted by the Committee for each such election in accordance with Section 3.2 above.

ARTICLE 11

Termination of Plan, Amendment or Modification

11.1 Termination of Plan. Although each Employer anticipates that it will continue the Plan for an indefinite period of time, there is no guarantee that any Employer will continue the Plan or will not terminate the Plan at any time in the future. Accordingly, each Employer reserves the right to terminate the Plan with respect to all of its Participants. In the event of a Plan termination, no new deferral election shall be permitted for the affected Participants and such Participants shall no longer be eligible to receive new company contributions. However, after the Plan termination, the Account Balances of such Participants shall continue to be credited with Annual Deferral Amounts attributable to a deferral election that was in effect prior to the Plan termination to the extent deemed necessary to comply with Code Section 409A and related Treasury Regulations and additional amounts shall continue to be credited or debited to such Participants' Account Balances pursuant to Section 3.7. The Measurement Funds available to Participants following the termination of the Plan shall be comparable in number and type to those Measurement Funds available to Participants in the Plan Year preceding the Plan Year in which Plan termination is effective. In addition, following a plan termination, Participant Account Balances shall remain in the Plan and shall not be distributed until such amounts become eligible for distribution in accordance with the other applicable provisions of the Plan. Notwithstanding the preceding sentence, to the extent permitted by Treas. Reg. §1.409A-3

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(j)(4)(ix), the Employer may provide that upon termination of the Plan, all Account Balances of the Participants shall be distributed, subject to and in accordance with any rules established by such Employer deemed necessary to comply with the applicable requirements and limitations of Treas. Reg. §1.409A-3(j)(4)(ix).

11.2 Amendment. Any Employer may, at any time, amend or modify the Plan in whole or in part with respect to that Employer. Notwithstanding the foregoing, (i) no amendment or modification shall be effective to decrease the value of a Participant's vested Account Balance in existence at the time the amendment or modification is made, and (ii) no amendment or modification of this Section 11.2 or Section 12.2 of the Plan shall be effective.

11.3 Plan Agreement. Despite the provisions of Sections 11.1 and 11.2 above, if a Participant's Plan Agreement contains benefits or limitations that are not in this Plan document, the Employer may only amend or terminate such provisions without the prior written consent of the Participant if the Committee determines, in its sole discretion, that such amendment or termination will not cause a decrease in the Participant's vested Account Balance in existence at the time the amendment or termination is made.

11.4 Effect of Payment. The full payment of the Participant's vested Account Balance in accordance with the applicable provisions of the Plan shall completely discharge all obligations to a Participant and his or her designated Beneficiaries under this Plan, and the Participant's Plan Agreement shall terminate.

ARTICLE 12

Administration

12.1 Committee Duties. Except as otherwise provided in this Article 12, this Plan shall be administered by a Committee, which shall consist of the Board, or such committee as the Board shall appoint. Members of the Committee may be Participants under this Plan. The Committee shall also have the discretion and authority to (a) make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Plan, and (b) decide or resolve any and all questions, including benefit entitlement determinations and interpretations of this Plan, as may arise in connection with the Plan. Any individual serving on the Committee who is a Participant shall not vote or act on any matter relating solely to himself or herself. When making a determination or calculation, the Committee shall be entitled to rely on information furnished by a Participant, an Employer or the Company or its agents.

12.2 Administration Upon Change in Control. Within 120 days following a Change in Control, the individuals who comprised the Committee immediately prior to the Change in Control (whether or not such individuals are members of the Committee following the Change in Control) may, by written consent of the majority of such individuals, appoint an independent third party administrator (the "Administrator") to perform any or all of the Committee's duties described in Section 12.1 above, including without limitation, the power to determine any questions arising in connection with the administration or interpretation of the Plan, and the power to make benefit entitlement determinations. Upon and after the effective date of such appointment, (a) the Company must pay all reasonable administrative expenses and fees of the Administrator, and (b) the Administrator may only be terminated with the written consent of the majority of Participants with an Account Balance in the Plan as of the date of such proposed termination.

12.3 Agents. In the administration of this Plan, the Committee or the Administrator, as applicable, may, from time to time, employ agents and delegate to them such administrative duties as it sees fit

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(including acting through a duly appointed representative) and may from time to time consult with counsel.

12.4 Binding Effect of Decisions. The decision or action of the Committee or Administrator, as applicable, with respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan.

12.5 Indemnity of Committee. All Employers shall indemnify and hold harmless the members of the Committee, any Employee to whom the duties of the Committee may be delegated, and the Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Plan, except in the case of willful misconduct by the Committee, any of its members, any such Employee or the Administrator.

12.6 Employer Information. To enable the Committee and/or Administrator to perform its functions, the Company and each Employer shall supply full and timely information to the Committee and/or Administrator, as the case may be, on all matters relating to the Plan, the Trust, the Participants and their Beneficiaries, the Account Balances of the Participants, the compensation of its Participants, the date and circum-stances of the Separation from Service, Disability, or death of its Participants, and such other pertinent information as the Committee or Administrator may reasonably require.

ARTICLE 13

Other Benefits and Agreements

13.1 Coordination with Other Benefits. The benefits provided for a Participant and Participant's Beneficiary under the Plan are in addition to any other benefits available to such Participant under any other plan or program for employees of the Participant's Employer. The Plan shall supplement and shall not supersede, modify or amend any other such plan or program except as may otherwise be expressly provided.

ARTICLE 14

Claims Procedures

14.1 Presentation of Claim. Any Participant or Beneficiary of a deceased Participant (such Participant or Beneficiary being referred to below as a "Claimant") may deliver to the Committee a written claim for a determination with respect to the amounts distributable to such Claimant from the Plan. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within 60 days after such notice was received by the Claimant. All other claims must be made within 180 days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant.

14.2 Notification of Decision. The Committee shall consider a Claimant's claim within a reasonable time, but no later than 90 days after receiving the claim. If the Committee determines that special circumstances require an extension of time for processing the claim, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial 90-day period. In no event shall such extension exceed a period of 90 days from the end of the initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render the benefit determination. The Committee shall notify the Claimant in writing:

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(a) that the Claimant's requested determination has been made, and that the claim has been allowed in full; or

(b) that the Committee has reached a conclusion contrary, in whole or in part, to the Claimant's requested determination, and such notice must set forth in a manner calculated to be understood by the Claimant:

(i) the specific reason(s) for the denial of the claim, or any part of it;

(ii) specific reference(s) to pertinent provisions of the Plan upon which such denial was based;

(iii) a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary;

(iv) an explanation of the claim review procedure set forth in Section 14.3 below; and

(v) a statement of the Claimant's right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.

14.3 Review of a Denied Claim. On or before 60 days after receiving a notice from the Committee that a claim has been denied, in whole or in part, a Claimant (or the Claimant's duly authorized representative) may file with the Committee a written request for a review of the denial of the claim. The Claimant (or the Claimant's duly authorized representative):

(a) may, upon request and free of charge, have reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claim for benefits;

(b) may submit written comments or other documents; and/or

(c) may request a hearing, which the Committee, in its sole discretion, may grant.

14.4 Decision on Review. The Committee shall render its decision on review promptly, and no later than 60 days after the Committee receives the Claimant's written request for a review of the denial of the claim. If the Committee determines that special circumstances require an extension of time for processing the claim, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial 60-day period. In no event shall such extension exceed a period of 60 days from the end of the initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render the benefit determination. In rendering its decision, the Committee shall take into account all comments, documents, records and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. The decision must be written in a manner calculated to be understood by the Claimant, and it must contain:

(a) specific reasons for the decision;

(b) specific reference(s) to the pertinent Plan provisions upon which the decision was based;

(c) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant's claim for benefits; and

(d) a statement of the Claimant's right to bring a civil action under ERISA Section 502(a).

14.5 Disability Benefits. The Committee shall comply with the special rules for Disability claims in 29 CFR §2560.503-1, where the availability of the benefit is conditioned upon a showing of Disability. Where a benefit is available only on a finding of Disability and such finding has already been determined under another benefit plan or program of the Employer, the special Disability claim rules need not apply and the rules of this Article 14 shall govern.

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14.6 Legal Action. A Claimant's compliance with the foregoing provisions of this Article 14 is a mandatory prerequisite to a Claimant's right to commence any legal action with respect to any claim for benefits under this Plan.

ARTICLE 15

Trust

15.1 Establishment of the Trust. In order to provide assets from which to fulfill the obligations of the Participants and their Beneficiaries under the Plan, the Company may establish a trust by a trust agreement with a third party, the trustee, to which each Employer may, in its discretion, contribute cash or other property, including securities issued by the Company, to provide for the benefit payments under the Plan (the "Trust). Notwithstanding the foregoing, no later than 60 days prior to a Change in Control, the Company shall establish a Trust if one has not been previously established, and each Employer shall transfer over to the Trust such assets as the Employer determines are necessary to provide, on a present value basis, for its respective liabilities created with respect to the Account Balance of each of such Employer's Participants as accumulated under the Plan immediately prior to such transfer.

15.2 Interrelationship of the Plan and the Trust. The provisions of the Plan and the Plan Agreement shall govern the rights of a Participant to receive distributions pursuant to the Plan. The provisions of the Trust shall govern the rights of the Employers, Participants and the creditors of the Employers to the assets transferred to the Trust. Each Employer shall at all times remain liable to carry out its obligations under the Plan.

15.3 Distributions From the Trust. Each Employer's obligations under the Plan may be satisfied with Trust assets distributed pursuant to the terms of the Trust, and any such distribution shall reduce the Employer's obligations under this Plan.

ARTICLE 16

Miscellaneous

16.1 Status of the Plan. The Plan is intended to be a plan that is not qualified within the meaning of Code Section 401(a) and that "is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees" within the meaning of ERISA Sections 201(2), 301(a)(3) and 401(a)(1). The Plan shall be administered and interpreted (a) to the extent possible in a manner consistent with the intent described in the preceding sentence, and (b) in accordance with Code Section 409A and related Treasury guidance and Regulations.

16.2 Unsecured General Creditor. Participants and their Bene-ficiaries, heirs, successors and assigns shall have no legal or equitable rights, interests or claims in any property or assets of an Employer. For purposes of the payment of benefits under this Plan, any and all of an Employer's assets shall be, and remain, the general, unpledged unrestricted assets of the Employer. An Employer's obligation under the Plan shall be merely that of an unfunded and unsecured promise to pay money in the future.

16.3 Employer's Liability. An Employer's liability for the payment of benefits shall be defined only by the Plan and the Plan Agreement, as entered into between the Employer and a Participant. An Employer shall have no obliga-tion to a Participant under the Plan except as expressly provided in the Plan and his or her Plan Agreement.

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16.4 Nonassignability. Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate, alienate or convey in advance of actual receipt, the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are expressly declared to be, unassignable and non-transfer-able. No part of the amounts payable shall, prior to actual payment, be subject to seizure, attachment, garnishment or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insolvency or be transferable to a spouse as a result of a property settlement or otherwise.

16.5 Not a Contract of Employment. The terms and conditions of this Plan shall not be deemed to constitute a contract of employment between any Employer and the Participant. Such employment is hereby acknowledged to be an "at will" employment relationship that can be terminated at any time for any reason, or no reason, with or without cause, and with or without notice, unless expressly provided in a written employment agreement. Nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of any Employer, either as an Employee or a Director, or to inter-fere with the right of any Employer to discipline or discharge the Participant at any time.

16.6 Furnishing Information. A Participant or his or her Beneficiary will cooperate with the Committee by furnishing any and all information requested by the Committee and take such other actions as may be requested in order to facilitate the administra-tion of the Plan and the payments of benefits hereunder, including but not limited to taking such physical examinations as the Committee may deem necessary.

16.7 Terms. Whenever any words are used herein in the masculine, they shall be construed as though they were in the feminine in all cases where they would so apply; and whenever any words are used herein in the singular or in the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply.

16.8 Captions. The captions of the articles, sections and paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions.

16.9 Governing Law. Subject to ERISA, the provisions of this Plan shall be construed and interpreted according to the laws of the State of Washington without regard to its conflicts of laws principles.

16.10 Notice. Any notice or filing required or permitted to be given to the Committee under this Plan shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below:

Sterling Savings Bank

Attn: Human Resources Director

111 North Wall Street

Spokane, Washington 99201

Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.

Any notice or filing required or permitted to be given to a Participant under this Plan shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Participant.

16.11 Successors. The provisions of this Plan shall bind and inure to the benefit of the Participant's Employer and its successors and assigns and the Participant and the Participant's designated Beneficiaries.

16.12 Spouse's Interest. The interest in the benefits hereunder of a spouse of a Participant who has predeceased the Participant shall automatically pass to the Participant and shall not be transferable

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by such spouse in any manner, including but not limited to such spouse's will, nor shall such interest pass under the laws of intestate succession.

16.13 Validity. In case any provision of this Plan shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal or invalid provision had never been inserted herein.

16.14 Incompetent. If the Committee determines in its discretion that a benefit under this Plan is to be paid to a minor, a person declared incompetent or to a person incapable of handling the disposition of that person's property, the Committee may direct payment of such benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or incapable person. The Committee may require proof of minority, incompetence, incapacity or guardianship, as it may deem appropriate prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Participant and the Participant's Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Plan for such payment amount.

16.15 Domestic Relations Orders. If necessary to comply with a domestic relations order, as defined in Code Section 414(p)(1)(B), pursuant to which a court has determined that a spouse or former spouse of a Participant has an interest in the Participant's benefits under the Plan, the Committee, shall have the right to immediately distribute the spouse's or former spouse's interest in the Participant's benefits under the Plan to such spouse or former spouse.

16.16 Distribution in the Event of Income Inclusion Under 409A. If any portion of a Participant's Account Balance under this Plan is required to be included in income by the Participant prior to receipt due to a failure of this Plan to comply with the requirements of Code Section 409A and related Treasury Regulations, the Committee may determined that such Participant shall receive a distribution from the Plan in an amount equal to the lesser of (i) the portion of his or her Account Balance required to be included in income as a result of the failure of the Plan to comply with the requirements of Code Section 409A and related Treasury Regulations, or (ii) unpaid vested Account Balance.

16.17 Deduction Limitation on Benefit Payments. If an Employer reasonably anticipates that the Employer's deduction with respect to any distribution from this Plan would be limited or eliminated by application of Code Section 162(m), then to the extent permitted by Treas. Reg. §1.409A-2(b)(7)(i), payment shall be delayed as deemed necessary to ensure that the entire amount of any distribution from this Plan is deductible. Any amounts for which distribution is delayed pursuant to this Section shall continue to be credited/debited with additional amounts in accordance with Section 3.7 above. The delayed amounts (and any amounts credited thereon) shall be distributed to the Participant (or his or her Beneficiary in the event of the Participant's death) at the earliest date the Employer reasonably anticipates that the deduction of the payment of the amount will not be limited or eliminated by application of Code Section 162(m). In the event that such date is determined to be after a Participant's Separation from Service and the Participant whom the payment relates is determined to be Specified Employee, then to the extent deemed necessary to comply with Treas. Reg. §1.409A-3(i)(2), the delayed payment shall not be made before the end of the six-month period following such Participant's Separation from Service.

16.18 Payment that would Jeopardize Ability of Employer to Continue as a Going Concern. If at the time of a specified payment date the making of a payment would jeopardize the ability of the Employer to continue as a going concern, the payment may be delayed and will be treated as made upon the specified payment date if the payment is made during the first taxable year of the Employer in which the making of the payment would not jeopardize the Employer continuing as a going concern. Additionally, an Employer may delay payment under this provision if such payment would violate a loan covenant or similar contractual obligation, and such violation would jeopardize the ability of the service recipient to continue as a going concern.

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16.19 Payment that would Violate Securities Laws or other Applicable Law. If an Employer reasonably anticipates that the making of a payment to a Participant under this Plan will violate Federal securities laws or other applicable law, the Employer may delay the payment to such Participant. Any amounts for which distribution is delayed pursuant to this Section shall continue to be credited/debited with additional amounts in accordance with Section 3.9 above. The delayed amounts (and any amounts credited thereon) shall be distributed to the Participant (or his or her Beneficiary in the event of the Participant's death) at the earliest date the Employer reasonably anticipates that the making of the payment will not cause such a violation.

16.20 Insurance. The Employers, on their own behalf or on behalf of the trustee of the Trust, and, in their sole discretion, may apply for and procure insurance on the life of the Participant, in such amounts and in such forms as the Trust may choose. The Employers or the trustee of the Trust, as the case may be, shall be the sole owner and beneficiary of any such insurance. The participant shall have no interest whatsoever in any such policy or policies and at the request of the Employers shall submit to medical examinations and supply such information and execute such documents as may be required by the insurance company or companies to whom the Employers have applied for insurance.

IN WITNESS WHEREOF, the Company has signed this Plan document as of ___________________, 2008.

"Company"

Sterling Savings Bank, a Washington corporation

By: __________________________________

Title: _________________________________

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EX-21.1

Exhibit 21.1

Subsidiaries of Sterling Financial Corporation:

Name of Entity	State of Incorporation
Golf Escrow Corporation	WA
Klamath First Capital Trust I	DE
Lynnwood Financial Statutory Trust I	CT
Lynnwood Financial Statutory Trust II	DE
Sterling Capital Trust III	DE
Sterling Capital Trust IV	DE
Sterling Capital Statutory Trust V	CT
Sterling Capital Trust VI	DE
Sterling Capital Trust VII	DE
Sterling Capital Trust VIII	DE
Sterling Capital Trust IX	DE
Sterling Savings Bank	WA
(d/b/a Sonoma Bank in CA)
Tri-Cities Mortgage Corporation (inactive)	WA

Subsidiaries of Sterling Savings Bank:

Name of Entity	State of Incorporation
Action Mortgage Company (inactive)	WA
(d/b/a SSB Mortgage Corporation in CA)
(d/b/a Sterling Mortgage Company in CO)
(d/b/a Action Mortgage Company, Inc. in HI)
(d/b/a SSB Mortgage Company in TX)
(d/b/a Sterling Mortgage Company in UT)
The Dime Service Corporation (inactive)	MT
Evergreen Environmental Development Corporation (inactive)	WA
Evergreen First Service Corporation (inactive)	WA
Sterling Savings Banc Financial Services, Inc.	WA
(a subsidiary of Evergreen First Service Corporation)
(d/b/a Sonoma Banc Financial Services in CA)
Fidelity Service Corporation (inactive)	WA
INTERVEST-Mortgage Investment Company	WA
Mason-McDuffie Financial Corporation	WA
(a subsidiary of INTERVEST-Mortgage Investment Company)
Source Capital Corporation (inactive)	WA
Peter W. Wong Associates, Inc. (a subsidiary of Source Capital Corporation)	WA
Source Capital Leasing Corporation (a subsidiary of Source Capital Corporation) (inactive)	WA

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors
Sterling Financial Corporation:

We consent to the incorporation by reference in the registration statements on Form S-3 (No. 333-130512, 333-136001, 333-156568, 333-160701, and 333-169579) and Form S-8 (No. 333-144956, 333-141006, 333-136000, 333-139490, 333-111802, 333-105723, 333-61452, 333-44078, 333-69481, 333-171070, and 333-175426) of Sterling Financial Corporation of our reports dated February 26, 2013, with respect to the consolidated balance sheets of Sterling Financial Corporation and subsidiaries as of December 31, 2012 and 2011, and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for the years then ended, and the effectiveness of internal control over financial reporting as of December 31, 2012, which reports appear in the December 31, 2012 annual report on Form 10‑K of Sterling Financial Corporation.

/s/ KPMG LLP

Seattle, WashingtonFebruary 26, 2013

EX-23.2

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

Sterling Financial Corporation

Spokane, Washington

We hereby consent to the incorporation by reference in the Registration Statements on Form S-­3 (No. 333-136001, 333-130512, 333-156568, 333-160701, and 333-169579) and Form S-­8 (No. 333-144956, 333-141006, 333-136000, 333-139490, 333-111802, 333-105723, 333-61452, 333-44078, 333-69481, 333-171070, and 333-175426) of Sterling Financial Corporation of our report dated March 8, 2011, relating to the consolidated financial statements for the year ended December 31, 2010 which appear in this Form 10-K.

/s/ BDO USA, LLP

BDO USA, LLP

Spokane, Washington

February 26, 2013

EX-31.1

Exhibit 31.1

Certification of Principal Executive Officer

I, J. Gregory Seibly, certify that:

1. I have reviewed this annual report on Form 10-K of Sterling Financial Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: February 26, 2013	By:	/s/ J. Gregory Seibly
		J. Gregory Seibly
		President and Principal Executive Officer

EX-31.2

Exhibit 31.2

Certification of Principal Financial Officer

I, Patrick J. Rusnak, certify that:

1. I have reviewed this annual report on Form 10-K of Sterling Financial Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: February 26, 2013	By:	/s/ Patrick J. Rusnak
		Patrick J. Rusnak
		Executive Vice President and
		Principal Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant

To Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of Sterling Financial Corporation (“Sterling”) on Form 10-K for the year ended December 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, J. Gregory Seibly, Chief Executive Officer of Sterling, hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Sterling.

Dated: February 26, 2013	By:	/s/ J. Gregory Seibly
		J. Gregory Seibly
		President and Principal Executive Officer

This certification accompanies each Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by Sterling for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906 has been provided to Sterling and will be retained by Sterling and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant

To Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of Sterling Financial Corporation (“Sterling”) on Form 10-K for the year ended December 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Patrick J. Rusnak, Principal Financial Officer of Sterling, hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Sterling.

Dated: February 26, 2013	By:	/s/ Patrick J. Rusnak
		Patrick J. Rusnak
		Executive Vice President and
		Principal Financial Officer

This certification accompanies each Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by Sterling for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906 has been provided to Sterling and will be retained by Sterling and furnished to the Securities and Exchange Commission or its staff upon request.

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Property and Equipment (Tables)

12 Months Ended

Dec. 31, 2012

Property, Plant and Equipment [Abstract]

Property and Equipment

The components of property and equipment are as follows:

	December 31,				Estimated
	2012		2011		Useful Life
	(in thousands)
Buildings and improvements	$	68,129	$	64,002	20-40 years
Furniture, fixtures, equipment and computer software	85,481		88,516		3-10 years
Leasehold improvements	17,893		19,267		5-20 years
	171,503		171,785
Less accumulated depreciation and amortization	(91,651)		(99,241)
	79,852		72,544
Land	13,998		11,471
Total property and equipment, net	$	93,850	$	84,015

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Parent Company Only Financial Information (Tables)

12 Months Ended

Dec. 31, 2012

Parent Only [Abstract]

Parent Only Balance Sheet

Parent Only Balance Sheets	December 31,		December 31,
	2012		2011
Assets:	(in thousands)
Cash and cash equivalents	$	24,443	$	44,602
Investments in subsidiaries:
Sterling Bank	1,417,025		1,089,820
Other subsidiaries	8,307		8,185
Receivable from subsidiaries	0		283
Other assets	20,755		1,158
Total assets	$	1,470,530	$	1,144,048
Liabilities and Shareholders' Equity:
Accrued expenses payable	$	3,072	$	4,111
Junior subordinated debentures	245,294		245,290
Due to affiliates	4,241		16,090
Shareholders' equity	1,217,923		878,557
Total liabilities and shareholders' equity	$	1,470,530	$	1,144,048

Parent Only Statement of Operations

Parent Only Statements of Operations	Years Ended December 31,
(in thousands)	2012			2011			2010
	(in thousands)
Interest income	$	268		$	300		$	253
Interest expense	6,785			6,433			6,349
Net interest expense	(6,517		)	(6,133		)	(6,096		)
Equity in net earnings of subsidiary	380,294			50,961			(206,677		)
Noninterest expenses	5,385			5,699			11,568
Income before income taxes	368,392			39,129			(224,341		)
Income tax benefit	17,329			4			59
Net income (loss)	$	385,721		$	39,133		$	(224,282	)

Parent Only Cash Flow

Parent Only Statements of Cash Flows	Years Ended December 31,
	2012			2011			2010
	(in thousands)
Cash flows from operating activities:
Net income (loss)	$	385,721		$	39,133		$	(224,282	)
Adjustments to reconcile net income to net cash used in operating activities	(412,528		)	(42,051		)	214,128
Net cash used in operating activities	(26,807		)	(2,918		)	(10,154		)
Cash flows from investing activities:
Investments in subsidiaries, net	0			0			(650,000		)
Dividends from subsidiary	52,600			0			0
Net cash provided by (used in) investing activities	52,600			0			(650,000		)
Cash flows from financing activities:
Net proceeds from stock issuances	3,791			0			683,334
Dividends paid	(49,743		)	0			0
Net cash provided by (used in) financing activities	(45,952		)	0			683,334
Net change in cash and cash equivalents	(20,159		)	(2,918		)	23,180
Cash and cash equivalents, beginning of year	44,602			47,520			24,340
Cash and cash equivalents, end of year	$	24,443		$	44,602		$	47,520

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Stock Based Compensation (Tables)

12 Months Ended

Dec. 31, 2012

Stock-Based Compensation [Abstract]

Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity

The following table presents a summary of restricted stock and units activity during the periods:

	Shares		Weighted Average Grant Price
Balance, January 1, 2010	4,000		$	619.55
Granted	488,040		16.39
Vested	(121,935	)	23.05
Expired	0		0.00
Forfeited	(1,300	)	723.41
Outstanding, December 31, 2010	368,805		$	18.24
Balance, January 1, 2011	368,805		$	18.24
Granted	130,021		17.18
Vested	(163,680	)	18.50
Expired	0		0.00
Forfeited	(33,773	)	16.63
Outstanding, December 31, 2011	301,373		$	17.82
Balance, January 1, 2012	301,373		$	17.82
Granted	305,157		20.06
Vested	(142,727	)	19.44
Expired	0		0.00
Forfeited	(78,290	)	17.02
Outstanding, December 31, 2012	385,513		$	19.16

Schedule of Share-based Compensation, Stock Options, Activity

The following table presents a summary of stock option activity during the periods:

	Shares		Weighted Average Exercise Price
Balance, January 1, 2010	28,932		$	1,390.07
Granted	0		0.00
Exercised	0		0.00
Expired	(9,195	)	1,449.05
Forfeited	(817	)	1,469.48
Outstanding, December 31, 2010	18,920		$	1,357.97
Exercisable, December 31, 2010	14,655		$	1,497.94
Balance, January 1, 2011	18,920		$	1,357.97
Granted	0		0.00
Exercised	0		0.00
Expired	(2,600	)	1,231.98
Forfeited	(520	)	903.92
Outstanding, December 31, 2011	15,800		$	1,393.65
Exercisable, December 31, 2011	14,011		$	1,507.87
Balance, January 1, 2012	15,800		$	1,393.65
Granted	0		0.00
Exercised	0		0.00
Expired	(1,211	)	1,362.40
Forfeited	(2,190	)	1,184.58
Outstanding, December 31, 2012	12,399		$	1,433.63
Exercisable, December 31, 2012	11,996		$	1,447.69

Schedule of Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Grant Date Intrinsic Value

The following table presents the weighted average remaining contractual life and the aggregate intrinsic value for stock options as of the dates indicated:

	Stock Options
	Outstanding			Exercisable
	Weighted Average Life	Intrinsic Value		Weighted Average Life	Intrinsic Value
December 31, 2012	1.3 years	$	0	1.2 years	$	0
December 31, 2011	2.1 years	0		2.1 years	0

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs

Stock based compensation expense recognized during the periods presented was as follows:

	Years Ended December 31,
	2012		2011		2010
	(in thousands)
Stock options	$	43	$	268	$	728
Restricted stock	3,765		3,595		2,435
Total	$	3,808	$	3,863	$	3,163

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Advances from Federal Home Loan Bank (Details) (USD $)	Dec. 31, 2012	Dec. 31, 2011
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Line of Credit Facility, Current Borrowing Capacity	$ 1,930,000,000	$ 1,860,000,000
Federal Home Loan Bank, Advances, Fiscal Year Maturity [Abstract]
Advances from Federal Home Loan Banks	605,330,000	405,609,000
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures [Abstract]
Federal Home Loan Bank Stock and Federal Reserve Bank Stock	97,500,000	99,000,000
Line of Credit Facility, Remaining Borrowing Capacity	1,320,000,000	1,560,000,000
FHLB of Seattle
Federal Home Loan Bank, Advances, Fiscal Year Maturity [Abstract]
Amount, Due within 1 year	269,053,000	300,000,000
Amount, Due in 1 to 2 years	55,000,000	69,164,000
Amount, Due in 2 to 3 years	50,550,000	5,000,000
Amount, Due in 3 to 4 years	50,196,000	550,000
Amount, Due in 4 to 5 years	123,000,000	245,000
Amount, Due after 5 years	57,531,000	30,650,000
Advances from Federal Home Loan Banks	$ 605,330,000	$ 405,609,000
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures [Abstract]
Weighted Average Interest Rate, Due within 1 year	0.96%	0.28%
Weighted Average Interest Rate, Due in 1 to 2 years	0.72%	3.00%
Weighted Average Interest Rate, Due in 2 to 3 years	0.64%	3.00%
Weighted Average Interest Rate, Due in 3 to 4 years	0.68%	3.00%
Weighted Average Interest Rate, Due in 4 to 5 years	1.45%	8.00%
Weighted Average Interest Rate, Due after 5 years	1.90%	4.00%
Weighted Average Interest Rate	1.07%	1.09%

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Quarterly Financial Data (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2012

Quarterly Financial Information Disclosure [Abstract]

Schedule of Quarterly Financial Information

The following tables present Sterling's condensed operations on a quarterly basis for the years ended December 31, 2012 and 2011:

	2012 Quarters Ended
	March 31		June 30		September 30		December 31
	(in thousands, except per share amounts)
Interest income	$	97,965	$	100,990	$	95,991	$	94,254
Interest expense	23,612		22,080		20,683		18,147
Net interest income	74,353		78,910		75,308		76,107
Provision for credit losses	4,000		4,000		2,000		0
Net interest income after provision	70,353		74,910		73,308		76,107
Noninterest income	31,587		44,741		46,698		31,227
Noninterest expenses	88,649		87,607		89,408		89,589
Income before income taxes	13,291		32,044		30,598		17,745
Income tax benefit	0		288,842		0		3,201
Net income	13,291		320,886		30,598		20,946
Earnings per share - basic	$	0.21	$	5.17	$	0.49	$	0.34
Earnings per share - diluted	$	0.21	$	5.13	$	0.49	$	0.33
Weighted average shares outstanding - basic	62,078,404		62,112,936		62,139,833		62,159,683
Weighted average shares outstanding - diluted	62,682,987		62,610,054		62,845,864		62,867,030

	2011 Quarters Ended
	March 31		June 30		September 30		December 31
	(in thousands, except per share amounts)
Interest income	$	103,237	$	102,347	$	101,379	$	97,329
Interest expense	29,494		27,540		26,543		25,520
Net interest income	73,743		74,807		74,836		71,809
Provision for credit losses	10,000		10,000		6,000		4,000
Net interest income after provision	63,743		64,807		68,836		67,809
Noninterest income	29,982		34,335		29,112		32,899
Noninterest expenses	88,308		91,587		86,620		85,875
Income before income taxes	5,417		7,555		11,328		14,833
Income tax benefit	0		0		0		0
Net income	5,417		7,555		11,328		14,833
Earnings per share - basic	$	0.09	$	0.12	$	0.18	$	0.24
Earnings per share - diluted	$	0.09	$	0.12	$	0.18	$	0.24
Weighted average shares outstanding - basic	61,930,783		61,943,851		61,958,183		61,989,094
Weighted average shares outstanding - diluted	62,335,212		62,312,224		62,041,203		62,194,011

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Income Taxes Effective Tax Rate Reconciliaton (Details)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Income Tax Disclosure [Abstract]
Income tax provision at the federal statutory rate	35.00%	35.00%	35.00%
Deferred tax valuation allowance	(347.80%)	(25.00%)	(40.10%)
State taxes, net of federal benefit	3.80%	0.00%	3.10%
Tax-exempt interest	(2.50%)	(6.30%)	1.00%
Bank owned life insurance	(3.20%)	(5.80%)	1.10%
Tax credits	0.00%	(1.60%)	0.90%
Other, net	3.20%	3.70%	(1.00%)
Federal statutory rate, net of tax effect of adjustments	(300.00%)	0.00%	0.00%

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Noninterest Expense (Tables)

12 Months Ended

Dec. 31, 2012

Noninterest Expense [Abstract]

Schedule of Noninterest Expense

The following table details the components of Sterling’s noninterest expense:

	Years Ended December 31,
	2012		2011		2010
	(in thousands)
Employee compensation and benefits	$	189,025	$	171,643	$	168,793
OREO operations	11,829		41,500		62,578
Occupancy and equipment	42,930		39,878		39,643
Data processing	27,091		24,171		23,116
FDIC insurance	7,493		14,328		32,088
Professional fees	16,691		13,902		22,394
Depreciation	11,690		12,184		13,391
Advertising	12,688		10,017		11,536
Travel and entertainment	5,756		5,420		3,975
Merger and acquisition	11,976		1,012		358
Amortization of other intangible assets	6,780		4,851		4,898
Other	11,304		13,484		12,275
Total noninterest expense	$	355,253	$	352,390	$	395,045

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Significant Accounting Policies Policies

12 Months Ended

Dec. 31, 2012

Text Block [Abstract]

Significant Accounting Policies

Significant Accounting Policies:

Sterling Financial Corporation, with headquarters in Spokane, Washington, was organized under the laws of Washington State in 1992 as the bank holding company for Sterling Savings Bank, which commenced operations in 1983. References to “Sterling,” “the Company,” “we,” “our,” or “us” in this report are to Sterling Financial Corporation, a Washington corporation, and its consolidated subsidiaries on a combined basis, unless otherwise specified or the context otherwise requires. References to “Sterling Bank” refer to our subsidiary Sterling Savings Bank, a Washington state-chartered commercial bank that operates under the registered trade name of Sterling Bank and, in California, as Sonoma Bank. Sterling Bank offers retail and commercial banking products and services, mortgage lending and wealth management to individuals, small businesses, commercial organizations and corporations. As of December 31, 2012, Sterling had assets of $9.24 billion and operated 174 depository branches in Washington, Oregon, Idaho and California.

Basis of Presentation

Basis of Presentation. The accompanying consolidated financial statements include the accounts of Sterling and its directly and indirectly wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Estimates

Estimates. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of Sterling’s consolidated financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions, which could have a material effect on the reported amounts of Sterling’s consolidated financial position and results of operations.

Cash and Cash Equivalents

Cash and Cash Equivalents. Cash equivalents include investments with a remaining maturity of three months or less at the date of purchase. Cash and cash equivalents are deposited with other banks and financial institutions in amounts that may at times exceed the federal insurance limit. Sterling evaluates the credit quality of these banks and financial institutions to mitigate its credit risk.

Restricted cash consists of noninterest bearing deposits maintained as a reserve at the Federal Reserve Bank, and cash collateral balances with correspondent banks.

Sterling occasionally purchases securities under agreements with other institutions to resell the same or similar securities. The amounts advanced under these agreements represent short-term loans and are reflected as interest bearing cash equivalents in the consolidated balance sheet. The securities underlying the agreements are comprised of mutual fund shares that are primarily invested in U.S. government securities.

Investments and MBS

Investments and MBS. Sterling classifies debt and equity securities as follows:

• Trading Securities. Debt or equity securities are classified as trading securities if acquired principally for the purpose of generating a profit from short-term fluctuations in price. As of December 31, 2012, Sterling did not hold any securities that it deems to be trading securities.

• Available for Sale. Debt and equity securities that are not classified as trading securities or held to maturity are classified as available for sale and are carried at fair value.

• Held to Maturity. These are investments that Sterling has the intent and ability to hold until maturity.

Premiums and discounts are amortized using the effective yield method over the weighted average life of the underlying security as estimated at time of purchase. Realized gains and losses on sales of investments and MBS are recognized in the statement of operations in the period sold using the specific identification method. FHLB stock is carried at cost, and is included in other assets.

Month end security price valuations are provided by a third party pricing service. These valuations are based on market data using pricing models that vary by asset class and incorporate available current trade, bid and other market information, and for structured securities, cash flow and loan performance data. The pricing processes utilize benchmark curves, benchmarking of similar securities, sector groupings, and matrix pricing. Option adjusted spread models are also used to assess the impact of changes in interest rates and to develop prepayment scenarios. All models and processes used take into account market convention.

Declines in the fair value of securities below their amortized cost that are other-than-temporary are reflected in earnings or other comprehensive income, as appropriate. For those debt securities whose fair value is less than their amortized cost basis, we consider our intent to sell the securities, whether it is more likely than not that we will be required to sell the securities before recovery, and whether or not we expect to recover our entire amortized cost basis in the investment. In making this assessment, considerations will include whether the issue is a government or government sponsored security, and whether or not rating downgrades have occurred. The assessment of other-than-temporary impairment includes an assessment of the carrying value of FHLB stock. FHLB stock is not a marketable security, and therefore, its value is primarily attributable to the borrowing capacity it provides.

Financing, Loans and Leases Receivable

Loans Receivable. Loans receivable that management of Sterling has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal balance net of unamortized origination and commitment fees, direct loan origination costs and an allowance for loan losses.

Interest income is recognized over the term of loans based on their unpaid principal balance. The accrual of interest on loans is discontinued when, in management’s opinion, a borrower may be unable to make payments as they become due, which generally occurs when a loan is 90 days past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. The interest payments received on these loans is accounted for on the cash basis or cost recovery method, until qualifying for a return to an accrual status. Loans return to an accrual status when all principal and interest is brought current, and future payments are reasonably assured.

