|UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549
      Amendment No. 1 onFORM 10-Q/A
      (Mark One)x QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                   

|For the quarterly period ended                                                             | September 30, 2004
|------------------------------------------------------------------------------------------ | ------------------
|                                                                                           |                   
|or                                                                                        
|                                                                                          
|o TRANSITION 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 an accelerated filer as defined
in Rule 12b-2 of the Exchange Act,
x Yes  o No
As
of October 31, 2004 there were 15,177,080 shares of common stock,$1.00 par value, outstanding.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|
|



|STERLING BANCORPEXPLANATORY NOTE
This Amendment No. 1 on Form 10-Q/A includes restated unaudited consolidated financial statements for
the three months and nine months ended September 30, 2004 and 2003 which supersede the Companys
previously issued unaudited consolidated financial statements for those interim periods. For information
regarding the restatement, see Note 2 to our unaudited consolidated financial statements contained
herein. This Amendment No. 1 also includes related changes to the disclosures in Managements
Discussion and Analysis of Financial Condition and Results of Operations and Controls
and Procedures. Except as otherwise specifically noted, all information contained herein
is as of September 30, 2004 and does not reflect any events or changes that have occurred subsequent
to that date. For the convenience of readers, this Amendment No. 1 restates in its entirety the Companys
Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (except that certain exhibits
that were previously filed with that Form 10-Q have been incorporated herein by reference to that Form 10-Q).
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

|PART I FINANCIAL
      INFORMATION |  | **Page**                                                       
|---------------------------------- |  | ---------------------------------------------------------------
|                                   |  |                                                                
|Item 1.                            |  | Financial Statements                                           
|                                   |  |                                                                
|                                   |  | Consolidated
      Financial Statements (Unaudited & Restated) 
|                                   |  | Notes
      to Consolidated Financial Statements               
|                                   |  |                                                                
|Item 2.                            |  | Managements
      Discussion and Analysis of Financial        
|                                   |  | Condition
      and Results of Operations                      
|                                   |  | Overview                                                       
|                                   |  | Income
      Statement Analysis                                
|                                   |  | Balance
      Sheet Analysis                                   
|                                   |  | Capital                                                        
|                                   |  | Cautionary
      Statement Regarding Forward-Looking Statements
|                                   |  | Average
      Balance Sheets                                   
|                                   |  | Rate/Volume
      Analysis                                     
|                                   |  | Regulatory
      Capital and Ratios                            
|                                   |  |                                                                
|Item 3.                            |  | Quantitative
      and Qualitative Disclosures About           
|                                   |  | Market
      Risk                                              
|                                   |  |                                                                
|                                   |  | Asset/Liability
      Management                               
|                                   |  | Interest
      Rate Sensitivity                                
|                                   |  |                                                                
|Item 4.                            |  | Controls
      and Procedures                                  
|                                   |  |                                                                
|PART
      II OTHER INFORMATION    |  |                                                                
|                                   |  |                                                                
|Item 6.                            |  | Exhibits
      and Reports on Form 8-K                         
|                                   |  |                                                                
|SIGNATURES                         |  | 40                                                             
|                                   |  |                                                                

|2
|-



|EXHIBIT
      INDEX |    |  |  |                                                                                                                          |  |    | 
|------------------- | -- |  |  | ------------------------------------------------------------------------------------------------------------------------ |  | -- | 
|                    |    |  |  |                                                                                                                          |  |    | 
|Exhibit             | 11 |  |  | Statement
      Re: Computation of Per ShareEarnings.                                                                    |  | 42 | 
|                    |    |  |  |                                                                                                                          |  |    | 
|Exhibit             | 31 |  |  | Certifications
      of the CEO and CFO pursuant to
      Exchange Act Rule 13a-14(a).                                   |  | 43 | 
|                    |    |  |  |                                                                                                                          |  |    | 
|Exhibit             | 32 |  |  | Certifications
      of the CEO and CFO required by
      Section 1350 of Chapter 63 of Title 18 of the
      U.S. Code. |  | 45 | 

|3
|-



|STERLING BANCORP AND SUBSIDIARIESConsolidated Balance Sheets
    (Unaudited & Restated)
|---------------------------------------------------------------------------------------
|                                                                                       

|ASSETS                                                                                                                                                              | **September
      30,
      2004** |               | **December
      31,
      2003** |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------- | ------------- | --------------------------------- | -
|                                                                                                                                                                    |                                    |               |                                   |  
|Cash and
      due from banks                                                                                                                                       | $                                  | 53,264,489    |                                   | $
|Interest-bearing
      deposits with other banks                                                                                                                    |                                    | 2,669,514     |                                   |  
|                                                                                                                                                                    |                                    |               |                                   |  
|Securities
      available for sale                                                                                                                                 |                                    | 160,946,796   |                                   |  
|Securities
      available for sale - pledged                                                                                                                       |                                    | 121,490,565   |                                   |  
|Securities
      held to maturity                                                                                                                                   |                                    | 258,309,947   |                                   |  
|Securities
      held to maturity - pledged                                                                                                                         |                                    | 129,372,694   |                                   |  
|                                                                                                                                                                    |                                    |               |                                   |  
|Total
      investment securities                                                                                                                                   |                                    | 670,120,002   |                                   |  
|                                                                                                                                                                    |                                    |               |                                   |  
|                                                                                                                                                                    |                                    |               |                                   |  
|Loans held
      for sale                                                                                                                                           |                                    | 38,810,366    |                                   |  
|                                                                                                                                                                    |                                    |               |                                   |  
|Loans held
      in portfolio, net of unearned discounts                                                                                                            |                                    | 968,073,110   |                                   |  
|Less allowance
      for loan losses                                                                                                                                |                                    | 15,602,478    |                                   |  
|                                                                                                                                                                    |                                    |               |                                   |  
|Loans,
      net                                                                                                                                                    |                                    | 952,470,632   |                                   |  
|                                                                                                                                                                    |                                    |               |                                   |  
|Customers
      liability under acceptances                                                                                                                        |                                    | 902,538       |                                   |  
|Excess cost
      over equity in net assets of the
        banking subsidiary                                                                                       |                                    | 21,158,440    |                                   |  
|Premises
      and equipment, net                                                                                                                                   |                                    | 9,987,174     |                                   |  
|Other real
      estate                                                                                                                                             |                                    | 1,019,095     |                                   |  
|Accrued interest
      receivable                                                                                                                                   |                                    | 5,140,340     |                                   |  
|Bank owned
      life insurance                                                                                                                                     |                                    | 22,302,781    |                                   |  
|Other assets                                                                                                                                                        |                                    | 32,462,795    |                                   |  
|                                                                                                                                                                    |                                    |               |                                   |  
|                                                                                                                                                                    | $                                  | 1,810,308,166 |                                   | $
|                                                                                                                                                                    |                                    |               |                                   |  
|                                                                                                                                                                    |                                    |               |                                   |  
|LIABILITIES
      AND SHAREHOLDERS EQUITY                                                                                                                          |                                    |               |                                   |  
|Deposits                                                                                                                                                            |                                    |               |                                   |  
|Noninterest-bearing
      deposits                                                                                                                                  | $                                  | 424,534,758   |                                   | $
|Interest-bearing
      deposits                                                                                                                                     |                                    | 874,834,879   |                                   |  
|                                                                                                                                                                    |                                    |               |                                   |  
|Total
      deposits                                                                                                                                                |                                    | 1,299,369,637 |                                   |  
|Securities
      sold under agreements to repurchase - customers                                                                                                    |                                    | 103,595,822   |                                   |  
|Securities
      sold under agreements to repurchase - dealers                                                                                                      |                                    |              |                                   |  
|Federal funds
      purchased                                                                                                                                       |                                    |              |                                   |  
|Commercial
      paper                                                                                                                                              |                                    | 34,953,800    |                                   |  
|Other short-term
      borrowings                                                                                                                                   |                                    | 1,107,981     |                                   |  
|Acceptances
      outstanding                                                                                                                                       |                                    | 902,538       |                                   |  
|Accrued expenses
      and other liabilities                                                                                                                        |                                    | 89,539,468    |                                   |  
|Long-term
      debt                                                                                                                                                |                                    | 135,774,000   |                                   |  
|                                                                                                                                                                    |                                    |               |                                   |  
|Total
      liabilities                                                                                                                                             |                                    | 1,665,243,246 |                                   |  
|                                                                                                                                                                    |                                    |               |                                   |  
|                                                                                                                                                                    |                                    |               |                                   |  
|Shareholders
      equity                                                                                                                                          |                                    |               |                                   |  
|Preferred
      stock, $5 par value. Authorized
        644,389 shares; Series D issued 0
         and 224,432 shares,respectively                                  |                                    |              |                                   |  
|Common stock,
      $1 par value. Authorized 50,000,000 and
        20,000,000 shares, respectively; issued 19,827,398
         and 19,275,964 shares, respectively |                                    | 19,827,398    |                                   |  
|Capital surplus                                                                                                                                                     |                                    | 144,725,821   |                                   |  
|Retained
      earnings                                                                                                                                             |                                    | 25,829,798    |                                   |  
|Accumulated
      other comprehensive loss, net of tax                                                                                                              |                                    | (2,648,293    | )                                 |  
|                                                                                                                                                                    |                                    |               |                                   |  
|                                                                                                                                                                    |                                    | 187,734,724   |                                   |  
|                                                                                                                                                                    |                                    |               |                                   |  
|Less                                                                                                                                                                |                                    |               |                                   |  
|Common
      shares in treasury at cost, 1,618,903
          and 1,306,587 shares, respectively                                                                     |                                    | 42,297,109    |                                   |  
|Unearned
      compensation                                                                                                                                         |                                    | 372,695       |                                   |  
|                                                                                                                                                                    |                                    |               |                                   |  
|Total
      shareholders equity                                                                                                                                    |                                    | 145,064,920   |                                   |  
|                                                                                                                                                                    |                                    |               |                                   |  
|                                                                                                                                                                    | $                                  | 1,810,308,166 |                                   | $
|                                                                                                                                                                    |                                    |               |                                   |  

|                                                 
|-------------------------------------------------
|*See Notes to Consolidated Financial Statements.*

|4
|-



|STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited & Restated)
|------------------------------------------------------------------------------------------
|

