Exhibit 10.1

                           INDEMNIFICATION AGREEMENT

     THIS  INDEMNIFICATION AGREEMENT (the "Agreement") is entered into effective
as  of  December  21,  2009  (the  "Effective Date"), between Sterling Financial
Corporation, a Washington corporation (the "Company"), and James B. Keegan, Jr.,
a  director  of  the  Company  ("Indemnitee").

                                R E C I T A L S

     A.  Indemnitee  is  a  director  of  the  Company  and  in such capacity is
performing  valuable  services  for  the  Company.

     B.  The Board of Directors has determined, after due investigation, without
the participation of Indemnitee, who recused himself from such investigation and
the  resulting  deliberations, that (i) Indemnitee has performed his duties as a
director  of  the  Company  in good faith and in a manner in which he reasonably
believed to be in the best interests of the Company and (ii) the protections set
forth  herein  are  not  only  reasonable  and prudent but also promote the best
interests  of  the  Company  and  its  shareholders.

     C.  Indemnitee  has  given  notice to the Company that he intends to resign
from  the  Board  of  Directors  in  the  near future because of health reasons.

     D.  The  Company  has  desired  and  requested  Indemnitee  to  continue to
cooperate  with  the Company subsequent to his term as a director of the Company
free  from  undue  concern  for unwarranted claims for damages arising out of or
related  to  his  services  to  the  Company.

     NOW,  THEREFORE,  in  consideration  of  the  recitals  above,  the  mutual
covenants  and  agreements set forth in this Agreement, and Indemnitee's service
as  a  director  both  before  and after the date hereof, Indemnitee's continued
cooperation  with the Company after the date hereof, and other good and valuable
consideration,  the  receipt  and adequacy of which are hereby acknowledged, the
Company  and Indemnitee, intending to be legally bound, hereby agree as follows:

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1.   INDEMNIFICATION

     1.1  SCOPE.  The  Company  agrees  to and shall hold harmless and indemnify
Indemnitee  to  the full extent permitted by law against any Damages (as defined
in  Section  1.3)  incurred  by  Indemnitee  with  respect to any Proceeding (as
defined  in  Section  1.4)  to which Indemnitee is or is threatened to be made a
party  or witness, notwithstanding that such indemnification is not specifically
authorized  by  this  Agreement,  the  Company's  Articles of Incorporation (the
"Articles")  or  the  Company's  Bylaws  (the "Bylaws"), the Washington Business
Corporation Act (the "Act") or otherwise. Such right to indemnification shall be
subject  to the limitations on, and conditions for, indemnification of directors
found  (a) in the Act as of the date of this Agreement and (b) elsewhere in this
Agreement, including, but not limited to the limitations of Section 18(k) of the
Federal  Deposit  Insurance  Act  and  Part 359 of the Federal Deposit Insurance
Corporation's  Rules  and  Regulations,  as  provided  in  Section  6.2  of this
Agreement.  In the event of any change, after the date of this Agreement, in any
applicable law, statute or rule issued pursuant to such law or statute regarding
the  right  of  a  Washington  corporation to indemnify a member of its board of
directors,  such  changes,  to  the  extent  that they would expand Indemnitee's
rights  hereunder,  shall  be  within  the  scope of Indemnitee's rights and the
Company's  obligations  hereunder,  and,  to  the  extent that they would narrow
Indemnitee's  rights hereunder, shall be excluded from this Agreement; provided,
however,  that  any  change  that  is  found in a final judgment, not subject to
appeal,  by  a  court  of proper jurisdiction to be required by applicable laws,
statutes  or  rules issued pursuant to such law or statute to be applied to this
Agreement shall be so applied regardless of whether the effect of such change is
to  narrow  Indemnitee's  rights  hereunder.

     1.2  NONEXCLUSIVITY.  The  indemnification provided by this Agreement shall
not  be  deemed exclusive of any rights to which Indemnitee may be entitled (and
any  failure  to  qualify  for indemnification under this Agreement shall not be
determinative  of  any  such rights) under the Company's Articles, the Company's
Bylaws,  any  vote  of  shareholders  or  disinterested  directors,  the  Act or
otherwise,  whether  as  to  actions  or omissions by Indemnitee in Indemnitee's
official  capacity  or  otherwise.