Loans that were modified and recorded as troubled debt restructurings (“TDR’s”) occur when a borrower has financial difficulties and Sterling grants a concession that it would not otherwise consider. The concession can take the form of an interest rate or principal reduction or an extension of payments of principal or interest, or both. TDRs may be the result of granting extensions to troubled credits which have already been adversely classified. We grant such extensions to reassess the borrower’s financial status and develop a plan for repayment. We rarely forgive principal for TDRs, but in those situations where principal is forgiven, the entire amount of such principal forgiveness is immediately charged off, if not done so previously. We sometimes delay the timing on the repayment of a portion of principal (principal forbearance) and charge off any amounts not considered fully collectible. We also consider insignificant delays in payments when determining if a loan should be classified as a TDR. Loans designated as TDRs may be returned to accrual status after the borrower performs in accordance with the modified loan terms, generally for a period of at least six months. A loan may be removed from TDR status after at least one year of performance under the modified term of the loan, unless the modification includes an interest rate concession that is below a market rate of interest for a loan with similar characteristics. TDRs will continue to be evaluated for impairment for the remainder of their term.

Certain loans acquired may be deemed to exhibit evidence of credit deterioration since their origination. When it is considered probable that all contractually required principal and interest payments will not be collected, a loan will be considered a purchased credit impaired ("PCI") loan. The accounting for PCI loans is periodically updated for changes in cash flow expectations, and reflected in interest income over the life of the loans as accretable yield.

Allowance for Credit Losses. The allowance for credit losses is comprised of the allowance for loan losses and the reserve for unfunded credit commitments. In general, determining the amount of the allowance requires significant judgment and the use of estimates by management. Sterling maintains an allowance for loan losses to absorb probable losses in the loan portfolio based on a quarterly analysis of the portfolio and expected losses. This analysis is designed to determine an appropriate level and allocation of the allowance for losses among loan classes by considering factors affecting loan losses, including specific and confirmed losses, levels and trends in classified and nonperforming loans, historical loan loss experience, loan migration analysis, current national and local economic conditions, volume, growth and composition of the portfolio, regulatory guidance and other relevant factors. The reserve for unfunded credit commitments includes loss coverage for loan repurchases arising from mortgage banking activities. Management monitors the loan portfolio to evaluate the adequacy of the allowance. The allowance can increase or decrease each quarter based upon the results of management's analysis.

The portfolio is grouped into several industry segments for loans collectively evaluated for impairment based on characteristics such as loan type, borrower and collateral. Loan migration to loss data is used to determine the annual probability of default. The annual probability of default is adjusted for the estimated loss emergence period and may be further adjusted based on the assessment of qualitative factors. The estimated loss emergence period reflects an estimate of the time frame during which losses may be realized. Sterling establishes the expected loss rate on loans using the losses on charged-off and foreclosed loans from the most recent 12 months to estimate the amount that would be lost if a default were to occur, which is termed the “loss given default.” The probability of default is multiplied by the loss given default to calculate the expected losses for each loan class. The calculated expected loss for each loan class is compared to the actual one and three year (annualized) losses for each respective loan class. If the calculated expected loss rate is less than the actual one and three year loss rates, then the expected loss rate would be set at the greater of the actual one or three year loss rate.

Sterling may also maintain an unallocated allowance to provide for other credit losses that may exist in the loan portfolio that are not taken into consideration in establishing the probability of default and loss given default. The unallocated amount may generally be maintained at higher levels during times of economic uncertainty. The unallocated amount is reviewed at least quarterly based on credit and economic trends.

Individual loan reviews are based upon specific quantitative and qualitative criteria, including the size of the loan, loan quality ratings, value of collateral, repayment ability of borrowers and guarantors, as applicable, and historical experience factors. The historical experience factors utilized and allowances for homogeneous loans (such as residential mortgage loans and consumer loans) are collectively evaluated based upon historical loss experience, loan migration analysis, trends in losses and delinquencies, growth of loans in particular markets, and known changes in economic conditions in each particular lending market.

A loan is considered impaired when, based on current information and events, it is probable Sterling will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of delay, the reasons for the delay, the borrower's prior payment record, the ability and willingness of guarantors to make payments, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's obtainable market price or the fair value of collateral if the loan is collateral-dependent.

The fair value of the underlying collateral for real estate loans, which may or may not be collateral-dependent, is determined by using appraisals from qualified external sources. For commercial properties and residential development loans, the external appraisals are reviewed by qualified internal appraisal staff to ensure compliance with appropriate standards and technical accuracy. Appraisals are updated according to regulatory provisions for extensions or restructurings of commercial or residential real estate construction and permanent loans that have not performed within the terms of the original loan. Updated appraisals are also ordered for loans that have not been restructured, but that have stale valuation information, generally defined in the current market as information older than one year, and deteriorating credit quality that warrants classification as substandard.

The timing of obtaining appraisals may vary, depending on the nature and complexity of the property being evaluated and the general breadth of appraisal activity in the marketplace, but generally it is within 30 to 90 days of recognition of substandard status, following determination of collateral dependency, or in connection with a loan's maturity or a negotiation that may result in the restructuring or extension of a real estate secured loan. Delays in timing may occur to comply with actions such as a bankruptcy filing or provisions of an SBA guarantee.

Estimates of fair value may be used for substandard collateral-dependent loans at quarter end if external appraisals are not expected to be completed in time for determining quarter end results or to update values between appraisal dates to reflect recent sales activity of comparable inventory or pending property sales of the subject collateral. During periods of declining real estate values, Sterling may record an additional specific reserve for impaired loans for which an updated valuation analysis has not been completed within the last quarter. Estimates of value are not used to increase a value; however, estimates may be used to recognize deterioration of market values in quarters between appraisal updates. The judgment with respect to recognition of any provision or related charge-off for a confirmed loss also takes into consideration whether the loan is collateral-dependent or whether it is supported by sources of repayment or cash flow beyond the collateral that is being valued. For loans that are deemed to be collateral-dependent, the amount of charge-off is determined in relation to the collateral's appraised value. For loans that are not deemed to be collateral-dependent, the amount of charge-off or specific reserve may differ from the collateral's appraised value because there is additional support for the loan, such as cash flow from other sources.

The reserve for unfunded credit commitments includes loss exposure from Sterling's mortgage banking operations. Loans sold into the secondary market are sold with limited recourse to Sterling, meaning that Sterling may be obligated to repurchase any loans that are not underwritten in accordance with agency guidelines or have borrower misrepresentations.

While management uses available information to provide for loan losses, the ultimate collectability of a substantial portion of the loan portfolio and the need for future additions to the allowance will be influenced by changes in economic conditions and other relevant factors. There can be no assurance that the allowance for credit losses will be adequate to cover all losses, but management believes the allowance for credit losses was appropriate at December 31, 2012.

Loans Held for Sale. Any loan that management determines will not be held to maturity is classified as held for sale. Residential loans held for sale are carried at fair value in order to match changes in the value of the loans with the value of the economic hedges on the loans without applying complex hedge accounting. The fair value of loans held for sale is determined based upon an analysis of investor quoted pricing inputs in the secondary market. Other loan types classified as held for sale are carried at the lower of cost or market.

Loan Origination and Commitment Fees. Loan origination fees, net of direct origination costs, are deferred and recognized as interest income using the effective yield method. If the related loan is sold, the remaining net amount, which is part of the basis of the loan, is considered in determining the gain or loss on sale.

Loan commitment fees are deferred until the expiration of the commitment period unless management believes there is a remote likelihood that the underlying commitment will be exercised, in which case the fees are amortized to fee income using the straight-line method over the commitment period. If a loan commitment is exercised, the deferred commitment fee is accounted for in the same manner as a loan origination fee. Deferred commitment fees associated with expired commitments are recognized as fee income.

Other Real Estate Owned. Prior to foreclosure, Sterling considers all viable alternatives, checks with the proper authorities to ensure the existence of a valid and recorded lien on the property and determines the current market value of the collateral. Property and other assets acquired through foreclosure of defaulted mortgage or other collateralized loans are recorded at fair value, less estimated costs to sell the property and other assets. The fair value of OREO is generally determined using “as is” or disposition values from appraisals obtained by independent appraisers.

An allowance for losses on OREO is designed to include amounts for estimated losses as a result of impairment in value of the real property after repossession. Sterling reviews its OREO for impairment in value at least quarterly or whenever events or circumstances indicate that the carrying value of the property or other assets may not be recoverable. In performing the review, if the fair value, less selling costs, is less than its carrying value, a specific reserve is established as a charge to noninterest expenses.

Property and Equipment

Property and Equipment. Property and equipment is carried at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the lesser of the estimated useful lives or the related lease terms of the assets. Expenditures for new property and equipment and major renewals or betterments are capitalized. Expenditures for repairs and maintenance are charged to expense as incurred. Upon sale or retirement, the cost and related accumulated depreciation are removed from the respective property or equipment accounts, and the resulting gains or losses are reflected in operations.

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets. Goodwill represents the difference between the value of consideration paid and the fair value of the net assets received in a business combination. Sterling records impairment losses as charges to noninterest expense and adjustments to the carrying value of goodwill.

Goodwill is tested for impairment on an annual basis as of June 30, or more frequently as events occur, or as current circumstances and conditions warrant. A qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill, determines the extent to which further testing is required. If the qualitative analysis concludes that further analysis is required, that analysis would compare the fair value of each of the reporting units, including goodwill, to the respective carrying amounts.

Other intangible assets are comprised primarily of core deposit intangibles, as well as other identifiable intangibles related to First Independent's trust and wealth management business. Core deposit intangibles are amortized over the estimated useful life of the deposit relationship, which is generally eight to 10 years. Other intangible assets are periodically assessed for impairment when certain triggering events occur that indicate the possibility of impairment.

Mortage Servicing Rights adn Transfers of Financial Assets

Mortgage Servicing Rights and Transfers of Financial Assets. Gains or losses on “servicing-retained” loan sale transactions generally include a component reflecting the differential between the contractual interest rate of the loan and the interest rate to be received by the investor. The present value of the estimated future profit for servicing the loans and changes in the fair value of any related derivatives,is also taken into account in determining the amount of gain or loss on the sale of these loans. For loans sold servicing-retained, the fair value of mortgage servicing rights is recorded as an asset, with their value estimated using a discounted cash flow methodology to arrive at the present value of future expected earnings from the servicing of the loans. Model inputs include prepayment speeds, market interest rates, servicing costs, contractual interest rates on the loans being serviced, and the amount of other fee income generated over the servicing contract. Mortgage servicing rights are amortized in proportion to, and over the estimated period of the servicing revenues. To the extent the carrying value of mortgage servicing rights exceeds the subsequent fair value estimates, a valuation allowance is recognized. Subsequent recoveries in value are recognized up to the original carrying value of the mortgage servicing rights only to the extent of cumulative valuation adjustments.

Loans sold into the secondary market are considered transfers of financial assets. These transfers are accounted for as sales when control over the asset has been surrendered, which is deemed to have occurred when: an asset does not have any claims to it by the transferor or their creditors, including in bankruptcy or other receivership situations; the transferee obtains the unconditional right to pledge or exchange the asset; or the transfer does not include a repurchase provision above the limited recourse provisions of these loan sales.

Income Taxes

Income Taxes. Sterling estimates income taxes payable based on the amount it expects to owe various taxing authorities. Accrued income taxes represent the net estimated amount due to, or to be received from, taxing authorities. In estimating accrued income taxes, Sterling assesses the relative merits and risks of the appropriate tax treatment of transactions, taking into account the applicable statutory, judicial and regulatory guidance in the context of Sterling's tax position. Sterling also considers recent audits and examinations, as well as its historical experience in making such estimates. Although Sterling uses available information to record income taxes, underlying estimates and assumptions can change over time as a result of unanticipated events or circumstances. Penalties and interest associated with any potential estimate variances would be included in income tax expense in the consolidated financial statements.  

A deferred tax asset valuation allowance was established during 2009 due to the three year cumulative loss and uncertainty at that time regarding Sterling's ability to generate future taxable income. Reversal of the deferred tax asset valuation allowance occurred during the quarter ended June 30, 2012, which marked the sixth consecutive quarter of profitability for Sterling. Prior to reversing the allowance, management analyzed both positive and negative evidence that could affect the realization of the deferred tax asset. Based on the earnings performance trend and projections of income through 2013, improvement in asset quality, higher net interest margin and improvements in other key financial ratios, expectations of continued profitability, the length of the carry-forward period for its net operating losses and tax credits, an analysis of the reversal of existing temporary differences, and an evaluation of its loss carry-back ability and tax planning strategies, Sterling determined that it was more likely than not that the net deferred tax asset would be realized. This assessment was updated as of December 31, 2012, resulting in the same conclusion.

Earnings (Loss) Per Share

Earnings (Loss) Per Share. Earnings (loss) per share—basic is computed by dividing net income or loss available to common shareholders by the weighted average number of shares outstanding during the period. Earnings (loss) per share—diluted is computed by dividing net income or loss available to common shareholders by the weighted average number of shares outstanding, increased by the additional shares that would have been outstanding if all potentially dilutive and contingently issuable shares had been issued. The accounting standards codification requires a two-class method of computing earnings per share for entities that have participating securities such as Sterling’s unvested restricted shares. Application of the two-class method resulted in the equivalent earnings per share to the treasury method.

Share-Based Compensation

Stock-Based Compensation. Stock options and restricted stock issued as compensation are recorded as an expense, over the vesting term of the awards, at their estimated grant date fair value. The Black-Scholes option pricing model is used to estimate the fair value of stock options granted, while the value of restricted stock awards are recorded using the grant date market closing price of Sterling’s common stock.

Comprehensive Income (Loss)

Comprehensive Income (Loss). Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) is comprised of unrealized gains and losses on available for sale securities, and is a separate component of shareholders’ equity. Sterling reports and displays comprehensive income (loss) and its components (revenues, expenses, gains and losses) on its Statement of Comprehensive Income (Loss).

Derivatives and Hedging

Derivatives and Hedging. Sterling enters into interest rate swap transactions with loan customers. The interest rate risk on these swap transactions is hedged by Sterling entering into offsetting interest rate swap agreements with various unaffiliated counterparties (“broker-dealers”). Both customer and broker-dealer related interest rate derivatives are carried at fair value, which includes consideration of counterparty credit risk.

As part of its mortgage banking activities, Sterling makes commitments to prospective borrowers on residential mortgage loan applications, which may have the interest rates locked for a period of 10 to 60 days or longer, if extended (“interest rate lock commitments”). The interest rate lock commitments fair valued below are net of the anticipated fallout. These interest rate lock commitments, and loans held for sale that have not been committed to investors, give rise to interest rate risk. Sterling hedges the interest rate risk arising from these mortgage banking activities by entering into forward sales agreements on MBS with third parties (“forward commitments”).

Reclassifications

Reclassifications. Certain amounts in prior period financial statements have been reclassified to conform to the current year’s presentation. These reclassifications had no effect on the accumulated deficit or net income(loss) as previously reported.

Accounting Changes and Error Corrections

During 2012, Sterling identified an error related to the classification of the loss on foreclosure amounts reported in the Consolidated Statement of Cash Flows for the quarter ended March 31, 2012, and for the years ended December 31, 2011 and 2010, and the interim periods therein. The loss on foreclosure amounts were previously included in the cash flows from operating activities in the "Loss on OREO" line item, instead of the cash flows from investing activities in the "Net change in loans" line item. In accordance with the SEC Staff Accounting Bulletin (SAB) No. 99, "Materiality," and SAB No. 108, "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements," management evaluated the materiality of the error from qualitative and quantitative perspectives and concluded that the error was immaterial to prior periods. Consequently, the Consolidated Statement of Cash Flows contained in this Report has been revised for the years ended December 31, 2011 and 2010. This change resulted in a decrease of $51.3 million and $66.1 million to cash flows from operating activities and an increase of the same amount to cash flows from investing activities for the years ended December 31, 2011 and 2010, respectively. This change did not affect net income(loss), the balance sheet, or shareholders' equity for any period.

Recent Accounting Pronouncements

Recent Accounting Pronouncements. In April 2011, the FASB issued Accounting Standards Update ("ASU") 2011-03, “Reconsideration of Effective Control for Repurchase Agreements.” This update to codification topic 860 revises the assessment of effective control for purposes of determining if a repurchase agreement should be accounted for as a sale, compared with a secured borrowing. ASU 2011-03 became effective for Sterling on January 1, 2012, and did not have a material effect on Sterling’s consolidated financial statements.

In May 2011, the FASB issued ASU 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS.” This update to codification topic 820 clarifies the application of existing fair value measurement and disclosure requirements, and implements changes to the codification that align U.S. GAAP and IFRS. This update became effective for Sterling on January 1, 2012, and did not have a material effect on Sterling's consolidated financial statements.

In September 2011, the FASB issued ASU 2011-08, “Intangibles-Goodwill and Other: Testing Goodwill for Impairment.” ASU 2011-08 is intended to simplify goodwill impairment testing by adding a qualitative review step to assess whether the required quantitative impairment analysis that exists today is necessary. Under the amended rule, a company will not be required to calculate the fair value of a business that contains recorded goodwill unless it concludes, based on the qualitative assessment, that it is more likely than not that the fair value of that business is less than its book value. If such a decline in fair value is deemed more likely than not to have occurred, then the quantitative goodwill impairment test that exists under current GAAP must be completed; otherwise, goodwill is deemed to be not impaired and no further testing is required until the next annual test date (or sooner if conditions or events before that date raise concerns of potential impairment in the business). The amended goodwill impairment guidance does not affect the manner in which a company estimates fair value. ASU 2011-08 became effective for Sterling on January 1, 2012, and did not have a material effect on Sterling’s consolidated financial statements.

In December 2011, the FASB issued ASU 2011-11, “Balance Sheet: Disclosures about Offsetting Assets and Liabilities.” ASU 2011-11 adds certain additional disclosure requirements about financial instruments and derivatives instruments that are subject to netting arrangements. The new disclosures are required for annual reporting periods beginning on or after January 1, 2013, and interim periods within those periods. This standard could add additional disclosures if applicable to Sterling. However, it is not expected to have a material impact on Sterling’s consolidated financial statements.

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Income Taxes Uncertain tax positions (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Income Tax Disclosure [Abstract]
Deferred Tax Assets, Valuation Allowance	$ 1,764	$ 327,449
Unrecognized tax benefits	525	1,586	6,330
Additions - current year tax positions	70	75	65
Additions - prior year tax positions	0	0	0
Reductions - prior year tax positions	(183)	(1,136)	(4,809)
Unrecognized tax benefits	412	525	1,586
Accrued Interest And Penalties, Net of Tax	100	103	140
Unrecognized tax benefits, net of accrued interest and penalties	512	628	1,726
Unrecognized tax benefits that would impact effective tax rate	$ 386

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Earnings Per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Sep. 19, 2012
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
Net Income (Loss) Available to Common Shareholders									$ 385,721	$ 39,133	$ (756,143)
Class of Warrant or Right, Number of Securities Called by Warrants or Rights	2,749,044				2,625,000				2,749,044	2,625,000		97,541
Warrants and Rights Outstanding												$ 825
Weighted average shares outstanding - basic (in shares)	62,159,683	62,139,833	62,112,936	62,078,404	61,989,094	61,958,183	61,943,851	61,930,783	62,122,862	61,955,659	14,253,869
Dilutive securities outstanding (in shares)									649,217	275,549	0
Weighted average shares outstanding - diluted (in shares)	62,867,030	62,845,864	62,610,054	62,682,987	62,194,011	62,041,203	62,312,224	62,335,212	62,772,079	62,231,208	14,253,869
Earnings per share - basic (in dollars per share)	$ 0.34	$ 0.49	$ 5.17	$ 0.21	$ 0.24	$ 0.18	$ 0.12	$ 0.09	$ 6.21	$ 0.63	$ (53.05)
Earnings per share - diluted (in dollars per share)	$ 0.33	$ 0.49	$ 5.13	$ 0.21	$ 0.24	$ 0.18	$ 0.12	$ 0.09	$ 6.14	$ 0.63	$ (53.05)
Weighted Average antidilutive securities outstanding (in shares)									14,022	21,239	996,208
Stock options
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
Weighted Average antidilutive securities outstanding (in shares)									13,792	16,511	20,700
Warrant [Member]
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
Weighted Average antidilutive securities outstanding (in shares)									0	0	954,754
Restricted shares
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
Weighted Average antidilutive securities outstanding (in shares)									230	4,728	20,754

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Regulatory Capital (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Tier One Leverage Capital [Abstract]
Tier One Leverage Capital	$ 1,115,834	$ 1,045,761
Tier One Leverage Capital to Average Assets	12.10%	11.40%
Tier One Leverage Capital Required for Capital Adequacy	367,909	366,048
Tier One Leverage Capital Required for Capital Adequacy to Average Assets	4.00%	4.00%
Tier One Leverage Capital Required to be Well Capitalized	459,886	457,560
Tier One Leverage Capital Required to be Well Capitalized to Average Assets	5.00%	5.00%
Tier One Risk Based Capital [Abstract]
Tier One Risk Based Capital	1,115,834	1,045,761
Tier One Risk Based Capital to Risk Weighted Assets	17.50%	17.80%
Tier One Risk Based Capital Required for Capital Adequacy	255,750	234,859
Tier One Risk Based Capital Required for Capital Adequacy to Risk Weighted Assets	4.00%	4.00%
Tier One Risk Based Capital Required to be Well Capitalized	383,625	352,288
Tier One Risk Based Capital Required to be Well Capitalized to Risk Weighted Assets	6.00%	6.00%
Capital [Abstract]
Capital	1,196,773	1,120,563
Capital to Risk Weighted Assets	18.70%	19.10%
Capital Required for Capital Adequacy	511,499	469,718
Capital Required for Capital Adequacy to Risk Weighted Assets	8.00%	8.00%
Capital Required to be Well Capitalized	639,374	587,147
Capital Required to be Well Capitalized to Risk Weighted Assets	10.00%	10.00%
Sterling Bank
Tier One Leverage Capital [Abstract]
Tier One Leverage Capital	1,100,443	1,019,016
Tier One Leverage Capital to Average Assets	12.00%	11.10%
Tier One Leverage Capital Required for Capital Adequacy	368,053	366,018
Tier One Leverage Capital Required for Capital Adequacy to Average Assets	4.00%	4.00%
Tier One Leverage Capital Required to be Well Capitalized	460,066	457,523
Tier One Leverage Capital Required to be Well Capitalized to Average Assets	5.00%	5.00%
Tier One Risk Based Capital [Abstract]
Tier One Risk Based Capital	1,100,443	1,019,016
Tier One Risk Based Capital to Risk Weighted Assets	17.20%	17.40%
Tier One Risk Based Capital Required for Capital Adequacy	255,875	234,468
Tier One Risk Based Capital Required for Capital Adequacy to Risk Weighted Assets	4.00%	4.00%
Tier One Risk Based Capital Required to be Well Capitalized	383,812	351,705
Tier One Risk Based Capital Required to be Well Capitalized to Risk Weighted Assets	6.00%	6.00%
Capital [Abstract]
Capital	1,181,421	1,093,697
Capital to Risk Weighted Assets	18.50%	18.70%
Capital Required for Capital Adequacy	511,749	468,936
Capital Required for Capital Adequacy to Risk Weighted Assets	8.00%	8.00%
Capital Required to be Well Capitalized	$ 639,687	$ 586,171
Capital Required to be Well Capitalized to Risk Weighted Assets	10.00%	10.00%

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Business Combinations (Details) (USD $)	12 Months Ended			10 Months Ended	12 Months Ended				12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Feb. 29, 2012	Dec. 31, 2012 First Independent Bank	Dec. 31, 2012 First Independent Bank	Feb. 29, 2012 First Independent Bank Branches Installments	Dec. 31, 2012 Minimum First Independent Bank	Dec. 31, 2012 Maximum First Independent Bank	Dec. 31, 2012 Evidence of credit deterioration	Feb. 29, 2012 Evidence of credit deterioration	Feb. 29, 2012 No Evidence of credit deterioration
Business Acquisition, Cost of Acquired Entity, Purchase Price [Abstract]
Net purchase price						$ 40,600,000
Cash paid						28,900,000
Contingent consideration fair value	15,442,000	0				11,700,000
First installment					12 months
Second installment					18 months
Number of installments payable						2
Potential cash payment range							0	17,000,000
Business Acquisition, Purchase Price Allocation, Noncurrent Assets [Abstract]
Additional branches acquired in Portland/Vancouver market						14
Cash and cash equivalents			150,045,000
Investments and MBS			187,465,000
Loans receivable, net			349,990,000
Goodwill	22,577,000	0	22,577,000
Core deposit intangible			11,974,000
Fixed assets			4,038,000
Other assets			10,886,000
Total assets acquired			736,975,000
Deposits			695,919,000
Other Liabilties			409,000
Total liabilities assumed			696,328,000
Net assets acquired			40,647,000
Business Acquisition, Pro Forma Information [Abstract]
Net interest income	311,159,000	326,916,000		20,145,000
Noninterest income	155,258,000	135,828,000		4,757,000
Net income	389,935,000	49,469,000		10,817,000
Earnigns per share - basic	$ 6.28	$ 0.80		$ 0.17
Earnings per share - diluted	$ 6.21	$ 0.79		$ 0.17
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Acquired During Period [Abstract]
Contractual cash flows										24,408,000
Expected prepayments and credit losses										7,220,000
Expected cash flows										17,188,000
Present value of expected cash flows										(15,265,000)
Accretable yield										1,923,000
Certain Loans Acquired in Transfer Not Accounted for as Held-to-maturity Debt Securities, Accretable Yield Movement Schedule [Roll Forward]
Beginning Balance									0
Additions									1,923,000
Accretable yield									(756,000)
Reclassifications	165,000
Ending Balance									1,332,000
Loans Acquired, Not Accounted for as Debt Securities, Held-to-maturity Category [Abstract]
Unpaid principal of impaired loans	18,200,000
Carrying amount of purchase impaired loans	11,200,000
Unpaid principal balance and contractual interest											403,800,000
Cash flows not expected to be collected											12,700,000
Cash flow discounted on loans											21,800,000
Investment Income, Net, Amortization of Discount and Premium [Abstract]
2013	4,210,000
2014	2,796,000
2015	1,724,000
2016	1,031,000
2017	$ 679,000

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Income Taxes Income Tax Expense (Benefit) breakdown (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Income Tax Disclosure [Abstract]
Current Federal Tax Expense (Benefit)									$ (163)	$ (248)	$ (102)
Current State and Local Tax Expense (Benefit)									0	(27)	(11)
Current Income Tax Expense (Benefit)									(163)	(275)	(113)
Deferred Federal Income Tax Expense (Benefit)									(269,968)	248	102
Deferred State and Local Income Tax Expense (Benefit)									(21,912)	27	11
Deferred income tax (provision) benefit									(291,880)	275	113
Income tax benefit	$ (3,201)	$ 0	$ (288,842)	$ 0	$ 0	$ 0	$ 0	$ 0	$ (292,043)	$ 0	$ 0

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Commitments and Contingencies Acquisition (Details) (USD $)	Dec. 31, 2012	Dec. 31, 2011	Oct. 22, 2012 American Heritage Holdings [Member] Scenario, Forecast [Member]	Dec. 31, 2012 Acquiree [Member] Boston Private [Member]
Business Acquisition [Line Items]
Consideration			$ 6,500,000
Aggregate loans of acquiree				270,000,000
Deposits of acquiree	$ 6,436,117,000	$ 6,485,818,000		$ 200,000,000

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Shareholders' Equity (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2012	Sep. 19, 2012	Dec. 31, 2011
Equity [Abstract]
Preferred Stock, Shares Authorized	10,000,000	10,000,000		10,000,000
Common Stock, Shares Authorized	151,515,151	151,515,151		151,515,151
Common Stock, Shares Outstanding	62,207,529	62,207,529		62,057,645
Common Stock, Shares, Issued	62,176,628	62,176,628		62,002,884
Common Stock, Dividends, Per Share, Cash Paid	$ 0.35	$ 0.80
Dividends, Common Stock, Cash		$ (49,743)
Class of Warrant or Right, Number of Securities Called by Warrants or Rights	2,749,044	2,749,044	97,541	2,625,000
Class of Warrant or Right, Exercise Price of Warrants or Rights	13.86	13.86		14.52

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Benefit Plans (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Defined Benefit Plan Disclosure [Line Items]
Defined Contribution Plan, Maximum Annual Contributions Per Employee, Percent	10.00%
Defined Contribution Plan, Employer Matching Contribution, Percent of Match	35.00%
Defined Contribution Plan, Employee Supplemental Contribution	65.00%
Defined Contribution Plan, Cost Recognized	$ 3,000,000	$ 3,000,000
Pension and Other Postretirement Benefit Expense	530,000	531,000	505,000
Pension and Other Postretirement Defined Benefit Plans, Liabilities		8,000,000
Employee Stock Purchase Plan, Eligible Employee Purchase Discount	15.00%
Employee stock purchase plan, shares	38,926
Employee Share Purchase Plan, Shares Available for Purchase	1,961,074
Deferred Compensation Arrangement with Individual, by Type of Compensation, Pension and Other Postretirement Benefits [Member]
Defined Benefit Plan Disclosure [Line Items]
Pension and Other Postretirement Benefit Expense	172,000	94,000	132,000
Pension and Other Postretirement Defined Benefit Plans, Liabilities	$ 4,000,000	$ 5,000,000
Minimum
Defined Benefit Plan Disclosure [Line Items]
Employee Stock Purchase Plan, Eligible Employee Purchase Discount	0.00%
Maximum
Defined Benefit Plan Disclosure [Line Items]
Employee Stock Purchase Plan, Eligible Employee Purchase Discount	15.00%

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Income Taxes Deferred Tax Asset (Details) (USD $)	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Deferred Tax Asset and Liability, Net [Line Items]
NOL carryforwards - federal	$ 242,318,000	$ 250,946,000
NOL carryforwards - state	21,443,000	22,110,000
Tax credits - federal	7,671,000	7,587,000
Tax credits - state	2,594,000	4,167,000
Allowance for losses on loans	61,385,000	75,393,000
Deferred compensation	10,760,000	12,485,000
Bonus accrual	4,670,000	2,138,000
Intangibles	2,284,000	6,000
Purchase accounting premiums and discounts	2,087,000	3,877,000
Nonaccrual loans	1,931,000	2,167,000
Deferred rent	1,119,000	1,063,000
Other	3,394,000	3,044,000
Deferred tax assets	361,656,000	384,983,000
Unrealized gain on available-for-sale securities	22,627,000	22,670,000
FHLB Seattle dividends	16,325,000	16,486,000
Mortgage servicing rights	11,869,000	8,169,000
Fair value - Llans held for sale	8,966,000	3,093,000
Deferred loan fees	5,867,000	5,162,000
Prepaid expenses	2,151,000	1,945,000
ASC 740 (FIN 48) - temporary differences	5,000	9,000
Deferred tax liabilities	67,810,000	57,534,000
Deferred Tax Assets, Valuation Allowance	(1,764,000)	(327,449,000)
Net deferred tax asset	292,082,000	0
Deferred Tax Assets, Percentage Restriction on Stock Transfer, Per Investor, Common Stock Outstanding			4.95%
Domestic Tax Authority [Member]
Deferred Tax Asset and Liability, Net [Line Items]
Net operatin loss carryforwards	692,300,000
State and Local Jurisdiction [Member]
Deferred Tax Asset and Liability, Net [Line Items]
Net operatin loss carryforwards	$ 442,400,000

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Securities Sold Under Repurchase Agreements (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Assets Sold under Agreements to Repurchase [Line Items]
Available-for-sale Securities Pledged as Collateral	$ 738,600,000	$ 1,280,000,000
Short-term Debt, Average Outstanding Amount	959,500,000	1,050,000,000
Short-term Debt, Maximum Month-end Outstanding Amount	1,070,000,000	1,060,000,000
Assets Sold under Agreements to Repurchase, Carrying Amount	586,867,000	1,055,763,000
Assets Sold under Agreements to Repurchase, Interest Rate	3.18%	3.64%
Due within 1 yr
Assets Sold under Agreements to Repurchase [Line Items]
Assets Sold under Agreements to Repurchase, Carrying Amount	86,867,000	205,763,000
Assets Sold under Agreements to Repurchase, Interest Rate	1.20%	3.08%
Due within 2 yrs
Assets Sold under Agreements to Repurchase [Line Items]
Assets Sold under Agreements to Repurchase, Carrying Amount	0	100,000,000
Assets Sold under Agreements to Repurchase, Interest Rate	0.00%	300.00%
Due within 3 yrs
Assets Sold under Agreements to Repurchase [Line Items]
Assets Sold under Agreements to Repurchase, Carrying Amount	50,000,000	0
Assets Sold under Agreements to Repurchase, Interest Rate	247.00%	0.00%
Due within 4 yrs
Assets Sold under Agreements to Repurchase [Line Items]
Assets Sold under Agreements to Repurchase, Carrying Amount	0	150,000,000
Assets Sold under Agreements to Repurchase, Interest Rate	0.00%	376.00%
Due within 5 yrs
Assets Sold under Agreements to Repurchase [Line Items]
Assets Sold under Agreements to Repurchase, Carrying Amount	400,000,000	100,000,000
Assets Sold under Agreements to Repurchase, Interest Rate	408.00%	397.00%
Thereafter
Assets Sold under Agreements to Repurchase [Line Items]
Assets Sold under Agreements to Repurchase, Carrying Amount	$ 50,000,000	$ 500,000,000
Assets Sold under Agreements to Repurchase, Interest Rate	261.60%	390.00%

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Derivatives And Hedging

12 Months Ended

Dec. 31, 2012

General Discussion of Derivative Instruments and Hedging Activities [Abstract]

Derivatives and Hedging

Derivatives and Hedging:

Sterling enters into interest rate swap transactions with loan customers. The interest rate risk on these swap transactions is hedged by Sterling entering into offsetting interest rate swap agreements with various unaffiliated counterparties (“broker-dealers”). Both customer and broker-dealer related interest rate derivatives are carried at fair value, which includes consideration of counterparty credit risk.

As part of its mortgage banking activities, Sterling makes commitments to prospective borrowers on residential mortgage loan applications, which may have the interest rates locked for a period of 10 to 60 days or longer, if extended (“interest rate lock commitments”). The interest rate lock commitments are fair valued net of the anticipated fallout. These interest rate lock commitments, and loans held for sale that have not been committed to investors, give rise to interest rate risk. Sterling hedges the interest rate risk arising from these mortgage banking activities by entering into forward sales agreements on MBS with third parties (“forward commitments”). Residential mortgage loans held for sale that were not committed to investors were $419.1 million and $192.4 million as of December 31, 2012 and December 31, 2011, respectively.

