Sterling Bancorp 10Q 2007 Q2 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period endedJune 30, 2007

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________________ to ______________________________________

Commission File Number:1-5273-1

Sterling Bancorp

(Exact name of registrant as specified in its charter)


New York		13-2565216

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification)

650 Fifth Avenue, New York, N.Y.		10019-6108

(Address of principal executive offices)		(Zip Code)

212-757-3300

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):


Large Accelerated Filero	Accelerated Filerx	Non-Accelerated Filero

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No

As of July 31, 2007 there were 18,017,668 shares of common stock,
$1.00 par value, outstanding.

STERLING BANCORP


			Page

PART I FINANCIAL INFORMATION

	Item 1.	Financial Statements

		Consolidated Financial Statements (Unaudited)	3
		Notes to Consolidated Financial Statements	8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

		Overview	13
		Income Statement Analysis	14
		Balance Sheet Analysis	19
		Capital	23
		Recently Issued Accounting Pronouncements	24
		Cautionary Statement Regarding Forward-Looking Statements	24
		Average Balance Sheets	25
		Rate/Volume Analysis	27
		Regulatory Capital and Ratios	29

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk

		Asset/Liability Management	30
		Interest Rate Sensitivity	35

	Item 4.	Controls and Procedures	36

PART II OTHER INFORMATION

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37

	Item 4.	Submission of Matters to a Vote of Security Holders	38

	Item 6.	Exhibits	39

SIGNATURES			40

EXHIBIT INDEX

	Exhibit 11	Statement Re: Computation of Per Share Earnings	42

	Exhibit 31.1	Certification of the CEO pursuant to Exchange Act Rule 13a-14(a)	43

	Exhibit 31.2	Certification of the CFO pursuant to Exchange Act Rule 13a-14(a)	44

	Exhibit 32.1	Certification of the CEO required by Section 1350 of Chapter 63 of Title 18 of the U.S. Code	45

	Exhibit 32.2	Certification of the CFO required by Section 1350 of Chapter 63 of Title 18 of the U.S. Code	46

STERLING BANCORP AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)


	June 30, 2007			December 31, 2006

ASSETS
Cash and due from banks	$	70,030,220		$	50,058,593
Interest-bearing deposits with other banks		1,177,462			1,261,187
Federal funds sold		10,000,000			20,000,000

Securities available for sale (at estimated fair value; pledged: $71,349,693 in 2007 and $90,583,854 in 2006)		145,899,741			148,420,887
Securities held to maturity (pledged: $193,736,735 in 2007 and $199,997,912 in 2006) (estimated fair value: $375,158,283 in 2007 and $411,650,690 in 2006)		386,406,886			420,903,430

Total investment securities		532,306,627			569,324,317


Loans held for sale		46,356,968			33,319,789

Loans held in portfolio, net of unearned discounts		1,121,943,872			1,112,601,620
Less allowance for loan losses		15,582,026			16,287,974

Loans, net		1,106,361,846			1,096,313,646

Customers’ liability under acceptances		33,787			98,399
Goodwill		22,900,912			22,862,051
Premises and equipment, net		11,510,098			11,323,649
Other real estate		2,057,365			2,242,419
Accrued interest receivable		4,893,910			5,844,868
Bank owned life insurance		28,487,841			27,949,160
Other assets		49,635,004			43,696,511

Total assets from continuing operations		1,885,752,040			1,884,294,589
Assets - discontinued operations		1,226,062			1,662,697

	$	1,886,978,102		$	1,885,957,286

LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits
Demand deposits	$	520,432,739		$	546,442,704
Savings, NOW and money market deposits		476,878,619			447,600,898
Time deposits		536,516,305			527,986,821

Total deposits		1,533,827,663			1,522,030,423

Securities sold under agreements to repurchase - customers		76,530,242			52,802,796
Commercial paper		27,444,077			27,561,567
Short-term borrowings - other		1,718,389			3,411,630
Long-term borrowings - FHLB		10,000,000			20,000,000
Long-term borrowings - subordinated debentures		25,774,000			25,774,000

Total borrowings		141,466,708			129,549,993

Acceptances outstanding		33,787			98,399
Accrued expenses and other liabilities		89,608,141			101,679,342
Liabilities - discontinued operations		129,255			336,358

Total liabilities		1,765,065,554			1,753,694,515

Shareholders’ equity
Common stock, $1 par value. Authorized 50,000,000 shares; issued 21,262,170 and 21,177,084 shares, respectively		21,262,170			21,177,084
Capital surplus		168,651,246			167,960,063
Retained earnings		17,043,353			16,693,987
Accumulated other comprehensive loss, net of tax		(12,347,079	)		(11,842,908	)

		194,609,690			193,988,226
Less
Common shares in treasury at cost, 3,244,502 and 2,572,368 shares, respectively		72,697,142			61,725,455


Total shareholders’ equity		121,912,548			132,262,771

	$	1,886,978,102		$	1,885,957,286

See Notes to Consolidated Financial Statements.

STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)


	Three Months Ended June 30,					Six Months Ended June 30,
	2007		2006			2007			2006

INTEREST INCOME
Loans	$	23,121,500	$	21,588,986		$	44,848,117		$	40,969,040
Investment securities
Available for sale		1,701,584		1,978,003			3,546,298			4,179,789
Held to maturity		4,698,726		5,551,640			9,567,851			11,295,114
Federal funds sold		367,338		34,886			1,002,646			74,871
Deposits with other banks		36,694		20,563			67,378			50,644

Total interest income		29,925,842		29,174,078			59,032,290			56,569,458

INTEREST EXPENSE
Deposits
Savings, NOW and money market		3,279,559		1,672,459			6,138,965			3,455,379
Time		6,581,415		4,714,822			13,128,913			9,175,673
Securities sold under agreements to repurchase
- customers		804,625		767,373			1,879,619			1,462,221
- dealers		—		1,344,154			—			2,328,142
Federal funds purchased		23,369		251,081			35,748			386,221
Commercial paper		355,519		537,923			705,258			942,524
Short-term borrowings - FHLB		—		642,197			—			835,365
Short-term borrowings - other		15,694		7,369			27,562			17,781
Long-term borrowings - FHLB		136,522		460,501			361,023			1,046,852
Long-term borrowings - subordinated debt		523,437		523,437			1,046,875			1,046,875

Total interest expense		11,720,140		10,921,316			23,323,963			20,697,033
Interest expense allocated to discontinued operations		—		(878,229	)		—			(1,652,223	)

Net interest income		18,205,702		19,130,991			35,708,327			37,524,648

Provision for loan losses		1,078,332		377,229			2,328,332			1,742,229

Net interest income after provision for loan losses		17,127,370		18,753,762			33,379,995			35,782,419

Total noninterest income		9,051,511		9,005,707			18,280,807			14,790,560

Total noninterest expenses		20,228,031		18,805,582			39,911,781			37,327,934

Income from continuing operations before income taxes		5,950,850		8,953,887			11,749,021			13,245,045

Provision for income taxes		2,159,412		3,571,596			4,385,910			1,377,862

Income from continuing operations		3,791,438		5,382,291			7,363,111			11,867,183
Income/(Loss) from discontinued operations, net of tax		71,252		(516,806	)		(20,719	)		(561,565	)

Net income	$	3,862,690	$	4,865,485		$	7,342,392		$	11,305,618

Average number of common shares outstanding
Basic		18,439,318		18,754,271			18,524,871			18,769,265
Diluted		18,856,903		19,286,286			18,994,625			19,310,135

Income from continuing operations, per average common share
Basic	$	0.21	$	0.29		$	0.40		$	0.63
Diluted		0.20		0.28			0.39			0.61

Net income, per average common share
Basic		0.21		0.26			0.40			0.60
Diluted		0.20		0.25			0.39			0.58

Dividends per common share		0.19		0.19			0.38			0.38

See Notes to Consolidated Financial Statements.

STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2007			2006			2007			2006


Net Income	$	3,862,690		$	4,865,485		$	7,342,392		$	11,305,618

Other comprehensive (loss)/income, net of tax:
Unrealized holding losses arising during the period		(1,233,699	)		(985,184	)		(897,251	)		(2,219,531	)

Reclassification adjustment for losses/(gains) included in net income		1,098			(8,148	)		1,098			243,702

Amortization of:
Prior service cost		13,544			—			27,089			—
Net actuarial losses		182,447			—			364,893			—


Comprehensive income	$	2,826,080		$	3,872,153		$	6,838,221		$	9,329,789

See Notes to Consolidated Financial Statements.

STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Changes in Shareholders’ Equity
(Unaudited)


	Six Months Ended June 30,
	2007			2006

Common Stock
Balance at January 1	$	21,177,084		$	21,066,916
Common shares issued under stock incentive plan		85,086			110,168

Balance at June 30	$	21,262,170		$	21,177,084

Capital Surplus
Balance at January 1	$	167,960,063		$	166,313,566
Common shares issued under stock incentive plan and related tax benefits		691,183			1,613,243

Balance at June 30	$	168,651,246		$	167,926,809

Retained Earnings
Balance at January 1	$	16,693,987		$	20,739,352
Net Income		7,342,392			11,305,618
Cash dividends paid - common shares		(6,993,026	)		(7,124,063	)

Balance at June 30	$	17,043,353		$	24,920,907

Accumulated Other Comprehensive Loss
Balance at January 1	$	(11,842,908	)	$	(5,229,620	)

Unrealized holding losses arising during the period:
Before tax		(1,635,526	)		(3,837,020	)
Tax effect		738,275			1,617,489

Net of tax		(897,251	)		(2,219,531	)

Reclassification adjustment for losses included in net income:
Before tax		2,001			444,631
Tax effect		(903	)		(200,929	)

Net of tax		1,098			243,702

Amortization of prior service cost and net actuarial losses:
Before tax		714,512			—
Tax effect		(322,530	)		—

Net of tax		391,982			—

Balance at June 30	$	(12,347,079	)	$	(7,205,449	)

Treasury Stock
Balance at January 1	$	(61,725,455	)	$	(55,280,647	)
Purchase of common shares		(10,515,732	)		(3,809,856	)
Surrender of shares issued under stock incentive plan		(455,955	)		(613,792	)

Balance at June 30	$	(72,697,142	)	$	(59,704,295	)

Unearned Compensation
Balance at January 1	$	—		$	(22,007	)
Amortization of unearned compensation		—			22,007

Balance at June 30	$	—		$	—

Total Shareholders’ Equity
Balance at January 1	$	132,262,771		$	147,587,560
Net changes during the period		(10,350,223	)		(472,504	)

Balance at June 30	$	121,912,548		$	147,115,056

See Notes to Consolidated Financial Statements.

STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)


	Six Months Ended June 30,
	2007			2006

Operating Activities
Net Income	$	7,342,392		$	11,305,618
Loss from discontinued operations included below in operating cash flows from discontinued operations		20,719			561,565

Income from continuing operations		7,363,111			11,867,183
Adjustments to reconcile income from continuing operations to net cash (used in) provided by operating activities:
Provision for loan losses		2,328,332			1,742,229
Depreciation and amortization of premises and equipment		1,297,663			1,118,244
Securities losses		2,001			444,631
Income from bank owned life insurance		(538,681	)		(488,365	)
Deferred income tax provision		207,295			1,282,520
Proceeds from sale of loans		272,674,045			312,440,005
Gains on sales of loans, net		(5,376,076	)		(4,783,972	)
Originations of loans held for sale		(280,335,148	)		(296,310,746	)
Amortization of unearned compensation		—			22,007
Amortization of premiums on securities		231,135			318,295
Accretion of discounts on securities		(180,222	)		(262,433	)
Decrease in accrued interest receivable		950,958			1,047,191
Decrease in accrued expenses and other liabilities		(12,071,201	)		(15,900,429	)
Increase in other assets		(5,338,491	)		(759,477	)
Other, net		(17,854	)		(762,003	)

Net cash (used in) provided by operating activities		(18,803,133	)		11,014,880

Investing Activities
Purchase of premises and equipment		(1,484,112	)		(770,429	)
Net decrease in interest-bearing deposits with other banks		83,725			56,613
Net decrease in federal funds sold		10,000,000			—
Net (increase) decrease in loans held in portfolio		(12,376,532	)		43,541,960
Decrease (Increase) in other real estate		185,054			(605,280	)
Proceeds from calls of securities - held to maturity		18,125,000			—
Proceeds from prepayments, redemptions or maturities of securities - held to maturity		41,344,375			40,563,283
Purchases of securities - held to maturity		(25,003,500	)		(115,870	)
Proceeds from sales of securities - available for sale		2,750			25,369,800
Proceeds from prepayments, redemptions or maturities of securities - available for sale		31,703,892			21,208,122
Purchases of securities - available for sale		(30,996,171	)		(10,045,571	)
Cash paid in acquisition		—			(44,901,402	)

Net cash provided by investing activities		31,584,481			74,301,226

Financing Activities
Net increase (decrease) in deposits		11,797,240			(42,951,065	)
Long-term borrowings called		10,000,000			—
Net increase (decrease) in borrowings		21,916,715			(22,394,330	)
Purchase of treasury stock		(10,515,732	)		(3,809,856	)
Net proceeds from issuance of common stock including the exercise of stock options and related tax benefits		776,269			1,723,411
Cash dividends paid on common stock		(6,993,026	)		(7,124,063	)

Net cash used in financing activities		6,981,466			(74,555,903	)

Cash flows from discontinued operations
Operating cash flows		208,813			2,819,401
Investing cash flows		—			(171,907	)

Total		208,813			2,647,494

Net (decrease) increase in cash and due from banks		19,971,627			13,407,697
Cash and due from banks - beginning of period		50,058,593			68,562,037

Cash and due from banks - end of period	$	70,030,220		$	81,969,734

Supplemental disclosures:
Interest paid	$	23,508,403		$	20,833,908
Income taxes paid		949,459			4,216,362

See Notes to Consolidated Financial Statements.

STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)


1.	The consolidated financial statements include the accounts of Sterling Bancorp (the “parent company”) and its subsidiaries, principally Sterling National Bank and its subsidiaries (the “bank”), after elimination of material intercompany transactions. The term the “Company” refers to Sterling Bancorp and its subsidiaries. The consolidated financial statements as of and for the interim periods ended June 30, 2007 and 2006 are unaudited; however, in the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of such periods have been made. Certain reclassifications have been made to the 2006 consolidated financial statements to conform to the current presentation. The interim consolidated financial statements should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2006.

2.	The major components of domestic loans held for sale and loans held in portfolio are as follows:


	June 30, 2007		December 31, 2006

Loans held for sale
Real estate-residential mortgage	$	46,356,968	$	33,319,789

Loans held in portfolio
Commercial and industrial	$	596,781,663	$	622,476,925
Lease financing		262,631,023		239,225,533
Real estate-residential mortgage		131,462,145		120,056,900
Real estate-commercial mortgage		92,718,380		93,214,668
Real estate-construction		38,146,578		30,030,684
Installment		10,333,376		12,380,848
Loans to depository institutions		25,000,000		27,000,000


Loans held in portfolio, gross		1,157,073,165		1,144,385,558
Less unearned discounts		35,129,293		31,783,938

Loans held in portfolio, net of unearned discounts	$	1,121,943,872	$	1,112,601,620

3.	The following information is provided in connection with the sales and/or calls of available for sale securities:

	Three Months Ended June 30,				Six Months Ended June 30,
	2007		2006		2007		2006
Proceeds	$	2,750	$	831,300	$	2,750	$	25,369,800
Gross Gains		—		14,866		—		14,866
Gross Losses		22		—		22		459,497

During the first quarter of 2006 the Company sold lower yielding available for sale securities at a loss to partially fund the acquisition of Sterling Resource Funding Corp.

The following information is provided in connection with the calls of held to maturity securities:

	Three Months Ended June 30,				Six Months Ended June 30,
	2007		2006		2007		2006
Proceeds	$	18,125,000	$	—	$	18,125,000	$	—
Gross Gains		—		—		—		—
Gross Losses		1,979		—		1,979		—

STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)


4.	The following table sets forth components of net periodic benefit cost for the Company’s noncontributory defined benefit pension plan and unfunded supplemental retirement plan.


	Three Months Ended June 30,						Six Months Ended June 30,

	2007			2006			2007			2006


COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost	$	409,271		$	446,747		$	818,542		$	914,246
Interest cost		567,201			583,642			1,134,402			1,200,542
Expected return on plan assets		(475,457	)		(565,806	)		(950,914	)		(1,108,782	)
Amortization of prior service cost		24,689			18,115			49,378			37,806
Recognized actuarial loss		332,567			319,270			665,134			656,188

Net periodic benefit cost	$	858,271		$	801,968		$	1,716,542		$	1,700,000


	The Company currently expects to contribute approximately $3,000,000 to the defined benefit pension plan in 2007. No contribution has been made as of June 30, 2007.


5.	The following tables set forth the significant components of noninterest income and noninterest expenses:


	Three Months Ended June 30,					Six Months Ended June 30,

	2007			2006		2007			2006

NONINTEREST INCOME
Accounts receivable management/factoring commissions and other fees	$	3,820,957		$	3,880,218	$	7,488,576		$	5,224,980
Service charges on deposit accounts		1,424,778			1,282,000		2,906,390			2,686,004
Other customer related service charges and fees		743,002			812,854		1,433,110			1,620,922
Mortgage banking income		2,543,656			2,567,420		5,376,076			4,783,972
Trust fees		125,180			137,798		266,383			289,520
Bank owned life insurance income		286,130			268,305		538,681			488,365
Securities (losses)/gains		(2,001	)		14,866		(2,001	)		(444,631	)
Other income		109,809			42,246		273,592			141,428

Total noninterest income	$	9,051,511		$	9,005,707	$	18,280,807		$	14,790,560


	Three Months Ended June 30,				Six Months Ended June 30,

	2007		2006		2007		2006

NONINTEREST EXPENSES
Salaries	$	8,450,719	$	9,110,770	$	17,448,231	$	16,873,588
Employee benefits		2,734,833		2,770,949		5,224,394		5,672,272

Total personnel expense		11,185,552		11,881,719		22,672,625		22,545,860
Occupancy and equipment expenses, net		2,638,634		2,480,026		5,346,337		4,782,975
Advertising and marketing		1,121,979		806,572		2,085,880		1,805,598
Professional fees		1,950,928		692,443		3,290,703		2,515,606
Communications		453,841		451,143		970,111		845,715
Other expenses		2,877,097		2,493,679		5,546,125		4,832,180

Total noninterest expense	$	20,228,031	$	18,805,582	$	39,911,781	$	37,327,934


6.	Statement of Financial Accounting Standards (“SFAS”) No. 131,Disclosures about Segments of an Enterprise and Related Information, established standards for the way that public business enterprises report and disclose selected information about operating segments in interim financial statements provided to stockholders.

	The Company provides a broad range of financial products and services, including commercial loans, asset-based financing, factoring and accounts receivable management services, trade financing, equipment leasing, corporate and consumer deposit services, commercial and residential mortgage lending and brokerage, trust and estate administration and investment management services. The Company’s primary source of earnings is net interest income, which represents the difference between interest earned on interest-earning assets and interest incurred on interest-bearing liabilities. The Company’s 2007 year-to-date average interest-earning assets were

STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

64.0% loans (corporate lending was 68.1% and real estate lending was 27.2% of total loans, respectively) and 33.6% investment securities and money market investments. There are no industry concentrations exceeding 10% of loans, gross, in the corporate lending segment. Approximately 72% of loans are to borrowers located in the metropolitan New York area. In order to comply with the provisions of SFAS No. 131, the Company has determined that it has three reportable operating segments: corporate lending, real estate lending and company-wide treasury.

The following tables provide certain information regarding the Company’s operating segments for the three and six month periods ended June 30, 2007 and 2006 (all amounts are from continuing operations except where designated as discontinued):


	Corporate Lending			Real Estate Lending		Company-wide Treasury		Totals

Three Months Ended June 30, 2007
Net interest income	$	6,591,874		$	5,394,533	$	5,967,782	$	17,954,189
Noninterest income		5,651,376			2,572,330		376,751		8,600,457
Depreciation and amortization		190,536			94,181		615		285,332
Segment income from continuing operations before income taxes		4,175,336			3,856,976		5,702,458		13,734,770
Segment income from discontinued operations before income taxes		129,732			—		—		129,732
Segment assets from continuing operations		744,023,452			399,817,522		715,189,386		1,859,030,360
Segment assets from discontinued operations		1,226,062			—		—		1,226,062

Three Months Ended June 30, 2006
Net interest income	$	9,462,733		$	5,414,600	$	3,994,866	$	18,872,199
Noninterest income		5,467,205			2,621,722		348,091		8,437,018
Depreciation and amortization		174,891			101,271		615		276,777
Segment income from continuing operations before income taxes		8,119,492			3,268,018		3,387,009		14,774,519
Segment loss from discontinued operations before income taxes		(940,908	)		—		—		(940,908	)
Segment assets from continuing operations		763,475,411			337,932,342		750,566,462		1,851,974,215
Segment assets from discontinued operations		114,265,781			—		—		114,265,781

