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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549


FORM 10-Q

|                                                                                                        
|--------------------------------------------------------------------------------------------------------
|(Mark One)                                                                                              
|x QUARTERLY REPORT
 PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934              
|                                                                                                        
|For the quarterly period ended March 31, 2011                                                           
|                                                                                                        
|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                                                                            | 12-2565216                      
|                                                                                   
|(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.

xYes o No

Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T(17 CFR § 232.405) during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post
such files).

oYes o No

Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer or
a smaller reporting company as defined in Rule 12b-2 of the Exchange Act.
(Check one):

| |                          |                            | 
| | ------------------------ | -------------------------- | 
| | Large Accelerated Filero | Accelerated Filerx         | 
| | Non-Accelerated Filero   | Smaller Reporting Companyo | 

Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act).

oYes x No

As of April 30, 2011 there were
30,927,328 shares of common stock,
$1.00 par value, outstanding.

---

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STERLING BANCORP

|                              |              |                                                                                                |  |   
|----------------------------- | ------------ | ---------------------------------------------------------------------------------------------- |  | --
|PART I
 FINANCIAL INFORMATION |              | Page                                                                                          
|                              |              |                                                                                                |  |   
|                              | Item 1.      | Financial
 Statements                                                                          |  |   
|                              |              |                                                                                                |  |   
|                              |              | Consolidated Financial Statements (Unaudited)                                                  |  | 3 
|                              |              | Notes to Consolidated Financial Statements                                                     |  | 8 
|                              |              |                                                                                                |  |   
|                              | Item 2.      | Managements Discussion and Analysis of Financial Condition and
 Results of Operations         |  |   
|                              |              |                                                                                                |  |   
|                              |              | Overview                                                                                       |  | 39
|                              |              | Income Statement Analysis                                                                      |  | 40
|                              |              | Balance Sheet Analysis                                                                         |  | 42
|                              |              | Capital                                                                                        |  | 49
|                              |              | Recently Issued Accounting Pronouncements                                                      |  | 50
|                              |              | Cautionary Statement Regarding Forward-Looking Statements                                      |  | 50
|                              |              | Average Balance Sheets                                                                         |  | 51
|                              |              | Rate/Volume Analysis                                                                           |  | 52
|                              |              | Regulatory Capital and Ratios                                                                  |  | 53
|                              |              |                                                                                                |  |   
|                              | Item 3.      | Quantitative and Qualitative Disclosures About Market Risk                                     |  |   
|                              |              |                                                                                                |  |   
|                              |              | Asset/Liability Management                                                                     |  | 54
|                              |              | Information Available on Our Website                                                           |  | 56
|                              |              | Interest Rate Sensitivity                                                                      |  | 57
|                              |              |                                                                                                |  |   
|                              | Item 4.      | Controls and Procedures                                                                        |  | 58
|                              |              |                                                                                                |  |   
|PART II OTHER INFORMATION     |              |                                                                                               
|                              |              |                                                                                                |  |   
|                              | Item 2.      | Unregistered Sale of Equity Securities and Use of Proceeds                                     |  | 59
|                              |              |                                                                                                |  |   
|                              | Item 6.      | Exhibits                                                                                       |  | 59
|                              |              |                                                                                                |  |   
|SIGNATURES                    |              | 60                                                                                            
|                              |              |                                                                                                |  |   
|EXHIBITS INDEX                |              |                                                                                               
|                              |              |                                                                                                |  |   
|                              | Exhibit 11   | Statement Re:
 Computation of Per Share Earnings                                               |  | 62
|                              |              |                                                                                                |  |   
|                              | Exhibit 31.1 | Certification
 of the CEO pursuant to Exchange Act Rule 13a-14(a)                              |  | 63
|                              |              |                                                                                                |  |   
|                              | Exhibit 31.2 | Certification
 of the CFO pursuant to Exchange Act Rule 13a-14(a)                              |  | 64
|                              |              |                                                                                                |  |   
|                              | Exhibit 32.1 | Certification
 of the CEO required by Section 1350 of Chapter 63 of Title 18 of the U.S.
 Code |  | 65
|                              |              |                                                                                                |  |   
|                              | Exhibit 32.2 | Certification
 of the CFO required by Section 1350 of Chapter 63 of Title 18 of the U.S.
 Code |  | 66

2

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|                                 
|---------------------------------
|STERLING BANCORP AND SUBSIDIARIES
|Consolidated Balance Sheets      
|(Unaudited)                      
|(dollars in thousands)           

|                                                                                                                                             |  |                |           |                   |   |           |  
|-------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | --------- | ----------------- | - | --------- | -
|                                                                                                                                             |  | March
31,
2011 |           | December 31,
2010 |  
|                                                                                                                                             |  |                |           |                   |  
|ASSETS                                                                                                                                       |  |                |           |                   |   |           |  
|Cash and due from banks                                                                                                                      |  | $              | 35,981    |                   | $ | 26,824    |  
|Interest-bearing deposits with other banks                                                                                                   |  |                | 7,932     |                   |   | 40,503    |  
|                                                                                                                                             |  |                |           |                   |   |           |  
|Securities available for sale (at estimated fair
 value; pledged: $75,188 in 2011 and $95,311 in 2010)                                       |  |                | 414,164   |                   |   | 390,080   |  
|Securities held to maturity (pledged: $295,549 in
 2011 and $212,606 in 2010) (estimated fair value: $462,298 in 2011 and
 $400,453 in 2010) |  |                | 458,281   |                   |   | 399,235   |  
|                                                                                                                                             |  |                |           |                   |   |           |  
|Total investment securities                                                                                                                  |  |                | 872,445   |                   |   | 789,315   |  
|                                                                                                                                             |  |                |           |                   |   |           |  
|Loans held for sale                                                                                                                          |  |                | 24,102    |                   |   | 32,049    |  
|                                                                                                                                             |  |                |           |                   |   |           |  
|Loans held in portfolio, net of unearned discounts                                                                                           |  |                | 1,288,649 |                   |   | 1,314,234 |  
|Less allowance for loan losses                                                                                                               |  |                | 18,040    |                   |   | 18,238    |  
|                                                                                                                                             |  |                |           |                   |   |           |  
|Loans, net                                                                                                                                   |  |                | 1,270,609 |                   |   | 1,295,996 |  
|                                                                                                                                             |  |                |           |                   |   |           |  
|Federal Reserve and Federal Home Loan Bank stock, at
 cost                                                                                   |  |                | 8,674     |                   |   | 9,365     |  
|Customers liability under acceptances                                                                                                       |  |                | 228       |                   |   |          |  
|Goodwill                                                                                                                                     |  |                | 22,901    |                   |   | 22,901    |  
|Premises and equipment, net                                                                                                                  |  |                | 18,000    |                   |   | 15,909    |  
|Other real estate                                                                                                                            |  |                | 132       |                   |   | 182       |  
|Accrued interest receivable                                                                                                                  |  |                | 9,296     |                   |   | 8,280     |  
|Cash surrender value of life insurance policies                                                                                              |  |                | 51,998    |                   |   | 51,512    |  
|Other assets                                                                                                                                 |  |                | 70,247    |                   |   | 67,621    |  
|                                                                                                                                             |  |                |           |                   |   |           |  
|                                                                                                                                             |  | $              | 2,392,545 |                   | $ | 2,360,457 |  
|                                                                                                                                             |  |                |           |                   |   |           |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                         |  |                |           |                   |   |           |  
|Deposits                                                                                                                                     |  |                |           |                   |   |           |  
|Noninterest-bearing demand deposits                                                                                                          |  | $              | 561,524   |                   | $ | 570,290   |  
|Savings, NOW and money market deposits                                                                                                       |  |                | 549,392   |                   |   | 562,207   |  
|Time deposits                                                                                                                                |  |                | 617,169   |                   |   | 615,267   |  
|                                                                                                                                             |  |                |           |                   |   |           |  
|Total deposits                                                                                                                               |  |                | 1,728,085 |                   |   | 1,747,764 |  
|                                                                                                                                             |  |                |           |                   |   |           |  
|Securities sold under agreements to repurchase -
 customers                                                                                  |  |                | 21,107    |                   |   | 23,016    |  
|Securities sold under agreements to repurchase -
 dealers                                                                                    |  |                | 5,000     |                   |   | 5,000     |  
|Federal funds purchased                                                                                                                      |  |                | 60,000    |                   |   | 15,000    |  
|Commercial paper                                                                                                                             |  |                | 15,391    |                   |   | 14,388    |  
|Short-term borrowings - other                                                                                                                |  |                | 4,525     |                   |   | 3,490     |  
|Advances - FHLB                                                                                                                              |  |                | 128,815   |                   |   | 144,173   |  
|Long-term borrowings - subordinated debentures                                                                                               |  |                | 25,774    |                   |   | 25,774    |  
|                                                                                                                                             |  |                |           |                   |   |           |  
|Total borrowings                                                                                                                             |  |                | 260,612   |                   |   | 230,841   |  
|                                                                                                                                             |  |                |           |                   |   |           |  
|Acceptances outstanding                                                                                                                      |  |                | 228       |                   |   |          |  
|Accrued interest payable                                                                                                                     |  |                | 1,145     |                   |   | 1,314     |  
|Due to factored clients                                                                                                                      |  |                | 70,117    |                   |   | 91,543    |  
|Accrued expenses and other liabilities                                                                                                       |  |                | 72,068    |                   |   | 66,253    |  
|                                                                                                                                             |  |                |           |                   |   |           |  
|Total liabilities                                                                                                                            |  |                | 2,132,255 |                   |   | 2,137,715 |  
|                                                                                                                                             |  |                |           |                   |   |           |  
|Shareholders equity                                                                                                                         |  |                |           |                   |   |           |  
|Preferred stock, Series A, $5 par value; $1,000
 liquidation value. Authorized 644,389 shares; issued 42,000 shares,
 respectively           |  |                | 40,721    |                   |   | 40,602    |  
|Common stock, $1 par value. Authorized 50,000,000
 shares; issued 35,225,110 and 31,138,545 shares, respectively                             |  |                | 35,225    |                   |   | 31,139    |  
|Warrants to purchase common stock                                                                                                            |  |                | 2,615     |                   |   | 2,615     |  
|Capital surplus                                                                                                                              |  |                | 268,878   |                   |   | 236,437   |  
|Retained earnings                                                                                                                            |  |                | 11,915    |                   |   | 11,392    |  
|Accumulated other comprehensive loss                                                                                                         |  |                | (12,508   | )                 |   | (12,887   | )
|Common shares in treasury at cost, 4,297,782 and
 4,297,782 shares, respectively                                                             |  |                | (86,556   | )                 |   | (86,556   | )
|                                                                                                                                             |  |                |           |                   |   |           |  
|Total shareholders equity                                                                                                                   |  |                | 260,290   |                   |   | 222,742   |  
|                                                                                                                                             |  |                |           |                   |   |           |  
|                                                                                                                                             |  | $              | 2,392,545 |                   | $ | 2,360,457 |  
|                                                                                                                                             |  |                |           |                   |   |           |  

See Notes to Consolidated Financial
Statements.

3

---



|                                              
|----------------------------------------------
|**STERLING BANCORP AND SUBSIDIARIES**         
|**Consolidated Statements of Income**         
|**(Unaudited)**                               
|(dollars
 in thousands, except per share data)

|                                                                           |  |                                   |            |          |   |            | 
|-------------------------------------------------------------------------- |  | --------------------------------- | ---------- | -------- | - | ---------- | 
|                                                                           |  | **Three
Months Ended 
March 31,** |           
|                                                                           |  |                                   |           
|                                                                           |  | **2011**                          | ****       | **2010** |  
|                                                                           |  |                                   | ****       |          |  
|**INTEREST INCOME**                                                        |  |                                   |            |          |   |            | 
|**Loans**                                                                  |  | $                                 | 16,876     |          | $ | 16,511     | 
|**Investment securities**                                                  |  |                                   |            |          |   |            | 
|**Available for sale**                                                     |  |                                   | 2,423      |          |   | 2,953      | 
|**Held to maturity**                                                       |  |                                   | 3,397      |          |   | 4,412      | 
|**FRB and FHLB stock**                                                     |  |                                   | 23         |          |   | 121        | 
|**Deposits with other banks**                                              |  |                                   | 35         |          |   | 19         | 
|****                                                                       |  |                                   |            |          |   |            | 
|**Total interest income**                                                  |  |                                   | 22,754     |          |   | 24,016     | 
|****                                                                       |  |                                   |            |          |   |            | 
|**INTEREST EXPENSE**                                                       |  |                                   |            |          |   |            | 
|**Deposits**                                                               |  |                                   |            |          |   |            | 
|**Savings, NOW and money market**                                          |  |                                   | 700        |          |   | 965        | 
|**Time**                                                                   |  |                                   | 1,360      |          |   | 1,675      | 
|**Short-term borrowings**                                                  |  |                                   | 78         |          |   | 87         | 
|**Advances - FHLB**                                                        |  |                                   | 664        |          |   | 871        | 
|**Long-term borrowings - subordinated
 debentures**                        |  |                                   | 523        |          |   | 523        | 
|****                                                                       |  |                                   |            |          |   |            | 
|**Total interest expense**                                                 |  |                                   | 3,325      |          |   | 4,121      | 
|****                                                                       |  |                                   |            |          |   |            | 
|**Net interest income**                                                    |  |                                   | 19,429     |          |   | 19,895     | 
|****                                                                       |  |                                   |            |          |   |            | 
|**Provision for loan losses**                                              |  |                                   | 3,000      |          |   | 6,000      | 
|****                                                                       |  |                                   |            |          |   |            | 
|**Net interest income after provision for
 loan losses**                   |  |                                   | 16,429     |          |   | 13,895     | 
|****                                                                       |  |                                   |            |          |   |            | 
|****                                                                       |  |                                   |            |          |   |            | 
|**NONINTEREST INCOME**                                                     |  |                                   |            |          |   |            | 
|**Accounts receivable management/factoring commissions and other fees**    |  |                                   | 5,368      |          |   | 5,127      | 
|**Mortgage banking income**                                                |  |                                   | 2,175      |          |   | 1,677      | 
|**Service charges on deposit accounts**                                    |  |                                   | 1,371      |          |   | 1,473      | 
|**Securities gains**                                                       |  |                                   | 729        |          |   | 1,502      | 
|**Other income**                                                           |  |                                   | 1,799      |          |   | 1,323      | 
|****                                                                       |  |                                   |            |          |   |            | 
|**Total noninterest income**                                               |  |                                   | 11,442     |          |   | 11,102     | 
|****                                                                       |  |                                   |            |          |   |            | 
|****                                                                       |  |                                   |            |          |   |            | 
|**NONINTEREST EXPENSE**                                                    |  |                                   |            |          |   |            | 
|**Salaries and employee benefits**                                         |  |                                   | 14,260     |          |   | 13,162     | 
|**Occupancy and equipment expenses, net**                                  |  |                                   | 3,273      |          |   | 2,540      | 
|**Deposit insurance**                                                      |  |                                   | 933        |          |   | 754        | 
|**Professional fees**                                                      |  |                                   | 818        |          |   | 1,353      | 
|**Other expenses**                                                         |  |                                   | 3,169      |          |   | 3,527      | 
|****                                                                       |  |                                   |            |          |   |            | 
|**Total noninterest expenses**                                             |  |                                   | 22,453     |          |   | 21,336     | 
|****                                                                       |  |                                   |            |          |   |            | 
|****                                                                       |  |                                   |            |          |   |            | 
|**Income before income taxes**                                             |  |                                   | 5,418      |          |   | 3,661      | 
|****                                                                       |  |                                   |            |          |   |            | 
|**Provision for income taxes**                                             |  |                                   | 1,475      |          |   | 1,098      | 
|****                                                                       |  |                                   |            |          |   |            | 
|**Net income**                                                             |  |                                   | 3,943      |          |   | 2,563      | 
|**Dividends on preferred shares and accretion**                            |  |                                   | 644        |          |   | 636        | 
|****                                                                       |  |                                   |            |          |   |            | 
|**Net income available to common shareholders**                            |  | $                                 | 3,299      |          | $ | 1,927      | 
|****                                                                       |  |                                   |            |          |   |            | 
|****                                                                       |  |                                   |            |          |   |            | 
|**Average number of common shares outstanding**                            |  |                                   |            |          |   |            | 
|**Basic**                                                                  |  |                                   | 27,351,584 |          |   | 19,208,189 | 
|**Diluted**                                                                |  |                                   | 27,351,584 |          |   | 19,212,768 | 
|****                                                                       |  |                                   |            |          |   |            | 
|**Net income available to common
 shareholders, per average common share** |  |                                   |            |          |   |            | 
|**Basic**                                                                  |  | $                                 | 0.12       |          | $ | 0.10       | 
|**Diluted**                                                                |  |                                   | 0.12       |          |   | 0.10       | 
|****                                                                       |  |                                   |            |          |   |            | 
|**Dividends per common share**                                             |  |                                   | 0.09       |          |   | 0.09       | 

**See Notes to Consolidated
Financial Statements.**

4

---



|                                                
|------------------------------------------------
|STERLING BANCORP AND SUBSIDIARIES               
|Consolidated Statements of Comprehensive
 Income
|(Unaudited)                                     
|(dollars in thousands)                          

|                                                                                                     |  |                               |           |       |       |           |  
|---------------------------------------------------------------------------------------------------- |  | ----------------------------- | --------- | ----- | ----- | --------- | -
|****                                                                                                 |  | Three Months Ended 
March 31, |          
|****                                                                                                 |  |                               |          
|****                                                                                                 |  | 2011                          |           | 2010  |      
|****                                                                                                 |  |                               |           |       |      
|****                                                                                                 |  |                               |           |       |       |           |  
|**Net income**                                                                                       |  | **$**                         | **3,943** | ****  | **$** | **2,563** |  
|****                                                                                                 |  |                               |           | ****  |       |           |  
|****                                                                                                 |  | ****                          | ****      | ****  | ****  | ****      |  
|**Other comprehensive income, net of tax:**                                                          |  | ****                          | ****      | ****  | ****  | ****      |  
|**Unrealized gains on securities available
 for sale and other investments arising during the year** |  | ****                          | **379**   | ****  | ****  | **1,214** |  
|****                                                                                                 |  | ****                          | ****      | ****  | ****  | ****      |  
|**Reclassification adjustment for gains
 included in net income**                                    |  | ****                          | **(398**  | **)** | ****  | **(820**  | )
|****                                                                                                 |  | ****                          | ****      | ****  | ****  | ****      |  
|**Reclassification adjustment for
 amortization of:**                                                |  | ****                          | ****      | ****  | ****  | ****      |  
|**Prior service cost**                                                                               |  | ****                          | **9**     | ****  | ****  | **9**     |  
|**Net actuarial losses**                                                                             |  | ****                          | **389**   | ****  | ****  | **413**   |  
|****                                                                                                 |  |                               |           | ****  |       |           |  
|**Other comprehensive income**                                                                       |  | ****                          | **379**   | ****  | ****  | **816**   |  
|****                                                                                                 |  |                               |           | ****  |       |           |  
|**Comprehensive income**                                                                             |  | **$**                         | **4,322** | ****  | **$** | **3,379** |  
|****                                                                                                 |  |                               |           |       |       |           |  

**See Notes to Consolidated Financial Statements.**

5

---



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

|                                                                          |  |                               |         |      |   |         |  
|------------------------------------------------------------------------- |  | ----------------------------- | ------- | ---- | - | ------- | -
|                                                                          |  | Three Months Ended
 March 31, |        
|                                                                          |  |                               |        
|                                                                          |  | 2011                          |         | 2010 |  
|                                                                          |  |                               |         |      |  
|Preferred Stock                                                           |  |                               |         |      |   |         |  
|Balance at January 1,                                                     |  | $                             | 40,602  |      | $ | 40,113  |  
|Discount accretion                                                        |  |                               | 119     |      |   | 111     |  
|                                                                          |  |                               |         |      |   |         |  
|Balance at March 31,                                                      |  | $                             | 40,721  |      | $ | 40,224  |  
|                                                                          |  |                               |         |      |   |         |  
|                                                                          |  |                               |         |      |   |         |  
|Common Stock                                                              |  |                               |         |      |   |         |  
|Balance at January 1,                                                     |  | $                             | 31,139  |      | $ | 22,227  |  
|Common shares issued                                                      |  |                               | 4,025   |      |   | 8,625   |  
|Restricted shares issued                                                  |  |                               | 61      |      |   | 84      |  
|Common shares issued under stock incentive plan                           |  |                               |        |      |   | 203     |  
|                                                                          |  |                               |         |      |   |         |  
|Balance at March 31,                                                      |  | $                             | 35,225  |      | $ | 31,139  |  
|                                                                          |  |                               |         |      |   |         |  
|                                                                          |  |                               |         |      |   |         |  
|Warrants to Purchase Common Stock                                         |  |                               |         |      |   |         |  
|Balance at January 1, and March 31,                                       |  | $                             | 2,615   |      | $ | 2,615   |  
|                                                                          |  |                               |         |      |   |         |  
|                                                                          |  |                               |         |      |   |         |  
|Capital Surplus                                                           |  |                               |         |      |   |         |  
|Balance at January 1,                                                     |  | $                             | 236,437 |      | $ | 178,734 |  
|Common shares issued                                                      |  |                               | 32,429  |      |   | 56,240  |  
|Restricted shares issued                                                  |  |                               | (61     | )    |   | (84     | )
|Common shares issued under stock incentive plan and
 related tax benefits |  |                               |        |      |   | 1,274   |  
|Stock option compensation and restricted stock
 expense                   |  |                               | 73      |      |   | 36      |  
|                                                                          |  |                               |         |      |   |         |  
|Balance at March 31,                                                      |  | $                             | 268,878 |      | $ | 236,200 |  
|                                                                          |  |                               |         |      |   |         |  
|                                                                          |  |                               |         |      |   |         |  
|Retained Earnings                                                         |  |                               |         |      |   |         |  
|Balance at January 1,                                                     |  | $                             | 11,392  |      | $ | 15,828  |  
|Net income                                                                |  |                               | 3,943   |      |   | 2,563   |  
|Cash dividends paid - preferred shares                                    |  |                               | (525    | )    |   | (525    | )
|Cash dividends paid - common shares                                       |  |                               | (2,776  | )    |   | (1,630  | )
|Discount accretion on series A preferred stock                            |  |                               | (119    | )    |   | (111    | )
|                                                                          |  |                               |         |      |   |         |  
|Balance at March 31,                                                      |  | $                             | 11,915  |      | $ | 16,125  |  
|                                                                          |  |                               |         |      |   |         |  
|                                                                          |  |                               |         |      |   |         |  
|Accumulated Other Comprehensive Loss                                      |  |                               |         |      |   |         |  
|Balance at January 1,                                                     |  | $                             | (12,887 | )    | $ | (12,399 | )
|Other comprehensive income, net of tax                                    |  |                               | 379     |      |   | 816     |  
|                                                                          |  |                               |         |      |   |         |  
|Balance at March 31,                                                      |  | $                             | (12,508 | )    | $ | (11,583 | )
|                                                                          |  |                               |         |      |   |         |  
|                                                                          |  |                               |         |      |   |         |  
|Treasury Stock                                                            |  |                               |         |      |   |         |  
|Balance at January 1,                                                     |  | $                             | (86,556 | )    | $ | (85,168 | )
|Surrender of shares issued under stock incentive
 plan                    |  |                               |        |      |   | (1,388  | )
|                                                                          |  |                               |         |      |   |         |  
|Balance at March 31,                                                      |  | $                             | (86,556 | )    | $ | (86,556 | )
|                                                                          |  |                               |         |      |   |         |  
|                                                                          |  |                               |         |      |   |         |  
|Total Shareholders Equity                                                |  |                               |         |      |   |         |  
|Balance at January 1,                                                     |  | $                             | 222,742 |      | $ | 161,950 |  
|Net changes during the period                                             |  |                               | 37,548  |      |   | 66,214  |  
|                                                                          |  |                               |         |      |   |         |  
|Balance at March 31,                                                      |  | $                             | 260,290 |      | $ | 228,164 |  
|                                                                          |  |                               |         |      |   |         |  

See Notes to Consolidated Financial Statements.

6

---



|                                     
|-------------------------------------
|STERLING BANCORP AND SUBSIDIARIES    
|Consolidated Statements of Cash Flows
|(Unaudited)                          
|(dollars in thousands)               

|                                                                                             |  |                               |          |      |   |          |  
|-------------------------------------------------------------------------------------------- |  | ----------------------------- | -------- | ---- | - | -------- | -
|                                                                                             |  | Three Months Ended
 March 31, |         
|                                                                                             |  |                               |         
|                                                                                             |  | 2011                          |          | 2010 |  
|                                                                                             |  |                               |          |      |  
|Operating Activities                                                                         |  |                               |          |      |   |          |  
|Net Income                                                                                   |  | $                             | 3,943    |      | $ | 2,563    |  
|Adjustments to reconcile net income to net cash
 (used in) provided by operating activities: |  |                               |          |      |   |          |  
|Provision for loan losses                                                                    |  |                               | 3,000    |      |   | 6,000    |  
|Depreciation and amortization of premises and
 equipment                                     |  |                               | 698      |      |   | 551      |  
|Securities gains                                                                             |  |                               | (729     | )    |   | (1,502   | )
|Income (Loss) from life insurance policies, net                                              |  |                               | 22       |      |   | (54      | )
|Deferred income tax provision (benefit)                                                      |  |                               | 446      |      |   | (512     | )
|Proceeds from sale of loans                                                                  |  |                               | 106,720  |      |   | 104,778  |  
|Gains on sales of loans, net                                                                 |  |                               | (2,184   | )    |   | (1,685   | )
|Originations of loans held for sale                                                          |  |                               | (96,928  | )    |   | (90,089  | )
|Amortization of premiums on securities                                                       |  |                               | 2,065    |      |   | 657      |  
|Accretion of discounts on securities                                                         |  |                               | (123     | )    |   | (198     | )
|(Increase) decrease in accrued interest receivable                                           |  |                               | (1,016   | )    |   | 1,425    |  
|(Decrease) increase in accrued interest payable                                              |  |                               | (169     | )    |   | 265      |  
|(Decrease) increase in due to factored clients                                               |  |                               | (21,426  | )    |   | 6,070    |  
|(Decrease) increase in accrued expenses and other liabilities                                |  |                               | (3,950   | )    |   | 2,349    |  
|Increase in other assets                                                                     |  |                               | (2,806   | )    |   | (1,728   | )
|Gain on other real estate owned                                                              |  |                               |         |      |   | (14      | )
|                                                                                             |  |                               |          |      |   |          |  
|Net cash (used in) provided by operating activities                                          |  |                               | (12,437  | )    |   | 28,876   |  
|                                                                                             |  |                               |          |      |   |          |  
|                                                                                             |  |                               |          |      |   |          |  
|Investing Activities                                                                         |  |                               |          |      |   |          |  
|Purchase of premises and equipment                                                           |  |                               | (2,789   | )    |   | (2,449   | )
|Net decrease (increase) in interest-bearing deposits with other
 banks                       |  |                               | 32,571   |      |   | (9,699   | )
|Net decrease in loans held in portfolio                                                      |  |                               | 15,707   |      |   | 5,513    |  
|Net decrease (increase) in short-term factored
 receivables                                  |  |                               | 7,018    |      |   | (11,127  | )
|Decrease in other real estate                                                                |  |                               | 50       |      |   | 604      |  
|Proceeds from prepayments, redemptions or maturities
 of securities - held to maturity       |  |                               | 15,298   |      |   | 14,414   |  
|Purchases of securities - held to maturity                                                   |  |                               | (79,383  | )    |   | (14,508  | )
|Proceeds from calls of securities - held to maturity                                         |  |                               | 5,000    |      |   | 54,380   |  
|Proceeds from calls/sales of securities - available
 for sale                                |  |                               | 88,587   |      |   | 123,285  |  
|Proceeds from prepayments, redemptions or maturities
 of securities - available for sale     |  |                               | 59,532   |      |   | 28,286   |  
|Purchases of securities - available for sale                                                 |  |                               | (163,934 | )    |   | (208,128 | )
|Proceeds from redemptions or maturities of
 securities - FHLB & FRB stock                    |  |                               | 691      |      |   | 450      |  
|                                                                                             |  |                               |          |      |   |          |  
|Net cash used in investing activities                                                        |  |                               | (21,652  | )    |   | (18,979  | )
|                                                                                             |  |                               |          |      |   |          |  
|                                                                                             |  |                               |          |      |   |          |  
|Financing Activities                                                                         |  |                               |          |      |   |          |  
|Net decrease in noninterest-bearing demand deposits                                          |  |                               | (8,766   | )    |   | (36,884  | )
|Net decrease in savings, NOW and money market
 deposits                                      |  |                               | (12,815  | )    |   | (29,327  | )
|Net increase in time deposits                                                                |  |                               | 1,902    |      |   | 99,586   |  
|Net increase(decrease) in Federal funds purchased                                            |  |                               | 45,000   |      |   | (41,000  | )
|Net (decrease) increase in securities sold under
 agreements to repurchase                   |  |                               | (1,909   | )    |   | 12       |  
|Net increase(decrease) in commercial paper and other
 short-term borrowings                  |  |                               | 2,038    |      |   | (50,669  | )
|Decrease in long-term borrowings                                                             |  |                               | (15,358  | )    |   | (10,000  | )
|Proceeds from exercise of stock options                                                      |  |                               |         |      |   | 79       |  
|Proceeds from issuance of common stock                                                       |  |                               | 36,455   |      |   | 64,865   |  
|Cash dividends paid on preferred stock                                                       |  |                               | (525     | )    |   | (525     | )
|Cash dividends paid on common stock                                                          |  |                               | (2,776   | )    |   | (1,630   | )
|                                                                                             |  |                               |          |      |   |          |  
|Net cash provided by (used in) financing activities                                          |  |                               | 43,246   |      |   | (5,493   | )
|                                                                                             |  |                               |          |      |   |          |  
|                                                                                             |  |                               |          |      |   |          |  
|Net increase in cash and due from banks                                                      |  |                               | 9,157    |      |   | 4,404    |  
|Cash and due from banks - beginning of period                                                |  |                               | 26,824   |      |   | 24,911   |  
|                                                                                             |  |                               |          |      |   |          |  
|                                                                                             |  |                               |          |      |   |          |  
|Cash and due from banks - end of period                                                      |  | $                             | 35,981   |      | $ | 29,315   |  
|                                                                                             |  |                               |          |      |   |          |  
|                                                                                             |  |                               |          |      |   |          |  
|Supplemental disclosures:                                                                    |  |                               |          |      |   |          |  
|Interest paid                                                                                |  | $                             | 3,494    |      | $ | 3,856    |  
|Income taxes paid                                                                            |  |                               | 877      |      |   | 904      |  
|Loans held for sale transferred to portfolio                                                 |  |                               | 338      |      |   |         |  
|Loans transferred to other real estate                                                       |  |                               |         |      |   | 79       |  
|Due to brokers on purchases of securities - AFS                                              |  |                               | 10,493   |      |   | 20,830   |  
|Due to brokers on purchases of securities - HTM                                              |  |                               |         |      |   | 1,074    |  

See Notes to Consolidated Financial Statements.

