8-K

UNITED STATESSECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K


CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): July 23, 2009

STERLING FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)

Washington	0-20800	91-1572822
(State or other jurisdiction of	(Commission File Number)	(I.R.S. Employer
incorporation or organization)		Identification No.)

111 North Wall Street, Spokane, Washington 99201
(Address of principal executive offices) (Zip Code)

(509) 458-3711
(Registrant's telephone number, including area code)

Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

INFORMATION TO BE INCLUDED IN THE REPORT

Item 2.02.     Results of Operations and Financial Condition.

On July 23, 2009, Sterling Financial Corporation ("Sterling") issued a press release and financial supplement thereto regarding its results of operations and financial condition for the quarter ended June 30, 2009.  The text of the press release is included as Exhibit 99.1 to this report and the financial supplement is included as Exhibit 99.2 to this report.  The information included in the press release text and the financial supplement is considered to be "furnished" under the Securities Exchange Act of 1934.  Sterling will include final financial statements and additional analyses for the period ended June 30, 2009, as part of its quarterly report on Form 10-Q covering that period.

Item 9.01.     Financial Statements and Exhibits.

(d) The following exhibits are being furnished herewith:
Exhibit No.	Exhibit Description
99.1	Press release text of Sterling Financial Corporation dated July 23, 2009.
99.2	Financial supplement of Sterling Financial Corporation.

S I G N A T U R E

Pursuant to the requirements 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
	(Registrant)
July 23, 2009	By:	/s/ Daniel G. Byrne
Date		Daniel G. Byrne
		Executive Vice President, Assistant Secretary and
		Principal Financial Officer

EXHIBIT INDEX

Exhibit No.	Exhibit Description
99.1	Press release text of Sterling Financial Corporation dated July 23, 2009.
99.2	Financial supplement of Sterling Financial Corporation.

EX-99.1

Exhibit 99.1

Sterling Financial Corporation of Spokane, Washington, Announces Second-Quarter 2009 Results

• Strong Capital and Liquidity Positions Maintained
• Strong Income Growth from Mortgage Banking Operations
• Classified Residential Construction Assets Stabilized

SPOKANE, Wash.--(BUSINESS WIRE)--July 23, 2009--Sterling Financial Corporation (NASDAQ:STSA), a leading community bank in the western region, today announced results for the second quarter ended June 30, 2009 of a net loss of $29.5 million. Second-quarter 2009 earnings results reflect an elevated loan loss provision of $79.7 million, higher expenses associated with the resolution of other real estate owned ("OREO") of $18.2 million and increased Federal Deposit Incorporation Corporation ("FDIC") insurance premiums, including a special FDIC assessment of $5.6 million. After the payment of preferred dividends to the U.S. Department of the Treasury under its Capital Purchase Program, earnings available to common shareholders were negative $33.9 million, or $0.65 per common share, compared with earnings of $11.7 million, or $0.23 per common share, for the second quarter ended June 30, 2008. Earnings for the six months ended June 30, 2009 were a loss of $58.7 million, or $1.13 per common share, compared with a profit of $14.6 million, or $0.28 per common share, for the same period in 2008.

"We remain diligently focused on managing the challenges of a difficult economy and are encouraged by the progress we are achieving with credit resolution. For the first time since this economic downturn began, our level of classified residential construction assets began to stabilize. This reflects our aggressive actions to resolve problem assets such as achieving pay-down of loans through incentive programs, modifying loan terms for the benefit of the bank and borrower, and decreasing the amount of OREO through sales," said Harold B. Gilkey, chairman and chief executive officer. "Sterling's quarterly pretax income, before credit costs (provision for credit losses, OREO non-interest expenses and reversal of accrued interest income on non-performing assets) and a special FDIC assessment,¹ remained strong and would have exceeded $50 million. Sterling's total risk-based capital ratio was maintained at 13.0%," continued Mr. Gilkey.

Second-Quarter 2009 Highlights

(for the three month period ended June 30, 2009)

• Tier I leverage capital ratio was 8.7%.
• Additional borrowing capacity was $2.85 billion.
• Total deposits increased 4% over last year to $8.30 billion.
• Fees and service charges income was up 8% over the linked quarter to $14.9 million.
• Income from mortgage banking operations rose 67% from a year ago to $13.7 million.
• Net OREO declined by $18.4 million over the linked quarter to $65.2 million.

Balance Sheet and Capital Management

Sterling's efforts to improve its balance sheet risk profile as well as manage its capital and liquidity positions led to a contraction in total assets to $12.40 billion at June 30, 2009 from $12.82 billion at March 31, 2009, and $12.70 billion at June 30, 2008.

Net loans receivable totaled $8.44 billion at the end of the second quarter of 2009, compared with $8.68 billion at the end of the first quarter of 2009, and $9.22 billion at the end of the second quarter of 2008. The contraction in Sterling’s loan portfolio reflects Sterling’s goal of reducing construction loans as a percent of its total loan portfolio. At the end of the second quarter of 2009, residential construction loans represented 14% of Sterling’s loan portfolio, compared with 19% at the end of the second quarter of 2008. Residential construction loans decreased by $140.9 million, an 11% decline, over the last quarter, and by $645.7 million, a 35% reduction, over the last year to $1.19 billion at June 30, 2009.