The following table summarizes Sterling’s mortgage banking operations and interest rate swaps:

	December 31, 2012
			Fair Value
	Notional		Asset		Liability
	(in thousands)
Interest rate lock commitments, net	$	242,061	$	9,035	$	0
Forward commitments	531,000		0		1,881
Interest rate swaps - broker-dealer	44,846		0		2,144
Interest rate swaps - customer	36,158		2,148		0
	December 31, 2011
			Fair Value
	Notional		Asset		Liability
	(in thousands)
Interest rate lock commitments, net	$	181,456	$	5,558	$	0
Forward commitments	315,579		0		3,785
Interest rate swaps - broker-dealer	43,213		0		4,527
Interest rate swaps - customer	45,820		4,711		0

The fair value of these derivatives is included in other assets and liabilities, respectively. Gains and losses on Sterling’s mortgage banking derivative transactions are included in mortgage banking income, while gains and losses on Sterling’s interest rate swap agreements are included in other noninterest income. The following table sets forth these gains and losses:

	Years Ended December 31,
	2012			2011			2010
	(in thousands)
Mortgage banking operations	$	9,816		$	(10,297	)	$	(8,871	)
Other noninterest income	(553		)	61			110

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Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2012

Commitments and Contingencies Disclosure [Abstract]

Schedule of Loss Contingencies by Contingency

The undisbursed balances and other commitments as of the dates indicated are summarized as follows:

	December 31,
	2012		2011
	(in thousands)
Undisbursed loan funds - construction loans	$	16,499	$	17,617
Undisbursed lines of credit - commercial loans	524,065		309,560
Undisbursed lines of credit - consumer loans	399,691		403,112
Firm commitments to sell loans	28,485		14,760

Schedule of Future Minimum Rental Payments for Operating Leases

Future minimum rental commitments as of December 31, 2012, under non-cancelable operating leases with initial or remaining terms of more than one year, are as follows:

	Amount
	(in thousands)
Years ended:
December 31, 2013	$	14,012
December 31, 2014	12,723
December 31, 2015	10,298
December 31, 2016	8,157
December 31, 2017	6,365
Thereafter	26,713
	$	78,268

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Advances from Federal Home Loan Bank (Tables)

12 Months Ended

Dec. 31, 2012

Advances from Federal Home Loan Banks [Abstract]

Schedule of Federal Home Loan Bank, Advances, by Branch of FHLB Bank [Table Text Block]

The advances from FHLB are repayable as follows:

	December 31, 2012				December 31, 2011
	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate
	(in thousands)
Due within 1 year	$	269,053	0.96	%	$	300,000	0.28	%
Due in 1 to 2 years	55,000		0.72		69,164		2.95
Due in 2 to 3 years	50,550		0.64		5,000		3.12
Due in 3 to 4 years	50,196		0.68		550		2.84
Due in 4 to 5 years	123,000		1.45		245		8.08
Due after 5 years	57,531		1.90		30,650		4.34
	$	605,330	1.08	%	$	405,609	1.09	%

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Income Taxes (Details) (USD $)	3 Months Ended								12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Operating Loss Carryforwards [Line Items]
Income tax benefit	$ (3,201,000)	$ 0	$ (288,842,000)	$ 0	$ 0	$ 0	$ 0	$ 0	$ (292,043,000)	$ 0	$ 0
Deferred tax asset, net	292,082,000				0				292,082,000	0
Operating loss and tax credit carryforward included in deferred tax asset	274,000,000				285,000,000				274,000,000	285,000,000
Deferred Tax Assets, Valuation Allowance	$ 1,764,000				$ 327,449,000				$ 1,764,000	$ 327,449,000

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OREO (Tables)

12 Months Ended

Dec. 31, 2012

Real Estate [Abstract]

Other Real Estate, Roll Forward

Changes in OREO and the related allowance were as follows for the periods presented:

	Years Ended December 31,
	2012			2011			2010
	(in thousands)
OREO, gross:
Beginning balance, January 1	$	98,187		$	183,452		$	91,476
Additions	33,499			177,881			265,115
Sales	(85,837		)	(241,028		)	(155,409		)
Charge-offs	(18,534		)	(27,731		)	(23,164		)
Other changes	1,282			5,613			5,434
Ending balance, December 31	$	28,597		$	98,187		$	183,452
Allowance, OREO:
Beginning balance, January 1	$	16,277		$	21,799		$	8,204
Provision	5,812			22,209			36,759
Charge-offs	(18,534		)	(27,731		)	(23,164		)
Ending balance, December 31	$	3,555		$	16,277		$	21,799
OREO, net	$	25,042		$	81,910		$	161,653

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Regulatory Capital (Tables)

12 Months Ended

Dec. 31, 2012

Regulatory Capital [Abstract]

Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations

The following table sets forth the respective regulatory capital positions for Sterling and Sterling Bank:

	Actual				Adequately Capitalized				Well-Capitalized
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(in thousands)
As of December 31, 2012
Tier 1 leverage ratio
Sterling	$	1,115,834	12.1	%	$	367,909	4.0	%	$	459,886	5.0	%
Sterling Bank	1,100,443		12.0	%	368,053		4.0	%	460,066		5.0	%
Tier 1 risk-based capital ratio
Sterling	1,115,834		17.5	%	255,750		4.0	%	383,625		6.0	%
Sterling Bank	1,100,443		17.2	%	255,875		4.0	%	383,812		6.0	%
Total risk-based capital ratio
Sterling	1,196,773		18.7	%	511,499		8.0	%	639,374		10.0	%
Sterling Bank	1,181,421		18.5	%	511,749		8.0	%	639,687		10.0	%
As of December 31, 2011
Tier 1 leverage ratio
Sterling	1,045,761		11.4	%	366,048		4.0	%	457,560		5.0	%
Sterling Bank	1,019,016		11.1	%	366,018		4.0	%	457,523		5.0	%
Tier 1 risk-based capital ratio
Sterling	1,045,761		17.8	%	234,859		4.0	%	352,288		6.0	%
Sterling Bank	1,019,016		17.4	%	234,468		4.0	%	351,705		6.0	%
Total risk-based capital ratio
Sterling	1,120,563		19.1	%	469,718		8.0	%	587,147		10.0	%
Sterling Bank	1,093,697		18.7	%	468,936		8.0	%	586,171		10.0	%

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Property and Equipment (Details) (USD $) In Thousands, unless otherwise specified					12 Months Ended				12 Months Ended				12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012 Buildings and improvements	Dec. 31, 2011 Buildings and improvements	Dec. 31, 2012 Buildings and improvements Minimum	Dec. 31, 2012 Buildings and improvements Maximum	Dec. 31, 2012 Furniture, fixtures, equipment and computer software	Dec. 31, 2011 Furniture, fixtures, equipment and computer software	Dec. 31, 2012 Furniture, fixtures, equipment and computer software Minimum	Dec. 31, 2012 Furniture, fixtures, equipment and computer software Maximum	Dec. 31, 2012 Leasehold improvements	Dec. 31, 2011 Leasehold improvements	Dec. 31, 2012 Leasehold improvements Minimum	Dec. 31, 2012 Leasehold improvements Maximum	Dec. 31, 2012 Land	Dec. 31, 2011 Land
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	$ 171,503	$ 171,785	$ 68,129	$ 64,002			$ 85,481	$ 88,516			$ 17,893	$ 19,267			$ 13,998	$ 11,471
Less accumulated depreciation and amortization	(91,651)	(99,241)
Property, Plant and Equipment, Net of Accumulated Amortization, Before Land	79,852	72,544
Properties and equipment, net	$ 93,850	$ 84,015
Estimated Useful Life					P20Y	P40Y			P3Y	P10Y			P5Y	P20Y

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Loans Receivable And Allowance For Credit Losses Landscape Financing Receivables Past Due (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Financing Receivable, Recorded Investment, Past Due [Abstract]
30 to 59 days past due	$ 34,944	$ 48,300
60 to 89 days past due	8,569	16,622
Greater than 90 days past due	93,936	179,080
Total past due	137,449	244,002
Current	6,115,785	5,274,887
Greater than 90 days and accruing	0	0
% of Total, 30 to 59 days past due	1.00%	1.00%
% of Total, 60 to 89 days past due	0.00%	0.00%
% of Total, 90 days past due	2.00%	3.00%
% of Total, Total Past Due	3.00%	4.00%
% of Total, Current	97.00%	96.00%
Total loans receivable, gross	6,253,234	5,518,889
Total Loans, Percentage	100.00%	100.00%
% of Total, 90 days past due and still accruing	0.00%	0.00%
Loan and Lease Receivables, Impaired [Abstract]
Unpaid Principal Balance	235,439	384,027
Charge-offs	50,110	96,867
Book Balance, Without Specific Reserve	152,448	182,446
Book Balance, With Specific Reserve	32,881	104,714
Specific Reserve	8,463	16,305
Residential Real Estate
Financing Receivable, Recorded Investment, Past Due [Abstract]
Total loans receivable, gross	806,722	688,020
Residential Real Estate | Residential Real Estate
Financing Receivable, Recorded Investment, Past Due [Abstract]
30 to 59 days past due	5,800	5,718
60 to 89 days past due	1,576	4,585
Greater than 90 days past due	20,507	20,207
Total past due	27,883	30,510
Current	778,839	657,510
Greater than 90 days and accruing	0	0
Total loans receivable, gross	806,722	688,020
Loan and Lease Receivables, Impaired [Abstract]
Unpaid Principal Balance	49,816	52,023
Charge-offs	6,391	9,120
Book Balance, Without Specific Reserve	43,060	38,519
Book Balance, With Specific Reserve	365	4,384
Specific Reserve	365	872
Commercial Real Estate
Financing Receivable, Recorded Investment, Past Due [Abstract]
Total loans receivable, gross	2,874,801	2,451,754
Loan and Lease Receivables, Impaired [Abstract]
Unpaid Principal Balance	99,693	210,290
Charge-offs	24,116	57,012
Book Balance, Without Specific Reserve	55,834	79,280
Book Balance, With Specific Reserve	19,743	73,998
Specific Reserve	3,182	11,170
Commercial Real Estate | Investor CRE
Financing Receivable, Recorded Investment, Past Due [Abstract]
30 to 59 days past due	10,565	3,354
60 to 89 days past due	1,042	3,954
Greater than 90 days past due	34,196	33,759
Total past due	45,803	41,067
Current	1,174,044	1,234,600
Greater than 90 days and accruing	0	0
Total loans receivable, gross	1,219,847	1,275,667
Loan and Lease Receivables, Impaired [Abstract]
Unpaid Principal Balance	59,099	70,517
Charge-offs	8,366	18,324
Book Balance, Without Specific Reserve	33,540	31,503
Book Balance, With Specific Reserve	17,193	20,690
Specific Reserve	2,697	4,892
Commercial Real Estate | Multifamily
Financing Receivable, Recorded Investment, Past Due [Abstract]
30 to 59 days past due	707	1,523
60 to 89 days past due	479	193
Greater than 90 days past due	3,436	3,178
Total past due	4,622	4,894
Current	1,575,667	996,585
Greater than 90 days and accruing	0	0
Total loans receivable, gross	1,580,289	1,001,479
Loan and Lease Receivables, Impaired [Abstract]
Unpaid Principal Balance	9,554	6,185
Charge-offs	1,405	318
Book Balance, Without Specific Reserve	6,873	4,496
Book Balance, With Specific Reserve	1,276	1,371
Specific Reserve	219	716
Commercial Real Estate | Construction
Financing Receivable, Recorded Investment, Past Due [Abstract]
30 to 59 days past due	611	11,830
60 to 89 days past due	0	879
Greater than 90 days past due	8,243	68,024
Total past due	8,854	80,733
Current	65,811	93,875
Greater than 90 days and accruing	0	0
Total loans receivable, gross	74,665	174,608
Loan and Lease Receivables, Impaired [Abstract]
Unpaid Principal Balance	31,040	133,588
Charge-offs	14,345	38,370
Book Balance, Without Specific Reserve	15,421	43,281
Book Balance, With Specific Reserve	1,274	51,937
Specific Reserve	266	5,562
Commercial
Financing Receivable, Recorded Investment, Past Due [Abstract]
Total loans receivable, gross	1,817,090	1,704,154
Loan and Lease Receivables, Impaired [Abstract]
Unpaid Principal Balance	78,259	115,101
Charge-offs	19,177	29,951
Book Balance, Without Specific Reserve	46,309	59,401
Book Balance, With Specific Reserve	12,773	25,749
Specific Reserve	4,916	4,206
Commercial | Owner Occupied CRE
Financing Receivable, Recorded Investment, Past Due [Abstract]
30 to 59 days past due	10,543	19,967
60 to 89 days past due	3,300	4,233
Greater than 90 days past due	20,883	40,987
Total past due	34,726	65,187
Current	1,241,865	1,207,274
Greater than 90 days and accruing	0	0
Total loans receivable, gross	1,276,591	1,272,461
Loan and Lease Receivables, Impaired [Abstract]
Unpaid Principal Balance	61,300	89,604
Charge-offs	6,452	16,333
Book Balance, Without Specific Reserve	42,075	48,194
Book Balance, With Specific Reserve	12,773	25,077
Specific Reserve	4,916	4,043
Commercial | Commercial & Industrial (C&I)
Financing Receivable, Recorded Investment, Past Due [Abstract]
30 to 59 days past due	2,690	1,741
60 to 89 days past due	376	520
Greater than 90 days past due	1,954	7,871
Total past due	5,020	10,132
Current	535,479	421,561
Greater than 90 days and accruing	0	0
Total loans receivable, gross	540,499	431,693
Loan and Lease Receivables, Impaired [Abstract]
Unpaid Principal Balance	16,959	25,497
Charge-offs	12,725	13,618
Book Balance, Without Specific Reserve	4,234	11,207
Book Balance, With Specific Reserve	0	672
Specific Reserve	0	163
Consumer
Financing Receivable, Recorded Investment, Past Due [Abstract]
Total loans receivable, gross	754,621	674,961
Consumer | Consumer
Financing Receivable, Recorded Investment, Past Due [Abstract]
30 to 59 days past due	4,028	4,167
60 to 89 days past due	1,796	2,258
Greater than 90 days past due	4,717	5,054
Total past due	10,541	11,479
Current	744,080	663,482
Greater than 90 days and accruing	0	0
Total loans receivable, gross	754,621	674,961
Loan and Lease Receivables, Impaired [Abstract]
Unpaid Principal Balance	7,671	6,613
Charge-offs	426	784
Book Balance, Without Specific Reserve	7,245	5,246
Book Balance, With Specific Reserve	0	583
Specific Reserve	$ 0	$ 57

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Abstract]

Schedule of Components of Income Tax Expense (Benefit)

The components of income tax expense (benefit) included in the consolidated statements of operations were as follows:

	Years Ended December 31,
	2012			2011			2010
	(in thousands)
Current income taxes:
Federal	$	(163	)	$	(248	)	$	(102	)
State	0			(27		)	(11		)
Total current income taxes	(163		)	(275		)	(113		)
Deferred income taxes:
Federal	(269,968		)	248			102
State	(21,912		)	27			11
Total deferred income taxes	(291,880		)	275			113
Total income tax (benefit) expense	$	(292,043	)	$	0		$	0

Schedule of Deferred Tax Assets and Liabilities

The tax effects of the principal temporary differences giving rise to deferred tax assets and liabilities were as follows:

	December 31,
	2012			2011
	(in thousands)
Deferred tax assets:
NOL carryforwards - federal	$	242,318		$	250,946
NOL carryforwards - state	21,443			22,110
Tax credits - federal	7,671			7,587
Tax credits - state	2,594			4,167
Allowance for losses on loans	61,385			75,393
Deferred compensation	10,760			12,485
Bonus accrual	4,670			2,138
Intangibles	2,284			6
Purchase accounting premiums and discounts	2,087			3,877
Nonaccrual loans	1,931			2,167
Deferred rent	1,119			1,063
Other	3,394			3,044
Total deferred tax assets	361,656			384,983
Deferred tax liabilities:
Unrealized gains on available-for-sale securities	22,627			22,670
FHLB Seattle dividends	16,325			16,486
Mortgage servicing rights	11,869			8,169
Fair value - loans held for sale	8,966			3,093
Deferred loan fees	5,867			5,162
Prepaid expenses	2,151			1,945
ASC 740 (FIN 48) - temporary differences	5			9
Total deferred tax liabilities	67,810			57,534
Valuation allowance	(1,764		)	(327,449		)
Net deferred tax asset	$	292,082		$	0

Schedule of Effective Income Tax Rate Reconciliation

The following table summarizes the calculation of Sterling's effective tax rates for the periods presented:

	Years Ended December 31,
	2012		2011		2010
Income tax provision at the federal statutory rate	35.0	%	35.0	%	35.0	%
Tax effect of:
Deferred tax valuation allowance	(347.8	)%	(25.0	)%	(40.1	)%
State taxes, net of federal benefit	3.8	%	0.0	%	3.1	%
Tax-exempt interest	(2.5	)%	(6.3	)%	1.0	%
Bank owned life insurance	(3.2	)%	(5.8	)%	1.1	%
Tax credits	0.0	%	(1.6	)%	0.9	%
Other, net	3.2	%	3.7	%	(1.0	)%
Effective tax rate	(311.5	)%	0.0	%	0.0	%

Summary of Income Tax Contingencies

The following is a reconciliation of the beginning and ending amount of unrecognized tax positions for the periods presented:

	2012			2011			2010
	(in thousands)
Balance at January 1	$	525		$	1,586		$	6,330
Additions - current year tax positions	70			75			65
Additions - prior year tax positions	0			0			0
Reductions - prior year tax positions	(183		)	(1,136		)	(4,809		)
Balance at December 31	412			525			1,586
Accrued interest and penalties, net of tax effect at December 31	100			103			140
Total liability for unrecognized tax positions at December 31	$	512		$	628		$	1,726

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Business Combinations

12 Months Ended

Dec. 31, 2012

Business Combinations [Abstract]

Business Combinations

Business Combination:

First Independent Bank. On February 29, 2012, Sterling Bank completed its acquisition of the operations of First Independent Bank ("First Independent"), by acquiring certain assets and assuming certain liabilities, including all deposits for a net purchase price of $40.6 million, comprised of $28.9 million of cash paid at closing and contingent consideration with a fair value of $11.7 million at acquisition date. As of December 31, 2012, the fair value of this contingent consideration was estimated at $15.4 million, with the increase, which was charged against earnings, due to favorable performance. The contingent consideration is payable in two installments at 12 and 18 months from the date of closing, in an amount ranging from zero to $17 million. The contingent consideration payments will be determined based on certain performance metrics relating to core deposit retention, loan charge-offs, and wealth management revenues. As a result of this transaction, Sterling now offers trust services, and has 14 additional branches in the Portland/Vancouver market. The following table summarizes the amounts recorded at closing:

	February 29, 2012
	(in thousands)
Cash and cash equivalents	$	150,045
Investments and MBS	187,465
Loans receivable, net	349,990
Goodwill	22,577
Core deposit intangible	11,974
Fixed assets	4,038
Other assets	10,886
Total assets acquired	$	736,975
Deposits	$	695,919
Other liabilities	409
Total liabilities assumed	696,328
Net assets acquired	$	40,647

The recorded goodwill of $22.6 million represents the inherent long-term value anticipated from synergies expected to be achieved as a result of the transaction. The amount recorded for goodwill includes subsequent adjustments, primarily from updated appraisals on fixed assets. The amount of goodwill deductible for income tax purposes is approximately equivalent to the recorded book value. The core deposit intangible has a weighted average amortization period of ten years and will be amortized on an accelerated basis.

The following table presents certain First Independent stand alone amounts and pro forma Sterling and First Independent combined amounts as if the transaction had occurred on January 1, 2011. Cost savings estimates are not included in the pro forma combined results, nor are certain credit impaired loans and associated losses excluded from the purchase and assumption transaction.

	First Independent (stand alone)		Pro Forma Combined
	Years Ended December 31,
	2012		2012		2011
	(in thousands, except per share data; unaudited)
Net interest income	$	20,145	$	311,159	$	326,916
Noninterest income	4,757		155,258		135,828
Net income	10,817		389,935		49,469
Earnings per share - basic	0.17		6.28		0.80
Earnings per share - diluted	$	0.17	$	6.21	$	0.79

Although the majority of First Independent's credit impaired loans were excluded from the transaction, certain loans acquired were deemed to exhibit evidence of credit deterioration since origination and therefore, were classified as impaired. The accounting for purchased impaired loans is periodically updated for changes in the loans' cash flow expectations, and reflected in interest income over the life of the loans as accretable yield. For purchased impaired loans, details as of the acquisition date were as follows:

	February 29, 2012
	(in thousands)
Contractual cash flows	$	24,408
Expected prepayments and credit losses	7,220
Expected cash flows	17,188
Present value of expected cash flows	15,265
Accretable yield	$	1,923

As of December 31, 2012, no allowance for credit losses was recorded in connection with these loans, and the unpaid principal balance and carrying amount of the purchased impaired loans were $18.2 million and $11.2 million, respectively. The following table presents a roll-forward of activity for the accretable yield for the purchased impaired loans:

	Year Ended December 31, 2012
	(in thousands)
Beginning balance	$	0
Additions	1,923
Accretion to interest income	(756		)
Reclassifications	165
Ending balance	$	1,332

As of February 29, 2012, the unpaid principal balance and contractual interest ("contractual cash flows") on purchased loans that had not exhibited evidence of credit deterioration was $403.8 million. Sterling estimated that $12.7 million of these cash flows would be uncollectable, resulting in a discount of $21.8 million being recorded on these loans.

The following table presents the related five-year projected accretion of the discount which will be recognized as an increase to interest income as of December 31, 2012:

	Amount
	(in thousands)
Years ended:
December 31, 2013	$	4,210
December 31, 2014	2,796
December 31, 2015	1,724
December 31, 2016	1,031
December 31, 2017	679

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Loans Receivable And Allowance For Credit Losses Troubled Debt Restructuring (Details) (USD $)	12 Months Ended
	Dec. 31, 2012 Contracts		Dec. 31, 2011 Contracts
Financing Receivable, Modifications [Line Items]
Average Book Balance	$ 236,244,000		$ 470,899,000
Interest Income Recognized	7,229,000		8,659,000
Number of Contracts	60	[1]	24	[1]
Pre-Modification Recorded Investment	40,342,000	[1]	47,139,000	[1]
Post-Modification Recorded Investment	37,875,000	[1]	47,448,000	[1]
Troubled Debt Restructuring, Debtor, Current Period [Abstract]
Specific reserves on TDR's	2,100,000
Financing Receivable, Modifications, Number of Contracts	33
Troubled Debt Restructuring, Post Modification Investment by Class [Abstract]
Principal Deferred	7,197,000		13,551,000
Rate Reduction	23,248,000		8,898,000
Extension of Terms	6,415,000		1,426,000
Forgiveness of Principal And/Or Interest	1,015,000		23,573,000
Total	37,875,000		47,448,000
Residential Real Estate
Financing Receivable, Modifications [Line Items]
Number of Contracts	29		1
Pre-Modification Recorded Investment	5,887,000		1,372,000
Post-Modification Recorded Investment	5,835,000		1,372,000
Troubled Debt Restructuring, Post Modification Investment by Class [Abstract]
Principal Deferred	407,000		0
Rate Reduction	5,428,000		1,372,000
Extension of Terms	0		0
Forgiveness of Principal And/Or Interest	0		0
Total	5,835,000		1,372,000
Investor CRE
Financing Receivable, Modifications [Line Items]
Number of Contracts	1		8
Pre-Modification Recorded Investment	1,302,000		3,271,000
Post-Modification Recorded Investment	1,302,000		3,282,000
Troubled Debt Restructuring, Post Modification Investment by Class [Abstract]
Principal Deferred	0		0
Rate Reduction	1,302,000		1,856,000
Extension of Terms	0		1,426,000
Forgiveness of Principal And/Or Interest	0		0
Total	1,302,000		3,282,000
Multifamily
Financing Receivable, Modifications [Line Items]
Number of Contracts	3		0
Pre-Modification Recorded Investment	2,955,000		0
Post-Modification Recorded Investment	2,945,000		0
Troubled Debt Restructuring, Post Modification Investment by Class [Abstract]
Principal Deferred	571,000		0
Rate Reduction	2,374,000		0
Extension of Terms	0		0
Forgiveness of Principal And/Or Interest	0		0
Total	2,945,000		0
Construction
Financing Receivable, Modifications [Line Items]
Number of Contracts	4		3
Pre-Modification Recorded Investment	10,062,000		23,701,000
Post-Modification Recorded Investment	9,194,000		24,348,000
Troubled Debt Restructuring, Post Modification Investment by Class [Abstract]
Principal Deferred	0		2,816,000
Rate Reduction	3,261,000		2,302,000
Extension of Terms	5,933,000		0
Forgiveness of Principal And/Or Interest	0		19,230,000
Total	9,194,000		24,348,000
Owner Occupied CRE
Financing Receivable, Modifications [Line Items]
Number of Contracts	11		6
Pre-Modification Recorded Investment	16,186,000		14,411,000
Post-Modification Recorded Investment	15,921,000		14,502,000
Troubled Debt Restructuring, Post Modification Investment by Class [Abstract]
Principal Deferred	6,219,000		10,159,000
Rate Reduction	9,393,000		0
Extension of Terms	0		0
Forgiveness of Principal And/Or Interest	309,000		4,343,000
Total	15,921,000		14,502,000
Commercial & Industrial (C&I)
Financing Receivable, Modifications [Line Items]
Number of Contracts	9		6
Pre-Modification Recorded Investment	3,482,000		4,384,000
Post-Modification Recorded Investment	2,206,000		3,944,000
Troubled Debt Restructuring, Post Modification Investment by Class [Abstract]
Principal Deferred	0		576,000
Rate Reduction	1,317,000		3,368,000
Extension of Terms	183,000		0
Forgiveness of Principal And/Or Interest	706,000		0
Total	2,206,000		3,944,000
Consumer
Financing Receivable, Modifications [Line Items]
Number of Contracts	3		0
Pre-Modification Recorded Investment	468,000		0
Post-Modification Recorded Investment	472,000		0
Troubled Debt Restructuring, Post Modification Investment by Class [Abstract]
Principal Deferred	0		0
Rate Reduction	173,000		0
Extension of Terms	299,000		0
Forgiveness of Principal And/Or Interest	0		0
Total	472,000		0
Loans Removed from TDR Status
Troubled Debt Restructuring, Post Modification Investment by Class [Abstract]
Total	29,800,000
Recorded Investment At Default [Member]
Troubled Debt Restructuring, Post Modification Investment by Class [Abstract]
Total			200,000
Consumer | Consumer
Financing Receivable, Modifications [Line Items]
Average Book Balance	6,537,000		6,901,000
Interest Income Recognized	8,000		0
Owner Occupied CRE | Commercial
Financing Receivable, Modifications [Line Items]
Average Book Balance	64,060,000		75,553,000
Interest Income Recognized	2,553,000		2,757,000
Construction | Commercial Real Estate
Financing Receivable, Modifications [Line Items]
Average Book Balance	55,956,000		215,436,000
Interest Income Recognized	1,708,000		1,401,000
Multifamily | Commercial Real Estate
Financing Receivable, Modifications [Line Items]
Average Book Balance	7,007,000		14,704,000
Interest Income Recognized	441,000		804,000
Investor CRE | Commercial Real Estate
Financing Receivable, Modifications [Line Items]
Average Book Balance	51,463,000		79,139,000
Interest Income Recognized	1,595,000		2,245,000
Residential Real Estate | Residential Real Estate
Financing Receivable, Modifications [Line Items]
Average Book Balance	43,164,000		67,157,000
Interest Income Recognized	819,000		992,000
Commercial & Industrial (C&I) | Commercial
Financing Receivable, Modifications [Line Items]
Average Book Balance	8,057,000		12,009,000
Interest Income Recognized	$ 105,000		$ 460,000

[1] Amounts exclude specific loan loss reserves.

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Securities Sold Under Repurchase Agreements (Tables)

12 Months Ended

Dec. 31, 2012

Disclosure of Repurchase Agreements [Abstract]

Schedule of Repurchase Agreements

At December 31, 2012 and 2011, borrowings under repurchase agreements are contractually repayable as follows. Actual repayments may vary due to default and call provisions:

	December 31, 2012				December 31, 2011
	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate
	(in thousands)
Due within 1 yr	$	86,867	1.20	%	$	205,763	3.08	%
Due within 2 yrs	0		0.00		100,000		3.00
Due within 3 yrs	50,000		2.47		0		0.00
Due within 4 yrs	0		0.00		150,000		3.76
Due within 5 yrs	400,000		4.08		100,000		3.97
Thereafter	50,000		2.62		500,000		3.90
	$	586,867	3.18	%	$	1,055,763	3.64	%

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Regulatory Capital

12 Months Ended

Dec. 31, 2012

Banking and Thrift [Abstract]

Regulatory Capital

Regulatory Capital:

The following table sets forth the respective regulatory capital positions for Sterling and Sterling Bank:

	Actual				Adequately Capitalized				Well-Capitalized
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(in thousands)
As of December 31, 2012
Tier 1 leverage ratio
Sterling	$	1,115,834	12.1	%	$	367,909	4.0	%	$	459,886	5.0	%
Sterling Bank	1,100,443		12.0	%	368,053		4.0	%	460,066		5.0	%
Tier 1 risk-based capital ratio
Sterling	1,115,834		17.5	%	255,750		4.0	%	383,625		6.0	%
Sterling Bank	1,100,443		17.2	%	255,875		4.0	%	383,812		6.0	%
Total risk-based capital ratio
Sterling	1,196,773		18.7	%	511,499		8.0	%	639,374		10.0	%
Sterling Bank	1,181,421		18.5	%	511,749		8.0	%	639,687		10.0	%
As of December 31, 2011
Tier 1 leverage ratio
Sterling	1,045,761		11.4	%	366,048		4.0	%	457,560		5.0	%
Sterling Bank	1,019,016		11.1	%	366,018		4.0	%	457,523		5.0	%
Tier 1 risk-based capital ratio
Sterling	1,045,761		17.8	%	234,859		4.0	%	352,288		6.0	%
Sterling Bank	1,019,016		17.4	%	234,468		4.0	%	351,705		6.0	%
Total risk-based capital ratio
Sterling	1,120,563		19.1	%	469,718		8.0	%	587,147		10.0	%
Sterling Bank	1,093,697		18.7	%	468,936		8.0	%	586,171		10.0	%

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Fair Value

12 Months Ended

Dec. 31, 2012

Fair Value Disclosures [Abstract]

Fair Value

Fair Value:

Fair value estimates are determined as of a specific date using quoted market prices, where available, or various assumptions and estimates. As the assumptions underlying these estimates change, the fair value of the financial instruments will change. The use of assumptions and various valuation techniques, as well as the absence of secondary markets for certain financial instruments, will likely reduce the comparability of fair value disclosures between financial institutions. Accordingly, the aggregate fair value amounts presented do not represent and should not be construed to represent the full underlying value of Sterling.

The carrying amounts and fair values of financial instruments as of the periods indicated were as follows. Other assets are comprised of FHLB stock and derivatives, while other liabilities are comprised of derivatives:

		December 31, 2012				December 31, 2011
	Level	Carrying Amount		Fair Value		Carrying Amount		Fair Value
		(in thousands)
Financial assets:
Cash and cash equivalents	1	$	331,550	$	331,550	$	491,228	$	491,228
Investments and MBS:
Available for sale	2	1,513,157		1,513,157		2,547,876		2,547,876
Held to maturity	2	206		206		1,747		1,747
Loans held for sale	2	465,983		465,983		273,957		273,957
Loans receivable, net	3	6,101,749		6,154,296		5,341,179		5,347,555
Mortgage servicing rights, net	3	32,420		32,420		23,102		23,102
Other assets (1)	2	108,642		108,642		109,317		109,317
Financial liabilities:
Non-maturity deposits	2	4,697,147		4,697,147		3,824,948		3,824,948
Deposits with stated maturities	2	1,738,970		1,768,818		2,660,870		2,710,740
Borrowings	2	1,437,491		1,457,911		1,706,662		1,724,347
Other liabilities	2	4,025		4,025		9,212		9,212

(1) Other assets includes FHLB stock. As of December 31, 2012 and December 31, 2011, FHLB stock was carried at $97.5 million and $99.0 million, respectively.

Companies have the option of carrying financial assets and liabilities at fair value, which can be implemented on all or individually selected financial instruments. The framework for defining and measuring fair value requires that one of three valuation methods be used to determine fair market value: the market approach, the income approach or the cost approach. To increase consistency and comparability in fair value measurements and related disclosures, the standard also creates a fair value hierarchy to prioritize the inputs to these valuation methods into the following three levels:

• Level 1 inputs are a select class of observable inputs, based upon the quoted prices for identical instruments in active markets that are accessible as of the measurement date, and are to be used whenever available.

• Level 2 inputs are other types of observable inputs, such as quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are inactive; or other inputs that are observable or can be derived from or supported by observable market data. Level 2 inputs are to be used whenever Level 1 inputs are not available.

• Level 3 inputs are substantially unobservable, reflecting the reporting entity's own assumptions regarding what market participants would assume when pricing a financial instrument. Level 3 inputs are to be used only when Level 1 and Level 2 inputs are unavailable.

The methods and assumptions used to estimate the fair value of certain financial instruments are as follows:

Cash and Cash Equivalents.  The carrying value of cash and cash equivalents approximates fair value due to the relatively short-term nature of these instruments.

Investments and MBS.  The fair value of investments and MBS are provided by a third-party pricing service. These valuations are based on market data using pricing models that vary by asset class and incorporate available current trade, bid and other market information, and for structured securities, cash flow and loan performance data. The pricing processes utilize benchmark curves, benchmarking of similar securities, sector groupings, and matrix pricing. Option adjusted spread models are also used to assess the impact of changes in interest rates and to develop prepayment scenarios. All models and processes used take into account market convention.

Loans Held for Sale.  Sterling has elected to carry residential loans held for sale at fair value. The fair values of residential loans are based on investor quotes in the secondary market, determined by the fair value of options and commitments to sell or issue mortgage loans. The fair value election was made to match changes in the value of these loans with the value of their economic hedges. Loan origination fees, costs and servicing rights, which were previously deferred on these loans, are now recognized as part of the loan value at origination. Nonresidential loans held for sale are carried at the lower of cost or market (“LOCOM”) due to the frequency of these loan sale transactions, as well as the availability of market data for these loan types.

Loans Receivable.  The fair value of performing loans is estimated by discounting the cash flows using interest rates that consider the current credit and interest rate risk inherent in the loans and current economic and lending conditions and does not incorporate the exit price concept of fair value. The fair value of nonperforming collateral-dependent loans is estimated based upon the value of the underlying collateral. The fair value of other nonperforming loans is estimated by discounting management's current estimate of future cash flows using a rate estimated to be commensurate with the risks involved. Changes in the various inputs in the fair value of nonperforming loans will have a significant impact on the fair value.

Mortgage Servicing Rights.  The fair value of mortgage servicing rights is estimated using a discounted cash flow model to arrive at the net present value of expected earnings from the servicing of the loans. Model inputs include prepayment speeds, market interest rates, contractual interest rates on the loans being serviced, the amount of other fee income generated and other factors. The fair value of mortgage servicing rights is impacted by any changes in these inputs.

Deposits.  The fair values of deposits subject to immediate withdrawal such as interest and noninterest bearing checking, regular savings, and money market deposit accounts, are equal to the amounts payable on demand at the reporting date. Fair values for time deposits are estimated by discounting future cash flows using interest rates currently offered on time deposits with similar remaining maturities.  

Borrowings.  The carrying amounts of short-term borrowings under repurchase agreements, federal funds purchased, short-term FHLB advances and other short-term borrowings approximate their fair values due to the relatively short period of time between the origination of the instruments and the expected payment dates on the instruments. The fair value of long-term FHLB advances and other long-term borrowings is estimated using discounted cash flow analysis based on Sterling's current incremental borrowing rates for similar types of borrowing arrangements with similar remaining terms.

Derivatives.  Interest rate lock commitments and forward commitments valuations are estimated using quoted market prices for similar instruments. Fair values for the interest rate swaps are based on the present value differential between the fixed interest rate payments and the floating interest rate payments as projected by the forward interest rate curve, over the term of the swap, with the recorded amount net of any credit valuation adjustments. 

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents Sterling’s financial instruments that are measured at fair value on a recurring basis:

	Total		Level 1		Level 2		Level 3
	(in thousands)
December 31, 2012
Investment securities available for sale:
MBS	$	1,308,838	$	0	$	1,308,838	$	0
Municipal bonds	204,306		0		204,306		0
Other	13		0		13		0
Total investment securities available for sale	1,513,157		0		1,513,157		0
Loans held for sale	465,983		0		465,983		0
Other assets - derivatives	11,183		0		11,183		0
Total assets	$	1,990,323	$	0	$	1,990,323	$	0
Contingent consideration	$	15,442	$	0	$	0	$	15,442
Other liabilities - derivatives	4,025		0		4,025		0
Total liabilities	$	19,467	$	0	$	4,025	$	15,442
December 31, 2011
Investment securities available for sale:
MBS	$	2,320,934	$	0	$	2,320,934	$	0
Municipal bonds	207,456		0		207,456		0
Other	19,486		0		19,486		0
Total investment securities available for sale	2,547,876		0		2,547,876		0
Loans held for sale	223,638		0		223,638		0
Other assets - derivatives	10,269		0		10,269		0
Total assets	$	2,781,783	$	0	$	2,781,783	$	0
Other liabilities - derivatives	$	9,212	$	0	$	9,212	$	0

Contingent consideration represents the estimated liability for additional payments related to the First Independent transaction based on the application of a discounted cash flow methodology. The following table presents a roll-forward of contingent consideration. Valuation adjustments are included in noninterest expense within merger and acquisition expense.