7

---



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

Note 1. Significant Accounting Policies

Nature of Operations.
Sterling Bancorp (the parent company) is a financial holding company,
pursuant to an election made under the Gramm-Leach-Bliley Act of 1999.
Throughout the notes, the term the Company refers to Sterling Bancorp and its
subsidiaries and the term the bank refers to Sterling National Bank and its
subsidiaries. The Company provides a full range of financial products and
services, including business and consumer loans, commercial and residential
mortgage lending and brokerage, mortgage warehouse lending, asset-based
financing, factoring/accounts receivable management services, trade financing,
equipment financing and deposit services. The Company has operations
principally in New York and conducts business throughout the United States.

The Companys financial statements are prepared in accordance with U.S.
generally accepted accounting principles (U.S. GAAP) which principally
consist of the Financial Accounting Standards Board Accounting Standards
Codification (FASB Codification). FASB Codification Topic 105: Generally Accepted Accounting Principles
establishes the FASB codification as the source of authoritative accounting
principles recognized by the FASB to be applied by nongovernmental entities in
the preparation of financial statements in conformity with generally accepted
accounting principles. Rules and interpretive releases of the Securities and
Exchange Commission (SEC) under authority of federal securities laws are also
sources of authoritative guidance for SEC registrants. All guidance contained
in the FASB Codification carries an equal level of authority. All
non-grandfathered, non-SEC accounting literature not included in the FASB
Codification is superseded and deemed non-authoritative.

Basis of Presentation.
The consolidated financial statements include the accounts of Sterling Bancorp
and its subsidiaries, principally the bank, after elimination of intercompany
transactions. The consolidated financial statements as of and for the interim
periods ended March 31, 2011 and 2010 are unaudited; however, in the opinion of
management, all adjustments, consisting of normal recurring accruals, necessary
for a fair presentation of such periods have been made. Certain
reclassifications have been made to the prior years consolidated financial
statements to conform to the current presentation. Throughout the notes, dollar
amounts presented in tables are in thousands, except per share data. 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, 2010
(the 2010 Form 10-K).

Use of Estimates.
The preparation of financial statements in accordance with U.S. GAAP requires
management to make assumptions and estimates which impact the amounts reported
in those statements and are, by their nature, subject to change in the future
as additional information becomes available or as circumstances vary. Actual
results could differ from managements current estimates as a result of
changing conditions and future events. The current economic environment has
increased the degree of uncertainty inherent in these significant estimates.
Several accounting estimates are particularly critical and are susceptible to
significant near-term change, including the allowance for loan losses and asset
impairment judgments, such as other-than-temporary declines in the value of
securities and the accounting for income taxes. The judgments used by
management in applying these critical accounting policies may be affected by a
further and prolonged deterioration in the economic environment, which may
result in changes to future financial results. For example, subsequent
evaluations of the loan portfolio, in light of the factors then prevailing, may
result in significant changes in the allowance for loan losses in future
periods, and the inability to collect outstanding principal may result in
increased loan losses. The Company evaluates subsequent events through the date
that the financial statements are issued.

8

---



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

Note 2.
Investment Securities

The following tables present information
regarding securities available for sale:

|                                                                                        |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|--------------------------------------------------------------------------------------- |  | --------------- | ------- | ------------------------ | - | ------------------------- |  | ----------- | ----- |  | - | ------- | 
|March 31,
 2011                                                                         |  | Amortized
 Cost |         | Gross
 Unrealized
 Gains |   | Gross
 Unrealized
 Losses |  | Fair
 Value |      
|                                                                                        |  |                 |         |                          |   |                           |  |             |      
|                                                                                        |  |                 |         |                          |   |                           |  |             |      
|Obligations of U.S. government corporations and government sponsored
 enterprises       |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|Residential mortgage-backed securities                                                  |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|CMOs (Federal Home Loan Mortgage Corporation)                                           |  | $               | 55,910  |                          | $ | 103                       |  | $           | 559   |  | $ | 55,454  | 
|CMOs (Government National Mortgage Association)                                         |  |                 | 6,837   |                          |   | 5                         |  |             | 12    |  |   | 6,830   | 
|Federal National Mortgage Association                                                   |  |                 | 11,186  |                          |   | 10                        |  |             | 51    |  |   | 11,145  | 
|Federal Home Loan Mortgage Corporation                                                  |  |                 | 42      |                          |   | 2                         |  |             | 1     |  |   | 43      | 
|Government National Mortgage Association                                                |  |                 | 107     |                          |   |                          |  |             |      |  |   | 107     | 
|                                                                                        |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|Total residential mortgage-backed securities                                            |  |                 | 74,082  |                          |   | 120                       |  |             | 623   |  |   | 73,579  | 
|                                                                                        |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|Agency notes                                                                            |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|Federal National Mortgage Association                                                   |  |                 | 20,088  |                          |   | 12                        |  |             | 34    |  |   | 20,066  | 
|Federal Home Loan Bank                                                                  |  |                 | 10,000  |                          |   |                          |  |             | 129   |  |   | 9,871   | 
|Federal Home Loan Mortgage Corporation                                                  |  |                 | 19,981  |                          |   |                          |  |             | 267   |  |   | 19,714  | 
|Federal Farm Credit Bank                                                                |  |                 | 10,000  |                          |   | 11                        |  |             |      |  |   | 10,011  | 
|                                                                                        |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|Total obligations of U.S. government corporations and government
 sponsored enterprises |  |                 | 134,151 |                          |   | 143                       |  |             | 1,053 |  |   | 133,241 | 
|                                                                                        |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|Obligations of state and political institutions-New York Bank
 Qualified                |  |                 | 28,461  |                          |   | 348                       |  |             | 137   |  |   | 28,672  | 
|Single-issuer, trust preferred securities                                               |  |                 | 8,633   |                          |   | 98                        |  |             | 65    |  |   | 8,666   | 
|Corporate debt securities                                                               |  |                 | 239,026 |                          |   | 184                       |  |             | 551   |  |   | 238,659 | 
|Other securities                                                                        |  |                 | 5,039   |                          |   | 1                         |  |             | 114   |  |   | 4,926   | 
|                                                                                        |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|Total                                                                                   |  | $               | 415,310 |                          | $ | 774                       |  | $           | 1,920 |  | $ | 414,164 | 
|                                                                                        |  |                 |         |                          |   |                           |  |             |       |  |   |         | 

9

---



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

|                                                                                        |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|--------------------------------------------------------------------------------------- |  | --------------- | ------- | ------------------------ | - | ------------------------- |  | ----------- | ----- |  | - | ------- | 
|December
 31, 2010                                                                      |  | Amortized
 Cost |         | Gross
 Unrealized
 Gains |   | Gross
 Unrealized
 Losses |  | Fair
 Value |      
|                                                                                        |  |                 |         |                          |   |                           |  |             |      
|                                                                                        |  |                 |         |                          |   |                           |  |             |      
|Obligations of U.S. government corporations and government sponsored
 enterprises       |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|Residential mortgage-backed securities                                                  |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|CMOs (Federal Home Loan Mortgage Corporation)                                           |  | $               | 36,026  |                          | $ | 64                        |  | $           | 372   |  | $ | 35,718  | 
|CMOs (Government National Mortgage Association)                                         |  |                 | 7,218   |                          |   | 72                        |  |             |      |  |   | 7,290   | 
|Federal National Mortgage Association                                                   |  |                 | 8,750   |                          |   | 84                        |  |             | 13    |  |   | 8,821   | 
|Federal Home Loan Mortgage Corporation                                                  |  |                 | 44      |                          |   | 2                         |  |             | 1     |  |   | 45      | 
|Government National Mortgage Association                                                |  |                 | 110     |                          |   |                          |  |             | 1     |  |   | 109     | 
|                                                                                        |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|Total residential mortgage-backed securities                                            |  |                 | 52,148  |                          |   | 222                       |  |             | 387   |  |   | 51,983  | 
|                                                                                        |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|Agency notes                                                                            |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|Federal National Mortgage Association                                                   |  |                 | 30,087  |                          |   | 77                        |  |             |      |  |   | 30,164  | 
|Federal Home Loan Bank                                                                  |  |                 | 10,000  |                          |   |                          |  |             | 59    |  |   | 9,941   | 
|Federal Home Loan Mortgage Corporation                                                  |  |                 | 49,964  |                          |   | 132                       |  |             | 110   |  |   | 49,986  | 
|Federal Farm Credit Bank                                                                |  |                 | 10,000  |                          |   | 31                        |  |             |      |  |   | 10,031  | 
|                                                                                        |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|Total obligations of U.S. government corporations and government sponsored
 enterprises |  |                 | 152,199 |                          |   | 462                       |  |             | 556   |  |   | 152,105 | 
|                                                                                        |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|Obligations of state and political institutions-New York Bank
 Qualified                |  |                 | 39,967  |                          |   | 780                       |  |             | 703   |  |   | 40,044  | 
|Single-issuer, trust preferred securities                                               |  |                 | 3,879   |                          |   | 79                        |  |             | 25    |  |   | 3,933   | 
|Corporate debt securities                                                               |  |                 | 189,091 |                          |   | 278                       |  |             | 311   |  |   | 189,058 | 
|Other securities                                                                        |  |                 | 5,039   |                          |   | 1                         |  |             | 100   |  |   | 4,940   | 
|                                                                                        |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|Total                                                                                   |  | $               | 390,175 |                          | $ | 1,600                     |  | $           | 1,695 |  | $ | 390,080 | 
|                                                                                        |  |                 |         |                          |   |                           |  |             |       |  |   |         | 

10

---



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

The following tables present information
regarding securities held to maturity:

|                                                                                        |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|--------------------------------------------------------------------------------------- |  | --------------- | ------- | ------------------------ | - | ------------------------- |  | ----------- | ----- |  | - | ------- | 
|March 31,
 2011                                                                         |  | Carrying
 Value |         | Gross
 Unrealized
 Gains |   | Gross
 Unrealized
 Losses |  | Fair
 Value |      
|                                                                                        |  |                 |         |                          |   |                           |  |             |      
|                                                                                       
|Obligations of U.S. government corporations and government sponsored
 enterprises       |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|Residential mortgage-backed securities                                                  |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|CMOs (Federal National Mortgage Association)                                            |  | $               | 6,182   |                          | $ | 265                       |  | $           |      |  | $ | 6,447   | 
|CMOs (Federal Home Loan Mortgage Corporation)                                           |  |                 | 9,838   |                          |   | 423                       |  |             |      |  |   | 10,261  | 
|Federal National Mortgage Association                                                   |  |                 | 63,976  |                          |   | 4,060                     |  |             |      |  |   | 68,036  | 
|Federal Home Loan Mortgage Corporation                                                  |  |                 | 34,756  |                          |   | 1,851                     |  |             |      |  |   | 36,607  | 
|Government National Mortgage Association                                                |  |                 | 4,726   |                          |   | 569                       |  |             |      |  |   | 5,295   | 
|                                                                                        |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|Total residential mortgage-backed securities                                            |  |                 | 119,478 |                          |   | 7,168                     |  |             |      |  |   | 126,646 | 
|                                                                                        |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|Agency notes                                                                            |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|Federal National Mortgage Association                                                   |  |                 | 109,948 |                          |   | 62                        |  |             | 1,634 |  |   | 108,376 | 
|Federal Home Loan Bank                                                                  |  |                 | 49,979  |                          |   | 4                         |  |             | 229   |  |   | 49,754  | 
|Federal Home Loan Mortgage Corporation                                                  |  |                 | 57,483  |                          |   | 13                        |  |             | 652   |  |   | 56,844  | 
|                                                                                        |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|Total obligations of U.S. government corporations and government
 sponsored enterprises |  |                 | 336,888 |                          |   | 7,247                     |  |             | 2,515 |  |   | 341,620 | 
|                                                                                        |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|Obligations of state and political institutions-New York Bank
 Qualified                |  |                 | 121,393 |                          |   | 738                       |  |             | 1,453 |  |   | 120,678 | 
|                                                                                        |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|Total                                                                                   |  | $               | 458,281 |                          | $ | 7,985                     |  | $           | 3,968 |  | $ | 462,298 | 
|                                                                                        |  |                 |         |                          |   |                           |  |             |       |  |   |         | 

11

---



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

|                                                                                        |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|--------------------------------------------------------------------------------------- |  | --------------- | ------- | ------------------------ | - | ------------------------- |  | ----------- | ----- |  | - | ------- | 
|December
 31, 2010                                                                      |  | Carrying
 Value |         | Gross
 Unrealized
 Gains |   | Gross
 Unrealized
 Losses |  | Fair
 Value |      
|                                                                                        |  |                 |         |                          |   |                           |  |             |      
|                                                                                        |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|Obligations of U.S. government corporations
 and government sponsored enterprises       |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|Residential mortgage-backed securities                                                  |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|CMOs (Federal National Mortgage
 Association)                                           |  | $               | 7,504   |                          | $ | 349                       |  | $           |      |  | $ | 7,853   | 
|CMOs (Federal Home Loan Mortgage
 Corporation)                                          |  |                 | 11,704  |                          |   | 572                       |  |             |      |  |   | 12,276  | 
|Federal National Mortgage Association                                                   |  |                 | 70,001  |                          |   | 4,292                     |  |             |      |  |   | 74,293  | 
|Federal Home Loan Mortgage Corporation                                                  |  |                 | 40,583  |                          |   | 1,931                     |  |             |      |  |   | 42,514  | 
|Government National Mortgage Association                                                |  |                 | 4,943   |                          |   | 605                       |  |             |      |  |   | 5,548   | 
|                                                                                        |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|Total residential mortgage-backed securities                                            |  |                 | 134,735 |                          |   | 7,749                     |  |             |      |  |   | 142,484 | 
|                                                                                        |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|Agency notes                                                                            |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|Federal National Mortgage Association                                                   |  |                 | 84,969  |                          |   | 5                         |  |             | 1,405 |  |   | 83,569  | 
|Federal Home Loan Bank                                                                  |  |                 | 14,991  |                          |   |                          |  |             | 222   |  |   | 14,769  | 
|Federal Home Loan Mortgage Corporation                                                  |  |                 | 42,493  |                          |   | 4                         |  |             | 608   |  |   | 41,889  | 
|Federal Farm Credit Bank                                                                |  |                 | 5,078   |                          |   |                          |  |             | 42    |  |   | 5,036   | 
|                                                                                        |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|Total obligations of U.S. government
 corporations and government sponsored enterprises |  |                 | 282,266 |                          |   | 7,758                     |  |             | 2,277 |  |   | 287,747 | 
|                                                                                        |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|Obligations of state and political
 institutions-New York Bank Qualified                |  |                 | 116,969 |                          |   | 118                       |  |             | 4,381 |  |   | 112,706 | 
|                                                                                        |  |                 |         |                          |   |                           |  |             |       |  |   |         | 
|Total                                                                                   |  | $               | 399,235 |                          | $ | 7,876                     |  | $           | 6,658 |  | $ | 400,453 | 
|                                                                                        |  |                 |         |                          |   |                           |  |             |       |  |   |         | 

12

---



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

The following tables present
information regarding securities available for sale with temporary unrealized
losses for the periods indicated:

|                                                                                        |  |                     |         |                     |   |             |  |                    |       |             |   |                    |  |   |         |  |   |       | 
|--------------------------------------------------------------------------------------- |  | ------------------- | ------- | ------------------- | - | ----------- |  | ------------------ | ----- | ----------- | - | ------------------ |  | - | ------- |  | - | ----- | 
|                                                                                        |  | Less Than 12 Months |         | 12 Months or Longer |   | Total       | 
|                                                                                        |  |                     |         |                     |   |             | 
|March 31,
 2011                                                                         |  | Fair
 Value         |         | Unrealized
 Losses  |   | Fair
 Value |  | Unrealized
 Losses |       | Fair
 Value |   | Unrealized
 Losses | 
|                                                                                        |  |                     |         |                     |   |             |  |                    |       |             |   |                    | 
|Obligations of U.S. government corporations
 and government sponsored enterprises       |  |                     |         |                     |   |             |  |                    |       |             |   |                    |  |   |         |  |   |       | 
|Residential mortgage-backed securities                                                  |  |                     |         |                     |   |             |  |                    |       |             |   |                    |  |   |         |  |   |       | 
|CMOs (Federal Home Loan Mortgage
 Corporation)                                          |  | $                   | 40,039  |                     | $ | 559         |  | $                  |      |             | $ |                   |  | $ | 40,039  |  | $ | 559   | 
|CMOs (Government National Mortgage
 Association)                                        |  |                     | 2,587   |                     |   | 12          |  |                    |      |             |   |                   |  |   | 2,587   |  |   | 12    | 
|Federal National Mortgage Association                                                   |  |                     | 11,045  |                     |   | 51          |  |                    |      |             |   |                   |  |   | 11,045  |  |   | 51    | 
|Federal Home Loan Mortgage Corporation                                                  |  |                     | 26      |                     |   | 1           |  |                    |      |             |   |                   |  |   | 26      |  |   | 1     | 
|                                                                                        |  |                     |         |                     |   |             |  |                    |       |             |   |                    |  |   |         |  |   |       | 
|Total residential mortgage-backed securities                                            |  |                     | 53,697  |                     |   | 623         |  |                    |      |             |   |                   |  |   | 53,697  |  |   | 623   | 
|                                                                                        |  |                     |         |                     |   |             |  |                    |       |             |   |                    |  |   |         |  |   |       | 
|Agency notes                                                                            |  |                     |         |                     |   |             |  |                    |       |             |   |                    |  |   |         |  |   |       | 
|Federal National Mortgage Association                                                   |  |                     | 15,056  |                     |   | 34          |  |                    |      |             |   |                   |  |   | 15,056  |  |   | 34    | 
|Federal Home Loan Bank                                                                  |  |                     | 9,871   |                     |   | 129         |  |                    |      |             |   |                   |  |   | 9,871   |  |   | 129   | 
|Federal Home Loan Mortgage Corporation                                                  |  |                     | 19,714  |                     |   | 267         |  |                    |      |             |   |                   |  |   | 19,714  |  |   | 267   | 
|                                                                                        |  |                     |         |                     |   |             |  |                    |       |             |   |                    |  |   |         |  |   |       | 
|Total obligations of U.S. government
 corporations and government sponsored enterprises |  |                     | 98,338  |                     |   | 1,053       |  |                    |      |             |   |                   |  |   | 98,338  |  |   | 1,053 | 
|                                                                                        |  |                     |         |                     |   |             |  |                    |       |             |   |                    |  |   |         |  |   |       | 
|Obligations of state and political
 institutions-New York Bank Qualified                |  |                     | 8,002   |                     |   | 137         |  |                    |      |             |   |                   |  |   | 8,002   |  |   | 137   | 
|Single-issuer, trust preferred securities                                               |  |                     | 2,979   |                     |   | 53          |  |                    | 2,124 |             |   | 12                 |  |   | 5,103   |  |   | 65    | 
|Corporate debt securities                                                               |  |                     | 166,168 |                     |   | 551         |  |                    |      |             |   |                   |  |   | 166,168 |  |   | 551   | 
|Other securities                                                                        |  |                     | 4,886   |                     |   | 114         |  |                    |      |             |   |                   |  |   | 4,886   |  |   | 114   | 
|                                                                                        |  |                     |         |                     |   |             |  |                    |       |             |   |                    |  |   |         |  |   |       | 
|Total                                                                                   |  | $                   | 280,373 |                     | $ | 1,908       |  | $                  | 2,124 |             | $ | 12                 |  | $ | 282,497 |  | $ | 1,920 | 
|                                                                                        |  |                     |         |                     |   |             |  |                    |       |             |   |                    |  |   |         |  |   |       | 

|                                                                                        |  |   |         |  |   |       |  |   |       |  |   |    |  |   |         |  |   |       | 
|--------------------------------------------------------------------------------------- |  | - | ------- |  | - | ----- |  | - | ----- |  | - | -- |  | - | ------- |  | - | ----- | 
|December 31, 2010                                                                       |  |   |         |  |   |       |  |   |       |  |   |    |  |   |         |  |   |       | 
|                                                                                        |  |   |         |  |   |       |  |   |       |  |   |    |  |   |         |  |   |       | 
|Obligations of U.S. government corporations
 and government sponsored enterprises       |  |   |         |  |   |       |  |   |       |  |   |    |  |   |         |  |   |       | 
|Residential mortgage-backed securities                                                  |  |   |         |  |   |       |  |   |       |  |   |    |  |   |         |  |   |       | 
|CMOs (Federal Home Loan Mortgage
 Corporation)                                          |  | $ | 30,494  |  | $ | 372   |  | $ |      |  | $ |   |  | $ | 30,494  |  | $ | 372   | 
|Federal National Mortgage Association                                                   |  |   | 7,269   |  |   | 13    |  |   |      |  |   |   |  |   | 7,269   |  |   | 13    | 
|Federal Home Loan Mortgage Corporation                                                  |  |   | 28      |  |   | 1     |  |   |      |  |   |   |  |   | 28      |  |   | 1     | 
|Government National Mortgage Association                                                |  |   | 110     |  |   | 1     |  |   |      |  |   |   |  |   | 110     |  |   | 1     | 
|                                                                                        |  |   |         |  |   |       |  |   |       |  |   |    |  |   |         |  |   |       | 
|Total residential mortgage-backed securities                                            |  |   | 37,901  |  |   | 387   |  |   |      |  |   |   |  |   | 37,901  |  |   | 387   | 
|                                                                                        |  |   |         |  |   |       |  |   |       |  |   |    |  |   |         |  |   |       | 
|Agency notes                                                                            |  |   |         |  |   |       |  |   |       |  |   |    |  |   |         |  |   |       | 
|Federal Home Loan Bank                                                                  |  |   | 9,941   |  |   | 59    |  |   |      |  |   |   |  |   | 9,941   |  |   | 59    | 
|Federal Home Loan Mortgage Corporation                                                  |  |   | 9,875   |  |   | 110   |  |   |      |  |   |   |  |   | 9,875   |  |   | 110   | 
|                                                                                        |  |   |         |  |   |       |  |   |       |  |   |    |  |   |         |  |   |       | 
|Total obligations of U.S. government
 corporations and government sponsored enterprises |  |   | 57,717  |  |   | 556   |  |   |      |  |   |   |  |   | 57,717  |  |   | 556   | 
|                                                                                        |  |   |         |  |   |       |  |   |       |  |   |    |  |   |         |  |   |       | 
|Obligations of state and political
 institutions-New York Bank Qualified                |  |   | 18,716  |  |   | 703   |  |   |      |  |   |   |  |   | 18,716  |  |   | 703   | 
|Single-issuer, trust preferred securities                                               |  |   |        |  |   |      |  |   | 2,111 |  |   | 25 |  |   | 2,111   |  |   | 25    | 
|Corporate debt securities                                                               |  |   | 92,392  |  |   | 311   |  |   |      |  |   |   |  |   | 92,392  |  |   | 311   | 
|Other securities                                                                        |  |   | 4,900   |  |   | 100   |  |   |      |  |   |   |  |   | 4,900   |  |   | 100   | 
|                                                                                        |  |   |         |  |   |       |  |   |       |  |   |    |  |   |         |  |   |       | 
|Total                                                                                   |  | $ | 173,725 |  | $ | 1,670 |  | $ | 2,111 |  | $ | 25 |  | $ | 175,836 |  | $ | 1,695 | 
|                                                                                        |  |   |         |  |   |       |  |   |       |  |   |    |  |   |         |  |   |       | 

13

---



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

The following tables present
information regarding securities held to maturity with temporary unrealized
losses for the periods indicated:

|                                                                                        |  |                     |         |                     |   |             |  |                    |       |             |   |                    |  |   |         |  |   |       | 
|--------------------------------------------------------------------------------------- |  | ------------------- | ------- | ------------------- | - | ----------- |  | ------------------ | ----- | ----------- | - | ------------------ |  | - | ------- |  | - | ----- | 
|                                                                                        |  | Less Than 12 Months |         | 12 Months or Longer |   | Total       | 
|                                                                                        |  |                     |         |                     |   |             | 
|March 31,
 2011                                                                         |  | Fair
 Value         |         | Unrealized
 Losses  |   | Fair
 Value |  | Unrealized
 Losses |       | Fair
 Value |   | Unrealized
 Losses | 
|                                                                                        |  |                     |         |                     |   |             |  |                    |       |             |   |                    | 
|                                                                                        |  |                     |         |                     |   |             |  |                    |       |             |   |                    |  |   |         |  |   |       | 
|Obligations of U.S. government corporations
 and government sponsored enterprises -     |  |                     |         |                     |   |             |  |                    |       |             |   |                    |  |   |         |  |   |       | 
|Agency notes                                                                            |  |                     |         |                     |   |             |  |                    |       |             |   |                    |  |   |         |  |   |       | 
|Federal National Mortgage Association                                                   |  | $                   | 78,337  |                     | $ | 1,634       |  | $                  |      |             | $ |                   |  | $ | 78,337  |  | $ | 1,634 | 
|Federal Home Loan Bank                                                                  |  |                     | 39,757  |                     |   | 229         |  |                    |      |             |   |                   |  |   | 39,757  |  |   | 229   | 
|Federal Home Loan Mortgage Corporation                                                  |  |                     | 51,836  |                     |   | 652         |  |                    |      |             |   |                   |  |   | 51,836  |  |   | 652   | 
|                                                                                        |  |                     |         |                     |   |             |  |                    |       |             |   |                    |  |   |         |  |   |       | 
|                                                                                        |  |                     |         |                     |   |             |  |                    |       |             |   |                    |  |   |         |  |   |       | 
|Total obligations of U.S. government
 corporations and government sponsored enterprises |  |                     | 169,930 |                     |   | 2,515       |  |                    |      |             |   |                   |  |   | 169,930 |  |   | 2,515 | 
|Obligations of state and political
 institutions-New York Bank Qualified                |  |                     | 64,624  |                     |   | 1,227       |  |                    | 2,825 |             |   | 226                |  |   | 67,449  |  |   | 1,453 | 
|                                                                                        |  |                     |         |                     |   |             |  |                    |       |             |   |                    |  |   |         |  |   |       | 
|Total                                                                                   |  | $                   | 234,554 |                     | $ | 3,742       |  | $                  | 2,825 |             | $ | 226                |  | $ | 237,379 |  | $ | 3,968 | 
|                                                                                        |  |                     |         |                     |   |             |  |                    |       |             |   |                    |  |   |         |  |   |       | 

|                                                                                        |  |   |         |  |   |       |  |   |       |  |   |     |  |   |         |  |   |       | 
|--------------------------------------------------------------------------------------- |  | - | ------- |  | - | ----- |  | - | ----- |  | - | --- |  | - | ------- |  | - | ----- | 
|December 31, 2010                                                                       |  |   |         |  |   |       |  |   |       |  |   |     |  |   |         |  |   |       | 
|                                                                                        |  |   |         |  |   |       |  |   |       |  |   |     |  |   |         |  |   |       | 
|                                                                                        |  |   |         |  |   |       |  |   |       |  |   |     |  |   |         |  |   |       | 
|Obligations of U.S. government corporations
 and government sponsored enterprises -     |  |   |         |  |   |       |  |   |       |  |   |     |  |   |         |  |   |       | 
|Agency notes                                                                            |  |   |         |  |   |       |  |   |       |  |   |     |  |   |         |  |   |       | 
|Federal National Mortgage Association                                                   |  | $ | 78,564  |  | $ | 1,405 |  | $ |      |  | $ |    |  | $ | 78,564  |  | $ | 1,405 | 
|Federal Home Loan Bank                                                                  |  |   | 14,769  |  |   | 222   |  |   |      |  |   |    |  |   | 14,769  |  |   | 222   | 
|Federal Home Loan Mortgage Corporation                                                  |  |   | 36,890  |  |   | 608   |  |   |      |  |   |    |  |   | 36,890  |  |   | 608   | 
|Federal Farm Credit Bank                                                                |  |   | 5,036   |  |   | 42    |  |   |      |  |   |    |  |   | 5,036   |  |   | 42    | 
|                                                                                        |  |   |         |  |   |       |  |   |       |  |   |     |  |   |         |  |   |       | 
|                                                                                        |  |   |         |  |   |       |  |   |       |  |   |     |  |   |         |  |   |       | 
|Total obligations of U.S. government
 corporations and government sponsored enterprises |  |   | 135,259 |  |   | 2,277 |  |   |      |  |   |    |  |   | 135,259 |  |   | 2,277 | 
|Obligations of state and political
 institutions-New York Bank Qualified                |  |   | 94,309  |  |   | 4,103 |  |   | 2,277 |  |   | 278 |  |   | 96,586  |  |   | 4,381 | 
|                                                                                        |  |   |         |  |   |       |  |   |       |  |   |     |  |   |         |  |   |       | 
|Total                                                                                   |  | $ | 229,568 |  | $ | 6,380 |  | $ | 2,277 |  | $ | 278 |  | $ | 231,845 |  | $ | 6,658 | 
|                                                                                        |  |   |         |  |   |       |  |   |       |  |   |     |  |   |         |  |   |       | 