Sterling's total deposits rose to $8.30 billion, a 4% increase over the second quarter of last year. "The continued growth of deposits, especially in our retail checking accounts, reflects the ongoing success of our deposit strategy. To increase deposits, we have been simplifying our product offerings, providing customers with greater convenience and fair pricing, and enhancing internal sales training," stated Mr. Gilkey. While total deposits declined from $8.49 billion at March 31, 2009, core deposits increased in the second quarter over the first quarter of 2009. "The decline in total deposits at quarter end primarily reflects a reduction of $160 million in brokered certificates of deposit," Mr. Gilkey observed. Due to the increased dollar amount of core deposits as well as an improved mix of its deposit base, Sterling was able to reduce the amount of more costly borrowings from outside sources, such as the Federal Home Loan Bank of Seattle, reverse repurchase agreements, and primary-credit and term-auction facilities from the Federal Reserve Bank, by $198.2 million over the linked quarter and by $530.0 million from the year-ago quarter. As a result, Sterling's funding costs improved by 21 basis points over last quarter and by 75 basis points over last year. As of June 30, 2009, Sterling had additional borrowing capacity from outside sources of $2.85 billion.

The total value of Sterling's cash equivalents and investment-grade securities was $2.84 billion at June 30, 2009, compared with $3.08 billion at March 31, 2009, and $2.39 billion at June 30, 2008. Sterling's investment portfolio of $2.72 billion at quarter end is comprised mostly of high-quality government-backed securities. The portfolio is managed for liquidity and capital preservation. "Throughout this credit cycle, we have rigorously adhered to our investment discipline. As interest rates began to fall, we did not seek higher yield premiums by investing in exotic financial instruments. For this reason, thus far we have avoided write-downs in our investment portfolio that many banks have had to recognize," Mr. Gilkey commented.

Sterling maintained its total risk-based capital ratio of 13.0% at June 30, 2009, which is above the regulatory minimum "well-capitalized" requirement of 10.0%. In order to maintain its strong capital position, Sterling elected to decrease total assets in order to reduce its capital requirement. "Throughout this credit cycle, Sterling has acted proactively to maintain healthy capital ratios and a strong liquidity position. Our commitment is to continue maintaining a safe, sound and secure banking practice for the benefit of customers, shareholders and employees," said Mr. Gilkey. On July 20, 2009, Sterling announced the filing of a universal shelf registration statement on Form S-3 with the Securities and Exchange Commission (the "SEC"). This registration statement replaces the company's prior shelf registration statement. The registration statement, if and when declared effective by the SEC, will enable Sterling to raise up to an aggregate of $500 million through the issuance of equity, debt, or other types of securities from time to time and through one or more methods of distribution. "By updating and expanding our shelf registration, we are ensuring that Sterling has the ongoing financial flexibility to meet the continued credit needs of the communities that we serve and act strategically as consolidation opportunities emerge," said Mr. Gilkey.

Operating Results

Net Interest Income

Sterling's net interest income was $87.6 million for the quarter ended June 30, 2009, compared with $88.3 million for the quarter ended March 31, 2009, and $94.1 million for the quarter ended June 30, 2008. Sterling's higher level of non-performing assets, including non-accrual loans and OREO, was primarily responsible for the reduced levels of net interest income. During the second quarter of 2009, Sterling reversed $12.6 million, representing 41 basis points, of interest income on non-performing assets, compared with $9.9 million, or 32 basis points, for the first quarter of 2009, and $4.9 million, or 17 basis points, for the second quarter of 2008.

Net interest income for the first six months of 2009 was $176.0 million, compared with $186.2 million for the first six months of 2008. During the six-month period ended June 30, 2009, Sterling reversed $22.2 million, or 37 basis points, of interest income on non-performing assets compared with $9.7 million, or 17 basis points, for the six-month period ended June 30, 2008.

Net interest margin for the quarter ended June 30, 2009 was 2.87%, decreasing 11 basis points over the linked quarter and 36 basis points over the year-ago quarter. In addition to reversal of accrued interest income on non-performing assets, a shift in the mix of interest-earning assets toward investments and cash, which generally provide lower yields than other interest-earning assets, also contributed to the decrease in net interest margin. During the quarter, Sterling carried larger cash balances in advance of the planned reduction of some public transaction deposits. In addition, Sterling's asset sensitivity during a declining interest rate environment contributed to the year-over-year contraction in net interest margin.

For the six months ended June 30, 2009, net interest margin was 2.92%, compared with 3.23% for the six months ended June 30, 2008. Sterling's higher level of non-performing assets, its asset sensitivity during a declining interest rate environment, and a shift in its mix of interest-earning assets were the main reasons for the decrease in net interest margin.

Non-Interest Income

Non-interest income primarily includes fees and service charges income, mortgage banking operations and other items such as bank-owned life insurance, loan servicing fees and OREO operations. In the second quarter of 2009, non-interest income was $13.5 million, compared with $25.5 million in the second quarter of 2008. The decrease in non-interest income was driven by higher OREO costs of $18.2 million, compared with $0.2 million in the second quarter of 2008. Excluding OREO costs, second-quarter non-interest income rose 23% over the comparable period last year. The elevation in OREO costs during the quarter reflects Sterling's efforts to resolve problem accounts through foreclosure and liquidation.