	Year Ended
	December 31, 2012
	(in thousands)
Beginning balance	$	0
Additions	11,700
Valuation adjustments	3,742
Ending balance	$	15,442

Derivatives include mortgage banking interest rate lock and loan delivery commitments, interest rate swaps, and also at December 31, 2011 a common stock warrant carried as a derivative liability. See Note 18 for a further discussion of these derivatives. The difference between the aggregate fair value and the aggregate unpaid principal balance of loans held for sale that are carried at fair value were included in earnings as follows:

	Years Ended December 31,
	2012		2011
	(in thousands)
Mortgage banking operations	$	11,447	$	7,506

Assets and Liabilities Measured at Fair Value on a Non-recurring Basis

Sterling may be required to measure certain assets at fair value on a non-recurring basis from application of LOCOM accounting or write-downs of individual assets. The following table presents the carrying value for these assets as of the dates indicated:

	December 31, 2012
	Total Carrying Value		Level 1		Level 2		Level 3		Losses During the Year Ended December 31, 2012
	(in thousands)
Loans	$	172,172	$	0	$	0	$	172,172	$	(27,649	)
OREO	18,074		0		0		18,074		(1,296		)
Mortgage servicing rights	32,420		0		0		32,420		(230		)
	December 31, 2011								Losses During the Year Ended December 31, 2011
	Total Carrying Value		Level 1		Level 2		Level 3
	(in thousands)
Loans	$	268,837	$	0	$	0	$	268,837	$	(47,372	)
OREO	31,379		0		0		31,379		(10,860		)
Mortgage servicing rights	23,102		0		0		23,102		(6,191		)

The loans disclosed above represent the net balance of loans as of period end for which a charge-off or specific reserve has been recognized during the years ended December 31, 2012 and 2011, with these charges comprised of charge-offs and increases in the specific reserve. OREO represents the carrying value of properties for which a specific reserve was established during the periods presented as a result of updated appraisals subsequent to foreclosure. The appraisals may use comparable sales and income approach valuation methods and may be adjusted to reflect current market or property information. In addition to the loan and OREO losses disclosed above, charge-offs at foreclosure for properties held as of period end totaled $3.9 million and $20.9 million for the years ended December 31, 2012 and 2011, respectively. Fair value adjustments to the mortgage servicing rights were mainly due to market derived assumptions associated with mortgage prepayment speeds. Sterling carries its mortgage servicing rights at LOCOM, and they are accordingly measured at fair value on a non-recurring basis. Qualitative information regarding the fair value measurements for Level 3 financial instruments are as follows:

	December 31, 2012
	Method	Inputs
Loans	Income, Market, Comparable Sales, Discounted Cash Flows	External appraised values; probability weighting of broker price opinions; management assumptions regarding market trends or other relevant factors; selling and commission costs ranging from 4.5% to 9%. Amount and timing of cash flows based upon current discount rates.
OREO	Income, Market, Comparable Sales,	External appraised values; probability weighting of broker price opinions; management assumptions regarding market trends or other relevant factors; selling and commissions costs ranging from 4.5% to 9%.
Mortgage servicing rights	Discounted Cash Flow	Weighted average prepayment speed 18.3%; weighted average discount rate 10.1%

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Significant Accounting Policies (Textual) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended			12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2012 Branches	Dec. 31, 2012 Minimum	Dec. 31, 2012 Maximum	Dec. 31, 2012 Minimum	Dec. 31, 2012 Core deposit intangibles Maximum	Dec. 31, 2011 Decrease to Cash Flows from Operating Activities [Member]	Dec. 31, 2010 Decrease to Cash Flows from Operating Activities [Member]
Significant Accounting Policies [Line Items]
Assets	$ 9,193,237	$ 9,493,169	$ 9,236,910
Number of Stores			174
Finite-Lived Intangible Asset, Useful Life				8 years			10 years
Derivative, Remaining Maturity					60 days	10 days
Quantifying Misstatement in Current Year Financial Statements, Amount	$ 0	$ 0						$ 51,300	$ 66,100

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Junior Subordinated Debentures (Tables)

12 Months Ended

Dec. 31, 2012

Junior Subordinated Debentures [Abstract]

Schedule of Subordinated Borrowing

Details of the junior subordinated debentures are as follows:

				December 31, 2012
Subsidiary Issuer	Issue Date	Maturity Date	Next Interest Payment Date	Rate		Amount
						(in thousands)
Sterling Capital Trust IX	July 2007	Oct 2037	Jan 2013	1.76%		$	46,392
Sterling Capital Trust VIII	Sept 2006	Dec 2036	Mar 2013	1.94		51,547
Sterling Capital Trust VII	June 2006	June 2036	Mar 2013	1.83		56,702
Lynnwood Financial Statutory Trust II	June 2005	June 2035	Mar 2013	2.11		10,310
Sterling Capital Trust VI	June 2003	Sept 2033	Mar 2013	3.51		10,310
Sterling Capital Statutory Trust V	May 2003	June 2033	Mar 2013	3.56		20,619
Sterling Capital Trust IV	May 2003	May 2033	Feb 2013	3.46		10,310
Sterling Capital Trust III	April 2003	April 2033	Jan 2013	3.56		14,433
Lynnwood Financial Statutory Trust I	Mar 2003	Mar 2033	Mar 2013	3.46		9,437
Klamath First Capital Trust I	July 2001	July 2031	Jan 2013	4.48		15,234
				2.47%	*	$	245,294
* Weighted average rate.

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Segment Information

12 Months Ended

Dec. 31, 2012

Segment Reporting [Abstract]

Segment Information

Segment Information:

Sterling's operations are divided into two primary business segments that represent its core businesses:

• Community Banking - providing traditional banking services through the retail banking, private banking and commercial banking groups, including the originating and servicing of commercial real estate, owner occupied CRE and C&I loans.

• Home Loan Division - originating and selling residential real estate loans through its mortgage banking operations, on both a servicing-retained and servicing-released basis.

In 2012, Sterling combined its Commercial Real Estate and Community Banking segments to improve how it made decisions and measured the segments' performance. Segment results for the 2011 comparable period have been restated to reflect current period presentation. The 2010 comparable period is grouped according to the original classifications, due to the impracticability of reclassification to current period presentation.

	As of and for the Year Ended December 31, 2012
	Community Banking		Home Loan Division		Other and Eliminations			Total
	(in thousands)
Interest income	$	360,901	$	28,299	$	0		$	389,200
Interest expense	78,004		0		6,518			84,522
Net interest income	282,897		28,299		(6,518		)	304,678
Provision for credit losses	9,980		20		0			10,000
Noninterest income	46,433		108,391		(571		)	154,253
Noninterest expense	266,486		92,742		(3,975		)	355,253
Income (loss) before income taxes	$	52,864	$	43,928	$	(3,114	)	$	93,678
Total assets	$	8,754,170	$	477,127	$	5,613		$	9,236,910

	As of and for the Year Ended December 31, 2011
	Community Banking		Home Loan Division		Other and Eliminations			Total
	(in thousands)
Interest income	$	387,365	$	16,927	$	0		$	404,292
Interest expense	102,963		0		6,134			109,097
Net interest income	284,402		16,927		(6,134		)	295,195
Provision for credit losses	56,507		71		(26,578		)	30,000
Noninterest income	76,337		48,865		1,126			126,328
Noninterest expense	295,139		58,979		(1,728		)	352,390
Income (loss) before income taxes	$	9,093	$	6,742	$	23,298		$	39,133
Total assets	$	9,219,398	$	2,594	$	(28,755	)	$	9,193,237

	As of and for the Year Ended December 31, 2010
	Community Banking			Residential Construction Lending			Residential Mortgage Banking		Commercial Mortgage Banking		Other and Eliminations			Total
	(in thousands)
Interest income	$	393,754		$	34,559		$	13,243	$	3,573	$	4		$	445,133
Interest expense	128,294			18,967			7,742		0		6,103			161,106
Net interest income	265,460			15,592			5,501		3,573		(6,099		)	284,027
Provision for credit losses	177,232			64,767			8,230		0		0			250,229
Noninterest income	67,499			60			65,099		2,470		1,837			136,965
Noninterest expense	332,557			7,291			36,785		5,070		13,342			395,045
Income (loss) before income taxes	$	(176,830	)	$	(56,406	)	$	25,585	$	973	$	(17,604	)	$	(224,282	)
Total assets	$	7,643,294		$	25,562		$	1,811,601	$	6,340	$	6,372		$	9,493,169

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Parent Company Only Financial Information

12 Months Ended

Dec. 31, 2012

Parent Only [Abstract]

Parent Company Only Financial Information

Parent Company Only Financial Information:

The following parent company-only financial information should be read in conjunction with the other notes to consolidated financial statements. The accounting policies for the parent company-only financial statements are the same as those used in the presentation of the consolidated financial statements other than the parent company-only financial statements account for the parent company's investments in its subsidiaries under the equity method.

Parent Only Balance Sheets	December 31,		December 31,
	2012		2011
Assets:	(in thousands)
Cash and cash equivalents	$	24,443	$	44,602
Investments in subsidiaries:
Sterling Bank	1,417,025		1,089,820
Other subsidiaries	8,307		8,185
Receivable from subsidiaries	0		283
Other assets	20,755		1,158
Total assets	$	1,470,530	$	1,144,048
Liabilities and Shareholders' Equity:
Accrued expenses payable	$	3,072	$	4,111
Junior subordinated debentures	245,294		245,290
Due to affiliates	4,241		16,090
Shareholders' equity	1,217,923		878,557
Total liabilities and shareholders' equity	$	1,470,530	$	1,144,048

Parent Only Statements of Operations	Years Ended December 31,
(in thousands)	2012			2011			2010
	(in thousands)
Interest income	$	268		$	300		$	253
Interest expense	6,785			6,433			6,349
Net interest expense	(6,517		)	(6,133		)	(6,096		)
Equity in net earnings of subsidiary	380,294			50,961			(206,677		)
Noninterest expenses	5,385			5,699			11,568
Income before income taxes	368,392			39,129			(224,341		)
Income tax benefit	17,329			4			59
Net income (loss)	$	385,721		$	39,133		$	(224,282	)

Parent Only Statements of Cash Flows	Years Ended December 31,
	2012			2011			2010
	(in thousands)
Cash flows from operating activities:
Net income (loss)	$	385,721		$	39,133		$	(224,282	)
Adjustments to reconcile net income to net cash used in operating activities	(412,528		)	(42,051		)	214,128
Net cash used in operating activities	(26,807		)	(2,918		)	(10,154		)
Cash flows from investing activities:
Investments in subsidiaries, net	0			0			(650,000		)
Dividends from subsidiary	52,600			0			0
Net cash provided by (used in) investing activities	52,600			0			(650,000		)
Cash flows from financing activities:
Net proceeds from stock issuances	3,791			0			683,334
Dividends paid	(49,743		)	0			0
Net cash provided by (used in) financing activities	(45,952		)	0			683,334
Net change in cash and cash equivalents	(20,159		)	(2,918		)	23,180
Cash and cash equivalents, beginning of year	44,602			47,520			24,340
Cash and cash equivalents, end of year	$	24,443		$	44,602		$	47,520

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Significant Accounting Policies

12 Months Ended

Dec. 31, 2012

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Significant Accounting Policies

Significant Accounting Policies:

Sterling Financial Corporation, with headquarters in Spokane, Washington, was organized under the laws of Washington State in 1992 as the bank holding company for Sterling Savings Bank, which commenced operations in 1983. References to “Sterling,” “the Company,” “we,” “our,” or “us” in this report are to Sterling Financial Corporation, a Washington corporation, and its consolidated subsidiaries on a combined basis, unless otherwise specified or the context otherwise requires. References to “Sterling Bank” refer to our subsidiary Sterling Savings Bank, a Washington state-chartered commercial bank that operates under the registered trade name of Sterling Bank and, in California, as Sonoma Bank. Sterling Bank offers retail and commercial banking products and services, mortgage lending and wealth management to individuals, small businesses, commercial organizations and corporations. As of December 31, 2012, Sterling had assets of $9.24 billion and operated 174 depository branches in Washington, Oregon, Idaho and California.

Basis of Presentation. The accompanying consolidated financial statements include the accounts of Sterling and its directly and indirectly wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Estimates. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of Sterling’s consolidated financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions, which could have a material effect on the reported amounts of Sterling’s consolidated financial position and results of operations.

Cash and Cash Equivalents. Cash equivalents include investments with a remaining maturity of three months or less at the date of purchase. Cash and cash equivalents are deposited with other banks and financial institutions in amounts that may at times exceed the federal insurance limit. Sterling evaluates the credit quality of these banks and financial institutions to mitigate its credit risk.

Restricted cash consists of noninterest bearing deposits maintained as a reserve at the Federal Reserve Bank, and cash collateral balances with correspondent banks.

Sterling occasionally purchases securities under agreements with other institutions to resell the same or similar securities. The amounts advanced under these agreements represent short-term loans and are reflected as interest bearing cash equivalents in the consolidated balance sheet. The securities underlying the agreements are comprised of mutual fund shares that are primarily invested in U.S. government securities.

Investments and MBS. Sterling classifies debt and equity securities as follows:

• Trading Securities. Debt or equity securities are classified as trading securities if acquired principally for the purpose of generating a profit from short-term fluctuations in price. As of December 31, 2012, Sterling did not hold any securities that it deems to be trading securities.

• Available for Sale. Debt and equity securities that are not classified as trading securities or held to maturity are classified as available for sale and are carried at fair value.

• Held to Maturity. These are investments that Sterling has the intent and ability to hold until maturity.

Premiums and discounts are amortized using the effective yield method over the weighted average life of the underlying security as estimated at time of purchase. Realized gains and losses on sales of investments and MBS are recognized in the statement of operations in the period sold using the specific identification method. FHLB stock is carried at cost, and is included in other assets.

Month end security price valuations are provided by a third party pricing service. These valuations are based on market data using pricing models that vary by asset class and incorporate available current trade, bid and other market information, and for structured securities, cash flow and loan performance data. The pricing processes utilize benchmark curves, benchmarking of similar securities, sector groupings, and matrix pricing. Option adjusted spread models are also used to assess the impact of changes in interest rates and to develop prepayment scenarios. All models and processes used take into account market convention.

Declines in the fair value of securities below their amortized cost that are other-than-temporary are reflected in earnings or other comprehensive income, as appropriate. For those debt securities whose fair value is less than their amortized cost basis, we consider our intent to sell the securities, whether it is more likely than not that we will be required to sell the securities before recovery, and whether or not we expect to recover our entire amortized cost basis in the investment. In making this assessment, considerations will include whether the issue is a government or government sponsored security, and whether or not rating downgrades have occurred. The assessment of other-than-temporary impairment includes an assessment of the carrying value of FHLB stock. FHLB stock is not a marketable security, and therefore, its value is primarily attributable to the borrowing capacity it provides.

Loans Receivable. Loans receivable that management of Sterling has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal balance net of unamortized origination and commitment fees, direct loan origination costs and an allowance for loan losses.

Interest income is recognized over the term of loans based on their unpaid principal balance. The accrual of interest on loans is discontinued when, in management’s opinion, a borrower may be unable to make payments as they become due, which generally occurs when a loan is 90 days past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. The interest payments received on these loans is accounted for on the cash basis or cost recovery method, until qualifying for a return to an accrual status. Loans return to an accrual status when all principal and interest is brought current, and future payments are reasonably assured.

Loans that were modified and recorded as troubled debt restructurings (“TDR’s”) occur when a borrower has financial difficulties and Sterling grants a concession that it would not otherwise consider. The concession can take the form of an interest rate or principal reduction or an extension of payments of principal or interest, or both. TDRs may be the result of granting extensions to troubled credits which have already been adversely classified. We grant such extensions to reassess the borrower’s financial status and develop a plan for repayment. We rarely forgive principal for TDRs, but in those situations where principal is forgiven, the entire amount of such principal forgiveness is immediately charged off, if not done so previously. We sometimes delay the timing on the repayment of a portion of principal (principal forbearance) and charge off any amounts not considered fully collectible. We also consider insignificant delays in payments when determining if a loan should be classified as a TDR. Loans designated as TDRs may be returned to accrual status after the borrower performs in accordance with the modified loan terms, generally for a period of at least six months. A loan may be removed from TDR status after at least one year of performance under the modified term of the loan, unless the modification includes an interest rate concession that is below a market rate of interest for a loan with similar characteristics. TDRs will continue to be evaluated for impairment for the remainder of their term.

Certain loans acquired may be deemed to exhibit evidence of credit deterioration since their origination. When it is considered probable that all contractually required principal and interest payments will not be collected, a loan will be considered a purchased credit impaired ("PCI") loan. The accounting for PCI loans is periodically updated for changes in cash flow expectations, and reflected in interest income over the life of the loans as accretable yield.

Allowance for Credit Losses. The allowance for credit losses is comprised of the allowance for loan losses and the reserve for unfunded credit commitments. In general, determining the amount of the allowance requires significant judgment and the use of estimates by management. Sterling maintains an allowance for loan losses to absorb probable losses in the loan portfolio based on a quarterly analysis of the portfolio and expected losses. This analysis is designed to determine an appropriate level and allocation of the allowance for losses among loan classes by considering factors affecting loan losses, including specific and confirmed losses, levels and trends in classified and nonperforming loans, historical loan loss experience, loan migration analysis, current national and local economic conditions, volume, growth and composition of the portfolio, regulatory guidance and other relevant factors. The reserve for unfunded credit commitments includes loss coverage for loan repurchases arising from mortgage banking activities. Management monitors the loan portfolio to evaluate the adequacy of the allowance. The allowance can increase or decrease each quarter based upon the results of management's analysis.

The portfolio is grouped into several industry segments for loans collectively evaluated for impairment based on characteristics such as loan type, borrower and collateral. Loan migration to loss data is used to determine the annual probability of default. The annual probability of default is adjusted for the estimated loss emergence period and may be further adjusted based on the assessment of qualitative factors. The estimated loss emergence period reflects an estimate of the time frame during which losses may be realized. Sterling establishes the expected loss rate on loans using the losses on charged-off and foreclosed loans from the most recent 12 months to estimate the amount that would be lost if a default were to occur, which is termed the “loss given default.” The probability of default is multiplied by the loss given default to calculate the expected losses for each loan class. The calculated expected loss for each loan class is compared to the actual one and three year (annualized) losses for each respective loan class. If the calculated expected loss rate is less than the actual one and three year loss rates, then the expected loss rate would be set at the greater of the actual one or three year loss rate.

Sterling may also maintain an unallocated allowance to provide for other credit losses that may exist in the loan portfolio that are not taken into consideration in establishing the probability of default and loss given default. The unallocated amount may generally be maintained at higher levels during times of economic uncertainty. The unallocated amount is reviewed at least quarterly based on credit and economic trends.

Individual loan reviews are based upon specific quantitative and qualitative criteria, including the size of the loan, loan quality ratings, value of collateral, repayment ability of borrowers and guarantors, as applicable, and historical experience factors. The historical experience factors utilized and allowances for homogeneous loans (such as residential mortgage loans and consumer loans) are collectively evaluated based upon historical loss experience, loan migration analysis, trends in losses and delinquencies, growth of loans in particular markets, and known changes in economic conditions in each particular lending market.

A loan is considered impaired when, based on current information and events, it is probable Sterling will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of delay, the reasons for the delay, the borrower's prior payment record, the ability and willingness of guarantors to make payments, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's obtainable market price or the fair value of collateral if the loan is collateral-dependent.

The fair value of the underlying collateral for real estate loans, which may or may not be collateral-dependent, is determined by using appraisals from qualified external sources. For commercial properties and residential development loans, the external appraisals are reviewed by qualified internal appraisal staff to ensure compliance with appropriate standards and technical accuracy. Appraisals are updated according to regulatory provisions for extensions or restructurings of commercial or residential real estate construction and permanent loans that have not performed within the terms of the original loan. Updated appraisals are also ordered for loans that have not been restructured, but that have stale valuation information, generally defined in the current market as information older than one year, and deteriorating credit quality that warrants classification as substandard.

The timing of obtaining appraisals may vary, depending on the nature and complexity of the property being evaluated and the general breadth of appraisal activity in the marketplace, but generally it is within 30 to 90 days of recognition of substandard status, following determination of collateral dependency, or in connection with a loan's maturity or a negotiation that may result in the restructuring or extension of a real estate secured loan. Delays in timing may occur to comply with actions such as a bankruptcy filing or provisions of an SBA guarantee.

Estimates of fair value may be used for substandard collateral-dependent loans at quarter end if external appraisals are not expected to be completed in time for determining quarter end results or to update values between appraisal dates to reflect recent sales activity of comparable inventory or pending property sales of the subject collateral. During periods of declining real estate values, Sterling may record an additional specific reserve for impaired loans for which an updated valuation analysis has not been completed within the last quarter. Estimates of value are not used to increase a value; however, estimates may be used to recognize deterioration of market values in quarters between appraisal updates. The judgment with respect to recognition of any provision or related charge-off for a confirmed loss also takes into consideration whether the loan is collateral-dependent or whether it is supported by sources of repayment or cash flow beyond the collateral that is being valued. For loans that are deemed to be collateral-dependent, the amount of charge-off is determined in relation to the collateral's appraised value. For loans that are not deemed to be collateral-dependent, the amount of charge-off or specific reserve may differ from the collateral's appraised value because there is additional support for the loan, such as cash flow from other sources.

The reserve for unfunded credit commitments includes loss exposure from Sterling's mortgage banking operations. Loans sold into the secondary market are sold with limited recourse to Sterling, meaning that Sterling may be obligated to repurchase any loans that are not underwritten in accordance with agency guidelines or have borrower misrepresentations.

While management uses available information to provide for loan losses, the ultimate collectability of a substantial portion of the loan portfolio and the need for future additions to the allowance will be influenced by changes in economic conditions and other relevant factors. There can be no assurance that the allowance for credit losses will be adequate to cover all losses, but management believes the allowance for credit losses was appropriate at December 31, 2012.

Loans Held for Sale. Any loan that management determines will not be held to maturity is classified as held for sale. Residential loans held for sale are carried at fair value in order to match changes in the value of the loans with the value of the economic hedges on the loans without applying complex hedge accounting. The fair value of loans held for sale is determined based upon an analysis of investor quoted pricing inputs in the secondary market. Other loan types classified as held for sale are carried at the lower of cost or market.

Loan Origination and Commitment Fees. Loan origination fees, net of direct origination costs, are deferred and recognized as interest income using the effective yield method. If the related loan is sold, the remaining net amount, which is part of the basis of the loan, is considered in determining the gain or loss on sale.

Loan commitment fees are deferred until the expiration of the commitment period unless management believes there is a remote likelihood that the underlying commitment will be exercised, in which case the fees are amortized to fee income using the straight-line method over the commitment period. If a loan commitment is exercised, the deferred commitment fee is accounted for in the same manner as a loan origination fee. Deferred commitment fees associated with expired commitments are recognized as fee income.

Other Real Estate Owned. Prior to foreclosure, Sterling considers all viable alternatives, checks with the proper authorities to ensure the existence of a valid and recorded lien on the property and determines the current market value of the collateral. Property and other assets acquired through foreclosure of defaulted mortgage or other collateralized loans are recorded at fair value, less estimated costs to sell the property and other assets. The fair value of OREO is generally determined using “as is” or disposition values from appraisals obtained by independent appraisers.

An allowance for losses on OREO is designed to include amounts for estimated losses as a result of impairment in value of the real property after repossession. Sterling reviews its OREO for impairment in value at least quarterly or whenever events or circumstances indicate that the carrying value of the property or other assets may not be recoverable. In performing the review, if the fair value, less selling costs, is less than its carrying value, a specific reserve is established as a charge to noninterest expenses.

Property and Equipment. Property and equipment is carried at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the lesser of the estimated useful lives or the related lease terms of the assets. Expenditures for new property and equipment and major renewals or betterments are capitalized. Expenditures for repairs and maintenance are charged to expense as incurred. Upon sale or retirement, the cost and related accumulated depreciation are removed from the respective property or equipment accounts, and the resulting gains or losses are reflected in operations.

Goodwill and Other Intangible Assets. Goodwill represents the difference between the value of consideration paid and the fair value of the net assets received in a business combination. Sterling records impairment losses as charges to noninterest expense and adjustments to the carrying value of goodwill.

Goodwill is tested for impairment on an annual basis as of June 30, or more frequently as events occur, or as current circumstances and conditions warrant. A qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill, determines the extent to which further testing is required. If the qualitative analysis concludes that further analysis is required, that analysis would compare the fair value of each of the reporting units, including goodwill, to the respective carrying amounts.

Other intangible assets are comprised primarily of core deposit intangibles, as well as other identifiable intangibles related to First Independent's trust and wealth management business. Core deposit intangibles are amortized over the estimated useful life of the deposit relationship, which is generally eight to 10 years. Other intangible assets are periodically assessed for impairment when certain triggering events occur that indicate the possibility of impairment.

Mortgage Servicing Rights and Transfers of Financial Assets. Gains or losses on “servicing-retained” loan sale transactions generally include a component reflecting the differential between the contractual interest rate of the loan and the interest rate to be received by the investor. The present value of the estimated future profit for servicing the loans and changes in the fair value of any related derivatives,is also taken into account in determining the amount of gain or loss on the sale of these loans. For loans sold servicing-retained, the fair value of mortgage servicing rights is recorded as an asset, with their value estimated using a discounted cash flow methodology to arrive at the present value of future expected earnings from the servicing of the loans. Model inputs include prepayment speeds, market interest rates, servicing costs, contractual interest rates on the loans being serviced, and the amount of other fee income generated over the servicing contract. Mortgage servicing rights are amortized in proportion to, and over the estimated period of the servicing revenues. To the extent the carrying value of mortgage servicing rights exceeds the subsequent fair value estimates, a valuation allowance is recognized. Subsequent recoveries in value are recognized up to the original carrying value of the mortgage servicing rights only to the extent of cumulative valuation adjustments.

Loans sold into the secondary market are considered transfers of financial assets. These transfers are accounted for as sales when control over the asset has been surrendered, which is deemed to have occurred when: an asset does not have any claims to it by the transferor or their creditors, including in bankruptcy or other receivership situations; the transferee obtains the unconditional right to pledge or exchange the asset; or the transfer does not include a repurchase provision above the limited recourse provisions of these loan sales.

Income Taxes. Sterling estimates income taxes payable based on the amount it expects to owe various taxing authorities. Accrued income taxes represent the net estimated amount due to, or to be received from, taxing authorities. In estimating accrued income taxes, Sterling assesses the relative merits and risks of the appropriate tax treatment of transactions, taking into account the applicable statutory, judicial and regulatory guidance in the context of Sterling's tax position. Sterling also considers recent audits and examinations, as well as its historical experience in making such estimates. Although Sterling uses available information to record income taxes, underlying estimates and assumptions can change over time as a result of unanticipated events or circumstances. Penalties and interest associated with any potential estimate variances would be included in income tax expense in the consolidated financial statements.  

A deferred tax asset valuation allowance was established during 2009 due to the three year cumulative loss and uncertainty at that time regarding Sterling's ability to generate future taxable income. Reversal of the deferred tax asset valuation allowance occurred during the quarter ended June 30, 2012, which marked the sixth consecutive quarter of profitability for Sterling. Prior to reversing the allowance, management analyzed both positive and negative evidence that could affect the realization of the deferred tax asset. Based on the earnings performance trend and projections of income through 2013, improvement in asset quality, higher net interest margin and improvements in other key financial ratios, expectations of continued profitability, the length of the carry-forward period for its net operating losses and tax credits, an analysis of the reversal of existing temporary differences, and an evaluation of its loss carry-back ability and tax planning strategies, Sterling determined that it was more likely than not that the net deferred tax asset would be realized. This assessment was updated as of December 31, 2012, resulting in the same conclusion.

Earnings (Loss) Per Share. Earnings (loss) per share—basic is computed by dividing net income or loss available to common shareholders by the weighted average number of shares outstanding during the period. Earnings (loss) per share—diluted is computed by dividing net income or loss available to common shareholders by the weighted average number of shares outstanding, increased by the additional shares that would have been outstanding if all potentially dilutive and contingently issuable shares had been issued. The accounting standards codification requires a two-class method of computing earnings per share for entities that have participating securities such as Sterling’s unvested restricted shares. Application of the two-class method resulted in the equivalent earnings per share to the treasury method.

Stock-Based Compensation. Stock options and restricted stock issued as compensation are recorded as an expense, over the vesting term of the awards, at their estimated grant date fair value. The Black-Scholes option pricing model is used to estimate the fair value of stock options granted, while the value of restricted stock awards are recorded using the grant date market closing price of Sterling’s common stock.

Comprehensive Income (Loss). Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) is comprised of unrealized gains and losses on available for sale securities, and is a separate component of shareholders’ equity. Sterling reports and displays comprehensive income (loss) and its components (revenues, expenses, gains and losses) on its Statement of Comprehensive Income (Loss).

Derivatives and Hedging. Sterling enters into interest rate swap transactions with loan customers. The interest rate risk on these swap transactions is hedged by Sterling entering into offsetting interest rate swap agreements with various unaffiliated counterparties (“broker-dealers”). Both customer and broker-dealer related interest rate derivatives are carried at fair value, which includes consideration of counterparty credit risk.

As part of its mortgage banking activities, Sterling makes commitments to prospective borrowers on residential mortgage loan applications, which may have the interest rates locked for a period of 10 to 60 days or longer, if extended (“interest rate lock commitments”). The interest rate lock commitments fair valued below are net of the anticipated fallout. These interest rate lock commitments, and loans held for sale that have not been committed to investors, give rise to interest rate risk. Sterling hedges the interest rate risk arising from these mortgage banking activities by entering into forward sales agreements on MBS with third parties (“forward commitments”).

Reclassifications. Certain amounts in prior period financial statements have been reclassified to conform to the current year’s presentation. These reclassifications had no effect on the accumulated deficit or net income(loss) as previously reported.

During 2012, Sterling identified an error related to the classification of the loss on foreclosure amounts reported in the Consolidated Statement of Cash Flows for the quarter ended March 31, 2012, and for the years ended December 31, 2011 and 2010, and the interim periods therein. The loss on foreclosure amounts were previously included in the cash flows from operating activities in the "Loss on OREO" line item, instead of the cash flows from investing activities in the "Net change in loans" line item. In accordance with the SEC Staff Accounting Bulletin (SAB) No. 99, "Materiality," and SAB No. 108, "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements," management evaluated the materiality of the error from qualitative and quantitative perspectives and concluded that the error was immaterial to prior periods. Consequently, the Consolidated Statement of Cash Flows contained in this Report has been revised for the years ended December 31, 2011 and 2010. This change resulted in a decrease of $51.3 million and $66.1 million to cash flows from operating activities and an increase of the same amount to cash flows from investing activities for the years ended December 31, 2011 and 2010, respectively. This change did not affect net income(loss), the balance sheet, or shareholders' equity for any period.

Recent Accounting Pronouncements. In April 2011, the FASB issued Accounting Standards Update ("ASU") 2011-03, “Reconsideration of Effective Control for Repurchase Agreements.” This update to codification topic 860 revises the assessment of effective control for purposes of determining if a repurchase agreement should be accounted for as a sale, compared with a secured borrowing. ASU 2011-03 became effective for Sterling on January 1, 2012, and did not have a material effect on Sterling’s consolidated financial statements.

In May 2011, the FASB issued ASU 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS.” This update to codification topic 820 clarifies the application of existing fair value measurement and disclosure requirements, and implements changes to the codification that align U.S. GAAP and IFRS. This update became effective for Sterling on January 1, 2012, and did not have a material effect on Sterling's consolidated financial statements.

In September 2011, the FASB issued ASU 2011-08, “Intangibles-Goodwill and Other: Testing Goodwill for Impairment.” ASU 2011-08 is intended to simplify goodwill impairment testing by adding a qualitative review step to assess whether the required quantitative impairment analysis that exists today is necessary. Under the amended rule, a company will not be required to calculate the fair value of a business that contains recorded goodwill unless it concludes, based on the qualitative assessment, that it is more likely than not that the fair value of that business is less than its book value. If such a decline in fair value is deemed more likely than not to have occurred, then the quantitative goodwill impairment test that exists under current GAAP must be completed; otherwise, goodwill is deemed to be not impaired and no further testing is required until the next annual test date (or sooner if conditions or events before that date raise concerns of potential impairment in the business). The amended goodwill impairment guidance does not affect the manner in which a company estimates fair value. ASU 2011-08 became effective for Sterling on January 1, 2012, and did not have a material effect on Sterling’s consolidated financial statements.

In December 2011, the FASB issued ASU 2011-11, “Balance Sheet: Disclosures about Offsetting Assets and Liabilities.” ASU 2011-11 adds certain additional disclosure requirements about financial instruments and derivatives instruments that are subject to netting arrangements. The new disclosures are required for annual reporting periods beginning on or after January 1, 2013, and interim periods within those periods. This standard could add additional disclosures if applicable to Sterling. However, it is not expected to have a material impact on Sterling’s consolidated financial statements.

In July 2012, the FASB issued ASU 2012-02, "Testing Indefinite-Lived Intangible Assets for Impairment." ASU 2012-02, similar to ASU 2011-08, provided a qualitative assessment of determining if it is more likely than not that impairment has occurred, to establish the extent to which further testing is required. ASU 2012-02 will become effective for Sterling on January 1, 2013, and is not expected to have a material impact on Sterling’s consolidated financial statements.

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Quarterly Financial Data (Unaudited)

12 Months Ended

Dec. 31, 2012

Quarterly Financial Information Disclosure [Abstract]

Quarterly Financial Information

Quarterly Financial Data (Unaudited):

The following tables present Sterling's condensed operations on a quarterly basis for the years ended December 31, 2012 and 2011:

	2012 Quarters Ended
	March 31		June 30		September 30		December 31
	(in thousands, except per share amounts)
Interest income	$	97,965	$	100,990	$	95,991	$	94,254
Interest expense	23,612		22,080		20,683		18,147
Net interest income	74,353		78,910		75,308		76,107
Provision for credit losses	4,000		4,000		2,000		0
Net interest income after provision	70,353		74,910		73,308		76,107
Noninterest income	31,587		44,741		46,698		31,227
Noninterest expenses	88,649		87,607		89,408		89,589
Income before income taxes	13,291		32,044		30,598		17,745
Income tax benefit	0		288,842		0		3,201
Net income	13,291		320,886		30,598		20,946
Earnings per share - basic	$	0.21	$	5.17	$	0.49	$	0.34
Earnings per share - diluted	$	0.21	$	5.13	$	0.49	$	0.33
Weighted average shares outstanding - basic	62,078,404		62,112,936		62,139,833		62,159,683
Weighted average shares outstanding - diluted	62,682,987		62,610,054		62,845,864		62,867,030

	2011 Quarters Ended
	March 31		June 30		September 30		December 31
	(in thousands, except per share amounts)
Interest income	$	103,237	$	102,347	$	101,379	$	97,329
Interest expense	29,494		27,540		26,543		25,520
Net interest income	73,743		74,807		74,836		71,809
Provision for credit losses	10,000		10,000		6,000		4,000
Net interest income after provision	63,743		64,807		68,836		67,809
Noninterest income	29,982		34,335		29,112		32,899
Noninterest expenses	88,308		91,587		86,620		85,875
Income before income taxes	5,417		7,555		11,328		14,833
Income tax benefit	0		0		0		0
Net income	5,417		7,555		11,328		14,833
Earnings per share - basic	$	0.09	$	0.12	$	0.18	$	0.24
Earnings per share - diluted	$	0.09	$	0.12	$	0.18	$	0.24
Weighted average shares outstanding - basic	61,930,783		61,943,851		61,958,183		61,989,094
Weighted average shares outstanding - diluted	62,335,212		62,312,224		62,041,203		62,194,011

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Commitments and Contingencies Undisbursed Loan Balances (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Other Commitments [Line Items]
Loans and Leases Receivable, Commitments to Purchase or Sell	$ 28,485,000	$ 14,760,000
Letters of Credit Outstanding, Amount	18,000,000	17,000,000
Line of Credit Facility, Commitment Fee Amount	180,000	153,000
Construction Loans
Other Commitments [Line Items]
Loans and Leases Receivable, Loans in Process	16,499,000	17,617,000
Commercial
Other Commitments [Line Items]
Loans and Leases Receivable, Loans in Process	524,065,000	309,560,000
Consumer
Other Commitments [Line Items]
Loans and Leases Receivable, Loans in Process	$ 399,691,000	$ 403,112,000

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Goodwill and Other Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill

The following table presents a roll-forward of Sterling's goodwill:

	Amount
Beginning balance, January 1, 2012	$	0
Acquired	22,577
Ending Balance, December 31, 2012	$	22,577

Schedule of Intangible Assets

The following table provides details of other intangible assets:

	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	(in thousands)
December 31, 2012
Core deposit intangibles	$	55,420	$	38,029	$	17,391
Other	1,800		119		1,681
December 31, 2011
Core deposit intangibles	43,446		31,368		12,078
Other	0		0		0

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense

The following table provides the projected core deposit and other intangibles amortization expense for the next five years:

	Amount
	(in thousands)
Years ended:
December 31, 2013	$	6,430
December 31, 2014	3,339
December 31, 2015	2,361
December 31, 2016	1,271
December 31, 2017	1,178

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Segment Information (Tables)

12 Months Ended

Dec. 31, 2012

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment

	As of and for the Year Ended December 31, 2012
	Community Banking		Home Loan Division		Other and Eliminations			Total
	(in thousands)
Interest income	$	360,901	$	28,299	$	0		$	389,200
Interest expense	78,004		0		6,518			84,522
Net interest income	282,897		28,299		(6,518		)	304,678
Provision for credit losses	9,980		20		0			10,000
Noninterest income	46,433		108,391		(571		)	154,253
Noninterest expense	266,486		92,742		(3,975		)	355,253
Income (loss) before income taxes	$	52,864	$	43,928	$	(3,114	)	$	93,678
Total assets	$	8,754,170	$	477,127	$	5,613		$	9,236,910

	As of and for the Year Ended December 31, 2011
	Community Banking		Home Loan Division		Other and Eliminations			Total
	(in thousands)
Interest income	$	387,365	$	16,927	$	0		$	404,292
Interest expense	102,963		0		6,134			109,097
Net interest income	284,402		16,927		(6,134		)	295,195
Provision for credit losses	56,507		71		(26,578		)	30,000
Noninterest income	76,337		48,865		1,126			126,328
Noninterest expense	295,139		58,979		(1,728		)	352,390
Income (loss) before income taxes	$	9,093	$	6,742	$	23,298		$	39,133
Total assets	$	9,219,398	$	2,594	$	(28,755	)	$	9,193,237

	As of and for the Year Ended December 31, 2010
	Community Banking			Residential Construction Lending			Residential Mortgage Banking		Commercial Mortgage Banking		Other and Eliminations			Total
	(in thousands)
Interest income	$	393,754		$	34,559		$	13,243	$	3,573	$	4		$	445,133
Interest expense	128,294			18,967			7,742		0		6,103			161,106
Net interest income	265,460			15,592			5,501		3,573		(6,099		)	284,027
Provision for credit losses	177,232			64,767			8,230		0		0			250,229
Noninterest income	67,499			60			65,099		2,470		1,837			136,965
Noninterest expense	332,557			7,291			36,785		5,070		13,342			395,045
Income (loss) before income taxes	$	(176,830	)	$	(56,406	)	$	25,585	$	973	$	(17,604	)	$	(224,282	)
Total assets	$	7,643,294		$	25,562		$	1,811,601	$	6,340	$	6,372		$	9,493,169