14

---



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

The following table presents information regarding single-issuer, trust
preferred securities at March 31, 2011:

|                                                          |  |               |     |              |  |               |  |           |       |                       |   |       |  |   |     |  
|--------------------------------------------------------- |  | ------------- | --- | ------------ |  | ------------- |  | --------- | ----- | --------------------- | - | ----- |  | - | --- | -
|Issuer                                                    |  | TARPRecipient |     | CreditRating |  | AmortizedCost |  | FairValue |       | UnrealizedGain/(Loss) |  
|                                                          |  |               |     |              |  |               |  |           |       |                       |  
|Sterling Bancorp Trust
 I, 8.375%, due 3/31/2032          |  |               | Yes |              |  | NA            |  | $         | 981   |                       | $ | 1,031 |  | $ | 50  |  
|                                                          |  |               |     |              |  |               |  |           |       |                       |   |       |  |   |     |  
|NPB Capital Trust II,
 7.85%, due 9/30/2032               |  |               | Yes | *            |  | NA            |  |           | 126   |                       |   | 125   |  |   | (1  | )
|                                                          |  |               |     |              |  |               |  |           |       |                       |   |       |  |   |     |  
|VNB Capital Trust I,
 7.75%, due 12/15/2031               |  |               | Yes | *            |  | BBB-          |  |           | 22    |                       |   | 22    |  |   |    |  
|                                                          |  |               |     |              |  |               |  |           |       |                       |   |       |  |   |     |  
|HSBC Finance, 6.875%,
 due 1/30/2033,                     |  |               | No  |              |  | A             |  |           | 740   |                       |   | 772   |  |   | 32  |  
|owned by HSBC Group,
 PLC                                 |  |               | No  |              |  |               |  |           |       |                       |   |       |  |   |     |  
|                                                          |  |               |     |              |  |               |  |           |       |                       |   |       |  |   |     |  
|Citigroup Capital VII,
 7.125%,
 due 7/31/2031            |  |               | Yes | *            |  | BB+           |  |           | 1,508 |                       |   | 1,499 |  |   | (9  | )
|                                                          |  |               |     |              |  |               |  |           |       |                       |   |       |  |   |     |  
|Fleet Capital Trust
 VIII, 7.20%,
 due 3/15/2032,         |  |               | No  |              |  | BB+           |  |           | 502   |                       |   | 500   |  |   | (2  | )
|owned by Bank of
 America Corporation                     |  |               | Yes | *            |  |               |  |           |       |                       |   |       |  |   |     |  
|                                                          |  |               |     |              |  |               |  |           |       |                       |   |       |  |   |     |  
|BAC Capital Trust II, 7.00%,
 due 2/01/2032,              |  |               | Yes | *            |  | BB+           |  |           | 300   |                       |   | 301   |  |   | 1   |  
|                                                          |  |               |     |              |  |               |  |           |       |                       |   |       |  |   |     |  
|JP MorganChase Capital XI,
 5.875%,
 due 6/15/2033,       |  |               | Yes | *            |  | BBB+          |  |           | 525   |                       |   | 520   |  |   | (5  | )
|                                                          |  |               |     |              |  |               |  |           |       |                       |   |       |  |   |     |  
|Citigroup Capital
 VIII, 6.95%,
 due 9/15/2031            |  |               | Yes | *            |  | BB+           |  |           | 245   |                       |   | 247   |  |   | 2   |  
|                                                          |  |               |     |              |  |               |  |           |       |                       |   |       |  |   |     |  
|Goldman Sachs Capital
 I, 6.345%,
 due 2/15/2034,         |  |               | Yes | *            |  | BBB-          |  |           | 995   |                       |   | 961   |  |   | (34 | )
|                                                          |  |               |     |              |  |               |  |           |       |                       |   |       |  |   |     |  
|Morgan Stanley Capital
 Trust III, 6.25%,
 due 3/01/2033, |  |               | Yes | *            |  | BB+           |  |           | 939   |                       |   | 950   |  |   | 11  |  
|                                                          |  |               |     |              |  |               |  |           |       |                       |   |       |  |   |     |  
|Keycorp Capital V,
 5.875%,
 due 7/30/2033,               |  |               | Yes | *            |  | BB            |  |           | 238   |                       |   | 240   |  |   | 2   |  
|                                                          |  |               |     |              |  |               |  |           |       |                       |   |       |  |   |     |  
|BB&T Capital Trust I,
 5.85%,
 due 8/18/2035,             |  |               | Yes | *            |  | BBB           |  |           | 960   |                       |   | 952   |  |   | (8  | )
|                                                          |  |               |     |              |  |               |  |           |       |                       |   |       |  |   |     |  
|JP MorganChase
 XVII, 5.85%,
 due 8/01/2035,              |  |               | Yes | *            |  | BBB+          |  |           | 460   |                       |   | 458   |  |   | (2  | )
|                                                          |  |               |     |              |  |               |  |           |       |                       |   |       |  |   |     |  
|Keycorp Capital II,
 6.875%,
 due 3/17/2029,              |  |               | Yes | *            |  | BB            |  |           | 92    |                       |   | 88    |  |   | (4  | )
|                                                          |  |               |     |              |  |               |  |           |       |                       |   |       |  |   |     |  
|                                                          |  |               |     |              |  |               |  | $         | 8,633 |                       | $ | 8,666 |  | $ | 33  |  
|                                                          |  |               |     |              |  |               |  |           |       |                       |   |       |  |   |     |  

* TARP obligation was repaid prior to March
31, 2011.

15

---



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

The Company invests principally in obligations of U.S. government
corporations and government sponsored enterprises and other investment-grade
securities. The fair value of these investments fluctuates based on several
factors, including credit quality and general interest rate changes. The
Company determined that it is not more likely than not that the Company would
be required to sell before anticipated recovery.

At March 31, 2011, approximately $118.5 million, representing approximately
13.6%, of the Companys held to maturity and available for sale securities are
comprised of securities issued by financial service companies/banks including
single-issuer trust preferred securities (11 issuers), corporate debt (18
issuers) and equity securities (8 issuers). These investments may pose a higher
risk of future impairment charges as result of a possible further deterioration
of the U.S. economy. The Company would be required to recognize impairment
charges on these securities if they suffer a decline in value that is
considered other-than-temporary. Numerous factors, including lack of liquidity
for re-sales of certain investment securities, absence of reliable pricing
information for investment securities, adverse changes in business climate,
adverse actions by regulators or unanticipated changes in the competitive
environment could have a negative effect on the Companys investment portfolio
and may result in other than temporary impairment on certain investment
securities in future periods.

At March 31, 2011, the Company held 3 securities positions of
single-issuer, trust preferred securities issued by financial institutions, in
the available for sale portfolio, that were in an unrealized loss position for
more than 12 months all of which are paying in accordance with their terms and
have no deferrals of interest or other deferrals. In addition, management
analyzes the performance of the issuers on a periodic basis, including a review
of the issuers most recent bank regulatory report and other public regulatory
disclosures, to assess credit risk and the
probability of impairment of the contractual cash flows of the applicable
securities. Based upon managements first quarter review, all of the issuers
have maintained performance levels adequate to support the contractual cash flows
of the securities.

At March 31, 2011, the Company held 11 issues of obligations of state
and political institutions, in the held to maturity portfolio, that were in an
unrealized loss position for more than 12 months. All of these securities were
rated A at issuance and carry private insurance which guarantees principal and
interest payments. Management has concluded that the unrealized losses are due
to changes in market interest rates and/or changes in securities markets which
resulted from temporary illiquidity and/or uncertainty in those markets.
Further, management has made an evaluation that it has the intent to hold these
securities until maturity and it is not more likely than not that the Company
would be required to sell before anticipated recovery. As a result, the
unrealized losses are deemed to be temporary.

16

---



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

The following tables present information regarding securities available
for sale and securities held to maturity at March 31, 2011, based on
contractual maturity. Expected
maturities will differ from contractual maturities because issuers may
have the right to call or prepay obligations with or without call or prepayment
penalties.

|                                                                                        |  |                 |         |             |   |         | 
|--------------------------------------------------------------------------------------- |  | --------------- | ------- | ----------- | - | ------- | 
|Available
 for sale                                                                     |  | Amortized
 Cost |         | Fair
 Value |  
|                                                                                        |  |                 |         |             |  
|                                                                                        |  |                 |         |             |   |         | 
|Obligations of U.S. government corporations
 and government sponsored enterprises       |  |                 |         |             |   |         | 
|Residential mortgage-backed securities                                                  |  |                 |         |             |   |         | 
|CMOs (Federal Home Loan Mortgage
 Corporation)                                          |  | $               | 55,910  |             | $ | 55,454  | 
|CMOs (Government National Mortgage
 Association)                                        |  |                 | 6,837   |             |   | 6,830   | 
|Federal National Mortgage Association                                                   |  |                 | 11,186  |             |   | 11,145  | 
|Federal Home Loan Mortgage Corporation                                                  |  |                 | 42      |             |   | 43      | 
|Government National Mortgage Association                                                |  |                 | 107     |             |   | 107     | 
|                                                                                        |  |                 |         |             |   |         | 
|Total residential mortgage-backed securities                                            |  |                 | 74,082  |             |   | 73,579  | 
|                                                                                        |  |                 |         |             |   |         | 
|Agency notes                                                                            |  |                 |         |             |   |         | 
|Federal National Mortgage Association                                                   |  |                 |         |             |   |         | 
|Due after 1 year but within 5 years                                                     |  |                 | 9,989   |             |   | 9,985   | 
|Due after 5 years but within 10 years                                                   |  |                 | 10,099  |             |   | 10,081  | 
|Federal Home Loan Bank                                                                  |  |                 |         |             |   |         | 
|Due after 5 years but within 10 years                                                   |  |                 | 10,000  |             |   | 9,871   | 
|Federal Home Loan Mortgage Corporation                                                  |  |                 |         |             |   |         | 
|Due after 5 years but within 10 years                                                   |  |                 | 19,981  |             |   | 19,714  | 
|Federal Farm Credit Bank                                                                |  |                 |         |             |   |         | 
|Due after 1 year but within 5 years                                                     |  |                 | 10,000  |             |   | 10,011  | 
|                                                                                        |  |                 |         |             |   |         | 
|                                                                                        |  |                 |         |             |   |         | 
|Total obligations of U.S. government
 corporations and government sponsored enterprises |  |                 | 134,151 |             |   | 133,241 | 
|                                                                                        |  |                 |         |             |   |         | 
|                                                                                        |  |                 |         |             |   |         | 
|Obligations of state and political
 institutions - New York Bank Qualified              |  |                 |         |             |   |         | 
|Due within 1 year                                                                       |  |                 | 1,417   |             |   | 1,428   | 
|Due after 1 year but within 5 years                                                     |  |                 | 2,859   |             |   | 2,949   | 
|Due after 5 years but within 10 years                                                   |  |                 | 2,977   |             |   | 3,039   | 
|Due after 10 years                                                                      |  |                 | 21,208  |             |   | 21,256  | 
|                                                                                        |  |                 |         |             |   |         | 
|Total obligations of state and political
 institutions-New York Bank Qualified          |  |                 | 28,461  |             |   | 28,672  | 
|                                                                                        |  |                 |         |             |   |         | 
|                                                                                        |  |                 |         |             |   |         | 
|Single-issuer, trust preferred securities                                               |  |                 |         |             |   |         | 
|Due after 10 years                                                                      |  |                 | 8,633   |             |   | 8,666   | 
|                                                                                        |  |                 |         |             |   |         | 
|                                                                                        |  |                 |         |             |   |         | 
|Corporate debt securities                                                               |  |                 |         |             |   |         | 
|Due within 6 months                                                                     |  |                 | 103,161 |             |   | 103,207 | 
|Due after 6 months but within 1 year                                                    |  |                 | 66,148  |             |   | 66,097  | 
|Due after 1 year but within 2 years                                                     |  |                 | 48,399  |             |   | 48,160  | 
|Due after 2 years but within 5 years                                                    |  |                 | 21,318  |             |   | 21,195  | 
|                                                                                        |  |                 |         |             |   |         | 
|Total corporate debt securities                                                         |  |                 | 239,026 |             |   | 238,659 | 
|                                                                                        |  |                 |         |             |   |         | 
|                                                                                        |  |                 |         |             |   |         | 
|Other securities                                                                        |  |                 | 5,039   |             |   | 4,926   | 
|                                                                                        |  |                 |         |             |   |         | 
|Total                                                                                   |  | $               | 415,310 |             | $ | 414,164 | 
|                                                                                        |  |                 |         |             |   |         | 

17

---



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

|                                                                                        |  |                 |         |             |   |         | 
|--------------------------------------------------------------------------------------- |  | --------------- | ------- | ----------- | - | ------- | 
|Held to
 maturity                                                                       |  | Carrying
 Value |         | Fair
 Value |  
|                                                                                        |  |                 |         |             |  
|                                                                                       
|Obligations of U.S. government corporations
 and government sponsored enterprises       |  |                 |         |             |   |         | 
|Residential mortgage-backed securities                                                  |  |                 |         |             |   |         | 
|CMOs (Federal National Mortgage
 Association)                                           |  | $               | 6,182   |             | $ | 6,447   | 
|CMOs (Federal Home Loan Mortgage
 Corporation)                                          |  |                 | 9,838   |             |   | 10,261  | 
|Federal National Mortgage Association                                                   |  |                 | 63,976  |             |   | 68,036  | 
|Federal Home Loan Mortgage Corporation                                                  |  |                 | 34,756  |             |   | 36,607  | 
|Government National Mortgage Association                                                |  |                 | 4,726   |             |   | 5,295   | 
|                                                                                        |  |                 |         |             |   |         | 
|Total residential mortgage-backed securities                                            |  |                 | 119,478 |             |   | 126,646 | 
|                                                                                        |  |                 |         |             |   |         | 
|Agency notes                                                                            |  |                 |         |             |   |         | 
|Federal National Mortgage Association                                                   |  |                 |         |             |   |         | 
|Due after 1 year but within 5 years                                                     |  |                 | 39,994  |             |   | 39,666  | 
|Due after 5 years but within 10 years                                                   |  |                 | 39,960  |             |   | 38,997  | 
|Due after 10 years                                                                      |  |                 | 29,994  |             |   | 29,713  | 
|Federal Home Loan Bank                                                                  |  |                 |         |             |   |         | 
|Due after 1 year but within 5 years                                                     |  |                 | 19,991  |             |   | 19,861  | 
|Due after 5 years but within 10 years                                                   |  |                 | 29,988  |             |   | 29,893  | 
|Federal Home Loan Mortgage Corporation                                                  |  |                 |         |             |   |         | 
|Due within 1 year                                                                       |  |                 | 5,000   |             |   | 4,993   | 
|Due after 1 year but within 5 years                                                     |  |                 | 29,995  |             |   | 29,851  | 
|Due after 5 years but within 10 years                                                   |  |                 | 22,488  |             |   | 22,000  | 
|                                                                                        |  |                 |         |             |   |         | 
|                                                                                        |  |                 |         |             |   |         | 
|Total obligations of U.S. government
 corporations and government sponsored enterprises |  |                 | 336,888 |             |   | 341,620 | 
|                                                                                        |  |                 |         |             |   |         | 
|Obligations of state and political
 institutions - New York Bank Qualified              |  |                 |         |             |   |         | 
|Due after 5 years but within 10 years                                                   |  |                 | 1,077   |             |   | 1,112   | 
|Due after 10 years                                                                      |  |                 | 120,316 |             |   | 119,566 | 
|                                                                                        |  |                 |         |             |   |         | 
|Total obligations of state and political
 institutions-New York Bank Qualified          |  |                 | 121,393 |             |   | 120,678 | 
|                                                                                        |  |                 |         |             |   |         | 
|Total                                                                                   |  | $               | 458,281 |             | $ | 462,298 | 
|                                                                                        |  |                 |         |             |   |         | 

Information regarding
sales/calls of available for sale securities is as follows:

|                                                                           |  |                               |        |      |   |        | 
|-------------------------------------------------------------------------- |  | ----------------------------- | ------ | ---- | - | ------ | 
|                                                                           |  | Three Months Ended
 March 31, |       
|                                                                           |  |                               |       
|                                                                           |  | 2011                          |        | 2010 |  
|                                                                           |  |                               |        |      |  
|                                                                          
|Sales                                                                      |  |                               |        |      |   |        | 
|Proceeds                                                                   |  | $                             | 55,898 |      | $ | 58,260 | 
|Gross gains                                                                |  |                               | 757    |      |   | 1,499  | 
|Gross losses                                                               |  |                               |       |      |   |       | 
|                                                                           |  |                               |        |      |   |        | 
|Calls                                                                      |  |                               |        |      |   |        | 
|Proceeds                                                                   |  |                               | 32,689 |      |   | 65,025 | 
|Gross gains                                                                |  |                               | 48     |      |   | 1      | 
|Gross losses                                                               |  |                               |       |      |   | 1      | 
|                                                                           |  |                               |        |      |   |        | 
|Information
 regarding calls of held to maturity securities is as follows: |  |                               |        |      |   |        | 
|                                                                           |  |                               |        |      |   |        | 
|                                                                           |  | Three Months Ended
 March 31, |       
|                                                                           |  |                               |       
|                                                                           |  | 2011                          |        | 2010 |  
|                                                                           |  |                               |        |      |  
|Calls                                                                      |  |                               |        |      |   |        | 
|Proceeds                                                                   |  | $                             | 5,000  |      | $ | 54,380 | 
|Gross gains                                                                |  |                               |       |      |   | 3      | 
|Gross losses                                                               |  |                               | 76     |      |   |       | 

There were no sales or transfers of held to
maturity securities during the three-month periods ended March 31, 2011 or
March 31, 2010.

18

---



STERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)



Note 3. Loans and allowance for loan losses



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

|                                                                                                       |  |                 |           |                    |   |           | 
|------------------------------------------------------------------------------------------------------ |  | --------------- | --------- | ------------------ | - | --------- | 
|                                                                                                       |  | March 31,
 2011 |           | December 31,
 2010 |  
|                                                                                                       |  |                 |           |                    |  
|Loans held for sale, net of valuation
 reserve ($-0- at March 31, 2011 and
 $113 at December 31, 2010) |  |                 |           |                    |   |           | 
|Real estateresidential mortgage                                                                       |  | $               | 24,102    |                    | $ | 32,049    | 
|                                                                                                       |  |                 |           |                    |   |           | 
|Loans held in portfolio, net of unearned
 discounts                                                    |  |                 |           |                    |   |           | 
|Commercial and industrial                                                                              |  |                 | 592,566   |                    |   | 620,136   | 
|Equipment financing receivables                                                                        |  |                 | 156,473   |                    |   | 161,054   | 
|Factored receivables                                                                                   |  |                 | 154,948   |                    |   | 162,070   | 
|Real estateresidential mortgage                                                                       |  |                 | 132,659   |                    |   | 127,695   | 
|Real estatecommercial mortgage                                                                        |  |                 | 98,216    |                    |   | 96,991    | 
|Real estateconstruction and land
 development                                                         |  |                 | 23,975    |                    |   | 25,624    | 
|Loans to individuals                                                                                   |  |                 | 11,699    |                    |   | 11,370    | 
|Loans to depository institutions                                                                       |  |                 | 25,505    |                    |   | 15,425    | 
|Loans to nondepository financial
 institutions                                                         |  |                 | 110,590   |                    |   | 112,882   | 
|                                                                                                       |  |                 |           |                    |   |           | 
|Loans held in portfolio, gross                                                                         |  |                 | 1,306,631 |                    |   | 1,333,247 | 
|Less unearned discounts                                                                                |  |                 | 17,982    |                    |   | 19,013    | 
|                                                                                                       |  |                 |           |                    |   |           | 
|Loans held in portfolio, net of unearned
 discounts                                                    |  |                 | 1,288,649 |                    |   | 1,314,234 | 
|                                                                                                       |  |                 |           |                    |   |           | 
|                                                                                                       |  | $               | 1,312,751 |                    | $ | 1,346,283 | 
|                                                                                                       |  |                 |           |                    |   |           | 



At March 31, 2011, the bank had qualified loans, at carrying value of approximately $432.1 million, available to secure borrowings from the FHLB and the FRB.  There were no loans pledged at March 31, 2011.



Loan Origination/Risk Management

The Company has lending policies and procedures in place that are designed to maximize loan income within an acceptable level of risk. Management reviews and approves these policies and procedures on a regular basis. A reporting system supplements the review process by providing management with frequent reports related to loan production, loan quality, concentrations of credit, loan delinquencies and non-performing and potential problem loans. Diversification in the loan portfolio is a means of managing risk associated with fluctuations in economic conditions.



The Company maintains an independent loan review process that reviews and validates the credit risk program on a periodic basis. Results of these reviews are presented to management. The loan review process complements and reinforces the risk identification and assessment decisions made by lenders.



Commercial and Loans to Nondepository Financial Institutions

Sterling provides a full range of loans to small and medium-sized businesses with the objective of establishing longer-term relationships. Loans generally range in size up to $20 million, tailored to meet customers long- and short-term needs, and include secured and unsecured lines of credit and business installment loans.



Loans generally are collateralized by accounts receivable, inventory and other assets. Sterling also provides back-office services, i.e., processing payroll, generating customer invoices, credit collection assistance and related payroll services.  The repayment of commercial loans is generally dependent on the creditworthiness and cash flow of borrowers and guarantors, which may be negatively impacted by adverse economic conditions.  While these loans are secured, collateral type, marketability, coverage, valuation and monitoring is not as uniform as in other portfolio classes and recovery from liquidation of such collateral may be subject to greater variability.



Factoring

Factoring provides a finance
service that combines working capital financing, credit risk protection, and accounts receivable management for
companies in a variety of industries. This business may be conducted on a recourse or non-recourse basis,
depending upon the needs of the client.

19

---



STERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)



In
general, Sterling records a receivable for the amount of accounts
receivable due from customers of its clients and records a liability for the
funds due to the client. Under advance factoring arrangements, clients can draw
an advance as accounts receivable are sold/assigned to Sterling. With advance
factoring, Sterling normally has recourse against the client if the customer
fails to pay. Under collection factoring arrangements, clients sell Sterling
their accounts receivable and Sterling provides credit protection to the client
guaranteeing the collection of the amount due and back-office support.
Collection factoring is generally under a nonrecourse basis where the principal
source of payment for Sterling is through the collection of the receivable from
our clientss customers whose credit has been approved by Sterling
following a rigorous review process. Also, with collection factoring, Sterling
has credit default insurance with a nationally recognized insurance company to
provide it with protection against customer default.



Commercial Real Estate

Sterling offers a range of commercial real estate lending including financing on commercial buildings, retail properties and mixed use properties. Loans are predicated on the cash flow of the property, the value of the property determined by an independent appraisal and the strength of personal guarantees, if any.  Loans are made at fixed or floating rates. Floating rate loans are based on the prime rate. Fixed rate loans are tied to Treasury or FHLB benchmarks and other indices.



Commercial
real estate loans are subject to underwriting standards and
processes similar to commercial and industrial loans, in addition to those of
real estate loans. These loans are viewed primarily as cash flow loans and
secondarily as loans secured by real estate. Commercial real estate lending
typically involves higher loan principal amounts and the repayment of these
loans is generally dependent on the successful operation of the property
securing the loan or the business conducted on the property securing the loan.
Commercial real estate loans may be more adversely affected by conditions in the
real estate markets or in the general economy. The properties securing the
Companys real estate portfolio are diverse in terms of type and geographic
location. This diversity helps reduce the Companys exposure to adverse
economic events that affect any single market or industry. Management monitors
and evaluates commercial real estate loans based on collateral, geographic and
risk grade criteria.



With respect to loans to developers and builders that are secured by non-owner occupied properties that the Company may originate from time to time, the Company generally requires the borrower to have had an existing relationship with the Company and have a record of success.  Construction loans are underwritten utilizing feasibility studies, independent appraisal reviews, sensitivity analysis of absorption and lease rates and financial analysis of the developers and property owners.  Construction loans are generally based upon estimates of costs and value associated with funds, with repayment substantially dependent on the success of the ultimate project.  Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained.  These loans are closely
monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to the timely completion of the project, interest rate changes, government regulation of real property, general economic conditions and the availability of long-term financing.



Equipment Financing

Sterling engages in direct and indirect lease financing. Direct lease financing is when requests for financing originate with an end user seeking to finance equipment for up to 60 months. Indirect lease financing arises through relationships with equipment financing brokers. In both cases, credit approval is based upon a full underwriting process that involves the submission of financial and other information, including the applicants historical performance, cash flow projections and value of equipment, and for customers who are not public entities, Sterling generally obtains the personal guarantees of the principals of the entities.

20

---



STERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)



Residential Mortgage

Residential mortgage loans, principally on single-family residences, are made primarily for re-sale into the secondary market. Offering both fixed and adjustable rate residential mortgage loan products, mortgages are focused on conforming credit, government insured FHA and other high-quality loan products. Jumbo loans are also originated for sale into the secondary market, or brokered to third party providers.



The
ability of borrowers to service debt in the residential mortgage loan
portfolios is generally subject to personal income which may be impacted by
general economic conditions, such as increased unemployment levels. These loans
are predominantly collateralized by first and second liens on single family
properties. If a borrower cannot maintain the loan, the Companys ability
to recover against the collateral in sufficient amount and in a timely manner
may be significantly influenced by market, legal and regulatory
conditions.



Concentrations of Credit

There are no industry concentrations (exceeding 10% of loans, gross) of loans held in portfolio. Approximately 68.5% of loans are to borrowers located in the New York metropolitan area. A further deterioration in economic conditions within the region including a decline in real estate values, higher unemployment and other factors which could adversely impact small and mid-sized businesses, could have a significant adverse impact on the quality of the Companys loan portfolio. In addition, a decline in real estate values and higher unemployment within the mid-Atlantic region and North Carolina could adversely impact the Companys residential real estate loan portfolio.



Approximately 22.6% or $6.9 million and 24.3% or $5.9 million of the Companys net interest income and noninterest income are related to real estate lending for the three months ended March 31, 2011 and 2010, respectively. Real estate prices in the U.S. market decreased during 2010 and have continued to decrease in 2011. Continuing declines in real estate values could necessitate charge-offs in our mortgage loan portfolio that may impact our operating results. In addition, a sustained period of declining real estate values combined with the continued turbulence in the financial and credit markets would continue to limit our mortgage-related revenues.

As of March 31, 2011, approximately 67.3% of the Companys loan portfolio consisted of commercial and industrial, factored receivables, construction and commercial real estate loans. Because the Companys loan portfolio contains a number of commercial and industrial, construction and commercial real estate loans with relatively large balances, the deterioration of one or a few of these loans could cause a significant increase in non-performing loans.



Related Party Loans

Loans are made to officers or directors (including their immediate families) of the Company or for the benefit of corporations in which they have a beneficial interest subject to applicable regulations. There were no outstanding balances on such loans in excess of $60 thousand to any individual or entity at March 31, 2011 or 2010.



Nonperforming Loans

Nonaccrual loans are those on which the accrual of interest has ceased. Loans, including loans that are individually identified as being impaired under FASB Codification Topic 310:Receivables, are generally placed on nonaccrual status immediately if, in the opinion of management, principal or interest is not likely to be paid in accordance with the terms of the loan agreement, or when principal or interest is past due 90 days or more and collateral, if any, is insufficient to cover principal and interest.



Interest accrued but not collected at the date a loan is placed on nonaccrual status is reversed against interest income. Interest income is recognized on nonaccrual loans only to the extent received in cash. Where there is doubt regarding the ultimate collectibility of the loan principal, cash receipts, whether designated as principal or interest, are thereafter applied to reduce the carrying value of the loan. Loans are restored to accrual status when interest and principal payments are brought current and future payments are reasonably assured.

