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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
For the transition period from Commission file number
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
Sterling Savings Bank Employee Savings and Investment Plan
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
Sterling Financial Corporation
111 North Wall Street
Spokane, WA 99201
REQUIRED INFORMATION
The following financial statements shall be furnished for the plan:
1. An audited statement of financial condition as of the end of the latest two
fiscal years of the plan (or such lesser period as the plan has been in
existence).
2. An audited statement of income and changes in plan equity for each of the
latest three fiscal years of the plan (or such lesser period as the plan as been
in existence).
3. The statements required by Items 1 and 2 shall be prepared in accordance with
the applicable provisions of Article 6A of Regulation S-X (17 CFR
210.6A-01-.6A-05).
4. In lieu of the requirements of Items 1-3 above, plans subject to ERISA may
file plan financial statements and schedules prepared in accordance with the
financial reporting requirements of ERISA. To the extent required by ERISA, the
plan financial statements shall be examined by an independent accountant, except
that the "limited scope exemption" contained in Section 103(a)(3)(C) of ERISA
shall not be available.
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SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act
of 1934, the trustees (or other persons who administer the employee benefit
plan) have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
STERLING SAVINGS BANK EMPLOYEE SAVINGS AND INCENTIVE PLAN
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(Name of Plan)
June 27, 2000 /s/ Daniel G. Byrne
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(Date) (Signature)
DANIEL G. BYRNE
Senior Vice President, Chief Financial Officer,
Principal Financial Officer, Principal Accounting Officer
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Sterling Savings Association
Employee Savings and Investment Plan
INFORMATION TO BE INCLUDED IN THE REPORT:
1. Not applicable, see Item 4.
2. Not applicable, see Item 4.
3. Not applicable, see Item 4.
4. Financial statements and schedules prepared in accordance with the
financial reporting requirements of ERISA.
Report of Independent Accountants F-1
Financial Statements:
Statements of Net Assets Available for Benefits as of December 31, 1999 and
1998
Statement of Changes in Net Assets Available for Benefits for the Year
Ended December 31, 1999
Notes to Financial Statements
Supplemental Schedules:
Form 5500 Schedule H, Line 4i - Schedule of Assets Held for Investment
Purposes at End of Year
Form 5500 Schedule H, Line 4j - Schedule of Reportable Transactions
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Administrative Committee
of the Sterling Savings Bank
Employee Savings and Investment Plan
In our opinion, the accompanying statements of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the Sterling Savings Bank Employee Savings and Investment Plan ("the Plan")
at December 31, 1999 and 1998, and the changes in net assets available for
benefits for the year ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. These financial statements
are the responsibility of the Plan's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States which 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, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules as listed in
the index to financial statements are presented for the purpose of additional
analysis and are not a required part of the basic financial statements, but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedules have been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, are fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
/s/ PricewaterhouseCoopers LLP
Spokane, Washington
June 7, 2000
F-1
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STERLING SAVINGS BANK
EMPLOYEE SAVINGS AND INVESTMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 1999 AND 1998
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<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
ASSETS:
Investments, at fair value:
Mutual funds $6,166,685 4,545,667
Common stock of Sterling Financial Corporation 2,350,899 2,725,236
Certificate of deposit 419,817 430,917
Cash and cash equivalents 129,846 76,475
Receivables:
Employer contribution 37,030 4,810
Participants contribution 55,736 --
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Net assets available for benefits $9,160,013 $7,783,105
========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F-2
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STERLING SAVINGS BANK
EMPLOYEE SAVINGS AND INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1999
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<TABLE>
<S> <C>
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Investment income:
Interest $ 26,945
Dividends 464,319
Net depreciation in fair value of investments (672,875)
Contributions:
Participants 1,583,297
Employer 430,125
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Total additions 1,831,811
DEDUCTIONS TO NET ASSETS ATTRIBUTED TO:
Distributions and benefits paid to participants 454,903
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Net increase in net assets available for benefits 1,376,908
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 7,783,105
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End of year $ 9,160,013
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</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F-3
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STERLING SAVINGS BANK
EMPLOYEE SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999
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1. DESCRIPTION OF PLAN:
THE FOLLOWING DESCRIPTION OF THE STERLING SAVINGS BANK ("STERLING" OR "THE
EMPLOYER") EMPLOYEE SAVINGS AND INVESTMENT PLAN ("THE PLAN") PROVIDES ONLY
GENERAL INFORMATION. PARTICIPANTS SHOULD REFER TO THE PLAN DOCUMENT FOR A
MORE COMPLETE DESCRIPTION OF THE PLAN'S PROVISIONS. SEE ALSO NOTE 6 BELOW.
