CREDIT AGREEMENT

<PAGE>

Exhibit 10.1

CREDIT AGREEMENT

THIS CREDIT AGREEMENT (this "Agreement") is entered into as of August 4,
2006, by and between STERLING FINANCIAL CORPORATION, a Washington corporation
("Borrower"), and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank").

RECITALS

Borrower has requested that Bank extend or continue credit to Borrower as
described below, and Bank has agreed to provide such credit to Borrower on the
terms and conditions contained herein.

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Bank and Borrower hereby agree as follows:

ARTICLE I
CREDIT TERMS

SECTION 1.1. LINE OF CREDIT.

(a) Line of Credit - 364 Days. Subject to the terms and conditions of this
Agreement, Bank hereby agrees to make advances to Borrower from time to time up
to and including August 3, 2007, not to exceed at any time the aggregate
principal amount of Forty Million Dollars ($40,000,000.00) ("Line of Credit"),
the proceeds of which shall be used for Borrower's working capital purposes and
general corporate purposes. Borrower's obligation to repay advances under the
Line of Credit shall be evidenced by a promissory note dated as of August 4,
2006 ("Line of Credit Note"), all terms of which are incorporated herein by this
reference.

(b) Borrowing and Repayment. Borrower may from time to time during the term
of the Line of Credit borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions contained herein or in the Line of Credit Note; provided however,
that the total outstanding borrowings under the Line of Credit shall not at any
time exceed the maximum principal amount available thereunder, as set forth
above.

SECTION 1.2. INTEREST/FEES

(a) Interest. The outstanding principal balance of the Line of Credit shall
bear interest at the rate of interest set forth in the Line of Credit Note.

(b) Computation and Payment. Interest shall be computed on the basis of a
360-day year, actual days elapsed. Interest shall be payable at the times and
place set forth in each promissory note or other instrument or document required
hereby.

(c) Commitment Fee. Borrower shall pay to Bank a non-refundable commitment
fee for the Line of Credit equal to Twenty Thousand Dollars ($20,000.00), which
fee shall be due and payable in full on the date of this Agreement.

(d) Unused Commitment Fee. Borrower shall pay to Bank a fee equal to
one-fifth percent (0.20%) per annum (computed on the basis of a 360-day year,
actual days elapsed) on


-1-

<PAGE>

the average daily unused amount of the Line of Credit, which fee shall be
calculated on a calendar quarter basis by Bank and shall be due and payable by
Borrower in arrears on the last day of each March, June, September and December.

ARTICLE II
REPRESENTATIONS AND WARRANTIES

Borrower makes the following representations and warranties to Bank, which
representations and warranties shall survive the execution of this Agreement and
shall continue in full force and effect until the full and final payment, and
satisfaction and discharge, of all obligations of Borrower to Bank subject to
this Agreement.

SECTION 2.1 LEGAL STATUS. Borrower is a corporation, duly organized and
existing and in good standing under the laws of Washington and is qualified or
licensed to do business (and is in good standing as a foreign corporation, if
applicable) in all jurisdictions in which such qualification or licensing is
required or in which the failure to so qualify or to be so licensed could have a
material adverse effect on Borrower.

SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement and each promissory
note, contract, instrument and other document required hereby or at any time
hereafter delivered to Bank in connection herewith (collectively, the "Loan
Documents") have been duly authorized, and upon their execution and delivery in
accordance with the provisions hereof will constitute legal, valid and binding
agreements and obligations of Borrower or the party which executes the same,
enforceable in accordance with their respective terms.

SECTION 2.3. NO VIOLATION. The execution, delivery and performance by
Borrower of each of the Loan Documents do not violate any provision of any law
or regulation, or contravene and provision of the Articles of Incorporation or
By-Laws of Borrower, or result in any breach of or default under any contract,
obligations, indenture or other instrument to which Borrower is a party or by
which Borrower may be bound.