     1.3  INCLUDED  COVERAGE. If Indemnitee is made a party (or is threatened to
be made a party) to, or is otherwise involved (including, but not limited to, as
a  witness)  in  any  Proceeding,  the Company shall hold harmless and indemnify
Indemnitee  from and against any and all losses, claims, damages and liabilities
incurred  in  connection  with  such  Proceeding,  including  but not limited to
attorneys' fees, judgments, fines, ERISA excise taxes or penalties, amounts paid
in  settlement  and  any  other  related  expenses  (collectively,  "Damages").

     1.4  DEFINITION OF PROCEEDING. For purposes of this Agreement, "Proceeding"
shall  mean  any actual, pending, threatened or completed investigation, action,
suit,  claim  or  other  proceeding  (whether  civil,  criminal, administrative,
regulatory  or investigative and whether formal or informal) in which Indemnitee
is, has been or becomes involved by reason of the fact that Indemnitee is or was
at any time before, on or after the Effective Date of this Agreement, a director
of  the  Company or that, being or having been such a director, Indemnitee is or
was  serving  at  the  request  of the Company as a director, officer, employee,
trustee  or  agent  of  another  corporation or of a partnership, joint venture,
trust or other enterprise (collectively, a "Related Company"), including but not
limited  to service with respect to any employee benefit plan, whether the basis
of such investigation, action, suit, claim or other proceeding is alleged action
or  omission  by  Indemnitee  in  an  official  capacity as a director, officer,
employee, trustee or agent or in any other capacity while serving as a director,
officer,  employee,  trustee  or  agent;  provided,  however,  that, except with
respect  to  an action to enforce this Agreement, "Proceeding" shall not include
any  investigation,  action,  suit,  claim or proceeding instituted by or at the
direction  of Indemnitee unless such investigation, action, suit, claim or other
proceeding  is  or  was  authorized  by  the  Board.

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     1.5  NOTIFICATION.  As  promptly as reasonably practicable after receipt by
Indemnitee  of notice of the commencement of any Proceeding, Indemnitee will, if
a  claim  in  respect  thereof  is  to  be  made  against the Company under this
Agreement,  notify  the  Company of the commencement thereof; provided, however,
that  failure  to  so  notify  the  Company  will  relieve  the Company from any
liability that it may otherwise have to Indemnitee under this Agreement only if,
and then solely to the extent that, such failure can be shown to have materially
prejudiced  the  Company's  ability  to  defend  the  Proceeding.

     1.6  DETERMINATION  OF  ENTITLEMENT.  If  a  determination  of Indemnitee's
entitlement  to  indemnification  is  required  pursuant  to applicable law, (a)
Indemnitee  shall  initially  be  presumed  in  all  cases  to  be  entitled  to
indemnification,  and (b) unless the Company shall deliver to Indemnitee written
notice of a determination that Indemnitee may not be entitled to indemnification
within  thirty  (30)  days  after  the  Company's receipt of Indemnitee's notice
pursuant  to Section 1.5, Indemnitee shall conclusively be deemed to be entitled
to  such  indemnification and the Company hereby agrees not to assert otherwise.
Indemnitee  may establish a conclusive presumption of any fact necessary to such
a determination by delivering to the Company a declaration made under penalty of
perjury  that  such  fact  is  true.

     1.7  PRESUMPTION  AND  EFFECT  OF  CERTAIN  PROCEEDINGS.

          A.  The  Company  shall  have  the  burden  of  proof  to overcome the
     presumption  that  Indemnitee  is  entitled to the protections provided for
     herein.

          B.  The  settlement  or termination of any Proceeding or of any claim,
     issue  or  matter therein, by judgment, order, settlement or conviction, or
     upon  a  plea  of  nolo  contendere or its equivalent, shall not (except as
     otherwise  expressly provided in this Agreement) of itself adversely affect
     the  right  of  Indemnitee  to indemnification or create a presumption that
     Indemnitee  did  not  act  in  good  faith and in a manner which Indemnitee
     reasonably  believed  to  be in or not opposed to the best interests of the
     Company  or,  with  respect to any criminal Proceeding, that Indemnitee had
     reasonable  cause  to  believe  that  Indemnitee's  conduct  was  lawful.