For the quarter ended June 30, 2009, fees and service charges income contributed $14.9 million to non-interest income, an increase of 8% from $13.8 million in the first quarter of 2009, but was down 7% from $16.0 million in the second quarter of 2008. Income from certain fees and service charges is influenced by the number of transaction accounts. Relative to the first quarter of 2009, transaction accounts were up nearly 2%, or 6% on an annualized basis. Fees and service charges income for the second quarter reflects higher Balance Shield overdraft fees, debit card and ATM fees, and financial services commissions, offset by a decrease in loan-related fees, including prepayment penalties. In the second quarter of 2008, fees and service charges income benefited from higher financial services commissions reflecting more non-deposit product transactions and higher real estate exchange fees.

Mortgage banking operations income in the second quarter of 2009 rose 67% to $13.7 million from $8.2 million in the second quarter of 2008, continuing the trend that started in the fourth quarter of 2008. For the second quarter of 2009, total residential mortgage originations were $946.5 million, with residential loan sales of $814.2 million, compared with originations of $376.1 million and loan sales of $377.0 million in the second quarter of 2008. "Our residential mortgage subsidiary, Golf Savings Bank, is enjoying its best year ever. Golf's current year-to-date production, measured in closed mortgage loans, has surpassed its production for all of 2008. Mortgage-product demand is being stimulated by historically low interest rates, government-supported loan programs and special loan incentive programs offered by many banks and the government. Compared with last year, in the states of Washington, Oregon and Idaho, Golf has made significant gains in its share of mortgage originations for new home purchases as well as improved its share of total mortgage originations, which include both new home loans and refinancings," commented Mr. Gilkey.

Sterling's non-interest income was $45.6 million for the six months ended June 30, 2009, compared with $46.7 million for the six months ended June 30, 2008. The results reflect higher income from mortgage banking operations as well as net gains on the sale of securities, but offset by higher OREO costs.

Non-Interest Expenses

Non-interest expenses rose to $87.0 million in the second quarter of 2009 from $72.4 million in the second quarter of 2008. Higher FDIC deposit insurance premiums, including a special FDIC assessment of $5.6 million, was the primary driver of higher non-interest expenses. Exclusive of FDIC insurance premiums, non-interest expenses rose 6%. This rise reflects expenses related to enhanced credit resolution efforts as well as costs associated with the growth of Sterling's mortgage banking operations. ''Our ratio of non-interest expenses to average assets was 2.71% during the quarter. Excluding the FDIC special assessment, that ratio was 2.54%. We continue to manage our overhead expenses relative to our asset base through improving our cost structure and increasing operating efficiency," Mr. Gilkey said.

For the six-month period ended June 30, 2009, non-interest expenses were $162.5 million, compared with $144.6 million for the six-month period ended June 30, 2008. Excluding FDIC insurance premiums, non-interest expenses for the six-month period rose 4%.

Lending Activity

During the second quarter of 2009, Sterling originated total net loans of $1.24 billion, representing a 28% increase over the first quarter of 2009 and a 17% gain over the second quarter of 2008. "Our higher level of loan originations reflects our commitment to increase credit availability to homebuyers, consumers and small businesses during a difficult credit cycle. As a result of our participation in the U.S. Department of the Treasury's Capital Purchase Program, we have additional capital resources to make credit available in the communities that we serve. Our recently introduced special homebuyers lending program and our expanded SBA loan platform have been well received by our customers," said Mr. Gilkey. Residential real estate mortgage originations represented $946.5 million of total loan originations in the second quarter, compared with $710.6 million in the previous quarter, and $376.1 million in the year-ago quarter. Consumer loan originations increased to $99.0 million during the second quarter of 2009, up from $79.3 million in the first quarter of 2009. Commercial real estate rose to $63.5 million during the quarter, up from $19.2 million in the linked quarter, primarily reflecting the conversion of commercial construction loans into permanent financing. Reflecting lower demand for credit in a recessionary economy, commercial banking originations were $86.8 million, down from $106.4 million in the last quarter and $169.8 million in the year-ago quarter. Consistent with Sterling's strategic goal of reducing construction loans as a percent of its total loan portfolio, total construction originations were $17.4 million in the current quarter, compared with $18.3 million in first-quarter 2009 and $158.2 million in second-quarter 2008.

Credit Quality

In the second quarter of 2009, Sterling recorded a $79.7 million provision for credit losses, compared with $65.9 million for the linked quarter, and $31.0 million for the same period a year ago. "The ongoing recession is causing higher levels of credit stress throughout our region, which in turn has led to an increase in our provision to reflect increased levels of classified assets within our loan portfolio and higher levels of charge-offs reflecting lower real estate appraisal values," stated Mr. Gilkey.

Classified assets include performing substandard loans, non-performing loans and OREO. As of June 30, 2009, classified assets were $1.22 billion, compared with $1.07 billion at March 31, 2009, and $497.5 million at June 30, 2008. "While we experienced a 6% decrease in classified residential construction assets over the previous quarter, asset-quality challenges are increasing in certain areas of our portfolio. During the quarter, the largest increase in classified assets by loan type was in commercial construction and primarily relates to a few multifamily projects and one office project," said Mr. Gilkey.

At June 30, 2009, non-performing assets totaled $787.5 million, compared with $670.0 million at March 31, 2009, and $303.4 million at June 30, 2008. Non-performing assets rose 18% over the linked quarter. In contrast, non-performing residential construction assets rose 3% over the same period. During the quarter, Sterling reduced its levels of non-performing residential construction assets in the following markets: southern California; Boise, Idaho; Utah; and Vancouver, Washington. Non-performing residential construction assets in the Portland, Oregon market remained relatively unchanged compared with the linked quarter. During the quarter, the Puget Sound region saw an increase of $45.5 million in non-performing residential construction assets, approximately half of which relates to two projects located outside of King County. Despite a rise in non-performing residential construction assets in the Puget Sound region, where Sterling has underwritten most of its residential construction loans, Sterling's residential construction loan portfolio in that region continues to perform better than residential construction assets in other markets. Sterling's loan portfolio in Puget Sound has a higher concentration of vertical construction than in most other markets.