SECTION 2.4. LITIGATION. There are no pending, or to the best of Borrower's
knowledge, threatened actions, claims, investigations, suites or proceedings by
or before any governmental authority, arbitrator, court or administrative agency
which could have a material adverse effect on the financial condition or
operation of Borrower other than those disclosed by Borrower to Bank in writing
prior to the date hereof.

SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The annual financial
statement of Borrower dated December 31, 2005, and all interim financial
statements delivered to Bank since said date, true copies of which have been
delivered by Borrower to Bank prior to the date hereof, (a) are complete and
correct and present fairly the financial condition of Borrower, (b) disclose all
liabilities of Borrower that are required to be reflected or reserved against
under generally accepted accounting principles, whether liquidated or
unliquidated, fixed or contingent, and (c) have been prepared in accordance with
generally accepted accounting principles consistently applied. Since the dates
of such financial statements there has been no material adverse change in the
financial condition of Borrower, nor has Borrower mortgaged, pledged, granted a
security interest in or otherwise encumbered any of its assets or properties
except in favor of Bank or as otherwise permitted by Bank in writing.


-2-

<PAGE>

SECTION 2.6 INCOME TAX RETURNS. Borrower has no knowledge of any pending
assessments or adjustments of its income tax payable with respect to any year.

SECTION 2.7. NO SUBORDINATION. There is no agreement, indenture, contract
or instrument to which Borrower is a party or by which Borrower may be bound
that requires the subordination in right of payment of any of Borrower's
obligations subject to this Agreement to any other obligation of Borrower.

SECTION 2.8. PERMITS, FRANCHISES. Borrower possesses, and will hereafter
possess, all permits, consents, approvals, franchises and licenses required and
rights to all trademarks, trade names, patents, and fictitious names, if any,
necessary to enable it to conduct the business in which it is now engaged in
compliance with applicable law.

SECTION 2.9. ERISA. Borrower is in compliance in all material respects with
all applicable provisions of the Employee Retirement Income Security Act of
1974, as amended or recodified from time to time ("ERISA"); Borrower has not
violated any provision of any defined employee pension benefit plan (as defined
in ERISA) maintained or contributed to by Borrower (each, a "Plan"); no
Reportable Event as defined in ERISA as occurred and is continuing with respect
to any Plan initiated by Borrower; Borrower has met its minimum funding
requirements under ERISA with respect to each Plan; and each Plan will be able
to fulfill its benefit obligations as they come due in accordance with the Plan
documents and under generally accepted accounting principles.

SECTION 2.10. OTHER OBLIGATIONS. Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation.

SECTION 2.11. BANK SUBSIDIARIES. As of the date of this Agreement Borrower
owns 100% of the issued and outstanding common voting stock in Sterling Savings
Bank. Each bank, if any, named in this Section, and each bank at any time
hereafter established or acquired by Borrower, is referred to as a "Bank
Subsidiary."

ARTICLE III
CONDITIONS

SECTION 3.1 CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation of
Bank to extend any credit contemplated by this Agreement is subject to the
fulfillment to Bank's satisfaction of all of the following conditions:

(a) Approval of Bank Counsel. All legal matters incidental to the extension
of credit by Bank shall be reasonably satisfactory to Bank's counsel.

(b) Documentation. Bank shall have received, in form and substance
satisfactory to Bank, each of the following, duly executed:

(i) This Agreement and each promissory note or other instrument or
document required hereby.

(ii) Certificate of Incumbency.

(iii) Corporate Borrowing Resolution.

(iv) Such other documents as Bank may require under any other Section of
this Agreement.


-3-

<PAGE>

(c) Financial Condition. There shall have been no material adverse change,
as determined by Bank, in the financial condition or business of Borrower, nor
any material decline, as determined by Bank, in the market value of any
collateral required hereunder or a substantial or material portion of the assets
of Borrower.