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Junior Subordinated Debentures (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Debt Instrument [Line Items]
Average Term of Junior Subordinated Debentures	30 years
Interest Expense, Junior Subordinated Debentures	$ 19,600,000
Junior Subordinated Debenture Owed to Unconsolidated Subsidiary Trust [Abstract]
Amount	245,294,000	245,290,000
Junior Subordinated Debt
Junior Subordinated Debenture Owed to Unconsolidated Subsidiary Trust [Abstract]
Rate, weighted average	2.47%
Amount	245,294,000
Junior Subordinated Debt | Sterling Capital Trust IX
Junior Subordinated Debenture Owed to Unconsolidated Subsidiary Trust [Abstract]
Rate	1.76%
Amount	46,392,000
Junior Subordinated Debt | Sterling Capital Trust VIII
Junior Subordinated Debenture Owed to Unconsolidated Subsidiary Trust [Abstract]
Rate	1.94%
Amount	51,547,000
Junior Subordinated Debt | Sterling Capital Trust VII
Junior Subordinated Debenture Owed to Unconsolidated Subsidiary Trust [Abstract]
Rate	1.83%
Amount	56,702,000
Junior Subordinated Debt | Lynnwood Capital Trust II
Junior Subordinated Debenture Owed to Unconsolidated Subsidiary Trust [Abstract]
Rate	2.11%
Amount	10,310,000
Junior Subordinated Debt | Sterling Capital Trust VI
Junior Subordinated Debenture Owed to Unconsolidated Subsidiary Trust [Abstract]
Rate	3.51%
Amount	10,310,000
Junior Subordinated Debt | Sterling Capital Statutory Trust V
Junior Subordinated Debenture Owed to Unconsolidated Subsidiary Trust [Abstract]
Rate	3.56%
Amount	20,619,000
Junior Subordinated Debt | Sterling Capital Trust IV
Junior Subordinated Debenture Owed to Unconsolidated Subsidiary Trust [Abstract]
Rate	3.46%
Amount	10,310,000
Junior Subordinated Debt | Sterling Capital Trust III
Junior Subordinated Debenture Owed to Unconsolidated Subsidiary Trust [Abstract]
Rate	3.56%
Amount	14,433,000
Junior Subordinated Debt | Lynnwood Capital Trust I
Junior Subordinated Debenture Owed to Unconsolidated Subsidiary Trust [Abstract]
Rate	3.46%
Amount	9,437,000
Junior Subordinated Debt | Klamath First Capital Trust I
Junior Subordinated Debenture Owed to Unconsolidated Subsidiary Trust [Abstract]
Rate	4.48%
Amount	$ 15,234,000

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Cash and cash equivalents:
Interest bearing	$ 173,962	$ 382,330
Noninterest bearing	125,916	88,269
Total cash and cash equivalents	299,878	470,599
Restricted cash	31,672	20,629
Investments and mortgage-backed securities ("MBS"):
Available for sale	1,513,157	2,547,876
Held to maturity	206	1,747
Loans held for sale (at fair value: $465,983 and $223,638)	465,983	273,957
Loans receivable, net	6,101,749	5,341,179
Accrued interest receivable	28,019	32,826
Other real estate owned, net (OREO)	25,042	81,910
Properties and equipment, net	93,850	84,015
Bank-owned life insurance ("BOLI")	179,828	174,512
Goodwill	22,577	0
Other intangible assets, net	19,072	12,078
Mortgage servicing rights, net	32,420	23,102
Deferred tax asset, net	292,082	0
Other assets, net	131,375	128,807
Total assets	9,236,910	9,193,237
LIABILITIES:
Noninterest bearing	1,702,740	1,211,628
Interest bearing	4,733,377	5,274,190
Total deposits	6,436,117	6,485,818
Advances from Federal Home Loan Bank ("FHLB")	605,330	405,609
Securities sold under repurchase agreements and funds purchased	586,867	1,055,763
Junior subordinated debentures	245,294	245,290
Accrued interest payable	4,229	22,575
Accrued expenses and other liabilities	141,150	99,625
Total liabilities	8,018,987	8,314,680
SHAREHOLDERS' EQUITY:
Preferred stock, 10,000,000 shares authorized; no shares outstanding	0	0
Common stock, 151,515,151 shares authorized; 62,124,551 and 62,057,645 shares outstanding, respectively	1,968,025	1,964,234
Accumulated other comprehensive income	60,712	61,115
Accumulated deficit	(810,814)	(1,146,792)
Total shareholders' equity	1,217,923	878,557
Total liabilities and shareholders' equity	$ 9,236,910	$ 9,193,237

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Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2012

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The following table presents the computations for basic and diluted earnings per common share:

	Years Ended December 31,
	2012		2011		2010
	(in thousands, except shares and per share amounts)
Numerator:
Net income	$	385,721	$	39,133	$	(756,143	)
Denominator:
Weighted average shares outstanding - basic	62,122,862		61,955,659		14,253,869
Dilutive securities outstanding	649,217		275,549		0
Weighted average shares outstanding - diluted	62,772,079		62,231,208		14,253,869
Earnings per share - basic	$	6.21	$	0.63	$	(53.05	)
Earnings per share - diluted	$	6.14	$	0.63	$	(53.05	)
Antidilutive securities outstanding (weighted average):
Stock options	13,792		16,511		20,700
Warrants	0		0		954,754
Restricted shares	230		4,728		20,754
Total antidilutive securities outstanding	14,022		21,239		996,208

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Consolidated Statement of Shareholders' Equity (USD $) In Thousands, except Share data	Total	Preferred Stock [Member]	Common Stock [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Retained Earnings [Member]
Balance at Dec. 31, 2009	$ 323,249	$ 294,136	$ 962,874	$ 16,284	$ (950,045)
Shares, Outstanding at Dec. 31, 2009		303,000	791,077
Accretion of preferred stock	0	1,248			(1,248)
Shares issued in direct stock purchases	18		18
Shares issued in direct stock purchases, shares			360
Series B and D Preferred Stock and Common Stock Issued	679,666	604,592	75,074
Series B and D Preferred Stock and Common Stock Issued, shares		7,300,000	4,424,242
Preferred Stock Beneficial Conversion Feature		(604,592)	604,592
Shares Issued and Simultaneous Conversion into Common Stock	19,864	(295,384)	315,248
Shares Issued and Simultaneous Conversion into Common Stock, shares		(303,000)	5,738,636
Shares issued from Series B and D preferred stock conversion into common stock, shares		(7,300,000)	50,878,788
Conversion of Stock, Amount Converted	0	0	0	0	0
Change in unrealized gain or loss on investments and MBS available for sale, net of tax	(20,463)	0	0	(20,463)	0
Preferred stock cash dividend accrued	10,350	0	0	0	10,350
Equity based compensation	3,065	0	3,065	0	0
Equity based compensation, shares			85,740
Fracitonal shares issued in stock split			7,344
Net Income	(224,282)				(224,282)
Balance at Dec. 31, 2010	770,767	0	1,960,871	(4,179)	(1,185,925)
Shares, Outstanding at Dec. 31, 2010		0	61,926,187
Change in unrealized gain or loss on investments and MBS available for sale, net of tax	65,294	0	0	65,294	0
Preferred stock cash dividend accrued	0
Equity based compensation	3,363	0	3,363	0	0
Equity based compensation, shares			131,458
Net Income	39,133				39,133
Balance at Dec. 31, 2011	878,557	0	1,964,234	61,115	(1,146,792)
Shares, Outstanding at Dec. 31, 2011		0	62,057,645
Change in unrealized gain or loss on investments and MBS available for sale, net of tax	(403)	0	0	(403)	0
Preferred stock cash dividend accrued	0
Equity based compensation	3,130	0	3,130	0	0
Equity based compensation, shares			110,958
Employee stock purchase plan	661	0	661	0	0
Employee stock purchase plan, shares	38,926	0	38,926
Dividends, Common Stock, Cash	(49,743)				(49,743)
Net Income	385,721				385,721
Balance at Dec. 31, 2012	$ 1,217,923	$ 0	$ 1,968,025	$ 60,712	$ (810,814)
Shares, Outstanding at Dec. 31, 2012		0	62,207,529

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Loans Receivable And Allowance For Credit Losses (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]
Total loans receivable, gross	$ 6,253,234,000	$ 5,518,889,000
Financing Receivable, Deferred Fees, Net	2,860,000	(252,000)
Total allowance for loan losses	(154,345,000)	(177,458,000)	(247,056,000)
Net loans receivable	6,101,749,000	5,341,179,000
Unamortized portion of discounts on acquired loans	21,300,000	4,300,000
Individually evaluated for impairment	126,257,000	243,112,000
Collectively evaluated for impairment	6,126,977,000	5,275,777,000
Individually evaluated for impairment	8,463,000	16,305,000
Collectively evaluated for impairment	145,882,000	161,153,000
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning balance	177,458,000	247,056,000	343,443,000
Provisions	7,500,000	28,500,000	250,591,000
Charge-offs	(58,737,000)	(129,169,000)	(376,855,000)
Recovery	28,124,000	31,071,000	29,877,000
Ending balance	154,345,000	177,458,000	247,056,000
Financing Receivable, Unfunded Credit Commitments [Roll Forward]
Beginning balance	10,029,000	10,707,000	11,967,000
Provisions	2,500,000	1,500,000	(360,000)
Charge-offs	(4,527,000)	(2,178,000)	(900,000)
Recoveries	0	0	0
Ending balance	8,002,000	10,029,000	10,707,000
Total credit allowance	162,347,000	187,487,000	257,763,000
FHLB and Federal Reserve
Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]
Loans Pledged as Collateral	4,150,000,000	4,020,000,000
Residential Real Estate
Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]
Total loans receivable, gross	806,722,000	688,020,000
Total allowance for loan losses	(19,847,000)	(15,197,000)	(17,307,000)
Individually evaluated for impairment	9,134,000	18,301,000
Collectively evaluated for impairment	797,588,000	669,719,000
Individually evaluated for impairment	365,000	872,000
Collectively evaluated for impairment	19,482,000	14,325,000
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning balance	15,197,000	17,307,000	28,319,000
Provisions	8,778,000	15,024,000	24,204,000
Charge-offs	(5,203,000)	(18,553,000)	(37,347,000)
Recovery	1,075,000	1,419,000	2,131,000
Ending balance	19,847,000	15,197,000	17,307,000
Financing Receivable, Unfunded Credit Commitments [Roll Forward]
Beginning balance	3,828,000	3,189,000	798,000
Provisions	2,929,000	2,817,000	3,291,000
Charge-offs	(4,527,000)	(2,178,000)	(900,000)
Recoveries	0	0	0
Ending balance	2,230,000	3,828,000	3,189,000
Total credit allowance	22,077,000	19,025,000	20,496,000
Commercial Real Estate
Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]
Total loans receivable, gross	2,874,801,000	2,451,754,000
Total allowance for loan losses	(48,094,000)	(91,722,000)	(124,907,000)
Individually evaluated for impairment	68,317,000	149,578,000
Collectively evaluated for impairment	2,806,484,000	2,302,176,000
Individually evaluated for impairment	3,182,000	11,170,000
Collectively evaluated for impairment	44,912,000	80,552,000
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning balance	91,722,000	124,907,000	236,501,000
Provisions	(33,184,000)	19,129,000	151,323,000
Charge-offs	(27,385,000)	(73,379,000)	(283,578,000)
Recovery	16,941,000	21,065,000	20,661,000
Ending balance	48,094,000	91,722,000	124,907,000
Financing Receivable, Unfunded Credit Commitments [Roll Forward]
Beginning balance	2,321,000	4,157,000	9,228,000
Provisions	(1,916,000)	(1,836,000)	(5,071,000)
Charge-offs	0	0	0
Recoveries	0	0	0
Ending balance	405,000	2,321,000	4,157,000
Total credit allowance	48,499,000	94,043,000	129,064,000
Commercial Real Estate | Investor CRE
Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]
Total loans receivable, gross	1,219,847,000	1,275,667,000
Commercial Real Estate | Multifamily
Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]
Total loans receivable, gross	1,580,289,000	1,001,479,000
Commercial Real Estate | Construction
Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]
Total loans receivable, gross	74,665,000	174,608,000
Commercial
Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]
Total loans receivable, gross	1,817,090,000	1,704,154,000
Total allowance for loan losses	(41,874,000)	(38,046,000)	(56,951,000)
Individually evaluated for impairment	48,312,000	74,041,000
Collectively evaluated for impairment	1,768,778,000	1,630,113,000
Individually evaluated for impairment	4,916,000	4,206,000
Collectively evaluated for impairment	36,958,000	33,840,000
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning balance	38,046,000	56,951,000	59,136,000
Provisions	12,189,000	2,708,000	33,764,000
Charge-offs	(17,005,000)	(28,369,000)	(41,165,000)
Recovery	8,644,000	6,756,000	5,216,000
Ending balance	41,874,000	38,046,000	56,951,000
Financing Receivable, Unfunded Credit Commitments [Roll Forward]
Beginning balance	1,796,000	1,515,000	1,952,000
Provisions	1,010,000	281,000	(437,000)
Charge-offs	0	0	0
Recoveries	0	0	0
Ending balance	2,806,000	1,796,000	1,515,000
Total credit allowance	44,680,000	39,842,000	58,466,000
Commercial | Owner Occupied CRE
Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]
Total loans receivable, gross	1,276,591,000	1,272,461,000
Commercial | Commercial & Industrial (C&I)
Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]
Total loans receivable, gross	540,499,000	431,693,000
Consumer
Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]
Total loans receivable, gross	754,621,000	674,961,000
Total allowance for loan losses	(25,602,000)	(13,427,000)	(14,645,000)
Individually evaluated for impairment	494,000	1,192,000
Collectively evaluated for impairment	754,127,000	673,769,000
Individually evaluated for impairment	0	57,000
Collectively evaluated for impairment	25,602,000	13,370,000
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning balance	13,427,000	14,645,000	19,198,000
Provisions	19,855,000	5,819,000	8,343,000
Charge-offs	(9,144,000)	(8,868,000)	(14,765,000)
Recovery	1,464,000	1,831,000	1,869,000
Ending balance	25,602,000	13,427,000	14,645,000
Financing Receivable, Unfunded Credit Commitments [Roll Forward]
Beginning balance	1,787,000	817,000	1,107,000
Provisions	331,000	970,000	(290,000)
Charge-offs	0	0	0
Recoveries	0	0	0
Ending balance	2,118,000	1,787,000	817,000
Total credit allowance	27,720,000	15,214,000	15,462,000
Unallocated Financing Receivables
Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]
Total loans receivable, gross	0	0
Total allowance for loan losses	(18,928,000)	(19,066,000)	(33,246,000)
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	0	0
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	18,928,000	19,066,000
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning balance	19,066,000	33,246,000	289,000
Provisions	(138,000)	(14,180,000)	32,957,000
Charge-offs	0	0	0
Recovery	0	0	0
Ending balance	18,928,000	19,066,000	33,246,000
Financing Receivable, Unfunded Credit Commitments [Roll Forward]
Beginning balance	297,000	1,029,000	(1,118,000)
Provisions	146,000	(732,000)	2,147,000
Charge-offs	0	0	0
Recoveries	0	0	0
Ending balance	443,000	297,000	1,029,000
Total credit allowance	$ 19,371,000	$ 19,363,000	$ 34,275,000

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Investments And MBS (Tables)

12 Months Ended

Dec. 31, 2012

Investments and MBS [Abstract]

Available-for-sale Securities [Table Text Block]

The carrying and fair values of investments and MBS are summarized as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
December 31, 2012
Available for sale
MBS	$	1,263,786	$	45,052	$	0		$	1,308,838
Municipal bonds	188,467		16,452		(613		)	204,306
Other	5		8		0			13
Total	$	1,452,258	$	61,512	$	(613	)	$	1,513,157
Held to maturity
Tax credits	$	206	$	0	$	0		$	206
Total	$	206	$	0	$	0		$	206
December 31, 2011
Available for sale
MBS	$	2,265,207	$	55,760	$	(33	)	$	2,320,934
Municipal bonds	195,512		13,338		(1,394		)	207,456
Other	24,923		2		(5,439		)	19,486
Total	$	2,485,642	$	69,100	$	(6,866	)	$	2,547,876
Held to maturity
Tax credits	$	1,747	$	0	$	0		$	1,747
Total	$	1,747	$	0	$	0		$	1,747

Realized Gain (Loss) on Investments [Table Text Block]

Total sales of Sterling’s securities during the years ended December 31, 2012, 2011 and 2010 are summarized as follows:

	Proceeds from Sales		Gross Realized Gains		Gross Realized Losses
	(in thousands)
Years Ended:
December 31, 2012	$	879,174	$	24,024	$	189
December 31, 2011	586,340		18,771		2,535
December 31, 2010	1,056,677		35,546		9,804

Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Table Text Block]

The following table summarizes Sterling’s investments and MBS that had a market value below their amortized cost as of December 31, 2012 and December 31, 2011, segregated by those investments that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 months or longer:

	Less than 12 months					12 months or longer					Total
	Market Value		Unrealized Losses			Market Value		Unrealized Losses			Market Value		Unrealized Losses
	(in thousands)
December 31, 2012
MBS	$	0	$	0		$	0	$	0		$	0	$	0
Municipal bonds	0		0			12,921		(613		)	12,921		(613		)
Other	0		0			0		0			0		0
Total	$	0	$	0		$	12,921	$	(613	)	$	12,921	$	(613	)
December 31, 2011
MBS	$	1,419	$	(12	)	$	24,726	$	(21	)	$	26,145	$	(33	)
Municipal bonds	0		0			17,289		(1,394		)	17,289		(1,394		)
Other	0		0			19,479		(5,439		)	19,479		(5,439		)
Total	$	1,419	$	(12	)	$	61,494	$	(6,854	)	$	62,913	$	(6,866	)

Investments Classified by Contractual Maturity Date [Table Text Block]

Actual maturities for MBS will differ from contractual maturities as a result of the level of prepayments experienced on the underlying mortgages.

	Held to maturity				Available for sale
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(in thousands)
Due within one year	$	0	$	0	$	0	$	0
Due after one year through five years	0		0		3,033		3,266
Due after five years through ten years	0		0		70,704		73,979
Due after ten years	206		206		1,378,521		1,435,912
Total	$	206	$	206	$	1,452,258	$	1,513,157

Other than Temporary Impairment, Credit Losses Recognized in Earnings [Table Text Block]

The following table presents a roll-forward of OTTI for the periods presented:

	Years Ended December 31,
	2012			2011		2010
	(in thousands)
OTTI, beginning balance	$	0		$	0	$	0
Additions	6,819			0		0
Realized	(6,819		)	0		0
Ending Balance	$	0		$	0	$	0

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Loan Servicing Principal Balance of Loans Serviced for Others (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Qualitative and Quantitative Information, Transferor's Continuing Involvement [Line Items]
Capitalization Rate for Residental Loan Servicing Portfolio	0.70%	0.00%
Balance of loans serviced for others	$ 5,249,255	$ 4,309,283
Residential Mortgage
Qualitative and Quantitative Information, Transferor's Continuing Involvement [Line Items]
Balance of loans serviced for others	4,132,570	2,915,817
Commercial Real Estate
Qualitative and Quantitative Information, Transferor's Continuing Involvement [Line Items]
Balance of loans serviced for others	983,782	1,276,742
Commercial
Qualitative and Quantitative Information, Transferor's Continuing Involvement [Line Items]
Balance of loans serviced for others	$ 132,903	$ 116,724

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Income Taxes

12 Months Ended

Dec. 31, 2012

Income Tax Expense (Benefit) [Abstract]

Income Taxes

Income Taxes:

During the year ended December 31, 2012, Sterling recorded a $292.0 million income tax benefit, which was the result of reversing the deferred tax asset valuation allowance. Sterling did not recognize any federal or state income tax expense during 2011. As of December 31, 2012, the net deferred tax asset was $292.1 million, including $274.0 million of net operating loss and tax credit carry-forwards. A valuation allowance of $1.8 million remains, relating to certain state tax credits that will likely expire unused. As of December 31, 2011, Sterling had a fully reserved net deferred tax asset of $327.4 million, including $285.0 million of net operating loss and tax credit carry-forwards.

A deferred tax asset valuation allowance was established during 2009 due to the three year cumulative loss and uncertainty at that time regarding Sterling's ability to generate future taxable income. Reversal of the deferred tax asset valuation allowance occurred during the quarter ended June 30, 2012, which marked the sixth consecutive quarter of profitability for Sterling. Prior to reversing the allowance, management analyzed both positive and negative evidence that could affect the realization of the deferred tax asset. Based on the earnings performance trend and projections of income through 2013, improvement in asset quality, higher net interest margin and improvements in other key financial ratios, expectations of continued profitability, the length of the carry-forward period for its net operating losses and tax credits, an analysis of the reversal of existing temporary differences, and an evaluation of its loss carry-back ability and tax planning strategies, Sterling determined that it was more likely than not that the net deferred tax asset would be realized. This assessment was updated as of December 31, 2012, resulting in the same conclusion. As a result, the deferred tax asset valuation allowance was $1.8 million at December 31, 2012, compared to $327.4 million at December 31, 2011.

The components of income tax expense (benefit) included in the consolidated statements of operations were as follows:

	Years Ended December 31,
	2012			2011			2010
	(in thousands)
Current income taxes:
Federal	$	(163	)	$	(248	)	$	(102	)
State	0			(27		)	(11		)
Total current income taxes	(163		)	(275		)	(113		)
Deferred income taxes:
Federal	(269,968		)	248			102
State	(21,912		)	27			11
Total deferred income taxes	(291,880		)	275			113
Total income tax (benefit) expense	$	(292,043	)	$	0		$	0

The tax effects of the principal temporary differences giving rise to deferred tax assets and liabilities were as follows:

	December 31,
	2012			2011
	(in thousands)
Deferred tax assets:
NOL carryforwards - federal	$	242,318		$	250,946
NOL carryforwards - state	21,443			22,110
Tax credits - federal	7,671			7,587
Tax credits - state	2,594			4,167
Allowance for losses on loans	61,385			75,393
Deferred compensation	10,760			12,485
Bonus accrual	4,670			2,138
Intangibles	2,284			6
Purchase accounting premiums and discounts	2,087			3,877
Nonaccrual loans	1,931			2,167
Deferred rent	1,119			1,063
Other	3,394			3,044
Total deferred tax assets	361,656			384,983
Deferred tax liabilities:
Unrealized gains on available-for-sale securities	22,627			22,670
FHLB Seattle dividends	16,325			16,486
Mortgage servicing rights	11,869			8,169
Fair value - loans held for sale	8,966			3,093
Deferred loan fees	5,867			5,162
Prepaid expenses	2,151			1,945
ASC 740 (FIN 48) - temporary differences	5			9
Total deferred tax liabilities	67,810			57,534
Valuation allowance	(1,764		)	(327,449		)
Net deferred tax asset	$	292,082		$	0

As of December 31, 2012, the net operating loss carry-forwards represented the tax effect of $692.3 million of federal operating loss carry-forwards, $442.4 million of state operating loss carry-forwards, federal tax credits of $7.7 million, and state tax credits of $2.6 million. These operating loss carry-forwards and tax credits expire between 2014 and 2031.

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 adopted a tax preservation rights plan, both of which restrict certain stock transfers that would result in an investor acquiring more than 4.95% of Sterling’s total outstanding common stock.

The following table summarizes the calculation of Sterling's effective tax rates for the periods presented:

	Years Ended December 31,
	2012		2011		2010
Income tax provision at the federal statutory rate	35.0	%	35.0	%	35.0	%
Tax effect of:
Deferred tax valuation allowance	(347.8	)%	(25.0	)%	(40.1	)%
State taxes, net of federal benefit	3.8	%	0.0	%	3.1	%
Tax-exempt interest	(2.5	)%	(6.3	)%	1.0	%
Bank owned life insurance	(3.2	)%	(5.8	)%	1.1	%
Tax credits	0.0	%	(1.6	)%	0.9	%
Other, net	3.2	%	3.7	%	(1.0	)%
Effective tax rate	(311.5	)%	0.0	%	0.0	%

The following is a reconciliation of the beginning and ending amount of unrecognized tax positions for the periods presented:

	2012			2011			2010
	(in thousands)
Balance at January 1	$	525		$	1,586		$	6,330
Additions - current year tax positions	70			75			65
Additions - prior year tax positions	0			0			0
Reductions - prior year tax positions	(183		)	(1,136		)	(4,809		)
Balance at December 31	412			525			1,586
Accrued interest and penalties, net of tax effect at December 31	100			103			140
Total liability for unrecognized tax positions at December 31	$	512		$	628		$	1,726

Sterling's tax positions for the years 2008 through 2012 remain subject to review by federal and state taxing authorities. Realization of $386,000 of unrecognized tax benefits would result in a favorable impact to the effective tax rate.

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Loans Receivable And Allowance For Credit Losses (Tables)

12 Months Ended

Dec. 31, 2012

Loans and Leases Receivable, Allowance [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable

The following table presents the composition of Sterling’s loan portfolio as of the balance sheet dates:

	December 31, 2012			December 31, 2011
	(in thousands)
Residential real estate	$	806,722		$	688,020
Commercial real estate ("CRE"):
Investor CRE	1,219,847			1,275,667
Multifamily	1,580,289			1,001,479
Construction	74,665			174,608
Total CRE	2,874,801			2,451,754
Commercial:
Owner occupied CRE	1,276,591			1,272,461
Commercial & Industrial ("C&I")	540,499			431,693
Total commercial	1,817,090			1,704,154
Consumer	754,621			674,961
Gross loans receivable	6,253,234			5,518,889
Deferred loan costs (fees), net	2,860			(252		)
Allowance for loan losses	(154,345		)	(177,458		)
Net loans receivable	$	6,101,749		$	5,341,179

Allowance for Credit Losses on Financing Receivables

The following table sets forth details by segment for Sterling’s loan portfolio and related allowance as of the balance sheet dates:

	Residential Real Estate		Commercial Real Estate		Commercial		Consumer		Unallocated		Total
	(in thousands)
December 31, 2012
Loans receivable, gross:
Individually evaluated for impairment	$	9,134	$	68,317	$	48,312	$	494	$	0	$	126,257
Collectively evaluated for impairment	797,588		2,806,484		1,768,778		754,127		0		6,126,977
Total loans receivable, gross	$	806,722	$	2,874,801	$	1,817,090	$	754,621	$	0	$	6,253,234
Allowance for loan losses:
Individually evaluated for impairment	$	365	$	3,182	$	4,916	$	0	$	0	$	8,463
Collectively evaluated for impairment	19,482		44,912		36,958		25,602		18,928		145,882
Total allowance for loan losses	$	19,847	$	48,094	$	41,874	$	25,602	$	18,928	$	154,345
December 31, 2011
Loans receivable, gross:
Individually evaluated for impairment	$	18,301	$	149,578	$	74,041	$	1,192	$	0	$	243,112
Collectively evaluated for impairment	669,719		2,302,176		1,630,113		673,769		0		5,275,777
Total loans receivable, gross	$	688,020	$	2,451,754	$	1,704,154	$	674,961	$	0	$	5,518,889
Allowance for loan losses:
Individually evaluated for impairment	$	872	$	11,170	$	4,206	$	57	$	0	$	16,305
Collectively evaluated for impairment	14,325		80,552		33,840		13,370		19,066		161,153
Total allowance for loan losses	$	15,197	$	91,722	$	38,046	$	13,427	$	19,066	$	177,458

Allowance for Credit Losses Rollforward

The following tables present a roll-forward by segment of the allowance for credit losses for the periods presented:

	Residential Real Estate			Commercial Real Estate			Commercial			Consumer			Unallocated			Total
	(in thousands)
2012
Allowance for loan losses:
Beginning balance, January 1	$	15,197		$	91,722		$	38,046		$	13,427		$	19,066		$	177,458
Provisions	8,778			(33,184		)	12,189			19,855			(138		)	7,500
Charge-offs	(5,203		)	(27,385		)	(17,005		)	(9,144		)	0			(58,737		)
Recoveries	1,075			16,941			8,644			1,464			0			28,124
Ending balance, December 31	19,847			48,094			41,874			25,602			18,928			154,345
Reserve for unfunded credit commitments:
Beginning balance, January 1	3,828			2,321			1,796			1,787			297			10,029
Provisions	2,929			(1,916		)	1,010			331			146			2,500
Charge-offs	(4,527		)	0			0			0			0			(4,527		)
Recoveries	0			0			0			0			0			0
Ending balance, December 31	2,230			405			2,806			2,118			443			8,002
Total credit allowance	$	22,077		$	48,499		$	44,680		$	27,720		$	19,371		$	162,347
2011
Allowance for loan losses:
Beginning balance, January 1	$	17,307		$	124,907		$	56,951		$	14,645		$	33,246		$	247,056
Provisions	15,024			19,129			2,708			5,819			(14,180		)	28,500
Charge-offs	(18,553		)	(73,379		)	(28,369		)	(8,868		)	0			(129,169		)
Recoveries	1,419			21,065			6,756			1,831			0			31,071
Ending balance, December 31	15,197			91,722			38,046			13,427			19,066			177,458
Reserve for unfunded credit commitments:
Beginning balance, January 1	3,189			4,157			1,515			817			1,029			10,707
Provisions	2,817			(1,836		)	281			970			(732		)	1,500
Charge-offs	(2,178		)	0			0			0			0			(2,178		)
Recoveries	0			0			0			0			0			0
Ending balance, December 31	3,828			2,321			1,796			1,787			297			10,029
Total credit allowance	$	19,025		$	94,043		$	39,842		$	15,214		$	19,363		$	187,487

	Residential Real Estate			Commercial Real Estate			Commercial			Consumer			Unallocated			Total
2010
Allowance for loan losses:
Beginning balance, January 1	$	28,319		$	236,501		$	59,136		$	19,198		$	289		$	343,443
Provisions	24,204			151,323			33,764			8,343			32,957			250,591
Charge-offs	(37,347		)	(283,578		)	(41,165		)	(14,765		)	0			(376,855		)
Recoveries	2,131			20,661			5,216			1,869			0			29,877
Ending balance, December 31	17,307			124,907			56,951			14,645			33,246			247,056
Reserve for unfunded credit commitments:
Beginning balance, January 1	798			9,228			1,952			1,107			(1,118		)	11,967
Provisions	3,291			(5,071		)	(437		)	(290		)	2,147			(360		)
Charge-offs	(900		)	0			0			0			0			(900		)
Recoveries	0			0			0			0			0			0
Ending balance, December 31	3,189			4,157			1,515			817			1,029			10,707
Total credit allowance	$	20,496		$	129,064		$	58,466		$	15,462		$	34,275		$	257,763

Financing Receivable Credit Quality Indicators

The following table presents credit quality indicators for Sterling’s loan portfolio grouped according to internally assigned risk ratings and performance status:

			Commercial Real Estate						Commercial
	Residential Real Estate		Investor CRE		Multifamily		Construction		Owner Occupied CRE		Commercial & Industrial		Consumer		Total		% of Total
	(in thousands)
December 31, 2012
Pass	$	714,346	$	599,660	$	1,486,824	$	10,946	$	678,916	$	349,674	$	723,698	$	4,564,064	73	%
Marginal	53,722		472,801		74,379		42,518		454,348		146,554		17,255		1,261,577		20	%
Special mention	11,739		77,342		10,122		3,401		85,228		38,874		4,864		231,570		4	%
Substandard	26,550		67,347		8,745		17,534		53,183		5,397		8,804		187,560		3	%
Doubtful/Loss	365		2,697		219		266		4,916		0		0		8,463		0	%
Total	$	806,722	$	1,219,847	$	1,580,289	$	74,665	$	1,276,591	$	540,499	$	754,621	$	6,253,234	100	%
Restructured	$	22,968	$	4,334	$	4,094	$	8,551	$	23,152	$	810	$	307	$	64,216	1	%
Nonaccrual	20,457		46,399		4,055		8,144		31,696		3,424		6,938		121,113		2	%
Nonperforming	43,425		50,733		8,149		16,695		54,848		4,234		7,245		185,329		3	%
Performing	763,297		1,169,114		1,572,140		57,970		1,221,743		536,265		747,376		6,067,905		97	%
Total	$	806,722	$	1,219,847	$	1,580,289	$	74,665	$	1,276,591	$	540,499	$	754,621	$	6,253,234	100	%
December 31, 2011
Pass	$	643,071	$	1,116,991	$	975,583	$	51,284	$	1,123,796	$	385,643	$	663,829	$	4,960,197	90	%
Special mention	14,031		83,372		9,901		24,578		54,009		25,334		4,166		215,391		4	%
Substandard	30,046		70,412		15,279		93,185		90,613		19,355		6,909		325,799		6	%
Doubtful/Loss	872		4,892		716		5,561		4,043		1,361		57		17,502		0	%
Total	$	688,020	$	1,275,667	$	1,001,479	$	174,608	$	1,272,461	$	431,693	$	674,961	$	5,518,889	100	%
Restructured	$	17,638	$	4,366	$	0	$	38,833	$	13,519	$	2,583	$	0	$	76,939	1	%
Nonaccrual	25,265		47,827		5,867		56,385		59,752		9,296		5,829		210,221		4	%
Nonperforming	42,903		52,193		5,867		95,218		73,271		11,879		5,829		287,160		5	%
Performing	645,117		1,223,474		995,612		79,390		1,199,190		419,814		669,132		5,231,729		95	%
Total	$	688,020	$	1,275,667	$	1,001,479	$	174,608	$	1,272,461	$	431,693	$	674,961	$	5,518,889	100	%

Past Due Financing Receivables

Aging by class for Sterling’s loan portfolio as of December 31, 2012 and December 31, 2011 was as follows:

			Commercial Real Estate						Commercial
	Residential Real Estate		Investor CRE		Multifamily		Construction		Owner Occupied CRE		Commercial & Industrial		Consumer		Total		% of Total
	(in thousands)
December 31, 2012
30 - 59 days past due	$	5,800	$	10,565	$	707	$	611	$	10,543	$	2,690	$	4,028	$	34,944	1	%
60 - 89 days past due	1,576		1,042		479		0		3,300		376		1,796		8,569		0	%
> 90 days past due	20,507		34,196		3,436		8,243		20,883		1,954		4,717		93,936		2	%
Total past due	27,883		45,803		4,622		8,854		34,726		5,020		10,541		137,449		3	%
Current	778,839		1,174,044		1,575,667		65,811		1,241,865		535,479		744,080		6,115,785		97	%
Total Loans	$	806,722	$	1,219,847	$	1,580,289	$	74,665	$	1,276,591	$	540,499	$	754,621	$	6,253,234	100	%
> 90 days and accruing	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	0	%
December 31, 2011
30 - 59 days past due	$	5,718	$	3,354	$	1,523	$	11,830	$	19,967	$	1,741	$	4,167	$	48,300	1	%
60 - 89 days past due	4,585		3,954		193		879		4,233		520		2,258		16,622		0	%
> 90 days past due	20,207		33,759		3,178		68,024		40,987		7,871		5,054		179,080		3	%
Total past due	30,510		41,067		4,894		80,733		65,187		10,132		11,479		244,002		4	%
Current	657,510		1,234,600		996,585		93,875		1,207,274		421,561		663,482		5,274,887		96	%
Total Loans	$	688,020	$	1,275,667	$	1,001,479	$	174,608	$	1,272,461	$	431,693	$	674,961	$	5,518,889	100	%
> 90 days and accruing	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	0	%

Impaired Financing Receivables

For purchased impaired loans, details as of the acquisition date were as follows:

	February 29, 2012
	(in thousands)
Contractual cash flows	$	24,408
Expected prepayments and credit losses	7,220
Expected cash flows	17,188
Present value of expected cash flows	15,265
Accretable yield	$	1,923

The following table summarizes impaired loans by class as of December 31, 2012 and December 31, 2011:

					Book Balance
	Unpaid Principal Balance		Charge-Offs		Without Specific Reserve		With Specific Reserve		Specific Reserve
	(in thousands)
December 31, 2012
Residential real estate	$	49,816	$	6,391	$	43,060	$	365	$	365
CRE:
Investor CRE	59,099		8,366		33,540		17,193		2,697
Multifamily	9,554		1,405		6,873		1,276		219
Construction	31,040		14,345		15,421		1,274		266
Total CRE	99,693		24,116		55,834		19,743		3,182
Commercial:
Owner Occupied CRE	61,300		6,452		42,075		12,773		4,916
C&I	16,959		12,725		4,234		0		0
Total commercial	78,259		19,177		46,309		12,773		4,916
Consumer	7,671		426		7,245		0		0
Total	$	235,439	$	50,110	$	152,448	$	32,881	$	8,463
					Book Balance
	Unpaid Principal Balance		Charge-Offs		Without Specific Reserve		With Specific Reserve		Specific Reserve
	(in thousands)
December 31, 2011
Residential real estate	$	52,023	$	9,120	$	38,519	$	4,384	$	872
CRE:
Investor CRE	70,517		18,324		31,503		20,690		4,892
Multifamily	6,185		318		4,496		1,371		716
Construction	133,588		38,370		43,281		51,937		5,562
Total CRE	210,290		57,012		79,280		73,998		11,170
Commercial:
Owner Occupied CRE	89,604		16,333		48,194		25,077		4,043
C&I	25,497		13,618		11,207		672		163
Total commercial	115,101		29,951		59,401		25,749		4,206
Consumer	6,613		784		5,246		583		57
Total	$	384,027	$	96,867	$	182,446	$	104,714	$	16,305

The following table presents the average book balance and interest income recognized for impaired loans by class for the periods presented:

	Years Ended December 31,
	2012				2011
	Average Book Balance		Interest Income Recognized		Average Book Balance		Interest Income Recognized
	(in thousands)
Residential real estate	$	43,164	$	819	$	67,157	$	992
Investor CRE	51,463		1,595		79,139		2,245
Multifamily	7,007		441		14,704		804
Construction	55,956		1,708		215,436		1,401
Owner Occupied CRE	64,060		2,553		75,553		2,757
C&I	8,057		105		12,009		460
Consumer	6,537		8		6,901		0
Total	$	236,244	$	7,229	$	470,899	$	8,659

Troubled Debt Restructurings on Financing Receivables

The following tables present loans that were modified and recorded as TDRs during the following periods:

	Years Ended December 31,
	2012					2011
	Number of Contracts	Pre-Modification Recorded Investment		Post-Modification Recorded Investment		Number of Contracts	Pre-Modification Recorded Investment		Post-Modification Recorded Investment
	(in thousands, except number of contracts)
Residential real estate	29	$	5,887	$	5,835	1	$	1,372	$	1,372
Investor CRE	1	1,302		1,302		8	3,271		3,282
Multifamily	3	2,955		2,945		0	0		0
Construction	4	10,062		9,194		3	23,701		24,348
Owner Occupied CRE	11	16,186		15,921		6	14,411		14,502
C&I	9	3,482		2,206		6	4,384		3,944
Consumer	3	468		472		0	0		0
Total (1)	60	$	40,342	$	37,875	24	$	47,139	$	47,448

⁽¹⁾ Amounts exclude specific loan loss reserves.