21

---



STERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)



The following table sets forth the amount of nonaccrual loans of the Company as of the dates  indicated:

|                                               |  |                 |       |                    |   |       | 
|---------------------------------------------- |  | --------------- | ----- | ------------------ | - | ----- | 
|                                               |  | March 31,
 2011 |       | December 31,
 2010 |  
|                                               |  |                 |       |                    |  
|Commercial & industrial                        |  | $               | 1,242 |                    | $ | 1,014 | 
|Equipment financing receivables                |  |                 | 972   |                    |   | 892   | 
|Factored receivables                           |  |                 |      |                    |   |      | 
|Real estateresidential mortgage               |  |                 | 1,675 |                    |   | 1,614 | 
|Real estate-commercial mortgage                |  |                 | 3,124 |                    |   | 3,124 | 
|Real estateconstruction and land
 development |  |                 |      |                    |   |      | 
|Loans to individuals                           |  |                 | 3     |                    |   |      | 
|                                               |  |                 |       |                    |   |       | 
|Total nonaccrual loans                         |  | $               | 7,016 |                    | $ | 6,644 | 
|                                               |  |                 |       |                    |   |       | 



The
following table provides information regarding the past due status of
loans at March 31, 2011 and December 31, 2010:

|                                              |  |                                   |        |                                   |   |                                  |  |                       |       |         |   |             |  |                                                        |           |  |   |           |  |   |     | 
|--------------------------------------------- |  | --------------------------------- | ------ | --------------------------------- | - | -------------------------------- |  | --------------------- | ----- | ------- | - | ----------- |  | ------------------------------------------------------ | --------- |  | - | --------- |  | - | --- | 
|March 31,
      2011                          |  | 3059 
      Days Past 
      Due |        | 6089 
      Days Past 
      Due |   | 90 & 
      Over Past 
      Due |  | Total Past 
      Due |       | Current |   | Total Loans |  | MEMO 
      90 & Over 
      and Still 
      Accruing |          
|                                              |  |                                   |        |                                   |   |                                  |  |                       |       |         |   |             |  |                                                        |          
|Commercial and industrial                     |  | $                                 | 17,138 |                                   | $ | 4,702                            |  | $                     | 1,243 |         | $ | 23,083      |  | $                                                      | 567,821   |  | $ | 590,904   |  | $ | 1   | 
|Equipment financing receivables               |  |                                   | 1,417  |                                   |   | 820                              |  |                       | 972   |         |   | 3,209       |  |                                                        | 137,121   |  |   | 140,330   |  |   |    | 
|Factored receivables                          |  |                                   | 1,180  |                                   |   | 307                              |  |                       | 295   |         |   | 1,782       |  |                                                        | 152,989   |  |   | 154,771   |  |   | 295 | 
|Real estateresidential mortgageportfolio    |  |                                   | 1,916  |                                   |   | 2,068                            |  |                       | 1,675 |         |   | 5,659       |  |                                                        | 127,000   |  |   | 132,659   |  |   |    | 
|Real estatecommercial mortgage               |  |                                   | 6,812  |                                   |   |                                 |  |                       | 3,124 |         |   | 9,936       |  |                                                        | 88,280    |  |   | 98,216    |  |   |    | 
|Real estateconstruction and land development |  |                                   |       |                                   |   |                                 |  |                       |      |         |   |            |  |                                                        | 23,975    |  |   | 23,975    |  |   |    | 
|Loans to individuals                          |  |                                   |       |                                   |   |                                 |  |                       | 3     |         |   | 3           |  |                                                        | 11,696    |  |   | 11,699    |  |   |    | 
|Loans to depository institutions              |  |                                   |       |                                   |   |                                 |  |                       |      |         |   |            |  |                                                        | 25,505    |  |   | 25,505    |  |   |    | 
|Loans to nondepository financial institutions |  |                                   |       |                                   |   |                                 |  |                       |      |         |   |            |  |                                                        | 110,590   |  |   | 110,590   |  |   |    | 
|                                              |  |                                   |        |                                   |   |                                  |  |                       |       |         |   |             |  |                                                        |           |  |   |           |  |   |     | 
|Total loans, net of unearned discount         |  | $                                 | 28,463 |                                   | $ | 7,897                            |  | $                     | 7,312 |         | $ | 43,672      |  | $                                                      | 1,244,977 |  | $ | 1,288,649 |  | $ | 296 | 
|                                              |  |                                   |        |                                   |   |                                  |  |                       |       |         |   |             |  |                                                        |           |  |   |           |  |   |     | 
|                                              |  |                                   |        |                                   |   |                                  |  |                       |       |         |   |             |  |                                                        |           |  |   |           |  |   |     | 
|December 31, 2010                             |  |                                   |        |                                   |   |                                  |  |                       |       |         |   |             |  |                                                        |          
|                                              |  |                                   |        |                                   |   |                                  |  |                       |       |         |   |             |  |                                                        |          
|Commercial and industrial                     |  | $                                 | 16,899 |                                   | $ | 4,693                            |  | $                     | 1,015 |         | $ | 22,607      |  | $                                                      | 595,616   |  | $ | 618,223   |  | $ | 1   | 
|Equipment financing receivables               |  |                                   | 1,399  |                                   |   | 579                              |  |                       | 958   |         |   | 2,936       |  |                                                        | 141,299   |  |   | 144,235   |  |   | 66  | 
|Factored receivables                          |  |                                   | 3,321  |                                   |   | 662                              |  |                       | 247   |         |   | 4,230       |  |                                                        | 157,559   |  |   | 161,789   |  |   | 247 | 
|Real estateresidential mortgageportfolio    |  |                                   | 3,297  |                                   |   | 2,515                            |  |                       | 1,614 |         |   | 7,426       |  |                                                        | 152,318   |  |   | 159,744   |  |   |    | 
|Real estatecommercial mortgage               |  |                                   | 9,626  |                                   |   |                                 |  |                       | 3,124 |         |   | 12,750      |  |                                                        | 84,241    |  |   | 96,991    |  |   |    | 
|Real estateconstruction and land development |  |                                   |       |                                   |   |                                 |  |                       |      |         |   |            |  |                                                        | 25,624    |  |   | 25,624    |  |   |    | 
|Loans to individuals                          |  |                                   | 52     |                                   |   |                                 |  |                       |      |         |   | 52          |  |                                                        | 11,318    |  |   | 11,370    |  |   |    | 
|Loans to depository institutions              |  |                                   |       |                                   |   |                                 |  |                       |      |         |   |            |  |                                                        | 15,425    |  |   | 15,425    |  |   |    | 
|Loans to nondepository financial institutions |  |                                   |       |                                   |   |                                 |  |                       |      |         |   |            |  |                                                        | 112,882   |  |   | 112,882   |  |   |    | 
|                                              |  |                                   |        |                                   |   |                                  |  |                       |       |         |   |             |  |                                                        |           |  |   |           |  |   |     | 
|Total loans, net of unearned discount         |  | $                                 | 34,594 |                                   | $ | 8,449                            |  | $                     | 6,958 |         | $ | 50,001      |  | $                                                      | 1,296,282 |  | $ | 1,346,283 |  | $ | 314 | 
|                                              |  |                                   |        |                                   |   |                                  |  |                       |       |         |   |             |  |                                                        |           |  |   |           |  |   |     | 
|                                              |  |                                   |        |                                   |   |                                  |  |                       |       |         |   |             |  |                                                        |           |  |   |           |  |   |     | 



Impaired Loans

Management considers a loan to be impaired when, based on current information and events, it is determined that the Company will not be able to collect all amounts due according to the loan contract, including scheduled interest payments. Determination of impairment is treated the same across all classes of loans on a loan-by-loan basis.  When management identifies a loan as impaired, the impairment is measured based on the present value of expected future cash flows, discounted at the loans effective interest rate, except when the sole remaining source of repayment of the loan is the operation or liquidation of the collateral. In these cases management uses the current fair value of the collateral, less selling costs when foreclosure is probable, instead of discounted cash flows.



22

---



STERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)



If management determines that the value of the impaired loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized through an allowance estimate or a charge-off to the allowance.

When the ultimate collectibility of the total principal of an impaired loan is in doubt and the loan is on nonaccrual status, all payments are applied to principal, under the cost recovery method. When the ultimate collectibility of the total principal of an impaired loan is not in doubt and the loan is on nonaccrual status, contractual interest is credited to interest income when received, under the cash basis method. Impaired loans, or portions thereof, are charged off when deemed uncollectible.



The following tables include the recorded investment and unpaid principal balances for impaired financing receivables with the associated allowance amount, if applicable.



|                                               |  |                                             |        |                                           |   |                                               |  |                     |        |                                                               |   |                                                      |  |   |        |  |   |     | 
|---------------------------------------------- |  | ------------------------------------------- | ------ | ----------------------------------------- | - | --------------------------------------------- |  | ------------------- | ------ | ------------------------------------------------------------- | - | ---------------------------------------------------- |  | - | ------ |  | - | --- | 
|March 31,
2011                                 |  | Recorded 
 Investment 
 in Impaired 
 Loans |        | Principal 
 Balance 
 With No 
 Allowance |   | Unpaid
Principal 
 Balance 
 With 
 Allowance |  | Related 
 Allowance |        | Average 
   Recorded 
   Investment 
   in Impaired 
   Loans |   | Interest 
 Income 
 Recognized 
 in Impaired 
 Loans | 
|                                               |  |                                             |        |                                           |   |                                               |  |                     |        |                                                               |   |                                                      | 
|Commercial
 and industrial                     |  | $                                           | 2,192  |                                           | $ |                                              |  | $                   | 4,242  |                                                               | $ | 518                                                  |  | $ | 2,214  |  | $ | 27  | 
|Equipment
 financing receivables               |  |                                             | 192    |                                           |   |                                              |  |                     | 192    |                                                               |   | 17                                                   |  |   | 303    |  |   | 20  | 
|Factored
 receivables                          |  |                                             |       |                                           |   |                                              |  |                     |       |                                                               |   |                                                     |  |   |       |  |   |    | 
|Real
 estateresidential mortgage              |  |                                             | 4,731  |                                           |   |                                              |  |                     | 4,817  |                                                               |   | 1,208                                                |  |   | 4,818  |  |   | 47  | 
|Real
 estatecommercial mortgage               |  |                                             | 3,124  |                                           |   |                                              |  |                     | 3,124  |                                                               |   | 1,113                                                |  |   | 3,124  |  |   | 26  | 
|Real
 estateconstruction and land development |  |                                             |       |                                           |   |                                              |  |                     |       |                                                               |   |                                                     |  |   |       |  |   |    | 
|Loans to
 individuals                          |  |                                             |       |                                           |   |                                              |  |                     |       |                                                               |   |                                                     |  |   |       |  |   |    | 
|Loans to
 depository institutions              |  |                                             |       |                                           |   |                                              |  |                     |       |                                                               |   |                                                     |  |   |       |  |   |    | 
|Loans to
 nondepository financial institutions |  |                                             |       |                                           |   |                                              |  |                     |       |                                                               |   |                                                     |  |   |       |  |   |    | 
|                                               |  |                                             |        |                                           |   |                                               |  |                     |        |                                                               |   |                                                      |  |   |        |  |   |     | 
|Total                                          |  | $                                           | 10,239 |                                           | $ |                                              |  | $                   | 12,375 |                                                               | $ | 2,856                                                |  | $ | 10,459 |  | $ | 120 | 
|                                               |  |                                             |        |                                           |   |                                               |  |                     |        |                                                               |   |                                                      |  |   |        |  |   |     | 
|                                               |  |                                             |        |                                           |   |                                               |  |                     |        |                                                               |   |                                                      |  |   |        |  |   |     | 
|December 31,
2010                              |  |                                             |        |                                           |   |                                               |  |                     |        |                                                               |   |                                                      |  |   |        |  |   |     | 
|                                               |  |                                             |        |                                           |   |                                               |  |                     |        |                                                               |   |                                                      |  |   |        |  |   |     | 
|Commercial
 and industrial                     |  | $                                           | 2,236  |                                           | $ | 584                                           |  | $                   | 4,243  |                                                               | $ | 605                                                  |  | $ | 1,598  |  |   |     | 
|Equipment
 financing receivables               |  |                                             | 414    |                                           |   |                                              |  |                     | 414    |                                                               |   | 33                                                   |  |   | 1,095  |  |   |     | 
|Factored
 receivables                          |  |                                             |       |                                           |   |                                              |  |                     |       |                                                               |   |                                                     |  |   |       |  |   |     | 
|Real
 estateresidential mortgage              |  |                                             | 4,904  |                                           |   |                                              |  |                     | 4,990  |                                                               |   | 1,104                                                |  |   | 3,681  |  |   |     | 
|Real
 estatecommercial mortgage               |  |                                             | 3,124  |                                           |   |                                              |  |                     | 3,124  |                                                               |   | 1,100                                                |  |   | 1,725  |  |   |     | 
|Real
 estateconstruction and land development |  |                                             |       |                                           |   |                                              |  |                     |       |                                                               |   |                                                     |  |   |       |  |   |     | 
|Loans to
 individuals                          |  |                                             |       |                                           |   |                                              |  |                     |       |                                                               |   |                                                     |  |   |       |  |   |     | 
|Loans to
 depository institutions              |  |                                             |       |                                           |   |                                              |  |                     |       |                                                               |   |                                                     |  |   |       |  |   |     | 
|Loans to
 nondepository financial institutions |  |                                             |       |                                           |   |                                              |  |                     |       |                                                               |   |                                                     |  |   |       |  |   |     | 
|                                               |  |                                             |        |                                           |   |                                               |  |                     |        |                                                               |   |                                                      |  |   |        |  |   |     | 
|Total                                          |  | $                                           | 10,678 |                                           | $ | 584                                           |  | $                   | 12,771 |                                                               | $ | 2,842                                                |  | $ | 8,099  |  |   |     | 
|                                               |  |                                             |        |                                           |   |                                               |  |                     |        |                                                               |   |                                                      |  |   |        |  |   |     | 



Credit Quality Indicators

As part of the ongoing monitoring of the credit quality of the Companys loan portfolio, management tracks certain credit quality indicators including trends related to (i) the risk grade of loans, (ii) the level of classified loans, (iii) charge-offs, (iv) nonperforming loans and (v) the general economic conditions in the New York metropolitan area.

The
Company categorizes loans into risk categories based on relevant
information about the ability of borrowers to service their debt, such as:
current financial information, historical payment experience, credit
documentation, public information, and current economic trends, among other
factors. The Company has a process for analyzing non-homogeneous loans, such as
commercial and industrial and commercial real estate loans, individually by grading the loans
based on credit risk. This analysis occurs at varying times based on the type of
loan as well as the loan balance and occurs at least once every 18 months for
those loans greater than $500,000.



23

---



STERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)



For homogeneous loan pools, such as residential mortgages, leases and consumer loans, the Company uses payment status to identify the credit risk in these loan portfolios. Payment status is reviewed on a daily basis by the Companys personnel and on a monthly basis with respect to determining the adequacy of the allowance for loan losses. The payment status of these homogeneous pools at March 31, 2011 is included in the aging of the recorded investment of past due loans table above. In addition, the total nonperforming portion of these homogeneous loan pools at March 31, 2011 is presented in the recorded investment in nonaccrual loans table above.



The Company utilizes a risk grading matrix to assign a risk grade to each of its commercial loans. Loans under $100,000 are not risk rated. Loans are graded on a scale of 1 to 9. A description of the general characteristics of the 9 risk grades is as follows:




      Risk Rating 1 & 2/High Quality/Minimal RiskThese loans are well secured by liquid or high quality, diversified, and readily marketable securities within the banks defined margin requirements including cash surrender value of life insurance, or loans to strong privately held obligors secured by real estate with satisfactory loan to
        value, and support guarantors. They could include loans to publicly traded entities with strong credit ratings (A-1 or better) with Moodys or Standard & Poors.



      Risk Rating 3 & 4/Very Good/Good QualityThese loans can be either unsecured or secured (with monthly monitoring of Accounts Receivable and/or Inventory) to adequately or moderately capitalized privately held obligors with satisfactory sales, revenue, earnings trends, cash flow, and leverage. These secured loans may be monitored in the
        Asset Based Lending or the Factoring Department to include control of cash receipts and defined formula advances. These categories could include loans to publicly traded entities with credit ratings of A-3 or lower by Moodys or Standard & Poors.



      Risk Rating 5/Watch ListThese loans are to companies with uneven financial performance containing exceptions to loan policy without mitigating factors. These loans may exist when the obligors experience temporary credit and/or structural deficiencies. Such credits have not been criticized by Loan Review. Close supervision is warranted to
        avoid further deterioration.



      Risk Rating 6/Special Mention (OCC Definition)Other Assets Especially Mentioned (OAEM) are loans that are currently protected but are potentially weak. Special Mention ratings have potential weaknesses which may, if not checked or corrected, weaken the asset or inadequately protect the banks credit position at some future date. Such
        assets constitute an undue and unwarranted credit risk but not to the point of justifying a classification of substandard. The credit risk may be relatively minor yet constitute an unwarranted risk in light of the circumstances surrounding a specific asset.



      Risk Rating 7/Substandard (OCC Definition)These loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness that jeopardizes the liquidation of the debt. They are characterized by the distinct possibility that the
        Bank will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified as substandard.



      Risk Rating 8/Doubtful (OCC Definition)These loans have all the weakness inherent in one classified as substandard with the added characteristics that the weakness makes collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely
        high, but because of certain important and reasonably specific pending factors which may work to the advantage and strengthening of the asset, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors include proposed merger, acquisition, or liquidating procedures, capital injection, perfecting liens or additional collateral and refinancing plans.



      Risk Rating 9/Loss (OCC Definition)These loans are classified as Loss and charged off because they are determined to be uncollectible and unbankable assets. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless
        asset even though partial recovery may be effected in the future. The bank should not be allowed to attempt long-term recoveries while the asset remains booked. Losses should be taken in the period in which they are determined to be uncollectible.




24

---



STERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)



The following table presents weighted average risk grades and classified loans by class of commercial loan. Classified loans include loans in Risk Grades 6, 7 and 8.



|                                              |  |                               |  |                   |       |                                   |      |                     |   |        | 
|--------------------------------------------- |  | ----------------------------- |  | ----------------- | ----- | --------------------------------- | ---- | ------------------- | - | ------ | 
|                                              |  | March 31, 2011                |  | December 31, 2010 |      
|                                              |  |                               |  |                   |       |                                   |      |                     |  
|                                              |  | Weighted
 Average
 Risk Grade |  | Classified
 Loans |       | Weighted
   Average
   Risk Grade |      | Classified
   Loans |  
|                                              |  |                               |  |                   |       |                                   |      |                     |  
|Commercial and industrial                     |  | 3.31                          |  | $                 | 5,848 |                                   | 3.32 |                     | $ | 3,450  | 
|Factored receivables                          |  | 2.76                          |  |                   |      |                                   | 2.76 |                     |   |       | 
|Real estatecommercial mortgage               |  | 3.38                          |  |                   | 3,124 |                                   | 3.36 |                     |   | 3,124  | 
|Real estateconstruction and land development |  | 4.49                          |  |                   |      |                                   | 4.55 |                     |   | 5,249  | 
|Loans to depository institutions              |  | 1.82                          |  |                   |      |                                   | 3.00 |                     |   |       | 
|Loans to nondepository financial institutions |  | 3.13                          |  |                   |      |                                   | 3.06 |                     |   |       | 
|                                              |  |                               |  |                   |       |                                   |      |                     |   |        | 
|Total                                         |  | 3.23                          |  | $                 | 8,972 |                                   | 3.24 |                     | $ | 11,823 | 
|                                              |  |                               |  |                   |       |                                   |      |                     |   |        | 



Allowance for Loan Losses

The allowance reflects managements best estimate of probable losses within the existing loan portfolio and of the risk inherent in various components of the loan portfolio. The allowance, in the judgment of management, is necessary to reserve for estimated loan losses and risk inherent in the loan portfolio. Additions to the allowance for loan losses are made by charges to the provision for loan losses. Credit exposures deemed to be uncollectible are charged against the allowance for loan losses. Recoveries of previously charged-off amounts are credited to the allowance for loan losses.

The Companys allowance for loan loss methodology is based on guidance provided by the Interagency Policy Statement on the Allowance for Loan and Lease Losses issued by the Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve system, the Federal Deposit Insurance Corporation, the National Credit Union Administration and the Office of Thrift Supervision in December 2006 and includes an allowance allocation calculated in accordance with U.S. GAAP guidance in FASB Codification Topic 310:Receivablesand allowance allocations calculated in accordance with FASB Codification Topic 450:Contingencies. Accordingly, the methodology is based on historical loss experience by type of credit and internal risk grade, specific homogeneous risk pools and specific loss allocations,
  with adjustments for current events and conditions.

The level of the allowance for loan losses relies on a consistent process that requires multiple layers of management review and judgment and of industry concentrations, specific credit risks, loan loss experience, current loan portfolio quality, present economic, political and regulatory conditions and unidentified losses inherent in the current loan portfolio. Portions of the allowance may be allocated to specific credits; however, the entire allowance is available for any credit that, in managements judgment, should be charged off. While management utilizes its best judgment and information available, the ultimate adequacy of the allowance is dependent upon a variety of factors beyond the Companys control, including, among other things, the performance of the Companys loan portfolio, the economy, changes in interest rates and the view of the regulatory authorities toward loan classifications.



The Companys allowance for loan losses includes (1) specific valuation allowances for impaired loans evaluated in accordance with FASB Codification Topic 310:Receivables; (2) formulaic allowances based on historical loss experience by loan category, adjusted, as necessary, to reflect the impact of current conditions; and (3) unallocated general valuation allowances determined in accordance with FASB Codification Topic 450:Contingenciesbased on general economic conditions and other qualitative risk factors both internal and external to the Company.

The allowance established for losses on specific loans is based on a regular analysis and evaluation of problem loans. Loans are classified based on an internal credit risk grading process that evaluates, among other things: (i) the obligors ability to repay; (ii) the underlying collateral, if any; and (iii) the economic environment and industry in which the borrower operates. This analysis is performed at the relationship manager level for all loans. When a loan has a calculated grade of 6 or higher, an analysis is performed to determine whether the loan is impaired and, if impaired, the need to specifically allocate a portion of the allowance for loan losses to the loan. Specific valuation allowances are determined by analyzing the borrowers ability to repay amounts owed, collateral deficiencies, the relative risk grade of the loan and economic conditions affecting the borrowers
  industry, among other things.



25

---



STERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)



Historical valuation allowances are calculated based on the historical loss experience of specific types of loans and the internal risk grade of such loans at the time they were charged-off. The Company calculates historical loss ratios for pools of similar loans with similar characteristics based on the portion of actual charge-offs experienced to the total population of loans in the pool. The historical loss ratios are periodically updated based on actual charge-off experience. A historical valuation allowance is established for each pool of similar loans based upon the product of the historical loss ratio and the total dollar amount of the loans in the pool. During 2010 the Company revised its historical loss ratio calculation to reflect a five year history from a ten year history to reflect the current loss experience.



The Companys pool of similar loans include similarly risk-graded groups of commercial and industrial loans, commercial real estate loans, residential real estate loans and consumer and other loans.



General valuation allowances are based on general economic conditions and other qualitative risk factors both internal and external to the Company. In general, such valuation allowances are determined by evaluating, among other things:


      Estimated future losses in all significant loans



      Existence and effect of any concentrations of credit



      Existence and effect of any geographic concentration



      Other external factors such as competition, legal matters or regulation that may affect risk



      Effect of criticized and classified loans



      Effects from risk arising with international lending



      Effectiveness of internal problem loan identification and risk ratings



      Trends in portfolio volume, maturity and compositions of loans within segments



      Volumes and trends in delinquencies and nonaccrual loans



      Changes in the quality of lending policies and procedures



      Changes in local and national economic conditions



      Experience, ability and depth of lending staff



      Changes in value of underlying collateral


Management evaluates the degree of risk that each one of these components has on the quality of the loan portfolio on a quarterly basis. Each component is determined based on degree of risk. The results are then input into a general allocation matrix to determine an appropriate general valuation allowance.



Included in the general valuation allowances are allocations for groups of similar loans with risk characteristics that exceed certain concentration limits established by management. Concentration risk limits have been established, among other things, for certain industry concentrations, large and highly leveraged credit relationships that exceed specified risk grades, and loans originated with policy exceptions that exceed specified risk grades.



Loans are generally charged-off at the earlier of when it is determined that collection efforts are no longer productive or when they have been identified as losses by management, internal loan review and/or bank examiners. Furthermore, equipment financing receivables and revolving credit lines to small businesses are charged-off at the earlier of when payments are 120 days past due or when it is determined that collection efforts are no longer productive.



Factors considered in determining whether collection efforts are no longer productive include any amounts currently being collected, the status of discussions or negotiations with the lessee/borrower, the principal and/or guarantors, the cost of continuing efforts to collect, the status of any foreclosure or other legal actions, the value of the collateral, and any other pertinent factors.

26

---



STERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)



The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2011:

|                                                |  |                              |        |               |   |              |  |                  |        |                                     |   |                           |  |   |       |   |   |        | 
|----------------------------------------------- |  | ---------------------------- | ------ | ------------- | - | ------------ |  | ---------------- | ------ | ----------------------------------- | - | ------------------------- |  | - | ----- | - | - | ------ | 
|                                                |  | Balance,
 December 31,
 2010 |        | Charge-
 Offs |   | (Recoveries) |  | Net
 Charge-Offs |        | Provision
     for Loan
     Losses |   | Balance,
 March 31,
 2011 | 
|                                                |  |                              |        |               |   |              |  |                  |        |                                     |   |                           | 
|                                                |  |                              |        |               |   |              |  |                  |        |                                     |   |                           | 
|Commercial and industrial                       |  | $                            | 7,454  |               | $ | 169          |  | $                | (20    | )                                   | $ | 149                       |  | $ | 174   |   | $ | 7,479  | 
|Equipment financing receivables                 |  |                              | 3,423  |               |   | 3,776        |  |                  | (923   | )                                   |   | 2,853                     |  |   | 2,485 |   |   | 3,055  | 
|Factored receivables                            |  |                              | 1,424  |               |   | 132          |  |                  | (21    | )                                   |   | 111                       |  |   | 27    |   |   | 1,340  | 
|Real estate  residential mortgage (portfolio)  |  |                              | 2,497  |               |   | 248          |  |                  | (163   | )                                   |   | 85                        |  |   | 184   |   |   | 2,596  | 
|Real estate  commercial mortgage               |  |                              | 2,275  |               |   |             |  |                  |       |                                     |   |                          |  |   | 10    |   |   | 2,285  | 
|Real estate  construction and land development |  |                              | 310    |               |   |             |  |                  |       |                                     |   |                          |  |   | (24   | ) |   | 286    | 
|Loans to individuals                            |  |                              | 119    |               |   |             |  |                  |       |                                     |   |                          |  |   | (3    | ) |   | 116    | 
|Loans to depository institutions                |  |                              | 46     |               |   |             |  |                  |       |                                     |   |                          |  |   | 31    |   |   | 77     | 
|Loans to nondepository finanical institutions   |  |                              | 564    |               |   |             |  |                  |       |                                     |   |                          |  |   | 100   |   |   | 664    | 
|Unallocated                                     |  |                              | 126    |               |   |             |  |                  |       |                                     |   |                          |  |   | 16    |   |   | 142    | 
|                                                |  |                              |        |               |   |              |  |                  |        |                                     |   |                           |  |   |       |   |   |        | 
|Total                                           |  | $                            | 18,238 |               | $ | 4,325        |  | $                | (1,127 | )                                   | $ | 3,198                     |  | $ | 3,000 |   | $ | 18,040 | 
|                                                |  |                              |        |               |   |              |  |                  |        |                                     |   |                           |  |   |       |   |   |        | 

The following table presents the activity in the allowance for loan losses for the three months ended March 31, 2010:

|                                                  |  |      |        | 
|------------------------------------------------- |  | ---- | ------ | 
|Three
 Months Ended March 31,                     |  | 2010 |       
|                                                  |  |      |       
|Allowance for loan losses:                        |  |      |        | 
|Balance at beginning of year                      |  | $    | 19,872 | 
|                                                  |  |      |        | 
|Charge-offs:                                      |  |      |        | 
|Commercial and industrial                         |  |      | 850    | 
|Equipment financing receivables                   |  |      | 4,983  | 
|Factored receivables                              |  |      | 151    | 
|Real estateresidential mortgage                  |  |      | 65     | 
|Real estatecommercial mortgage                   |  |      | 129    | 
|Real estateconstruction and land development     |  |      |       | 
|Loans to individuals                              |  |      | 21     | 
|                                                  |  |      |        | 
|Total charge-offs                                 |  |      | 6,199  | 
|                                                  |  |      |        | 
|Recoveries:                                       |  |      |        | 
|Commercial and industrial                         |  |      | 215    | 
|Equipment financing receivables                   |  |      | 105    | 
|Factored receivables                              |  |      | 9      | 
|Real estateresidential mortgage                  |  |      |       | 
|Real estatecommercial mortgage                   |  |      |       | 
|Real estateconstruction and land development     |  |      |       | 
|Loans to individuals                              |  |      |       | 
|                                                  |  |      |        | 
|Total recoveries                                  |  |      | 329    | 
|                                                  |  |      |        | 
|Subtract:                                         |  |      |        | 
|Net charge-offs                                   |  |      | 5,870  | 
|                                                  |  |      |        | 
|Provision for loan losses                         |  |      | 6,000  | 
|                                                  |  |      |        | 
|Less loss on transfers to other real estate owned |  |      | 39     | 
|                                                  |  |      |        | 
|Balance at end of year                            |  | $    | 19,963 | 
|                                                  |  |      |        | 

27

---



STERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)



The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of March 31, 2011:

|                                              |  |                                                                           |       |                                         |   |        |  |              |        |              |   |        |  |   |           |  |   |           | 
|--------------------------------------------- |  | ------------------------------------------------------------------------- | ----- | --------------------------------------- | - | ------ |  | ------------ | ------ | ------------ | - | ------ |  | - | --------- |  | - | --------- | 
|                                              |  | Ending Allowance Balance
 Attributable to Loans Evaluated
 for Impairment |       | Loan Balances
 Evaluated for Impairment |  
|                                              |  |                                                                           |       |                                         |  
|                                              |  | Individually                                                              |       | Collectively                            |   | Total  |  | Individually |        | Collectively |   | Total  | 
|                                              |  |                                                                           |       |                                         |   |        |  |              |        |              |   |        | 
|Commercial and industrial                     |  | $                                                                         | 518   |                                         | $ | 6,961  |  | $            | 7,479  |              | $ | 2,192  |  | $ | 588,712   |  | $ | 590,904   | 
|Equipment financing receivables               |  |                                                                           | 17    |                                         |   | 3,038  |  |              | 3,055  |              |   | 192    |  |   | 140,138   |  |   | 140,330   | 
|Factored receivables                          |  |                                                                           |      |                                         |   | 1,340  |  |              | 1,340  |              |   |       |  |   | 154,771   |  |   | 154,771   | 
|Real estateresidential mortgage (portfolio)  |  |                                                                           | 1,208 |                                         |   | 1,388  |  |              | 2,596  |              |   | 4,731  |  |   | 127,928   |  |   | 132,659   | 
|Real estatecommercial mortgage               |  |                                                                           | 1,113 |                                         |   | 1,172  |  |              | 2,285  |              |   | 3,124  |  |   | 95,092    |  |   | 98,216    | 
|Real estateconstruction and land development |  |                                                                           |      |                                         |   | 286    |  |              | 286    |              |   |       |  |   | 23,975    |  |   | 23,975    | 
|Loans to individuals                          |  |                                                                           |      |                                         |   | 116    |  |              | 116    |              |   |       |  |   | 11,699    |  |   | 11,699    | 
|Loans to depository institutions              |  |                                                                           |      |                                         |   | 77     |  |              | 77     |              |   |       |  |   | 25,505    |  |   | 25,505    | 
|Loans to nondepository financial institutions |  |                                                                           |      |                                         |   | 664    |  |              | 664    |              |   |       |  |   | 110,590   |  |   | 110,590   | 
|Unallocated                                   |  |                                                                           |      |                                         |   |       |  |              | 142    |              |   |       |  |   |          |  |   |          | 
|                                              |  |                                                                           |       |                                         |   |        |  |              |        |              |   |        |  |   |           |  |   |           | 
|Total                                         |  | $                                                                         | 2,856 |                                         | $ | 15,042 |  | $            | 18,040 |              | $ | 10,239 |  | $ | 1,278,410 |  | $ | 1,288,649 | 
|                                              |  |                                                                           |       |                                         |   |        |  |              |        |              |   |        |  |   |           |  |   |           | 



Note 4. Federal Home Loan Bank Advances



During the 2011 first quarter, the bank restructured a portion of its Federal Home Loan Bank fixed rate advances by repaying $100 million of existing borrowings and replacing them with $100 million of lower cost, floating rate advances.  This transaction resulted in $4.2 million in  prepayment penalties that were deferred and will be recognized in interest expense as an adjustment to the cost of these borrowings in future periods.  The existing borrowings were a combination of fixed rate and amortizing advances with an average cost of 2.58% and an average duration of 3.2 years.  The new borrowings are all floating-rate advances with an average cost of 1.58%, including the deferred adjustment, with an average duration of three months.  The relevant accounting treatment for this transaction was an interpretation of the guidance provided in ASC 470-50.  This transaction was executed as an earnings and interest
  rate risk strategy, resulting in lower FHLB advance costs and a reduction of average duration.



