Sterling Financial Corporation of Spokane, Washington, Revises Estimated Range for Fourth Quarter Earnings, Reports Increased Charge for Credit Costs

    SPOKANE, Wash., Dec. 26 /PRNewswire-FirstCall/ -- Sterling Financial
 Corporation ( STSA) announced today that it is revising its estimate
 for earnings for the fourth quarter of 2007 as a result of an increased
 charge for credit costs, a charge to prepay some high fixed rate trust
 preferred securities and other charges during the fourth quarter. Sterling
 now expects to report earnings in the range of $0.31 to $0.34 per diluted
 share for the quarter ended December 31, 2007. For the year ended December
 31, 2007, Sterling expects earnings to be in the range of $1.84 to $1.87
 per diluted share.
 
     Sterling continues to closely monitor its loan portfolio, with
 particular focus on residential construction lending, and is taking a
 measured approach to provide adequate loan loss provisions. As a result,
 Sterling expects to report an approximately $13.0 million provision for
 credit costs for the fourth quarter. Management indicated that residential
 construction lending in its primary markets in the Puget Sound region and
 Portland area is generally healthy, but is being monitored on a regular
 basis. Other segments of the loan portfolio generally continue to perform
 well throughout Sterling's footprint.
 
     Also during the fourth quarter, Sterling intends to prepay a $24.0
 million trust preferred securities issue that carries a 10.25 percent
 fixed-rate coupon, and replace it with existing cash resources that have a
 significantly lower cost. This early extinguishment of the trust preferred
 securities will trigger a prepayment premium that will result in a charge
 of approximately $2.1 million that was not previously budgeted for the
 fourth quarter. This prepayment is ultimately expected to result in a
 positive impact on earnings into future periods. Management has indicated
 that the Company's capital will exceed levels required to remain
 "well-capitalized" for regulatory compliance purposes.
 
     Sterling expects to incur merger-related costs of approximately $1.0
 million associated with the proposed acquisition of North Valley Bancorp,
 which, as previously announced, was terminated by North Valley during the
 quarter following unexpected delays in obtaining regulatory approval.
 
     Harold Gilkey, Sterling's chairman and chief executive officer, stated,
 "Along with other financial institutions across the country, Sterling is
 dealing with challenging market conditions, which we expect will continue
 into the next few quarters. Although we believe that these credit
 conditions will work themselves out over time, our seasoned management
 team, based on their experience with similar downturns before, is taking an
 aggressive stance on asset quality and being proactive in working with our
 customers to find solutions. We continue to execute on our business plan in
 order to position Sterling to take advantage of opportunities in future
 periods."
 
     Sterling plans to report its results for the fourth quarter and year
 ended December 31, 2007 on January 28, 2008. Management will provide
 guidance for 2008 at its conference call the next day, on January 29, 2008.
 
     ABOUT STERLING
 
     Sterling Financial Corporation of Spokane, Washington, is a bank
 holding company, of which the principal operating subsidiaries are Sterling
 Savings Bank and Golf Savings Bank. Sterling Savings Bank is a Washington
 State-chartered, federally insured commercial bank, which opened in April
 1983 as a stock savings and loan association. Sterling Savings Bank, based
 in Spokane, Washington, has financial service centers throughout
 Washington, California, Oregon, Idaho and Montana. Through Sterling Savings
 Bank's wholly owned subsidiaries, Action Mortgage Company and
 INTERVEST-Mortgage Investment Company, it operates loan production offices
 throughout the western region. Sterling Savings Bank's subsidiary Harbor
 Financial Services provides non-bank investments, including mutual funds,
 variable annuities and tax-deferred annuities and other investment products
 through regional representatives throughout Sterling Savings Bank's branch
 network.
 
     Golf Savings Bank is a Washington State-chartered and FDIC insured
 savings bank. Golf Savings Bank's primary focus is the origination of
 single-family residential mortgage loans.
 
     FORWARD-LOOKING STATEMENTS
 
     This report 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 report that are not historical facts. 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. 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
 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.
 
 

      Investor Contact:  Daniel G. Byrne
      EVP, Chief Financial Officer
      509-458-3711
 
      Media Contact: Jennifer Lutz
      Public Relations Administrator
      509-368-2032
 
 

SOURCE Sterling Financial Corporation