Schedule of Post-Modification Investments in Troubled Debt Restructings

The following tables show the post-modification recorded investment by class for TDRs restructured during the periods presented by the primary type of concession granted:

	Principal Deferral		Rate Reduction		Extension of Terms		Forgiveness of Principal and/or Interest		Total
	(in thousands)
Year Ended December 31, 2012
Residential Real Estate	$	407	$	5,428	$	0	$	0	$	5,835
Investor CRE	0		1,302		0		0		1,302
Multifamily	571		2,374		0		0		2,945
Construction	0		3,261		5,933		0		9,194
Owner CRE	6,219		9,393		0		309		15,921
C&I	0		1,317		183		706		2,206
Consumer	0		173		299		0		472
	$	7,197	$	23,248	$	6,415	$	1,015	$	37,875
Year Ended December 31, 2011
Residential Real Estate	$	0	$	1,372	$	0	$	0	$	1,372
Investor CRE	0		1,856		1,426		0		3,282
Multifamily	0		0		0		0		0
Construction	2,816		2,302		0		19,230		24,348
Owner CRE	10,159		0		0		4,343		14,502
C&I	576		3,368		0		0		3,944
Consumer	0		0		0		0		0
	$	13,551	$	8,898	$	1,426	$	23,573	$	47,448

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Shareholders' Equity

12 Months Ended

Dec. 31, 2012

Equity [Abstract]

Stockholders' Equity Note Disclosure

Shareholders’ Equity:

As of December 31, 2012 and 2011, Sterling had 10 million shares of preferred stock authorized, with no shares being issued and outstanding. As of December 31, 2012 and 2011, there were 151,515,151 shares of common stock authorized, with one class of common stock issued and outstanding at both dates. As of December 31, 2012, 62,207,529 shares of common stock were outstanding, and 62,176,628 were issued, compared with 62,057,645 outstanding, and 62,002,884 issued at December 31, 2011. The common stock has no par value. During 2010, a 1-for-66 reverse stock split was effected, which is reflected in prior period presentations within these financial statements.

During the third quarter of 2012, Sterling resumed the payment of quarterly dividends on its common stock. Dividends paid in 2012 also included a special dividend of $0.35 per share, as well as the acceleration of the first quarter of 2013 dividend. A total of $49.7 million, or $0.80 per share, of dividends were paid during 2012, compared with none being paid in 2011.

On August 14, 2012, the United States Department of the Treasury (“Treasury”) sold all of its shares in Sterling common stock in an underwritten public offering. On September 19, 2012, Sterling repurchased a warrant for 97,541 shares held by Treasury. The warrant and stock investment had been issued to Treasury on December 5, 2008, in connection with Sterling's participation in the Capital Purchase Program of the Troubled Asset Relief Program, and the stock was converted on August 26, 2010 to Sterling common stock.

As of December 31, 2012, there were 2,749,044 warrants outstanding, with an exercise price of $13.86. As of December 31, 2011, there were 2,625,000 warrants outstanding, with an exercise price of $14.52. These warrants were issued as part of the 2010 recapitalization, and have an expiration date of August 26, 2017. Adjustments to the number and exercise price of these outstanding warrants occurred in 2012 due to dividend distributions triggering an anti-dilutive provision.

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Goodwill and Other Intangible Assets (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Feb. 29, 2012	Dec. 31, 2011
Goodwill [Roll Forward]
Beginning balance	$ 0	$ 22,577
Acquired	22,577
Ending balance	22,577	22,577
Intangible Assets, Net (Excluding Goodwill) [Abstract]
Net Carrying Amount	19,072		12,078
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
2013	6,430
2014	3,339
2015	2,361
2016	1,271
2017	1,178
Core deposit intangibles
Intangible Assets, Net (Excluding Goodwill) [Abstract]
Gross Carrying Amount	55,420		43,446
Accumulated Amortization	38,029		31,368
Net Carrying Amount	17,391		12,078
Other
Intangible Assets, Net (Excluding Goodwill) [Abstract]
Gross Carrying Amount	1,800		0
Accumulated Amortization	119		0
Net Carrying Amount	$ 1,681		$ 0

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Consolidated Statements Of Cash Flows (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012		Dec. 31, 2011		Dec. 31, 2010
Cash flows from operating activities:
Net Income	$ 385,721		$ 39,133		$ (224,282)
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	10,000		30,000		250,229
Net gain on sales of loans	(98,223)		(61,097)		(61,920)
Net gain on sales of investments and MBS	(23,835)		(16,236)		(25,744)
Net loss (gain) on mortgage servicing rights	216		6,179		(1,125)
Other than temporary impairment	6,819	[1]	0	[1]	0	[1]
Stock based compensation	3,130		3,363		3,181
Loss on OREO	247		16,628		26,664
Charge on prepayment of debt	35,342		0		11,296
Increase in cash surrender value of BOLI	(8,401)		(6,213)		(7,307)
Depreciation and amortization	45,843		42,651		39,517
Deferred income tax provision (benefit)	(291,880)		275		113
Change in:
Accrued interest receivable	8,337		1,261		9,782
Prepaid expenses and other assets	(24,098)		(1,342)		23,807
Accrued interest payable	(18,479)		5,316		(4,986)
Accrued expenses and other liabilities	(29,548)		9,003		(4,249)
Proceeds from sales of loans originated for sale	2,728,418		2,076,393		2,485,664
Loans originated for sale	(2,915,204)		(2,043,236)		(2,455,895)
Net cash provided by operating activities	(126,499)		84,072		73,243
Cash flows from investing activities:
Change in restricted cash	(11,043)		(4,948)		(7,458)
Net change in loans	(500,452)		(285,736)		1,125,793
Proceeds from sales of loans	139,356		91,456		324,328
Purchase of investment securities	(3,734)		(10,357)		(33,179)
Proceeds from maturities of investment securities	20,588		2,012		5,500
Proceeds from sale of investment securities	199,966		30,987		17,534
Purchase of MBS	(287,849)		(760,519)		(2,325,488)
Principal payments received on MBS	613,809		533,851		608,776
Proceeds from sales of MBS	679,208		555,353		1,039,143
Proceeds from BOLI death benefits	3,714		1,187		0
Office properties and equipment, net	(9,853)		(15,881)		(3,034)
Improvements and other changes to OREO	(1,282)		(5,613)		(5,434)
Proceeds from sales of OREO	91,402		246,609		165,504
Net change in cash and cash equivalents from acquisitions	121,098		0		0
Net cash provided by investing activities	1,054,928		378,401		911,985
Cash flows from financing activities:
Net change in deposits	(745,620)		(425,189)		(864,183)
Advances from FHLB	545,000		0		538,050
Repayment of advances from FHLB	(345,210)		(1,519)		(1,478,995)
Net change in short term repurchase agreements	(18,896)		23,251		(16,634)
Payments under structured repurchase agreements	(485,342)		0		0
Proceeds from stock issuance, net	661		0		683,334
Dividends paid	(49,743)		0		0
Net cash used in financing activities	(1,099,150)		(403,457)		(1,138,428)
Net change in cash and cash equivalents	(170,721)		59,016		(153,200)
Cash and cash equivalents, beginning of period	470,599		411,583		564,783
Cash and cash equivalents, end of period	299,878		470,599		411,583
Cash paid (received) during the period for:
Interest	102,868		103,781		166,092
Income taxes, net	44		(250)		(49,342)
Noncash financing and investing activities:
Foreclosed real estate acquired in settlement of loans	33,499		177,881		265,115
Preferred stock cash dividend accrued	0		0		10,350
Conversion of Preferred Stock into Common Stock	0		0		295,384
Conversion of Preferred Stock Accrued Dividend into Common Stock	0		0		19,865
Conversion of Treasury Warrant	0		0		3,669
Parent Company [Member]
Cash flows from operating activities:
Net Income	385,721		39,133		(224,282)
Adjustments to reconcile net income to net cash used in operating activities	(412,528)		(42,051)		214,128
Change in:
Net cash provided by operating activities	(26,807)		(2,918)		(10,154)
Cash flows from investing activities:
Net cash provided by investing activities	52,600		0		(650,000)
Cash flows from financing activities:
Proceeds from stock issuance, net	3,791		0		683,334
Dividends paid	(49,743)		0		0
Net cash used in financing activities	(45,952)		0		683,334
Net change in cash and cash equivalents	(20,159)		(2,918)		23,180
Cash and cash equivalents, beginning of period	44,602		47,520		24,340
Cash and cash equivalents, end of period	$ 24,443		$ 44,602		$ 47,520

[1] The other-than-temporary impairment recognized in earnings during 2012 did not have a portion recognized in accumulated other comprehensive income.

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Statement of Financial Position [Abstract]
Loans held for sale	$ 465,983	$ 223,638
Preferred Stock, Shares Authorized	10,000,000	10,000,000
Preferred stock, shares outstanding	0	0
Common Stock, Shares Authorized	151,515,151	151,515,151
Common Stock, Shares Outstanding	62,207,529	62,057,645

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Advances from Federal Home Loan Bank

12 Months Ended

Dec. 31, 2012

Advances from Federal Home Loan Banks [Abstract]

Federal Home Loan Bank Advances, Disclosure [Text Block]

Advances from Federal Home Loan Bank:

Sterling Bank has a secured credit line with the FHLB of Seattle. At December 31, 2012 and 2011, this credit line represented a total borrowing capacity of $1.93 billion and $1.86 billion, of which $1.32 billion and $1.56 billion was available, respectively. The advances from FHLB are repayable as follows:

	December 31, 2012				December 31, 2011
	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate
	(in thousands)
Due within 1 year	$	269,053	0.96	%	$	300,000	0.28	%
Due in 1 to 2 years	55,000		0.72		69,164		2.95
Due in 2 to 3 years	50,550		0.64		5,000		3.12
Due in 3 to 4 years	50,196		0.68		550		2.84
Due in 4 to 5 years	123,000		1.45		245		8.08
Due after 5 years	57,531		1.90		30,650		4.34
	$	605,330	1.08	%	$	405,609	1.09	%

Only member institutions have access to funds from the Federal Home Loan Banks. As a condition of membership, Sterling is required to hold FHLB stock. As of December 31, 2012 and 2011, Sterling held $97.5 million and $99.0 million of FHLB stock, respectively, which is included as a component of other assets on the consolidated balance sheet. The FHLB of Seattle has experienced losses from credit-related charges associated with projected losses on their investments in nonagency MBS, and is currently unable to pay dividends. FHLB stock does not have a readily determinable fair value and the equity ownership rights are more limited than would be the case for ownership rights in a public company. FHLB stock is viewed as a long term investment and as a restricted investment security carried at cost. Sterling has evaluated its FHLB stock held at December 31, 2012, and determined there was no other-than-temporary impairment. The FHLB was able to reestablish its ability to repurchase shares, and is currently repurchasing shares at par.

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Parent Company Only Financial Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
ASSETS:
Cash and Cash Equivalents, at Carrying Value	$ 299,878				$ 470,599				$ 299,878	$ 470,599	$ 411,583	$ 564,783
Assets	9,236,910				9,193,237				9,236,910	9,193,237	9,493,169
Liabilities and Stockholders' Equity [Abstract]
Junior subordinated debentures	245,294				245,290				245,294	245,290
Interest Payable	4,229				22,575				4,229	22,575
Stockholders' Equity Attributable to Parent	1,217,923				878,557				1,217,923	878,557	770,767	323,249
Liabilities and Equity	9,236,910				9,193,237				9,236,910	9,193,237
Income Statement [Abstract]
Interest expense	18,147	20,683	22,080	23,612	25,520	26,543	27,540	29,494	84,522	109,097	161,106
Net interest income	76,107	75,308	78,910	74,353	71,809	74,836	74,807	73,743	304,678	295,195	284,027
Noninterest expense	89,589	89,408	87,607	88,649	85,875	86,620	91,587	88,308	355,253	352,390	395,045
Income before income taxes	17,745	30,598	32,044	13,291	14,833	11,328	7,555	5,417	93,678	39,133	(224,282)
Income Tax Expense (Benefit)	3,201	0	288,842	0	0	0	0	0	292,043	0	0
Net income	20,946	30,598	320,886	13,291	14,833	11,328	7,555	5,417	385,721	39,133	(224,282)
Statement of Cash Flows [Abstract]
Net cash provided by operating activities									(126,499)	84,072	73,243
Net cash provided by investing activities									1,054,928	378,401	911,985
Proceeds from stock issuance, net									661	0	683,334
Dividends paid									(49,743)	0	0
Net Cash Provided by (Used in) Financing Activities									(1,099,150)	(403,457)	(1,138,428)
Cash and Cash Equivalents, Period Increase (Decrease)									(170,721)	59,016	(153,200)
Parent Company [Member]
ASSETS:
Cash and Cash Equivalents, at Carrying Value	24,443				44,602				24,443	44,602	47,520	24,340
Investments in and Advances to Affiliates, Amount of Equity	1,417,025				1,089,820				1,417,025	1,089,820
Advances to Affiliate	0				283				0	283
Other Assets	20,755				1,158				20,755	1,158
Assets	1,470,530				1,144,048				1,470,530	1,144,048
Liabilities and Stockholders' Equity [Abstract]
Accrued Liabilities, Current	3,072				4,111				3,072	4,111
Junior subordinated debentures	245,294				245,290				245,294	245,290
Interest Payable	4,241				16,090				4,241	16,090
Stockholders' Equity Attributable to Parent	1,217,923				878,557				1,217,923	878,557
Liabilities and Equity	1,470,530				1,144,048				1,470,530	1,144,048
Income Statement [Abstract]
Interest Income, Other									268	300	253
Interest expense									6,785	6,433	6,349
Net interest income									(6,517)	(6,133)	(6,096)
Income (Loss) from Equity Method Investments									380,294	50,961	(206,677)
Noninterest expense									5,385	5,699	11,568
Income before income taxes									368,392	39,129	(224,341)
Income Tax Expense (Benefit)									17,329	4	59
Net income									385,721	39,133	(224,282)
Statement of Cash Flows [Abstract]
Adjustments to reconcile net income to net cash used in operating activities									(412,528)	(42,051)	214,128
Net cash provided by operating activities									(26,807)	(2,918)	(10,154)
Payments to Acquire Interest in Subsidiaries and Affiliates									0	0	(650,000)
Dividends from subsidiaries									52,600	0	0
Net cash provided by investing activities									52,600	0	(650,000)
Proceeds from stock issuance, net									3,791	0	683,334
Dividends paid									(49,743)	0	0
Net Cash Provided by (Used in) Financing Activities									(45,952)	0	683,334
Cash and Cash Equivalents, Period Increase (Decrease)									(20,159)	(2,918)	23,180
Parent Company [Member] | Other Investments [Member]
ASSETS:
Investments in and Advances to Affiliates, Amount of Equity	$ 8,307				$ 8,185				$ 8,307	$ 8,185

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Document And Entity Information (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Jan. 31, 2013	Jun. 30, 2012
Document And Entity Information [Abstract]
Entity Registrant Name	STERLING FINANCIAL CORP /WA/
Entity Central Index Key	0000891106
Document Type	10-K
Document Period End Date	Dec. 31, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	FY
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding		62,247,254
Entity Public Float			$ 674,000

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Securities Sold Under Repurchase Agreements

12 Months Ended

Dec. 31, 2012

Disclosure of Repurchase Agreements [Abstract]

Securities Sold Under Repurchase Agreements

Securities Sold Under Repurchase Agreements:

Sterling sells securities under agreements to repurchase the same or similar securities (“repurchase agreements”). Repurchase agreements are treated as financings, and the obligations to repurchase securities sold are reflected as a liability on the consolidated balance sheet. The securities underlying these agreements continue to be held by Sterling, but the title has been transferred to the counterparties to the agreements. The risk of default under such agreements is limited by the financial strength of these broker/dealers and the level of borrowings relative to the market value of pledged securities. At both December 31, 2012 and 2011, under the repurchase agreements, Sterling had pledged as collateral $738.6 million and $1.28 billion, respectively, of investments and MBS. The average balances of repurchase agreements were $959.5 million and $1.05 billion during the years ended December 31, 2012 and 2011, respectively. The maximum amount outstanding at any month end during these same periods was $1.07 billion and $1.06 billion, respectively.

At December 31, 2012 and 2011, borrowings under repurchase agreements are contractually repayable as follows. Actual repayments may vary due to default and call provisions:

	December 31, 2012				December 31, 2011
	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate
	(in thousands)
Due within 1 yr	$	86,867	1.20	%	$	205,763	3.08	%
Due within 2 yrs	0		0.00		100,000		3.00
Due within 3 yrs	50,000		2.47		0		0.00
Due within 4 yrs	0		0.00		150,000		3.76
Due within 5 yrs	400,000		4.08		100,000		3.97
Thereafter	50,000		2.62		500,000		3.90
	$	586,867	3.18	%	$	1,055,763	3.64	%

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Stock Based Compensation (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Weighted Average Contractual Life And Aggregate Intrinsic Value Of Stock Options [Abstract]
Unrecognized Equity Compensation	$ 5,400,000
Unrecognized Equity Compensation, Weighted Average Period for Recognition	2 years 1 month 24 days
Restricted shares
Restricted Stock Award, Forfeitures [Abstract]
Restricted Stock, Balance, January 1, 2012 (in shares)	301,373	368,805	4,000
Restricted Stock, Granted, Shares	305,157	130,021	488,040
Restricted Stock, Vested, Shares	(142,727)	(163,680)	(121,935)
Restricted Stock, Expired, Shares	0	0	0
Restricted Stock, Forfeited, Shares	(78,290)	(33,773)	(1,300)
Restricted Stock Outstanding, June 30, 2012 (in shares)	385,513	301,373	368,805
Restricted Stock, Weighted Average Grant Price, Balance, January 1, 2012 (in dollars per share)	$ 17.82	$ 18.24	$ 619.55
Restricted Stock, Granted, Weighted Average Grant Price	$ 20.06	$ 17.18	$ 16.39
Restricted Stock, Vested, Weighted Average Grant Price	$ 19.44	$ 18.50	$ 23.05
Restricted Stock, Expired, Weighted Average Grant Price	$ 0.00	$ 0.00	$ 0.00
Restricted Stock, Forfeited, Weighted Average Exercise Price	$ 17.02	$ 16.63	$ 723.41
Restricted Stock Outstanding, Weighted Average Grant Price, Balance, June 30, 2012 (in dollars per share	$ 19.16	$ 17.82	$ 18.24
Stock options
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]
Stock Options, Shares, Oustanding, January 1, 2012 (in shares)	15,800	18,920	28,932
Stock Options, Granted, Shares	0	0	0
Stock Options, Exercised, Shares	0	0	0
Stock Options, Expired, Shares	(1,211)	(2,600)	(9,195)
Stock Options, Cancelled, Shares	(2,190)	(520)	(817)
Stock Options, Shares, Oustanding, June 30, 2012 (in shares)	12,399	15,800	18,920
Stock Options, Weighted Average Grant Price, Balance, January 1, 2012 (in dollars per share)	$ 1,393.65	$ 1,357.97	$ 1,390.07
Stock Options Granted, Weighted Average Grant Price	$ 0.00	$ 0.00	$ 0.00
Stock Options, Exercised, Weighted Average Grant Price	$ 0.00	$ 0.00	$ 0.00
Stock Options, Expired, Weighted Average Grant Price	$ 1,362.40	$ 1,231.98	$ 1,449.05
Stock Options, Cancelled, Weighted Average Exercise Price	$ 1,184.58	$ 903.92	$ 1,469.48
Stock Options, Weighted Average Grant Price, Outstanding, June 30, 2012 (in dollars per share)	$ 1,433.63	$ 1,393.65	$ 1,357.97
Stock Options, Shares Exercisable, June 30, 2012	11,996	14,011	14,655
Stock Options, Weighted Average Exercise Price, June 30, 2012	$ 1,447.69	$ 1,507.87	$ 1,497.94
Weighted Average Contractual Life And Aggregate Intrinsic Value Of Stock Options [Abstract]
Stock Options, Outstanding, Weighted Average Life	1 year 3 months 18 days	2 years 1 month 6 days
Stock Options, Outstanding, Intrinsic Value	0	0
Stock Options, Exercisable, Weighted Average Life	1 year 2 months 18 days	2 years 1 month 6 days
Stock Options, Exercisable, Intrinsic Value	0	0
Performance Shares
Weighted Average Contractual Life And Aggregate Intrinsic Value Of Stock Options [Abstract]
Shares Available for Grant	5,382,896
Term 1
Weighted Average Contractual Life And Aggregate Intrinsic Value Of Stock Options [Abstract]
Long-Term Incentive Plans, Vesting Periods	4 years
Term 2
Weighted Average Contractual Life And Aggregate Intrinsic Value Of Stock Options [Abstract]
Long-Term Incentive Plans, Vesting Periods	6 years
Term 3
Weighted Average Contractual Life And Aggregate Intrinsic Value Of Stock Options [Abstract]
Long-Term Incentive Plans, Vesting Periods	8 years
Term 4
Weighted Average Contractual Life And Aggregate Intrinsic Value Of Stock Options [Abstract]
Long-Term Incentive Plans, Vesting Periods	10 years
Stock Compensation Plan
Weighted Average Contractual Life And Aggregate Intrinsic Value Of Stock Options [Abstract]
Stock-based Compensation Expense	3,808,000	3,863,000	3,163,000
Stock Compensation Plan | Restricted shares
Weighted Average Contractual Life And Aggregate Intrinsic Value Of Stock Options [Abstract]
Stock-based Compensation Expense	3,765,000	3,595,000	2,435,000
Stock Compensation Plan | Stock options
Weighted Average Contractual Life And Aggregate Intrinsic Value Of Stock Options [Abstract]
Stock-based Compensation Expense	$ 43,000	$ 268,000	$ 728,000

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Segment Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Segment Reporting Information [Line Items]
Interest income									$ 10,244	$ 10,641	$ 10,755
Interest expense	18,147	20,683	22,080	23,612	25,520	26,543	27,540	29,494	84,522	109,097	161,106
Provision for credit losses	0	2,000	4,000	4,000	4,000	6,000	10,000	10,000	10,000	30,000	250,229
Noninterest Income	31,227	46,698	44,741	31,587	32,899	29,112	34,335	29,982	154,253	126,328	136,965
Noninterest expense	89,589	89,408	87,607	88,649	85,875	86,620	91,587	88,308	355,253	352,390	395,045
Income before income taxes	17,745	30,598	32,044	13,291	14,833	11,328	7,555	5,417	93,678	39,133	(224,282)
Assets	9,236,910				9,193,237				9,236,910	9,193,237	9,493,169
Community Banking
Segment Reporting Information [Line Items]
Interest income									360,901	387,365	393,754
Interest expense									78,004	102,963	128,294
Net interest income									282,897	284,402	265,460
Provision for credit losses									9,980	56,507	177,232
Noninterest Income									46,433	76,337	67,499
Noninterest expense									266,486	295,139	332,557
Income before income taxes									52,864	9,093	(176,830)
Assets	8,754,170				9,219,398				8,754,170	9,219,398	7,643,294
Residential Construction Lending [Member]
Segment Reporting Information [Line Items]
Interest income											34,559
Interest expense											18,967
Net interest income											15,592
Provision for credit losses											64,767
Noninterest Income											60
Noninterest expense											7,291
Income before income taxes											(56,406)
Assets											25,562
Home Loan Division
Segment Reporting Information [Line Items]
Interest income									28,299	16,927	13,243
Interest expense									0	0	7,742
Net interest income									28,299	16,927	5,501
Provision for credit losses									20	71	8,230
Noninterest Income									108,391	48,865	65,099
Noninterest expense									92,742	58,979	36,785
Income before income taxes									43,928	6,742	25,585
Assets	477,127				2,594				477,127	2,594	1,811,601
Commercial
Segment Reporting Information [Line Items]
Interest income											3,573
Interest expense											0
Net interest income											3,573
Provision for credit losses											0
Noninterest Income											2,470
Noninterest expense											5,070
Income before income taxes											973
Assets											6,340
Other and Eliminations
Segment Reporting Information [Line Items]
Interest income									0	0	4
Interest expense									6,518	6,134	6,103
Net interest income									(6,518)	(6,134)	(6,099)
Provision for credit losses									0	(26,578)	0
Noninterest Income									(571)	1,126	1,837
Noninterest expense									(3,975)	(1,728)	13,342
Income before income taxes									(3,114)	23,298	(17,604)
Assets	5,613				(28,755)				5,613	(28,755)	6,372
Reportable Segment
Segment Reporting Information [Line Items]
Interest income									389,200	404,292	445,133
Interest expense									84,522	109,097	161,106
Net interest income									304,678	295,195	284,027
Provision for credit losses									10,000	30,000	250,229
Noninterest Income									154,253	126,328	136,965
Noninterest expense									355,253	352,390	395,045
Income before income taxes									$ 93,678	$ 39,133	$ (224,282)

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Consolidated Statements Of Income (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2012		Dec. 31, 2011		Dec. 31, 2010
Interest income:
Loans	$ 331,514		$ 322,435		$ 359,572
MBS	47,442		71,216		74,806
Investments and cash equivalents	10,244		10,641		10,755
Total interest income	389,200		404,292		445,133
Interest expense:
Deposits	37,697		59,634		94,707
Short-term borrowings	7,364		1,882		6,517
Long-term borrowings	39,461		47,581		59,882
Total interest expense	84,522		109,097		161,106
Net interest income	304,678		295,195		284,027
Provision for credit losses	10,000		30,000		250,229
Net interest income after provision for credit losses	294,678		265,195		33,798
Noninterest income:
Fees and service charges	55,773		50,073		54,740
Mortgage banking operations	96,909		52,376		62,564
Loan servicing fees	383		(3,213)		3,762
BOLI	8,625		6,448		7,307
Gains on sales of securities, net	23,835		16,236		25,745
Other-than-temporary impairment losses on securities	(6,819)	[1]	0	[1]	0	[1]
Charge on prepayment of debt	(35,342)		0		(11,296)
Gains on other loan sales	4,372		4,442		(4,928)
Gains (Losses) on Assets	6,515		(85)		(1,309)
Other	2		51		380
Total noninterest income	154,253		126,328		136,965
Noninterest expense	355,253		352,390		395,045
Income before income taxes	93,678		39,133		(224,282)
Income tax (provision) benefit
Current Income Tax Expense (Benefit)	163		275		113
Deferred income tax (provision) benefit	291,880		(275)		(113)
Income tax benefit	(292,043)		0		0
Net income	385,721		39,133		(224,282)
Preferred Stock Dividends and Other Adjustments	0		0		(11,598)
Other shareholder allocations	0		0		(520,263)
Net Income (Loss) Available to Common Shareholders	$ 385,721		$ 39,133		$ (756,143)
Earnings per share - basic (in dollars per share)	$ 6.21		$ 0.63		$ (53.05)
Earnings per share - diluted (in dollars per share)	$ 6.14		$ 0.63		$ (53.05)
Common Stock, Dividends, Per Share, Declared	$ 0.80		$ 0.00		$ 0.00
Weighted average shares outstanding - basic (in shares)	62,122,862		61,955,659		14,253,869
Weighted average shares outstanding - diluted (in shares)	62,772,079		62,231,208		14,253,869

[1] The other-than-temporary impairment recognized in earnings during 2012 did not have a portion recognized in accumulated other comprehensive income.

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OREO

12 Months Ended

Dec. 31, 2012

Real Estate [Abstract]

Real Estate Owned

OREO:

At foreclosure, OREO is recorded at the fair value of the real estate, less the estimated costs to sell. The carrying value of OREO is periodically evaluated and, if necessary, an allowance is established to reduce the carrying value to net realizable value. Changes in OREO and the related allowance were as follows for the periods presented:

	Years Ended December 31,
	2012			2011			2010
	(in thousands)
OREO, gross:
Beginning balance, January 1	$	98,187		$	183,452		$	91,476
Additions	33,499			177,881			265,115
Sales	(85,837		)	(241,028		)	(155,409		)
Charge-offs	(18,534		)	(27,731		)	(23,164		)
Other changes	1,282			5,613			5,434
Ending balance, December 31	$	28,597		$	98,187		$	183,452
Allowance, OREO:
Beginning balance, January 1	$	16,277		$	21,799		$	8,204
Provision	5,812			22,209			36,759
Charge-offs	(18,534		)	(27,731		)	(23,164		)
Ending balance, December 31	$	3,555		$	16,277		$	21,799
OREO, net	$	25,042		$	81,910		$	161,653

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Loans Receivable And Allowance For Credit Losses

12 Months Ended

Dec. 31, 2012

Loans and Leases Receivable, Allowance [Abstract]

Loans Receivable And Allowance For Credit Losses

4. Loans Receivable and Allowance for Credit Losses:

The following table presents the composition of Sterling’s loan portfolio as of the balance sheet dates:

	December 31, 2012			December 31, 2011
	(in thousands)
Residential real estate	$	806,722		$	688,020
Commercial real estate ("CRE"):
Investor CRE	1,219,847			1,275,667
Multifamily	1,580,289			1,001,479
Construction	74,665			174,608
Total CRE	2,874,801			2,451,754
Commercial:
Owner occupied CRE	1,276,591			1,272,461
Commercial & Industrial ("C&I")	540,499			431,693
Total commercial	1,817,090			1,704,154
Consumer	754,621			674,961
Gross loans receivable	6,253,234			5,518,889
Deferred loan costs (fees), net	2,860			(252		)
Allowance for loan losses	(154,345		)	(177,458		)
Net loans receivable	$	6,101,749		$	5,341,179

Gross loans pledged as collateral for borrowings from the FHLB and the Federal Reserve totaled $4.15 billion and $4.02 billion as of December 31, 2012 and December 31, 2011, respectively. As of December 31, 2012 and December 31, 2011, the unamortized portion of discounts on acquired loans was $21.3 million and $4.3 million, respectively.

The following table sets forth details by segment for Sterling’s loan portfolio and related allowance as of the balance sheet dates:

	Residential Real Estate		Commercial Real Estate		Commercial		Consumer		Unallocated		Total
	(in thousands)
December 31, 2012
Loans receivable, gross:
Individually evaluated for impairment	$	9,134	$	68,317	$	48,312	$	494	$	0	$	126,257
Collectively evaluated for impairment	797,588		2,806,484		1,768,778		754,127		0		6,126,977
Total loans receivable, gross	$	806,722	$	2,874,801	$	1,817,090	$	754,621	$	0	$	6,253,234
Allowance for loan losses:
Individually evaluated for impairment	$	365	$	3,182	$	4,916	$	0	$	0	$	8,463
Collectively evaluated for impairment	19,482		44,912		36,958		25,602		18,928		145,882
Total allowance for loan losses	$	19,847	$	48,094	$	41,874	$	25,602	$	18,928	$	154,345
December 31, 2011
Loans receivable, gross:
Individually evaluated for impairment	$	18,301	$	149,578	$	74,041	$	1,192	$	0	$	243,112
Collectively evaluated for impairment	669,719		2,302,176		1,630,113		673,769		0		5,275,777
Total loans receivable, gross	$	688,020	$	2,451,754	$	1,704,154	$	674,961	$	0	$	5,518,889
Allowance for loan losses:
Individually evaluated for impairment	$	872	$	11,170	$	4,206	$	57	$	0	$	16,305
Collectively evaluated for impairment	14,325		80,552		33,840		13,370		19,066		161,153
Total allowance for loan losses	$	15,197	$	91,722	$	38,046	$	13,427	$	19,066	$	177,458

The following tables present a roll-forward by segment of the allowance for credit losses for the periods presented:

	Residential Real Estate			Commercial Real Estate			Commercial			Consumer			Unallocated			Total
	(in thousands)
2012
Allowance for loan losses:
Beginning balance, January 1	$	15,197		$	91,722		$	38,046		$	13,427		$	19,066		$	177,458
Provisions	8,778			(33,184		)	12,189			19,855			(138		)	7,500
Charge-offs	(5,203		)	(27,385		)	(17,005		)	(9,144		)	0			(58,737		)
Recoveries	1,075			16,941			8,644			1,464			0			28,124
Ending balance, December 31	19,847			48,094			41,874			25,602			18,928			154,345
Reserve for unfunded credit commitments:
Beginning balance, January 1	3,828			2,321			1,796			1,787			297			10,029
Provisions	2,929			(1,916		)	1,010			331			146			2,500
Charge-offs	(4,527		)	0			0			0			0			(4,527		)
Recoveries	0			0			0			0			0			0
Ending balance, December 31	2,230			405			2,806			2,118			443			8,002
Total credit allowance	$	22,077		$	48,499		$	44,680		$	27,720		$	19,371		$	162,347
2011
Allowance for loan losses:
Beginning balance, January 1	$	17,307		$	124,907		$	56,951		$	14,645		$	33,246		$	247,056
Provisions	15,024			19,129			2,708			5,819			(14,180		)	28,500
Charge-offs	(18,553		)	(73,379		)	(28,369		)	(8,868		)	0			(129,169		)
Recoveries	1,419			21,065			6,756			1,831			0			31,071
Ending balance, December 31	15,197			91,722			38,046			13,427			19,066			177,458
Reserve for unfunded credit commitments:
Beginning balance, January 1	3,189			4,157			1,515			817			1,029			10,707
Provisions	2,817			(1,836		)	281			970			(732		)	1,500
Charge-offs	(2,178		)	0			0			0			0			(2,178		)
Recoveries	0			0			0			0			0			0
Ending balance, December 31	3,828			2,321			1,796			1,787			297			10,029
Total credit allowance	$	19,025		$	94,043		$	39,842		$	15,214		$	19,363		$	187,487

	Residential Real Estate			Commercial Real Estate			Commercial			Consumer			Unallocated			Total
2010
Allowance for loan losses:
Beginning balance, January 1	$	28,319		$	236,501		$	59,136		$	19,198		$	289		$	343,443
Provisions	24,204			151,323			33,764			8,343			32,957			250,591
Charge-offs	(37,347		)	(283,578		)	(41,165		)	(14,765		)	0			(376,855		)
Recoveries	2,131			20,661			5,216			1,869			0			29,877
Ending balance, December 31	17,307			124,907			56,951			14,645			33,246			247,056
Reserve for unfunded credit commitments:
Beginning balance, January 1	798			9,228			1,952			1,107			(1,118		)	11,967
Provisions	3,291			(5,071		)	(437		)	(290		)	2,147			(360		)
Charge-offs	(900		)	0			0			0			0			(900		)
Recoveries	0			0			0			0			0			0
Ending balance, December 31	3,189			4,157			1,515			817			1,029			10,707
Total credit allowance	$	20,496		$	129,064		$	58,466		$	15,462		$	34,275		$	257,763

In establishing the allowance for loan losses, Sterling groups its loan portfolio into segments for loans collectively evaluated for impairment. The groups are further segregated based on internal risk ratings. Both qualitative and quantitative data are considered in determining the probability of default and loss given default for each group of loans. The probability of default and loss given default are used to calculate an expected loss rate. The calculated expected loss for each loan class is compared to the actual one-year and three-year (annualized) losses. Beginning in 2012, if the calculated expected loss rate is less than the actual one and three year loss rates, then the expected loss rate would be set at the greater of the actual one or three year loss rate. If a loan is determined to be impaired, Sterling prepares an individual evaluation of the loan. The individual evaluation compares the present value of the expected future cash flows or the fair value of the underlying collateral to the recorded investment in the loan. The results of the individual impairment evaluation could determine the need to record a charge-off or establish a specific reserve.

Sterling assigns risk rating classifications to its loans. During the fourth quarter of 2012, the additional category of Marginal was added to the analysis to further enhance the model used to calculate the allowance for loan losses. These risk ratings are divided into the following groups:

Pass (excluding marginal) - the asset is considered of sufficient quality to preclude a Marginal rating. Pass assets generally are well protected by the current net worth and paying capacity of the obligor or by the value of the asset or underlying collateral.

Marginal - the asset is susceptible to deterioration if stressed from a cash flow or earnings shock, with liquidity and leverage possibly below industry norms. The borrower may have few reserves to cover debt service, besides current income. A business generating cash flows that service the debt may be dependent on the successful reception of new products in the marketplace.

Special Mention - the asset has potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or of Sterling's credit position at some future date. Special Mention assets are not adversely classified and do not expose Sterling to sufficient risk to warrant adverse classification.

Substandard - the asset is inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged, if any. Assets so classified have well-defined weaknesses. They are characterized by the distinct possibility that Sterling may sustain some loss if the deficiencies are not corrected.