Note 5. Other noninterest income and expenses



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



|                                    |  |                               |       |      |   |       | 
|----------------------------------- |  | ----------------------------- | ----- | ---- | - | ----- | 
|                                    |  | Three Months Ended
 March 31, |      
|                                    |  |                               |      
|                                    |  | 2011                          |       | 2010 |  
|                                    |  |                               |       |      |  
|OTHER NONINTEREST INCOME            |  |                               |       |      |   |       | 
|Trade finance income                |  | $                             | 588   |      | $ | 492   | 
|Other customer related fees         |  |                               | 180   |      |   | 174   | 
|Trust fees                          |  |                               | 53    |      |   | 84    | 
|Income from life insurance policies |  |                               | 275   |      |   | 264   | 
|Gain on other real estate owned     |  |                               |      |      |   | 13    | 
|Other income                        |  |                               | 703   |      |   | 296   | 
|                                    |  |                               |       |      |   |       | 
|Total other noninterest income      |  | $                             | 1,799 |      | $ | 1,323 | 
|                                    |  |                               |       |      |   |       | 
|                                    |  |                               |       |      |   |       | 
|OTHER NONINTEREST EXPENSES          |  |                               |       |      |   |       | 
|Advertising and marketing           |  | $                             | 425   |      | $ | 1,006 | 
|Communications                      |  |                               | 410   |      |   | 348   | 
|Other expenses                      |  |                               | 2,334 |      |   | 2,173 | 
|                                    |  |                               |       |      |   |       | 
|Total other noninterest expenses    |  | $                             | 3,169 |      | $ | 3,527 | 
|                                    |  |                               |       |      |   |       | 

28

---



STERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)



Note 6. Common Shares and Stock Incentive Plan



On March 9, 2011, the Company completed an underwritten public offering of 4.025 million common shares at an offering price of $9.60 per share, which resulted in net proceeds of $36.5 million after underwriting discounts and expenses.



On March 24, 2011, the Board of Directors, upon recommendation by the Compensation and Corporate Governance Committees, granted a total of 20,000 shares of restricted stock to the eight non-management directors (director restricted shares) and 41,565 restricted shares to the Chairman, President and five Executive Vice Presidents (officer restricted shares).  The director restricted shares will vest 25% annually over four years beginning on the first anniversary of the grant date.  The officer restricted shares vest 50% on the second anniversary of the grant date and 25% on each of the third and fourth anniversaries of the grant date and were also limited by the 2008 agreement between the Company and the U.S. Treasury.  The director restricted shares and the officer restricted shares were issued at $9.71 per share, the closing price on the date of the grant.  The agreements for both
  the director restricted shares and the officer restricted shares have additional provisions regarding transferability and accelerated vesting of the shares and the continuation of performing substantial services for the Company.



Note 7.Employee Benefit Plans



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



|                                   |  |                               |       |      |   |       |  
|---------------------------------- |  | ----------------------------- | ----- | ---- | - | ----- | -
|                                   |  | Three Months Ended
 March 31, |      
|                                   |  |                               |      
|                                   |  | 2011                          |       | 2010 |  
|                                   |  |                               |       |      |  
|Service Cost                       |  | $                             | 544   |      | $ | 565   |  
|Interest Cost                      |  |                               | 895   |      |   | 938   |  
|Expected return on plan assets     |  |                               | (771  | )    |   | (789  | )
|Amortization of prior service cost |  |                               | 16    |      |   | 17    |  
|Recognized actuarial loss          |  |                               | 700   |      |   | 756   |  
|                                   |  |                               |       |      |   |       |  
|Net periodic benefit cost          |  | $                             | 1,384 |      | $ | 1,487 |  
|                                   |  |                               |       |      |   |       |  

The Company expects to contribute approximately $2.0 million to the defined benefit pension plan in 2011.



Note 8. Income Taxes



The Internal Revenue Service (IRS) has completed its examination of the Companys federal tax returns for the years 2002 through 2004 and has issued a report disallowing certain bad debt deductions arising from the worthlessness of loans made to customers.  The Company, assisted by outside counsel, has prepared a written protest which vigorously challenges all of the IRS findings and the Company will exercise its right to a conference with the Appeals Office of the IRS to discuss the issues and arguments raised in the Companys protest.  The Company and its outside counsel believe that the bad debt deductions were proper and that the position of the IRS is unsupportable as a matter of fact and law.



Note 9. Segment Reporting



The Company provides a broad range of financial products and services, including commercial loans, asset-based financing, mortgage warehouse lending, factoring and accounts receivable management services, trade financing, equipment leasing, commercial and residential mortgage lending and brokerage, and corporate and consumer deposit 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 liabilities. The Companys 2011 year-to-date average interest-earning assets were 58.6% loans (corporate lending was 74.0% and real estate lending was 22.6% of total loans, respectively) and 41.0% investment securities and money market investments.  There are no industry concentrations exceeding 10% of loans, gross, in the corporate lending segment.  Approximately
  68.5% of loans are to borrowers located in the New York metropolitan area.  In order to comply with the segment reporting guidance under U.S. GAAP, the Company has determined that it has three reportable operating segments: corporate lending, real estate lending and company-wide treasury.

29

---



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

The
following tables provide certain information regarding the Companys operating
segments:

|                                   |  |                    |         |                      |   |                        |  |        |           |  |   |           | 
|---------------------------------- |  | ------------------ | ------- | -------------------- | - | ---------------------- |  | ------ | --------- |  | - | --------- | 
|                                   |  | Corporate
 Lending |         | Real Estate
 Lending |   | Company-wide
 Treasury |  | Totals |          
|                                   |  |                    |         |                      |   |                        |  |        |          
|Three Months Ended March 31, 2011  |  |                    |         |                      |   |                        |  |        |           |  |   |           | 
|Net interest income                |  | $                  | 9,625   |                      | $ | 4,687                  |  | $      | 4,895     |  | $ | 19,207    | 
|Noninterest income                 |  |                    | 7,633   |                      |   | 2,183                  |  |        | 1,530     |  |   | 11,346    | 
|Depreciation and amortization      |  |                    | 199     |                      |   | 24                     |  |        | 1         |  |   | 224       | 
|Segment income before income taxes |  |                    | 5,521   |                      |   | 3,974                  |  |        | 6,169     |  |   | 15,664    | 
|Segment assets                     |  |                    | 877,720 |                      |   | 402,877                |  |        | 1,053,759 |  |   | 2,334,356 | 
|                                   |  |                    |         |                      |   |                        |  |        |           |  |   |           | 
|Three Months Ended March 31, 2010  |  |                    |         |                      |   |                        |  |        |           |  |   |           | 
|Net interest income                |  | $                  | 8,195   |                      | $ | 4,218                  |  | $      | 7,264     |  | $ | 19,677    | 
|Noninterest income                 |  |                    | 6,939   |                      |   | 1,702                  |  |        | 2,338     |  |   | 10,979    | 
|Depreciation and amortization      |  |                    | 174     |                      |   | 28                     |  |        | 1         |  |   | 203       | 
|Segment income before income taxes |  |                    | 6,327   |                      |   | 3,421                  |  |        | 8,033     |  |   | 17,781    | 
|Segment assets                     |  |                    | 829,351 |                      |   | 355,521                |  |        | 966,572   |  |   | 2,151,444 | 

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
 March 31, |          
|                                        |  | 2011                          |           | 2010 |  
|                                        |  |                               |           |      |  
|Net interest income:                    |  |                               |           |      |   |           |  
|Total for reportable operating segments |  | $                             | 19,207    |      | $ | 19,677    |  
|Other [1]                               |  |                               | 222       |      |   | 218       |  
|                                        |  |                               |           |      |   |           |  
|Consolidated net interest income        |  | $                             | 19,429    |      | $ | 19,895    |  
|                                        |  |                               |           |      |   |           |  
|                                        |  |                               |           |      |   |           |  
|Noninterest income:                     |  |                               |           |      |   |           |  
|Total for reportable operating segments |  | $                             | 11,346    |      | $ | 10,979    |  
|Other [1]                               |  |                               | 96        |      |   | 123       |  
|                                        |  |                               |           |      |   |           |  
|Consolidated noninterest income         |  | $                             | 11,442    |      | $ | 11,102    |  
|                                        |  |                               |           |      |   |           |  
|                                        |  |                               |           |      |   |           |  
|Income before taxes:                    |  |                               |           |      |   |           |  
|Total for reportable operating segments |  | $                             | 15,664    |      | $ | 17,781    |  
|Other [1]                               |  |                               | (10,246   | )    |   | (14,120   | )
|                                        |  |                               |           |      |   |           |  
|                                        |  |                               |           |      |   |           |  
|Consolidated income before income taxes |  | $                             | 5,418     |      | $ | 3,661     |  
|                                        |  |                               |           |      |   |           |  
|                                        |  |                               |           |      |   |           |  
|Assets:                                 |  |                               |           |      |   |           |  
|Total for reportable operating segments |  | $                             | 2,334,356 |      | $ | 2,151,444 |  
|Other [1]                               |  |                               | 58,189    |      |   | 42,870    |  
|                                        |  |                               |           |      |   |           |  
|Consolidated assets                     |  | $                             | 2,392,545 |      | $ | 2,194,314 |  
|                                        |  |                               |           |      |   |           |  

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

30

---



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

Note
10. Other Comprehensive Income

Information
related to the components of other comprehensive income included in accumulated
other comprehensive loss is as follows with related tax effects:

|                                                                          |  |                               |      |      |   |        |  
|------------------------------------------------------------------------- |  | ----------------------------- | ---- | ---- | - | ------ | -
|                                                                          |  | Three Months Ended
 March 31, |     
|                                                                          |  |                               |     
|                                                                          |  | 2011                          |      | 2010 |  
|                                                                          |  |                               |      |      |  
|Other Comprehensive Income                                                |  |                               |      |      |   |        |  
|Unrealized holding gains on securities,
 arising during the period:       |  |                               |      |      |   |        |  
|Before tax                                                                |  | $                             | 693  |      | $ | 2,223  |  
|Tax effect                                                                |  |                               | (314 | )    |   | (1,009 | )
|                                                                          |  |                               |      |      |   |        |  
|Net of tax                                                                |  |                               | 379  |      |   | 1,214  |  
|                                                                          |  |                               |      |      |   |        |  
|                                                                          |  |                               |      |      |   |        |  
|Reclassification adjustment for securities
 gains included in net income: |  |                               |      |      |   |        |  
|Before tax                                                                |  |                               | (729 | )    |   | (1,502 | )
|Tax effect                                                                |  |                               | 331  |      |   | 682    |  
|                                                                          |  |                               |      |      |   |        |  
|Net of tax                                                                |  |                               | (398 | )    |   | (820   | )
|                                                                          |  |                               |      |      |   |        |  
|                                                                          |  |                               |      |      |   |        |  
|Reclassification adjustment for
 amortization of prior service cost:      |  |                               |      |      |   |        |  
|Before tax                                                                |  |                               | 16   |      |   | 17     |  
|Tax effect                                                                |  |                               | (7   | )    |   | (8     | )
|                                                                          |  |                               |      |      |   |        |  
|Net of tax                                                                |  |                               | 9    |      |   | 9      |  
|                                                                          |  |                               |      |      |   |        |  
|                                                                          |  |                               |      |      |   |        |  
|Reclassification adjustment for
 amortization of net actuarial losses:    |  |                               |      |      |   |        |  
|Before tax                                                                |  |                               | 712  |      |   | 756    |  
|Tax effect                                                                |  |                               | (323 | )    |   | (343   | )
|                                                                          |  |                               |      |      |   |        |  
|Net of tax                                                                |  |                               | 389  |      |   | 413    |  
|                                                                          |  |                               |      |      |   |        |  
|                                                                          |  |                               |      |      |   |        |  
|Other comprehensive income                                                |  | $                             | 379  |      | $ | 816    |  
|                                                                          |  |                               |      |      |   |        |  

31

---



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

Note 11. Fair Value Measurements

The fair value of an asset or liability is the price that would be
received to sell that asset or paid to transfer that liability in an orderly
transaction between market participants. A fair value measurement assumes that
the transaction to sell the asset or transfer the liability occurs in the
principal market for the asset or liability or, in the absence of a principal
market, the most advantageous market for the asset or liability. The price in
the principal (or most advantageous) market used to measure the fair value of
the asset or liability shall not be adjusted for transaction costs. An orderly
transaction is a transaction that assumes exposure to the market for a period
prior to the measurement date to allow for marketing activities that are usual
and customary for transactions involving such assets and liabilities; it is not
a forced transaction. Market participants are buyers and sellers in the
principal market that are independent, knowledgeable, able to transact and
willing to transact.

FASB Codification Topic 820: Fair
Value Measurements and Disclosures establishes a hierarchy for
valuation inputs that gives the highest priority to quoted prices in active
markets for identical assets or liabilities and the lowest priority to
unobservable inputs. The fair values hierarchy is as follows:

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Level 1 Inputs-
 Unadjusted quoted prices in active markets for identical assets or
 liabilities that the reporting entity has the ability to access at the
 measurement date. Examples of financial instruments generally included in
 this level are U.S. Treasury securities, equity and trust preferred
 securities that trade in active markets and listed derivative instruments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | Level 2 Inputs- Inputs
 other than quoted prices included in Level 1 that are observable for the
 asset or liability, either directly or indirectly. These might include quoted
 prices for similar assets or liabilities in active markets, quoted prices for
 identical or similar assets or liabilities in markets that are not active,
 inputs other than quoted prices that are observable for the asset or
 liability (such as interest rates, volatilities, prepayment speeds, credit
 risks, etc.) or inputs that are derived principally from or corroborated by
 market data by correlation or other means. Examples of financial instruments
 generally included in this level are corporate debt, mortgage-backed
 certificates issued by U.S. government corporations and government sponsored
 enterprises, equity securities that trade in less active markets and certain
 derivative instruments.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | Level 3 Inputs-
 Unobservable inputs for determining the fair values of assets or liabilities
 that reflect an entitys own judgments about the assumptions that market
 participants would use in pricing the assets or liabilities. Examples of
 financial instruments generally included in this level are private equities,
 certain loans held for sale and other alternative investments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

Fair value of securities is based upon quoted market
prices, where available (level 1 inputs). If such quoted market prices are not
available, fair value is based upon market prices determined by an outside,
independent entity that primarily uses as inputs, observable market-based
parameters (level 2 inputs). Fair value of loans held for sale is based upon
internally developed models that primarily use as inputs, observable
market-based parameters. Valuation adjustments may be made to ensure that
financial instruments are recorded at fair value. These adjustments may include
amounts to reflect counterparty credit quality, the Companys creditworthiness,
among other things, as well as unobservable parameters (level 3 inputs). Any
such valuation adjustments are applied consistently over time. The Company
valuation methodologies may produce a fair value calculation that may not be
indicative of net realizable value or reflective of future fair values. While
management believes the Companys valuation methodologies are appropriate and
consistent with other market participants, the use of different methodologies
or assumptions to determine the fair value of certain financial instruments
could result in a different estimate of fair value at the reporting date.

Securities available for sale and other
investments. Securities classified as available for
sale and other investments (included in Other assets on the Consolidated
Balance Sheet) are generally reported at fair value utilizing Level 1 and Level
2 inputs. Investments in fixed income securities, exclusive of preferred stock
and mortgage-backed securities, are valued based on evaluations
provided by Interactive Data Corporation (IDC), a leading global
provider of market data information. IDC evaluations represent an
exit price or their opinion as to what a buyer would pay for a security,
typically in an institutional round lot position in a current sale. IDC seeks
to utilize market data and observations in its evaluation service, and gives
priority to observable benchmark yields and reported trades. IDC utilizes
evaluated pricing techniques that vary by asset class and incorporate available
market information; because many fixed income securities do not trade on a
daily basis, IDC applies available information through processes such as
benchmark curves, benchmarking of similar securities, sector groupings and
matrix pricing. Model processes such as option-adjusted spread models are used
to value securities that have prepayment features. Substantially all securities
available for sale evaluated in this manner are deemed to be Level 2
valuations.

32

---



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

For mortgage-backed securities issued by U.S. government corporations
and government sponsored enterprises, management considers dealer indicative
bids in the valuation process. Indicative bids are estimates of value and do
not necessarily represent the price at which the dealer would be willing to
transact. Such bids are compared to IDC evaluated prices for reasonableness as
well as consistency with observable market conditions. All mortgage-backed
securities are deemed to be valued based on Level 2 inputs.

Publicly traded common and preferred stocks are valued by reference to
the market closing price (last trade) on the measurement date (Level 1 inputs).
In the unlikely event that no trade occurred on the measurement date, reference
would be made to an indicative bid or the last trade most proximate to the
measurement date (Level 2 inputs).

The following table summarizes financial assets measured at fair value
on a recurring basis, segregated by the level of the valuation inputs within
the fair value hierarchy utilized to measure fair value. There were no
financial liabilities measured at fair value.

|                                                                                        |  |                 |        |                 |   |                 |  |                   |   |  |   |         | 
|--------------------------------------------------------------------------------------- |  | --------------- | ------ | --------------- | - | --------------- |  | ----------------- | - |  | - | ------- | 
|March 31, 2011                                                                          |  | Level 1
 Inputs |        | Level 2
 Inputs |   | Level 3
 Inputs |  | Total
 Fair Value |  
|                                                                                        |  |                 |        |                 |   |                 |  |                   |  
|Securities available for sale:                                                          |  |                 |        |                 |   |                 |  |                   |   |  |   |         | 
|Obligations of U.S. government corporations and government sponsored
 enterprises       |  |                 |        |                 |   |                 |  |                   |   |  |   |         | 
|Mortgage-backed securities                                                              |  | $               |       |                 | $ | 73,579          |  | $                 |  |  | $ | 73,579  | 
|Agency notes                                                                            |  |                 |       |                 |   | 59,662          |  |                   |  |  |   | 59,662  | 
|                                                                                        |  |                 |        |                 |   |                 |  |                   |   |  |   |         | 
|Total obligations of U.S. government corporations and government
 sponsored enterprises |  |                 |       |                 |   | 133,241         |  |                   |  |  |   | 133,241 | 
|Obligations of state and political institutions - New York Bank
 Qualified              |  |                 |       |                 |   | 28,672          |  |                   |  |  |   | 28,672  | 
|Single-issuer, trust preferred securities                                               |  |                 | 8,666  |                 |   |                |  |                   |  |  |   | 8,666   | 
|Corporate debt securities                                                               |  |                 |       |                 |   | 238,659         |  |                   |  |  |   | 238,659 | 
|Equity and other securities                                                             |  |                 | 4,926  |                 |   |                |  |                   |  |  |   | 4,926   | 
|                                                                                        |  |                 |        |                 |   |                 |  |                   |   |  |   |         | 
|Total marketable securities                                                             |  | $               | 13,592 |                 | $ | 400,572         |  | $                 |  |  | $ | 414,164 | 
|                                                                                        |  |                 |        |                 |   |                 |  |                   |   |  |   |         | 
|                                                                                        |  |                 |        |                 |   |                 |  |                   |   |  |   |         | 
|Other investments                                                                       |  | $               | 11,445 |                 | $ | 8,686           |  | $                 |  |  | $ | 20,131  | 
|                                                                                        |  |                 |        |                 |   |                 |  |                   |   |  |   |         | 
|                                                                                        |  |                 |        |                 |   |                 |  |                   |   |  |   |         | 
|December 31, 2010                                                                       |  |                 |        |                 |   |                 |  |                   |   |  |   |         | 
|                                                                                        |  |                 |        |                 |   |                 |  |                   |   |  |   |         | 
|Securities available for sale:                                                          |  |                 |        |                 |   |                 |  |                   |   |  |   |         | 
|Obligations of U.S. government corporations and government sponsored
 enterprises       |  |                 |        |                 |   |                 |  |                   |   |  |   |         | 
|Mortgage-backed securities                                                              |  | $               |       |                 | $ | 51,983          |  | $                 |  |  | $ | 51,983  | 
|Agency notes                                                                            |  |                 |       |                 |   | 100,122         |  |                   |  |  |   | 100,122 | 
|                                                                                        |  |                 |        |                 |   |                 |  |                   |   |  |   |         | 
|Total obligations of U.S. government corporations and government
 sponsored enterprises |  |                 |       |                 |   | 152,105         |  |                   |  |  |   | 152,105 | 
|Obligations of state and political institutions - New York Bank
 Qualified              |  |                 |       |                 |   | 40,044          |  |                   |  |  |   | 40,044  | 
|Single-issuer, trust preferred securities                                               |  |                 | 3,933  |                 |   |                |  |                   |  |  |   | 3,933   | 
|Corporate debt securities                                                               |  |                 |       |                 |   | 189,058         |  |                   |  |  |   | 189,058 | 
|Equity and other securities                                                             |  |                 | 4,940  |                 |   |                |  |                   |  |  |   | 4,940   | 
|                                                                                        |  |                 |        |                 |   |                 |  |                   |   |  |   |         | 
|Total marketable securities                                                             |  | $               | 8,873  |                 | $ | 381,207         |  | $                 |  |  | $ | 390,080 | 
|                                                                                        |  |                 |        |                 |   |                 |  |                   |   |  |   |         | 
|                                                                                        |  |                 |        |                 |   |                 |  |                   |   |  |   |         | 
|Other investments                                                                       |  | $               | 11,838 |                 | $ | 6,760           |  | $                 |  |  | $ | 18,598  | 
|                                                                                        |  |                 |        |                 |   |                 |  |                   |   |  |   |         | 

33

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

Certain financial assets, such as loans held for sale and
collateral-dependent impaired loans are measured at fair value on a
non-recurring basis; that is, the instruments are not measured at fair value on
an ongoing basis but are subject to fair value adjustments in certain
circumstances (for example, when there is evidence of impairment). The
following table summarizes the period end fair value of financial assets, based
on significant unobservable (Level 3) inputs, measured on a non-recurring
basis:

|                             |  |                 |        |                    |   |        | 
|---------------------------- |  | --------------- | ------ | ------------------ | - | ------ | 
|                             |  | March 31,
 2011 |        | December 31,
 2010 |  
|                             |  |                 |        |                    |  
|Impaired loans               |  | $               | 3,336  |                    | $ | 3,368  | 
|Other real estate owned, net |  |                 | 132    |                    |   | 182    | 
|Loans held for sale          |  |                 | 24,102 |                    |   | 32,049 | 
|                             |  |                 |        |                    |   |        | 

Impaired loans. The
fair value of impaired loans with specific allocations of the allowance for
loan losses is generally based on either recent real estate appraisals or, for
loans with modification agreements in place, discounted cash flow analyses.
These appraisals may utilize a single valuation approach or a combination of
approaches including comparable sales and the income approach. Adjustments are
routinely made in the appraisal process by the appraisers to adjust for
differences between the comparable sales and income data available. Such
adjustments are usually significant and typically result in a Level 3
classification of the inputs for determining fair value.

Other real estate owned.
Nonrecurring adjustments to certain residential real estate properties
classified as other real estate owned (OREO) are measured at the lower of
carrying amount or fair value, less costs to sell. Fair values are generally
based on third-party appraisals of the property, resulting in a Level 3
classification. In cases where the carrying amount exceeds the fair value, less
costs to sell, an impairment loss is recognized.

Loans held for sale.
Loans held for sale are carried at the lower of cost or fair value, as
determined by outstanding commitments, from third-party investors.

Impaired loans at fair value
had a recorded investment of $4.5 million, net of a
specific allocation of the allowance for loan losses of $1.2 million, at March
31, 2011. Two of the impaired loans are commercial real estate loans
and one is a commercial and indutrial loan. The fair value of these loans is estimated using
Level 3 inputs. For the first three months of 2011, the Company recognized
charge-offs in the allowance for loan losses totaling $0.4 million.

Other real estate owned (comprised of foreclosed assets),which is
measured at the lower of carrying or fair value less costs to sell, had a net
carrying amount of $132 thousand, net of a valuation allowance of $-0- million
at March 31, 2011. Certain of these assets, upon initial recognition, were
re-measured and reported at fair value through a charge-off to the allowance
for loan losses based upon the fair value of the foreclosed asset. The fair
value of a foreclosed asset, upon initial recognition, is estimated using Level
2 inputs based on observable market data or Level 3 inputs based on customized
discount criteria. For the three months ended March 31, 2011, the Company did
not recognize any charge-offs in connection with the measurement and initial
recognition of foreclosed assets; for the year ended December 31, 2010, the
Company recognized $538 thousand. Other than foreclosed assets measured at fair
value upon initial recognition, two properties were re-measured at fair value
during the year ended December 31, 2010, resulting in a $233 thousand charge to
noninterest expense.

Loans held for sale, are carried at $24.1 million, which is made up of
the outstanding balance of $24.1 million, net of a valuation allowance of $-0-
million at March 31, 2011.

34

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

For those financial instruments that are not recorded at fair value in
the Consolidated Balance Sheets, but are measured at fair value for disclosure
purposes, management follows the same fair value measurement principles and
guidance as for instruments recorded at fair value.

Much of the information used to arrive at fair value is highly
subjective and judgmental in nature and therefore the results may not be precise.
The subjective factors include, among other things, estimated cash flows, risk
characteristics, credit quality and interest rates, all of which are subject to
change. With the exception of investment securities and certain long-term debt,
the Companys financial instruments are not readily marketable and market
prices do not exist. Since negotiated prices for the instruments that are not
readily marketable depend greatly on the motivation of the buyer and seller,
the amounts that will actually be realized or paid per settlement or maturity
of these instruments could be significantly different.

In particular, fair value estimates are made at a point in time, based
on relevant market data as well as the best information available about the
financial instrument. Illiquid credit markets have resulted in inactive markets
for certain of the Companys financial instruments. As a result, there is no or
limited observable market data for these assets and liabilities. Fair value
estimates for financial instruments for which no or limited observable market
data is available are based on our judgments regarding current economic
conditions, liquidity discounts, currency, credit, and interest rate risks,
loss experience and other factors, all of which are Level 3 inputs as discussed
above. These estimates involve significant judgments and uncertainties and
cannot be substantiated by comparison to quoted prices in active markets and
cannot be determined with precision. As a result, such calculated fair value
estimates may not be realizable in a current sale or immediate settlement of
the instrument. In addition, there are inherent uncertainties in any fair value
measurement technique, and changes in the underlying assumptions used in the
fair value measurement technique, including discount rates, liquidity risks,
and estimates of future cash flows, could significantly affect these fair value
estimates.

A description of the methods, factors and significant assumptions
utilized in estimating the fair values for significant categories of financial
instruments follows:

Financial
Instruments with Carrying Amounts Equal to Fair ValueThe carrying amounts for cash and due from banks,
interest-bearing deposits with other banks, customers liability under
acceptances, accrued interest receivable, Federal funds purchased, securities
sold under agreements to repurchase, commercial paper, other short-term
borrowings, acceptances outstanding, and accrued interest payable, as a result
of their short-term nature, are considered to approximate fair value.

Investment
SecuritiesThe methods, factors and significant assumptions
used to estimate fair values of all securities are described more fully
beginning on page 32.

Loans Held in
PortfolioThe fair value of loans held in portfolio which
reprice within 90 days reflecting changes in the base rate approximate their
carrying amount.
For other loans held in portfolio, the fair value is calculated based on
discounted cash flow analyses, using interest rates currently being offered for
loans with similar terms to borrowers of similar credit quality and for similar
maturities. These calculations have been adjusted for credit risk based on the
Companys historical credit loss experience.

The fair value for secured nonaccrual loans is the value of the
underlying collateral which is sufficient to repay each loan. For other
nonaccrual loans, the fair value represents book value less a credit risk
adjustment based on the Companys historical credit loss experience.

DepositsFASB Codification Topic 825: Financial Instrumentsrequires that the
fair value of demand, savings, NOW (negotiable order of withdrawal) and certain
money market deposits be equal to their carrying amount. The Company believes
that the fair value of these deposits, including the value of deposit
relationships, is greater than that prescribed by FASB Codification Topic 825.
For other types of deposits with fixed maturities, fair value has been
estimated based upon interest rates currently being offered on deposits with
similar characteristics and maturities.

AdvancesFHLB and
Long-Term BorrowingsFor advancesFHLB and long-term borrowings, the
fair value is calculated based on discounted cash flow analyses, using interest
rates currently being quoted for debt with similar characteristics and
maturities.

35



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

Commitments to
Extend Credit, Standby Letters of Credit and Financial GuaranteesThe fees received for the issuance of commitments
to extend credit, standby letters of credit, and financial guarantees, are
considered to approximate fair value. Due to the uncertainty involved in
attempting to assess the likelihood and timing of a commitment being drawn
upon, coupled with lack of an established market and the wide diversity of fee
structures, the Company does not believe it is meaningful to provide an
estimate of fair value that differs from the amount of consideration received.