|                                                                  | Three
      Months Ended
      September 30, |            | Nine
      Months Ended
      September 30, |  
|----------------------------------------------------------------- | -------------------------------------------- | ---------- | ------------------------------------------- | -
|                                                                  | 2004                                         |            | 2003                                        |  
|                                                                  |                                              |            |                                             |  
|INTEREST
      INCOME                                             |                                              |            |                                             |  
|Loans                                                             | $                                            | 16,897,670 |                                             | $
|Investment
      securities                                       |                                              |            |                                             |  
|Available
      for sale                                          |                                              | 3,211,403  |                                             |  
|Held
      to maturity                                            |                                              | 4,624,665  |                                             |  
|Federal
      funds sold                                          |                                              | 72,779     |                                             |  
|Deposits
      with other banks                                   |                                              | 5,902      |                                             |  
|                                                                  |                                              |            |                                             |  
|Total
      interest income                                       |                                              | 24,812,419 |                                             |  
|                                                                  |                                              |            |                                             |  
|INTEREST
      EXPENSE                                            |                                              |            |                                             |  
|Deposits                                                          |                                              | 3,015,262  |                                             |  
|Securities
      sold under agreements
          to repurchase    |                                              | 325,203    |                                             |  
|Federal
      funds purchased                                     |                                              | 9,041      |                                             |  
|Commercial
      paper                                            |                                              | 106,502    |                                             |  
|Other
      short-term borrowings                                 |                                              | 33,970     |                                             |  
|Long-term
      debt                                              |                                              | 1,559,688  |                                             |  
|                                                                  |                                              |            |                                             |  
|Total
      interest expense                                      |                                              | 5,049,666  |                                             |  
|                                                                  |                                              |            |                                             |  
|Net interest
      income                                         |                                              | 19,762,753 |                                             |  
|Provision
      for loan losses                                   |                                              | 2,338,500  |                                             |  
|                                                                  |                                              |            |                                             |  
|Net interest
      income after provision
        for loan losses |                                              | 17,424,253 |                                             |  
|                                                                  |                                              |            |                                             |  
|NONINTEREST
      INCOME                                          |                                              |            |                                             |  
|Factoring
      income                                            |                                              | 1,915,761  |                                             |  
|Mortgage
      banking income                                     |                                              | 3,846,269  |                                             |  
|Service
      charges on deposit accounts                         |                                              | 1,258,129  |                                             |  
|Trade
      finance income                                        |                                              | 688,276    |                                             |  
|Trust
      fees                                                  |                                              | 160,311    |                                             |  
|Other
      service charges and fees                              |                                              | 394,754    |                                             |  
|Bank
      owned life insurance income                            |                                              | 498,530    |                                             |  
|Securities
      gains                                            |                                              | 285,918    |                                             |  
|Other
      income                                                |                                              | 126,880    |                                             |  
|                                                                  |                                              |            |                                             |  
|Total
      noninterest income                                    |                                              | 9,174,828  |                                             |  
|                                                                  |                                              |            |                                             |  
|NONINTEREST EXPENSES                                              |                                              |            |                                             |  
|Salaries                                                          |                                              | 7,787,817  |                                             |  
|Employee
      benefits                                           |                                              | 2,464,874  |                                             |  
|                                                                  |                                              |            |                                             |  
|Total
      personnel expense                                     |                                              | 10,252,691 |                                             |  
|Occupancy
      expenses, net                                     |                                              | 1,315,456  |                                             |  
|Equipment
      expenses                                          |                                              | 755,738    |                                             |  
|Advertising
      and marketing                                   |                                              | 974,755    |                                             |  
|Professional
      fees                                           |                                              | 952,253    |                                             |  
|Data
      processing fees                                        |                                              | 272,292    |                                             |  
|Stationery
      and printing                                     |                                              | 141,816    |                                             |  
|Communications                                                    |                                              | 363,698    |                                             |  
|Other
      expenses                                              |                                              | 1,464,884  |                                             |  
|                                                                  |                                              |            |                                             |  
|Total
      noninterest expenses                                  |                                              | 16,493,583 |                                             |  
|                                                                  |                                              |            |                                             |  
|Income before
      income taxes                                  |                                              | 10,105,498 |                                             |  
|Provision
      for income taxes                                  |                                              | 3,555,324  |                                             |  
|                                                                  |                                              |            |                                             |  
|Net income                                                        | $                                            | 6,550,174  |                                             | $
|                                                                  |                                              |            |                                             |  
|Average number
      of common
       shares outstanding          |                                              |            |                                             |  
|Basic                                                             |                                              | 18,207,370 |                                             |  
|Diluted                                                           |                                              | 19,025,500 |                                             |  
|Earnings
      per average common share                           |                                              |            |                                             |  
|Basic                                                             | $                                            | 0.36       |                                             | $
|Diluted                                                           |                                              | 0.35       |                                             |  
|Dividends
      per common share                                  |                                              | 0.16       |                                             |  

|                                               
|-----------------------------------------------
|See Notes to Consolidated Financial Statements.

|5
|-



|STERLING BANCORP AND SUBSIDIARIES 
Consolidated Statements of Comprehensive Income
(Unaudited & Restated)
|---------------------------------------------------------------------------------------------------------
|                                                                                                         

|                                                                             | Three
      Months Ended
      September 30, |           | Nine
      Months Ended 
      September 30, |  
|---------------------------------------------------------------------------- | -------------------------------------------- | --------- | -------------------------------------------- | -
|                                                                             | 2004                                         |           | 2003                                         |  
|                                                                             |                                              |           |                                              |  
|                                                                             |                                              |           |                                              |  
|Net Income                                                                   | $                                            | 6,550,174 |                                              | $
|                                                                             |                                              |           |                                              |  
|                                                                             |                                              |           |                                              |  
|Other comprehensive
      income,
        net of tax:                        |                                              |           |                                              |  
|Unrealized
      holding gains (losses)
          arising during the period  |                                              | 2,347,046 |                                              |  
|                                                                             |                                              |           |                                              |  
|Reclassification
      adjustment for
          gains included in net income |                                              | (154,681  | )                                            |  
|                                                                             |                                              |           |                                              |  
|Unrealized
      (losses) gains
           on supplemental pension           |                                              | (29,921   | )                                            |  
|                                                                             |                                              |           |                                              |  
|                                                                             |                                              |           |                                              |  
|Other
      comprehensive income (loss)                                      |                                              | 2,162,444 |                                              |  
|                                                                             |                                              |           |                                              |  
|                                                                             |                                              |           |                                              |  
|Comprehensive
      income                                                   | $                                            | 8,712,618 |                                              | $
|                                                                             |                                              |           |                                              |  

|                                               
|-----------------------------------------------
|See Notes to Consolidated Financial Statements.

|6
|-



|STERLING BANCORP AND SUBSIDIARIES 
Consolidated Statements of Changes in Shareholders Equity
(Unaudited & Restated)
|--------------------------------------------------------------------------------------------------------------------
|

|                                                                                          | Nine
      Months Ended
      September 30, |            
|----------------------------------------------------------------------------------------- | ------------------------------------------- | -----------
|
|                                                                                          |                                             |            
|Preferred
      Stock                                                                     |                                             |            
|Balance
      at January 1                                                                | $                                           | 2,244,320  
|Conversions
      of Series D shares                                                      |                                             | (2,244,320 
|                                                                                          |                                             |            
|Balance
      at September 30                                                             | $                                           |           
|                                                                                          |                                             |            
|                                                                                          |                                             |            
|Common Stock                                                                              |                                             |            
|Balance
      at January 1                                                                | $                                           | 19,275,964 
|Conversions
      of preferred shares into common shares                                  |                                             | 428,304    
|Options
      exercised                                                                   |                                             | 123,130    
|                                                                                          |                                             |            
|Balance
      at September 30                                                             | $                                           | 19,827,398 
|                                                                                          |                                             |            
|                                                                                          |                                             |            
|Capital Surplus                                                                           |                                             |            
|Balance
      at January 1                                                                | $                                           | 141,179,832
|Conversions
      of preferred shares into common shares                                  |                                             | 1,816,016  
|Common
      shares issued under stock incentive plan and 
          related tax benefits |                                             | 1,729,973  
|Stock
      split paid - cash in lieu                                                     |                                             |           
|                                                                                          |                                             |            
|Balance
      at September 30                                                             | $                                           | 144,725,821
|                                                                                          |                                             |            
|                                                                                          |                                             |            
|Retained Earnings                                                                         |                                             |            
|                                                                                          |                                             |            
|Balance
      at January 1                                                                | $                                           | 16,166,517 
|Net
      Income                                                                          |                                             | 18,321,709 
|Cash
      dividends paid  common shares                                                 |                                             | (8,658,428 
|                                                                                          | 
      preferred shares                    |            
|                                                                                          |                                             |            
|Balance
      at September 30                                                             | $                                           | 25,829,798 
|                                                                                          |                                             |            
|                                                                                          |                                             |            
|                                                                                          |                                             |            
|Accumulated
      Other Comprehensive Income                                              |                                             |            
|Balance
      at January 1                                                                | $                                           | (1,131,803 
|                                                                                          |                                             |            
|Unrealized
      holding gains/(losses)arising
      during the period:                   |                                             |            
|Before
      tax                                                                          |                                             | (2,230,677 
|Tax
      effect                                                                          |                                             | 1,023,881  
|                                                                                          |                                             |            
|Net
      of tax                                                                          |                                             | (1,206,796 
|                                                                                          |                                             |            
|Reclassification
      adjustment for gains
         included in net income:              |                                             |            
|Before
      tax                                                                          |                                             | (970,722   
|Tax
      effect                                                                          |                                             | 445,562    
|                                                                                          |                                             |            
|Net
      of tax                                                                          |                                             | (525,160   
|                                                                                          |                                             |            
|Unrealized
      gains/(losses) in supplemental pension:                                  |                                             |            
|Before
      tax                                                                          |                                             | 398,273    
|Tax
      effect                                                                          |                                             | (182,807   
|                                                                                          |                                             |            
|Net
      of tax                                                                          |                                             | 215,466    
|                                                                                          |                                             |            
|                                                                                          |                                             |            
|Balance
      at September 30                                                             | $                                           | (2,648,293 
|                                                                                          |                                             |            
|                                                                                          |                                             |            
|Treasury Stock                                                                            |                                             |            
|                                                                                          |                                             |            
|Balance
      at January 1                                                                | $                                           | (33,577,847
|Purchase
      of common shares                                                           |                                             | (8,310,004 
|Surrender
      of shares issued under
          incentive compensation plan              |                                             | (409,258   
|                                                                                          |                                             |            
|Balance
      at September 30                                                             | $                                           | (42,297,109
|                                                                                          |                                             |            
|                                                                                          |                                             |            
|Unearned Compensation                                                                     |                                             |            
|                                                                                          |                                             |            
|Balance
      at January 1                                                                | $                                           | (894,976   
|Amortization
      of unearned compensation                                               |                                             | 522,281    
|                                                                                          |                                             |            
|Balance
      at September 30                                                             | $                                           | (372,695   
|                                                                                          |                                             |            
|                                                                                          |                                             |            
|Total
      Shareholders Equity                                                          |                                             |            
|Balance
      at January 1                                                                | $                                           | 143,262,007
|Net
      changes during the period                                                       |                                             | 1,802,913  
|                                                                                          |                                             |            
|Balance
      at September 30                                                             | $                                           | 145,064,920
|                                                                                          |                                             |            

|                                                 
|-------------------------------------------------
|*See Notes to Consolidated Financial Statements.*

|7
|-



|STERLING BANCORP AND SUBSIDIARIES 
Consolidated Statements of Cash Flows
(Unaudited & Restated)
|-----------------------------------------------------------------------------------------------
|