The accompanying table shows an analysis of Sterling's non-performing assets by loan category and geographic region for the current, prior and year-ago quarters.

NON-PERFORMING ASSET ANALYSIS
($ in thousands)
	6/30/2009					3/31/2009					6/30/2008
	Amt			% of Gross NPAs		Amt			% of Gross NPAs		Amt			% of Gross NPAs
Residential construction (by location)
Puget Sound	$	129,248		16	%	$	83,711		12	%	$	30,986		10	%
Portland, OR		121,037		15	%		118,524		18	%		46,101		15	%
S. California		42,960		5	%		64,818		10	%		40,085		13	%
Bend, OR		29,474		4	%		26,114		4	%		19,695		6	%
Boise, ID		27,270		3	%		37,921		6	%		34,939		12	%
Vancouver, WA		20,447		3	%		23,945		4	%		19,854		7	%
Utah		20,230		3	%		26,823		4	%		36,179		12	%
Other		76,584		10	%		71,527		10	%		13,314		5	%
Total residential construction		467,250		59	%		453,383		68	%		241,153		80	%
Commercial construction (a)		127,720		16	%		78,888		12	%		12,017		4	%
Commercial banking		86,117		11	%		56,118		8	%		29,072		10	%
Residential real estate		61,761		8	%		50,420		8	%		10,121		3	%
Commercial real estate (b)		37,845		5	%		25,276		3	%		7,035		2	%
Consumer		6,761		1	%		5,866		1	%		4,009		1	%
Total gross NPAs (c)	$	787,454		100	%	$	669,951		100	%	$	303,407		100	%
Specific reserves		(24,554	)				(16,970	)				(40,597	)
Total net NPAs (c)	$	762,900				$	652,981				$	262,810
(a) Includes multifamily.
(b) Includes multifamily real estate of $10.9 million for 6/30/2009, $6.0 million for 3/31/2009, and $2.2 million for 6/30/2008.
(c) Includes confirmed loss amounts of $224.7 million for 6/30/2009, $185.0 million for 3/31/2009, and none for 6/30/2008.

The largest loan segment of non-performing assets continues to be construction, including residential, commercial and multifamily. Non-performing construction loans represented 75.6% of total non-performing assets and increased 12%, or by $62.7 million, to $595.0 million during the second quarter of 2009. Of the $62.7 million increase, $13.9 million was from residential construction, commercial construction contributed $22.3 million, and multifamily added $26.6 million. During the quarter, non-performing commercial banking assets increased by $30.0 million, or by 53%, over the linked quarter; residential mortgage loans rose by $11.3 million, or by 22%. Non-performing assets related to commercial real estate, multifamily real estate and consumer each rose by less than $10 million over the linked quarter.

Sterling believes its success at decreasing classified residential construction assets and reducing the rate of growth of non-performing residential construction assets, reflects the cumulative efforts of its construction credit team, which has been in place since early 2008 to manage and resolve stressed assets. The process of resolving problem assets involves restructuring loans, obtaining additional collateral, repossessing problem assets, evaluating loans in relation to fair market value and disposing of OREO assets. Sterling is also providing a homebuyer loan program to assist builders and developers in the sale of their Sterling-financed inventory. "We are encouraged by the number and size of resolutions that we are achieving and anticipate continued success. Still, it will take several more quarters for our credit administration team to manage and resolve problem assets," said Mr. Gilkey.

Cumulatively, Sterling has written down its non-performing assets by $278.1 million as of June 30, 2009, compared with write-downs of $244.0 million as of March 31, 2009, and $53.1 million as of June 30, 2008. Sterling continued modifying the terms of certain problem loans in an effort to improve loan quality, in part, by requiring borrowers to provide additional collateral and capital. At June 30, 2009, Sterling had restructured loans of $105.3 million, compared with $84.3 million at March 31, 2009, and $149,000 as of June 30, 2008. During the quarter, sales of foreclosed properties increased to $32.4 million from $11.0 million in the linked quarter. This sales activity contributed to a decline in net OREO to $65.2 million at the end of the quarter from $83.6 million at March 31, 2009.

In the first quarter of 2009, Sterling introduced a lending incentive plan to increase sales of newly constructed homes currently financed by Sterling. Under the program, qualified homebuyers could select between a rate as low as 3.875% on a 30-year conventional mortgage or a 3% contribution, up to $20,000, from Sterling that could be used for closing costs or rate buy-downs on FHA, VA or conventional loans. Since the start of this program through the end of June 2009, Sterling closed 280 loans under this program with aggregate sales of $97 million, or an average selling price of approximately $347,000 per loan. “Due to the success of this homebuyers program, we anticipate that the program will be continued with slight revisions in terms. Based on its pipeline of loan activity at quarter end, Sterling anticipates continued success with this program during the third quarter of 2009," commented Mr. Gilkey.