The following is a summary of the carrying amounts and fair values of the Companys financial assets and liabilities:

|                                               |  |                      |           |                   |   |                        |  |                   |           |  |   |           | 
|---------------------------------------------- |  | -------------------- | --------- | ----------------- | - | ---------------------- |  | ----------------- | --------- |  | - | --------- | 
|                                               |  | March 31, 2011       |           | December 31, 2010 |  
|                                               |  |                      |           |                   |  
|                                               |  | Carrying 
    Amount |           | Fair 
    Value   |   | Carrying 
      Amount |  | Fair 
      Value |          
|                                               |  |                      |           |                   |   |                        |  |                   |          
|FINANCIAL ASSETS                               |  |                      |           |                   |   |                        |  |                   |           |  |   |           | 
|Cash and due from banks                        |  | $                    | 35,981    |                   | $ | 35,981                 |  | $                 | 26,824    |  | $ | 26,824    | 
|Interest-bearing deposits with other banks     |  |                      | 7,932     |                   |   | 7,932                  |  |                   | 40,503    |  |   | 40,503    | 
|Investment securities                          |  |                      | 872,445   |                   |   | 876,462                |  |                   | 789,315   |  |   | 790,533   | 
|Loans held for sale                            |  |                      | 24,102    |                   |   | 24,102                 |  |                   | 32,049    |  |   | 32,049    | 
|Loans held in portfolio, net                   |  |                      | 1,270,609 |                   |   | 1,278,829              |  |                   | 1,295,996 |  |   | 1,300,624 | 
|Customers’ liability under acceptances         |  |                      | 228       |                   |   | 228                    |  |                   |          |  |   |          | 
|Accrued interest receivable                    |  |                      | 9,296     |                   |   | 9,296                  |  |                   | 8,280     |  |   | 8,280     | 
|FINANCIAL LIABILITIES                          |  |                      |           |                   |   |                        |  |                   |           |  |   |           | 
|Demand, NOW, savings and money market deposits |  |                      | 1,110,916 |                   |   | 1,110,916              |  |                   | 1,132,497 |  |   | 1,132,497 | 
|Time deposits                                  |  |                      | 617,169   |                   |   | 618,976                |  |                   | 615,267   |  |   | 617,096   | 
|Securities sold under agreements to repurchase |  |                      | 26,107    |                   |   | 26,107                 |  |                   | 28,016    |  |   | 28,016    | 
|Federal funds purchased                        |  |                      | 60,000    |                   |   | 60,000                 |  |                   | 15,000    |  |   | 15,000    | 
|Commercial paper                               |  |                      | 15,391    |                   |   | 15,391                 |  |                   | 14,388    |  |   | 14,388    | 
|Other short-term borrowings                    |  |                      | 4,525     |                   |   | 4,525                  |  |                   | 3,490     |  |   | 3,490     | 
|Acceptances outstanding                        |  |                      | 228       |                   |   | 228                    |  |                   |          |  |   |          | 
|Accrued interest payable                       |  |                      | 1,145     |                   |   | 1,145                  |  |                   | 1,314     |  |   | 1,314     | 
|Advances-FHLB and long-term borrowings         |  |                      | 154,589   |                   |   | 146,944                |  |                   | 169,947   |  |   | 173,110   | 

36

---



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

Note 12. New Accounting Standards

Accounting Standards Update (ASU) No.
2010-06, Fair Value Measurements and Disclosures (Topic 820)- Improving
Disclosures About Fair Value Measurements.ASU
2010-06 requires expanded disclosures related to fair value measurements
including (i) the amounts of significant transfers of assets or liabilities
between Levels 1 and 2 of the fair value hierarchy and the reasons for the
transfers, (ii) the reasons for transfers of assets or liabilities in or out of
Level 3 of the fair value hierarchy, with significant transfers disclosed
separately, (iii) the policy for determining when transfers between levels of
the fair value hierarchy are recognized and (iv) for recurring fair value
measurements of assets and liabilities in Level 3 of the fair value hierarchy,
a gross presentation of information about purchased, sales, issuances and
settlements. ASU 2010-06 further clarifies that (i) fair value measurement
disclosures should be provided for each class and liabilities (rather major
category), which would generally be a subject of assets or liabilities within a
line in statement of financial position and (ii) companies should provide
disclosures about the valuation techniques and inputs used to measure fair
value for both recurring and nonrecurring fair value measurements for each
class of assets and liabilities included in Levels 2 and 3 of the fair value
hierarchy. The disclosures related to the gross presentation of purchased,
sales, issuances and settlements of assets and liabilities included in Level 3
of the fair value hierarchy were required for the Company beginning January 1,
2011. The effect of adopting this new guidance did not have a material impact
on the Companys financial statements.

ASU No. 2010-20,Receivables (Topic
310)-Disclosures about the Credit Quality of Financing Receivables and the
Allowance for Credit Losses.ASU 2010-20 requires entities to
provide disclosures designed to facilitate financial statement users
evaluation of (i) the nature of credit risk inherent in the entitys portfolio
of financing receivables, (ii) how that risk is analyzed and assessed in
arriving at the allowance for credit losses and (iii) the changes and reasons
for those changes in the allowance for credit losses. Disclosures must be
disaggregated by portfolio segment, the level at which an entity develops and
documents a systematic method for determining its allowance for credit losses,
and class of financing receivables, which is generally a disaggregation of
portfolio segment. The required disclosures include, among other things, a
roll-forward of the allowance for credit losses as well as information about
modified, impaired, nonaccrual and past due loans and credit quality
indicators. This guidance became effective for the Companys financial
statements as of December 31, 2010, as it relates to disclosures required as of
the end of a reporting period. Disclosures that relate to activity during a reporting
period were required for the Companys financial statements that include
periods beginning on or after January 1, 2011. The effect of adopting this new
guidance did not have a material impact on the Companys financial statements.

ASU No. 2010-28,Intangibles-Goodwill
and Other (Topic 350)- When to Perform Step 2 of the Goodwill Impairment Test
for Reporting Units with Zero or Negative Carrying Amounts (a consensus of the
FASB Emerging Issues Task Force). ASU 2010-28 modifies Step 1 of the
goodwill impairment test for reporting units with zero or negative carrying
amounts. For those reporting units, an entity is required to perform Step 2 of
the goodwill impairment test if it is more likely than not that a goodwill
impairment exists. In determining whether it is more likely than not that
goodwill impairment exists, an entity should consider whether there are any
adverse qualitative factors indicating that an impairment may exist. The
qualitative factors are consistent with the existing guidance which requires
that goodwill of a reporting unit be tested for impairment between annual tests
if an event occurs or circumstances change that would more likely than not
reduce the fair value of a reporting unit below its carrying amount. The
provisions of this guidance were effective for the Company beginning January 1,
2011. The adoption of this guidance did not
have a material impact on the Companys financial statements.

37

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

ASU No. 2010-29 Business
Combinations (Topic 805)- Disclosure of Supplementary Pro Forma Information for
Business Combinations (a consensus of the FASB Emerging Issues Task Force).
ASU 2010-29 specifies that if a public entity presents comparative financial
statements, the entity should disclose revenue and earnings of the combined
entity as though the business combination(s) that occurred during the current
year had occurred as of the beginning of the comparable prior annual reporting
period only. This guidance also expands the pro forma disclosures to include a
description of the nature and amount of material, nonrecurring pro forma
adjustments directly attributed to the business combination included in the
reported pro forma revenue and earnings. The provisions of this guidance will
be effective prospectively for business combinations for which the acquisition
date is on or after the beginning of the first annual reporting period
beginning on or after December 15, 2010. The
adoption of this guidance did not have a material impact on the Companys
financial statements.

ASU No. 2011-02 Receivables (Topic
310)- A Creditors Determination of Whether a Restructuring Is a Troubled Debt
Restructuring. ASU 2011-02 clarifies which loan modifications constitute troubled
debt restructurings and is intended to assist creditors in determining whether a modification of the terms
of a receivable meets the criteria to be considered a troubled debt restructuring, both for purposes of recording
an impairment loss and for disclosure of troubled debt restructurings. In evaluating whether a restructuring constitutes
a troubled debt restructuring, a creditor must separately conclude, under the guidance clarified by ASU 2011-02,
that both of the following exist: (a) the restructuring constitutes a concession; and (b) the debtor is experiencing
financial difficulties. ASU 2011-02 will be effective for the Corporation on July, 2011, and applies retrospectively
to restructurings occurring on or after January 1, 2011. Given the recency of this pronouncement, the Company is
continuing to evaluate the impact of adoption of this ASU.

Note 13. Subsequent Event

On April 27, 2011, the parent company paid $42.4 million to the U.S. Treasury for the repurchase of the Treasurys investment in 42,000 shares of the parent companys Fixed Rate Cumulative Perpetual Preferred Shares, Series A, liquidation preference of $1,000 per share (the Preferred Shares), issued under the provisions of the TARP Capital Purchase Program. As a result of this action, the Preferred Shares were redeemed in full, eliminating an annual dividend of $2.1 million. In this connection, the Company will recognize in the second quarter a non-cash deemed dividend in determining net income available to common shareholders of $1.3 million which represents the difference between the carrying value of $40.7 million and the liquidation value of $42.0 million for the repurchased Preferred Shares.



On May 5, 2011, the parent company gave a notice to the U.S. Treasury of its intention to repurchase in full the warrant to purchase 516,817 of the parent companys common shares (the Warrant), originally issued to the U.S. Treasury in connection with the U.S. Treasurys investment in the Preferred Shares.  Under the terms of the agreements that govern the rights and obligations of the parent company and the U.S. Treasury regarding the Warrant, whether the parent company will repurchase the Warrant or, if so, the price at which the parent company will repurchase the Warrant is not known as of the date of this report.

38

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|        |                                                                                      
|------- | -------------------------------------------------------------------------------------
|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 Bank Holding Company Act
of 1956, as amended by the Gramm-Leach-Bliley Act
of 1999, and its subsidiaries, principally Sterling National Bank. Throughout
this discussion and analysis, the term the Company refers to Sterling Bancorp
and its subsidiaries and the term the bank refers to Sterling National Bank
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, 2010 (the 2010 Form 10-K). Certain
reclassifications have been made to prior years financial data to conform to
current financial statement presentations. Throughout managements discussion
and analysis of financial condition and results of operations, dollar amounts
in tables are presented in thousands, except per share data.

OVERVIEW

The Company provides a broad range of financial products and services,
including business and consumer loans, commercial and residential mortgage
lending and brokerage, mortgage warehouse lending, asset-based financing,
factoring/accounts receivable management services, deposit services, trade
financing, equipment financing, and deposit services. The Company has
operations principally in New York and conducts business throughout the United
States. The general state of the U.S. economy and, in particular, economic and
market conditions in New York, New Jersey and Connecticut (the New York
metropolitan 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 March 31, 2011, the banks average earning
assets represented approximately 99.0% of the Companys average earning assets.
Loans represented 58.6% and investment securities represented 38.5% of the
banks average earning assets for the first three months of 2011.

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

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

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

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

Recent economic conditions during 2011, such as the continuing decrease
in real estate values in the principal markets the Company serves and illiquid
credit markets, have reduced demands for corporate and real estate lending. If
these trends continue, the Company would expect its income from corporate and
real estate lending to decrease from the current levels in the near term. In
addition, due to the geographic concentration of the Companys loan portfolio
in the New York metropolitan area, representing approximately 68.5% of total
loans at March 31, 2011, an adverse change in market conditions in that
geographic area could result in a decrease in our income from corporate and
real estate lending. A significant prolonged decrease in income from our
lending segments, if realized, may have a severe adverse impact on the
operations of the Company.

39

---



INCOME STATEMENT
ANALYSIS

Net interest income, which represents the difference between interest
earned on interest-earning assets and interest incurred on interest-bearing
liabilities, is the Companys primary source of earnings. Net interest income
can be affected by changes in market interest rates as well as the level and
composition of assets, liabilities and shareholders equity. Net interest
spread is the difference between the average rate earned, on a tax-equivalent
basis, on interest-earning assets and the average rate paid on interest-bearing
liabilities. The net yield on interest-earning assets (net interest margin)
is calculated by dividing tax-equivalent net interest income by average
interest-earning assets. Generally, the net interest margin will exceed the net
interest spread because a portion of interest-earning assets are funded by
various noninterest-bearing sources, principally noninterest-bearing deposits
and shareholders equity. The increases (decreases) in the components of
interest income and interest expense, expressed in terms of fluctuation in
average volume and rate, are provided in the Rate/Volume Analysis shown on page
52. Information as to the components of interest income and interest expense
and average rates is provided in the Average Balance Sheets shown on page 51.

Comparison of the Three Months Ended March
31, 2011 and 2010

The Company reported net income available to common shareholders for
the three months ended March 31, 2011 of $3.3 million, representing $0.12 per
share calculated on a diluted basis, compared to $1.9 million, or $0.10 per
share calculated on a diluted basis, for the first quarter of 2010. The
increase in net income available to common shareholders was primarily due to a
$3.0 million decrease in the provision for loan losses and a $0.3 increase in
noninterest income, partially offset by a $0.4 million decrease in net interest
income, a $1.1 million increase in noninterest expenses and a $0.4 million
increase in the provision for income taxes.

Net Interest IncomeNet interest income, on a tax-equivalent basis, was
$20.3 million for the first quarter of 2011 compared to $20.4 million for the
2010 period. Net interest income benefitted from higher average loan and
investment securities balances and lower cost of funding. Those benefits were
more than offset by the impact of lower yields on loans and investment
securities and higher interest-bearing deposits balances. The net interest
margin, on a tax-equivalent basis, was 3.84% for the first quarter of 2011
compared to 4.37% for the 2010 period. The net interest margin was impacted by
the mix of earning assets and funding, including the higher level of
noninterest-bearing demand deposits.

Total interest income, on a tax-equivalent basis, aggregated $23.6
million for the first quarter of 2011, down $0.9 million from the 2010 period.
The tax-equivalent yield on interest-earning assets was 4.50% for the first
quarter of 2011 compared to 5.28% for the 2010 period.

Interest earned on the loan portfolio increased to $16.9 million for
the first quarter of 2011 from $16.5 million in the prior year period. Average
loan balances amounted to $1,254.3 million for the first quarter of 2011, an
increase of $95.2 million from an average of $1,159.1 million in the prior year
period. The increase in average loans, primarily due to the Companys business
development activities, accounted for a $1.4 million increase in interest
earned on loans. The yield on the loan portfolio decreased to 5.59% for the
first quarter of 2011 from 5.98% for the 2010 period, which was primarily
attributed to the mix of average outstanding balances among the components of
the loan portfolio.

Interest earned on the securities portfolio, on a tax-equivalent basis,
decreased to $6.7 million for the first quarter of 2011 from $7.9 million in
the 2010 period. Average outstandings increased to $823.7 million (38.5% of
average earning assets) for the first quarter of 2011 from $696.2 million
(36.5% of average earning assets) in the first quarter of 2010. The average
yield on investment securities decreased to 3.24% for the first quarter of 2011
from 4.52% in the 2010 period. The increase in balances and the decrease in
yields reflect the impact of the Companys asset/liability management strategy
designed to shorten the average life of the portfolio to position the Company
for rising interest rates in future periods while taking advantage of the
current uptick in long-term rates. The short-term part of the strategy was
implemented through the sale of available for sale securities, principally
mortgage-backed securities, with longer term average lives offset by the
purchase of short-term corporate debt and obligations of U.S. government
corporations and government sponsored enterprises. The long-term part of the
strategy was implemented through the purchase of obligations of state and
political subdivisions with maturities of approximately 15 years.

Total interest expense decreased by $0.8 million for the first quarter
of 2011 from $4.1 million for the 2010 period, primarily due to the impact of
lower rates paid for interest-bearing deposits and borrowings partially offset
by the impact of higher interest-bearing deposits.

40

---



Interest expense on deposits decreased to $2.1 million for the first
quarter of 2011 from $2.6 million for the 2010 period, due to decreases in the
cost of those funds partially offset by the impact of higher balances. The
average rate paid on interest-bearing deposits was 0.71%, which was 31 basis
points lower than the prior year period. The decrease in average cost of
deposits reflects the impact of deposit pricing strategies and the Companys
purchase of certificates of deposit from the Certificate of Deposit Account
Registry Service (CDARS) which provided certificate of deposit balances at
lower rates. Average interest-bearing deposits were $1,181.5 million for the
first quarter of 2011 compared to $1,045.2 million for the prior year period, reflecting
the impact of the Companys business development activities as well as the
purchase of funds from CDARS.

Interest expense on borrowings decreased to $1.3 million for the first
quarter of 2011 from $1.5 million for the 2010 period, primarily due to lower
cost of those funds partially offset by the impact of the changes in mix.
Average borrowings decreased to $234.3 million for the first quarter of 2011
from $250.8 million in the prior year period, reflecting a lesser reliance by
the Company on wholesale borrowed funds. The rates paid on all categories of
borrowings, except on advances from the FHLB, were flat in the first quarter of
2011 compared with those in the 2010 period. During the 2011 first quarter, the
bank restructured a portion of its Federal Home Loan Bank fixed rate advances
by repaying $100 million of existing borrowings and replacing them with $100
million of lower cost, floating rate advances. This transaction resulted in
$4.2 million in prepayment penalties that were deferred and will be recognized
in interest expense as an adjustment to the cost of these borrowings in future
periods. The existing borrowings were a combination of fixed rate and
amortizing advances with an average cost of 2.58% and an average duration of
3.2 years. The new borrowings are all floating-rate advances with an average
cost of 1.58%, including the deferred adjustment, with an average duration of three
months. The relevant accounting treatment for this transaction was an
interpretation of the guidance provided in ASC 470-50. This transaction was
executed as an earnings and interest rate risk strategy, resulting in lower
FHLB advance costs and a reduction of average duration. The blended cost of
borrowings decreased by 21 bps to 2.18% from 2.39%.

Provision for Loan LossesBased on managements continuing evaluation of the
loan portfolio (discussed under Asset Quality on page 44), the provision for
loan losses for the first quarter of 2011 was $3.0 million, compared to $6.0
million for the prior year period. Factors affecting the lower provision for
the first quarter of 2011 included stable economic conditions during the
quarter and a lower level of net charge-offs.

The level of the allowance reflects changes in the size of the
portfolio or in any of its components as well as managements continuing
evaluation of industry concentrations, specific credit risks, loan loss
experience, current loan portfolio quality, economic, political and regulatory
conditions. Portions of the allowance may be allocated for specific credits;
however, the entire allowance is available for any credit that, in managements
judgment, should be charged off. While management utilizes its best judgment
and information available, the ultimate adequacy of the allowance is dependent
upon a variety of factors beyond the Companys control, including the
performance of the Companys loan portfolio, the economy, changes in interest
rates and the view of the regulatory authorities toward loan classifications.

During 2011, the allowance for loan losses decreased $0.2 million from
$18.2 million at December 31, 2010 primarily due to decreases in the allowance
allocated to equipment financing receivables ($0.4 million) and factored
receivables ($0.1 million) partially offset by increases in the allowance
allocated real estate-residential ($0.1 million) and loans to nondepository
institutions ($0.1 million). The allowance allocated to lease financing
receivables decreased primarily as a result of the lower level of nonaccrual
loans.

Noninterest IncomeNoninterest income increased to $11.4 million for the
first quarter of 2011 from $11.1 million in the 2010 period. The increase
principally resulted from the benefit derived from increased mortgage banking
income and accounts receivable management/factoring commissions and other fees
which was partially offset by lower securities gains. Commissions and other
fees earned from accounts receivable management and factoring services were
higher primarily due to the impact of increased volumes at our factoring unit
and billings by clients providing temporary staffing also contributed to the
improved level of fee income. Mortgage banking increased due to slightly
greater volume of loans sold at higher yields and a change in the mix of
products being sold. Securities gains declined and reflected a modification of
the asset liability management program commenced in 2009 that was designed to
reduce the average life of the investment securities portfolio which was
replaced by the strategy that was described under Net Interest Income on page
40. The Company sold approximately $55 million of securities with a weighted
average life of about 2.1 years. Reinvestment of the proceeds will be in
obligations of state and political subdivisions and U.S. government agencies
with maturities of approximately 15 years and in short-term corporate
securities.

41

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Noninterest ExpensesNoninterest expenses for the first quarter of 2011
increased $1.1 million when compared to the 2010 period, primarily reflecting
higher compensation and occupancy expense related to the growth of the business
and increased business development activities.

Provision for Income TaxesThe provision for income taxes for the first quarter
of 2011 increased to $1.5 million, reflecting an effective tax rate of 27.2%,
compared with $1.1 million for the first quarter of 2010 reflecting an
effective tax rate of 30.0%. The increase was primarily due to the higher level
of pre-tax income in the 2011 period. The decrease in the effective tax rate
was primarily related to the higher proportions of tax-exempt income achieved
in 2011 compared to 2010 partially offset by the impact of a higher level of
pre-tax income.

BALANCE SHEET
ANALYSIS

Securities 
At March 31, 2011, the Companys portfolio of securities totaled $872.4 million,
of which obligations of U.S. government corporations and government sponsored
enterprises amounted to $470.1 million which is approximately 53.9% of the
total. The Company has the intent and ability to hold to maturity securities
classified as held to maturity, at which time it will receive full value for
these securities. 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 $8.0 million and $4.0 million,
respectively. Securities classified as available for sale may be sold in the
future, prior to maturity. These securities are carried at fair value. Net
aggregate unrealized gains or losses on these securities are included, net of
taxes, as a component of shareholders equity. Given the generally high credit
quality of the portfolio, management expects to realize all of its investments
upon market recovery or, the maturity of such instruments and thus believes
that any impairment in value is interest rate related and therefore temporary.
Available for sale securities included gross unrealized gains of $0.8 million
and gross unrealized losses of $1.9 million. As of March 31, 2011, management
does not have the intent to sell any of the securities classified as available
for sale in the table on page 9 and management believes that it is more likely
than not that the Company will not have to sell any such securities before a
recovery of cost.

In connection with an asset-liability management program described
under Net Interest Income on page 40, the Company sold approximately $55
million of securities with a weighted average life of about 2.1 years.
Reinvestment of the proceeds will be in obligations of state and political
subdivisions and U.S. government agencies with maturities of approximately 15
years and in short-term corporate securities.

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

|                                                                           |  |                       |            |                        |  |             |  |     |      |      |  |      |     
|-------------------------------------------------------------------------- |  | --------------------- | ---------- | ---------------------- |  | ----------- |  | --- | ---- | ---- |  | ---- | ----
|March 31, 2011                                                             |  | Weighted
Average Life |            | Weighted
Average Yield | 
|                                                                           |  |                       |            |                        | 
|                                                                           |  | AFS                   |            | HTM                    |  | AFS         |  | HTM |     
|                                                                           |  |                       |            |                        |  |             |  |     |     
|Residential mortgage-backed
 securities                                    |  |                       | 5.3
 Years |                        |  | 3.0
 Years  |  |     | 2.93 | %    |  | 4.53 | %   
|Agency notes (with original
 call dates ranging between 3 and 36 months)   |  |                       | 5.5
 Years |                        |  | 5.7
 Years  |  |     | 1.84 | %    |  | 1.51 | %   
|Corporate debt securities                                                  |  |                       | 0.9
 Years |                        |  |            |  |     | 2.14 | %    |  |     |     
|Obligations of state and
 political subdivisions  New York Bank Qualified |  |                       | 8.5
 Years |                        |  | 11.1
 Years |  |     | 5.67 | %[1] |  | 5.86 | %[1]
|                                                                           |  |                       |            |                        |  |             |  |     |      |      |  |      |     
|[1]tax equivalent                                                          |  |                       |            |                        |  |             |  |     |      |      |  |      |     

42

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The following
table sets forth the composition of the Companys investment securities by type,
with related values:

|                                                                                        |  |                |         |                   |  |          |   |              |         |  |  |        |  
|--------------------------------------------------------------------------------------- |  | -------------- | ------- | ----------------- |  | -------- | - | ------------ | ------- |  |  | ------ | -
|                                                                                        |  | March 31, 2011 |         | December 31, 2010 | 
|                                                                                        |  |                |         |                   | 
|                                                                                        |  | Balances       |         | % of 
 Total      |  | Balances |   | % of 
 Total |        
|                                                                                        |  |                |         |                   |  |          |   |              |        
|                                                                                        |  |                |         |                   |  |          |   |              |         |  |  |        |  
|Obligations of U.S. government corporations and government sponsored
 enterprises       |  |                |         |                   |  |          |   |              |         |  |  |        |  
|Residential mortgage-backed securities                                                  |  |                |         |                   |  |          |   |              |         |  |  |        |  
|CMOs (Federal National Mortgage Association)                                            |  | $              | 6,182   |                   |  | 0.71     | % | $            | 7,504   |  |  | 0.95   | %
|CMOs (Federal Home Loan Mortgage Corporation)                                           |  |                | 65,292  |                   |  | 7.48     |   |              | 47,422  |  |  | 6.01   |  
|CMOs (Government National Mortgage Association)                                         |  |                | 6,830   |                   |  | 0.78     |   |              | 7,290   |  |  | 0.92   |  
|Federal National Mortgage Association                                                   |  |                | 75,121  |                   |  | 8.61     |   |              | 78,822  |  |  | 9.98   |  
|Federal Home Loan Mortgage Corporation                                                  |  |                | 34,799  |                   |  | 3.99     |   |              | 40,628  |  |  | 5.15   |  
|Government National Mortgage Association                                                |  |                | 4,833   |                   |  | 0.55     |   |              | 5,052   |  |  | 0.64   |  
|                                                                                        |  |                |         |                   |  |          |   |              |         |  |  |        |  
|Total residential mortgage-backed
 securities                                           |  |                | 193,057 |                   |  | 22.12    |   |              | 186,718 |  |  | 23.65  |  
|                                                                                        |  |                |         |                   |  |          |   |              |         |  |  |        |  
|Agency notes                                                                            |  |                |         |                   |  |          |   |              |         |  |  |        |  
|Federal National Mortgage Association                                                   |  |                | 130,014 |                   |  | 14.90    |   |              | 115,133 |  |  | 14.59  |  
|Federal Home Loan Bank                                                                  |  |                | 59,850  |                   |  | 6.86     |   |              | 24,932  |  |  | 3.16   |  
|Federal Home Loan Mortgage Corporation                                                  |  |                | 77,197  |                   |  | 8.85     |   |              | 92,479  |  |  | 11.72  |  
|Federal Farm Credit Bank                                                                |  |                | 10,011  |                   |  | 1.15     |   |              | 15,109  |  |  | 1.91   |  
|                                                                                        |  |                |         |                   |  |          |   |              |         |  |  |        |  
|Total obligations of U.S. government corporations and government
 sponsored enterprises |  |                | 470,129 |                   |  | 53.88    |   |              | 434,371 |  |  | 55.03  |  
|                                                                                        |  |                |         |                   |  |          |   |              |         |  |  |        |  
|Obligations of state and political institutions-New York Bank
 Qualified                |  |                | 150,065 |                   |  | 17.20    |   |              | 157,013 |  |  | 19.89  |  
|Single-issuer, trust preferred securities                                               |  |                | 8,666   |                   |  | 0.99     |   |              | 3,933   |  |  | 0.50   |  
|Corporate debt securities                                                               |  |                | 238,659 |                   |  | 27.36    |   |              | 189,058 |  |  | 23.95  |  
|Other securities                                                                        |  |                | 4,926   |                   |  | 0.57     |   |              | 4,940   |  |  | 0.63   |  
|                                                                                        |  |                |         |                   |  |          |   |              |         |  |  |        |  
|Total                                                                                   |  | $              | 872,445 |                   |  | 100.00   | % | $            | 789,315 |  |  | 100.00 | %
|                                                                                        |  |                |         |                   |  |          |   |              |         |  |  |        |  

43

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Loan Portfolio

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

The Companys commercial and industrial loan and factored receivables
portfolios represent approximately 57% of all loans. Loans in this category are typically made to small- and
medium-sized businesses and range between $250 thousand and $15 million. The Companys real estate mortgage
portfolio, which represents approximately 21% of all loans, is comprised of
mortgages secured by real property located principally in the states of New
York, New Jersey, Virginia and North Carolina.
The Companys leasing portfolio, which consists of finance leases for
various types of business equipment, represents approximately 11% of all
loans. Sources of repayment are the
borrowers operating profits, cash flows and liquidation of pledged collateral.
 Based on underwriting standards, loans
may be secured in whole or in part by collateral such as liquid assets,
accounts receivable, equipment, inventory and real property. The collateral securing any loan or lease
may depend on the type of loan or lease and may vary in value based on market
conditions.

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

|                                               |  |           |           |            |  |          |   |              |           |  |  |        |  
|---------------------------------------------- |  | --------- | --------- | ---------- |  | -------- | - | ------------ | --------- |  |  | ------ | -
|                                               |  | March 31, |          
|                                               |  |           |          
|                                               |  | 2011      |           | 2010       | 
|                                               |  |           |           |            | 
|                                               |  | Balances  |           | % of Total |  | Balances |   | % of 
 Total |          
|                                               |  |           |           |            |  |          |   |              |          
|Domestic                                       |  |           |           |            |  |          |   |              |           |  |  |        |  
|Commercial and industrial                      |  | $         | 590,904   |            |  | 45.01    | % | $            | 571,200   |  |  | 46.98  | %
|Lease financing receivables                    |  |           | 140,330   |            |  | 10.69    |   |              | 179,407   |  |  | 14.76  |  
|Factored receivables                           |  |           | 154,771   |            |  | 11.79    |   |              | 151,054   |  |  | 12.42  |  
|Real estate-residential mortgage               |  |           |           |            |  |          |   |              |           |  |  |        |  
|Portfolio                                      |  |           | 132,659   |            |  | 10.11    |   |              | 127,453   |  |  | 10.48  |  
|Held for sale                                  |  |           | 24,102    |            |  | 1.84     |   |              | 20,885    |  |  | 1.72   |  
|Real estate-commercial mortgage                |  |           | 98,216    |            |  | 7.48     |   |              | 96,670    |  |  | 7.95   |  
|Real estate-construction and land
 development |  |           | 23,975    |            |  | 1.83     |   |              | 22,386    |  |  | 1.84   |  
|Loans to individuals                           |  |           | 11,699    |            |  | 0.89     |   |              | 13,043    |  |  | 1.07   |  
|Loans to depository institutions               |  |           | 25,505    |            |  | 1.94     |   |              |          |  |  |       |  
|Loans to nondepository financial institutions  |  |           | 110,590   |            |  | 8.42     |   |              | 33,829    |  |  | 2.78   |  
|                                               |  |           |           |            |  |          |   |              |           |  |  |        |  
|                                               |  |           |           |            |  |          |   |              |           |  |  |        |  
|Loans, net of unearned discounts               |  | $         | 1,312,751 |            |  | 100.00   | % | $            | 1,215,927 |  |  | 100.00 | %
|                                               |  |           |           |            |  |          |   |              |           |  |  |        |  

Asset Quality

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

During the first three months of 2011,
conditions across many segments of the economy began to stabilize. Nonaccrual loans increased by $0.4 million
at the end of the first three months of 2011 compared to December 31, 2010 (primarily
reflecting a $0.2 million increase in nonaccrual commercial and industrial
loans and a $0.1 million increase in equipment financing receivables), and net
charge-offs for the first three months of 2011 were $3.2 million,
compared to $2.9 million for the fourth quarter of 2010.
Nevertheless, a worsening of existing economic conditions will likely
result in levels of charge-offs and nonaccrual loans that will be higher than
those in prior periods.

