Fitch Affirms Sterling Financial Corp.'s Ratings Following Acquisition Announcement.

Business Editors

NEW YORK--(BUSINESS WIRE)--July 16, 2003

Fitch Ratings has affirmed its ratings of Sterling Financial Corporation (STSA) following the company's announcement that it has entered into a definitive agreement to acquire Klamath First Bancorp, Inc. (KFBI). KFBI, with approximately $1.5 billion in assets, is the holding company for Klamath First Federal Savings and Loan Association, a savings and loan operating branches in Oregon and Washington. The exchange of stock transaction, valued at approximately $147 million, is expected to close in first quarter of 2004 pending shareholder and regulatory approval.

The acquisition will add to STSA's Pacific Northwest franchise creating an institution with approximately $5.3 billion in assets and 143 branches in four states. While, as with all acquisitions, there is integration risk, Fitch views this transaction as a positive addition to STSA's franchise. Additionally, STSA's track record with previous acquisitions is good. Nonetheless, we are mindful that this is a relatively large transaction for STSA. Management expects the transaction to be accretive to EPS in 2004 and is projecting cutting approximately 17% of KFBI's expense base. After-tax merger costs are estimated at $13.0 million.

Ratings Affirmed:

Sterling Financial Corporation

-- Long-term Issuer 'BB';

-- Short-term Issuer 'B';

-- Individual Rating 'C';

-- Support '5';

-- Rating Outlook Stable.