Six Months Ended June 30, 2007
Net interest income	$	12,817,524		$	10,368,705	$	12,021,830	$	35,208,059
Noninterest income		11,233,401			5,493,329		712,474		17,439,204
Depreciation and amortization		370,940			186,489		1,229		558,658
Segment income from continuing operations before income taxes		8,297,305			8,104,876		11,448,675		27,850,856
Segment loss from discontinued operations before income taxes		(37,722	)		—		—		(37,722	)
Segment assets from continuing operations		744,023,452			399,817,522		715,189,386		1,859,030,360
Segment assets from discontinued operations		1,226,062			—		—		1,226,062

Six Months Ended June 30, 2006
Net interest income	$	17,573,494		$	10,839,233	$	8,581,267	$	36,993,994
Noninterest income		8,618,674			4,937,193		186,442		13,742,309
Depreciation and amortization		278,293			202,002		1,229		481,524
Segment income from continuing operations before income taxes		12,947,430			6,191,656		7,681,298		26,820,384
Segment loss from discontinued operations before income taxes		(1,017,526	)		—		—		(1,017,526	)
Segment assets from continuing operations		763,475,411			337,932,342		750,566,462		1,851,974,215
Segment assets from discontinued operations		114,265,781			—		—		114,265,781

STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

The following table sets forth reconciliations of net interest income, noninterest income, income from continuing operations before income taxes and assets of reportable operating segments to the Company’s consolidated totals:


	Three Months Ended June 30,						Six Months Ended June 30,

	2007			2006			2007			2006


Net interest income:
Total for reportable operating segments	$	17,954,189		$	18,872,199		$	35,208,059		$	36,993,994
Other^[1]		251,513			258,792			500,268			530,654


Consolidated net interest income	$	18,205,702		$	19,130,991		$	35,708,327		$	37,524,648


Noninterest income:
Total for reportable operating segments	$	8,600,457		$	8,437,018		$	17,439,204		$	13,742,309
Other^[1]		451,054			568,689			841,603			1,048,251


Consolidated noninterest income	$	9,051,511		$	9,005,707		$	18,280,807		$	14,790,560

Income from continuing operations before income taxes:
Total for reportable operating segments	$	13,734,770		$	14,774,519		$	27,850,856		$	26,820,384
Other^[1]		(7,783,920	)		(5,820,632	)		(16,101,835	)		(13,575,339	)


Consolidated income from continuing operations before income taxes	$	5,950,850		$	8,953,887		$	11,749,021		$	13,245,045


Assets:
Total for reportable operating segments:
- continuing operations	$	1,859,030,360		$	1,851,974,215		$	1,859,030,360		$	1,851,974,215
- discontinued operations		1,226,062			114,265,781			1,226,062			114,265,781
Other^[1]		26,721,680			28,693,686			26,721,680			28,693,686


Consolidated assets	$	1,886,978,102		$	1,994,933,682		$	1,886,978,102		$	1,994,933,682

[1] Represents operations not considered to be a reportable segment and/or general operating expenses of the Company.

STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)


7.	The Company adopted Emerging Issues Task Force Issue No. 06-5,Accounting for Purchases of Life Insurance-Determining the Amount that Could be Realized in Accordance with FASB Technical BulletinNo. 85-4, Accounting for Purchases of Life Insurance, and Statement of Financial Accounting Standards (“SFAS”) No. 156,Accounting for Servicing of Financial Assets-An Amendment of FASB Statement No. 140, as of January 1, 2007. There was no material impact on the Company’s results of operations or financial condition upon adoption.

	The Company also adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48 (“FIN 48”) as of January 1, 2007. The implementation of FIN 48 did not have an impact on our financial position or results of operations. At the adoption date of January 1, 2007 and at June 30, 2007, we had approximately $644,000 of unrecognized tax benefits, all of which would affect our effective tax rate if recognized. Approximately 50% of the unrecognized tax benefits are expected to be recognized during the second half of 2007 due to the expiration of the statute of limitations related to the taxation of certain income items. The Company recognizes interest accrued related to unrecognized tax benefits and penalties in noninterest operating expenses. Such accrued interest payable was approximately $235,000 at January 1, 2007. The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. The Company’s federal income tax returns for 2002 through 2005 are currently either under examination or subject to examination. The Company’s New York State and New York City tax returns for years prior to 2003 are no longer subject to examination.

	SFAS No. 155,Accounting for Certain Hybrid Financial Instruments – An Amendment of FASB Statements No. 133 and 140, which became effective for certain hybrid financial instruments acquired or issued by the Company on or after January 1, 2007, has had no impact on the Company’s consolidated financial statements because the Company has not acquired or issued the type of instruments covered by SFAS No. 155.

	In February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial Assets and Financial Liabilities– Including An Amendment of FASB StatementNo. 115(“SFAS No. 159”). SFAS No. 159 provides companies with an option to report selected financial assets and liabilities at estimated fair value. Most of the provisions of SFAS No. 159 are elective; however, the amendment to SFAS No. 115,Accounting for Certain Investments in Debt and Equity Securities,applies to all entities that own trading and available for sale securities. The fair value option created by SFAS No. 159 permits an entity to measure eligible items at fair value as of specified election dates. The fair value option (a) may generally be applied instrument by instrument, (b) is irrevocable unless a new election date occurs, and (c) must be applied to the entire instrument and not to only a portion of the instrument. SFAS No. 159 is effective for the Company as of January 1, 2008. The Company is currently analyzing the potential effects of SFAS No. 159 on its financial statements.

	In September 2006, FASB issued SFAS No. 157,Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles, and requires expanded disclosures regarding fair value measurements. SFAS No. 157 is effective for the Company on January 1, 2008 and is not expected to have a significant impact on the Company’s financial statements.


ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following commentary presents management’s discussion and analysis of the financial condition and results of operations of Sterling Bancorp (the “parent company”), a financial holding company under the Gramm-Leach-Bliley Act of 1999, and its subsidiaries, principally Sterling National Bank (the “bank”). Throughout this discussion and analysis, the term the “Company” refers to Sterling Bancorp and its subsidiaries. This discussion and analysis should be read in conjunction with the consolidated financial statements and supplemental data contained elsewhere in this quarterly report and the Company’s annual report on Form 10-K for the year ended December 31, 2006. Certain reclassifications have been made to prior years’ financial data to conform to current financial statement presentations.

OVERVIEW

The Company provides a broad range of financial products and services, including business and consumer loans, commercial and residential mortgage lending and brokerage, asset-based financing, factoring/accounts receivable management services, deposit services, trade financing, equipment leasing, trust and estate administration, and investment management services. The Company has operations in the metropolitan New York area, New Jersey and North Carolina and conducts business throughout the United States. The general state of the U.S. economy and, in particular, economic and market conditions in the metropolitan New York area have a significant impact on loan demand, the ability of borrowers to repay these loans and the value of any collateral securing these loans and may also affect deposit levels. Accordingly, future general economic conditions are a key uncertainty that management expects will materially affect the Company’s results of operations.

For the three months ended June 30, 2007, the bank’s average earning assets represented approximately 99.9% of the Company’s average earning assets. Loans represented 65.3% and investment securities represented 32.9% of the bank’s average earning assets for the second quarter of 2007.

For the six months ended June 30, 2007, the bank’s average earning assets represented approximately 99.7% of the Company’s average earning assets. Loans represented 63.9% and investment securities represented 33.7% of the bank’s average earning assets for the six months ended June 30, 2007.

The Company’s primary source of earnings is net interest income, and its principal market risk exposure is interest rate risk. The Company is not able to predict market interest rate fluctuations, and its asset-liability management strategy may not prevent interest rate changes from having a material adverse effect on the Company’s results of operations and financial condition.

Although management endeavors to minimize the credit risk inherent in the Company’s loan portfolio, it must necessarily make various assumptions and judgments about the collectibility of the loan portfolio based on its experience and evaluation of economic conditions. If such assumptions or judgments prove to be incorrect, the current allowance for loan losses may not be sufficient to cover loan losses and additions to the allowance may be necessary, which would have a negative impact on net income.

There is intense competition in all areas in which the Company conducts its business. The Company competes with banks and other financial institutions, including savings and loan associations, savings banks, finance companies and credit unions. Many of these competitors have substantially greater resources and lending limits and provide a wider array of banking services. To a limited extent, the Company also competes with other providers of financial services, such as money market mutual funds, brokerage firms, consumer finance companies and insurance companies. Competition is based on a number of factors, including prices, interest rates, service, availability of products, and geographic location.

The Company regularly evaluates acquisition opportunities and conducts due diligence activities in connection with possible acquisitions. As a result, acquisition discussions, and in some cases negotiations, regularly take place and future acquisitions could occur.

INCOME STATEMENT ANALYSIS

Net interest income, which represents the difference between interest earned on interest-earning assets and interest incurred on interest-bearing liabilities, is the Company’s primary source of earnings. Net interest income can be affected by changes in market interest rates as well as the level and composition of assets, liabilities and shareholders’ equity. Net interest spread is the difference between the average rate earned, on a tax-equivalent basis, on interest-earning assets and the average rate paid on interest-bearing liabilities. The net yield on interest-earning assets (“net interest margin”) is calculated by dividing tax-equivalent net interest income by average interest-earning assets. Generally, the net interest margin will exceed the net interest spread because a portion of interest-earning assets are funded by various noninterest-bearing sources, principally noninterest-bearing deposits and shareholders’ equity. The increases (decreases) in the components of interest income and interest expense, expressed in terms of fluctuation in average volume and rate, are provided in the Rate/Volume Analysis shown on pages 27 and 28. Information as to the components of interest income and interest expense and average rates is provided in the Average Balance Sheets shown on pages 25 and 26.

Comparison of the Three Months Ended June 30, 2007 and 2006

The Company reported income from continuing operations, after income taxes, for the three months ended June 30, 2007 of $3.8 million, representing $0.20 per share, calculated on a diluted basis, compared to $5.4 million, or $0.28 per share calculated on a diluted basis, for the second quarter of 2006. This decrease reflects higher interest and noninterest expenses and an increase in provision for loan losses which were only partially offset by increases in both interest and noninterest income and a decrease in provision for income taxes.

Net Interest Income

Net interest income, on a tax-equivalent basis, was $18.3 million for the second quarter of 2007 compared to $19.3 million for the 2006 period, as the higher rates paid on interest-bearing deposits and borrowings in the second quarter of 2007 more than offset the effects of higher balances for loans and lower balances for borrowings and investment securities for that quarter. The net interest margin, on a tax-equivalent basis, was 4.35% for the second quarter of 2007 compared to 4.58% for the 2006 period. The net interest margin was impacted by the flat yield curve, the higher interest rate environment in 2007, the higher level of noninterest-bearing demand deposits and the effect of higher average loans outstanding. The flat yield curve and more competitive pricing practices in the Company’s markets have caused the costs of deposits and borrowings to increase faster than the yield on earning assets.