|                                                                                                           | **Nine
      Months Ended
      September 30,** |             
|---------------------------------------------------------------------------------------------------------- | ----------------------------------------------- | ------------
|
|                                                                                                           |                                                 |             
|Operating
      Activities                                                                                 |                                                 |             
|Net
      Income                                                                                           | $                                               | 18,321,709  
|Adjustments
      to reconcile net income to net cash provided
         by (used in) operating activities: |                                                 |             
|Provision
      for loan losses                                                                            |                                                 | 7,235,500   
|Depreciation
      and amortization of premises and equipment                                              |                                                 | 1,318,157   
|Securities
      gains                                                                                     |                                                 | (970,722    
|Income
      from bank owned life insurance                                                                |                                                 | (975,264    
|Deferred
      income tax benefit                                                                          |                                                 | (300,878    
|Net
      change in loans held for sale                                                                    |                                                 | 1,746,014   
|Amortization
      of unearned compensation                                                                |                                                 | 522,281     
|Amortization
      of premiums on securities                                                               |                                                 | 1,198,486   
|Accretion
      of discounts on securities                                                                 |                                                 | (394,808    
|Increase
      in accrued interest receivable                                                              |                                                 | (70,917     
|Increase
      in accrued expenses and
           other liabilities                                        |                                                 | 10,934,829  
|Increase
      in other assets                                                                             |                                                 | (5,353,733  
|Other,
      net                                                                                           |                                                 | 861,992     
|                                                                                                           |                                                 |             
|Net
      cash provided by (used in) operating activities                                                  |                                                 | 34,072,646  
|                                                                                                           |                                                 |             
|Investing Activities                                                                                       |                                                 |             
|                                                                                                           |                                                 |             
|Purchase
      of premises and equipment                                                                   |                                                 | (2,079,148  
|(Increase)
      Decrease in interest-bearing deposits
         with other banks                           |                                                 | (1,013,176  
|Decrease
      in Federal funds sold                                                                       |                                                 |            
|Net
      increase in loans held in portfolio                                                              |                                                 | (73,608,868 
|Increase
      in other real estate                                                                        |                                                 | (189,239    
|Proceeds
      from prepayments, redemptions or maturities
         of securities - held to maturity       |                                                 | 105,510,986 
|Purchases
      of securities - held to maturity                                                           |                                                 | (123,394,828
|Proceeds
      from sales of securities - available for sale                                               |                                                 | 73,254,718  
|Proceeds
      from prepayments, redemptions or maturitiesof securities
      - available for sale         |                                                 | 84,957,982  
|Purchases
      of securities - available for sale                                                         |                                                 | (130,365,143
|                                                                                                           |                                                 |             
|Net
      cash used in investing activities                                                                |                                                 | (66,926,716 
|                                                                                                           |                                                 |             
|                                                                                                           |                                                 |             
|Financing
      Activities                                                                                 |                                                 |             
|Decrease
      in noninterest-bearing deposits                                                             |                                                 | (49,557,132 
|Increase
      in interest-bearing deposits                                                                |                                                 | 137,185,949 
|Decrease
      in Federal funds purchased                                                                  |                                                 | (10,000,000 
|Net
      increase in securities sold under agreements
         to repurchase                              |                                                 | 9,777,016   
|Decrease
      in commercial paper and
         other short-term borrowings                                |                                                 | (49,608,633 
|Purchase
      of treasury stock                                                                           |                                                 | (8,310,004  
|Proceeds
      from exercise of stock options                                                              |                                                 | 1,342,069   
|Cash
      dividends paid on common and preferred stock                                                    |                                                 | (8,658,428  
|Cash
      paid in lieu of fractional shares in connection
         with stock split                       |                                                 |            
|                                                                                                           |                                                 |             
|Net
      cash provided by financing activities                                                            |                                                 | 22,170,837  
|                                                                                                           |                                                 |             
|                                                                                                           |                                                 |             
|Net increase
      (decrease) in cash and due from banks                                                   |                                                 | (10,683,233 
|Cash and
      due from banks - beginning of period                                                        |                                                 | 63,947,722  
|                                                                                                           |                                                 |             
|Cash and
      due from banks - end of period                                                              | $                                               | 53,264,489  
|                                                                                                           |                                                 |             
|Supplemental disclosures:                                                                                  |                                                 |             
|Interest
      paid                                                                                        | $                                               | 13,800,992  
|Income
      taxes paid                                                                                    |                                                 | 10,869,100  

|                                                 
|-------------------------------------------------
|*See Notes to Consolidated Financial Statements.*

|8
|-



|STERLING BANCORP AND SUBSIDIARIESNotes 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 September 30, 2004 and 2003 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 prior period amounts 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, 2003. The Company
  effected a six-for- five stock split on December 8, 2004, a five-for-four stock split on September
  10,2003 and paid stock dividends as follows: 20% on December 9, 2002; 10% on December 10, 2001; 10%
  on December 11, 2000; and 5% on December 14, 1999. Fractional shares were cashed-out and payments
  were made to shareholders in lieu of fractional shares. All capital and share amounts as well as
  basic and diluted average number of shares outstanding and earnings per average common share information
  for all reporting periods have been restated to reflect the effect of the stock splits and stock dividends.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|2. | The
consolidated financial statements for the three and nine month periods ended
September 30, 2004 and 2003 have been restated to correct the accounting for
employee benefits expense so as to comply with Accounting Principles Board
(APB) Opinion No. 12, as amended by Financial Accounting Standards
Board (FASB) Statement of Financial Accounting Standards
(SFAS) No. 106, Employers Accounting for Postretirement Benefits
Other Than Pensions,and FASB Technical Bulletin 85-4, Accounting for
Purchases of Life Insurance, and, accordingly, these consolidated financial
statements supersede the Companys previously issued unaudited consolidated
financial statements for the three and nine months ended September 30, 2004 and 2003. The
adjustment to the accounting for employee benefits expense involved (a) the
expensing of premiums paid for split-dollar life insurance policies on the lives
of certain executive officers of the Company, (b) the expensing of the
Companys obligations to pay future premiums on split-dollar life insurance
policies issued as part of a transaction in which an executive officer
relinquishes his right to receive pension payments in exchange for the insurance
policy, and (c) the crediting of increases in the cash surrender values of these
various policies. These changes comprise the restatement adjustments for
employee benefits expense set forth below. The Company also restated certain
other less significant items. Accordingly, the restated consolidated financial statements
for the three and nine months ended September 30, 2004 and 2003 also correct the accounting for (i)
other income and unrealized holding (losses) gains (and thus other comprehensive (loss)
income) so as to comply with SFAS No. 115, Accounting for Certain Investments in Debt
and Equity Securities(changes to other income relate to the recognition of earnings
on assets held in a trust established by the Company and changes to unrealized holding
(losses) gains relate to the inclusion of unrealized holding (losses) gains on assets held
in the trust), (ii) occupancy expense so as to comply with SFAS No. 13, Accounting for
Leases(changes required to properly straight-line rent incentives), (iii) income tax
benefit arising from the exercise of non- qualified stock options and the vesting of
restricted stock so as to comply with SFAS No. 109, Accounting for Income Taxes(changes relate to the amounts credited directly to capital surplus), and (iv) minimum
pension liability adjustment (and thus other comprehensive (loss) income) so as to comply
with SFAS No. 87, Employers Accounting for Pensions(changes relate to the
timing of adjustments).

|9
|-



|STERLING BANCORP AND SUBSIDIARIESNotes to Consolidated Financial Statements(Unaudited)
The table below shows the impact of these restatements on the bank and the parent company for
other income, employee benefits expense, occupancy expense, net income and basic and diluted
earnings per share:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                     

|**Three
      Months Ended September 30,**                                          |   | **Nine
      Months Ended September 30,**
|----------------------------------------------------------------------------------- | - | -----------------------------------------
|                                                                                    |  
|                                                                                    |   |                                          
|**Other
      Income:**                                                             |   |                                          
|Other
      income as previously reported                                           | $ | 126,880                                  
|Restatement
      adjustment (bank)                                                 |   |                                         
|                                                                                    |   |                                          
|                                                                                    |   |                                          
|Other
      income as restated                                                      | $ | 126,880                                  
|                                                                                    |   |                                          
|                                                                                    |   |                                          
|**Employee
      benefits expense:**                                                |   |                                          
|Employee
      benefits expense as previously
          reported                    | $ | 2,265,765                                
|                                                                                    |   |                                          
|                                                                                    |   |                                          
|Restatement adjustment:                                                             |   |                                          
|Impact
      on bank:                                                               |   | 199,578                                  
|Impact
      on parent company                                                      |   | (469                                     
|                                                                                    |   |                                          
|Total                                                                               |   | 199,109                                  
|                                                                                    |   |                                          
|                                                                                    |   |                                          
|Employee
      benefits expense as restated                                         | $ | 2,464,874                                
|                                                                                    |   |                                          
|                                                                                    |   |                                          
|**Occupancy
      expense, net:**                                                   |   |                                          
|Occupancy
      expense, net as previously
          reported                       | $ | 1,336,548                                
|Restatement
      adjustment (bank)                                                 |   | (21,092                                  
|                                                                                    |   |                                          
|                                                                                    |   |                                          
|Occupancy
      expense, net as restated                                            | $ | 1,315,456                                
|                                                                                    |   |                                          
|                                                                                    |   |                                          
|**Net
      Income:**                                                               |   |                                          
|Net
      income as previously reported                                             | $ | 6,737,934                                
|                                                                                    |   |                                          
|                                                                                    |   |                                          
|Restatement
      adjustment:                                                       |   |                                          
|Impact
      on bank                                                                |   | (188,229                                 
|Impact
      on parent company                                                      |   | 469                                      
|                                                                                    |   |                                          
|Total                                                                               |   | (187,760                                 
|                                                                                    |   |                                          
|                                                                                    |   |                                          
|Net
      income as restated                                                        | $ | 6,550,174                                
|                                                                                    |   |                                          
|                                                                                    |   |                                          
|**Basic
      earnings per share:**                                                 |   |                                          
|Net
      income attributable to common stock 
          as previously reported [1] | $ | 0.37                                     
|Restatement
      adjustment                                                        |   | (0.01                                    
|                                                                                    |   |                                          
|                                                                                    |   |                                          
|Net
      income attributable to common stock
          as restated                 | $ | 0.36                                     
|                                                                                    |   |                                          
|                                                                                    |   |                                          
|**Diluted
      earnings per share:**                                               |   |                                          
|Net
      income attributable to common stock
         as previously reported [1]   | $ | 0.35                                     
|                                                                                    |   |                                          
|Restatement
      adjustment                                                        |   |                                         
|                                                                                    |   |                                          
|Net
      income attributable to common stock
        as restated                   | $ | 0.35                                     
|                                                                                    |   |                                          

|10
|--



|STERLING BANCORP AND SUBSIDIARIESNotes to Consolidated Financial Statements(Unaudited)
|--------------------------------------------------------------------------------------
|                                                                                      

|**Three
      Months Ended September 30,**                                                                                                                                     |   | **Nine
      Months Ended September 30,**
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | - | -----------------------------------------
|                                                                                                                                                                               |  
|                                                                                                                                                                               |   |                                          
|**Other
      comprehensive income (loss) net of tax:**                                                                                                                        |   |                                          
|                                                                                                                                                                               |   |                                          
|Other
      comprehensive income (loss) as
           previously reported                                                                                                      | $ | 2,444,715                                
|                                                                                                                                                                               |   |                                          
|Restatement
      adjustment:                                                                                                                                                  |   |                                          
|Minimum
      pension liability adjustment, net
             of tax effect of $309,165
      (parent company)                                                                  |   |                                         
|                                                                                                                                                                               |   |                                          
|Unrealized
      (losses) gains on supplemental pension,
             net of tax effect of $188,715, $(85,430),
      $ 31,294       and $(224,012), respectively
      (bank) |   | (282,271                                 
|                                                                                                                                                                               |   |                                          
|                                                                                                                                                                               |   |                                          
|Total                                                                                                                                                                          |   | (282,271                                 
|                                                                                                                                                                               |   |                                          
|                                                                                                                                                                               |   |                                          
|Other
      comprehensive (loss) income as restated                                                                                                                            | $ | 2,162,444                                
|                                                                                                                                                                               |   |                                          

|   | [1]  Restated
        to reflect the effect of the six-for-five stock split in the form of a
        stock dividend effected on
               December 8, 2004; see Note 1.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | At December
        31, 2003, other assets increased $1,079,000, accrued expenses and other
        liabilities increased $1,002,000, capital surplus decreased $1,214,000
        (which includes a reduction of $3,031,000 for the effect of the six-for
        five stock split),retained earnings decreased $1,585,000, and accumulated
        other comprehensive loss increased $155,000. At September 30, 2004, other
        assets increased $429,000, accrued expenses and other liabilities increased
        $1,110,000, capital surplus decreased $703,000 (which includes a reduction
        of $3,031,000 for the effect of the six-for-five stock split), retained
        earnings decreased $3,182,000 and accumulated other comprehensive loss
        increased $172,000.                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|3. | At
        September 30, 2004, the Company has a stock-based employee compensation
        plan, which is described more fully in Note 1 and Note 15 to the consolidated
        financial statements in the Companys annual report on Form 10-K
        for the year ended December 31, 2004. The Company accounts for this plan
        under the recognition and measurement principles of APB Opinion No. 25,
        Accounting for Stock Issued to Employees, and related Interpretations.
        No stock-based employee compensation cost is reflected in net income,
        as all options granted under those plans had an exercise price equal to
        the market value of the underlying common stock on the date of grant.
        In accordance with SFAS No. 148, the following table illustrates the effect
        on net income and earnings per average common share if the Company had
        applied the fair value recognition provisions of SFAS No. 123, Accounting
        for Stock-Based Compensation, to the stock-based employee compensation
        plans.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