At June 30, 2009, the allowance for credit losses totaled $235.1 million, or 2.71% of total loans, compared with $230.3 million, or 2.59% of total loans at March 31, 2009, and $168.7 million, or 1.80% of total loans at June 30, 2008. During the quarter, Sterling recognized total net charge-offs of $75.0 million, the majority of which is related to non-performing construction loans, compared with $13.6 million during the second quarter of 2008. The year-to-date ratio of net charge-offs to average loans was 1.52%, compared with 0.18% in the comparable period last year.

Shareholders' Equity

At June 30, 2009, Sterling's tangible book value per share was $10.53, down from $10.99 at the end of the first quarter of 2009, and down from $13.41 at the end of the second quarter of 2008. Both the year-over-year and linked-quarter decreases in tangible book value primarily reflect net losses and the payment of preferred dividends, partially offset by lower unrealized losses on investments and mortgage-backed securities. Sterling's ratio of tangible shareholders' equity to tangible assets was 6.95% at the end of the second quarter of 2009, compared with 6.91% at the end of the first quarter of 2009, and 5.71% at the end of the second quarter of 2008.

Goodwill

Sterling is currently analyzing the value of its goodwill to determine if further impairment has resulted based on the continued market volatility and the decline in price of Sterling's common stock since the beginning of 2008. At June 30, 2009, Sterling had goodwill of $227.6 million. Sterling previously recognized a non-cash charge of $223.8 million to reflect the impairment of its goodwill as of December 31, 2008.

Any potential goodwill impairment could be material to reported earnings, but would be a non-cash charge and have no effect on Sterling's cash balances, liquidity or tangible equity. In addition, because goodwill and other intangible assets are not included in the calculation of regulatory capital, Sterling's well-capitalized regulatory capital ratios would not be affected by this potential non-cash expense. Sterling anticipates the analysis will be completed prior to filing its Quarterly Report on Form 10-Q for the period ended June 30, 2009 with the SEC in early August 2009.

Second-Quarter 2009 Earnings Conference Call

Sterling will host a conference call for investors the morning of July 24, 2009, at 8:00 a.m. PDT to discuss the company's financial results. A live audio webcast of the conference call can be accessed at the company's website, www.sterlingfinancialcorporation-spokane.com. To access this audio presentation call, click on the audio webcast icon. Additionally, investors may listen to the live conference call by telephone. To participate in the conference call, domestic callers should dial 517-308-9194 approximately five minutes before the scheduled start time. You will be asked by the operator to identify yourself and provide the password "STERLING" to enter the call. A webcast replay of the conference call will be available on the company's website approximately one hour following the completion of the call. The webcast replay will be offered through September 15, 2009.

About Sterling Financial Corporation

Sterling Financial Corporation of Spokane, Washington, is the bank holding company for Sterling Savings Bank, a commercial bank, and Golf Savings Bank, a savings bank focused on single-family mortgage originations. Both banks are state chartered and federally insured. Sterling offers banking products and services, mortgage lending, construction financing and investment products to individuals, small businesses, commercial organizations and corporations. As of June 30, 2009, Sterling Financial Corporation had assets of $12.40 billion and operated more than 175 depository branches throughout Washington, Oregon, Idaho, Montana and California. Visit Sterling's website at www.sterlingfinancialcorporation-spokane.com.

Forward-Looking Statements

This release contains forward-looking statements, which are not historical facts and pertain to Sterling's future operating results. These forward-looking statements are within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may include, but are not limited to, statements about Sterling's plans, objectives, expectations and intentions and other statements contained in this release that are not historical facts. When used in this release, the words "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions are generally intended to identify forward-looking statements. These forward-looking statements are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond Sterling's control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ materially from the results discussed in these forward-looking statements because of numerous possible risks and uncertainties. These include but are not limited to: the possibility of continued adverse economic developments that may, among other things, increase default and delinquency risks in Sterling's loan portfolios; shifts in interest rates that may result in lower interest rate margins; shifts in the demand for Sterling's loan and other products; lower-than-expected revenue or cost savings in connection with acquisitions; changes in accounting policies; changes in the monetary and fiscal policies of the federal government; and changes in laws, regulations and the competitive environment.

¹ For a reconciliation to reported pretax income see Exhibit A of the Selected Financial Data. Management believes that this presentation of non-GAAP results provides useful information to investors regarding the effects of the credit cycle on the company's reported results of operations.

CONTACT:
Investor Contacts:
Sterling Financial Corporation
EVP/Chief Financial Officer
Daniel G. Byrne, 509-458-3711
or
VP/Investor Relations Director
Deborah L. Wardwell, CFA, 509-354-8165
or
Media Contact:
Sterling Savings Bank
VP/Communications Manager
Cara Coon, 509-626-5348