44

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The following table sets forth the amount of
non-performing assets (nonaccrual loans and other real estate owned). Also shown are loans that are past due more
than 90 and are still accruing because they are both well secured or guaranteed
by financially responsible third parties and are in the process of collection.

|                                                  |  |           |           |      |   |           | 
|------------------------------------------------- |  | --------- | --------- | ---- | - | --------- | 
|                                                  |  | March 31, |          
|                                                  |  |           |          
|                                                  |  | 2011      |           | 2010 |  
|                                                  |  |           |           |      |  
|Gross loans                                       |  | $         | 1,330,733 |      | $ | 1,239,037 | 
|                                                  |  |           |           |      |   |           | 
|Nonaccrual loans                                  |  |           |           |      |   |           | 
|Commercial and industrial                         |  | $         | 1,242     |      | $ | 4,052     | 
|Lease financing receivables                       |  |           | 972       |      |   | 11,298    | 
|Factored receivables                              |  |           |          |      |   |          | 
|Real estate-residential mortgage                  |  |           | 1,675     |      |   | 1,889     | 
|Real estate-commercial mortgage                   |  |           | 3,124     |      |   |          | 
|Real estate-construction and land development     |  |           |          |      |   |          | 
|Loans to individuals                              |  |           | 3         |      |   |          | 
|                                                  |  |           |           |      |   |           | 
|                                                  |  |           |           |      |   |           | 
|Total nonaccrual loans                            |  |           | 7,016     |      |   | 17,239    | 
|                                                  |  |           |           |      |   |           | 
|Other real estate owned                           |  |           | 132       |      |   | 874       | 
|                                                  |  |           |           |      |   |           | 
|Total non-performing assets                       |  | $         | 7,148     |      | $ | 18,113    | 
|                                                  |  |           |           |      |   |           | 
|                                                  |  |           |           |      |   |           | 
|Loans past due 90 days or more and still accruing |  | $         | 296       |      | $ | 3,668     | 
|                                                  |  |           |           |      |   |           | 

At
March 31, 2011, commercial and industrial nonaccruals represented 0.21% of
commercial and industrial loans. There
were seven loans made to small business borrowers located in two states with balances
ranging between approximately $20.6 thousand and $497.6 thousand.

At March 31, 2011, lease financing nonaccruals represented 0.69% of
lease financing receivables. The
lessees of the equipment are located in twelve states. There were fourteen leases ranging between approximately $0.2 thousand
and $254.2 thousand, twelve of which were under $100 thousand. The value of the underlying collateral
related to lease financing nonaccruals varies depending on the type and
condition of equipment. While most
leases are written on a recourse basis, with personal guarantees of the
principals, the current value of the collateral is often less than the lease
financing balance. Collection efforts
include repossession and/or sale of leased equipment, payment discussions with
the lessee, the principal and/or guarantors, and obtaining judgments against
the lessee, the principal and/or guarantors.
The balance is charged off when it is determined that collection efforts
are no longer productive. Factors
considered in determining whether collection efforts are no longer productive
include any amounts currently being collected, the status of discussions or
negotiations with the lessee, the principal and/or guarantors, the cost of
continuing efforts to collect, the status of any foreclosure or other legal
actions, the value of the collateral, and any other pertinent factors.

At March 31, 2011, residential real estate nonaccruals represented
1.26% of residential real estate loans held in portfolio. There were eleven loans ranging between
approximately $10.1 thousand and $302.6 thousand secured by properties located
in six states.

At March 31, 2011, other real estate owned consisted of two properties
with values between approximately $31.7 thousand and $100.0 thousand located in
two states.

45

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The allowance for loan losses is
a reserve established through a provision for loan losses charged to expense,
which represents managements best estimate of probable losses that have been
incurred within the existing portfolio of loans. The allowance, in the judgement of management, is necessary to
reserve for estimated loan losses and risks inherent in the loan
portfolio. The Companys allowance for
loan losses methodology includes allowance allocations calculated in accordance
with FASB Codification Topic 310, Receivables and allowance allocations
calculated in accordance with FASB Codification Topic 450, Contingencies. Accordingly, the methodology is based on
historical experience by type of credit and internal risk grade, specific
homogenous pools and specific loss allocations, with adjustments for current
events and conditions. The Companys
process for the appropriate level of the allowance for loan losses is designed
to account for credit deterioration as it occurs. The provision for loan losses reflects loan quality trends,
including the levels of trends related to non-accrual loans, past due loans,
potential problem loans, classified and criticized loans and net charge-offs or
recoveries, among other factors. The
provision for loan losses also reflects the totality of actions taken on all
loans for a particular period. In other
words, the amount of the provision reflects not only the necessary increases in
the allowance for loan losses related to newly identified criticized loans, but
it also reflects actions taken related to other loans including, among other
things, any necessary increases or decreases in required allowance for specific
loans or loan pools. See Note 3-Loans
and Allowance for Loan Losses in the accompanying notes to consolidated
financial statements included elsewhere in this report for further details
regarding the methodology for estimating the appropriate level of the allowance
for loan losses.

At March 31, 2011, the ratio of the allowance to
loans held in portfolio, net unearned discounts, was 1.40% and the allowance was
$18.0 million. Loans 90 days past due and still accruing amounted to $296
thousand. At such date, the Companys nonaccrual loans amounted to $7.0
million; $4.3 million of such loans were judged to be impaired within the
scope of FASB Codification Topic 310, Receivables, and had a valuation allowance
totalling $1.4 million, which is included within the overall allowance for loan
losses. Based on the foregoing, as well as managements judgement as to the
current risks inherent in loans held in portfolio, the Companys allowance
for loan losses was deemed adequate to absorb all probable losses on
specifically known and other credit risks associated with the portfolio as of
March 31, 2011. 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 different from the provision taken in the
first quarter of 2011. 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- and $2.4 million at March 31,
2011 and 2010, respectively.

46

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The
following table sets forth certain information with respect to the
Companys loan loss experience:

|                                                                                                        |  |                                    |           |      |   |           |  
|------------------------------------------------------------------------------------------------------- |  | ---------------------------------- | --------- | ---- | - | --------- | -
|                                                                                                        |  | Three Months Ended
      March 31, |          
|                                                                                                        |  |                                   
|                                                                                                        |  | 2011                               |           | 2010 |  
|                                                                                                        |  |                                    |           |     
|                                                                                                        |  |                                    |           |      |   |           |  
|Average loans held in portfolio, net of
      unearned discounts, during period                         |  | $                                  | 1,228,301 |      | $ | 1,132,255 |  
|                                                                                                        |  |                                    |           |      |   |           |  
|                                                                                                        |  |                                    |           |      |   |           |  
|Allowance for loan losses:                                                                              |  |                                    |           |      |   |           |  
|Balance at beginning of period                                                                          |  | $                                  | 18,238    |      | $ | 19,872    |  
|                                                                                                        |  |                                    |           |      |   |           |  
|                                                                                                        |  |                                    |           |      |   |           |  
|Charge-offs:                                                                                            |  |                                    |           |      |   |           |  
|Commercial and industrial                                                                               |  |                                    | 169       |      |   | 850       |  
|Lease financing receivables                                                                             |  |                                    | 3,776     |      |   | 4,983     |  
|Factored receivables                                                                                    |  |                                    | 132       |      |   | 151       |  
|Real estate - residential mortgage                                                                      |  |                                    | 248       |      |   | 65        |  
|Real estate - commercial mortgage                                                                       |  |                                    |          |      |   | 129       |  
|Real estate - construction and land
      development                                                   |  |                                    |          |      |   |          |  
|Loans to individuals                                                                                    |  |                                    |          |      |   | 21        |  
|                                                                                                        |  |                                    |           |      |   |           |  
|Total charge-offs                                                                                       |  |                                    | 4,325     |      |   | 6,199     |  
|                                                                                                        |  |                                    |           |      |   |           |  
|                                                                                                        |  |                                    |           |      |   |           |  
|Recoveries:                                                                                             |  |                                    |           |      |   |           |  
|Commercial and industrial                                                                               |  |                                    | 20        |      |   | 215       |  
|Lease financing receivables                                                                             |  |                                    | 923       |      |   | 105       |  
|Factored receivables                                                                                    |  |                                    | 21        |      |   | 9         |  
|Real estate - residential mortgage                                                                      |  |                                    | 163       |      |   |          |  
|Real estate - commercial mortgage                                                                       |  |                                    |          |      |   |          |  
|Real estate - construction and land
      development                                                   |  |                                    |          |      |   |          |  
|Loans to individuals                                                                                    |  |                                    |          |      |   |          |  
|                                                                                                        |  |                                    |           |      |   |           |  
|Total recoveries                                                                                        |  |                                    | 1,127     |      |   | 329       |  
|                                                                                                        |  |                                    |           |      |   |           |  
|                                                                                                        |  |                                    |           |      |   |           |  
|Subtract:                                                                                               |  |                                    |           |      |   |           |  
|Net charge-offs                                                                                         |  |                                    | 3,198     |      |   | 5,870     |  
|                                                                                                        |  |                                    |           |      |   |           |  
|                                                                                                        |  |                                    |           |      |   |           |  
|Provision for loan losses                                                                               |  |                                    | 3,000     |      |   | 6,000     |  
|                                                                                                        |  |                                    |           |      |   |           |  
|                                                                                                        |  |                                    |           |      |   |           |  
|Less losses on transfers to other real
      estate owned                                               |  |                                    |          |      |   | 39        |  
|                                                                                                        |  |                                    |           |      |   |           |  
|                                                                                                        |  |                                    |           |      |   |           |  
|Balance at end of period                                                                                |  | $                                  | 18,040    |      | $ | 19,963    |  
|                                                                                                        |  |                                    |           |      |   |           |  
|                                                                                                        |  |                                    |           |      |   |           |  
|Ratio of annualized net charge-offs to
      average loans held in portfolio, net of unearned discounts |  |                                    | 1.04      | %    |   | 2.07      | %
|                                                                                                        |  |                                    |           |      |   |           |  

---

47

---



The following
table presents the Companys allocation of the allowance for loan losses. This allocation is
based on estimates by management and may vary from period to period based on
managements evaluation of the risk characteristics of the loan portfolio. The amount allocated to
a particular loan category of the Companys loans held in portfolio may not necessarily
be indicative of actual future charge-offs in that loan category.

|                                                 |  |               |        |                                                       |  |        |   |                                                       |        |  |  |        |  
|------------------------------------------------ |  | ------------- | ------ | ----------------------------------------------------- |  | ------ | - | ----------------------------------------------------- | ------ |  |  | ------ | -
|                                                 |  | March 31,2011 |        | December 31,2010                                      | 
|                                                 |  |               |        |                                                       | 
|                                                 |  | Amount        |        | % ofloansin eachcategoryto totalloansheld inportfolio |  | Amount |   | % ofloansin eachcategoryto totalloansheld inportfolio |       
|                                                 |  |               |        |                                                       |  |        |   |                                                       |       
|                                                 |  |               |        |                                                       |  |        |   |                                                       |        |  |  |        |  
|Domestic                                         |  |               |        |                                                       |  |        |   |                                                       |        |  |  |        |  
|                                                 |  |               |        |                                                       |  |        |   |                                                       |        |  |  |        |  
|Commercial and industrial                        |  | $             | 7,479  |                                                       |  | 45.86  | % | $                                                     | 7,454  |  |  | 47.04  | %
|Loans to depository institutions                 |  |               | 77     |                                                       |  | 1.98   |   |                                                       | 46     |  |  | 1.17   |  
|Loans to nondepository financial
 institutions   |  |               | 664    |                                                       |  | 8.58   |   |                                                       | 564    |  |  | 8.59   |  
|Equipment financing receivables                  |  |               | 3,055  |                                                       |  | 10.89  |   |                                                       | 3,423  |  |  | 10.97  |  
|Factored receivables                             |  |               | 1,340  |                                                       |  | 12.01  |   |                                                       | 1,424  |  |  | 12.31  |  
|Real estate - residential mortgage               |  |               | 2,596  |                                                       |  | 10.29  |   |                                                       | 2,497  |  |  | 9.72   |  
|Real estate - commercial mortgage                |  |               | 2,285  |                                                       |  | 7.62   |   |                                                       | 2,275  |  |  | 7.38   |  
|Real estate - construction and land
 development |  |               | 286    |                                                       |  | 1.86   |   |                                                       | 310    |  |  | 1.95   |  
|Loans to individuals                             |  |               | 116    |                                                       |  | 0.91   |   |                                                       | 119    |  |  | 0.87   |  
|Unallocated                                      |  |               | 142    |                                                       |  | 0.00   |   |                                                       | 126    |  |  | 0.00   |  
|                                                 |  |               |        |                                                       |  |        |   |                                                       |        |  |  |        |  
|Total                                            |  | $             | 18,040 |                                                       |  | 100.00 | % | $                                                     | 18,238 |  |  | 100.00 | %
|                                                 |  |               |        |                                                       |  |        |   |                                                       |        |  |  |        |  

As of March 31, 2011, the allowance for loan losses decreased by $0.2 million from
$18.2 million at  December 31,
2010 primarily due to a reduction in the allowance allocated to equipment financing receivables ($0.4 million) and factored
receivables ($0.1 million) partially offset by increases in the allowance
allocated to real estate residential mortgage ($0.1 million) and loans to nondepository institutions ($0.1
million). The allowance allocated to equipment financing receivables decreased primarily as a
result of the
lower level of equipment financing receivables nonaccrual balances.

48

---



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:

|                        |  |           |           |            |  |          |   |            |           |  |  |        |  
|----------------------- |  | --------- | --------- | ---------- |  | -------- | - | ---------- | --------- |  |  | ------ | -
|                        |  | March
31, |          
|                        |  |           |          
|                        |  | 2011      |           | 2010       | 
|                        |  |           |           |            | 
|                        |  | Balances  |           | %
of Total |  | Balances |   | %
of Total |          
|                        |  |           |           |            |  |          |   |            |          
|Domestic                |  |           |           |            |  |          |   |            |           |  |  |        |  
|Demand                  |  | $         | 561,524   |            |  | 32.49    | % | $          | 509,453   |  |  | 31.56  | %
|NOW                     |  |           | 178,243   |            |  | 10.32    |   |            | 221,797   |  |  | 13.74  |  
|Savings                 |  |           | 18,853    |            |  | 1.09     |   |            | 18,832    |  |  | 1.17   |  
|Money Market            |  |           | 352,296   |            |  | 20.39    |   |            | 322,059   |  |  | 19.95  |  
|Time deposits           |  |           | 617,169   |            |  | 35.71    |   |            | 541,321   |  |  | 33.54  |  
|                        |  |           |           |            |  |          |   |            |           |  |  |        |  
|Total domestic deposits |  |           | 1,728,085 |            |  | 100.00   |   |            | 1,613,462 |  |  | 99.96  |  
|                        |  |           |           |            |  |          |   |            |           |  |  |        |  
|Foreign                 |  |           |           |            |  |          |   |            |           |  |  |        |  
|Time deposits           |  |           |          |            |  |         |   |            | 580       |  |  | 0.04   |  
|                        |  |           |           |            |  |          |   |            |           |  |  |        |  
|Total deposits          |  | $         | 1,728,085 |            |  | 100.00   | % | $          | 1,614,042 |  |  | 100.00 | %
|                        |  |           |           |            |  |          |   |            |           |  |  |        |  

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 page 51.

CAPITAL

The Company and the bank are subject to risk-based capital regulations
which quantitatively measure capital against risk-weighted assets, including
certain off-balance sheet items. These
regulations define the elements of the Tier 1 and Tier 2 components of total
capital and establish minimum ratios of 4% for Tier 1 capital and 8% for total
capital for capital adequacy purposes.
Supplementing these regulations is a leverage requirement. This requirement establishes a minimum
leverage ratio (at least 3% or 4%, depending upon an institutions regulatory
status) which is calculated by dividing Tier 1 capital by adjusted quarterly
average assets (after deducting goodwill).
Information regarding the Companys and the banks risk-based capital is
presented on page 53. In addition, the
bank is subject to the Federal Deposit Insurance Corporation Improvement Act of
1991 (FDICIA) which imposes a number of mandatory supervisory measures. Among other matters, FDICIA established five
capital categories, ranging from well capitalized to critically under
capitalized. Such classifications are
used by regulatory agencies to determine a banks deposit insurance premium,
approval of applications authorizing institutions to increase their asset size
or otherwise expand business activities or acquire other institutions. Under
FDICIA, a well capitalized bank must maintain minimum leverage, Tier 1 and
total capital ratios of 5%, 6% and 10%, respectively. The Federal Reserve Board applies comparable tests for holding
companies such as the Company. At March
31, 2011, the Company and the bank exceeded the requirements for well
capitalized institutions under the tests pursuant to FDICIA and of the Federal
Reserve Board.

The bank regulatory agencies have encouraged banking organizations,
including healthy, well-run banking organizations, to operate with capital
ratios substantially in excess of the stated ratios required to maintain well
capitalized status. This has resulted
from, among other things, current economic conditions, the global financial
crisis and the likelihood, as described in the 2010 Form 10-K, of increased
formal capital requirements for banking organizations. In light of the foregoing, the Company and
the bank expect that they will maintain capital ratios substantially in excess
of these ratios.

49

---



During
the first quarter 2011, we completed an underwritten public offering of
4,025,000 shares of our common shares at an offering price of $9.60 per share,
which resulted in net proceeds of $36.5 million after underwriting discounts
and expenses. The proceeds from the
issuance of shares were intended to be used for general corporate purposes which could
include the financing of possible acquisitions of complementary business or assets,
including FDIC-assisted transactions,
the extension of credit to, or the funding of the investments in, our
subsidiaries, or the possible repurchase of Series A Preferred Shares,
separately or together with the warrant for 516,817 common shares
held by the U.S. Treasury, subject to the receipt of any required regulatory
approval.

On April 27, 2011, after obtaining regulatory approvals, the parent company
repurchased from the U.S. Treasury all of the issued and outstanding Fixed Rate Cumulative Perpetual Preferred
Shares, Series A, for an aggregate purchase price of $42,420,000, which includes accrued and unpaid dividends. The
repurchase was funded with a combination of the proceeds from the March 2011 and March 2010 offerings of common shares.

On May 5, 2011, the parent company gave a notice to the U.S. Treasury of its intention to repurchase in full the warrant to purchase 516,817 of the parent companys common shares, originally issued to the U.S. Treasury in connection with the U.S. Treasurys investment in the Series A preferred shares.  Under the terms of the agreements that govern the rights and obligations of the parent company and the U.S. Treasury regarding the warrant, whether the parent company will repurchase the warrant or, if so, the price at which the parent company will repurchase the warrant is not known as of the date of this report.

RECENTLY ISSUED
ACCOUNTING PRONOUNCEMENTS

For information regarding recently issued accounting pronouncements and
their expected impact on the Companys consolidated financial statements, see
Note 12 of the Companys unaudited consolidated financial statements in this
quarterly report on Form 10-Q.

CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained or incorporated by reference in this
quarterly report on Form 10-Q, including but not limited to, statements
concerning future results of operations or financial position, borrowing
capacity and future liquidity, future investment results, future credit
exposure, future loan losses and plans and objectives for future operations,
economic environment 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
and we make no commitment to update or revise forward-looking statements in
order to reflect new information, subsequent events or changes in expectations.

Factors that could cause our actual results to differ materially from
those in the forward-looking statements include, but are not limited to, the
following: inflation, interest rates, market and monetary fluctuations;
geopolitical developments, including acts of war and terrorism and their impact
on economic conditions; the effects of, and changes in, trade, monetary and
fiscal policies and laws, including interest rate policies of the Federal
Reserve Board and laws and regulations concerning taxes, banking and securities
with which the Company must comply; changes, particularly declines, in general
economic conditions and in the local economies in which the Company operates;
the financial condition of the Companys borrowers; competitive pressures on
loan and deposit pricing and demand; changes in technology and their impact on
the marketing of new products and services and the acceptance of these products
and services by new and existing customers; the willingness of customers to
substitute competitors products and services for the Companys products and
services; the impact of changes in financial services laws and regulations
(including laws concerning taxes, banking, securities and insurance); changes
in accounting principles, policies and guidelines; the risks and uncertainties
described in Risk Factors in the Companys annual report on Form 10-K for the
year ended December 31, 2010; and other risks and uncertainties detailed from
time to time in press releases and other public filings; and the Companys
performance in managing the risks involved in any of the foregoing. 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.

50

---



|                                 
|---------------------------------
|STERLING BANCORP AND SUBSIDIARIES
|Average Balance Sheets [1]       
|Three Months Ended March 31,     
|(Unaudited)                      

|                                                           |  |                       |           |          |   |                    |  |                       |      |          |   |                    |   |   |        |  |  |      |  
|---------------------------------------------------------- |  | --------------------- | --------- | -------- | - | ------------------ |  | --------------------- | ---- | -------- | - | ------------------ | - | - | ------ |  |  | ---- | -
|                                                           |  | 2011                  |           | 2010     |  
|                                                           |  |                       |           |          |  
|                                                           |  | Average
      Balance |           | Interest |   | Average
      Rate |  | Average
      Balance |      | Interest |   | Average
      Rate |  
|                                                           |  |                       |           |          |   |                    |  |                       |      |          |   |                    |  
|ASSETS                                                     |  |                       |           |          |   |                    |  |                       |      |          |   |                    |   |   |        |  |  |      |  
|Interest-bearing deposits with other banks                 |  | $                     | 52,589    |          | $ | 35                 |  |                       | 0.27 | %        | $ | 43,365             |   | $ | 19     |  |  | 0.17 | %
|Investment Securities                                      |  |                       |           |          |   |                    |  |                       |      |          |   |                    |   |   |        |  |  |      |  
|Available for sale - taxable                               |  |                       | 350,728   |          |   | 2,057              |  |                       | 2.35 |          |   | 292,343            |   |   | 2,734  |  |  | 3.74 |  
|Held to maturity - taxable                                 |  |                       | 316,118   |          |   | 2,187              |  |                       | 2.77 |          |   | 312,199            |   |   | 3,716  |  |  | 4.76 |  
|Tax-exempt [2]                                             |  |                       | 156,867   |          |   | 2,425              |  |                       | 6.18 |          |   | 91,655             |   |   | 1,408  |  |  | 6.15 |  
|                                                           |  |                       |           |          |   |                    |  |                       |      |          |   |                    |   |   |        |  |  |      |  
|Total investment securities                                |  |                       | 823,713   |          |   | 6,669              |  |                       | 3.24 |          |   | 696,197            |   |   | 7,858  |  |  | 4.52 |  
|FRB and FHLB stock [2]                                     |  |                       | 9,142     |          |   | 23                 |  |                       | 1.02 |          |   | 8,467              |   |   | 122    |  |  | 5.74 |  
|Loans, net of unearned discounts [3]                       |  |                       | 1,254,344 |          |   | 16,876             |  |                       | 5.59 |          |   | 1,159,100          |   |   | 16,511 |  |  | 5.98 |  
|                                                           |  |                       |           |          |   |                    |  |                       |      |          |   |                    |   |   |        |  |  |      |  
|TOTAL INTEREST-EARNING
      ASSETS                        |  |                       | 2,139,788 |          |   | 23,603             |  |                       | 4.50 | %        |   | 1,907,129          |   |   | 24,510 |  |  | 5.28 | %
|                                                           |  |                       |           |          |   |                    |  |                       |      |          |   |                    |   |   |        |  |  |      |  
|Cash and due from banks                                    |  |                       | 36,937    |          |   |                    |  |                       |      |          |   | 35,588             |   |   |        |  |  |      |  
|Allowance for loan losses                                  |  |                       | (19,817   | )        |   |                    |  |                       |      |          |   | (22,158            | ) |   |        |  |  |      |  
|Goodwill                                                   |  |                       | 22,901    |          |   |                    |  |                       |      |          |   | 22,901             |   |   |        |  |  |      |  
|Other assets                                               |  |                       | 144,199   |          |   |                    |  |                       |      |          |   | 126,988            |   |   |        |  |  |      |  
|                                                           |  |                       |           |          |   |                    |  |                       |      |          |   |                    |   |   |        |  |  |      |  
|TOTAL ASSETS                                               |  | $                     | 2,324,008 |          |   |                    |  |                       |      |          | $ | 2,070,448          |   |   |        |  |  |      |  
|                                                           |  |                       |           |          |   |                    |  |                       |      |          |   |                    |   |   |        |  |  |      |  
|LIABILITIES AND SHAREHOLDERS EQUITY                       |  |                       |           |          |   |                    |  |                       |      |          |   |                    |   |   |        |  |  |      |  
|Interest-bearing deposits                                  |  |                       |           |          |   |                    |  |                       |      |          |   |                    |   |   |        |  |  |      |  
|Domestic                                                   |  |                       |           |          |   |                    |  |                       |      |          |   |                    |   |   |        |  |  |      |  
|Savings                                                    |  | $                     | 19,964    |          |   | 2                  |  |                       | 0.05 | %        | $ | 18,454             |   |   | 3      |  |  | 0.07 | %
|NOW                                                        |  |                       | 205,789   |          |   | 71                 |  |                       | 0.14 |          |   | 249,671            |   |   | 225    |  |  | 0.37 |  
|Money market                                               |  |                       | 342,173   |          |   | 627                |  |                       | 0.74 |          |   | 324,458            |   |   | 737    |  |  | 0.92 |  
|Time                                                       |  |                       | 613,586   |          |   | 1,360              |  |                       | 0.90 |          |   | 452,065            |   |   | 1,673  |  |  | 1.50 |  
|Foreign                                                    |  |                       |           |          |   |                    |  |                       |      |          |   |                    |   |   |        |  |  |      |  
|Time                                                       |  |                       |          |          |   |                   |  |                       |     |          |   | 580                |   |   | 2      |  |  | 1.09 |  
|                                                           |  |                       |           |          |   |                    |  |                       |      |          |   |                    |   |   |        |  |  |      |  
|Total interest-bearing deposits                            |  |                       | 1,181,512 |          |   | 2,060              |  |                       | 0.71 |          |   | 1,045,228          |   |   | 2,640  |  |  | 1.02 |  
|                                                           |  |                       |           |          |   |                    |  |                       |      |          |   |                    |   |   |        |  |  |      |  
|Borrowings                                                 |  |                       |           |          |   |                    |  |                       |      |          |   |                    |   |   |        |  |  |      |  
|Securities sold under agreements to repurchase - customers |  |                       | 41,269    |          |   | 48                 |  |                       | 0.47 |          |   | 50,525             |   |   | 61     |  |  | 0.49 |  
|Securities sold under agreements to repurchase - dealers   |  |                       | 5,000     |          |   | 16                 |  |                       | 1.29 |          |   |                   |   |   |       |  |  |     |  
|Federal funds purchased                                    |  |                       | 4,833     |          |   | 2                  |  |                       | 0.15 |          |   | 11,200             |   |   | 4      |  |  | 0.14 |  
|Commercial paper                                           |  |                       | 15,656    |          |   | 12                 |  |                       | 0.30 |          |   | 16,404             |   |   | 13     |  |  | 0.31 |  
|Short-term borrowings - FRB                                |  |                       |          |          |   |                   |  |                       |     |          |   | 15,000             |   |   | 9      |  |  | 0.25 |  
|Short-term borrowings - other                              |  |                       | 2,590     |          |   |                   |  |                       |     |          |   | 2,233              |   |   |       |  |  |     |  
|Advances - FHLB                                            |  |                       | 139,215   |          |   | 664                |  |                       | 1.93 |          |   | 129,681            |   |   | 871    |  |  | 2.72 |  
|Long-term borrowings - sub debt                            |  |                       | 25,774    |          |   | 523                |  |                       | 8.38 |          |   | 25,774             |   |   | 523    |  |  | 8.38 |  
|                                                           |  |                       |           |          |   |                    |  |                       |      |          |   |                    |   |   |        |  |  |      |  
|Total borrowings                                           |  |                       | 234,337   |          |   | 1,265              |  |                       | 2.18 |          |   | 250,817            |   |   | 1,481  |  |  | 2.39 |  
|                                                           |  |                       |           |          |   |                    |  |                       |      |          |   |                    |   |   |        |  |  |      |  
|TOTAL INTEREST-BEARING
      LIABILITIES                   |  |                       | 1,415,849 |          |   | 3,325              |  |                       | 0.95 | %        |   | 1,296,045          |   |   | 4,121  |  |  | 1.29 | %
|                                                           |  |                       |           |          |   |                    |  |                       |      |          |   |                    |   |   |        |  |  |      |  
|Noninterest-bearing deposits                               |  |                       | 538,136   |          |   |                   |  |                       |      |          |   | 468,676            |   |   |       |  |  |      |  
|                                                           |  |                       |           |          |   |                    |  |                       |      |          |   |                    |   |   |        |  |  |      |  
|Total including noninterest-bearing demand deposits        |  |                       | 1,953,985 |          |   | 3,325              |  |                       | 0.69 | %        |   | 1,764,721          |   |   | 4,121  |  |  | 0.95 | %
|                                                           |  |                       |           |          |   |                    |  |                       |      |          |   |                    |   |   |        |  |  |      |  
|Other liabilities                                          |  |                       | 138,610   |          |   |                    |  |                       |      |          |   | 134,478            |   |   |        |  |  |      |  
|                                                           |  |                       |           |          |   |                    |  |                       |      |          |   |                    |   |   |        |  |  |      |  
|Total liabilities                                          |  |                       | 2,092,595 |          |   |                    |  |                       |      |          |   | 1,899,199          |   |   |        |  |  |      |  
|Shareholders equity                                       |  |                       | 231,413   |          |   |                    |  |                       |      |          |   | 171,249            |   |   |        |  |  |      |  
|                                                           |  |                       |           |          |   |                    |  |                       |      |          |   |                    |   |   |        |  |  |      |  
|TOTAL LIABILITIES AND
      SHAREHOLDERS EQUITY           |  | $                     | 2,324,008 |          |   |                    |  |                       |      |          | $ | 2,070,448          |   |   |        |  |  |      |  
|                                                           |  |                       |           |          |   |                    |  |                       |      |          |   |                    |   |   |        |  |  |      |  
|Net interest income/spread                                 |  |                       |           |          |   | 20,278             |  |                       | 3.55 | %        |   |                    |   |   | 20,389 |  |  | 3.99 | %
|                                                           |  |                       |           |          |   |                    |  |                       |      |          |   |                    |   |   |        |  |  |      |  
|Net yield on interest-earning assets (margin)              |  |                       |           |          |   |                    |  |                       | 3.84 | %        |   |                    |   |   |        |  |  | 4.37 | %
|                                                           |  |                       |           |          |   |                    |  |                       |      |          |   |                    |   |   |        |  |  |      |  
|Less: Tax equivalent adjustment                            |  |                       |           |          |   | 849                |  |                       |      |          |   |                    |   |   | 494    |  |  |      |  
|                                                           |  |                       |           |          |   |                    |  |                       |      |          |   |                    |   |   |        |  |  |      |  
|Net interest income                                        |  |                       |           |          | $ | 19,429             |  |                       |      |          |   |                    |   | $ | 19,895 |  |  |      |  
|                                                           |  |                       |           |          |   |                    |  |                       |      |          |   |                    |   |   |        |  |  |      |  