| | Three Months Ended September 30,                                                                                                                        | 2004 [1] |           | 2003 [1] |  
| | ------------------------------------------------------------------------------------------------------------------------------------------------------- | -------- | --------- | -------- | -
| |                                                                                                                                                         |          |           |          |  
| | Net income available for
    common shareholders                                                                                                        | $        | 6,550,174 |          | $
| | Deduct: Total stock-based employee
    compensation expense determined under
    fair value based method for all awards,
    net of related tax effects |          | (59,528   | )        |  
| |                                                                                                                                                         |          |           |          |  
| |                                                                                                                                                         |          |           |          |  
| | Pro forma, net income                                                                                                                                   | $        | 6,490,646 |          | $
| |                                                                                                                                                         |          |           |          |  
| | Earnings per average common share:                                                                                                                      |          |           |          |  
| | Basic- as reported                                                                                                                                      | $        | 0.36      |          | $
| | Basic- pro forma                                                                                                                                        |          | 0.36      |          |  
| | Diluted- as reported                                                                                                                                    |          | 0.35      |          |  
| | Diluted- pro forma                                                                                                                                      |          | 0.34      |          |  

|11
|--



|STERLING BANCORP AND SUBSIDIARIESNotes to Consolidated Financial Statements(Unaudited)
|--------------------------------------------------------------------------------------
|                                                                                      

| | **Nine Months Ended September 30,**                                                                                                                     | **2004 [1]** |            | **2003 [1]**
| | ------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------ | ---------- | ------------
| |                                                                                                                                                         |              |            |             
| |                                                                                                                                                         |              |            |             
| | Net income available for
    common shareholders                                                                                                        | $            | 18,321,709 |             
| | Deduct: Total stock-based employee
    compensation expense determined under
    fair value based method for all awards,
    net of related tax effects |              | (174,954   | )           
| |                                                                                                                                                         |              |            |             
| |                                                                                                                                                         |              |            |             
| | Pro forma, net income                                                                                                                                   | $            | 18,146,755 |             
| |                                                                                                                                                         |              |            |             
| |                                                                                                                                                         |              |            |             
| | Earnings per average common share:                                                                                                                      |              |            |             
| | Basic- as reported                                                                                                                                      | $            | 1.00       |             
| | Basic- pro forma                                                                                                                                        |              | 0.99       |             
| | Diluted- as reported                                                                                                                                    |              | 0.96       |             
| | Diluted- pro forma                                                                                                                                      |              | 0.95       |             

| | [1] | Restated;
see Notes 1 and 2 above.
| | --- | ----------------------------------

|   |                                                                                                 
|-- | ------------------------------------------------------------------------------------------------
|4. | The major components of domestic loans held for sale and loans held in portfolio are as follows:
|   |                                                                                                 

| |                                  | September 30, |            
| | -------------------------------- | ------------- | -----------
|
|
| |                                  |               |            
| | Loans held for sale              |               |            
| | Real estate-mortgage             | $             | 38,810,366 
| |                                  |               |            
| | Loans held in portfolio          |               |            
| | Commercial and industrial        | $             | 585,288,435
| | Lease financing                  |               | 181,671,932
| | Real estate-mortgage             |               | 206,546,866
| | Real estate-construction         |               | 2,329,491  
| | Installment                      |               | 15,270,005 
| | Loans to depository institutions |               |           
| |                                  |               |            
| |                                  |               |            
| | Loans, gross                     |               | 991,106,729
| | Less unearned discounts          |               | 23,033,619 
| |                                  |               |            
| |                                  |               |            
| |                                  |               |            
| | Loans, net of unearned discounts | $             | 968,073,110
| |                                  |               |            

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|5. | 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. In order to comply
with SFAS No. 131, the Company has determined that it has three reportable operating segments: corporate
lending, real estate lending and company-wide treasury.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

| | 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 the interest incurred on interest-bearing
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|12
|--



|STERLING BANCORP AND SUBSIDIARIESNotes to Consolidated Financial Statements(Unaudited)
|--------------------------------------------------------------------------------------
|                                                                                      

| | liabilities. The Companys 2004 year-to-date average interest-earning assets were 55.8% loans
(corporate lending was 72.5% and real estate lending was 24.6% of total loans, respectively) and
43.1% investment securities and money market investments. There are no industry concentrations exceeding
10% of loans, gross, in the corporate loan portfolio. Approximately 66% of loans are to borrowers
located in the metropolitan New York area.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                     

| | The following tables provide certain information regarding the Companys operating segments for
the three-and nine-month periods ended September 30, 2004 and 2003:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                    

|**Corporate
      Lending**                 |   | **Real
      Estate
      Lending** |     | **Company-wide
      Treasury** |             | **Totals**
|------------------------------------------- | - | ----------------------------------- | --- | ------------------------------- | ----------- | ----------
|                                            |   |                                     |     |                                 |             |           
|Three
      Months Ended September 30, 2004 |   |                                     |     |                                 |             |           
|Net interest
      income                   | $ | 9,186,653                           |     | $                               | 4,125,387   |           
|Noninterest
      income                    |   | 3,587,898                           |     |                                 | 3,929,044   |           
|Depreciation
      and amortization         |   | 80,415                              |     |                                 | 102,964     |           
|Segment
      income before taxes           |   | 4,544,561                           | [1] |                                 | 4,109,381   |           
|Segment assets                              |   | 703,541,000                         |     |                                 | 286,075,699 |           
|                                            |   |                                     |     |                                 |             |           
|Three
      Months Ended September 30, 2003 |   |                                     |     |                                 |             |           
|Net interest
      income                   | $ | 8,678,941                           |     | $                               | 4,574,622   |           
|Noninterest
      income                    |   | 3,285,616                           |     |                                 | 4,038,713   |           
|Depreciation
      and amortization         |   | 65,875                              |     |                                 | 81,167      |           
|Segment income
      before taxes           |   | 4,457,269                           | [1] |                                 | 3,446,438   |           
|Segment assets                              |   | 703,324,770                         |     |                                 | 240,461,682 |           
|                                            |   |                                     |     |                                 |             |           
|Nine Months
      Ended September 30, 2004  |   |                                     |     |                                 |             |           
|Net interest
      income                   | $ | 26,222,249                          |     | $                               | 11,788,083  |           
|Noninterest
      income                    |   | 9,762,453                           |     |                                 | 11,606,416  |           
|Depreciation
      and amortization         |   | 221,579                             |     |                                 | 302,679     |           
|Segment income
      before taxes           |   | 11,283,731                          | [1] |                                 | 12,201,185  |           
|Segment assets                              |   | 703,541,000                         |     |                                 | 286,075,699 |           
|                                            |   |                                     |     |                                 |             |           
|Nine Months
      Ended September 30, 2003  |   |                                     |     |                                 |             |           
|Net interest
      income                   | $ | 25,443,875                          |     | $                               | 12,502,274  |           
|Noninterest
      income                    |   | 9,313,652                           |     |                                 | 11,105,877  |           
|Depreciation
      and amortization         |   | 154,512                             |     |                                 | 235,559     |           
|Segment income
      before taxes           |   | 13,136,989                          | [1] |                                 | 10,762,855  |           
|Segment assets                              |   | 703,324,770                         |     |                                 | 240,461,682 |           

|                               
|-------------------------------
|[1]  Restated; see Note 2 above

|13
|--



|STERLING BANCORP AND SUBSIDIARIESNotes to Consolidated Financial Statements(Unaudited)
The following table sets forth reconciliations of net interest income, noninterest income, profits
and assets of reportable operating segments to the Companys consolidated totals:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                           

|                                              | Three Months
      Ended September 30, |               | Nine Months
      Ended September 30, |  
|--------------------------------------------- | -------------------------------------- | ------------- | ------------------------------------- | -
|                                              |                                        |               |                                       |  
|                                              | 2004                                   |               | 2003                                  |  
|                                              |                                        |               |                                       |  
|Net interest
      income:                    |                                        |               |                                       |  
|Total
      for reportable operating segments | $                                      | 19,270,772    |                                       | $
|Other
      [1]                               |                                        | 491,981       |                                       |  
|                                              |                                        |               |                                       |  
|                                              |                                        |               |                                       |  
|Consolidated
      net interest income        | $                                      | 19,762,753    |                                       | $
|                                              |                                        |               |                                       |  
|                                              |                                        |               |                                       |  
|Noninterest
      income:                     |                                        |               |                                       |  
|Total
      for reportable operating segments | $                                      | 8,338,939     |                                       | $
|Other
      [1] [2]                           |                                        | 835,889       |                                       |  
|                                              |                                        |               |                                       |  
|                                              |                                        |               |                                       |  
|Consolidated
      noninterest income [2]     | $                                      | 9,174,828     |                                       | $
|                                              |                                        |               |                                       |  
|                                              |                                        |               |                                       |  
|Income before
      taxes:[2]                 |                                        |               |                                       |  
|Total
      for reportable operating segments | $                                      | 16,204,161    |                                       | $
|Other
      [1]                               |                                        | (6,098,663    | )                                     |  
|                                              |                                        |               |                                       |  
|                                              |                                        |               |                                       |  
|Consolidated
      income before income taxes | $                                      | 10,105,498    |                                       | $
|                                              |                                        |               |                                       |  
|                                              |                                        |               |                                       |  
|Assets:[2]                                    |                                        |               |                                       |  
|Total
      for reportable operating segments | $                                      | 1,768,507,534 |                                       | $
|Other
      [1]                               |                                        | 41,800,632    |                                       |  
|                                              |                                        |               |                                       |  
|                                              |                                        |               |                                       |  
|Consolidated
      assets                     | $                                      | 1,810,308,166 |                                       | $
|                                              |                                        |               |                                       |  

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|[1] | Represents operations not considered to be a reportable segment and/or general operating expenses of
   the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|[2] | Restated see Note 2 above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|6.  | On December 31, 2003, the Company adopted FASB Interpretation No. 46R (FIN 46R), Consolidation of Variable Interest Entities, which clarified certain provisions of a previously released interpretation. Under the provisions
  of FIN 46R, Sterling deconsolidated the issuer trust and accounts for its investment in the trust
  as an asset, its junior subordinated debentures as long-term debt and the interest paid on those
  debentures as interest expense. As a result of the adoption of FIN 46R, the Companys prior
  period presentations have been restated to conform to the current presentation. Based on proposed
  Federal Reserve guidance, the Company does not expect the change in accounting treatment to affect
  the Tier I regulatory classification of the Companys outstanding trust preferred securities.

|14
|--



|STERLING BANCORP AND SUBSIDIARIESNotes to Consolidated Financial Statements(Unaudited)
|--------------------------------------------------------------------------------------
|                                                                                      

|7. | The following information is provided in connection with the sales of available for sale securities:
|-- | ----------------------------------------------------------------------------------------------------
|   |                                                                                                     

| |                                 |  | 2004 |   | 2003       | 
| | ------------------------------- |  | ---- | - | ---------- | 
| |                                 |  |      |   |            | 
| | Proceeds                        |  |      | $ | 26,149,573 | 
| |                                 |  |      |   |            | 
| | Gross Gains                     |  |      |   | 285,918    | 
| |                                 |  |      |   |            | 
| | Gross Losses                    |  |      |   |           | 
| |                                 |  |      |   |            | 
| | Nine Months Ended September 30, |  |      |   | 2004       | 
| |                                 |  |      |   |            | 
| | Proceeds                        |  |      | $ | 73,254,718 | 
| |                                 |  |      |   |            | 
| | Gross Gains                     |  |      |   | 970,722    | 
| |                                 |  |      |   |            | 
| | Gross Losses                    |  |      |   |           | 

|   |                                                                                                            
|-- | -----------------------------------------------------------------------------------------------------------
|8. | In February 2004, 224,432 Series D preferred shares were converted into 428,304 common shares.             
|   |                                                                                                            
|9. | The following tables set forth the disclosures required for net periodic benefit cost and net benefit
cost:
|   |                                                                                                            

|                                   | Three Months Ended September 30, |          | Nine Months Ended September 30, |  
|---------------------------------- | -------------------------------- | -------- | ------------------------------- | -
|                                   |                                  |          |                                 |  
|
|                                   |                                  |          |                                 |  
|COMPONENTS OF NET PERIODIC COST    |                                  |          |                                 |  
|Service Cost                       | $                                | 388,090  |                                 | $
|Interest Cost                      |                                  | 492,931  |                                 |  
|Expected return on plan assets     |                                  | (417,379 | )                               |  
|Amortization of prior service cost |                                  | 19,331   |                                 |  
|Recognized actuarial loss          |                                  | 216,556  |                                 |  
|                                   |                                  |          |                                 |  
|                                   |                                  |          |                                 |  
|Net periodic benefit cost          |                                  | 699,529  |                                 |  
|                                   |                                  |          |                                 |  
|Settlement gain                    |                                  |         |                                 |  
|                                   |                                  |          |                                 |  
|                                   |                                  |          |                                 |  
|Net benefit cost                   | $                                | 699,529  |                                 | $
|                                   |                                  |          |                                 |  

|                                                            
|------------------------------------------------------------
|The Company contributed $1,322,088 as of September 30, 2004.