EX-99.2

Exhibit 99.2

Sterling Financial Corporation
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts, unaudited)
	June 30,			Mar 31,			June 30,
	2009			2009			2008
ASSETS:
Cash and due from banks	$	125,246		$	167,937		$	181,841
Investments and mortgage-backed securities ("MBS") available for sale		2,548,249			2,733,541			2,023,306
Investments held to maturity		167,972			174,790			180,185
Loans receivable, net		8,441,402			8,683,919			9,219,919
Loans held for sale (at fair value: $226,067, $160,261 and $73,859)		229,996			162,148			82,413
Other real estate owned, net ("OREO")		65,181			83,557			22,998
Office properties and equipment, net		92,178			93,322			90,750
Bank owned life insurance ("BOLI")		161,056			158,944			154,714
Goodwill, net		227,558			227,558			451,323
Other intangible assets, net		24,276			25,501			29,175
Prepaid expenses and other assets, net		316,661			308,410			263,086
Total assets	$	12,399,775		$	12,819,627		$	12,699,710
LIABILITIES:
Deposits	$	8,303,741		$	8,488,034		$	7,987,831
Advances from Federal Home Loan Bank		1,501,438			1,573,618			1,881,973
Repurchase agreements and fed funds		1,096,130			1,222,162			1,245,569
Other borrowings		248,278			248,277			248,274
Accrued expenses and other liabilities		153,729			165,904			157,879
Total liabilities		11,303,316			11,697,995			11,521,526
SHAREHOLDERS' EQUITY:
Preferred stock		293,084			292,524			0
Common stock		52,397			52,400			52,009
Additional paid-in capital		909,850			909,586			896,469
Accumulated comprehensive loss:
Unrealized loss on investments and MBS (1)		(5,619	)		(13,504	)		(32,215	)
Retained earnings		(153,253	)		(119,374	)		261,921
Total shareholders' equity		1,096,459			1,121,632			1,178,184
Total liabilities and shareholders' equity	$	12,399,775		$	12,819,627		$	12,699,710
Book value per common share	$	15.33		$	15.82		$	22.65
Tangible book value per common share (2)	$	10.53		$	10.99		$	13.41
Common shares outstanding at end of period		52,397,188			52,399,631			52,008,761
Shareholders' equity to total assets		8.84	%		8.75	%		9.28	%
Tangible shareholders' equity to tangible assets (3)		6.95	%		6.91	%		5.71	%
Tangible common shareholders' equity to tangible assets (4)		4.54	%		4.58	%		5.71	%
(1) Net of deferred income taxes.
(2) Common equity less goodwill and other intangible assets divided by common shares outstanding.
(3) Shareholders' equity less goodwill and other intangible assets divided by assets less goodwill and other intangible assets.
(4) Excludes preferred equity from tangible shareholders' equity to tangible assets ratio.

Sterling Financial Corporation
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in thousands, except per share amounts, unaudited)	Three Months Ended									Six Months Ended
	June 30,			Mar 31,			June 30,			June 30,			June 30,
	2009			2009			2008			2009			2008
INTEREST INCOME:
Loans	$	123,948		$	126,923		$	152,271		$	250,871		$	314,391
Mortgage-backed securities		27,578			29,880			25,586			57,458			50,085
Investments and cash		2,993			3,328			2,785			6,321			5,149
Total interest income		154,519			160,131			180,642			314,650			369,625
INTEREST EXPENSE:
Deposits		44,608			48,314			57,438			92,922			120,308
Borrowings		22,292			23,469			29,085			45,761			63,111
Total interest expense		66,900			71,783			86,523			138,683			183,419
Net interest income		87,619			88,348			94,119			175,967			186,206
Provision for credit losses		(79,744	)		(65,865	)		(30,987	)		(145,609	)		(68,130	)
Net interest income after provision		7,875			22,483			63,132			30,358			118,076
NONINTEREST INCOME:
Fees and service charges		14,878			13,840			16,012			28,718			30,163
Mortgage banking operations		13,732			13,308			8,227			27,040			14,425
Loan servicing fees		1,022			(467	)		697			555			549
OREO		(18,191	)		(4,478	)		(238	)		(22,669	)		(344	)
BOLI		2,000			1,406			1,747			3,406			3,213
Other		60			8,539			(947	)		8,599			(1,346	)
Total noninterest income		13,501			32,148			25,498			45,649			46,660
NONINTEREST EXPENSES:
Employee compensation and benefits		42,927			40,188			41,133			83,115			82,023
Occupancy and equipment		11,635			11,242			10,693			22,877			22,225
Amortization of core deposit intangibles		1,224			1,225			1,226			2,449			2,452
Other		31,172			22,855			19,395			54,027			37,854
Total noninterest expenses		86,958			75,510			72,447			162,468			144,554
Income (loss) before income taxes		(65,582	)		(20,879	)		16,183			(86,461	)		20,182
Income tax benefit (provision)		36,049			436			(4,508	)		36,485			(5,631	)
Net income (loss)		(29,533	)		(20,443	)		11,675			(49,976	)		14,551
Preferred stock dividend		(4,347	)		(4,347	)		0			(8,694	)		0
Net income (loss) applicable to common shareholders	$	(33,880	)	$	(24,790	)	$	11,675		$	(58,670	)	$	14,551
Earnings per common share - basic	$	(0.65	)	$	(0.48	)	$	0.23		$	(1.13	)	$	0.28
Earnings per common share - diluted	$	(0.65	)	$	(0.48	)	$	0.23		$	(1.13	)	$	0.28
Average common shares outstanding - basic		51,922,407			51,896,149			51,687,600			51,909,350			51,606,966
Average common shares outstanding - diluted		51,922,407			51,896,149			51,883,549			51,909,350			51,837,108