Total interest income, on a tax-equivalent basis, aggregated $30.0 million for the second quarter of 2007 compared to $29.4 million for the 2006 period. The tax-equivalent yield on interest-earning assets was 7.24% for the second quarter of 2007 compared to 7.06% for the 2006 period.

Interest earned on the loan portfolio amounted to $23.1 million for the second quarter of 2007, up from $21.6 million the prior year period. Average loan balances amounted to $1,104.7 million, an increase of $76.4 million from an average of $1,028.3 million in the prior year period. The increase in average loans (across many segments of the Company’s loan portfolio), primarily due to the Company’s business development activities, accounted for $1.7 million of the $1.5 million increase in interest earned on loans. The decrease in the yield on the loan portfolio to 8.66% for the second quarter of 2007 from 8.72% for the 2006 period was primarily attributable to the mix of average outstanding balances among the components of the loan portfolio and the competitive pricing practices in the Company’s markets.

Interest earned on the securities portfolio, on a tax-equivalent basis, decreased to $6.5 million for the second quarter of 2007 from $7.7 million in the prior year period. Average outstandings decreased to $554.6 million (32.8% of average earning assets) for the second quarter of 2007 from $661.6 million (39.0% of average earning assets) in the prior year period. The average life of the securities portfolio was approximately 4.4 years at June 30, 2007 compared to 4.5 years at June 30, 2006.

Total interest expense increased by $1.7 million for the second quarter of 2007 from $10.0 million for the 2006 period, primarily due to the impact of higher rates paid for interest-bearing deposits partially offset by the impact of lower borrowed funds balances.

Interest expense on deposits increased to $9.9 million for the second quarter of 2007 from $6.4 million for the 2006 period, primarily due to an increase in the cost of those funds. The average rate paid on interest-bearing deposits was 3.77% which was 96 basis points higher than the prior year period. The increase in average cost of deposits reflects the higher interest rate environment during 2007.

Interest expense on borrowings decreased to $1.9 million for the second quarter of 2007 from $4.5 million for the 2006 period, primarily due to a decrease in average balances. Average borrowings decreased to $144.4 million for the second quarter of 2007 from $373.7 million in the prior year period, reflecting less reliance by the Company on wholesale funding.

Provision for Loan Losses

Based on management’s continuing evaluation of the loan portfolio (discussed under “Asset Quality” below), the provision for loan losses for the second quarter of 2007 was $1.1 million, compared to $0.4 million for the prior year period. Factors affecting the level of provision included the growth in the loan portfolios, changes in general economic conditions and the amount of nonaccrual loans.

Noninterest Income

Noninterest income increased to $9.1 million for the second quarter of 2007 from $9.0 million in the 2006 period, primarily due to an increase in service charges on deposit accounts.

Noninterest Expenses

Noninterest expenses for the second quarter of 2007 increased $1.4 million when compared to the 2006 period primarily due to an increase in professional fees; during the second quarter of 2006, professional fee expense benefitted from a recovery of $1.1 million.

Provision for Income Taxes

The provision for income taxes decreased by $1.4 million to $2.2 million for the second quarter of 2007. The decrease was primarily due to the lower level of pre-tax income in the 2007 period.

Discontinued Operations

In September 2006, the Company sold the business conducted by Sterling Financial Services. In accordance with U.S. generally accepted accounting principles, the after-tax loss from discontinued operations is reported in the Consolidated Statements of Income after income from continuing operations.

Income from discontinued operations, net of tax, was $71 thousand for the second quarter of 2007, compared to a loss of $517 thousand for the second quarter of 2006.

Income taxes applicable to discontinued operations were calculated at the Company’s overall marginal tax rate of 45.14%.

Comparison of the Six Months Ended June 30, 2007 and 2006

The Company reported income from continuing operations, after income taxes, for the six months ended June 30, 2007 of $7.4 million, representing $0.39 per share, calculated on a diluted basis, compared to $11.9 million, or $0.61 per share, calculated on a diluted basis, for the first six months of 2006. This decrease reflects higher interest and noninterest expenses and increases in provision for loan losses and provision for income taxes which were only partially offset by increases in both interest and noninterest income.

Net Interest Income

Net interest income, on a tax-equivalent basis, was $36.0 million for the first six months of 2007 compared to $37.9 million for the 2006 period, as the higher rates paid on interest-bearing deposits and borrowings in the first six months of 2007 more than offset the effects of higher average yield on loans, higher balances for loans, lower balances for borrowings and investment securities compared to the 2006 period. The net interest margin, on a tax-equivalent basis, was 4.34% for the first six months of 2007 compared to 4.58% for the 2006 period. The net interest margin was impacted by the flat yield curve, the higher interest rate environment in 2007, the lower level of noninterest-bearing demand deposits and the effect of higher average loans outstanding. The flat yield curve and more competitive pricing practices in the Company’s markets have caused the costs of deposits and borrowings to increase faster than the yield on earning assets.

Total interest income, on a tax-equivalent basis, aggregated $59.3 million for the first six months of 2007, up $2.3 million from the 2006 period. The tax-equivalent yield on interest-earning assets was 7.24% for the first six months of 2007 compared to 6.94% for the 2006 period.

Interest earned on the loan portfolio amounted to $44.8 million for the first six months of 2007, up from $41.0 million the prior year period. Average loan balances amounted to $1,079.1 million, an increase of $76.9 million from an average of $1,002.3 million in the prior year period. The increase in average loans (across many segments of the Company’s loan portfolio), primarily due to the acquisition of Sterling Resource Funding Corp. (completed April 1, 2006) coupled with the Company’s other business development activities, accounted for $3.3 million of the $3.9 million increase in interest earned on loans. The increase in the yield on the loan portfolio to 8.74% for the first six months of 2007 from 8.62% for the 2006 period was primarily attributable to the mix (including the acquisition of Sterling Resource Funding Corp.) of average outstanding balances among the components of the loan portfolio and the higher interest rate environment in 2007.

Interest earned on the securities portfolio, on a tax-equivalent basis, decreased to $13.4 million for the first six months of 2007 from $15.9 million in the prior year period. Average outstandings decreased to $566.8 million (33.6% of average earning assets) for the first six months of 2007 from $685.0 million (40.5% of average earning assets) in the prior year period. The average life of the securities portfolio was approximately 4.4 years at June 30, 2007 compared to 4.5 years at June 30, 2006.

Total interest expense increased by $4.3 million for the first six months of 2007 from $19.0 million for the 2006 period, primarily due to the impact of higher interest-bearing deposit balances coupled with higher rates paid for those deposits partially offset by the impact of lower borrowed funds balances.

Interest expense on deposits increased to $19.3 million for the first six months of 2007 from $12.6 million for the 2006 period, primarily due to an increase in the cost of those funds. Average interest-bearing deposit balances increased to $1,033.7 million for the first six months of 2007 from $944.0 million in the 2006

period primarily the result of the Company’s branching initiatives and other business development activities. The average rate paid on interest-bearing deposits was 3.76% which was 106 basis points higher than the prior year period. The increase in average cost of deposits reflects the higher interest rate environment during 2007.

Interest expense on borrowings decreased to $4.1 million for the first six months of 2007 from $8.1 million for the 2006 period, primarily due to a decrease in average balances. Average borrowings decreased to $157.4 million for the first six months of 2007 from $345.4 million in the prior year period, reflecting less reliance by the Company on wholesale funding.

Provision for Loan Losses

Based on management’s continuing evaluation of the loan portfolio (discussed under “Asset Quality” below), the provision for loan losses for the first six months of 2007 was $2.3 million, compared to $1.7 million for the prior year period. Factors affecting the level of provision included the growth in the loan portfolios, changes in general economic conditions and the amount of nonaccrual loans.

Noninterest Income

Noninterest income increased to $18.3 million for the first six months of 2007 from $14.8 million in the 2006 period. Higher accounts receivable management/ factoring commissions and other fees were primarily due to revenues attributable to the acquisition of Sterling Resource Funding Corp. Mortgage banking income increased due to a change in product mix towards more profitable market segments and away from the less profitable, higher risk wholesale business. Also contributing to the increase were higher revenue from service charges on deposit accounts and a $0.4 million decrease in losses on sales of securities.

Noninterest Expenses

Noninterest expenses for the first six months of 2007 increased $2.6 million when compared to the 2006 period. The increase was primarily due to higher salaries and occupancy costs related to investments in the Sterling franchise, including two new branches and the acquisition of Sterling Resource Funding Corp. Also contributing to the increase was higher professional fees; during the second quarter of 2006, professional fee expenses benefitted from a recovery of $1.1 million. These increases were partially offset by expense reductions achieved from the reengineering of the mortgage banking activities and lower expenses for employee benefits.

Provision for Income Taxes

The provision for income taxes increased by $3.0 million to $4.4 million for the first six months of 2007. The increase was primarily due to a $3.7 million reversal of state and local taxes, net of federal tax effect, in the first quarter of 2006 as a result of the closure of certain years for local tax purposes.

Discontinued Operations

Loss from discontinued operations, net of tax, was $21 thousand for the first six months of 2007, compared to $562 thousand for the first six months of 2006.

Income taxes applicable to discontinued operations were calculated at the Company’s overall marginal tax rate of 45.14%.

BALANCE SHEET ANALYSIS

Securities

The Company’s securities portfolios are comprised principally of mortgage-backed securities and agency notes of U.S. government corporations and government sponsored enterprises, and obligations of state and political institutions. At June 30, 2007, the Company’s portfolio of securities totaled $532.3 million, of which mortgage-backed securities and collateralized mortgage obligations of U.S. government corporations and government sponsored enterprises having an average life of approximately 4.5 years amounted to $476.6 million. The Company has the intent and ability to hold to maturity securities classified as “held to maturity.” These securities are carried at cost, adjusted for amortization of premiums and accretion of discounts. The gross unrealized gains and losses on “held to maturity” securities were $0.4 million and $11.7 million, respectively. Securities classified as “available for sale” may be sold in the future, prior to maturity. These securities are carried at market value. Net aggregate unrealized gains or losses on these securities are included in a valuation allowance account and are shown net of taxes, as a component of shareholders’ equity. Given the generally high credit quality of the portfolio, management expects to realize all of its investment upon market recovery or the maturity of such instruments and thus believes that any market value impairment is interest rate related and therefore temporary. “Available for sale” securities included gross unrealized gains of $0.2 million and gross unrealized losses of $5.8 million.