|15
|--



|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND 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, 2004. As described in Note 2
to the consolidated financial statements, the financial statements have been
restated. Certain reclassifications have been made to prior years
financial data to conform to current financial statement presentations. All
capital and share amounts as well as basic and diluted average number of shares
outstanding and earnings per average common share information for all periods
have been restated to reflect the effect of the six-for-five stock split
effected on December 8, 2004 and all prior stock splits and stock
dividends.
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 New
York, Virginia 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 September 30, 2004, the banks average earning assets represented approximately
96.7% of the Companys average earning assets. Loans represented 56.0% and investment securities
represented 42.6% of the banks average earning assets for the third quarter of 2004.
For the nine  months ended September 30, 2004, the banks average earning assets represented
approximately 97.2% of the Companys average earning assets. Loans represented 54.6% and investment
securities represented 44.3% of the banks average earning assets for the first nine months
of 2004.
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.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|16
|--



|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 itsexperience 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-earnings
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 28 and 29. Information as to the components of interest
income and interest expense and average rates is provided in the Average Balance Sheets shown on pages 26 and 27.
Comparisons of the Three Months Ended September 30, 2004 and 2003
The Company reported net income for the three months ended September 30, 2004 of $6.6 million, representing
$0.35 per share, calculated on a diluted basis, compared to $6.1 million, or $0.32 per share calculated
on a diluted basis, for the third quarter of 2003. This increase reflects continued growth in both
net
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|17
|--



|interest income and noninterest income and a lower provision for income taxes, which more than offset
increases in the provision for loan losses and noninterest expenses.
Net Interest Income
Net interest income on a tax-equivalent basis, increased to $20.0 million for the third quarter of
2004 from $18.3 million for the corresponding 2003 period, due to higher average earning assets outstanding
coupled with lower average cost of funding partially offset by a lower yield on earning assets and
higher average interest-bearing deposit balances. The net interest margin, on a tax equivalent basis,
was 4.84% for the third quarter of 2004 compared to 5.02% for 2003. The decrease in the net
interest margin was primarily the result of the impact of changes in the mix of earning assets, partially
offset by the impact of the higher interest rate environment in the third quarter of 2004.
Total interest income, on a tax-equivalent basis, aggregated $25.0 million for the third quarter of
2004, up from $22.6 million for the corresponding 2003 period. The tax-equivalent yield on interest-earning
assets was 6.11% for the third quarter of 2004 compared to 6.22% for the 2003 period.
Interest earned on the loan portfolio increased to $16.9 million for the third quarter of 2004,
from $15.9 million for the third quarter of 2003. Average loan balances, which represented 57.4%
of average earning assets for the third quarter of 2004, amounted to $951.9 million, an increase
of $56.9 million from an average of $895.0 million (61.3% of average earning assets) in the corresponding
prior year period. The increase in the average loans (across virtually all segments of the Companys
loan portfolio), primarily due to the Companys business development activities and the ongoing
consolidation of banks in the Companys marketing area, accounted for the increase in interest
earned on loans. The increase in the yield on the loan portfolio to 7.31% for the third quarter of
2004 from 7.18% for the third quarter of 2003 was primarily attributable to the mix of outstanding
balances on average among the components of the loan portfolio and the higher interest rate environment in 2004.
Interest earned on the securities portfolio, on a tax-equivalent basis, increased to $8.0 million for
the third quarter of 2004 from $6.7 million in the prior year period. Average outstandings increased
to $682.7 million (41.2% of average earning assets for the third quarter of 2004) from $558.6 million
(38.3% of average earning assets) in the prior year period. The average life of the securities portfolio
was approximately 4.2 years at September 30, 2004 compared to 2.8 years at September 30, 2003,
reflecting the impact of purchases made primarily in the fourth quarter of 2003 and the first and
second quarters of 2004. The decrease in yields on the securities portfolio reflects the impact of
purchases made during the lower rate environment on average in the first and second quarters of 2004
and of the principal prepayments primarily in the fourth quarter of 2003 and the second quarter of 2004.
Total interest expense increased to $5.1 million for the third quarter of 2004, from $4.3 million
in the prior year period. The increase was primarily due to
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|18
|--



|higher average balances for interest-bearing deposits coupled with higher rates paid for those balances.
Interest expense on deposits increased to $3.0 million for the third quarter of 2004 from $2.2 million
for the 2003 period due to an increase in average balance coupled with an increase in the cost of
those funds. Average interest- bearing deposit balances increased to $853.3 million for the third
quarter of 2004 from $681.6 million in the corresponding 2003 period primarily as a result of branching
initiatives and other business development activities. Average rate paid on interest-bearing deposits
was 1.41%, 15 basis points higher than the prior year period. The increase in average cost of deposits
reflects the higher interest rate environment in 2004.
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 third quarter of 2004 was $2.3 million
compared to $2.2 million for the prior year period. Factors affecting the level of provision
for loan losses included the growth in the loan portfolios, changes in general economic conditions
and the amount of nonaccrual loans.
Noninterest Income
Noninterest income increased to $9.2 million for the third quarter of 2004 from $8.8 million in the
third quarter of 2003, primarily due to increased income from factoring activities, from bank owned
life insurance and from gains on sales of available for sale securities. Partially offsetting these
increases were lower revenues from fees various other services.
Noninterest Expenses
Noninterest expenses increased $1.6 million for the third quarter of 2004 when compared to the third
quarter of 2003. The increase was primarily due to investments in the Sterling franchise, including
the new branches, with higher expenses related to salaries and employee benefits, occupancy and professional
fees.
Provision for Income Taxes
The provision for income taxes was $3.6 million for the third quarter of 2004, virtually unchanged
from $3.7 million in the corresponding 2003 period.
Comparisons of the Nine Months Ended September 30, 2004 and 2003
The Company reported net income for the nine months ended September 30, 2004 of $18.3 million, representing
$0.96 per share, calculated on a diluted basis, compared to $17.6 million, or $0.93 per share calculated
on a diluted basis, for the first nine months of 2003. This increase reflects continued growth in
both net interest income and noninterest income and a lower provision for income taxes, which more
than offset increases in the provision for loan losses and noninterest expenses.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|19
|--



|Net Interest Income
Net interest income on a tax-equivalent basis increased to $58.4 million for the first nine months
of 2004 from $55.6 million for the corresponding 2003 period, due to higher average earning assets
outstanding coupled with lower average cost of funding partially offset by a lower yield on earning
assets and higher average interest-bearing deposit balances. The net interest margin, on a tax-equivalent
basis, was 4.92% for the first nine months of 2004 compared to 5.36% for 2003. The decrease
in the net interest margin was primarily the result of changes in the mix of earning assets.
Total interest income, on a tax-equivalent basis, aggregated $72.5 million for the first nine months
of 2004, up from $68.8 million for the 2003 period. The tax-equivalent yield on interest-earning
assets was 6.13% for the first nine months of 2004 compared to 6.64% for the corresponding 2003 period.
Interest earned on the loan portfolio amounted to $47.4 million for the first nine months of 2004,
up $1.4 million from a year ago. Average loan balances amounted to $905.4 million, an increase
of $61.1 million from an average of $844.3 million in the prior year period. The increase in the
average loans (across virtually all segments of the Companys loan portfolio), primarily due
to the Companys business development activities and the ongoing consolidation of banks in the
Companys marketing area, accounted for the increase in interest earned on loans. The decrease
in the yield on the loan portfolio to 7.38% for the first nine months of 2004 from 7.68% for the
first nine months of 2003 was primarily attributable to changes in the mix of outstanding balances
on average among the components of the loan portfolio.
Interest earned on the securities portfolio, on a tax-equivalent basis, increased to $25.0 million
for the first nine months of 2004 from $22.7 million in the corresponding prior year period.
Average outstandings increased to $698.3 million from $573.4 million in the prior year period. The average
life of the securities portfolio was approximately 4.2 years at September 30, 2004 compared to 2.8
years at September 30, 2003, reflecting the impact of purchases made primarily in the fourth quarter
of 2003 and the first and second quarters of 2004. The decrease in yields on the securities portfolio
reflects the impact of purchases made during the lower rate environment on average in the first and
second quarters of the 2004 period and of the principal prepayments primarily in the fourth quarter
of 2003 and the second quarter of 2004.
Total interest expense increased to $14.1 million for the first nine months of 2004 from $13.2 million
for the corresponding 2003 period, primarily due to higher average balances for interest-bearing
deposits.
Interest expense on deposits increased to $7.9 million for the first nine months of 2004 from
$6.7 million for the 2003 period primarily, due to an increase in average balances. Average interest-bearing
deposit balances increased to $815.3 million for the first nine months of 2004 from $671.2 in the
first nine months of 2003 period, primarily as a result of branching initiatives and other business
development activities. Average rate paid on interest-bearing deposits was 1.29%, which was 4 basis
points lower than the prior year period.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|20
|--



|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 nine months of 2004 increased to
$7.2 million from $6.1 million for the prior year period. Factors affecting the level of provision
for loan losses included the growth in the loan portfolios, changes in general economic conditions
and the amount of nonaccrual loans.
Noninterest Income
Noninterest income increased to $25.9 million for the first nine months of 2004 from $24.4 million
in the corresponding 2003 period, primarily due to increased income from mortgage banking, principally
the result of a change in the mix of loans sold due to a broader array of loan products and an increased
focus on higher margin mortgage loans, and from factoring activities, from bank owned life insurance
and from gains on sales of available for sale securities. Partially offsetting these increases were
lower revenues from fees for deposit and various other services.
Noninterest Expenses
Noninterest expenses increased $4.2 million for the first nine months of 2004 when compared to the
corresponding 2003 period. The increase was primarily due to investments in the Sterling franchise,
including the new branches, with higher expenses related to salaries and employee benefits, advertising
and marketing, and professional fees.
Provision for Income Taxes
The provision for income taxes decreased to $9.5 million for the first nine months of 2004 from $ 11.1
million in the first nine months of 2003. The lower provision for taxes in the 2004 period was
due to the resolution, during the second quarter of 2004, of certain state tax issues for tax years
1999-2001.
BALANCE SHEET ANALYSIS
Securities
The Companys securities portfolios are comprised of principally U.S. government and U.S. government
corporation and agency guaranteed mortgage-backed securities along with other debt and equity securities.
At September 30, 2004, the Companys portfolio of securities totaled $670.1 million, of which
U.S. government corporation and agency guaranteed mortgage-backed securities and collateralized mortgage
obligations having an average life of approximately 4.4 years amounted to $575.0 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 $5.2 million
and $2.4 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. Available for sale securities
included gross unrealized gains of $3.3 million and gross unrealized losses of $2.7 million. Given
the generally high credit quality of the portfolio, management expects to realize all of its investment
upon the maturity of such instruments and thus believes that any market value impairment is temporary.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|21
|--