GENERAL
The Plan is a defined contribution plan, which became effective on
July 1, 1985. Employees with one year of service may enroll on the
first day of any calendar quarter. The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974
("ERISA"), as amended.
CONTRIBUTIONS
Participants may contribute from 1% to 15% of their compensation up to
a statutory maximum amount of $10,000 in 1999, tax deferred, through
payroll deductions to the Plan. Contributions may be suspended at any
time upon written notice by the participant. However, contributions
may only be reinstated, and changes in the amount contributed are only
allowed on the first day of any calendar quarter.
Participants contributing to the Plan are entitled to an Employer
matching contribution should Sterling elect to make one. Sterling's
matching contribution is 35% of the employee's contribution up to 8%
of compensation. Additional amounts may be contributed at the option
of Sterling as a profit sharing contribution. All Employer
contributions, whether matching or profit sharing, are made out of
Sterling's current or accmulated net profits and are invested in the
Stock Fund. Amounts contributed by both Sterling and the participant
shall not exceed 25% of compensation paid to the participants during
the fiscal year or the maximum amount allowable as a tax deduction by
Sterling.
In April 1998, Sterling amended the Plan to allow for the acceptance
of employee contributions of amounts previously contributed to another
qualified plan.
INVESTMENT OPTIONS
Participant contributions are invested in separate funds as designated
by the individual participants. Participants may elect to reallocate
the amounts invested in each fund on the first day of any calendar
quarter during the year. The separate investment funds are described
below.
FIXED FUND
The objective of this fund is to maximize short-term income while
minimizing risk. The fund invests in Sterling certificates of
deposit, money market funds and cash. The certificates of deposit
and cash are federally insured up to $100,000 per participant.
The interest rates on the certificates of deposit are set each
year on January 1.
F-4
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STERLING SAVINGS BANK
EMPLOYEE SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1999
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1. DESCRIPTION OF PLAN, CONTINUED:
INVESTMENT OPTIONS, CONTINUED
BALANCED FUND
The objective of this fund is to maximize long-term return
through a combination of market appreciation and income. The fund
invests in the American Balanced Fund, a mutual fund which
invests in stocks and bonds.
ALLOCATION FUND
The objective of this fund is to maximize long-term return
through a combination of market appreciation and income. The fund
invests in the Stagecoach Index Allocation Fund, a mutual fund
which invests in stocks, bonds and money market investments.
GROWTH AND INCOME FUND
The objective of this fund is to maximize long-term return
primarily through market appreciation. The fund invests in The
Putnam Fund for Growth and Income, a mutual fund which invests
primarily in common stocks of domestic corporations.
GROWTH FUND
The objective of this fund is to maximize long-term return
through market appreciation. The fund invests in the AIM Value
Fund, a mutual fund which invests in stocks, convertible
securities, bonds and other equity investments.
AGGRESSIVE GROWTH FUND
The objective of this fund is to maximize long-term return
through market appreciation. The fund invests in the Delaware
Group Trend Fund which invests in emerging-growth companies. On
July 1, 1999, the investment option was changed from the John
Hancock Special Equities Fund to The Delaware Group Trend Fund.
LARGE CAP GROWTH FUND
The objective of this fund is to maximize long-term return
through market appreciation. The fund invests in the Putnam
Investors Fund, a mutual fund which invests primarily in the
stock of large companies with favorable earnings forecasts.