Sterling Financial Corporation
OTHER SELECTED FINANCIAL DATA
(in thousands, unaudited)	Three Months Ended									Six Months Ended
	June 30,			Mar 31,			June 30,			June 30,			June 30,
	2009			2009			2008			2009			2008
LOAN ORIGINATIONS:
Residential real estate	$	946,468		$	710,564		$	376,122		$	1,657,032		$	787,238
Multifamily real estate		29,861			36,774			70,516			66,635			111,902
Commercial real estate		63,500			19,168			118,400			82,668			182,917
Construction:
Residential		11,403			7,244			96,559			18,647			288,920
Multifamily		0			0			2,750			0			2,750
Commercial		5,948			11,035			58,855			16,983			130,775
Total construction		17,351			18,279			158,164			35,630			422,445
Consumer - direct		63,133			48,547			124,032			111,680			205,635
Consumer - indirect		35,852			30,753			43,742			66,605			115,423
Commercial banking		86,816			106,437			169,836			193,253			318,521
Total loan origination volume	$	1,242,981		$	970,522		$	1,060,812		$	2,213,503		$	2,144,081
PERFORMANCE RATIOS:
Return on assets		-0.92	%		-0.65	%		0.37	%		-0.79	%		0.23	%
Return on common equity		-16.6	%		-11.9	%		3.9	%		-14.2	%		2.4	%
Return on common tangible equity (1)		-24.0	%		-17.0	%		6.5	%		-20.4	%		4.1	%
Operating efficiency		86.0	%		62.7	%		60.6	%		73.3	%		62.1	%
Non interest expense to assets		2.71	%		2.40	%		2.29	%		2.56	%		2.31	%
Average assets	$	12,859,872		$	12,769,750		$	12,712,109		$	12,814,123		$	12,562,278
Average common equity	$	819,642		$	846,417		$	1,199,990		$	832,956		$	1,196,225
Average common tangible equity (1)	$	567,400		$	592,601		$	718,864		$	579,926		$	714,001
REGULATORY CAPITAL RATIOS:
Sterling Financial Corporation:
Tier 1 leverage (to average assets)		8.7	%		9.1	%		8.0	%		8.7	%		8.0	%
Tier 1 (to risk-weighted assets)		11.7	%		11.7	%		9.6	%		11.7	%		9.6	%
Total (to risk-weighted assets)		13.0	%		13.0	%		10.9	%		13.0	%		10.9	%
Sterling Savings Bank:
Tier 1 leverage (to average assets)		8.1	%		8.5	%		8.0	%		8.1	%		8.0	%
Tier 1 (to risk-weighted assets)		10.8	%		10.8	%		9.4	%		10.8	%		9.4	%
Total (to risk-weighted assets)		12.1	%		12.1	%		10.7	%		12.1	%		10.7	%
OTHER:
Sales of financial products	$	40,675		$	28,899		$	49,701		$	69,574		$	99,426
FTE employees at end of period (whole numbers)		2,594			2,518			2,545			2,594			2,545
(1) Average common tangible equity is average common equity less average net goodwill and other intangible assets.

Sterling Financial Corporation
OTHER SELECTED FINANCIAL DATA
(in thousands, unaudited)	June 30,			Mar 31,			June 30,
	2009			2009			2008
LOAN PORTFOLIO DETAIL:
Residential real estate	$	885,999		$	894,886		$	798,408
Multifamily real estate		514,475			508,799			445,298
Commercial real estate		1,413,895			1,386,631			1,321,895
Construction:
Residential		1,185,313			1,326,239			1,831,051
Multifamily		272,869			290,636			293,367
Commercial		703,209			740,014			787,429
Total construction		2,161,391			2,356,889			2,911,847
Consumer - direct		827,040			842,001			842,713
Consumer - indirect		372,654			378,075			398,219
Commercial banking		2,498,951			2,534,836			2,677,479
Gross loans receivable		8,674,405			8,902,117			9,395,859
Deferred loan fees, net		(9,294	)		(9,213	)		(13,572	)
Allowance for losses on loans		(223,709	)		(208,985	)		(162,368	)
Net loans receivable	$	8,441,402		$	8,683,919		$	9,219,919