|The following table presents information regarding securities available for sale:
|---------------------------------------------------------------------------------
|                                                                                 

|September 30, 2004          |  | Gross
Amortized
Cost |             | Gross
Unrealized
Gains |   | Gross
Unrealized
Losses |  | Market
Value |           
|--------------------------- |  | -------------------- | ----------- | ---------------------- | - | ----------------------- |  | ------------ | ----------
|                            |  |                      |             |                        |   |                         |  |              |           
|U.S. Treasury securities    |  | $                    | 2,488,090   |                        | $ |                        |  | $            | (1,059    
|Obligations of U.S. govern- |  |                      |             |                        |   |                         |  |              |           
|ment corporations and       |  |                      |             |                        |   |                         |  |              |           
|agenciesmortgage-backed    |  |                      |             |                        |   |                         |  |              |           
|securities                  |  |                      | 149,099,649 |                        |   | 1,499,379               |  |              | (605,420  
|Obligations of U.S. govern- |  |                      |             |                        |   |                         |  |              |           
|ment corporations and       |  |                      |             |                        |   |                         |  |              |           
|agenciescollateralized     |  |                      |             |                        |   |                         |  |              |           
|mortgage obligations        |  |                      | 50,300,775  |                        |   |                        |  |              | (1,906,729
|Obligations of state and    |  |                      |             |                        |   |                         |  |              |           
|political institutions      |  |                      | 29,074,083  |                        |   | 1,331,349               |  |              |          
|Trust preferred securities  |  |                      | 3,220,732   |                        |   | 442,315                 |  |              |          
|Other debt securities       |  |                      | 39,994,461  |                        |   |                        |  |              | (141,336  
|Federal Reserve Bank and    |  |                      |             |                        |   |                         |  |              |           
|other equity securities     |  |                      | 7,623,241   |                        |   | 17,831                  |  |              |          
|                            |  |                      |             |                        |   |                         |  |              |           
|                            |  |                      |             |                        |   |                         |  |              |           
|Total                       |  | $                    | 281,801,031 |                        | $ | 3,290,874               |  | $            | (2,654,544
|                            |  |                      |             |                        |   |                         |  |              |           

|                                                                               
|-------------------------------------------------------------------------------
|The following table presents information regarding securities held to maturity:
|                                                                               

|September 30, 2004          | Carrying
Value |   | Gross
Unrealized
Gains |  | Gross
Unrealized
Losses |           | Estimated
Market
Value |  
|--------------------------- | -------------- | - | ---------------------- |  | ----------------------- | --------- | ---------------------- | -
|                            |                |   |                        |  |                         |           |                        |  
|Obligations of U.S. govern- |                |   |                        |  |                         |           |                        |  
|ment corporations and       |                |   |                        |  |                         |           |                        |  
|agencies  mortgage-backed  |                |   |                        |  |                         |           |                        |  
|securities                  |                | $ | 306,779,884            |  | $                       | 5,066,482 |                        | $
|Obligations of U.S. govern- |                |   |                        |  |                         |           |                        |  
|ment corporations and       |                |   |                        |  |                         |           |                        |  
|agenciescollateralized     |                |   |                        |  |                         |           |                        |  
|mortgage obligations        |                |   | 69,641,819             |  |                         | 138,245   |                        |  
|Debt securities issued by   |                |   |                        |  |                         |           |                        |  
|Foreign governments         |                |   | 1,250,000              |  |                         |          |                        |  
|Other debt securities       |                |   | 10,010,938             |  |                         |          |                        |  
|                            |                |   |                        |  |                         |           |                        |  
|                            |                |   |                        |  |                         |           |                        |  
|Total                       |                | $ | 387,682,641            |  | $                       | 5,204,727 |                        | $
|                            |                |   |                        |  |                         |           |                        |  

|22
|--



|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 the
origination of loans in markets with which the Company is familiar.
The Companys commercial and industrial loan portfolio represents approximately 58% of all loans.
Loans in this category are typically made to small and medium-sized businesses and range between
$100,000 and $15 million. 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 Companys real estate loan portfolio, which represents approximately
24% of all loans, is secured by mortgages on real property located principally in the states of New
York, North Carolina, Georgia and Virginia. The Companys leasing portfolio, which consists
of finance leases for various types of business equipment, represents approximately 16% of all loans.
The collateral securing any loan 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:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

|                                 |  | September 30,    |          
|-------------------------------- |  | ---------------- | ---------
|                                 |  |                  |          
|                                 |  | 2004             |          
|                                 |  |                  |          
|                                 |  | ($ in thousands) |          
|                                 |  |                  | Balances 
|                                 |  |                  |          
|Domestic                         |  |                  |          
|Commercial and industrial        |  | $                | 584,754  
|Equipment lease financing        |  |                  | 159,175  
|Real estate - mortgage           |  |                  | 245,357  
|Real estate - construction       |  |                  | 2,329    
|Installment - individuals        |  |                  | 15,268   
|Loans to depository institutions |  |                  |         
|                                 |  |                  |          
|                                 |  |                  |          
|Loans, net of unearned discounts |  | $                | 1,006,883
|                                 |  |                  |          

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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 be increased. 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 expected 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

|23
|--



|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 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 includes, but is 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 September 30, 2004, the ratio of the allowance
to loans held in portfolio, net of unearned discounts, was 1.61% and the allowance was $15.6 million.
At such date, the Companys nonaccrual loans amounted to $3.0 million; $921 thousand of such
loans was judged to be impaired within the scope of SFAS No. 114. 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 possible credit risks associated with the portfolio as of September 30, 2004.
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 nine months of 2004. 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 $0.6 million at September 30, 2004.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|24
|--



|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:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                         

|                        |  | September 30,    |          
|----------------------- |  | ---------------- | ---------
|                        |  |                  |          
|                        |  | 2004             |          
|                        |  |                  |          
|                        |  | ($ in thousands) |          
|                        |  |                  | Balances 
|                        |  |                  |          
|Domestic                |  |                  |          
|Demand                  |  | $                | 424,534  
|NOW                     |  |                  | 111,868  
|Savings                 |  |                  | 29,488   
|Money market            |  |                  | 226,655  
|Time deposits           |  |                  | 503,824  
|                        |  |                  |          
|                        |  |                  |          
|Total domestic deposits |  |                  | 1,296,369
|Foreign                 |  |                  |          
|Time deposits           |  |                  | 3,000    
|                        |  |                  |          
|                        |  |                  |          
|Total deposits          |  | $                | 1,299,369
|                        |  |                  |          

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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 26 and 27.
The Company does not have any off-balance sheet arrangements that are reasonably likely to have a material
current or future effect on the Companys financial condition, revenues, expenses, results of
operations, liquidity or regulatory capital.
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% to 5%) 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 31. 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, five capital categories, ranging from well capitalized
to critically under capitalized, are used by regulatory agencies

|25
|--



|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 September 30, 2004, the Company and the bank exceeded
the requirements for well capitalized institutions.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this quarterly report, 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 development 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 Board of Governors of the Federal Reserve System; 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 the 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 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.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|26
|--



|STERLING BANCORP AND SUBSIDIARIESAverage Balance Sheets [1] 
Three Months Ended September 30,
(Unaudited) 
(dollars in thousands)
|---------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                 

|                                                                | 2004 |           | 2003 |  
|--------------------------------------------------------------- | ---- | --------- | ---- | -
|
|
|Interest-bearing deposits
  with other banks                    | $    | 3,799     |      | $
|Securities available for sale                                   |      | 266,551   |      |  
|Securities held to maturity                                     |      | 386,851   |      |  
|Securities tax-exempt [2]                                       |      | 29,267    |      |  
|Federal funds sold                                              |      | 19,620    |      |  
|Loans, net of unearned discounts [3]                            |      | 951,941   |      |  
|                                                                |      |           |      |  
|TOTAL INTEREST-EARNING ASSETS                                   |      | 1,658,029 |      |  
|                                                                |      |           |      |  
|Cash and due from banks                                         |      | 53,476    |      |  
|Allowance for loan losses                                       |      | (16,158   | )    |  
|Goodwill                                                        |      | 21,158    |      |  
|Other assets                                                    |      | 70,050    |      |  
|                                                                |      |           |      |  
|TOTAL ASSETS                                                    | $    | 1,786,555 |      |  
|                                                                |      |           |      |  
|LIABILITIES AND SHAREHOLDERS                                  
|EQUITY                                                         
|Interest-bearing deposits                                      
|Domestic                                                       
|Savings                                                         | $    | 29,991    |      |  
|NOW                                                             |      | 133,357   |      |  
|Money market                                                    |      | 217,612   |      |  
|Time                                                            |      | 469,319   |      |  
|Foreign                                                        
|Time                                                            |      | 3,000     |      |  
|                                                                |      |           |      |  
|Total interest-bearing deposits                                 |      | 853,279   |      |  
|                                                                |      |           |      |  
|Borrowings                                                     
|Securities sold under agreements
     to repurchase - customers |      | 90,654    |      |  
|Securities sold under agreements
     to repurchase - dealers   |      | 14,910    |      |  
|Federal funds purchased                                         |      | 2,500     |      |  
|Commercial paper                                                |      | 34,394    |      |  
|Other short-term debt                                           |      | 6,293     |      |  
|Long-term debt                                                  |      | 135,774   |      |  
|                                                                |      |           |      |  
|Total borrowings                                                |      | 284,525   |      |  
|                                                                |      |           |      |  
|TOTAL INTEREST-BEARING LIABILITIES                              |      | 1,137,804 |      |  
|                                                                |      |           |      |  
|Noninterest-bearing deposits                                    |      | 424,974   |      |  
|Other liabilities                                               |      | 83,603    |      |  
|                                                                |      |           |      |  
|Total liabilities                                               |      | 1,646,381 |      |  
|                                                                |      |           |      |  
|                                                                |      |           |      |  
|Shareholders equity                                            |      | 140,174   |      |  
|                                                                |      |           |      |  
|TOTAL LIABILITIES AND
           SHAREHOLDERS EQUITY           | $    | 1,786,555 |      |  
|                                                                |      |           |      |  
|Net interest income/spread                                      |      |           |      |  
|                                                                |      |           |      |  
|Net yield on interest-earning
  assets (margin)                 |      |           |      |  
|                                                                |      |           |      |  
|Less: Tax equivalent adjustment                                 |      |           |      |  
|                                                                |      |           |      |  
|Net interest income                                             |      |           |      | $
|                                                                |      |           |      |  

|[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.                                                                                             

|27
|--



|STERLING BANCORP AND SUBSIDIARIES
Average Balance Sheets  [1]
Nine Months Ended September 30,
(Unaudited)
(dollars in thousands)
|--------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                