     1.8   SURVIVAL.  The  indemnification  and   release  provided  under  this
Agreement  shall  apply  to  any  and  all  Proceedings,  notwithstanding   that
Indemnitee  has  ceased to be a director, officer, employee, trustee or agent of
the  Company  or  a  Related  Company.

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2.     ADVANCEMENT  OF  EXPENSES

     2.1     GENERALLY.  The  protections  provided for herein shall include the
right to have the Company pay Indemnitee's attorneys' fees and other expenses in
any Proceeding as such expenses are incurred and in advance of such Proceeding's
final  disposition  (such  right  is  referred  to  hereinafter  as  an "Expense
Advance").

     2.2  CONDITIONS  TO EXPENSE ADVANCE. The Company's obligation to provide an
Expense  Advance  is  subject  to  the  following  conditions:

          A.  UNDERTAKING.  Indemnitee or Indemnitee's representative shall have
     executed and delivered to the Company an acceptable undertaking, which need
     not be secured but shall demonstrate Indemnitee's financial ability to make
     repayment,  by or on behalf of Indemnitee, to repay all Expense Advances if
     and  to  the  extent  that  it  shall  ultimately be determined, by a final
     decision  not  subject  to  appeal  rendered  by  a  court  having  proper
     jurisdiction,  that  Indemnitee  is not entitled to be indemnified for such
     Expense  Advance  under  this  Agreement  or  otherwise.

          B.  AFFIRMATION.  If  required  under applicable law, Indemnitee shall
     furnish  a  written  affirmation  of  Indemnitee's  good  faith belief that
     Indemnitee  has  met  all  applicable  standards  of  conduct.

3.     PROCEDURES  FOR  ENFORCEMENT

     3.1  ENFORCEMENT.  If  a  claim  for  indemnification  made  by  Indemnitee
hereunder is not paid in full within thirty (30) days, or a claim for an Expense
Advance  made  by  Indemnitee  hereunder  is not paid in full within thirty (30)
days,  after  written  notice  of  such  claim  is delivered to the Company, the
parties  agree that Indemnitee's remedy at law will be inadequate and therefore,
in addition to any other right or remedy Indemnitee may have at law or in equity
with  respect  to  breach  of  this  Agreement,  Indemnitee shall be entitled to
injunctive  or mandatory relief directing specific performance by the Company of
its  obligations  under this Agreement (any such action at law, in equity or for
injunctive  or  mandatory  relief,  an  "Enforcement  Action").

     3.2  PRESUMPTIONS.  The  following  presumptions  (and  limitations  on
presumptions)  shall  apply  hereunder:

          A. The failure of the Company (including but not limited to the Board,
     independent or special legal counsel or the Company's shareholders) to make
     a  determination  prior  to  the commencement of an Enforcement Action that
     indemnification of Indemnitee is proper in the circumstances shall not be a
     defense  to  the Enforcement Action or create a presumption that Indemnitee
     is  not  entitled  to  indemnification  hereunder;  and

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          B.  If  Indemnitee  is  or  was  serving  (i)  as a director, officer,
     employee,  trustee  or  agent  of  a corporation of which a majority of the
     shares  entitled  to  vote  in  the  election  of  its directors is held or
     controlled  by  the  Company  or in which the Company has otherwise made an
     investment,  or  (ii)  in  an  executive  or  management  capacity  in  a
     partnership,  joint venture, trust or other enterprise of which the Company
     or  a  wholly-owned subsidiary of the Company is a general partner or has a
     majority  ownership  or  control  position  or  in  which  the  Company has
     otherwise  made  an  investment,  then such corporation, partnership, joint
     venture, trust or enterprise shall conclusively be deemed a Related Company
     and  Indemnitee  shall  conclusively  be  deemed to be serving such Related
     Company  at  the  request  of  the  Company  for  all  purposes  hereunder.