The following table presents information regarding the average life and yields of certain available for sale (“AFS”) and held to maturity (“HTM”) securities:


	Weighted Average Life		Weighted Average Yield

June 30, 2007	AFS	HTM	AFS		HTM


Mortgage-backed securities	5.3 years	4.3 years	4.66	%	4.63	%
Agency notes	—	1.2 years	—		4.31	%
Obligations of state and political institutions	5.2 years	—	6.35	% (1)	—

(1) tax equivalent

The following table presents information regarding securities available for sale:


June 30, 2007	Gross Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Market Value

Mortgage-backed securities
CMOs (Federal National Mortgage Association)	$	8,872,390	$	—	$	661,270	$	8,211,120
CMOs (Federal Home Loan Mortgage Corporation)		22,532,866		—		1,555,532		20,977,334
Federal National Mortgage Association		42,618,870		36,698		1,722,419		40,933,149
Federal Home Loan Mortgage Corporation		40,261,333		7,085		1,583,558		38,684,860
Government National Mortgage Association		3,701,983		101,022		3,738		3,799,267

Total mortgage-backed securities		117,987,442		144,805		5,526,517		112,605,730
Obligations of state and political institutions		17,877,746		38,547		270,662		17,645,631
Trust and money market preferred securities		12,177,116		39,600		7,114		12,209,602
Federal Reserve Bank stock		1,130,700		—		—		1,130,700
Federal Home Loan Bank stock		1,984,700		—		—		1,984,700
Other securities		304,442		18,936		—		323,378


Total	$	151,462,146	$	241,888	$	5,804,293	$	145,899,741

The following table presents information regarding securities held to maturity:


June 30, 2007	Carrying Value		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Market Value


Mortgage-backed securities
CMOs (Federal National Mortgage Association)	$	12,521,964	$	—	$	728,280	$	11,793,684
CMOs (Federal Home Loan Mortgage Corporation)		21,889,193		—		1,270,179		20,619,014
Federal National Mortgage Association		188,084,592		183,552		5,105,195		183,162,949
Federal Home Loan Mortgage Corporation		132,012,336		55,031		4,444,398		127,622,969
Government National Mortgage Association		9,527,285		189,829		23,111		9,694,003

Total mortgage-backed securities		364,035,370		428,412		11,571,163		352,892,619
Agency Notes
Federal Home Loan Bank		11,871,516		—		44,954		11,826,562
Federal Farm Credit Bank		10,000,000		—		59,375		9,940,625

Total obligations of U.S. government corporations and agencies		385,906,886		428,412		11,675,492		374,659,806
Debt securities issued by foreign governments		500,000		—		1,523		498,477

Total	$	386,406,886	$	428,412	$	11,677,015	$	375,158,283

Loan Portfolio

A management objective is to maintain the quality of the loan portfolio. The Company seeks to achieve this objective by maintaining rigorous underwriting standards coupled with regular evaluation of the creditworthiness of and the designation of lending limits for each borrower. The portfolio strategies include seeking industry and loan size diversification in order to minimize credit exposure and originating loans in markets with which the Company is familiar.

The Company’s commercial and industrial loan portfolio represents approximately 51% of all loans. Loans in this category are typically made to small and medium-sized businesses and range between $25,000 and $10 million. The Company’s real estate mortgage portfolio, which represents approximately 26% of all loans, is secured by mortgages on real property located principally in the states of New York, New Jersey, Virginia and North Carolina. The Company’s leasing portfolio, which consists of finance leases for various types of business equipment, represents approximately 20% of all loans. Sources of repayment are from the borrower’s operating profits, cash flows and liquidation of pledged collateral. Based on underwriting standards, loans may be secured in whole or in part by collateral such as liquid assets, accounts receivable, equipment, inventory, and real property. The collateral securing any loan or lease may depend on the type of loan or lease and may vary in value based on market conditions.

The following table sets forth the composition of the Company’s loans held for sale and loans held in portfolio:


	June 30,

	2007					2006

	($ in thousands)
			% of					% of
	Balances		Total			Balances		Total

Domestic
Commercial and industrial	$	596,624		51.1	%	$	542,606		51.2	%
Equipment lease financing		227,660		19.5			212,893		20.1
Real estate - residential mortgage		177,819		15.2			166,745		15.8
Real estate- commercial mortgage		92,718		7.9			118,891		11.2
Real estate - construction		38,147		3.3			3,746		0.4
Installment - individuals		10,333		0.9			14,213		1.3
Loans to depository institutions		25,000		2.1			—		—



Loans, net of unearned discounts	$	1,168,301		100.0	%	$	1,059,094		100.0	%

Asset Quality

Intrinsic to the lending process is the possibility of loss. In times of economic slowdown, the risk of loss inherent in the Company’s portfolio of loans may increase. While management endeavors to minimize this risk, it recognizes that loan losses will occur and that the amount of these losses will fluctuate depending on the risk characteristics of the loan portfolio which in turn depend on current and future economic conditions, the financial condition of borrowers, the realization of collateral, and the credit management process.

Management views the allowance for loan losses as a critical accounting policy due to its subjectivity. The allowance for loan losses is maintained through the provision for loan losses, which is a charge to operating earnings. The adequacy of the provision and the resulting allowance for loan losses is determined by a management evaluation process of the loan portfolio, including identification and review of individual problem situations that may affect the borrower’s ability to repay, review of overall portfolio quality through an analysis of current charge-offs, delinquency and nonperforming loan data, estimates of the value of any underlying collateral, an assessment of current and expected future economic conditions and changes in the size and character of the loan portfolio. Other data utilized by management in determining the adequacy of the allowance for loan losses include, but are not limited to, the results of regulatory reviews, the amount of, trend of and/or borrower characteristics on loans that are identified as requiring special attention as part of the credit review process, and peer group comparisons. The impact of this other data might result in an allowance which will be greater than that indicated by the evaluation process previously described. The allowance reflects management’s evaluation both of loans presenting identified loss potential and of the risk inherent in various components of the loan portfolio, including loans identified as impaired as required by SFAS No. 114. Thus, an increase in the size of the portfolio or in any of its components could necessitate an increase in the allowance even though there may not be a decline in credit quality or an increase in potential problem loans. A significant change in any of the evaluation factors described above could result in future additions to the allowance. At June 30, 2007, the ratio of the allowance to loans held in portfolio, net of unearned discounts, was 1.39% and the allowance was $15.6 million. At such date, the Company’s nonaccrual loans amounted to $5.9 million; $0.3 million of such loans was judged to be impaired within the scope of SFAS No. 114. There were no loans 90 days past due and still accruing. Based on the foregoing, as well as management’s judgment as to the current risks inherent in loans held in portfolio, the Company’s allowance for loan losses was deemed adequate to absorb all reasonably anticipated losses on specifically known and other potential credit risks associated with the portfolio as of June 30, 2007. Net losses within loans held in portfolio are not statistically predictable and changes in conditions in the next twelve months could result in future provisions for loan losses varying from the level taken in the first six months of 2007. Potential problem loans, which are loans that are currently performing under present loan repayment terms but where known information about possible credit problems of borrowers causes management to have serious doubts as to the ability of the borrowers to continue to comply with the present repayment terms, aggregated $1.3 million at June 30, 2007.

Deposits

A significant source of funds for the Company continues to be deposits, consisting of demand (noninterest-bearing), NOW, savings, money market and time deposits (principally certificates of deposit).

The following table provides certain information with respect to the Company’s deposits:


	June 30,

	2007					2006

	($ in thousands)
			% of					% of
	Balances		Total			Balances		Total

Domestic
Demand	$	520,433		33.9	%	$	495,257		35.0	%
NOW		231,391		15.1			213,823		15.1
Savings		19,679		1.3			22,579		1.6
Money market		225,809		14.7			200,528		14.2
Time deposits		535,941		34.9			480,228		33.9

Total domestic deposits		1,533,253		99.9			1,412,415		99.8
Foreign
Time deposits		575		0.1			3,028		0.2

Total deposits	$	1,533,828		100.0	%	$	1,415,443		100.0	%

Fluctuations of balances in total or among categories at any date may occur based on the Company’s mix of assets and liabilities as well as on customers’ balance sheet strategies. Historically, however, average balances for deposits have been relatively stable. Information regarding these average balances is presented on pages 25 and 26.

CAPITAL

The Company and the bank are subject to risk-based capital regulations which quantitatively measure capital against risk-weighted assets, including certain off-balance sheet items. These regulations define the elements of the Tier 1 and Tier 2 components of Total Capital and establish minimum ratios of 4% for Tier 1 capital and 8% for Total Capital for capital adequacy purposes. Supplementing these regulations is a leverage requirement. This requirement establishes a minimum leverage ratio (at least 3% or 4%, depending upon an institution’s regulatory status) which is calculated by dividing Tier 1 capital by adjusted quarterly average assets (after deducting goodwill). Information regarding the Company’s and the bank’s risk-based capital is presented on page 29. In addition, the bank is subject to the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) which imposes a number of mandatory supervisory measures. Among other matters, FDICIA established five capital categories, ranging from “well capitalized” to “critically undercapitalized”, which are used by regulatory agencies to determine a bank’s deposit insurance premium, approval of applications authorizing institutions to increase their asset size or otherwise expand business activities or acquire other institutions. Under FDICIA, a “well capitalized” bank must maintain minimum leverage, Tier 1 and Total Capital ratios of 5%, 6% and 10%, respectively. The Federal Reserve Board applies comparable tests for holding companies such as the Company. At June 30, 2007, the Company and the bank exceeded the requirements for “well capitalized” institutions.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

For information regarding recently issued accounting pronouncements and their impact or expected impact on the Company’s consolidated financial statements, see Note 7 of the Company’s unaudited consolidated financial statements in this quarterly report.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained or incorporated by reference in this quarterly report on Form 10-Q, including but not limited to, statements concerning future results of operations or financial position, borrowing capacity and future liquidity, future investment results, future credit exposure, future loan losses and plans and objectives for future operations, and other statements contained herein regarding matters that are not historical facts, are “forward-looking statements” as defined in the Securities Exchange Act of 1934. These statements are not historical facts but instead are subject to numerous assumptions, risks and uncertainties, and represent only our belief regarding future events, many of which, by their nature, are inherently uncertain and outside our control. Any forward-looking statements we may make speak only as of the date on which such statements are made. Our actual results and financial position may differ materially from the anticipated results and financial condition indicated in or implied by these forward-looking statements.

Factors that could cause our actual results to differ materially from those in the forward-looking statements include, but are not limited to, the following: inflation, interest rates, market and monetary fluctuations; geopolitical developments including acts of war and terrorism and their impact on economic conditions; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board; changes, particularly declines, in general economic conditions and in the local economies in which the Company operates; the financial condition of the Company’s borrowers; competitive pressures on loan and deposit pricing and demand; changes in technology and their impact on the marketing of new products and services and the acceptance of these products and services by new and existing customers; the willingness of customers to substitute competitors’ products and services for the Company’s products and services; the impact of changes in financial services laws and regulations (including laws concerning taxes, banking, securities and insurance); changes in accounting principles, policies and guidelines; the success of the Company at managing the risks involved in the foregoing, as well as the risks and uncertainties described in “Risk Factors” in the Company’s annual report on Form 10-K for the year ended December 31, 2006, and other risks and uncertainties detailed from time to time in press releases and other public filings. The foregoing list of important factors is not exclusive, and we will not update any forward-looking statement, whether written or oral, that may be made from time to time.