|                                                                              | 2004 |           | 2003 |  
|----------------------------------------------------------------------------- | ---- | --------- | ---- | -
|
|
|Interest-bearing
      deposits
        with other banks                      | $    | 3,151     |      | $
|Securities
      available for sale                                           |      | 282,504   |      |  
|Securities
      held to maturity                                             |      | 385,548   |      |  
|Securities
      tax-exempt [2]                                               |      | 30,217    |      |  
|Federal funds
      sold                                                      |      | 14,361    |      |  
|Loans, net
      of unearned discounts [3]                                    |      | 905,402   |      |  
|                                                                              |      |           |      |  
|TOTAL INTEREST-EARNING
      ASSETS                                           |      | 1,621,183 |      |  
|                                                                              |      |           |      |  
|Cash and
      due from banks                                                 |      | 59,477    |      |  
|Allowance
      for loan losses                                               |      | (15,694   | )    |  
|Goodwill                                                                      |      | 21,158    |      |  
|Other
      assets                                                            |      | 70,370    |      |  
|                                                                              |      |           |      |  
|TOTAL
      ASSETS                                                            | $    | 1,756,494 |      |  
|                                                                              |      |           |      |  
|LIABILITIES
      AND SHAREHOLDERS                                          
|EQUITY                                                                       
|Interest-bearing
      deposits                                              
|Domestic                                                                     
|Savings                                                                       | $    | 31,851    |      |  
|NOW                                                                           |      | 134,237   |      |  
|Money
      market                                                            |      | 210,257   |      |  
|Time                                                                          |      | 435,991   |      |  
|Foreign                                                                      
|Time                                                                          |      | 3,000     |      |  
|                                                                              |      |           |      |  
|Total
      interest-bearing deposits                                         |      | 815,336   |      |  
|                                                                              |      |           |      |  
|Borrowings                                                                   
|Securities
      sold under agreements
           to repurchase - customers   |      | 81,625    |      |  
|Securities
      sold under agreements
           to repurchase - dealers     |      | 34,018    |      |  
|Federal
      funds purchased                                                 |      | 8,580     |      |  
|Commercial
      paper                                                        |      | 28,733    |      |  
|Other
      short-term debt                                                   |      | 16,603    |      |  
|Long-term
      debt                                                          |      | 135,774   |      |  
|                                                                              |      |           |      |  
|Total
      borrowings                                                        |      | 305,333   |      |  
|                                                                              |      |           |      |  
|TOTAL INTEREST-BEARING
      LIABILITIES                                      |      | 1,120,669 |      |  
|                                                                              |      |           |      |  
|Noninterest-bearing
      deposits                                            |      | 411,916   |      |  
|Other liabilities                                                             |      | 81,928    |      |  
|                                                                              |      |           |      |  
|Total
      liabilities                                                       |      | 1,614,513 |      |  
|                                                                              |      |           |      |  
|                                                                              |      |           |      |  
|Shareholders
      equity                                                    |      | 141,981   |      |  
|                                                                              |      |           |      |  
|TOTAL
      LIABILITIES AND
                       SHAREHOLDERS
      EQUITY | $    | 1,756,494 |      |  
|                                                                              |      |           |      |  
|Net interest
      income/spread                                              |      |           |      |  
|                                                                              |      |           |      |  
|Net yield
      on interest-earning
        assets (margin)                   |      |           |      |  
|                                                                              |      |           |      |  
|Less: Tax
      equivalent adjustment                                         |      |           |      |  
|                                                                              |      |           |      |  
|Net interest
      income                                                     |      |           |      | $
|                                                                              |      |           |      |  
|                                                                              |      |           |      |  
|                                                                              |      |           |      |  

|    |                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|[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.                                                                                             
|    |                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                       

|28
|--



|STERLING BANCORP AND SUBSIDIARIESRate/Volume Analysis  [1]
(Unaudited)
(in thousands)
|-------------------------------------------------------------------------------------
|                                                                                     

|                                           | Increase/(Decrease)
  Three Months Ended
  September 30, 2004 to September 30, 2003 |      
|------------------------------------------ | ----------------------------------------------------------------------------------- | -----
|                                           |                                                                                     |      
|                                           | Volume                                                                              |      
|                                           |                                                                                     |      
|INTEREST INCOME                            |                                                                                     |      
|Interest-bearing deposits with other banks | $                                                                                   | (1   
|                                           |                                                                                     |      
|                                           |                                                                                     |      
|                                           |                                                                                     |      
|                                           |                                                                                     |      
|Securities available for sale              |                                                                                     | 1,079
|Securities held to maturity                |                                                                                     | 378  
|Securities tax-exempt                      |                                                                                     | (40  
|                                           |                                                                                     |      
|                                           |                                                                                     |      
|Total investment securities                |                                                                                     | 1,417
|                                           |                                                                                     |      
|                                           |                                                                                     |      
|                                           |                                                                                     |      
|                                           |                                                                                     |      
|Federal funds sold                         |                                                                                     | 65   
|                                           |                                                                                     |      
|                                           |                                                                                     |      
|Loans, net of unearned discounts [3]       |                                                                                     | 795  
|                                           |                                                                                     |      
|                                           |                                                                                     |      
|                                           |                                                                                     |      
|                                           |                                                                                     |      
|TOTAL INTEREST INCOME                      | $                                                                                   | 2,276
|                                           |                                                                                     |      
|                                           |                                                                                     |      
|                                           |                                                                                     |      
|                                           |                                                                                     |      
|                                           |                                                                                     |      
|                                           |                                                                                     |      
|INTEREST EXPENSE                           |                                                                                     |      
|Interest-bearing deposits                  |                                                                                     |      
|Domestic                                   |                                                                                     |      
|Savings                                    | $                                                                                   | 2    
|NOW                                        |                                                                                     | 10   
|Money market                               |                                                                                     | 62   
|Time                                       |                                                                                     | 592  
|Foreign                                    |                                                                                     |      
|Time                                       |                                                                                     |     
|                                           |                                                                                     |      
|                                           |                                                                                     |      
|Total interest-bearing deposits            |                                                                                     | 666  
|                                           |                                                                                     |      
|                                           |                                                                                     |      
|                                           |                                                                                     |      
|                                           |                                                                                     |      
|Borrowings                                 |                                                                                     |      
|Securities sold under agreements           |                                                                                     |      
|to repurchase - customers                  |                                                                                     | 39   
|Securities sold under agreements           |                                                                                     |      
|to repurchase - dealers                    |                                                                                     | (69  
|Federal funds purchased                    |                                                                                     | (16  
|Commercial paper                           |                                                                                     | 30   
|Other short-term debt                      |                                                                                     | (98  
|Long-term debt                             |                                                                                     | (57  
|                                           |                                                                                     |      
|                                           |                                                                                     |      
|Total borrowings                           |                                                                                     | (171 
|                                           |                                                                                     |      
|                                           |                                                                                     |      
|                                           |                                                                                     |      
|                                           |                                                                                     |      
|TOTAL INTEREST EXPENSE                     | $                                                                                   | 495  
|                                           |                                                                                     |      
|                                           |                                                                                     |      
|                                           |                                                                                     |      
|                                           |                                                                                     |      
|NET INTEREST INCOME                        | $                                                                                   | 1,781
|                                           |                                                                                     |      

|    |                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|[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.                                                  
|    |                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                            

|29
|--



|STERLING BANCORP AND SUBSIDIARIES
Rate/Volume Analysis  [1]
(Unaudited)
(in thousands)
|--------------------------------------------------------------------------------------
|                                                                                      

|                                           |  |  | Increase/(Decrease)
    Nine Months Ended
    September 30, 2004 to September 30, 2003 |      
|------------------------------------------ |  |  | -------------------------------------------------------------------------------------- | -----
|                                           |  |  |                                                                                        |      
|                                           |  |  | Volume                                                                                 |      
|                                           |  |  |                                                                                        |      
|INTEREST INCOME                            |  |  |                                                                                        |      
|Interest-bearing deposits with other banks |  |  | $                                                                                      | (3   
|                                           |  |  |                                                                                       
|                                           |  |  |                                                                                       
|                                           |  |  |                                                                                        |      
|                                           |  |  |                                                                                        |      
|Securities available for sale              |  |  |                                                                                        | 4,121
|Securities held to maturity                |  |  |                                                                                        | 303  
|Securities tax-exempt                      |  |  |                                                                                        | (111 
|                                           |  |  |                                                                                       
|                                           |  |  |                                                                                        |      
|Total investment securities                |  |  |                                                                                        | 4,313
|                                           |  |  |                                                                                       
|                                           |  |  |                                                                                       
|                                           |  |  |                                                                                        |      
|                                           |  |  |                                                                                        |      
|Federal funds sold                         |  |  |                                                                                        | 84   
|                                           |  |  |                                                                                       
|                                           |  |  |                                                                                        |      
|Loans, net of unearned discounts [3]       |  |  |                                                                                        | 3,416
|                                           |  |  |                                                                                       
|                                           |  |  |                                                                                       
|                                           |  |  |                                                                                        |      
|                                           |  |  |                                                                                        |      
|TOTAL INTEREST INCOME                      |  |  | $                                                                                      | 7,810
|                                           |  |  |                                                                                       
|                                           |  |  |                                                                                       
|                                           |  |  |                                                                                       
|                                           |  |  |                                                                                       
|                                           |  |  |                                                                                        |      
|                                           |  |  |                                                                                        |      
|INTEREST EXPENSE                           |  |  |                                                                                        |      
|Interest-bearing deposits                  |  |  |                                                                                        |      
|Domestic                                   |  |  |                                                                                        |      
|Savings                                    |  |  | $                                                                                      | 14   
|NOW                                        |  |  |                                                                                        | 54   
|Money market                               |  |  |                                                                                        | 196  
|Time                                       |  |  |                                                                                        | 1,115
|Foreign                                    |  |  |                                                                                        |      
|Time                                       |  |  |                                                                                        |     
|                                           |  |  |                                                                                       
|                                           |  |  |                                                                                        |      
|Total interest-bearing deposits            |  |  |                                                                                        | 1,379
|                                           |  |  |                                                                                       
|                                           |  |  |                                                                                       
|                                           |  |  |                                                                                        |      
|                                           |  |  |                                                                                        |      
|Borrowings                                 |  |  |                                                                                        |      
|Securities sold under agreements           |  |  |                                                                                        |      
|to repurchase - customers                  |  |  |                                                                                        | 113  
|Securities sold under agreements           |  |  |                                                                                        |      
|to repurchase - dealers                    |  |  |                                                                                        | (56  
|Federal funds purchased                    |  |  |                                                                                        | 21   
|Commercial paper                           |  |  |                                                                                        | 53   
|Other short-term debt                      |  |  |                                                                                        | (204 
|Long-term debt                             |  |  |                                                                                        | (166 
|                                           |  |  |                                                                                       
|                                           |  |  |                                                                                        |      
|Total borrowings                           |  |  |                                                                                        | (239 
|                                           |  |  |                                                                                       
|                                           |  |  |                                                                                       
|                                           |  |  |                                                                                        |      
|                                           |  |  |                                                                                        |      
|TOTAL INTEREST EXPENSE                     |  |  | $                                                                                      | 1,140
|                                           |  |  |                                                                                       
|                                           |  |  |                                                                                       
|                                           |  |  |                                                                                        |      
|                                           |  |  |                                                                                        |      
|NET INTEREST INCOME                        |  |  | $                                                                                      | 6,670
|                                           |  |  |                                                                                        |      

|    |                                                                                                                                                                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|[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. The effect of the extra day in 2004 has been included in the change in volume.
|    |                                                                                                                                                                                                                                                                                                                           
|[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.                                                                                                                                 

|30
|--



|STERLING BANCORP AND SUBSIDIARIESRegulatory Capital and Ratios
(Unaudited & Restated)
|-------------------------------------------------------------------------------------
|                                                                                     
|Ratios and Minimums                                                                  
|(dollars in thousands)                                                               
|                                                                                     