Doubtful/Loss - the Doubtful asset has the weaknesses of those classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. An asset classified Loss is the portion of the asset that is considered uncollectible and/or of such little value that its continuance as an asset, without a charge-off or establishment of a specific reserve, is not warranted. This classification does not necessarily mean that an asset has absolutely no recovery or salvage value; but rather, it is not practical or desirable to defer writing off an asset that is no longer deemed to have financial value, even though partial recovery may be recognized in the future.

The following table presents credit quality indicators for Sterling’s loan portfolio grouped according to internally assigned risk ratings and performance status:

			Commercial Real Estate						Commercial
	Residential Real Estate		Investor CRE		Multifamily		Construction		Owner Occupied CRE		Commercial & Industrial		Consumer		Total		% of Total
	(in thousands)
December 31, 2012
Pass	$	714,346	$	599,660	$	1,486,824	$	10,946	$	678,916	$	349,674	$	723,698	$	4,564,064	73	%
Marginal	53,722		472,801		74,379		42,518		454,348		146,554		17,255		1,261,577		20	%
Special mention	11,739		77,342		10,122		3,401		85,228		38,874		4,864		231,570		4	%
Substandard	26,550		67,347		8,745		17,534		53,183		5,397		8,804		187,560		3	%
Doubtful/Loss	365		2,697		219		266		4,916		0		0		8,463		0	%
Total	$	806,722	$	1,219,847	$	1,580,289	$	74,665	$	1,276,591	$	540,499	$	754,621	$	6,253,234	100	%
Restructured	$	22,968	$	4,334	$	4,094	$	8,551	$	23,152	$	810	$	307	$	64,216	1	%
Nonaccrual	20,457		46,399		4,055		8,144		31,696		3,424		6,938		121,113		2	%
Nonperforming	43,425		50,733		8,149		16,695		54,848		4,234		7,245		185,329		3	%
Performing	763,297		1,169,114		1,572,140		57,970		1,221,743		536,265		747,376		6,067,905		97	%
Total	$	806,722	$	1,219,847	$	1,580,289	$	74,665	$	1,276,591	$	540,499	$	754,621	$	6,253,234	100	%
December 31, 2011
Pass	$	643,071	$	1,116,991	$	975,583	$	51,284	$	1,123,796	$	385,643	$	663,829	$	4,960,197	90	%
Special mention	14,031		83,372		9,901		24,578		54,009		25,334		4,166		215,391		4	%
Substandard	30,046		70,412		15,279		93,185		90,613		19,355		6,909		325,799		6	%
Doubtful/Loss	872		4,892		716		5,561		4,043		1,361		57		17,502		0	%
Total	$	688,020	$	1,275,667	$	1,001,479	$	174,608	$	1,272,461	$	431,693	$	674,961	$	5,518,889	100	%
Restructured	$	17,638	$	4,366	$	0	$	38,833	$	13,519	$	2,583	$	0	$	76,939	1	%
Nonaccrual	25,265		47,827		5,867		56,385		59,752		9,296		5,829		210,221		4	%
Nonperforming	42,903		52,193		5,867		95,218		73,271		11,879		5,829		287,160		5	%
Performing	645,117		1,223,474		995,612		79,390		1,199,190		419,814		669,132		5,231,729		95	%
Total	$	688,020	$	1,275,667	$	1,001,479	$	174,608	$	1,272,461	$	431,693	$	674,961	$	5,518,889	100	%

Note: Marginal loans are pass loans that were separated out in 2012 to better analyze loans with this rating.

Aging by class for Sterling’s loan portfolio as of December 31, 2012 and December 31, 2011 was as follows:

			Commercial Real Estate						Commercial
	Residential Real Estate		Investor CRE		Multifamily		Construction		Owner Occupied CRE		Commercial & Industrial		Consumer		Total		% of Total
	(in thousands)
December 31, 2012
30 - 59 days past due	$	5,800	$	10,565	$	707	$	611	$	10,543	$	2,690	$	4,028	$	34,944	1	%
60 - 89 days past due	1,576		1,042		479		0		3,300		376		1,796		8,569		0	%
> 90 days past due	20,507		34,196		3,436		8,243		20,883		1,954		4,717		93,936		2	%
Total past due	27,883		45,803		4,622		8,854		34,726		5,020		10,541		137,449		3	%
Current	778,839		1,174,044		1,575,667		65,811		1,241,865		535,479		744,080		6,115,785		97	%
Total Loans	$	806,722	$	1,219,847	$	1,580,289	$	74,665	$	1,276,591	$	540,499	$	754,621	$	6,253,234	100	%
> 90 days and accruing	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	0	%
December 31, 2011
30 - 59 days past due	$	5,718	$	3,354	$	1,523	$	11,830	$	19,967	$	1,741	$	4,167	$	48,300	1	%
60 - 89 days past due	4,585		3,954		193		879		4,233		520		2,258		16,622		0	%
> 90 days past due	20,207		33,759		3,178		68,024		40,987		7,871		5,054		179,080		3	%
Total past due	30,510		41,067		4,894		80,733		65,187		10,132		11,479		244,002		4	%
Current	657,510		1,234,600		996,585		93,875		1,207,274		421,561		663,482		5,274,887		96	%
Total Loans	$	688,020	$	1,275,667	$	1,001,479	$	174,608	$	1,272,461	$	431,693	$	674,961	$	5,518,889	100	%
> 90 days and accruing	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	0	%

The following table summarizes impaired loans by class as of December 31, 2012 and December 31, 2011:

					Book Balance
	Unpaid Principal Balance		Charge-Offs		Without Specific Reserve		With Specific Reserve		Specific Reserve
	(in thousands)
December 31, 2012
Residential real estate	$	49,816	$	6,391	$	43,060	$	365	$	365
CRE:
Investor CRE	59,099		8,366		33,540		17,193		2,697
Multifamily	9,554		1,405		6,873		1,276		219
Construction	31,040		14,345		15,421		1,274		266
Total CRE	99,693		24,116		55,834		19,743		3,182
Commercial:
Owner Occupied CRE	61,300		6,452		42,075		12,773		4,916
C&I	16,959		12,725		4,234		0		0
Total commercial	78,259		19,177		46,309		12,773		4,916
Consumer	7,671		426		7,245		0		0
Total	$	235,439	$	50,110	$	152,448	$	32,881	$	8,463
					Book Balance
	Unpaid Principal Balance		Charge-Offs		Without Specific Reserve		With Specific Reserve		Specific Reserve
	(in thousands)
December 31, 2011
Residential real estate	$	52,023	$	9,120	$	38,519	$	4,384	$	872
CRE:
Investor CRE	70,517		18,324		31,503		20,690		4,892
Multifamily	6,185		318		4,496		1,371		716
Construction	133,588		38,370		43,281		51,937		5,562
Total CRE	210,290		57,012		79,280		73,998		11,170
Commercial:
Owner Occupied CRE	89,604		16,333		48,194		25,077		4,043
C&I	25,497		13,618		11,207		672		163
Total commercial	115,101		29,951		59,401		25,749		4,206
Consumer	6,613		784		5,246		583		57
Total	$	384,027	$	96,867	$	182,446	$	104,714	$	16,305

The following table presents the average book balance and interest income recognized for impaired loans by class for the periods presented:

	Years Ended December 31,
	2012				2011
	Average Book Balance		Interest Income Recognized		Average Book Balance		Interest Income Recognized
	(in thousands)
Residential real estate	$	43,164	$	819	$	67,157	$	992
Investor CRE	51,463		1,595		79,139		2,245
Multifamily	7,007		441		14,704		804
Construction	55,956		1,708		215,436		1,401
Owner Occupied CRE	64,060		2,553		75,553		2,757
C&I	8,057		105		12,009		460
Consumer	6,537		8		6,901		0
Total	$	236,244	$	7,229	$	470,899	$	8,659

The following tables present loans that were modified and recorded as TDRs during the following periods:

	Years Ended December 31,
	2012					2011
	Number of Contracts	Pre-Modification Recorded Investment		Post-Modification Recorded Investment		Number of Contracts	Pre-Modification Recorded Investment		Post-Modification Recorded Investment
	(in thousands, except number of contracts)
Residential real estate	29	$	5,887	$	5,835	1	$	1,372	$	1,372
Investor CRE	1	1,302		1,302		8	3,271		3,282
Multifamily	3	2,955		2,945		0	0		0
Construction	4	10,062		9,194		3	23,701		24,348
Owner Occupied CRE	11	16,186		15,921		6	14,411		14,502
C&I	9	3,482		2,206		6	4,384		3,944
Consumer	3	468		472		0	0		0
Total (1)	60	$	40,342	$	37,875	24	$	47,139	$	47,448

⁽¹⁾ Amounts exclude specific loan loss reserves.

Substantially all TDRs are determined to be impaired prior to being restructured. As such, they are individually evaluated for impairment, unless they are considered homogeneous loans in which case they are collectively evaluated for impairment. As of December 31, 2012, Sterling had specific reserves of $2.1 million on TDRs which were restructured during the previous twelve months. There were 33 loans totaling $29.8 million that were removed from TDR status during this period, as they had met the conditions for removal by achieving twelve consecutive months of performance at market equivalent rates of interest.

The following tables show the post-modification recorded investment by class for TDRs restructured during the periods presented by the primary type of concession granted:

	Principal Deferral		Rate Reduction		Extension of Terms		Forgiveness of Principal and/or Interest		Total
	(in thousands)
Year Ended December 31, 2012
Residential Real Estate	$	407	$	5,428	$	0	$	0	$	5,835
Investor CRE	0		1,302		0		0		1,302
Multifamily	571		2,374		0		0		2,945
Construction	0		3,261		5,933		0		9,194
Owner CRE	6,219		9,393		0		309		15,921
C&I	0		1,317		183		706		2,206
Consumer	0		173		299		0		472
	$	7,197	$	23,248	$	6,415	$	1,015	$	37,875
Year Ended December 31, 2011
Residential Real Estate	$	0	$	1,372	$	0	$	0	$	1,372
Investor CRE	0		1,856		1,426		0		3,282
Multifamily	0		0		0		0		0
Construction	2,816		2,302		0		19,230		24,348
Owner CRE	10,159		0		0		4,343		14,502
C&I	576		3,368		0		0		3,944
Consumer	0		0		0		0		0
	$	13,551	$	8,898	$	1,426	$	23,573	$	47,448

Restructurings that result in the forgiveness of principal or interest are typically part of a bankruptcy settlement. There were no TDRs completed during the twelve month period ended December 31, 2012 that subsequently defaulted during this period. During the twelve month period ended December 31, 2011, there was one Investor CRE TDR completed that subsequently defaulted. The recorded investment at default for this TDR was $223,000.

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Stock-Based Compensation

12 Months Ended

Dec. 31, 2012

Share-based Compensation, Allocation and Classification in Financial Statements [Abstract]

Stock-Based Compensation

Stock Based Compensation:

The following table presents a summary of restricted stock and units activity during the periods:

	Shares		Weighted Average Grant Price
Balance, January 1, 2010	4,000		$	619.55
Granted	488,040		16.39
Vested	(121,935	)	23.05
Expired	0		0.00
Forfeited	(1,300	)	723.41
Outstanding, December 31, 2010	368,805		$	18.24
Balance, January 1, 2011	368,805		$	18.24
Granted	130,021		17.18
Vested	(163,680	)	18.50
Expired	0		0.00
Forfeited	(33,773	)	16.63
Outstanding, December 31, 2011	301,373		$	17.82
Balance, January 1, 2012	301,373		$	17.82
Granted	305,157		20.06
Vested	(142,727	)	19.44
Expired	0		0.00
Forfeited	(78,290	)	17.02
Outstanding, December 31, 2012	385,513		$	19.16

The following table presents a summary of stock option activity during the periods:

	Shares		Weighted Average Exercise Price
Balance, January 1, 2010	28,932		$	1,390.07
Granted	0		0.00
Exercised	0		0.00
Expired	(9,195	)	1,449.05
Forfeited	(817	)	1,469.48
Outstanding, December 31, 2010	18,920		$	1,357.97
Exercisable, December 31, 2010	14,655		$	1,497.94
Balance, January 1, 2011	18,920		$	1,357.97
Granted	0		0.00
Exercised	0		0.00
Expired	(2,600	)	1,231.98
Forfeited	(520	)	903.92
Outstanding, December 31, 2011	15,800		$	1,393.65
Exercisable, December 31, 2011	14,011		$	1,507.87
Balance, January 1, 2012	15,800		$	1,393.65
Granted	0		0.00
Exercised	0		0.00
Expired	(1,211	)	1,362.40
Forfeited	(2,190	)	1,184.58
Outstanding, December 31, 2012	12,399		$	1,433.63
Exercisable, December 31, 2012	11,996		$	1,447.69

The following table presents the weighted average remaining contractual life and the aggregate intrinsic value for stock options as of the dates indicated:

	Stock Options
	Outstanding			Exercisable
	Weighted Average Life	Intrinsic Value		Weighted Average Life	Intrinsic Value
December 31, 2012	1.3 years	$	0	1.2 years	$	0
December 31, 2011	2.1 years	0		2.1 years	0

As of December 31, 2012, a total of 5,382,896 shares remained available for grant under Sterling’s 2003, 2007 and 2010 Long-Term Incentive Plans. The stock options granted under these plans have terms of four, six, eight and 10 years. Stock based compensation expense recognized during the periods presented was as follows:

	Years Ended December 31,
	2012		2011		2010
	(in thousands)
Stock options	$	43	$	268	$	728
Restricted stock	3,765		3,595		2,435
Total	$	3,808	$	3,863	$	3,163

As of December 31, 2012, unrecognized equity compensation expense totaled $5.4 million as the underlying outstanding awards had not yet been earned. This amount will be recognized over a weighted average period of 2.1 years.

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Junior Subordinated Debentures

12 Months Ended

Dec. 31, 2012

Junior Subordinated Debenture Owed to Unconsolidated Subsidiary Trust [Abstract]

Junior Subordinated Debentures

Junior Subordinated Debentures:

Sterling has raised regulatory capital through the formation of trust subsidiaries and has assumed similar obligations through mergers with other financial institutions. The trusts are business trusts in which Sterling owns all of the common equity. The proceeds from the sale of the securities were used to purchase junior subordinated debentures issued by Sterling. Sterling’s obligations under the junior subordinated debentures and related documents, taken together, constitute a full and unconditional guarantee by Sterling of the trusts’ obligations. The junior subordinated debentures are treated as debt of Sterling. The junior subordinated debentures mature 30 years after issuance, and are redeemable, subject to certain conditions. As of September 30, 2012, all of Sterling's junior subordinated debentures were redeemable at par, at their applicable quarterly or semiannual interest payment dates. During the third quarter of 2009, Sterling elected to defer regularly scheduled interest payments on its junior subordinated debentures. In June 2012, Sterling elected to resume regularly scheduled interest payments and as a result, the deferred accrued interest in the amount of $19.6 million was paid in full.

Details of the junior subordinated debentures are as follows:

				December 31, 2012
Subsidiary Issuer	Issue Date	Maturity Date	Next Interest Payment Date	Rate		Amount
						(in thousands)
Sterling Capital Trust IX	July 2007	Oct 2037	Jan 2013	1.76%		$	46,392
Sterling Capital Trust VIII	Sept 2006	Dec 2036	Mar 2013	1.94		51,547
Sterling Capital Trust VII	June 2006	June 2036	Mar 2013	1.83		56,702
Lynnwood Financial Statutory Trust II	June 2005	June 2035	Mar 2013	2.11		10,310
Sterling Capital Trust VI	June 2003	Sept 2033	Mar 2013	3.51		10,310
Sterling Capital Statutory Trust V	May 2003	June 2033	Mar 2013	3.56		20,619
Sterling Capital Trust IV	May 2003	May 2033	Feb 2013	3.46		10,310
Sterling Capital Trust III	April 2003	April 2033	Jan 2013	3.56		14,433
Lynnwood Financial Statutory Trust I	Mar 2003	Mar 2033	Mar 2013	3.46		9,437
Klamath First Capital Trust I	July 2001	July 2031	Jan 2013	4.48		15,234
				2.47%	*	$	245,294
* Weighted average rate.

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Commitments and Contingencies Future Minimum Rental Commitments (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Commitments and Contingencies Disclosure [Abstract]
2012	$ 14,012,000
2013	12,723,000
2014	10,298,000
2015	8,157,000
2016	6,365,000
Thereafter	26,713,000
Total	78,268,000
Operating Leases, Rent Expense, Net	$ 16,000,000	$ 15,000,000	$ 16,000,000

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Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets:

Goodwill represents the excess of a purchase price over the net assets acquired. The following table presents a roll-forward of Sterling's goodwill:

	Amount
Beginning balance, January 1, 2012	$	0
Acquired	22,577
Ending Balance, December 31, 2012	$	22,577

Goodwill acquired during 2012 was related to the First Independent transaction and has been allocated to the Community Banking segment. Goodwill is not amortized, but is reviewed for impairment at least annually. Other intangible assets at December 31, 2012 were comprised of core deposit intangibles from various acquisitions, and other identifiable intangibles related to First Independent's trust and wealth management business.

The following table provides details of other intangible assets:

	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	(in thousands)
December 31, 2012
Core deposit intangibles	$	55,420	$	38,029	$	17,391
Other	1,800		119		1,681
December 31, 2011
Core deposit intangibles	43,446		31,368		12,078
Other	0		0		0

The following table provides the projected core deposit and other intangibles amortization expense for the next five years:

	Amount
	(in thousands)
Years ended:
December 31, 2013	$	6,430
December 31, 2014	3,339
December 31, 2015	2,361
December 31, 2016	1,271
December 31, 2017	1,178

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Loans Receivable And Allowance For Credit Losses Landscape (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Financing Receivable, Recorded Investment [Line Items]
% of Total	100.00%	100.00%
Financing Receivable, Gross	$ 6,253,234	$ 5,518,889
Residential Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	806,722	688,020
Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	2,874,801	2,451,754
Commercial
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	1,817,090	1,704,154
Consumer
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	754,621	674,961
Pass
Financing Receivable, Recorded Investment [Line Items]
% of Total	73.00%	90.00%
Financing Receivable, Gross	4,564,064	4,960,197
Pass | Residential Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	714,346	643,071
Pass | Consumer
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	723,698	663,829
Internally Assigned Grade [Member]
Financing Receivable, Recorded Investment [Line Items]
% of Total	20.00%
Financing Receivable, Gross	1,261,577
Internally Assigned Grade [Member] | Residential Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	53,722
Internally Assigned Grade [Member] | Consumer
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	17,255
Special Mention
Financing Receivable, Recorded Investment [Line Items]
% of Total	4.00%	4.00%
Financing Receivable, Gross	231,570	215,391
Special Mention | Residential Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	11,739	14,031
Special Mention | Consumer
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	4,864	4,166
Substandard
Financing Receivable, Recorded Investment [Line Items]
% of Total	3.00%	6.00%
Financing Receivable, Gross	187,560	325,799
Substandard | Residential Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	26,550	30,046
Substandard | Consumer
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	8,804	6,909
Doubtful/Loss
Financing Receivable, Recorded Investment [Line Items]
% of Total	0.00%	0.00%
Financing Receivable, Gross	8,463	17,502
Doubtful/Loss | Residential Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	365	872
Doubtful/Loss | Consumer
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	0	57
Restructured
Financing Receivable, Recorded Investment [Line Items]
% of Total	1.00%	1.00%
Financing Receivable, Gross	64,216	76,939
Restructured | Residential Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	22,968	17,638
Restructured | Consumer
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	307	0
Nonaccrual
Financing Receivable, Recorded Investment [Line Items]
% of Total	2.00%	4.00%
Financing Receivable, Gross	121,113	210,221
Nonaccrual | Residential Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	20,457	25,265
Nonaccrual | Consumer
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	6,938	5,829
Nonperforming
Financing Receivable, Recorded Investment [Line Items]
% of Total	3.00%	5.00%
Financing Receivable, Gross	185,329	287,160
Nonperforming | Residential Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	43,425	42,903
Nonperforming | Consumer
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	7,245	5,829
Performing
Financing Receivable, Recorded Investment [Line Items]
% of Total	97.00%	95.00%
Financing Receivable, Gross	6,067,905	5,231,729
Performing | Residential Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	763,297	645,117
Performing | Consumer
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	747,376	669,132
Residential Real Estate | Residential Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	806,722	688,020
Investor CRE | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	1,219,847	1,275,667
Investor CRE | Pass | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	599,660	1,116,991
Investor CRE | Internally Assigned Grade [Member] | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	472,801
Investor CRE | Special Mention | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	77,342	83,372
Investor CRE | Substandard | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	67,347	70,412
Investor CRE | Doubtful/Loss | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	2,697	4,892
Investor CRE | Restructured | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	4,334	4,366
Investor CRE | Nonaccrual | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	46,399	47,827
Investor CRE | Nonperforming | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	50,733	52,193
Investor CRE | Performing | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	1,169,114	1,223,474
Multifamily | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	1,580,289	1,001,479
Multifamily | Pass | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	1,486,824	975,583
Multifamily | Internally Assigned Grade [Member] | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	74,379
Multifamily | Special Mention | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	10,122	9,901
Multifamily | Substandard | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	8,745	15,279
Multifamily | Doubtful/Loss | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	219	716
Multifamily | Restructured | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	4,094	0
Multifamily | Nonaccrual | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	4,055	5,867
Multifamily | Nonperforming | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	8,149	5,867
Multifamily | Performing | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	1,572,140	995,612
Construction | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	74,665	174,608
Construction | Pass | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	10,946	51,284
Construction | Internally Assigned Grade [Member] | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	42,518
Construction | Special Mention | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	3,401	24,578
Construction | Substandard | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	17,534	93,185
Construction | Doubtful/Loss | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	266	5,561
Construction | Restructured | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	8,551	38,833
Construction | Nonaccrual | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	8,144	56,385
Construction | Nonperforming | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	16,695	95,218
Construction | Performing | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	57,970	79,390
Owner Occupied CRE | Commercial
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	1,276,591	1,272,461
Owner Occupied CRE | Pass | Commercial
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	678,916	1,123,796
Owner Occupied CRE | Internally Assigned Grade [Member] | Commercial
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	454,348
Owner Occupied CRE | Special Mention | Commercial
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	85,228	54,009
Owner Occupied CRE | Substandard | Commercial
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	53,183	90,613
Owner Occupied CRE | Doubtful/Loss | Commercial
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	4,916	4,043
Owner Occupied CRE | Restructured | Commercial
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	23,152	13,519
Owner Occupied CRE | Nonaccrual | Commercial
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	31,696	59,752
Owner Occupied CRE | Nonperforming | Commercial
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	54,848	73,271
Owner Occupied CRE | Performing | Commercial
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	1,221,743	1,199,190
Commercial & Industrial (C&I) | Commercial
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	540,499	431,693
Commercial & Industrial (C&I) | Pass | Commercial
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	349,674	385,643
Commercial & Industrial (C&I) | Internally Assigned Grade [Member] | Commercial
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	146,554
Commercial & Industrial (C&I) | Special Mention | Commercial
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	38,874	25,334
Commercial & Industrial (C&I) | Substandard | Commercial
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	5,397	19,355
Commercial & Industrial (C&I) | Doubtful/Loss | Commercial
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	0	1,361
Commercial & Industrial (C&I) | Restructured | Commercial
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	810	2,583
Commercial & Industrial (C&I) | Nonaccrual | Commercial
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	3,424	9,296
Commercial & Industrial (C&I) | Nonperforming | Commercial
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	4,234	11,879
Commercial & Industrial (C&I) | Performing | Commercial
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	536,265	419,814
Consumer | Consumer
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Gross	$ 754,621	$ 674,961

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Loan Servicing

12 Months Ended

Dec. 31, 2012

Servicing Asset [Abstract]

Loan Servicing [Text Block]

Loan Servicing:

Loans serviced for others are not included in the consolidated balance sheets. The following table presents an analysis of the changes in mortgage servicing rights and related allowance as of the dates indicated:

	2012			2011
	(in thousands)
Mortgage servicing rights, gross:
Beginning balance, January 1	$	30,409		$	21,720
Originated servicing	19,727			14,330
Amortization	(10,180		)	(5,641		)
Ending balance, December 31	39,956			30,409
Allowance, mortgage servicing rights:
Beginning balance, January 1	$	7,307		$	1,116
Additions	3,560			6,981
Recoveries	(3,331		)	(790		)
Ending balance, December 31	7,536			7,307
Mortgage servicing rights, net	$	32,420		$	23,102

The following table presents the unpaid principal balances of loans serviced for others as of the dates indicated:

	December 31,
	2012		2011
	(in thousands)
Balance of loans serviced for others
Residential	$	4,132,570	$	2,915,817
Commercial real estate	983,782		1,276,742
Commercial	132,903		116,724
Total	$	5,249,255	$	4,309,283

As of December 31, 2012, the residential portion of MSR was capitalized at approximately 71 basis points of the unpaid principal balance of residential loans serviced for others, compared with at 70 basis points as of December 31, 2011. Valuation inputs used in determining the fair value of MSR included:

	December 31,
	2012		2011
Key assumptions
Weighted average prepayment speed	18.3	%	19.4	%
Weighted average discount rate	10.1	%	10.2	%

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Property and Equipment

12 Months Ended

Dec. 31, 2012

Property, Plant and Equipment [Abstract]

Property and Equipment

Property and Equipment:

The components of property and equipment are as follows:

	December 31,				Estimated
	2012		2011		Useful Life
	(in thousands)
Buildings and improvements	$	68,129	$	64,002	20-40 years
Furniture, fixtures, equipment and computer software	85,481		88,516		3-10 years
Leasehold improvements	17,893		19,267		5-20 years
	171,503		171,785
Less accumulated depreciation and amortization	(91,651)		(99,241)
	79,852		72,544
Land	13,998		11,471
Total property and equipment, net	$	93,850	$	84,015

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Deposits

12 Months Ended

Dec. 31, 2012

Deposits [Abstract]

Deposits

Deposits:

The following table sets forth the composition of Sterling’s deposits at the dates indicated:

	December 31,
	2012				2011
	Amount		%		Amount		%
	(in thousands)
Noninterest bearing transaction	$	1,702,740	26	%	$	1,211,628	19	%
Interest bearing transaction	732,038		11	%	521,037		8	%
Savings and MMDA	2,262,369		36	%	2,092,283		32	%
Time deposits	1,738,970		27	%	2,660,870		41	%
Total deposits	$	6,436,117	100	%	$	6,485,818	100	%

The following presents the contractual maturities of time deposits:

	December 31, 2012
	(in thousands)
Due within 1 year	$	977,745
Due in 1 to 2 years	326,849
Due in 2 to 3 years	119,397
Due in 3 to 4 years	219,706
Due in 4 to 5 years	29,087
Due after 5 years	66,186
	$	1,738,970

The following presents the contractual maturities of time deposits with a minimum balance of $100,000:

	December 31, 2012
	(in thousands)
Three months or less	$	165,107
After three months through six months	99,941
After six months through twelve months	212,215
After twelve months	402,083
	$	879,346

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Loan Servicing (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Mortgage servicing rights, gross [Roll Forward]
Beginning balance	$ 30,409	$ 21,720
Originated servicing	19,727	14,330
Amortization	(10,180)	(5,641)
Ending balance	39,956	30,409
Allowance, mortgage servicing rights [Roll Forward]
Beginning balance	7,307	1,116
Additions	3,560	6,981
Recoveries	(3,331)	(790)
Ending balance	7,536	7,307
Mortgage servicing rights, net	$ 32,420	$ 23,102

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Commitments and Contingencies Litigation (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012
Commitments and Contingencies Disclosure [Abstract]
Litigation Settlement, Expense	$ 3
Loss Contingency Accrual, at Carrying Value	$ 6

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Loan Servicing Servicing Asset Valuation Inputs (Details)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Servicing Asset [Abstract]
Weighted average prepayment	18.30%	19.40%
Weighted average discount rate	10.10%	10.20%

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OREO (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Other Real Estate [Roll Forward]
Beginning balance	$ 98,187,000	$ 183,452,000	$ 91,476,000
Additions	33,499,000	177,881,000	265,115,000
Sales	(85,837,000)	(241,028,000)	(155,409,000)
Charge-offs	(18,534,000)	(27,731,000)	(23,164,000)
Other changes	1,282,000	5,613,000	5,434,000
Ending balance	28,597,000	98,187,000	183,452,000
Allowance, OREO [Roll Forward]
Beginning balance	16,277,000	21,799,000	8,204,000
Provisions	5,812,000	22,209,000	36,759,000
Charge-offs	(18,534,000)	(27,731,000)	(23,164,000)
Ending balance	3,555,000	16,277,000	21,799,000
Other real estate owned, net (OREO)	$ 25,042,000	$ 81,910,000	$ 161,653,000

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Quarterly Financial Data (Unaudited) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Quarterly Financial Information Disclosure [Abstract]
Interest income	$ 94,254	$ 95,991	$ 100,990	$ 97,965	$ 97,329	$ 101,379	$ 102,347	$ 103,237	$ 389,200	$ 404,292	$ 445,133
Interest expense	18,147	20,683	22,080	23,612	25,520	26,543	27,540	29,494	84,522	109,097	161,106
Net interest income	76,107	75,308	78,910	74,353	71,809	74,836	74,807	73,743	304,678	295,195	284,027
Provision for credit losses	0	2,000	4,000	4,000	4,000	6,000	10,000	10,000	10,000	30,000	250,229
Net interest income after provision for credit losses	76,107	73,308	74,910	70,353	67,809	68,836	64,807	63,743	294,678	265,195	33,798
Noninterest Income	31,227	46,698	44,741	31,587	32,899	29,112	34,335	29,982	154,253	126,328	136,965
Noninterest expense	89,589	89,408	87,607	88,649	85,875	86,620	91,587	88,308	355,253	352,390	395,045
Income before income taxes	17,745	30,598	32,044	13,291	14,833	11,328	7,555	5,417	93,678	39,133	(224,282)
Income Tax Expense (Benefit)	3,201	0	288,842	0	0	0	0	0	292,043	0	0
Net income	$ 20,946	$ 30,598	$ 320,886	$ 13,291	$ 14,833	$ 11,328	$ 7,555	$ 5,417	$ 385,721	$ 39,133	$ (224,282)
Earnings per share - basic (in dollars per share)	$ 0.34	$ 0.49	$ 5.17	$ 0.21	$ 0.24	$ 0.18	$ 0.12	$ 0.09	$ 6.21	$ 0.63	$ (53.05)
Earnings per share - diluted (in dollars per share)	$ 0.33	$ 0.49	$ 5.13	$ 0.21	$ 0.24	$ 0.18	$ 0.12	$ 0.09	$ 6.14	$ 0.63	$ (53.05)
Weighted Average Number of Shares Outstanding, Basic	62,159,683	62,139,833	62,112,936	62,078,404	61,989,094	61,958,183	61,943,851	61,930,783	62,122,862	61,955,659	14,253,869
Weighted average shares outstanding - diluted (in shares)	62,867,030	62,845,864	62,610,054	62,682,987	62,194,011	62,041,203	62,312,224	62,335,212	62,772,079	62,231,208	14,253,869

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Business Combinations (Tables)

12 Months Ended

Dec. 31, 2012

Business Combinations [Abstract]

Schedule of components of business acquisition

The following table summarizes the amounts recorded at closing:

	February 29, 2012
	(in thousands)
Cash and cash equivalents	$	150,045
Investments and MBS	187,465
Loans receivable, net	349,990
Goodwill	22,577
Core deposit intangible	11,974
Fixed assets	4,038
Other assets	10,886
Total assets acquired	$	736,975
Deposits	$	695,919
Other liabilities	409
Total liabilities assumed	696,328
Net assets acquired	$	40,647

Schedule of pro forma combined results

Cost savings estimates are not included in the pro forma combined results, nor are certain credit impaired loans and associated losses excluded from the purchase and assumption transaction.

	First Independent (stand alone)		Pro Forma Combined
	Years Ended December 31,
	2012		2012		2011
	(in thousands, except per share data; unaudited)
Net interest income	$	20,145	$	311,159	$	326,916
Noninterest income	4,757		155,258		135,828
Net income	10,817		389,935		49,469
Earnings per share - basic	0.17		6.28		0.80
Earnings per share - diluted	$	0.17	$	6.21	$	0.79

Impaired financing receivables

For purchased impaired loans, details as of the acquisition date were as follows:

	February 29, 2012
	(in thousands)
Contractual cash flows	$	24,408
Expected prepayments and credit losses	7,220
Expected cash flows	17,188
Present value of expected cash flows	15,265
Accretable yield	$	1,923

The following table summarizes impaired loans by class as of December 31, 2012 and December 31, 2011:

					Book Balance
	Unpaid Principal Balance		Charge-Offs		Without Specific Reserve		With Specific Reserve		Specific Reserve
	(in thousands)
December 31, 2012
Residential real estate	$	49,816	$	6,391	$	43,060	$	365	$	365
CRE:
Investor CRE	59,099		8,366		33,540		17,193		2,697
Multifamily	9,554		1,405		6,873		1,276		219
Construction	31,040		14,345		15,421		1,274		266
Total CRE	99,693		24,116		55,834		19,743		3,182
Commercial:
Owner Occupied CRE	61,300		6,452		42,075		12,773		4,916
C&I	16,959		12,725		4,234		0		0
Total commercial	78,259		19,177		46,309		12,773		4,916
Consumer	7,671		426		7,245		0		0
Total	$	235,439	$	50,110	$	152,448	$	32,881	$	8,463
					Book Balance
	Unpaid Principal Balance		Charge-Offs		Without Specific Reserve		With Specific Reserve		Specific Reserve
	(in thousands)
December 31, 2011
Residential real estate	$	52,023	$	9,120	$	38,519	$	4,384	$	872
CRE:
Investor CRE	70,517		18,324		31,503		20,690		4,892
Multifamily	6,185		318		4,496		1,371		716
Construction	133,588		38,370		43,281		51,937		5,562
Total CRE	210,290		57,012		79,280		73,998		11,170
Commercial:
Owner Occupied CRE	89,604		16,333		48,194		25,077		4,043
C&I	25,497		13,618		11,207		672		163
Total commercial	115,101		29,951		59,401		25,749		4,206
Consumer	6,613		784		5,246		583		57
Total	$	384,027	$	96,867	$	182,446	$	104,714	$	16,305

The following table presents the average book balance and interest income recognized for impaired loans by class for the periods presented:

	Years Ended December 31,
	2012				2011
	Average Book Balance		Interest Income Recognized		Average Book Balance		Interest Income Recognized
	(in thousands)
Residential real estate	$	43,164	$	819	$	67,157	$	992
Investor CRE	51,463		1,595		79,139		2,245
Multifamily	7,007		441		14,704		804
Construction	55,956		1,708		215,436		1,401
Owner Occupied CRE	64,060		2,553		75,553		2,757
C&I	8,057		105		12,009		460
Consumer	6,537		8		6,901		0
Total	$	236,244	$	7,229	$	470,899	$	8,659

Schedule of roll forward activity for accretable yield

The following table presents a roll-forward of activity for the accretable yield for the purchased impaired loans:

	Year Ended December 31, 2012
	(in thousands)
Beginning balance	$	0
Additions	1,923
Accretion to interest income	(756		)
Reclassifications	165
Ending balance	$	1,332

Schedule of five-year projected accretion of discount to be recognized as increase to interest income

The following table presents the related five-year projected accretion of the discount which will be recognized as an increase to interest income as of December 31, 2012:

	Amount
	(in thousands)
Years ended:
December 31, 2013	$	4,210
December 31, 2014	2,796
December 31, 2015	1,724
December 31, 2016	1,031
December 31, 2017	679

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Fair Value (Tables)

12 Months Ended

Dec. 31, 2012

Fair Value Disclosures [Abstract]

Fair Value, by Balance Sheet Grouping

The carrying amounts and fair values of financial instruments as of the periods indicated were as follows. Other assets are comprised of FHLB stock and derivatives, while other liabilities are comprised of derivatives:

		December 31, 2012				December 31, 2011
	Level	Carrying Amount		Fair Value		Carrying Amount		Fair Value
		(in thousands)
Financial assets:
Cash and cash equivalents	1	$	331,550	$	331,550	$	491,228	$	491,228
Investments and MBS:
Available for sale	2	1,513,157		1,513,157		2,547,876		2,547,876
Held to maturity	2	206		206		1,747		1,747
Loans held for sale	2	465,983		465,983		273,957		273,957
Loans receivable, net	3	6,101,749		6,154,296		5,341,179		5,347,555
Mortgage servicing rights, net	3	32,420		32,420		23,102		23,102
Other assets (1)	2	108,642		108,642		109,317		109,317
Financial liabilities:
Non-maturity deposits	2	4,697,147		4,697,147		3,824,948		3,824,948
Deposits with stated maturities	2	1,738,970		1,768,818		2,660,870		2,710,740
Borrowings	2	1,437,491		1,457,911		1,706,662		1,724,347
Other liabilities	2	4,025		4,025		9,212		9,212

(1) Other assets includes FHLB stock. As of December 31, 2012 and December 31, 2011, FHLB stock was carried at $97.5 million and $99.0 million, respectively.