STOCK FUND
The objective of this fund is to achieve total return primarily
from capital appreciation through investment in Sterling
Financial Corporation (Sterling's parent company) common stock.
F-5
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STERLING SAVINGS BANK
EMPLOYEE SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1999
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1. DESCRIPTION OF PLAN, CONTINUED:
PARTICIPANT ACCOUNTS
Separate accounts are maintained for each participant. Each
participant's account is credited with the participant's contribution
and an allocation of Sterling's contribution and Plan earnings.
Allocations of Sterling's contribution and Plan earnings are based on
participant account balances, as defined in the Plan document. The
participant's benefit is limited to the benefit that has accumulated
in the participant's account.
VESTING
A participant is 100% vested in all contributions, both participant
and Employer, at all times.
PAYMENT OF BENEFITS
Distributions are made upon termination, death, disability or
retirement. Participants or their beneficiaries will receive payment
of benefits as follows: (a) balances of $5,000 or less will be
distributed in a lump sum, or (b) balances greater than $5,000 in
various optional forms of distribution.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF ACCOUNTING
The financial statements of the Plan are prepared under the accrual
basis of accounting in accordance with accounting principles generally
accepted in the United States.
INVESTMENTS
The Plan's investments are stated at fair value. Certificates of
deposit are valued at cost which approximates fair value. Mutual funds
are valued at quoted market prices which represent the value of shares
held by the Plan at year end. Sterling Financial Corporation common
stock is valued at its quoted market price.
The Plan presents in the statement of changes in net assets available
for benefits the net appreciation or depreciation in the fair value of
its investments which consists of the realized gains or losses and the
net unrealized appreciation or depreciation on those investments.
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on the accrual basis. Dividends are
recorded on the ex-dividend date.
F-6
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STERLING SAVINGS BANK
EMPLOYEE SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1999
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
CASH AND CASH EQUIVALENTS
Cash equivalents are highly liquid instruments, primarily money market
funds, with a remaining maturity of three months or less at the date
of purchase.
ADMINISTRATIVE EXPENSES
Expenses for administration of the Plan are paid by Sterling.
BENEFIT PAYMENTS
Benefits are recorded when paid.
ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management
to make significant estimates and assumptions that affect the reported
amounts of net assets available for benefits and disclosures of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of changes in net assets available
for benefits during the reporting period. Actual results could differ
from those estimates.
RISKS AND UNCERTAINTIES
The Plan provides for various investment options in combinations of
stocks, bonds, fixed income securities, mutual funds and other
investment securities. Investment securities are exposed to various
risks, such as interest rate, market and credit. Due to the level of
risk associated with certain investment securities and the level of
uncertainty related to changes in the value of investment securities,
it is at least reasonably possible that changes in risks in the near
term would materially affect participants' account balances and the
amounts reported in the statements of net assets available for
benefits and the statement of changes in net assets available for
benefits.
F-7
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STERLING SAVINGS BANK
EMPLOYEE SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1999
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3. INVESTMENTS:
The following table presents the fair value of investments, including those
that represent 5% or more of the Plan's net assets at December 31, 1999 and
1998.
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Certificate of deposit- Sterling Savings Bank
1999-6.10% due January 1, 2000; 1998-5.60%
due July 1, 1999 $ 419,817 $ 430,917
Mutual funds:
American Balanced Fund 204,815 139,800
Stagecoach Index Allocation Fund 913,526 588,560
The Putnam Fund for Growth and Income 2,075,567 2,077,111
AIM Value Fund 1,938,606 1,170,762
Delaware Group Trend Fund 751,209 --
The Putnam Investors Fund 282,962 --
John Hancock Special Equities Fund -- 569,434
Common stock of Sterling Financial Corporation 2,350,899 2,725,236
Cash and cash equivalents - Merrill Lynch Cash
Management Account 129,846 76,475
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$9,067,247 $7,778,295
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</TABLE>
During the year ended December 31, 1999, the Plan's investments (including
realized and unrealized gains (losses) appreciated (depreciated) as follows:
<TABLE>
<S> <C>
Mutual funds $ 378,396
Common stock of Sterling Financial Corporation (1,051,271)
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$ (672,875)
===========
</TABLE>
4. PLAN TERMINATION:
Although it has not expressed an intent to do so, Sterling has the right to
discontinue its contributions to the Plan at any time and to terminate the
Plan subject to the provisions of ERISA.