|                                                  |  | Actual |         | For Capital 
      Adequacy Minimum |  | To Be Well
      Capitalized |  
|------------------------------------------------- |  | ------ | ------- | ----------------------------------- |  | ---------------------------- | -
|                                                  |  |        |         |                                     |  |                              |  
|As
        of September 30, 2004 [1]              |  | Amount |         | Ratio                               |  | Amount                       |  
|                                                  |  |        |         |                                     |  |                              |  
|Total Capital(to
      Risk Weighted Assets):     |  |        |         |                                     |  |                              |  
|The
      Company                                 |  | $      | 166,075 |                                     |  | 14.31                        | %
|The
      bank                                    |  |        | 132,072 |                                     |  | 12.02                        |  
|                                                  |  |        |         |                                     |  |                              |  
|Tier 1 Capital(to
      Risk Weighted Assets):    |  |        |         |                                     |  |                              |  
|The
      Company                                 |  |        | 151,550 |                                     |  | 13.05                        |  
|The
      bank                                    |  |        | 118,314 |                                     |  | 10.77                        |  
|                                                  |  |        |         |                                     |  |                              |  
|Tier 1 Leverage
      Capital(to Average Assets): |  |        |         |                                     |  |                              |  
|The
      Company                                 |  |        | 151,550 |                                     |  | 8.58                         |  
|The
      bank                                    |  |        | 118,314 |                                     |  | 6.94                         |  
|                                                  |  |        |         |                                     |  |                              |  
|As of
      December 31, 2003 [1]                 |  |        |         |                                     |  |                              |  
|                                                  |  |        |         |                                     |  |                              |  
|Total Capital(to
      Risk Weighted Assets):     |  |        |         |                                     |  |                              |  
|The
      Company                                 |  | $      | 161,837 |                                     |  | 14.88                        | %
|The
      bank                                    |  |        | 121,439 |                                     |  | 11.68                        |  
|                                                  |  |        |         |                                     |  |                              |  
|Tier 1 Capital(to
      Risk Weighted Assets):    |  |        |         |                                     |  |                              |  
|The
      Company                                 |  |        | 148,235 |                                     |  | 13.63                        |  
|The
      bank                                    |  |        | 108,426 |                                     |  | 10.43                        |  
|                                                  |  |        |         |                                     |  |                              |  
|Tier 1 Leverage
      Capital(to Average Assets): |  |        |         |                                     |  |                              |  
|The
      Company                                 |  |        | 148,235 |                                     |  | 8.88                         |  
|The
      bank                                    |  |        | 108,426 |                                     |  | 6.76                         |  

|    |                                 
|--- | --------------------------------
|[1] | Restated;  see Note 2 on page 9.
|    |                                 

|31
|--



|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 to excessive 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 periods. The mismatch between repricings
or maturities within a time period 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.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|32
|--



|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 September 30, 2004, presented on page 36, indicates that net interest income would increase during
periods of rising interest rates and decrease 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 with the corresponding amortization reflected in the
yield of the related balance sheet assets being hedged. 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.
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 September 30, 2004, the model indicated the impact of a 200 basis point parallel and pro rata
rise in rates over 12 months would approximate a 3.0% ($2.4 million) increase in net interest income,
while the impact of a 200 basis point decline in rates over the same period would approximate a 5.2%
($4.2 million) decline from an unchanged rate environment.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|33
|--



|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,
pre-payments 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 customers 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: pre-payment/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.
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 market 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 September 30, 2004, the parent companys short-term debt, consisting principally of commercial
paper used to finance ongoing current business activities, was approximately $35.0 million. The parent
company had cash, interest-bearing deposits with banks and other current assets aggregating $34.8
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.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|34
|--



|The following table sets forth information regarding the Companys obligations and commitments to make future payments under contract as of September 30, 2004:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                               

|                                   |  | Payments Due by Period |        
|---------------------------------- |  | ---------------------- | -------
|                                   |  |                        |        
|Contractual
Obligations            |  | Total                  |        
|                                   |  |                        |        
|                                   |  | (in thousands)         |        
|                                   |  |                        |        
|Long-Term Debt                     |  | $                      | 110,000
|Operating Leases                   |  |                        | 30,242 
|                                   |  |                        |        
|Total Contractual Cash Obligations |  | $                      | 140,242
|                                   |  |                        |        

|                                                                                                                                           
|-------------------------------------------------------------------------------------------------------------------------------------------
|The following table sets forth information regarding the Companys obligations under other commercial commitments as of September 30, 2004:
|                                                                                                                                           

|                             |  | Amount of Commitment Expiration Per Period |        
|---------------------------- |  | ------------------------------------------ | -------
|                             |  |                                            |        
|Other Commercial
Commitments |  | Total Amount
Committed                     |        
|                             |  |                                            |        
|                             |  | (in thousands)                             |        
|                             |  |                                            |        
|Residential loans            |  | $                                          | 69,175 
|Standby Letters of Credit    |  |                                            | 31,483 
|Other Commercial Commitments |  |                                            | 46,610 
|                             |  |                                            |        
|                             |  |                                            |        
|Total Commercial Commitments |  | $                                          | 147,268
|                             |  |                                            |        

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|INFORMATION AVAILABLE ON OUR WEB SITE
Our Internet address is www.sterlingbancorp.com and the investor relations section of our web site is located at www.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.

|35
|--



|STERLING BANCORP AND SUBSIDIARIESInterest Rate Sensitivity
(Unaudited & Restated)                                                                                                                                                                                                                                                                                                                                                                                                                                                
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|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.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

|                                                                                 | Repricing
      Date   |        
|-------------------------------------------------------------------------------- | ---------------------- | -------
|                                                                                 |                        |        
|                                                                                 | 3 Months
      or Less |        
|                                                                                 |                        |        
|ASSETS                                                                           |                        |        
|Interest-bearing
      deposits
          with other banks                       | $                      | 2,670  
|Investment
      securities                                                      |                        | 16,500 
|Loans,
      net of unearned
          discounts                                 |                        |        
|Commercial
      and industrial                                                  |                        | 577,019
|Loans
      to depository
               institutions                            |                        |       
|Lease
      financing                                                            |                        | 1,212  
|Real
      estate                                                                |                        | 98,694 
|Installment                                                                      |                        | 13,108 
|Noninterest-earning
          assets and allowance
          for loan losses [2] |                        |       
|                                                                                 |                        |        
|Total
      Assets                                                               |                        | 709,203
|                                                                                 |                        |        
|LIABILITIES
      AND
      SHAREHOLDERS EQUITY                                 |                        |        
|Interest-bearing
      deposits                                                  |                        |        
|Savings
      [1]                                                                |                        |       
|NOW
      [1]                                                                    |                        |       
|Money
      market [1]                                                           |                        | 185,045
|Time                                                                             | - domestic             |        
|                                                                                 | - foreign              |        
|Securities
      sold u/a/r - cust                                               |                        | 98,483 
|Securities
      sold u/a/r - deal                                               |                        |       
|Federal
      funds purchased                                                    |                        |       
|Commercial
      paper                                                           |                        | 34,954 
|Other
      short-term borrowings                                                |                        | 1,108  
|Long-term
      borrowings - FHLB                                                |                        |       
|Noninterest-bearing
      liabilities
         and shareholders equity [2]      |                        |       
|                                                                                 |                        |        
|Total
      Liabilities and
              Shareholders Equity                   |                        | 515,041
|                                                                                 |                        |        
|Net
      Interest Rate
          Sensitivity Gap                                | $                      | 194,162
|                                                                                 |                        |        
|Cumulative
      Gap
          September 30, 2004                                | $                      | 194,162
|                                                                                 |                        |        
|Cumulative
      Gap
          September 30, 2003                                | $                      | 259,449
|                                                                                 |                        |        
|Cumulative
      Gap
          December 31, 2003                                 | $                      | 230,662
|                                                                                 |                        |        

|    |                                                                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|[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.
|    |                                                                                                                                                                                                                                                          
|[2] | Restated;  see Note 2 on page 9.                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                          

|36
|--



|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------
|        |                        

|An evaluation was carried out under the supervision and with the participation
of the Companys management, including the Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e)
under the Securities Exchange Act of 1934) as of the end of the period covered
by this quarterly report. Based upon that evaluation, the Companys
management, including the Chief Executive Officer and Chief Financial Officer,
had concluded that the design and operation of these disclosure controls and
procedures were effective as of the end of the period covered by this report.
However, based on a subsequent evaluation as of December 31, 2004 and the
identification of a material weakness in the Companys internal control
over financial reporting (relating to inadequate resources for controls over the
accounting for Company-owned split-dollar life insurance policies on the lives
of certain officers of the Company) described in Item 9A of the Companys
annual report on Form 10-K for the fiscal year ended December 31, 2004, the
Companys management, including the Chief Executive Officer and Chief
Financial Officer, have concluded that, as of the end of the period covered by
this quarterly report, the Companys disclosure controls and procedures
were not 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. For a discussion of the reasons and matters on
which this conclusion was based, see Item 9A of the Companys annual report
on Form 10-K for the fiscal year ended December 31, 2004. No changes in our
internal control over financial reporting ( as defined in Rule 13a-15(f) or
15d-15(f) under the Securities Exchange Act of 1934) occurred during our last
fiscal quarter covered by this quarterly report that have materially affected,
or are reasonably likely to materially affect, our internal control over
financial reporting.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|37
|--



|PART II - OTHER INFORMATION
|---------------------------
|                           

|Item
      6. | Exhibits
      and Reports on Form 8-K
|------------- | --------------------------------------
|              |                                       
|              | (a)                                   
|              |                                       
|              | 3.                                    
|              |                                       
|              | 3.                                    
|              |                                       
|              | 10.                                   
|              |                                       
|              |                                       
|              |                                       
|              |                                       
|              |                                       
|              | 11.                                   
|              |                                       
|              | 31.                                   
|              |                                       
|              | 32.                                   
|              |                                       
|              | (b)                                   
|              |                                       
|              |                                       
|              |                                       
|              |                                       
|              |                                       

|38
|--



| | In a report
      on Form 8-K dated July 21, 2004 and filed on July 22, 2004, the Company
      reported, under Item 7 Financial Statements, Pro Forma Information
      and Exhibits and under Item 9 Regulation FD Disclosure,
      the press release announcing a presentation on July 27, 2004 by John C.
      Millman, President of Sterling Bancorp, as part of the Keefe, Bruyette &
      Woods, Inc. Fifth Annual Investor Conference.                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | In
        a report on Form 8-K dated August 19, 2004 and filed on August 20, 2004,
        the Company reported under Item 5. Other Events and under
        Item 7 Financial Statements, Pro Forma Financial Information and
        Exhibits, the press release announcing the declaration of a quarterly
        cash dividend of $0.19 payable September 30, 2004 to shareholders of record
        on September 15, 2004.                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | In
        a report on Form 8-K dated September 20, 2004 and filed on September 21,
        2004, the Company reported, under Item 7 Financial Statements, Pro
        Forma Information and Exhibits and under Item 9 Regulation
        FD Disclosure, the press release announcing a presentation on September
        23, 2004 by John C. Millman, President of Sterling Bancorp and Michael
        Bizenov, President of Sterling National Mortgage Company Inc., as part
        of the LI Invest First Annual Investor Conference.  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | In
        a report on Form 8-K/A dated September 20, 2004 and filed on September 21,
        2004, the Company reported, under Item 7.01 Regulation FD Disclosure
        and Item 9.01 Financial Statements, Pro Forma Information and Exhibits,
        the press release announcing a presentation on September 23, 2004 by John
        C. Millman, President of Sterling Bancorp and Michael Bizenov, President
        of Sterling National Mortgage Company Inc., as part of the LI Invest First
        Annual Investor Conference.

|39
|--



|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            
|                
|                
|                
|                
|Date            
|                
|                

|40
|--



|STERLING BANCORP AND SUBSIDIARIES
EXHIBIT INDEX
|-----------------------------------------------
|                                               

|Exhibit 
      Number |  | Description |  |                                                                |  |  | Sequential
      Page
      No.
|--------------------- |  | ----------- |  | -------------------------------------------------------------- |  |  | -------------------------------
|                      |  |             |  |                                                                |  |  |                                
|                      |  |             |  |                                                                |  |  |                                
|11                    |  |             |  | Statement
      re: Computation                                |  |  |                                
|                      |  |             |  | of Per Share
      Earnings.                                   |  |  |                                
|                      |  |             |  |                                                                |  |  |                                
|31                    |  |             |  | Certifications
      of the CEO and CFO pursuant to            |  |  |                                
|                      |  |             |  | Exchange
      Act Rule 13a-14(a).                             |  |  |                                
|                      |  |             |  |                                                                |  |  |                                
|32                    |  |             |  | Certifications
      of the CEO and CFO required by            |  |  |                                
|                      |  |             |  | Section
      1350 of Chapter 63 of Title 18 of the U.S. Code. |  |  |                                

|41
|--