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

51

---



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

|                                                                 |  |                                                                                     |       |      |   |         |   |   |        |  
|---------------------------------------------------------------- |  | ----------------------------------------------------------------------------------- | ----- | ---- | - | ------- | - | - | ------ | -
|                                                                 |  | Increase/(Decrease)
      Three Months Ended
      March 31, 2011 to March 31, 2010 |      
|                                                                 |  |                                                                                     |      
|                                                                 |  |                                                                                     |       |      |   |         |   |   |        |  
|                                                                 |  | Volume                                                                              |       | Rate |   | Net [2] |  
|                                                                 |  |                                                                                     |       |      |   |         |  
|INTEREST INCOME                                                  |  |                                                                                     |       |      |   |         |   |   |        |  
|Interest-bearing deposits with other banks                       |  | $                                                                                   | 4     |      | $ | 12      |   | $ | 16     |  
|                                                                 |  |                                                                                     |       |      |   |         |   |   |        |  
|                                                                 |  |                                                                                     |       |      |   |         |   |   |        |  
|Investment Securities                                            |  |                                                                                     |       |      |   |         |   |   |        |  
|Available for sale - taxable                                     |  |                                                                                     | 464   |      |   | (1,141  | ) |   | (677   | )
|Held to maturity - taxable                                       |  |                                                                                     | 45    |      |   | (1,574  | ) |   | (1,529 | )
|Tax-exempt [2]                                                   |  |                                                                                     | 1,010 |      |   | 7       |   |   | 1,017  |  
|                                                                 |  |                                                                                     |       |      |   |         |   |   |        |  
|Total investment securities                                      |  |                                                                                     | 1,519 |      |   | (2,708  | ) |   | (1,189 | )
|                                                                 |  |                                                                                     |       |      |   |         |   |   |        |  
|                                                                 |  |                                                                                     |       |      |   |         |   |   |        |  
|FRB and FHLB stock                                               |  |                                                                                     | 9     |      |   | (108    | ) |   | (99    | )
|                                                                 |  |                                                                                     |       |      |   |         |   |   |        |  
|                                                                 |  |                                                                                     |       |      |   |         |   |   |        |  
|Loans, net of unearned discounts [3]                             |  |                                                                                     | 1,446 |      |   | (1,081  | ) |   | 365    |  
|                                                                 |  |                                                                                     |       |      |   |         |   |   |        |  
|                                                                 |  |                                                                                     |       |      |   |         |   |   |        |  
|TOTAL INTEREST INCOME                                            |  | $                                                                                   | 2,978 |      | $ | (3,885  | ) | $ | (907   | )
|                                                                 |  |                                                                                     |       |      |   |         |   |   |        |  
|                                                                 |  |                                                                                     |       |      |   |         |   |   |        |  
|INTEREST EXPENSE                                                 |  |                                                                                     |       |      |   |         |   |   |        |  
|Interest-bearing deposits                                        |  |                                                                                     |       |      |   |         |   |   |        |  
|Domestic                                                         |  |                                                                                     |       |      |   |         |   |   |        |  
|Savings                                                          |  | $                                                                                   |      |      | $ | (1      | ) | $ | (1     | )
|NOW                                                              |  |                                                                                     | (34   | )    |   | (120    | ) |   | (154   | )
|Money market                                                     |  |                                                                                     | 39    |      |   | (149    | ) |   | (110   | )
|Time                                                             |  |                                                                                     | 483   |      |   | (796    | ) |   | (313   | )
|Foreign                                                          |  |                                                                                     |       |      |   |         |   |   |        |  
|Time                                                             |  |                                                                                     | (2    | )    |   |        |   |   | (2     | )
|                                                                 |  |                                                                                     |       |      |   |         |   |   |        |  
|Total interest-bearing deposits                                  |  |                                                                                     | 486   |      |   | (1,066  | ) |   | (580   | )
|                                                                 |  |                                                                                     |       |      |   |         |   |   |        |  
|                                                                 |  |                                                                                     |       |      |   |         |   |   |        |  
|Borrowings                                                       |  |                                                                                     |       |      |   |         |   |   |        |  
|Securities sold under agreements to
      repurchase - customers |  |                                                                                     | (11   | )    |   | (2      | ) |   | (13    | )
|Securities sold under agreements to
      repurchase - dealers   |  |                                                                                     | 16    |      |   |        |   |   | 16     |  
|Federal funds purchased                                          |  |                                                                                     | (2    | )    |   |        |   |   | (2     | )
|Commercial paper                                                 |  |                                                                                     | (1    | )    |   |        |   |   | (1     | )
|Short-term borrowings - FRB                                      |  |                                                                                     | (9    | )    |   |        |   |   | (9     | )
|Short-term borrowings - other                                    |  |                                                                                     |      |      |   |        |   |   |       |  
|Advances - FHLB                                                  |  |                                                                                     | 60    |      |   | (267    | ) |   | (207   | )
|Long-term borrowings - sub debt                                  |  |                                                                                     |      |      |   |        |   |   |       |  
|                                                                 |  |                                                                                     |       |      |   |         |   |   |        |  
|Total borrowings                                                 |  |                                                                                     | 53    |      |   | (269    | ) |   | (216   | )
|                                                                 |  |                                                                                     |       |      |   |         |   |   |        |  
|                                                                 |  |                                                                                     |       |      |   |         |   |   |        |  
|TOTAL INTEREST EXPENSE                                           |  | $                                                                                   | 539   |      | $ | (1,335  | ) | $ | (796   | )
|                                                                 |  |                                                                                     |       |      |   |         |   |   |        |  
|                                                                 |  |                                                                                     |       |      |   |         |   |   |        |  
|NET INTEREST INCOME                                              |  | $                                                                                   | 2,439 |      | $ | (2,550  | ) | $ | (111   | )
|                                                                 |  |                                                                                     |       |      |   |         |   |   |        |  

|    |                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|[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 change
 in interest expense for securities under agreements to repurchase-dealers and
 short term borrowings-FRB has been allocated entirely to the volume variance.
|[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.                                                                                                                                                                                                                           

52

---



STERLING BANCORP AND SUBSIDIARIES
Regulatory Capital and Ratios

Ratios and
Minimums

|                                            |  |        |         |                               |  |                         |   |       |         |        |  |       |   |   |         |  |  |       |  
|------------------------------------------- |  | ------ | ------- | ----------------------------- |  | ----------------------- | - | ----- | ------- | ------ |  | ----- | - | - | ------- |  |  | ----- | -
|                                            |  | Actual |         | For Capital
 Adequacy Minimum |  | To Be Well
 Capitalized |  
|                                            |  |        |         |                               |  |                         |  
|As of
 March 31, 2011                       |  | Amount |         | Ratio                         |  | Amount                  |   | Ratio |         | Amount |  | Ratio |  
|                                            |  |        |         |                               |  |                         |   |       |         |        |  |       |  
|Total Capital(to Risk-Weighted Assets):     |  |        |         |                               |  |                         |   |       |         |        |  |       |   |   |         |  |  |       |  
|The Company                                 |  | $      | 292,071 |                               |  | 16.53                   | % | $     | 141,328 |        |  | 8.00  | % | $ | 176,660 |  |  | 10.00 | %
|The bank                                    |  |        | 215,593 |                               |  | 12.36                   |   |       | 139,555 |        |  | 8.00  |   |   | 174,443 |  |  | 10.00 |  
|                                            |  |        |         |                               |  |                         |   |       |         |        |  |       |   |   |         |  |  |       |  
|Tier 1 Capital(to Risk-Weighted Assets):    |  |        |         |                               |  |                         |   |       |         |        |  |       |   |   |         |  |  |       |  
|The Company                                 |  |        | 273,770 |                               |  | 15.50                   |   |       | 70,664  |        |  | 4.00  |   |   | 105,996 |  |  | 6.00  |  
|The bank                                    |  |        | 197,292 |                               |  | 11.31                   |   |       | 69,777  |        |  | 4.00  |   |   | 104,666 |  |  | 6.00  |  
|                                            |  |        |         |                               |  |                         |   |       |         |        |  |       |   |   |         |  |  |       |  
|Tier 1 Leverage Capital(to Average Assets): |  |        |         |                               |  |                         |   |       |         |        |  |       |   |   |         |  |  |       |  
|The Company                                 |  |        | 273,770 |                               |  | 11.90                   |   |       | 92,044  |        |  | 4.00  |   |   | 115,055 |  |  | 5.00  |  
|The bank                                    |  |        | 197,292 |                               |  | 8.65                    |   |       | 91,191  |        |  | 4.00  |   |   | 113,989 |  |  | 5.00  |  

|                                            |  |   |         |  |  |       |   |   |         |  |  |      |   |   |         |  |  |       |  
|------------------------------------------- |  | - | ------- |  |  | ----- | - | - | ------- |  |  | ---- | - | - | ------- |  |  | ----- | -
|As of December 31, 2010                     |  |   |         |  |  |       |   |   |         |  |  |      |   |   |         |  |  |       |  
|                                            |  |   |         |  |  |       |   |   |         |  |  |      |   |   |         |  |  |       |  
|Total Capital(to Risk-Weighted Assets):     |  |   |         |  |  |       |   |   |         |  |  |      |   |   |         |  |  |       |  
|The Company                                 |  | $ | 255,022 |  |  | 14.68 | % | $ | 138,982 |  |  | 8.00 | % | $ | 173,728 |  |  | 10.00 | %
|The bank                                    |  |   | 211,737 |  |  | 12.32 |   |   | 137,516 |  |  | 8.00 |   |   | 171,895 |  |  | 10.00 |  
|                                            |  |   |         |  |  |       |   |   |         |  |  |      |   |   |         |  |  |       |  
|Tier 1 Capital(to Risk-Weighted Assets):    |  |   |         |  |  |       |   |   |         |  |  |      |   |   |         |  |  |       |  
|The Company                                 |  |   | 236,477 |  |  | 13.61 |   |   | 69,491  |  |  | 4.00 |   |   | 104,237 |  |  | 6.00  |  
|The bank                                    |  |   | 193,192 |  |  | 11.24 |   |   | 68,758  |  |  | 4.00 |   |   | 103,137 |  |  | 6.00  |  
|                                            |  |   |         |  |  |       |   |   |         |  |  |      |   |   |         |  |  |       |  
|Tier 1 Leverage Capital(to Average Assets): |  |   |         |  |  |       |   |   |         |  |  |      |   |   |         |  |  |       |  
|The Company                                 |  |   | 236,477 |  |  | 10.15 |   |   | 93,152  |  |  | 4.00 |   |   | 116,440 |  |  | 5.00  |  
|The bank                                    |  |   | 193,192 |  |  | 8.39  |   |   | 92,070  |  |  | 4.00 |   |   | 115,087 |  |  | 5.00  |  

53

---



ITEM 3. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ASSET/LIABILITY
MANAGEMENT

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

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

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

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

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

The Companys balance sheet structure is primarily short-term in nature
with a substantial portion of assets and liabilities repricing or maturing
within one year. The Companys gap analysis at March 31, 2011, presented on
page 57, 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. The Company has written policy guidelines, approved by the Board of
Directors, governing the use of financial instruments, including approved
counterparties, risk limits and appropriate internal control procedures. The
credit risk of derivatives arises principally from the potential for a
counterparty to fail to meet its obligation to settle a contract on a timely
basis.

As of March 31, 2011, the Company was not a party to any financial
instrument derivative agreement.

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.

54

---



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 December 31, 2010, the model indicated
the impact of a 100 and 200 basis point parallel and pro rata rise in rates
over 12 months would approximate a 3.4% ($3.7 million) and a 6.8% ($7.2
million) increase in net interest income, respectively, while the impact of a
25 basis point decline in rates over the same period would approximate a 0.9%
($1.0 million) decline from an unchanged rate environment. The likelihood of a
decrease in interest rates beyond 25 basis points as of December 31, 2010 was
considered to be remote given then-current interest rate levels. As of March
31, 2011, the model indicated the impact of a 100 and 200 basis point parallel
and pro rata rise in rates over 12 months would approximate a 1.5% ($1.7
million) and a 3.5% ($3.9 million) increase in net interest income, respectively,
while the impact of a 25 basis point decline in rates over the same period
would approximate a 0.5% ($0.6 million) decline from an unchanged rate
environment. The likelihood of a decrease in interest rates beyond 25 basis
points as of March 31, 2011 was considered to be remote given then-current
interest rate levels.

The preceding sensitivity analysis does not represent a Company
forecast and should not be relied upon as being indicative of expected
operating results. These hypothetical estimates are based upon numerous
assumptions including: the nature and timing of interest rate levels including
yield curve shape, prepayments on loans and securities, deposit decay rates,
pricing decisions on loans and deposits, reinvestment/replacement of asset and
liability cash flows and others. While assumptions are developed based upon
current economic and local market conditions, the Company cannot provide any
assurances as to the predictive nature of these assumptions, including how
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: prepayment/refinancing levels
likely deviating from those assumed, the varying impact of interest rate change
caps or floors on adjustable rate assets, the potential effect of changing debt
service levels on customers with adjustable rate loans, depositor early
withdrawals and product preference changes and other variables. Furthermore,
the sensitivity analysis does not reflect actions that the Asset/Liability
Committee might take in responding to or anticipating changes in interest
rates.

The shape of the yield curve can cause downward pressure on net
interest income. In general, if and to the extent that the yield curve is
flatter (i.e., the differences between interest rates for different maturities
are relatively smaller) than previously anticipated, then the yield on the
Companys interest-earning assets and its cash flows will tend to be lower. Management
believes that a relatively flat yield curve could continue to adversely affect
the Companys results in 2011.

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

The parent company 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 March 31, 2011, the parent companys short-term debt, consisting
principally of commercial paper used to finance ongoing current business
activities, was approximately $16.4 million. The parent company had cash,
interest-bearing deposits with banks and other current assets aggregating
$100.1 million. The parent company also has back-up credit lines with banks of
$19.0 million. Since 1979, the parent company has had no need to use the
available back-up lines of credit.

55

---



The following table sets forth information regarding the Companys
obligations and commitments to make future payments under contract as of March
31, 2011:

|                                    |  |                        |         |                   |   |           |  |           |        |               |   |         |  |   |        | 
|----------------------------------- |  | ---------------------- | ------- | ----------------- | - | --------- |  | --------- | ------ | ------------- | - | ------- |  | - | ------ | 
|                                    |  | Payments Due by Period |        
|                                    |  |                        |        
|Contractual
 obligations(1)         |  | Total                  |         | Less than
 1 Year |   | 1-3 Years |  | 4-5 Years |        | After 5 Years |  
|                                    |  |                        |         |                   |   |           |  |           |        |               |  
|                                   
|Long-Term
 Debt                     |  | $                      | 154,589 |                   | $ | 15,000    |  | $         | 11,818 |               | $ | 101,997 |  | $ | 25,774 | 
|Operating
 Leases                   |  |                        | 48,540  |                   |   | 4,806     |  |           | 8,969  |               |   | 9,211   |  |   | 25,554 | 
|                                    |  |                        |         |                   |   |           |  |           |        |               |   |         |  |   |        | 
|Total
 Contractual Cash Obligations |  | $                      | 203,129 |                   | $ | 19,806    |  | $         | 20,787 |               | $ | 111,208 |  | $ | 51,328 | 
|                                    |  |                        |         |                   |   |           |  |           |        |               |   |         |  |   |        | 

(1) Based on contractual
maturity dates

The following table sets forth information regarding the Companys
obligations under other commercial commitments as of March 31, 2011:

|                              |  |                                            |         |                   |   |           |  |           |       |               |   |   |  |   |       | 
|----------------------------- |  | ------------------------------------------ | ------- | ----------------- | - | --------- |  | --------- | ----- | ------------- | - | - |  | - | ----- | 
|                              |  | Amount of Commitment Expiration per Period |        
|                              |  |                                            |        
|Other
 Commercial Commitments |  | Total
 Amount
 Committed                   |         | Less Than
 1 Year |   | 1-3 Years |  | 4-5 Years |       | After 5 Years |  
|                              |  |                                            |         |                   |   |           |  |           |       |               |  
|                             
|Residential
 Loans            |  | $                                          | 35,676  |                   | $ | 35,676    |  | $         |      |               | $ |  |  | $ |      | 
|Commercial
 Loans             |  |                                            | 27,777  |                   |   | 19,589    |  |           | 6,254 |               |   |  |  |   | 1,934 | 
|                              |  |                                            |         |                   |   |           |  |           |       |               |   |   |  |   |       | 
|Total Loans                   |  |                                            | 63,453  |                   |   | 55,265    |  |           | 6,254 |               |   |  |  |   | 1,934 | 
|Standby
 Letters of Credit    |  |                                            | 24,627  |                   |   | 23,852    |  |           | 775   |               |   |  |  |   |      | 
|Other
 Commercial Commitments |  |                                            | 68,913  |                   |   | 68,749    |  |           |      |               |   |  |  |   | 164   | 
|                              |  |                                            |         |                   |   |           |  |           |       |               |   |   |  |   |       | 
|                              |  |                                            |         |                   |   |           |  |           |       |               |   |   |  |   |       | 
|Total
 Commercial Commitments |  | $                                          | 156,993 |                   | $ | 147,866   |  | $         | 7,029 |               | $ |  |  | $ | 2,098 | 
|                              |  |                                            |         |                   |   |           |  |           |       |               |   |   |  |   |       | 

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, our
Excessive or Luxury Expenditures Policy 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.

The contents of our web site are not incorporated by reference into
this quarterly report on Form 10-Q.

56

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STERLING BANCORP AND SUBSIDIARIES
Interest Rate Sensitivity

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

|                                                          |  |                 |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|--------------------------------------------------------- |  | --------------- | ------- | -------------------------- | - | ------------------------- |  | --------------------------- | ------- | ------------ | - | ---------------- |  | ----- | ------- |  | - | -------- | - | - | --------- | 
|                                                          |  | Repricing Date  |        
|                                                          |  |                 |        
|                                                          |  | 3 Monthsor Less |         | More than3 Monthsto 1 Year |   | More than1 Year to5 Years |  | More than5 Years to10 Years |         | Over10 Years |   | NonrateSensitive |  | Total |        
|                                                          |  |                 |         |                            |   |                           |  |                             |         |              |   |                  |  |       |        
|ASSETS                                                    |  |                 |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|Interest-bearing deposits with other banks                |  | $               | 7,932   |                            | $ |                          |  | $                           |        |              | $ |                 |  | $     |        |  | $ |         |   | $ | 7,932     | 
|Investment securities                                     |  |                 | 62,527  |                            |   | 238,858                   |  |                             | 201,790 |              |   | 68,860           |  |       | 300,410 |  |   |         |   |   | 872,445   | 
|Commercial and industrial loans                           |  |                 | 445,498 |                            |   | 62,184                    |  |                             | 81,646  |              |   | 3,238            |  |       |        |  |   | (1,662   | ) |   | 590,904   | 
|Lease financing receivables                               |  |                 | 671     |                            |   | 10,313                    |  |                             | 77,246  |              |   | 64,011           |  |       | 4,233   |  |   | (16,144  | ) |   | 140,330   | 
|Factored receivables                                      |  |                 | 154,948 |                            |   |                          |  |                             |        |              |   |                 |  |       |        |  |   | (177     | ) |   | 154,771   | 
|Real estate-residential mortgage                          |  |                 | 22,664  |                            |   | 31,698                    |  |                             | 16,196  |              |   | 28,156           |  |       | 58,047  |  |   |         |   |   | 156,761   | 
|Real estate-commercial mortgage                           |  |                 | 27,990  |                            |   | 17,863                    |  |                             | 35,125  |              |   | 17,238           |  |       |        |  |   |         |   |   | 98,216    | 
|Real estate-construction and land development             |  |                 | 10,286  |                            |   |                          |  |                             | 8,989   |              |   | 4,700            |  |       |        |  |   |         |   |   | 23,975    | 
|Loans to individuals                                      |  |                 | 8,541   |                            |   | 2,126                     |  |                             | 1,032   |              |   |                 |  |       |        |  |   |         |   |   | 11,699    | 
|Loans to nondepository financial institutions             |  |                 | 88,292  |                            |   | 21,122                    |  |                             | 1,110   |              |   |                 |  |       | 66      |  |   |         |   |   | 110,590   | 
|Loans to depository institutions                          |  |                 | 25,505  |                            |   |                          |  |                             |        |              |   |                 |  |       |        |  |   |         |   |   | 25,505    | 
|Noninterest-earning assets & allowance for loan losses    |  |                 |        |                            |   |                          |  |                             |        |              |   |                 |  |       |        |  |   | 199,417  |   |   | 199,417   | 
|                                                          |  |                 |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|Total Assets                                              |  |                 | 854,854 |                            |   | 384,164                   |  |                             | 423,134 |              |   | 186,203          |  |       | 362,756 |  |   | 181,434  |   |   | 2,392,545 | 
|                                                          |  |                 |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|                                                          |  |                 |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|LIABILITIES AND SHAREHOLDERS EQUITY                      |  |                 |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|Interest-bearing deposits                                 |  |                 |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|Savings [1]                                               |  |                 |        |                            |   |                          |  |                             | 18,853  |              |   |                 |  |       |        |  |   |         |   |   | 18,853    | 
|NOW [1]                                                   |  |                 |        |                            |   |                          |  |                             | 178,243 |              |   |                 |  |       |        |  |   |         |   |   | 178,243   | 
|Money market [1]                                          |  |                 | 267,745 |                            |   |                          |  |                             | 84,551  |              |   |                 |  |       |        |  |   |         |   |   | 352,296   | 
|Time                                                      |  |                 | 262,916 |                            |   | 306,132                   |  |                             | 48,121  |              |   |                 |  |       |        |  |   |         |   |   | 617,169   | 
|Securities sold under agreement to repurchase - customers |  |                 | 21,107  |                            |   |                          |  |                             |        |              |   |                 |  |       |        |  |   |         |   |   | 21,107    | 
|Securities sold under agreement to repurchase - dealers   |  |                 |        |                            |   |                          |  |                             | 5,000   |              |   |                 |  |       |        |  |   |         |   |   | 5,000     | 
|Federal funds purchased                                   |  |                 | 60,000  |                            |   |                          |  |                             |        |              |   |                 |  |       |        |  |   |         |   |   | 60,000    | 
|Commercial paper                                          |  |                 | 15,341  |                            |   | 50                        |  |                             |        |              |   |                 |  |       |        |  |   |         |   |   | 15,391    | 
|Short-term borrowings - other                             |  |                 | 4,525   |                            |   |                          |  |                             |        |              |   |                 |  |       |        |  |   |         |   |   | 4,525     | 
|Advances - FHLB                                           |  |                 | 100,000 |                            |   | 15,000                    |  |                             | 13,815  |              |   |                 |  |       |        |  |   |         |   |   | 128,815   | 
|Long-term borrowings - subordinated debentures            |  |                 |        |                            |   |                          |  |                             |        |              |   |                 |  |       | 25,774  |  |   |         |   |   | 25,774    | 
|Noninterest-bearing liabilities & shareholders equity    |  |                 |        |                            |   |                          |  |                             |        |              |   |                 |  |       |        |  |   | 965,372  |   |   | 965,372   | 
|                                                          |  |                 |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|                                                          |  |                 |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|Total Liabilities and Shareholders Equity                |  |                 | 731,634 |                            |   | 321,182                   |  |                             | 348,583 |              |   |                 |  |       | 25,774  |  |   | 965,372  |   |   | 2,392,545 | 
|                                                          |  |                 |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|                                                          |  |                 |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|Net Interest Rate Sensitivity Gap                         |  | $               | 123,220 |                            | $ | 62,982                    |  | $                           | 74,551  |              | $ | 186,203          |  | $     | 336,982 |  | $ | (783,938 | ) | $ |          | 
|                                                          |  |                 |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|                                                          |  |                 |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|Cumulative Gap March 31, 2011                             |  | $               | 123,220 |                            | $ | 186,202                   |  | $                           | 260,753 |              | $ | 446,956          |  | $     | 783,938 |  | $ |         |   | $ |          | 
|                                                          |  |                 |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|                                                          |  |                 |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|Cumulative Gap March 31, 2010 [2]                         |  | $               | 160,652 |                            | $ | 137,818                   |  | $                           | 191,021 |              | $ | 408,750          |  | $     | 757,828 |  | $ |         |   | $ |          | 
|                                                          |  |                 |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|                                                          |  |                 |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|Cumulative Gap December 31, 2010 [2]                      |  | $               | 377,384 |                            | $ | 308,139                   |  | $                           | 289,256 |              | $ | 468,057          |  | $     | 786,799 |  | $ |         |   | $ |          | 
|                                                          |  |                 |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 

[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] Certain reclassifications
have been made to conform to the current presentation.

57

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ITEM 4. CONTROLS
AND PROCEDURES

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

No change in the Companys internal control over financial reporting
(as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934)
occurred during the fiscal quarter ended March 31, 2011 that has materially
affected, or is reasonably likely to materially affect, the Companys internal
control over financial reporting.

58

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PART II - OTHER INFORMATION

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

Under its share repurchase program, the Company buys back common shares
from time to time. The Company did not repurchase any of its common shares
during the first quarter of 2011. At March 31, 2011, the maximum number of
shares that may yet be purchased under the share repurchase program was
870,963.

The Board of Directors initially authorized the repurchase of common
shares in 1997 and since then has approved increases in the number of common
shares that the Company is authorized to repurchase. The latest increase was
announced on August 16, 2007, when the Board of Directors increased the
Companys authority to repurchase common shares by an additional 800,000
shares.

Item 6. Exhibits

The following
exhibits are filed as part of this report:

| |      |                                                                                                 |                                                                                                                                                                                                                                                                         
| | ---- | ----------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3.   | (i)                                                                                             | Restated
 Certificate of Incorporation filed with the State of New York Department of
 State, October 28, 2004 (Filed as Exhibit 3(i) to the Registrants Form 10-K
 for the year ended December 31, 2008 and incorporated herein by reference).                        
| |      |                                                                                                 |                                                                                                                                                                                                                                                                         
| |      | (ii)                                                                                            | Certificate
 of Amendment of Certificate of Incorporation filed with the State of New York
 Department of State on December 18, 2008 (Filed as Exhibit 3(ii) to the
 Registrants Form 10-K for the year ended December 31, 2008 and incorporated
 herein by reference).
| |      |                                                                                                 |                                                                                                                                                                                                                                                                         
| |      | (iii)                                                                                           | By-Laws as
 in effect on November 15, 2007 (Filed as Exhibit 3(ii) (A) to the
 Registrants Form 8-K dated November 15, 2007 and filed on November 19, 2007
 and incorporated herein by reference).                                                                     
| |      |                                                                                                 |                                                                                                                                                                                                                                                                         
| | 11.  | Statement
 Re: Computation of Per Share Earnings.                                              
| |      |                                                                                                
| | 31.1 | Certification
 of the CEO pursuant to Exchange Act Rule 13a-14(a).                             
| |      |                                                                                                
| | 31.2 | Certification
 of the CFO pursuant to Exchange Act Rule 13a-14(a).                             
| |      |                                                                                                
| | 32.1 | Certification
 of the CEO required by Section 1350 of Chapter 63 of Title 18 of the U.S.
 Code.
| |      |                                                                                                
| | 32.2 | Certification
 of the CFO required by Section 1350 of Chapter 63 of Title 18 of the U.S.
 Code.

59

---



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: May
 10, 2011 |  | /s/ Louis J.
 Cappelli               
|                    |  |                                      
|                    |  | Louis J.
 Cappelli                   
|                    |  | Chairman and
 Chief Executive Officer
|                    |  |                                      
|Date:May
 10, 2011  |  | /s/ John W.
 Tietjen                 
|                    |  |                                      
|                    |  | John W.
 Tietjen                     
|                    |  | Executive Vice President and         
|                    |  | Chief
 Financial Officer             

60

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STERLING BANCORP AND SUBSIDIARIES
EXHIBIT INDEX

|               |  |                                                                                                |  |                    
|-------------- |  | ---------------------------------------------------------------------------------------------- |  | -------------------
|Exhibit
Number |  | Description                                                                                    |  | Sequential
Page No.
|               |  |                                                                                                |  |                    
|               |  |                                                                                                |  |                    
|11             |  | Statement
 re: Computation of per share earnings                                               |  | 62                 
|               |  |                                                                                                |  |                    
|31.1           |  | Certification
 of the CEO pursuant to Exchange Act Rule 13a-14(a).                             |  | 63                 
|               |  |                                                                                                |  |                    
|31.2           |  | Certification
 of the CFO pursuant to Exchange Act Rule 13a-14(a).                             |  | 64                 
|               |  |                                                                                                |  |                    
|32.1           |  | Certification
 of the CEO required by Section 1350 of Chapter 63 of Title 18 of the U.S.
 Code |  | 65                 
|               |  |                                                                                                |  |                    
|32.2           |  | Certification
 of the CFO required by Section 1350 of Chapter 63 of Title 18 of the U.S.
 Code |  | 66                 

61

---