SECTION 3.2 CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of Bank
to make each extension of credit requested by Borrower hereunder shall be
subject to the fulfillment to Bank's satisfaction of each of the following
conditions:

(a) Compliance. The representations and warranties contained herein and in
each of the other Loan Documents shall be true on and as of the date of the
signing of this Agreement and on the date of each extension of credit by Bank
pursuant hereto, with the same effect as though such representations and
warranties had been made on and as of each such date, and on each such date, no
Event of Default as defined herein, and no condition, event or act which with
the giving of notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall exist.

(b) Documentation. Bank shall have received all additional documents which
may be required in connection with such extension of credit.

ARTICLE IV
AFFIRMATIVE COVENANTS

Borrower covenants that so long as Bank remains committed to extend credit
to Borrower pursuant thereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents
remain outstanding, and until payment in full of all obligations of Borrower
subject hereto, Borrower shall, unless Bank otherwise consents in writing:

SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all principal, interest,
fees or other liabilities due under any of the Loan Documents at the times and
place and in the manner specified therein.

SECTION 4.2. ACCOUNTING RECORDS. Maintain adequate books and records in
accordance with generally accepted accounting principals consistently applied,
and permit any representative of Bank, at any reasonable time, to inspect, audit
and examine such books and records, to make copies of the same, and to inspect
the properties of Borrower; provided, however, Bank understands that Borrower is
a publicly owned company whose shares are traded on a national exchange and
that, as a consequence, Bank agrees that it, its employees attorneys, and
agents, shall keep all non-public financial information of Borrower strictly
confidential and that neither it, or any of its employees, attorneys or agents,
shall trade, sell or otherwise exchange any shares of Borrower's stock while
they are in possession of any of Borrower's nonpublic financial information.

SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of the following, in
form and detail satisfactory to Bank:

(a) not later than 90 days after and as of the end of each fiscal year, an
unqualified audit of the financial statement of Borrower prepared by the
independent accounting firm of BDO Seidman, or such other independent certified
public accountant reasonably acceptable to


-4-

<PAGE>

Bank, to include balance sheet, income statement, statement of Borrower's cash
flow, which Bank confirms is acceptable to it, management report, auditor's
report, all supporting schedules, footnotes and a copy of 10K report filed with
the Securities Exchange Commission;

(b) not later than 45 days after and as of the end of each fiscal quarter,
company prepared financial statement of Borrower, to include a balance sheet,
income statement, statement of cash flow, and a copy of 10Q report filed with
the Securities Exchange Commission;

(c) contemporaneously with each annual and quarterly financial statement of
Borrower required hereby, a compliance certificate of the president or chief
financial officer of Borrower that said financial statements are accurate, that
there exists no Event of Default nor any condition, act or event which with the
giving of notice or the passage of time or both would constitute an Event of
Default, and demonstrating compliance with the financial covenants contained in
this Agreement;

(d) as soon as available, and in any event no later than 15 days after
filing with the Federal Reserve Bank, each quarterly, semi-annual, and annual
financial statement of the Borrower (including but not limited to any FRY-9SP,
FRY-9LP, FRY-6 and FRY-9C, as applicable) required to be filed by Borrower with
the Federal Reserve Bank in the applicable Federal Reserve District;

(e) as soon as available (but without duplication of any other requirements
set forth in this Section 4.3.) a copy of all reports which are required by law
to be furnished to any regulatory authority having jurisdiction over Borrower or
any Bank Subsidiary (including without limitation Call Reports, but excluding
any report which applicable law or regulation prohibits Borrower or a Bank
Subsidiary from furnishing to Bank);

(f) from time to time such other information as Bank may reasonably
request.

SECTION 4.4. COMPLIANCE. Preserve and maintain all license, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which Borrower is organized and/or which govern Borrower's continued
existence and with the requirements of all laws, rules, regulations and orders
of any governmental authority applicable to Borrower and/or its business.