STERLING BANCORP AND SUBSIDIARIES
Average Balance Sheets [1]
Three Months Ended June 30,
(Unaudited)

(dollars in thousands)


	2007									2006

	Average Balance			Interest			Average Rate			Average Balance			Interest				Average Rate

ASSETS
Interest-bearing deposits with other banks	$	2,881			$	36		5.11	%	$	1,788			$	20			4.61	%
Securities available for sale		127,616				1,510		4.73			143,428				1,684			4.70
Securities held to maturity		407,034				4,699		4.62			488,398				5,551			4.55
Securities tax-exempt [2]		19,993				314		6.30			29,793				485			6.53

Total investment securities		554,643				6,523		4.71			661,619				7,720			4.67
Federal funds sold		27,967				368		5.20			2,802				35			4.93
Loans, net of unearned discounts [3]		1,104,708				23,121		8.66			1,028,304				21,589			8.72

TOTAL INTEREST-EARNING ASSETS		1,690,199				30,048		7.24	%		1,694,513				29,364			7.06	%

Cash and due from banks		63,451									60,953
Allowance for loan losses		(16,320	)								(16,248	)
Goodwill		22,875									23,886
Other assets		92,000									89,855

Total assets-continuing operations		1,852,205									1,852,959
Assets-discontinued operations		1,328									114,065

TOTAL ASSETS	$	1,853,533								$	1,967,024


LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits
Domestic
Savings	$	21,149				27		0.51	%	$	23,646				24			0.41	%
NOW		245,682				1,572		2.57			176,292				691			1.57
Money market		221,135				1,681		3.05			205,165				957			1.87
Time		561,843				6,579		4.70			504,428				4,707			3.74
Foreign
Time		574				2		1.09			3,027				8			1.02

Total interest-bearing deposits		1,050,383				9,861		3.77			912,558				6,387			2.81


Borrowings
Securities sold under agreements to repurchase - customers		76,091				805		4.24			81,439				767			3.78
Securities sold under agreements to repurchase - dealers		—				—		—			106,438				1,344			5.07
Federal funds purchased		1,758				24		5.26			19,912				251			4.99
Commercial paper		27,906				355		5.11			49,371				538			4.37
Short-term borrowings - FHLB		—				—		—			50,498				642			5.10
Short-term borrowings - other		1,179				15		5.34			581				7			5.09
Long-term borrowings - FHLB		11,648				136		4.69			39,670				461			4.64
Long-term borrowings - sub debt		25,774				524		8.38			25,774				524			8.37

Total borrowings		144,356				1,859		5.19			373,683				4,534			4.87

Interest-bearing liabilities allocated to discontinued operations		—				—		—			(103,508	)			(878	)		3.36

TOTAL INTEREST-BEARING LIABILITIES		1,194,739				11,720		3.94	%		1,182,733				10,043			3.41	%

Noninterest-bearing deposits		444,369									441,630
Other liabilities		86,095									93,675
Liabilities-discontinued operations		180									103,661

Total liabilities		1,725,383									1,821,699

Shareholders’ equity		128,150									145,325

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,853,533								$	1,967,024

Net interest income/spread						18,328		3.30	%						19,321			3.65	%

Net yield on interest-earning assets (margin)								4.35	%									4.58	%

Less: Tax equivalent adjustment						123									191

Net interest income					$	18,205								$	19,130


[1]	The average balances of assets, liabilities and shareholders’ equity are computed on the basis of daily averages. Average rates are presented on a tax-equivalent basis. Certain reclassifications have been made to amounts for prior periods to conform to the current presentation.

[2]	Interest on tax-exempt securities is presented on a tax-equivalent basis.

[3]	Includes loans held for sale and loans held in portfolio; all loans are domestic. Nonaccrual loans are included in amounts outstanding and income has been included to the extent earned.

STERLING BANCORP AND SUBSIDIARIES
Average Balance Sheets [1]
Six Months Ended June 30,
(Unaudited)

(dollars in thousands)


	2007								2006

	Average Balance			Interest		Average Rate			Average Balance			Interest			Average Rate

ASSETS
Interest-bearing deposits with other banks	$	2,856		$	67		5.24	%	$	2,413		$	50			4.47	%

Securities available for sale		131,105			3,149		4.80			156,907			3,571			4.55
Securities held to maturity		415,032			9,568		4.61			497,371			11,295			4.54
Securities tax-exempt [2]		20,669			653		6.37			30,752			1,004			6.59

Total investment securities		566,806			13,370		4.72			685,030			15,870			4.64
Federal funds sold		37,790			1,003		5.28			3,204			75			4.65
Loans, net of unearned discounts [3]		1,079,149			44,848		8.74			1,002,291			40,969			8.62

TOTAL INTEREST-EARNING ASSETS		1,686,601			59,288		7.24	%		1,692,938			56,964			6.94	%

Cash and due from banks		65,493								62,198
Allowance for loan losses		(16,596	)							(16,124	)
Goodwill		22,868								22,530
Other assets		89,551								89,263

Total assets-continuing operations		1,847,917								1,850,805
Assets-discontinued operations		1,215								114,115

TOTAL ASSETS	$	1,849,132							$	1,964,920


LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits
Domestic
Savings	$	21,026			52		0.50	%	$	24,666			50			0.41	%
NOW		233,916			2,970		2.56			179,385			1,426			1.60
Money market		214,138			3,117		2.94			223,379			1,979			1.79
Time		563,998			13,126		4.69			513,542			9,160			3.60
Foreign
Time		574			3		1.09			3,025			16			1.06

Total interest-bearing deposits		1,033,652			19,268		3.76			943,997			12,631			2.70


Borrowings
Securities sold under agreements to repurchase - customers		85,517			1,880		4.43			80,756			1,462			3.65
Securities sold under agreements to repurchase - dealers		—			—		—			96,683			2,328			4.86
Federal funds purchased		1,354			36		5.25			16,117			386			4.77
Commercial paper		27,904			705		5.10			45,776			943			4.15
Short-term borrowings - FHLB		—			—		—			33,814			835			4.98
Short-term borrowings - other		1,040			27		5.34			746			18			4.81
Long-term borrowings - FHLB		15,801			361		4.57			45,746			1,047			4.58
Long-term borrowings - sub debt		25,774			1,047		8.38			25,774			1,047			8.38

Total borrowings		157,390			4,056		5.21			345,412			8,066			4.71

Interest-bearing liabilities allocated to discontinued operations		—			—		—			(103,015	)		(1,652	)		3.19

TOTAL INTEREST-BEARING LIABILITIES		1,191,042			23,324		3.95	%		1,186,394			19,045			3.24	%

Noninterest-bearing deposits		439,609								441,683
Other liabilities		88,880								89,006
Liabilities-discontinued operations		308								103,188

Total liabilities		1,719,839								1,820,271

Shareholders’ equity		129,293								144,649

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,849,132							$	1,964,920

Net interest income/spread					35,964		3.29	%					37,919			3.70	%

Net yield on interest-earning assets (margin)							4.34	%								4.58	%

Less: Tax equivalent adjustment					256								395

Net interest income				$	35,708							$	37,524


[1]	The average balances of assets, liabilities and shareholders’ equity are computed on the basis of daily averages. Average rates are presented on a tax-equivalent basis. Certain reclassifications have been made to amounts for prior periods to conform to the current presentation.

[2]	Interest on tax-exempt securities is presented on a tax-equivalent basis.

[3]	Includes loans held for sale and loans held in portfolio; all loans are domestic. Nonaccrual loans are included in amounts outstanding and income has been included to the extent earned.

STERLING BANCORP AND SUBSIDIARIES
Rate/Volume Analysis [1]
(Unaudited)

(in thousands)


	Increase/(Decrease) Three Months Ended June 30, 2007 to June 30, 2006

	Volume			Rate			Net [2]

INTEREST INCOME
Interest-bearing deposits with other banks	$	14		$	2		$	16


Securities available for sale		(185	)		11			(174	)
Securities held to maturity		(936	)		84			(852	)
Securities tax-exempt		(155	)		(16	)		(171	)

Total investment securities		(1,276	)		79			(1,197	)


Federal funds sold		331			2			333

Loans, net of unearned discounts [3]		1,684			(152	)		1,532


TOTAL INTEREST INCOME	$	753		$	(69	)	$	684


INTEREST EXPENSE
Interest-bearing deposits
Domestic
Savings	$	(3	)	$	6		$	3
NOW		337			544			881
Money market		79			645			724
Time		575			1,297			1,872
Foreign
Time		(7	)		1			(6	)

Total interest-bearing deposits		981			2,493			3,474


Borrowings
Securities sold under agreements to repurchase - customers		(52	)		90			38
Securities sold under agreements to repurchase - dealers		(1,344	)		—			(1,344	)
Federal funds purchased		(239	)		12			(227	)
Commercial paper		(263	)		80			(183	)
Short-term borrowings - FHLB		(642	)		—			(642	)
Short-term borrowings - other		8			—			8
Long-term borrowings - FHLB		(330	)		5			(325	)
Long-term borrowings - sub debt		—			—			—

Total borrowings		(2,862	)		187			(2,675	)

Less: interest-bearing liabilities allocated to discontinued operations		878			—			878

TOTAL INTEREST EXPENSE	$	(1,003	)	$	2,680		$	1,677

NET INTEREST INCOME	$	1,756		$	(2,749	)	$	(993	)


[1]	This table is presented on a tax-equivalent basis.

[2]	Changes in interest income and interest expense due to a combination of both volume and rate have been allocated to the change due to volume and the change due to rate in proportion to the relationship of the change due solely to each.

[3]	Includes loans held for sale and loans held in portfolio; all loans are domestic. Nonaccrual loans are included in amounts outstanding and income has been included to the extent earned.