     3.3  ATTORNEYS'  FEES AND EXPENSES FOR ENFORCEMENT ACTION. If Indemnitee is
required  to  bring  an Enforcement Action, the Company shall pay, hold harmless
and  indemnify  Indemnitee  against  all  of  Indemnitee's  attorneys'  fees and
expenses  in  bringing  and  pursuing  the Enforcement Action (including but not
limited  to  attorneys'  fees at any stage of the Enforcement Action, and on any
appeal  of  such  Enforcement  Action).

4.     DEFENSE  OF CLAIM.  With respect to any Proceeding as to which Indemnitee
has  provided  notice  to  the  Company  pursuant  to  Section  1.5:

     4.1  The  Company  may  participate  therein  at  its  own  expense.

     4.2  If: (a) the Company agrees, in writing, to provide the Indemnitee with
all  of  the protections provided for herein with respect to the Proceeding; (b)
the  Company  is  able  to demonstrate, to Indemnitee's reasonable satisfaction,
that  it  is  financially  capable  of  providing  Indemnitee  with  all  of the
protections  provided  for  herein;  (c)  the Company retains counsel reasonably
satisfactory  to  Indemnitee;  and  (d)  there  exists  no  material conflict of
interest  between the Indemnitee and any of the other parties to the Proceeding,
then  the Company, jointly with any other indemnifying party similarly notified,
may  assume  the defense of the Proceeding for as long as the conditions in this
sentence  remain  fulfilledAfter  notice  from  the Company to Indemnitee of its
election  to  so  assume the defense thereof, the Company shall not be liable to
Indemnitee under this Agreement for any legal fees or other expenses (other than
reasonable  costs  of  investigation)  subsequently  incurred  by  Indemnitee in
connection  with  the  defense  thereof.

     4.3  The  Company shall not be liable for any amounts paid in settlement of
any  Proceeding  effected without its prior written consent, which consent shall
not  be  unreasonably  withheld.

     4.4  The  Company shall not settle any Proceeding in any manner which would
impose  any  penalty,  costs or Damages on Indemnitee without Indemnitee's prior
written  consent.

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     4.5  The  Company shall make reasonable efforts to ensure that the terms of
any settlement of any Proceeding to which Indemnitee is a party shall be subject
to  confidentiality  obligations  and  that  any  such settlement does not admit
Indemnitee's  culpability  with  respect to the subject matter of the proceeding
without  Indemnitee's  prior  written  consent.

5.   DIRECTORS  AND  OFFICERS  INSURANCE

     5.1  To  the  extent  that  the  Company  maintains a policy or policies of
insurance  ("D&O Insurance") for directors and officers, employees, or agents or
fiduciaries  of  the  Company  or  of  any other corporation, partnership, joint
venture,  trust,  employee  benefit  plan  or other enterprise which such person
serves at the request of the Company, Indemnitee shall be covered by such policy
or  policies  in accordance with its or their terms to the maximum extent of the
coverage  available for any such director, officer, employee or agent under such
policy  or  policies.

     5.2  In  the  event of any payment under this Agreement by the Company, the
Company  shall  be subrogated to the extent of such payment to all of the rights
of  recovery  of  Indemnitee,  who  shall  reasonably cooperate in the Company's
action  to  secure  such  rights,  including  executing  such  documents  as are
reasonably necessary to enable the Company to bring suit to enforce such rights.

     5.3  The  Company  shall  not  be  liable  under this Agreement to make any
payment  of  amounts  otherwise  payable  hereunder  if  and  to the extent that
Indemnitee  has  otherwise  actually  received  such payment under any insurance
policy,  contract,  agreement  or  otherwise.

6.     LIMITATION  ON  INDEMNIFICATION;  MUTUAL  ACKNOWLEDGMENT

     6.1  LIMITATION  ON  INDEMNIFICATION.  No  indemnification pursuant to this
Agreement  shall  be  provided  by the Company on account of any suit in which a
final,  unappealable  judgment  for which there is no further right of appeal is
rendered  by  a  court  having  proper  jurisdiction  against  Indemnitee for an
accounting of profits made from the purchase or sale by Indemnitee of securities
of the Company in violation of the provisions of Section 16(b) of the Securities
Exchange  Act  of  1934,  as  amended.