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The following table presents Sterling’s financial instruments that are measured at fair value on a recurring basis:

	Total		Level 1		Level 2		Level 3
	(in thousands)
December 31, 2012
Investment securities available for sale:
MBS	$	1,308,838	$	0	$	1,308,838	$	0
Municipal bonds	204,306		0		204,306		0
Other	13		0		13		0
Total investment securities available for sale	1,513,157		0		1,513,157		0
Loans held for sale	465,983		0		465,983		0
Other assets - derivatives	11,183		0		11,183		0
Total assets	$	1,990,323	$	0	$	1,990,323	$	0
Contingent consideration	$	15,442	$	0	$	0	$	15,442
Other liabilities - derivatives	4,025		0		4,025		0
Total liabilities	$	19,467	$	0	$	4,025	$	15,442
December 31, 2011
Investment securities available for sale:
MBS	$	2,320,934	$	0	$	2,320,934	$	0
Municipal bonds	207,456		0		207,456		0
Other	19,486		0		19,486		0
Total investment securities available for sale	2,547,876		0		2,547,876		0
Loans held for sale	223,638		0		223,638		0
Other assets - derivatives	10,269		0		10,269		0
Total assets	$	2,781,783	$	0	$	2,781,783	$	0
Other liabilities - derivatives	$	9,212	$	0	$	9,212	$	0

Schedule of Business Acquisitions by Acquisition, Contingent Consideration

The following table presents a roll-forward of contingent consideration. Valuation adjustments are included in noninterest expense within merger and acquisition expense.

	Year Ended
	December 31, 2012
	(in thousands)
Beginning balance	$	0
Additions	11,700
Valuation adjustments	3,742
Ending balance	$	15,442

Fair Value, Measured on Recurring Basis, Gain (Loss) Included in Earnings

The difference between the aggregate fair value and the aggregate unpaid principal balance of loans held for sale that are carried at fair value were included in earnings as follows:

	Years Ended December 31,
	2012		2011
	(in thousands)
Mortgage banking operations	$	11,447	$	7,506

Fair Value Measurements, Nonrecurring

The following table presents the carrying value for these assets as of the dates indicated:

	December 31, 2012
	Total Carrying Value		Level 1		Level 2		Level 3		Losses During the Year Ended December 31, 2012
	(in thousands)
Loans	$	172,172	$	0	$	0	$	172,172	$	(27,649	)
OREO	18,074		0		0		18,074		(1,296		)
Mortgage servicing rights	32,420		0		0		32,420		(230		)
	December 31, 2011								Losses During the Year Ended December 31, 2011
	Total Carrying Value		Level 1		Level 2		Level 3
	(in thousands)
Loans	$	268,837	$	0	$	0	$	268,837	$	(47,372	)
OREO	31,379		0		0		31,379		(10,860		)
Mortgage servicing rights	23,102		0		0		23,102		(6,191		)

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Noninterest Expense

12 Months Ended

Dec. 31, 2012

Noninterest Expense [Abstract]

Non Interest Expenses

Noninterest Expense:

The following table details the components of Sterling’s noninterest expense:

	Years Ended December 31,
	2012		2011		2010
	(in thousands)
Employee compensation and benefits	$	189,025	$	171,643	$	168,793
OREO operations	11,829		41,500		62,578
Occupancy and equipment	42,930		39,878		39,643
Data processing	27,091		24,171		23,116
FDIC insurance	7,493		14,328		32,088
Professional fees	16,691		13,902		22,394
Depreciation	11,690		12,184		13,391
Advertising	12,688		10,017		11,536
Travel and entertainment	5,756		5,420		3,975
Merger and acquisition	11,976		1,012		358
Amortization of other intangible assets	6,780		4,851		4,898
Other	11,304		13,484		12,275
Total noninterest expense	$	355,253	$	352,390	$	395,045

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2012

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies:

Sterling is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to originate and purchase loans, provide funds under existing lines of credit, and include forward loan sale agreements to mortgage brokers. Commitments, which are disbursed subject to certain limitations, extend over various periods of time, with the majority of funds being disbursed within a twelve-month period. The undisbursed balances and other commitments as of the dates indicated are summarized as follows:

	December 31,
	2012		2011
	(in thousands)
Undisbursed loan funds - construction loans	$	16,499	$	17,617
Undisbursed lines of credit - commercial loans	524,065		309,560
Undisbursed lines of credit - consumer loans	399,691		403,112
Firm commitments to sell loans	28,485		14,760

As of December 31, 2012 and 2011, Sterling had approximately $17.5 million and $16.6 million of commercial and standby letters of credit outstanding, respectively. During the years ended December 31, 2012 and 2011, Sterling collected approximately $180,000 and $153,000 in fees from these off-balance sheet arrangements.

Future minimum rental commitments as of December 31, 2012, under non-cancelable operating leases with initial or remaining terms of more than one year, are as follows:

	Amount
	(in thousands)
Years ended:
December 31, 2013	$	14,012
December 31, 2014	12,723
December 31, 2015	10,298
December 31, 2016	8,157
December 31, 2017	6,365
Thereafter	26,713
	$	78,268

Rent expense recorded for the years ended December 31, 2012, 2011 and 2010 was $16.3 million, $15.2 million and $16.0 million, respectively.

Securities Class Action Litigation. On December 11, 2009, a putative securities class action was filed in the United States District Court for the Eastern District of Washington against Sterling and certain of our current and former officers. The court appointed a lead plaintiff on March 9, 2010. On June 18, 2010, the lead plaintiff filed a consolidated complaint (the “Complaint”). The Complaint purports to be brought on behalf of a class of persons who purchased or otherwise acquired Sterling's stock during the period from July 23, 2008 to October 15, 2009. The Complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by failing to disclose the extent of Sterling's delinquent commercial real estate, construction and land development loans, properly record losses for impaired loans, and properly reserve for loan losses, thereby causing Sterling's stock price to be artificially inflated during the purported class period. Plaintiffs seek unspecified damages and attorneys' fees and costs. Sterling believes the lawsuit is without merit and intends to defend against it vigorously. On August 30, 2010, Sterling moved to dismiss the Complaint. On March 2, 2011, after complete briefing, the court held a hearing on the motion to dismiss. The court has not yet issued an order on the motion, but indicated that it intends to do so in the near future. Failure by Sterling to obtain a favorable resolution of the claims set forth in the complaint could have a material adverse effect on our business, results of operations and financial condition. Currently, a loss resulting from these claims is not considered probable or reasonably estimable in amount.

ERISA Class Action Litigation. On January 20 and 22, 2010, two putative class action complaints were filed in the United States District Court for the Eastern District of Washington against Sterling, as well as certain of Sterling's current and former officers and directors. The two complaints were merged in a Consolidated Amended Complaint (the “Complaint”) filed on July 16, 2010 in the same court. The Complaint does not name all of the individuals named in the prior complaints, but it is expected that additional defendants will be added. The Complaint alleges that the defendants breached their fiduciary duties under sections 404 and 405 of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), with respect to the Sterling Savings Bank Employee Savings and Investment Plan (the “401(k) Plan”) and the FirstBank Northwest Employee Stock Ownership Plan (“ESOP”) (collectively, the "Plans”). Specifically, the Complaint alleges that the defendants breached their duties by investing assets of the Plans in Sterling's securities when it was imprudent to do so, and by investing such assets in Sterling securities when defendants knew or should have known that the price of those securities was inflated due to misrepresentations and omissions about Sterling's business practices. The business practices at issue include alleged over-reliance on risky construction loans; alleged inadequate loan reserves; alleged spiking increases in nonperforming assets, nonperforming loans, classified assets, and over 90-day delinquent loans; alleged inadequate accounting for rising loan payment shortfalls; alleged unsafe and unsound banking practices; and a capital base that was allegedly inadequate to withstand the significant deterioration in the real estate markets. The putative class periods are October 22, 2007 to the present for the 401(k) Plan class, and October 22, 2007 to November 14, 2008 for the ESOP class. The Complaint seeks damages of an unspecified amount and attorneys' fees and costs. On September 26, 2012, Sterling received a letter from the U.S. Department of Labor (the “Department of Labor”) containing similar allegations as those set forth in the Complaint, demanding that the violations alleged in the Department of Labor's letter be corrected and notifying Sterling that the Department of Labor may take legal action in connection with such allegations, including assessing a civil money penalty. Failure by Sterling to obtain a favorable resolution of the claims set forth in the Complaint or in the letter from the Department of Labor could have a material adverse effect on Sterling's business, results of operations, and financial condition. In January 2013, a tentative settlement was reached, pursuant to which Sterling agreed to pay $3.0 million to settle the claims. The settlement is subject to approval by the court and the Department of Labor.

Additionally, Sterling is involved in ongoing litigation, primarily related to its normal business operations. When establishing a liability for contingent litigation losses, Sterling determines a range of potential losses for each matter that is both probable and estimable, and records the amount it considers to be the best estimate within the range. For these matters and others where an unfavorable outcome is reasonably possible but not probable, there is no estimable range of possible losses. For specific cases, including the ERISA class action litigation discussed above, Sterling has established an accrual of $5.5 million for potential settlement losses. The accrual is Sterling's best estimate of the liability after any potential insurance coverages for specific settlements that are estimable and probable as of December 31, 2012. Sterling believes that the eventual outcome from these cases will not, individually or in the aggregate, have a material adverse effect on its consolidated financial position.

American Heritage Holdings On October 22, 2012, Sterling entered into a definitive agreement with American Heritage Holdings ("AHH"), the holding company for Borrego Springs Bank, N.A., to acquire AHH for cash consideration of $6.5 million. The transaction, which has been approved by the boards of directors of Sterling and AHH. The shareholders of AHH have agreed to vote in favor of the transaction, which is subject to customary closing conditions and is expected to be completed during the first quarter of 2013.

Boston Private Bank and Trust Company On December 14, 2012, Sterling entered into a definitive agreement to acquire the Puget Sound operations of Boston Private Bank & Trust Company (“Boston Private”), a wholly owned subsidiary of Boston Private Financial Holdings, Inc. The Boston Private Puget Sound offices are located in Seattle, Bellevue and Redmond, Washington. As of December 31, 2012, these offices had aggregate loans of approximately $270 million and deposits of $200 million. The transaction, which is subject to regulatory approval and other customary closing conditions, is expected to be completed during the second quarter of 2013.

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Derivatives And Hedging (Tables)

12 Months Ended

Dec. 31, 2012

General Discussion of Derivative Instruments and Hedging Activities [Abstract]

Schedule of Notional Amounts of Outstanding Derivative Positions

The following table summarizes Sterling’s mortgage banking operations and interest rate swaps:

	December 31, 2012
			Fair Value
	Notional		Asset		Liability
	(in thousands)
Interest rate lock commitments, net	$	242,061	$	9,035	$	0
Forward commitments	531,000		0		1,881
Interest rate swaps - broker-dealer	44,846		0		2,144
Interest rate swaps - customer	36,158		2,148		0
	December 31, 2011
			Fair Value
	Notional		Asset		Liability
	(in thousands)
Interest rate lock commitments, net	$	181,456	$	5,558	$	0
Forward commitments	315,579		0		3,785
Interest rate swaps - broker-dealer	43,213		0		4,527
Interest rate swaps - customer	45,820		4,711		0

Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance

The following table sets forth these gains and losses:

	Years Ended December 31,
	2012			2011			2010
	(in thousands)
Mortgage banking operations	$	9,816		$	(10,297	)	$	(8,871	)
Other noninterest income	(553		)	61			110

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Deposits (Tables)

12 Months Ended

Dec. 31, 2012

Deposits [Abstract]

Schedule of Deposits [Table Text Block]

The following table sets forth the composition of Sterling’s deposits at the dates indicated:

	December 31,
	2012				2011
	Amount		%		Amount		%
	(in thousands)
Noninterest bearing transaction	$	1,702,740	26	%	$	1,211,628	19	%
Interest bearing transaction	732,038		11	%	521,037		8	%
Savings and MMDA	2,262,369		36	%	2,092,283		32	%
Time deposits	1,738,970		27	%	2,660,870		41	%
Total deposits	$	6,436,117	100	%	$	6,485,818	100	%

Schedule of Contractual Maturities of Time Deposits

The following presents the contractual maturities of time deposits:

	December 31, 2012
	(in thousands)
Due within 1 year	$	977,745
Due in 1 to 2 years	326,849
Due in 2 to 3 years	119,397
Due in 3 to 4 years	219,706
Due in 4 to 5 years	29,087
Due after 5 years	66,186
	$	1,738,970

Schedule of Contractual Maturities of Time Deposits Over $100,000

The following presents the contractual maturities of time deposits with a minimum balance of $100,000:

	December 31, 2012
	(in thousands)
Three months or less	$	165,107
After three months through six months	99,941
After six months through twelve months	212,215
After twelve months	402,083
	$	879,346

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Consolidated Statements Of Comprehensive Income (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Statement of Other Comprehensive Income [Abstract]
Net income	$ 385,721	$ 39,133	$ (224,282)
Other comprehensive income (loss):
Change in unrealized gains on investments and MBS available-for-sale	16,119	86,140	(6,541)
Realized net gains reclassified from other comprehensive income	(17,016)	(18,462)	(25,745)
Less deferred income tax provision	494	(2,384)	11,823
Net other comprehensive income (loss)	(403)	65,294	(20,463)
Comprehensive income	$ 385,318	$ 104,427	$ (244,745)

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Fair Value (Details) (USD $)	12 Months Ended
	Dec. 31, 2012		Dec. 31, 2011		Dec. 31, 2010
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Federal Home Loan Bank Stock and Federal Reserve Bank Stock	$ 97,500,000		$ 99,000,000
Business Combination, Contingent Consideration Arrangements, Change in Amount of Contingent Consideration, Asset	11,700,000
Available for sale	1,513,157,000		2,547,876,000
Loans held for sale	465,983,000		223,638,000
Loans Receivable Held-for-sale, Net	465,983,000		273,957,000
Gain (Loss) on Mortgage Servicing Rights	(216,000)		(6,179,000)		1,125,000
Gains (Losses) on Sales of Other Real Estate	(247,000)		(16,628,000)		(26,664,000)
Servicing Asset at Fair Value, Amount	32,420,000
Mortgage servicing rights, net	32,420,000		23,102,000
Charge-offs for properties held	3,900,000		20,900,000
Contingent Consideration Liability [Roll Forward]
Beginning Balance	0
Valuation adjustments - noninterest expense - other - mergers and acquisitions	3,742,000
Ending Balance	15,442,000		0
Change During Period, Fair Value Disclosure
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for sale	11,447,000		7,506,000
MBS
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	1,308,838,000
Municipal Bonds
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	204,306,000
Fair Value, Measurements, Nonrecurring | Loans
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Gain (Loss) on Sales of Loans, Net	(27,649,000)		(47,372,000)
Fair Value, Measurements, Nonrecurring | Loans | Carrying Amount
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans receivable, net	172,172,000		268,837,000
Fair Value, Measurements, Nonrecurring | OREO
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Gains (Losses) on Sales of Other Real Estate	(1,296,000)		(10,860,000)
Fair Value, Measurements, Nonrecurring | OREO | Carrying Amount
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Other Real Estate Fair Value Disclosure	18,074,000		31,379,000
Fair Value, Measurements, Nonrecurring | Mortgage Servicing Rights
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Gain (Loss) on Mortgage Servicing Rights	(230,000)		(6,191,000)
Fair Value, Measurements, Nonrecurring | Mortgage Servicing Rights | Carrying Amount
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Servicing Asset at Fair Value, Amount	32,420,000		23,102,000
Estimate of Fair Value, Fair Value Disclosure [Member] | Fair Value, Measurements, Recurring
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	1,513,157,000		2,547,876,000
Loans held for sale	465,983,000		223,638,000
Other assets	11,183,000		10,269,000
Assets, Fair Value Disclosure, Recurring	1,990,323,000		2,781,783,000
Other liabilities - derivatives	4,025,000		9,212,000
Total liabilities	19,467,000
Contingent Consideration Liability [Roll Forward]
Ending Balance	15,442,000
Estimate of Fair Value, Fair Value Disclosure [Member] | Fair Value, Measurements, Recurring | MBS
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	1,308,838,000		2,320,934,000
Estimate of Fair Value, Fair Value Disclosure [Member] | Fair Value, Measurements, Recurring | Municipal Bonds
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	204,306,000		207,456,000
Estimate of Fair Value, Fair Value Disclosure [Member] | Fair Value, Measurements, Recurring | Other
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	13,000		19,486,000
Fair Value, Inputs, Level 1 [Member] | Carrying Amount
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	331,550,000		491,228,000
Fair Value, Inputs, Level 1 [Member] | Estimate of Fair Value, Fair Value Disclosure [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	331,550,000		491,228,000
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Nonrecurring | Loans
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans receivable, net	0		0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Nonrecurring | OREO
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Other Real Estate Fair Value Disclosure	0		0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Nonrecurring | Mortgage Servicing Rights
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Servicing Asset at Fair Value, Amount	0		0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	0		0
Loans held for sale	0		0
Other assets	0		0
Assets, Fair Value Disclosure, Recurring	0		0
Other liabilities - derivatives	0		0
Total liabilities	0
Contingent Consideration Liability [Roll Forward]
Ending Balance	0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring | MBS
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	0		0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring | Municipal Bonds
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	0		0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring | Other
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	0		0
Fair Value, Inputs, Level 2 [Member] | Carrying Amount
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	1,513,157,000		2,547,876,000
Held to maturity	206,000		1,747,000
Loans held for sale	465,983,000		273,957,000
Other assets	108,642,000	[1]	109,317,000	[1]
Non-maturity deposits	4,697,147,000		3,824,948,000
Deposits with stated maturities	1,738,970,000		2,660,870,000
Borrowings	1,437,491,000		1,706,662,000
Other liabilities	4,025,000		9,212,000
Fair Value, Inputs, Level 2 [Member] | Estimate of Fair Value, Fair Value Disclosure [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	1,513,157,000		2,547,876,000
Held to maturity	206,000		1,747,000
Loans held for sale	465,983,000		273,957,000
Other assets	108,642,000	[1]	109,317,000	[1]
Non-maturity deposits	4,697,147,000		3,824,948,000
Deposits with stated maturities	1,768,818,000		2,710,740,000
Borrowings	1,457,911,000		1,724,347,000
Other liabilities	4,025,000		9,212,000
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Nonrecurring | Loans
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans receivable, net	0		0
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Nonrecurring | OREO
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Other Real Estate Fair Value Disclosure	0		0
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Nonrecurring | Mortgage Servicing Rights
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Servicing Asset at Fair Value, Amount	0		0
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	1,513,157,000		2,547,876,000
Loans held for sale			223,638,000
Loans Receivable Held-for-sale, Net	465,983,000
Other assets	11,183,000		10,269,000
Assets, Fair Value Disclosure, Recurring	1,990,323,000		2,781,783,000
Other liabilities - derivatives	4,025,000		9,212,000
Total liabilities	4,025,000
Contingent Consideration Liability [Roll Forward]
Ending Balance	0
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring | MBS
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	1,308,838,000		2,320,934,000
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring | Municipal Bonds
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	204,306,000		207,456,000
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring | Other
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	13,000		19,486,000
Fair Value, Inputs, Level 3 [Member] | Carrying Amount
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans receivable, net	6,101,749,000		5,341,179,000
Fair Value, Inputs, Level 3 [Member] | Estimate of Fair Value, Fair Value Disclosure [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans receivable, net	6,154,296,000		5,347,555,000
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Nonrecurring | Loans
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans receivable, net	172,172,000		268,837,000
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Nonrecurring | Loans | Minimum
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fair Value Inputs, Selling Costs, Percent	4.50%
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Nonrecurring | Loans | Maximum
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fair Value Inputs, Selling Costs, Percent	9.00%
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Nonrecurring | OREO
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Other Real Estate Fair Value Disclosure	18,074,000		31,379,000
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Nonrecurring | OREO | Minimum
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fair Value Inputs, Selling Costs, Percent	4.50%
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Nonrecurring | OREO | Maximum
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fair Value Inputs, Selling Costs, Percent	9.00%
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Nonrecurring | Mortgage Servicing Rights
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Servicing Asset at Fair Value, Amount	32,420,000		23,102,000
Weighted average prepayment speed	18.30%
Weighted average discount rate	10.10%
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	0		0
Loans held for sale	0		0
Other assets	0		0
Assets, Fair Value Disclosure, Recurring	0		0
Other liabilities - derivatives	0		0
Total liabilities	15,442,000
Contingent Consideration Liability [Roll Forward]
Ending Balance	15,442,000
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring | MBS
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	0		0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring | Municipal Bonds
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	0		0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring | Other
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale	$ 0		$ 0

[1] Other assets includes FHLB stock. As of December 31, 2012 and December 31, 2011, FHLB stock was carried at $97.5 million and $99.0 million, respectively

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Investments And MBS

12 Months Ended

Dec. 31, 2012

Investments and MBS [Abstract]

Investments and MBS

Investments and MBS:

The carrying and fair values of investments and MBS are summarized as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
December 31, 2012
Available for sale
MBS	$	1,263,786	$	45,052	$	0		$	1,308,838
Municipal bonds	188,467		16,452		(613		)	204,306
Other	5		8		0			13
Total	$	1,452,258	$	61,512	$	(613	)	$	1,513,157
Held to maturity
Tax credits	$	206	$	0	$	0		$	206
Total	$	206	$	0	$	0		$	206
December 31, 2011
Available for sale
MBS	$	2,265,207	$	55,760	$	(33	)	$	2,320,934
Municipal bonds	195,512		13,338		(1,394		)	207,456
Other	24,923		2		(5,439		)	19,486
Total	$	2,485,642	$	69,100	$	(6,866	)	$	2,547,876
Held to maturity
Tax credits	$	1,747	$	0	$	0		$	1,747
Total	$	1,747	$	0	$	0		$	1,747

Sterling’s MBS portfolio is comprised primarily of residential agency securities. Total sales of Sterling’s securities during the years ended December 31, 2012, 2011 and 2010 are summarized as follows:

	Proceeds from Sales		Gross Realized Gains		Gross Realized Losses
	(in thousands)
Years Ended:
December 31, 2012	$	879,174	$	24,024	$	189
December 31, 2011	586,340		18,771		2,535
December 31, 2010	1,056,677		35,546		9,804

The following table summarizes Sterling’s investments and MBS that had a market value below their amortized cost as of December 31, 2012 and December 31, 2011, segregated by those investments that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 months or longer:

	Less than 12 months					12 months or longer					Total
	Market Value		Unrealized Losses			Market Value		Unrealized Losses			Market Value		Unrealized Losses
	(in thousands)
December 31, 2012
MBS	$	0	$	0		$	0	$	0		$	0	$	0
Municipal bonds	0		0			12,921		(613		)	12,921		(613		)
Other	0		0			0		0			0		0
Total	$	0	$	0		$	12,921	$	(613	)	$	12,921	$	(613	)
December 31, 2011
MBS	$	1,419	$	(12	)	$	24,726	$	(21	)	$	26,145	$	(33	)
Municipal bonds	0		0			17,289		(1,394		)	17,289		(1,394		)
Other	0		0			19,479		(5,439		)	19,479		(5,439		)
Total	$	1,419	$	(12	)	$	61,494	$	(6,854	)	$	62,913	$	(6,866	)

The following table presents the amortized cost and fair value of available for sale and held to maturity securities as of December 31, 2012, grouped by contractual maturity. Actual maturities for MBS will differ from contractual maturities as a result of the level of prepayments experienced on the underlying mortgages.

	Held to maturity				Available for sale
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(in thousands)
Due within one year	$	0	$	0	$	0	$	0
Due after one year through five years	0		0		3,033		3,266
Due after five years through ten years	0		0		70,704		73,979
Due after ten years	206		206		1,378,521		1,435,912
Total	$	206	$	206	$	1,452,258	$	1,513,157

Management evaluates investment securities for other-than-temporary declines in fair value each quarter. If the fair value of investment securities falls below the amortized cost and the decline is deemed to be other-than temporary, the securities are written down to current market value, resulting in the recognition of an other-than-temporary impairment ("OTTI"). During the second quarter of 2012, Sterling recognized an OTTI charge of $6.8 million on a single issuer trust preferred security. The security was sold during the fourth quarter at a gain of $2.5 million.

The following table presents a roll-forward of OTTI for the periods presented:

	Years Ended December 31,
	2012			2011		2010
	(in thousands)
OTTI, beginning balance	$	0		$	0	$	0
Additions	6,819			0		0
Realized	(6,819		)	0		0
Ending Balance	$	0		$	0	$	0

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Investments And MBS (Details) (USD $)	12 Months Ended
	Dec. 31, 2012		Dec. 31, 2011		Dec. 31, 2010
Available-for-sale Securities and Held-to-maturity Securities [Abstract]
Amortized cost	$ 1,452,258,000		$ 2,485,642,000
Gross Unrealized Gains	61,512,000		69,100,000
Gross Unrealized Losses	(613,000)		(6,866,000)
Estimated Fair Value, Total	1,513,157,000		2,547,876,000
Amortized Cost	206,000		1,747,000
Gross Unrealized Gains	0		0
Gross Unrealized Losses	0		0
Fair Value	206,000		1,747,000
Gain (Loss) on Investments [Abstract]
Proceeds from Sales	879,174,000		586,340,000		1,056,677,000
Gross Realized Gains	24,024,000		18,771,000		35,546,000
Gross Realized Losses	189,000		2,535,000		9,804,000
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
Market Value, Less than 12 months	0		1,419,000
Unrealized Losses, Less than 12 months	0		(12,000)
Market Value, 12 months or longer	12,921,000		61,494,000
Unrealized Losses, 12 months or longer	(613,000)		(6,854,000)
Market Value	12,921,000		62,913,000
Unrealized Losses	(613,000)		(6,866,000)
Held-to-maturity Securities, Debt Maturities [Abstract]
Amortized Cost, Due within one year	0
Amortized Cost, Due after one year through five years	0
Amortized Cost, Due afer five years through ten years	0
Amortized Cost, Due after ten years	206,000
Amortized Cost, Total	206,000
Estimated Fair Value, Due within one year	0
Estimated Fair Value, Due after one year through five years	0
Estimated Fair Value, Due after five years through ten years	0
Estimated Fair Value, Due after ten years	206,000
Estimated Fair Value, Total	206,000
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Amortized Cost, Due within on year	0
Amortized Cost, Due after one year through five years	3,033,000
Amortized Cost, Due after five years through ten years	70,704,000
Amortized Cost, Due after ten years	1,378,521,000
Amortized Cost, Total	1,452,258,000
Estimated Fair Value, Due within one year	0
Estimated Fair Value, Due after one year through five years	3,266,000
Estimated Fair Value, Due after five years through ten years	73,979,000
Estimated Fair Value, Due after ten years	1,435,912,000
Estimated Fair Value, Total	1,513,157,000		2,547,876,000
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Roll Forward]
OTTI, Beginning Balance	0		0		0
Additions	6,819,000	[1]	0	[1]	0	[1]
Realized	(6,819,000)		0		0
OTTI, Ending Balance	0		0		0
Gain (Loss) on Investments, Excluding Other than Temporary Impairments	2,500,000
MBS
Available-for-sale Securities and Held-to-maturity Securities [Abstract]
Amortized cost	1,263,786,000		2,265,207,000
Gross Unrealized Gains	45,052,000		55,760,000
Gross Unrealized Losses	0		(33,000)
Estimated Fair Value, Total	1,308,838,000
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
Market Value, Less than 12 months	0		1,419,000
Unrealized Losses, Less than 12 months	0		(12,000)
Market Value, 12 months or longer	0		24,726,000
Unrealized Losses, 12 months or longer	0		(21,000)
Market Value	0		26,145,000
Unrealized Losses	0		(33,000)
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Estimated Fair Value, Total	1,308,838,000
Municipal Bonds
Available-for-sale Securities and Held-to-maturity Securities [Abstract]
Amortized cost	188,467,000		195,512,000
Gross Unrealized Gains	16,452,000		13,338,000
Gross Unrealized Losses	(613,000)		(1,394,000)
Estimated Fair Value, Total	204,306,000
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
Market Value, Less than 12 months	0		0
Unrealized Losses, Less than 12 months	0		0
Market Value, 12 months or longer	12,921,000		17,289,000
Unrealized Losses, 12 months or longer	(613,000)		(1,394,000)
Market Value	12,921,000		17,289,000
Unrealized Losses	(613,000)		(1,394,000)
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Estimated Fair Value, Total	204,306,000
Tax credits
Available-for-sale Securities and Held-to-maturity Securities [Abstract]
Amortized Cost	206,000		1,747,000
Gross Unrealized Gains	0		0
Gross Unrealized Losses	0		0
Fair Value	206,000		1,747,000
Other
Available-for-sale Securities and Held-to-maturity Securities [Abstract]
Amortized cost	5,000		24,923,000
Gross Unrealized Gains	8,000		2,000
Gross Unrealized Losses	0		(5,439,000)
Estimated Fair Value, Total	13,000
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
Market Value, Less than 12 months	0		0
Unrealized Losses, Less than 12 months	0		0
Market Value, 12 months or longer	0		19,479,000
Unrealized Losses, 12 months or longer	0		(5,439,000)
Market Value	0		19,479,000
Unrealized Losses	0		(5,439,000)
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Estimated Fair Value, Total	$ 13,000

[1] The other-than-temporary impairment recognized in earnings during 2012 did not have a portion recognized in accumulated other comprehensive income.

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Derivatives And Hedging (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Derivative [Line Items]
Residential mortgage loans held for sale	$ 419,100,000	$ 192,400,000
Minimum
Derivative [Line Items]
Interest rate lock period	10 days
Maximum
Derivative [Line Items]
Interest rate lock period	60 days
Interest rate lock commitments
Derivative [Line Items]
Notional	242,061,000	181,456,000
Fair Value Asset	9,035,000	5,558,000
Fair Value Liability	0	0
Forward commitments
Derivative [Line Items]
Notional	531,000,000	315,579,000
Fair Value Asset	0	0
Fair Value Liability	1,881,000	3,785,000
Interest rate swaps - broker-dealer
Derivative [Line Items]
Notional	44,846,000	43,213,000
Fair Value Asset	0	0
Fair Value Liability	2,144,000	4,527,000
Interest rate swaps - customer
Derivative [Line Items]
Notional	36,158,000	45,820,000
Fair Value Asset	2,148,000	4,711,000
Fair Value Liability	0	0
Mortgage Banking Operations [Member]
Derivative [Line Items]
Gain (loss) recognized in income	9,816,000	(10,297,000)	(8,871,000)
Other Noninterest Income [Member]
Derivative [Line Items]
Gain (loss) recognized in income	$ (553,000)	$ 61,000	$ 110,000

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Deposits (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Contractual Maturities, Time Deposits, $100,000 or More [Abstract]
Three months or less	$ 165,107
After three months through six months	99,941
After six months through twelve months	212,215
After twelve months	402,083
Total	879,346
Deposits, by Component, Alternative [Abstract]
Noninterest bearing	1,702,740	1,211,628
Interest-bearing transaction	732,038	521,037
Savings and MMDA	2,262,369	2,092,283
Time deposits	1,738,970	2,660,870
Total deposits	6,436,117	6,485,818
Noninterest bearing transaction, percentage of total deposits	26.00%	19.00%
Interest bearing transactions, percentage of total deposits	11.00%	8.00%
Savings and MMDA, percentage of total deposits	36.00%	32.00%
Time deposits, percentage of total deposits	27.00%	41.00%
Time Deposits, Rolling Year Maturity [Abstract]
Due within 1 year	977,745
Due in 1 to 2 years	326,849
Due in 2 to 3 years	119,397
Due in 3 to 4 years	219,706
Due in 4 to 5 years	29,087
Due after 5 years	66,186
Total	$ 1,738,970

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Benefit Plans

12 Months Ended

Dec. 31, 2012

Compensation and Retirement Disclosure [Abstract]

Pension and Other Postretirement Benefits Disclosure

Benefit Plans:

Sterling maintains an employee savings plan under Section 401(k) of the Internal Revenue Code. Substantially all employees are eligible to participate in the plan subject to certain requirements. Under the plan, employees may elect to contribute up to 10% of their salary, and Sterling will make a matching contribution equal to 35% of the employee's contribution. Each employee may make a supplemental contribution of an additional 65% of their salary. All employee contributions vest immediately and, if applicable, employer contributions vest over the employee's first three years of employment. Employees have the option of investing their contributions among selected mutual funds and Sterling common stock. Sterling contributed $2.9 million during 2012 and $2.8 million during 2011 and 2010 to the employee savings plan.

Since 2002, Sterling has a supplemental executive retirement plan ("SERP"). The SERP is a nonqualified, unfunded plan that is designed to provide retirement benefits for certain key employees of Sterling. Sterling maintains and administers three additional SERPs from past acquisitions. These SERPs are all nonqualified, unfunded plans that were designed to provide retirement benefits for certain key employees and directors of the acquired companies. All amounts and benefits were established and accrued at acquisition either by previous service or change of control clauses. Sterling continues to administer these benefit plans, as necessary. Sterling had recognized $530,000, $531,000, and $505,000 for the years ended December 31, 2012, 2011 and 2010 in expenses related to the SERP. As of both December 31, 2012 and 2011, Sterling had $8.4 million accrued for the SERP.

In 2006, Sterling adopted a new nonqualified deferred compensation plan (the “2006 DCP”) which is primarily funded through employee deferral contributions. The 2006 DCP is designed to retain and attract key employees while serving as a vehicle to assist participants in deferring current compensation to a time when taxes may be at a more personally beneficial rate and aid in saving for long-term financial needs. Participation in the 2006 DCP is limited to Directors and a select group of management or highly compensated employees as determined by the plan Committee. No employer contributions have been made to the 2006 DCP. Sterling had $172,000, $94,000, and $132,000 of net expenses related to the 2006 DCP for the years ended December 31, 2012, 2011 and 2010, respectively. As of December 31, 2012 and 2011, Sterling had an accrued liability for the 2006 DCP of $4.3 million and $4.8 million, respectively.

During 2011, Sterling initiated an Employee Stock Purchase Plan ("ESPP"). Employees are eligible to participate in the ESPP, with purchases discounted from 0% - 15% (currently at 15%) from the closing price of Sterling's common stock on the last day of the semiannual offering period. During 2012, 38,926 shares were issued under the plan, leaving 1,961,074 shares available for future purchase as of December 31, 2012.

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Noninterest Expense (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Noninterest Expense [Abstract]
Employee compensation and benefits									$ 189,025	$ 171,643	$ 168,793
OREO operations									11,829	41,500	62,578
Occupancy and equipment									42,930	39,878	39,643
Data processing									27,091	24,171	23,116
FDIC insurance									7,493	14,328	32,088
Professional Fees									16,691	13,902	22,394
Depreciation									11,690	12,184	13,391
Advertising									12,688	10,017	11,536
Travel and entertainment									5,756	5,420	3,975
Merger and acquisition									11,976	1,012	358
Amortization of other intangible assets									6,780	4,851	4,898
Other									11,304	13,484	12,275
Total noninterest expense	$ 89,589	$ 89,408	$ 87,607	$ 88,649	$ 85,875	$ 86,620	$ 91,587	$ 88,308	$ 355,253	$ 352,390	$ 395,045

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Loan Servicing (Tables)

12 Months Ended

Dec. 31, 2012

Servicing Asset [Abstract]

Schedule of Servicing Assets at Amortized Value [Table Text Block]

The following table presents an analysis of the changes in mortgage servicing rights and related allowance as of the dates indicated:

	2012			2011
	(in thousands)
Mortgage servicing rights, gross:
Beginning balance, January 1	$	30,409		$	21,720
Originated servicing	19,727			14,330
Amortization	(10,180		)	(5,641		)
Ending balance, December 31	39,956			30,409
Allowance, mortgage servicing rights:
Beginning balance, January 1	$	7,307		$	1,116
Additions	3,560			6,981
Recoveries	(3,331		)	(790		)
Ending balance, December 31	7,536			7,307
Mortgage servicing rights, net	$	32,420		$	23,102

Qualitative and Quantitative Information, Transferor's Continuing Involvement [Table Text Block]

The following table presents the unpaid principal balances of loans serviced for others as of the dates indicated:

	December 31,
	2012		2011
	(in thousands)
Balance of loans serviced for others
Residential	$	4,132,570	$	2,915,817
Commercial real estate	983,782		1,276,742
Commercial	132,903		116,724
Total	$	5,249,255	$	4,309,283

Fair Value Inputs, Assets, Quantitative Information [Table Text Block]

Valuation inputs used in determining the fair value of MSR included:

	December 31,
	2012		2011
Key assumptions
Weighted average prepayment speed	18.3	%	19.4	%
Weighted average discount rate	10.1	%	10.2	%

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Earnings Per Share

12 Months Ended

Dec. 31, 2012

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share:

The following table presents the computations for basic and diluted earnings per common share:

	Years Ended December 31,
	2012		2011		2010
	(in thousands, except shares and per share amounts)
Numerator:
Net income	$	385,721	$	39,133	$	(756,143	)
Denominator:
Weighted average shares outstanding - basic	62,122,862		61,955,659		14,253,869
Dilutive securities outstanding	649,217		275,549		0
Weighted average shares outstanding - diluted	62,772,079		62,231,208		14,253,869
Earnings per share - basic	$	6.21	$	0.63	$	(53.05	)
Earnings per share - diluted	$	6.14	$	0.63	$	(53.05	)
Antidilutive securities outstanding (weighted average):
Stock options	13,792		16,511		20,700
Warrants	0		0		954,754
Restricted shares	230		4,728		20,754
Total antidilutive securities outstanding	14,022		21,239		996,208

Sterling's dilutive securities outstanding include warrants held by certain investors. On September 19, 2012, Sterling repurchased a warrant for 97,541 shares held by the United States Department of the Treasury (“Treasury”). The warrant had been issued to Treasury on December 5, 2008, in connection with Sterling's participation in the Capital Purchase Program of the Troubled Asset Relief Program. Sterling repurchased the warrant for $825,000, which was cancelled upon repurchase. Treasury sold all of its Sterling common stock on August 14, 2012 in an underwritten public offering.