STERLING BANCORP AND SUBSIDIARIES
Rate/Volume Analysis [1]
(Unaudited)

(in thousands)


	Increase/(Decrease) Six Months Ended June 30, 2007 to June 30, 2006

	Volume			Rate			Net [2]

INTEREST INCOME
Interest-bearing deposits with other banks	$	9		$	8		$	17


Securities available for sale		(608	)		186			(422	)
Securities held to maturity		(1,896	)		169			(1,727	)
Securities tax-exempt		(318	)		(33	)		(351	)

Total investment securities		(2,822	)		322			(2,500	)


Federal funds sold		917			11			928

Loans, net of unearned discounts [3]		3,283			596			3,879


TOTAL INTEREST INCOME	$	1,387		$	937		$	2,324


INTEREST EXPENSE
Interest-bearing deposits
Domestic
Savings	$	(8	)	$	10		$	2
NOW		519			1,025			1,544
Money market		(85	)		1,223			1,138
Time		972			2,994			3,966
Foreign
Time		(13	)		—			(13	)

Total interest-bearing deposits		1,385			5,252			6,637


Borrowings
Securities sold under agreements to repurchase - customers		90			328			418
Securities sold under agreements to repurchase - dealers		(2,328	)		—			(2,328	)
Federal funds purchased		(384	)		34			(350	)
Commercial paper		(422	)		184			(238	)
Short-term borrowings - FHLB		(835	)		—			(835	)
Short-term borrowings - other		7			2			9
Long-term borrowings - FHLB		(684	)		(2	)		(686	)
Long-term borrowings - sub debt		—			—			—

Total borrowings		(4,556	)		546			(4,010	)

Less: interest-bearing liabilities allocated to discontinued operations		1,652			—			1,652

TOTAL INTEREST EXPENSE	$	(1,519	)	$	5,798		$	4,279

NET INTEREST INCOME	$	2,906		$	(4,861	)	$	(1,955	)


[1]	This table is presented on a tax-equivalent basis.

[2]	Changes in interest income and interest expense due to a combination of both volume and rate have been allocated to the change due to volume and the change due to rate in proportion to the relationship of the change due solely to each.

[3]	Includes loans held for sale and loans held in portfolio; all loans are domestic. Nonaccrual loans are included in amounts outstanding and income has been included to the extent earned.

STERLING BANCORP AND SUBSIDIARIES
Regulatory Capital and Ratios

Ratios and Minimums
(dollars in thousands)


	Actual					For Capital Adequacy Minimum					To Be Well Capitalized

As of June 30, 2007	Amount		Ratio			Amount		Ratio			Amount		Ratio

Total Capital (to Risk Weighted Assets):
The Company	$	151,941		11.84	%	$	102,662		8.00	%	$	128,328		10.00	%
The bank		148,196		11.71			101,248		8.00			126,560		10.00

Tier 1 Capital (to Risk Weighted Assets):
The Company		136,359		10.63			51,331		4.00			76,997		6.00
The bank		132,614		10.48			50,624		4.00			75,936		6.00	��

Tier 1 Leverage Capital (to Average Assets):
The Company		136,359		7.45			73,225		4.00			91,532		5.00
The bank		132,614		7.30			72,651		4.00			90,813		5.00

As of December 31, 2006

Total Capital (to Risk Weighted Assets):
The Company	$	162,232		12.74	%	$	102,299		8.00	%	$	127,874		10.00	%
The bank		138,651		11.00			101,288		8.00			126,610		10.00

Tier 1 Capital (to Risk Weighted Assets):
The Company		146,244		11.49			51,150		4.00			76,725		6.00
The bank		122,819		9.75			50,644		4.00			75,966		6.00

Tier 1 Leverage Capital (to Average Assets):
The Company		146,244		7.82			75,131		4.00			93,913		5.00
The bank		122,819		6.60			74,788		4.00			93,485		5.00

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ASSET/LIABILITY MANAGEMENT

The Company’s primary earnings source is its net interest income; therefore, the Company devotes significant time and has invested in resources to assist in the management of interest rate risk and asset quality. The Company’s net interest income is affected by changes in market interest rates, and by the level and composition of interest-earning assets and interest-bearing liabilities. The Company’s objectives in its asset/liability management are to utilize its capital effectively, to provide adequate liquidity and to enhance net interest income, without taking undue risks or subjecting the Company unduly to interest rate fluctuations.

The Company takes a coordinated approach to the management of its liquidity, capital and interest rate risk. This risk management process is governed by policies and limits established by senior management which are reviewed and approved by the Asset/Liability Committee. This committee, which is comprised of members of senior management, meets to review, among other things, economic conditions, interest rates, yield curve, cash flow projections, expected customer actions, liquidity levels, capital ratios and repricing characteristics of assets, liabilities and financial instruments.

Market Risk

Market risk is the risk of loss in a financial instrument arising from adverse changes in market indices such as interest rates, foreign exchange rates and equity prices. The Company’s principal market risk exposure is interest rate risk, with no material impact on earnings from changes in foreign exchange rates or equity prices.

Interest rate risk is the exposure to changes in market interest rates. Interest rate sensitivity is the relationship between market interest rates and net interest income due to the repricing characteristics of assets and liabilities. The Company monitors the interest rate sensitivity of its balance sheet positions by examining its near-term sensitivity and its longer-term gap position. In its management of interest rate risk, the Company utilizes several financial and statistical tools, including traditional gap analysis and sophisticated income simulation models.

A traditional gap analysis is prepared based on the maturity and repricing characteristics of interest-earning assets and interest-bearing liabilities for selected time bands. The mismatch between repricings or maturities within a time band is commonly referred to as the “gap” for that period. A positive gap (asset sensitive) where interest rate sensitive assets exceed interest rate sensitive liabilities generally will result in the net interest margin increasing in a rising rate environment and decreasing in a falling rate environment. A negative gap (liability sensitive) will generally have the opposite result on the net interest margin. However, the traditional gap analysis does not assess the relative sensitivity of assets and liabilities to changes in interest rates and other factors that could have an impact on interest rate sensitivity or net interest income. The Company utilizes the gap analysis to complement its income simulations modeling, primarily focusing on the longer-term structure of the balance sheet.

The Company’s balance sheet structure is primarily short-term in nature with a substantial portion of assets and liabilities repricing or maturing within one year. The Company’s gap analysis at June 30, 2007, presented on page 35, indicates that net interest income would decrease during periods of rising interest rates and increase during periods of falling interest rates, but, as mentioned above, gap analysis may not be an accurate predictor of net interest income.

As part of its interest rate risk strategy, the Company may use financial instrument derivatives to hedge the interest rate sensitivity of assets. The Company has written policy guidelines, approved by the Board of Directors, governing the use of financial instruments, including approved counterparties, risk limits and appropriate internal control procedures. The credit risk of derivatives arises principally from the potential for a counterparty to fail to meet its obligation to settle a contract on a timely basis.

As of June 30, 2007, the Company was a party to two interest rate floor agreements with notional amounts of $50,000,000 each and maturities of September 14, 2007 and September 14, 2008, respectively. Interest rate floor contracts require the counterparty to pay the Company at specified future dates the amount, if any, by which the specified interest (prime rate) falls below the fixed floor rates, applied to the notional amounts. The Company utilizes the financial instruments to adjust its interest rate risk position without exposing itself to principal risk and funding requirements. These financial instruments are being used as part of the Company’s interest rate risk management and not for trading purposes. At June 30, 2007, all counterparties have investment grade credit ratings from the major rating agencies. Each counterparty is specifically approved for applicable credit exposure.

The interest rate floor contracts require the Company to pay a fee for the right to receive a fixed interest payment. The Company paid up-front premiums of $141,250. At June 30, 2007, there were no amounts receivable under these contracts.

The interest rate floor agreements were not designated as hedges for accounting purposes and therefore changes in the fair values of the instruments are required to be recognized as income or expenses in the Company’s financial statements. At June 30, 2007 and 2006, the aggregate fair value of the interest rate floors was $165 and $1,782, respectively. For the three months ended June 30, 2007 and 2006, $2,122 and $4,362, respectively, were charged to “Other expenses”. For the six months ended June 30, 2007 and 2006 $2,503 and $26,248, respectively, were charged to “Other expenses”.

The Company utilizes income simulation models to complement its traditional gap analysis. While the Asset/Liability Committee routinely monitors simulated net interest income sensitivity over a rolling two-year horizon, it also utilizes additional tools to monitor potential longer-term interest rate risk. The income simulation models measure the Company’s net interest income volatility or sensitivity to interest rate changes utilizing statistical techniques that allow the Company to consider various factors which impact net interest income. These factors include actual maturities, estimated cash flows, repricing characteristics, deposits growth/retention and, most importantly, the relative sensitivity of the Company’s assets and liabilities to changes in market interest rates. This relative sensitivity is important to consider as the Company’s core deposit base has not been subject to the same degree of interest rate sensitivity as its assets. The core deposit costs are internally managed and tend to exhibit less sensitivity to changes in interest rates than the Company’s adjustable rate assets whose yields are based on external indices and generally change in concert with market interest rates.

The Company’s interest rate sensitivity is determined by identifying the probable impact of changes in market interest rates on the yields on the Company’s assets and the rates that would be paid on its liabilities. This modeling technique involves a degree of estimation based on certain assumptions that management believes to be reasonable. Utilizing this process, management projects the impact of changes in interest rates on net interest margin. The Company has established certain policy limits for the potential volatility of its net interest margin assuming certain levels of changes in market interest rates with the objective of maintaining a stable net interest margin under various probable rate scenarios. Management generally has maintained a risk position well within the policy limits. As of June 30, 2007, the model indicated the impact of a 200 basis point parallel and pro rata rise in rates over 12 months would approximate a 4.7% ($3.9 million) increase in net interest income, while the impact of a 200 basis point decline in rates over the same period would approximate a 5.1% ($4.3 million) decline from an unchanged rate environment.

The preceding sensitivity analysis does not represent a Company forecast and should not be relied upon as being indicative of expected operating results. These hypothetical estimates are based upon numerous assumptions including: the nature and timing of interest rate levels including yield curve shape, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, reinvestment/replacement of asset and liability cash flows, and others. While assumptions are developed based upon current economic and local market conditions, the Company cannot provide any assurances as to the predictive nature of these assumptions, including how customer’s preferences or competitor influences might change.

Also, as market conditions vary from those assumed in the sensitivity analysis, actual results will also differ due to: prepayment/refinancing levels likely deviating from those assumed, the varying impact of interest rate change caps or floors on adjustable rate assets, the potential effect of changing debt service levels on customers with adjustable rate loans, depositor early withdrawals and product preference changes, and other variables. Furthermore, the sensitivity analysis does not reflect actions that the Asset/Liability Committee might take in responding to or anticipating changes in interest rates.

The shape of the yield curve can cause downward pressure on net interest income. In general, if and to the extent that the yield curve is flatter (i.e., the differences between interest rates for different maturities are relatively smaller) than previously anticipated, then the yield on the Company’s interest-earning assets and its cash flows will tend to be lower. Management believes that a relatively flat yield curve would continue to adversely affect the Company’s results in 2007.

Liquidity Risk

Liquidity is the ability to meet cash needs arising from changes in various categories of assets and liabilities. Liquidity is constantly monitored and managed at both the parent company and the bank levels. Liquid assets consist of cash and due from banks, interest-bearing deposits in banks and Federal funds sold and securities available for sale. Primary funding sources include core deposits, capital markets funds and other money market sources. Core deposits include domestic noninterest-bearing and interest-bearing retail deposits, which historically have been relatively stable. The parent company and the bank believe that they have significant unused borrowing capacity. Contingency plans exist which we believe could be implemented on a timely basis to mitigate the impact of any dramatic change in market conditions.