SECTION 4.5. INSURANCE. Maintain and keep in force, for each business in
which Borrower is engaged, insurance as described in Schedule 4.5 attached
hereto, with all such insurance carried with companies and in amounts
satisfactory to Bank, and deliver to Bank from time to time at Bank's request
schedules setting forth all insurance then in effect.

SECTION 4.6. FACILITIES. Keep all properties useful or necessary to
Borrower's business in good repair and condition, and from time to time make
necessary repairs, renewals and replacements there to so that such properties
shall be fully and efficiently preserved and maintained.

SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay and discharge when due any
and all indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation federal and state income taxes and state and local
property taxes and assessments, except such (a) as Borrower may in good faith
contest or as to which a bona fide


-5-

<PAGE>

dispute may arise, and (b) for which Borrower has made provision, to Bank's
satisfaction, for eventual payment thereof in the event Borrower is obligated to
make such payment.

SECTION 4.8. LITIGATION. Promptly give notice in writing to Bank of any
litigation pending or threatened against Borrower with a claim in excess of
$10,000,000.00.

SECTION 4.9. BORROWER'S FINANCIAL CONDITION. Maintain Borrower's
consolidated financial condition as follows using generally accepted account
principles consistently applied and used consistently with prior practices
(except to the extent modified by the definitions herein), with compliance
determined commencing with Borrower's financial statements for period ending
September 30, 2006:

(a) ROA not less than 0.65% on a rolling four quarter basis, determined as
of each fiscal quarter end, with "ROA" defined as the percentage arrived at by
dividing net income by Total Assets, as reported in the most recent Call Report.

(b) Allowance for loan and lease losses not less than 100% of the total
amount of Non-Performing Assets, determined as of each fiscal quarter end, with
"Non-Performing Assets" defined as the sum of: (i) all loans classified as past
due 90 days or more and still accruing interest; (ii) all loans classified as
'non-accrual' and no longer accruing interest; (iii) all loans classified as
'restructured loans and leases'; and (iv) all other 'non-performing assets',
including those classified as 'other real estate owned' and 'repossessed
property', as reported in the then most recent Call Report.

(c) Non-Performing Assets not greater than 10% of Primary Equity Capital,
determined as of each fiscal quarter end, with "Non-Performing Assets" as
defined above, and with "Primary Equity Capital" defined as the aggregate of
allowance for loan and lease losses, as reported in the then most recent Call
Report, plus Equity Capital (defined as the aggregate of perpetual preferred
stock (and related surplus), common stock, surplus (excluding all surplus
related to perpetual preferred stock), undivided profits and capital reserves,
plus the net unrealized holding gains (or less the net realized holding losses)
on available-for-sale securities, less goodwill and other disallowed intangible
assets).

SECTION 4.10. BORROWER'S AND BANK SUBSIDIARY FINANCIAL CONDITION. Cause
Borrower and each Bank Subsidiary to maintain its categorization as Well
Capitalized as defined by regulatory agencies having jurisdiction, which,
pursuant to Section 38 of the Federal Deposit Insurance Act (created by Section
131 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA) of
1991) (entitled "Prompt Corrective Action") (herein, "Section 38"), which
considers an institution "Well Capitalized" if, among other things, its Total
Risk-Based Capital Ratio equals or exceeds 10%, its Tier 1 Risk-Based Capital
equals or exceeds 6% and its Leverage equals or exceeds 5%. As used herein,
"Total Risk-Based Capital Ratio," "Tier 1 Risk-Based Capital" and "Leverage"
shall be defined and calculated in conformity with Section 38.

SECTION 4.11. NOTICE TO BANK. Promptly (but in no event more than five (5)
business days after Borrower knows or in the exercise of reasonable care and
diligence should have known of the occurrence of each such event or matter) give
written notice to Bank in reasonable detail of: (a) the occurrence of any Event
of Default, or any condition, event or act which with the giving or the passage
of time or both would constitute an Event of Default; (b) any change in t