5. TAX STATUS:
The Internal Revenue Service has determined and informed Sterling by a
letter dated October 20, 1995 that the Plan was designed in accordance with
applicable sections of the Internal Revenue Code (the "Code"), as amended.
The Plan has been amended since receiving the determination letter.
However, the Plan administrator believes that the Plan is designed and is
being operated in compliance with the applicable requirements of the Code.
F-8
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STERLING SAVINGS BANK
EMPLOYEE SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1999
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6. PLAN AMENDMENTS:
On June 27, 2000, Sterling made amendments to the Plan, including the
following, effective July 1, 2000.
- Each employee may become a participant on the first day of the month
following one calendar month of employment.
- Participants will be allowed to contribute up to 20% of their compensation
up to a statutory maximum.
- The matching contribution will be increased to up to 10% of a participant's
compensation.
- Company contributions and earnings thereon will be subject to a vesting
schedule of 50% after two years and 100% after three years of service.
Employees eligible for the Plan on June 30, 2000 will be 100% vested.
- Expenses for administering the Plan will be paid for by the Plan
participants.
- Six of the current eight investment alternatives will be changed to new
funds and four additional funds will be added, for a total of twelve
investment options.
F-9
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SUPPLEMENTAL INFORMATION
F-10
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STERLING SAVINGS BANK
EMPLOYEE SAVINGS AND INVESTMENT PLAN
FORM 5500, SCHEDULE H, LINE 4I - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AT END OF YEAR
DECEMBER 31, 1999
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<TABLE>
<CAPTION>
DESCRIPTION OF INVESTMENT, INCLUDING
IDENTITY OF ISSUER, BORROWER, MATURITY DATE, RATE OF INTEREST, CURRENT
LESSOR OR SIMILAR PARTY COLLATERAL, PAR OR MATURITY VALUE VALUE
---------------------------------------- ----------------------------------------------- ---------------
<S> <C> <C>
Sterling Savings Bank Certificate of deposit, due January 1, 2000,
interest at 6.10% $ 419,817
American Balanced Fund Mutual fund, 14,204 shares 204,815
Stagecoach Index Allocation Fund Mutual fund, 41,809 class A shares 913,526
The Putnam Fund for Growth
and Income Mutual fund, 110,697 shares 2,075,567
AIM Value Fund Mutual fund, 39,701 shares 1,938,606
Delaware Group Trend Fund Mutual fund, 31,132 shares 751,209
The Putnam Investors Fund Mutual fund 14,776 Class A shares 282,962
Sterling Financial Corporation Common Stock, 204,426 shares 2,350,899
Merrill Lynch Cash
Management Account Short-term money market fund 129,846
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$ 9,067,247
===============
</TABLE>
F-11
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STERLING SAVINGS BANK
EMPLOYEE SAVINGS AND INVESTMENT PLAN
FORM 5500, SCHEDULE H, LINE 4I - SCHEDULE OF REPORTABLE TRANSACTIONS FOR THE
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
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(h) CURRENT
(f) EXPENSES VALUE OF
(b) DESCRIPTION OF ASSET INCURRED ASSET ON (i) NET
(a) IDENTITY OF (INCLUDE INTEREST RATE AND (c) PURCHASE (d) SELLING (e) LEASE WITH (g) COST TRANSACTION GAIN
PARTY INVOLVED MATURITY IN CASE OF LOAN) PRICE PRICE RENTAL TRANSACTION OF ASSET DATE OR (LOSS)
------------------ -------------------------- ------------ ----------- --------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sterling Financial
Corporation Common stock $ 389,410 $ 389,410
</TABLE>
F-12