While the parent company generates income from its own operations, it also depends for its cash requirements on funds maintained or generated by its subsidiaries, principally the bank. Such sources have been adequate to meet the parent company’s cash requirements throughout its history.

Various legal restrictions limit the extent to which the bank can supply funds to the parent company and its nonbank subsidiaries. All national banks are limited in the payment of dividends without the approval of the Comptroller of the Currency to an amount not to exceed the net profits as defined, for the year to date combined with its retained net profits for the preceding two calendar years.

At June 30, 2007, the parent company’s short-term debt, consisting principally of commercial paper used to finance ongoing current business activities, was approximately $27.4 million. The parent company had cash, interest-bearing deposits with banks and other current assets aggregating $31.0 million. The parent company also has back-up credit lines with banks of $24.0 million. Since 1979, the parent company has had no need to use the available back-up lines of credit.

The following table sets forth information regarding the Company’s obligations and commitments to make future payments under contract as of June 30, 2007:


	Payments Due by Period

Contractual Obligations (1)	Total		Less than 1 Year		1-3 Years		4-5 Years		After 5 Years

	(in thousands)

Long-Term Debt	$	35,774	$	—	$	—	$	10,000	$	25,774

Operating Leases		24,129		4,157		7,245		4,496		8,231


Total Contractual Cash Obligations	$	59,903	$	4,157	$	7,245	$	14,496	$	34,005


(1) Based on contractual maturity dates

The following table sets forth information regarding the Company’s obligations under other commercial commitments as of June 30, 2007:


	Amount of Commitment Expiration Per Period

Other Commercial Commitments	Total Amount Committed		Less than 1 Year		1-3 Years		4-5 Years		After 5 Years

	(in thousands)

Residential Loans	$	22,357	$	22,357	$	—	$	—	$	—
Commercial Loans		62,423		33,800		28,398		225		—

Total Loans		84,780		56,157		28,398		225		—
Standby Letters of Credit		34,714		33,101		1,613		—		—
Other Commercial Commitments		19,426		18,824		—		—		602

Total Commercial Commitments	$	138,920	$	108,082	$	30,011	$	225	$	602

INFORMATION AVAILABLE ON OUR WEB SITE

Our Internet address iswww.sterlingbancorp.com and the investor relations section of our web site is located atwww.sterlingbancorp.com/ir/investor.cfm. We make available free of charge, on or through the investor relations section of our web site, annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.

Also posted on our web site, and available in print upon request of any shareholder to our Investor Relations Department, are the charters for our Board of Directors’ Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee, our Corporate Governance Guidelines, our Method for Interested Persons to Communicate with Non-Management Directors and a Code of Business Conduct and Ethics governing our directors, officers and employees. Within the time period required by the Securities and Exchange Commission and the New York Stock Exchange, we will post on our web site any amendment to the Code of Business Conduct and Ethics and any waiver applicable to our senior financial officers, as defined in the Code, or our executive officers or directors. In addition, information concerning purchases and sales of our equity securities by our executive officers and directors is posted on our web site.

STERLING BANCORP AND SUBSIDIARIES
Interest Rate Sensitivity

To mitigate the vulnerability of earnings to changes in interest rates, the Company manages the repricing characteristics of assets and liabilities in an attempt to control net interest rate sensitivity. Management attempts to confine significant rate sensitivity gaps predominantly to repricing intervals of a year or less so that adjustments can be made quickly. Assets and liabilities with predetermined repricing dates are classified based on the earliest repricing period. Amounts are presented in thousands. Based on the interest rate sensitivity analysis shown below, the Company’s net interest income would decrease during periods of rising interest rates and increase during periods of falling interest rates.


	Repricing Date

	3 Months or Less		More than 3 Months to 1 Year			More than 1 Year to 5 Years		Over 5 Years		Nonrate Sensitive			Total

ASSETS
Interest-bearing deposits with other banks	$	1,177	$	—		$	—	$	—	$	—		$	1,177
Federal funds sold		10,000		—			—		—		—			10,000
Investment securities		11,074		11,663			102,887		403,244		3,439			532,307
Commercial and industrial loans		413,283		45,630			118,389		19,480		(158	)		596,624
Equipment lease financing		1,111		8,696			242,970		9,854		(34,971	)		227,660
Real estate-residential mortgage		71,441		9,211			76,022		21,145		—			177,819
Real estate-commercial mortgage		30,820		5,037			43,938		12,923		—			92,718
Real estate-construction loans		—		—			38,147		—		—			38,147
Installment-individuals		10,333		—			—		—		—			10,333
Loans to depository institutions		25,000		—			—		—		—			25,000
Noninterest-earning assets & allowance for loan losses		—		—			—		—		175,193			175,193

Total Assets		574,239		80,237			622,353		466,646		143,503			1,886,978


LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits
Savings [1]		—		—			19,679		—		—			19,679
NOW [1]		—		—			231,391		—		—			231,391
Money market [1]		181,452		—			44,357		—		—			225,809
Time - domestic		258,395		240,550			36,766		230		—			535,941
- foreign		395		180			—		—		—			575
Securities sold under agreement to repurchase - customer		74,530		2,000			—		—		—			76,530
Commercial paper		27,444		—			—		—		—			27,444
Short-term borrowings - other		1,718		—			—		—		—			1,718
Long-term borrowings - FHLB		—		—			10,000		—		—			10,000
Long-term borrowings - subordinated debentures		—		—			—		25,774		—			25,774
Noninterest-bearing liabilities & shareholders’ equity		—		—			—		—		732,117			732,117

Total Liabilities and Shareholders’ Equity		543,934		242,730			342,193		26,004		732,117			1,886,978

Net Interest Rate Sensitivity Gap	$	30,305	$	(162,493	)	$	280,160	$	440,642	$	(588,614	)	$	—

Cumulative Gap June 30, 2007	$	30,305	$	(132,188	)	$	147,972	$	588,614	$	—		$	—

Cumulative Gap June 30, 2006	$	33,216	$	(50,163	)	$	64,007	$	594,623	$	—		$	—

Cumulative Gap December 31, 2006	$	130,609	$	(31,621	)	$	170,278	$	684,751	$	—		$	—


[1]	Historically, balances in non-maturity deposit accounts have remained relatively stable despite changes in levels of interest rates. Balances are shown in repricing periods based on management’s historical repricing practices and run-off experience.

ITEM 4. CONTROLS AND PROCEDURES

The Company’s management, with the participation of the Company’s principal executive and principal financial officers, evaluated the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that, as of the end of the period covered by this quarterly report, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

No change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) occurred during the fiscal quarter ended June 30, 2007 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Under its share repurchase program, the Company buys back common shares from time to time.

The Board of Directors initially authorized the repurchase of common shares in 1997 and since then has approved increases in the number of common shares that the Company is authorized to repurchase. The latest increase was announced on February 15, 2007, when the Board of Directors increased the Company’s authority to repurchase common shares by an additional 800,000 shares.

The following table discloses the Company’s repurchase of the Company’s common shares during the second quarter of 2007:

ISSUER PURCHASES OF EQUITY SECURITIES


Period	Total Number of Shares Purchased	Average Price Paid Per Share			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs


April 1-30, 2007	—		$	—	—	932,963

May 1-31, 2007	315,000			16.45	315,000	617,963

June 1-30, 2007	332,200			16.06	332,200	285,763


Total	647,200				647,200

All shares were repurchased through the Company’s share repurchase program.

Item 4. Submission of Matters to a Vote of Security Holders


(a)	The following sets forth the voting results as to each matter voted upon at the Annual Meeting of Shareholders of the Company held on May 3, 2007:

	(1)	Election of Directors


Nominee	Total Votes For	Total Votes Withheld


Robert Abrams	16,600,638	578,299
Joseph M. Adamko	16,087,737	1,091,200
Louis J. Cappelli	16,085,050	1,093,887
Walter Feldesman	16,053,417	1,125,520
Fernando Ferrer	16,602,940	575,997
Allan F. Hershfield	16,082,266	1,096,671
Henry J. Humphreys	16,080,219	1,098,718
Robert Lazar	16,603,526	575,411
John C. Millman	16,090,540	1,088,397
Eugene T. Rossides	15,456,453	1,722,484


			There were no abstentions or broker nonvotes.

		(2)	Ratification of the appointment by the Audit Committee of the Board of Directors of KPMG LLP as the Company’s independent public accountants for fiscal year 2007.


Total Votes For			16,454,192
Total Votes Against			710,292
Total Absentions			14,453

Item 6. Exhibits

The following exhibits are filed as part of this report:


	3. (i)		Restated Certificate of Incorporation filed with the State of New York Department of State, October 28, 2004 (Filed as Exhibit 3(i) to the Registrant’s Form 10-Q for the quarter ended September 30, 2004 and incorporated herein by reference).

	(ii)		By-Laws as in effect on August 5, 2004 (Filed as Exhibit 3(ii)(A) to the Registrant’s Form 10-Q for the quarter ended June 30, 2004 and incorporated herein by reference).

	11.		Statement Re: Computation of Per Share Earnings.

	31.1		Certification of the CEO pursuant to Exchange Act Rule 13a-14(a).

	31.2		Certification of the CFO pursuant to Exchange Act Rule 13a-14(a).

	32.1		Certification of the CEO required by Section 1350 of Chapter 63 of Title 18 of the U.S. Code.

	32.2		Certification of the CFO required by Section 1350 of Chapter 63 of Title 18 of the U.S. Code.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	STERLING BANCORP


	(Registrant)


Date:	August 9, 2007	/s/	Louis J. Cappelli

			Louis J. Cappelli
			Chairman and
			Chief Executive Officer


Date:	August 9, 2007	/s/	John W. Tietjen

			John W. Tietjen
			Executive Vice President
			and Chief Financial Officer

STERLING BANCORP AND SUBSIDIARIES

EXHIBIT INDEX


Exhibit Number	Description	Sequential Page No.


11	Statement re: Computation of Per Share Earnings.	42

31.1	Certification of the CEO pursuant to Exchange Act Rule 13a-14(a).	43

31.2	Certification of the CFO pursuant to Exchange Act Rule 13a-14(a).	44

32.1	Certification of the CEO required by Section 1350 of Chapter 63 of Title 18 of the U.S. Code.	45

32.2	Certification of the CFO required by Section 1350 of Chapter 63 of Title 18 of the U.S. Code.	46

Positive
Negative
Uncertain
Constraining
Legalese
Litigious
Readability	H.S. freshman Avg

Sterling Bancorp 10-Q2007 Q2 Quarterly report

Content analysis