Sterling Financial Corporation
OTHER SELECTED FINANCIAL DATA
(in thousands, unaudited)	June 30,			Mar 31,			June 30,
	2009			2009			2008
ALLOWANCE FOR CREDIT LOSSES:
Allowance - loans, beginning of quarter	$	208,985		$	208,365		$	145,009
Provision		79,744			65,865			30,987
Net charge-offs		(74,980	)		(65,245	)		(13,605	)
Transfers		9,960			0			(23	)
Allowance - loans, end of quarter		223,709			208,985			162,368
Allowance - unfunded commitments, beginning of quarter		21,334			21,334			6,265
Provision		0			0			32
Charge-offs		0			0			0
Transfers		(9,960	)		0			24
Allowance - unfunded commitments, end of quarter		11,374			21,334			6,321
Total credit allowance	$	235,083		$	230,319		$	168,689
Net charge-offs to average net loans (annualized)		3.26	%		2.84	%		0.58	%
Net charge-offs to average net loans (ytd)		1.52	%		0.70	%		0.18	%
Loan loss allowance to total loans		2.58	%		2.35	%		1.73	%
Total credit allowance to total loans		2.71	%		2.59	%		1.80	%
Loan loss allowance to nonperforming loans		32.1	%		36.7	%		57.9	%
Loan loss allowance to nonperforming loans excluding nonaccrual loans carried at fair value		87.1	%		86.4	%		80.9	%
Total allowance to nonperforming loans		33.7	%		40.4	%		60.2	%
NONPERFORMING ASSETS:
Past 90 days due	$	0		$	0		$	0
Nonaccrual loans		592,450			485,158			280,260
Restructured loans		105,283			84,281			149
Total nonperforming loans		697,733			569,439			280,409
OREO		89,721			100,512			22,998
Total nonperforming assets (NPA)		787,454			669,951			303,407
Specific reserve on nonperforming assets		(24,554	)		(16,970	)		(40,597	)
Net nonperforming assets	$	762,900		$	652,981		$	262,810
Nonperforming loans to loans		8.05	%		6.40	%		2.99	%
NPA to total assets		6.35	%		5.23	%		2.39	%
Loan delinquency ratio (60 days and over)		6.45	%		5.24	%		3.07	%
Classified assets	$	1,215,271		$	1,070,383		$	497,461
Classified assets/total assets		9.80	%		8.35	%		3.92	%
Nonperforming assets by collateral type:
Residential real estate	$	61,761		$	50,420		$	10,121
Multifamily real estate		10,898			6,020			2,197
Commercial real estate		26,947			19,256			4,838
Construction:
Residential		467,250			453,383			241,153
Multifamily		27,373			800			0
Commercial		100,347			78,088			12,017
Total Construction		594,970			532,271			253,170
Consumer - direct		6,107			5,302			3,053
Consumer - indirect		654			564			956
Commercial banking		86,117			56,118			29,072
Total nonperforming assets	$	787,454		$	669,951		$	303,407
DEPOSITS DETAIL:
Interest-bearing transaction accounts	$	922,705		$	847,064		$	444,888
Noninterest-bearing transaction accounts		967,780			935,659			896,671
Savings and money market demand accounts		1,708,212			1,767,136			2,178,826
Time deposits		4,705,044			4,938,175			4,467,446
Total deposits	$	8,303,741		$	8,488,034		$	7,987,831
Number of transaction accounts (whole numbers):
Interest-bearing transaction accounts		44,406			44,425			46,511
Noninterest-bearing transaction accounts		159,943			156,738			152,138
Total transaction accounts		204,349			201,163			198,649

Sterling Financial Corporation
AVERAGE BALANCE AND RATE
(in thousands, unaudited)	Three Months Ended
	June 30, 2009						March 31, 2009						June 30, 2008
	Average Balance		Amount		Average Rate		Average Balance		Amount		Average Rate		Average Balance		Amount		Average Rate
ASSETS:
Loans:
Mortgage	$	5,464,596	$	70,951	5.21	%	$	5,533,645	$	72,080	5.22	%	$	5,560,327	$	89,495	6.47	%
Commercial and consumer		3,766,628		53,124	5.66	%		3,787,020		54,974	5.82	%		3,870,181		62,910	6.54	%
Total loans		9,231,224		124,075	5.39	%		9,320,665		127,054	5.47	%		9,430,508		152,405	6.50	%
MBS		2,363,603		27,578	4.68	%		2,385,219		29,880	5.02	%		2,064,073		25,586	4.99	%
Investments and cash		814,425		3,981	1.96	%		432,956		4,368	4.05	%		362,678		3,700	4.10	%
Total interest-earning assets		12,409,252		155,634	5.03	%		12,138,840		161,302	5.33	%		11,857,259		181,691	6.16	%
Noninterest-earning assets		450,620						630,910						854,850
Total average assets	$	12,859,872					$	12,769,750					$	12,712,109
LIABILITIES and EQUITY:
Deposits:
Transaction	$	1,991,833		887	0.18	%	$	1,479,222		292	0.08	%	$	1,308,412		342	0.11	%
Savings		1,734,687		3,754	0.87	%		1,953,228		5,555	1.14	%		2,227,429		11,216	2.03	%
Time deposits		4,857,696		39,967	3.30	%		4,922,202		42,467	3.46	%		4,447,706		45,880	4.15	%
Total deposits		8,584,216		44,608	2.08	%		8,354,652		48,314	2.32	%		7,983,547		57,438	2.89	%
Borrowings		3,042,457		22,292	2.94	%		3,082,453		23,469	3.05	%		3,373,550		29,085	3.47	%
Total interest-bearing liabilities		11,626,673		66,900	2.31	%		11,437,105		71,783	2.52	%		11,357,097		86,523	3.06	%
Noninterest-bearing liabilities		120,839						194,070						155,022
Total average liabilities		11,747,512						11,631,175						11,512,119
Total average equity		1,112,360						1,138,575						1,199,990
Total average liabilities and equity	$	12,859,872					$	12,769,750					$	12,712,109
Tax equivalent net interest income and spread			$	88,734	2.72	%			$	89,519	2.81	%			$	95,168	3.10	%
Tax equivalent net interest margin					2.87	%					2.98	%					3.23	%

Sterling Financial Corporation
EXHIBIT A- RECONCILIATION SCHEDULE
(in thousands, unaudited)	Three Months Ended								Six Months Ended
	June 30,			Mar 31,			June 30,		June 30,			June 30,
	2009			2009			2008		2009			2008
Income (loss) before income taxes	$	(65,582	)	$	(20,879	)	$	16,183	$	(86,461	)	$	20,182
Provision for credit losses		79,744			65,865			30,987		145,609			68,130
OREO		18,191			4,478			238		22,669			344
Interest reversal on nonperforming loans		12,581			9,871			4,850		22,452			9,676
FDIC special assessment		5,605			0			0		5,605			0
Total (1)	$	50,539		$	59,335		$	52,258	$	109,874		$	98,332
(1) Management believes that this presentation of non-GAAP results provides useful information to investors regarding the effects of the credit cycle on the Company's reported results of operations.