     6.2  Notwithstanding  any  other provision contained in this Agreement, the
provisions  of  this  Agreement are subject to the requirements, limitations and
conditions  set  forth  in state and federal laws, rules, regulations, or orders
regarding  indemnification,  defense  of claims and prepayment of legal fees and
expenses,  including,  but  not limited to, Section 18(k) of the Federal Deposit
Insurance  Act and Part 359 of the Federal Deposit Insurance Corporation's Rules
and  Regulations  or  any  successor  regulations  thereto.

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7.  COOPERATION  AND  PARTIAL INDEMNIFICATION. Indemnitee shall give the Company
such  information  and  cooperation as it may reasonably request and as shall be
within  Indemnitee's power. If the Indemnitee is entitled under any provision of
this  Agreement  to  indemnification by the Company for some or a portion of any
Damages  actually  and  reasonably incurred by the Indemnitee in connection with
the  investigation,  defense,  settlement  or  appeal  of  a  Proceeding but not
entitled,  however,  to indemnification for all of the total amount thereof, the
Company  shall nevertheless indemnify the Indemnitee for that portion thereof to
which  the  Indemnitee  is  entitled.

8.  SEVERABILITY.  Any  term  or  provision  of this Agreement which is declared
invalid  or  unenforceable  by  a  court  of  competent  jurisdiction  in  any
jurisdiction  shall,  as  to  that jurisdiction, be ineffective to the extent of
such  invalidity  or unenforceability without rendering invalid or unenforceable
the  remaining  terms and provisions of this Agreement or affecting the validity
or  enforceability  of  any  of the terms or provisions of this Agreement in any
other  jurisdiction.  If  any  provision  of this Agreement is so broad as to be
unenforceable,  the  provision  shall  be  interpreted to be only so broad as is
enforceable.

9.     GOVERNING  LAW;  BINDING  EFFECT; ASSUMPTION BY SUCCESSORS; AMENDMENT AND
TERMINATION

     9.1 This Agreement shall be interpreted and enforced in accordance with the
laws  of  the  State  of  Washington.

     9.2  This  Agreement shall be binding upon Indemnitee and upon the Company,
its successors and assigns, and shall inure to the benefit of Indemnitee, his or
her  spouse  and marital community, Indemnitee's heirs, personal representatives
and  assigns  and  to  the  benefit  of the Company, its successors and assigns.

     9.3  In  the  event  the  Company or any successor (i) consolidates with or
merges  into  any  other  person  or  entity  and shall not be the continuing or
surviving  corporation  or  entity  of  such  consolidation  or  merger  or (ii)
liquidates, dissolves or transfers all or substantially all of its assets to any
person  or  entity,  then,  and in each case, proper provisions shall be made so
that  the  successors  of  the  Company assume the obligations set forth in this
Agreement.

     9.4  No  amendment,  modification,  termination  or  cancellation  of  this
Agreement  shall  be  effective unless in writing signed by both parties hereto.

     9.5  No  amendment, modification, repeal, termination or replacement of any
part  or  all  of  the  Company's Bylaws or Articles shall operate in any way to
limit  Indemnitee's  rights  under  this  Agreement.

     9.6  Nothing  in  this  Agreement shall confer upon Indemnitee the right to
continue  to serve as a director and/or officer of the Company. If Indemnitee is
an  officer  of  the  Company,  then,  unless  otherwise expressly provided in a
written  employment agreement between the Company and Indemnitee, the employment
of  Indemnitee  with  the  Company  shall be terminable at will by either party.

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     9.7  It  is  understood that the parties hereto intend this Agreement to be
interpreted  and  enforced so as to provide indemnification to the Indemnitee to
the  fullest  extent  now  or  hereafter  permitted  by  law.

     9.8  Nothing in this Agreement is intended to require or shall be construed
as  requiring  the  Company  to  take or fail to take any action in violation of
applicable  law.  The  Company's inability to perform its obligations under this
Agreement pursuant to an unappealable judgment rendered by a court having proper
jurisdiction  shall  not  constitute  a  breach  of  this  Agreement.

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IN  WITNESS  WHEREOF,  the  parties  have  executed and delivered this Agreement
effective  as  of  the  day  and  year  first  set  forth  above.

STERLING FINANCIAL CORPORATION

By: ________________________________________



INDEMNITEE

________________________________________














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