|                                                                                                      |
|-----------------------------------------------------------------------------------------------------------|
| **UNITED STATES                SECURITIES AND EXCHANGE COMMISSION                Washington, 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                              September                30,                2007                                                                                                                           **                                                                                                                                                                 |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| **or**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| **o**                    **TRANSITION REPORT PURSUANT                TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| **For the transition                period from                                                                                                        to                                                                                                              ** |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| **Commission File                Number:                                                    1-5273-1                                                                                                                 **                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

| **Sterling                Bancorp**                                       |
|---------------------------------------------------------------------------|
|                                                                           |
| **(Exact                name of registrant as specified in its charter)** |

|                                                                                             |   |                                                |
|--------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|
| **New York**                                                                                     |   | **13-2565216**                                      |
|                                                                                                  |
| **(State or other jurisdiction                of                incorporation or organization)** |   | **(I.R.S. Employer                Identification)** |
|                                                                                             |   |                                                |

| **650 Fifth Avenue, New York,                N.Y.**         |   | **10019-6108**                      |
|-------------------------------------------------------------|--------|-------------------------------------|
|                                                             |
| **(Address of principal                executive offices)** |   | ** (Zip                Code)** |
|                                                        |   |                                |

| **212-757-3300**                                                              |
|-------------------------------------------------------------------------------|
|                                                                               |
| **(Registrant’s                telephone number, including area code)** |
|                                                                          |

| **N/A**                                                                                                              |
|----------------------------------------------------------------------------------------------------------------------|
|                                                                                                                      |
| **(Former                name, former address and former fiscal year, if changed since last                report)** |
|                                                                                                                 |

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

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

| **Large                Accelerated Filer o** | **Accelerated Filer                x** | **Non-Accelerated Filer                o** |
|----------------------------------------------|----------------------------------------|--------------------------------------------|
|                                         |                                   |                                       |

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

**As of                    October 31, 2007 there were 17,804,947 shares of common stock,****$1.00 par value,                    outstanding.** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  |
|--|

| STERLING                BANCORP |
|---------------------------------|
|                       |

|                                               |                   | **Page**                                                                                                                                |
|----------------------------------------------------|------------------------|-----------------------------------------------------------------------------------------------------------------------------------------|
|                                               |                   |                                                                                                                                    |   |  |
| PART I                  FINANCIAL INFORMATION |                   |                                                                                                                                    |   |
|                                               |                   |                                                                                                                                    |   |   |   |
|                                               | Item 1.                | Financial Statements                                                                                                                    |   |   |   |
|                                               |                   |                                                                                                                                    |   |   |   |
|                                               |                   | Consolidated                Financial Statements (Unaudited)                                                                            |   | 3 |   |
|                                               |                   | Notes to                Consolidated Financial Statements                                                                               |   | 8 |   |
|                                               |                   |                                                                                                                                    |   |   |   |
|                                               | Item                2. | Management’s                Discussion and Analysis of Financial Condition and Results of     Operations |   |   |   |
|                                               |                   |                                                                                                                                    |   |   |   |
|                                               |                   | Overview                                                                                                                                |   | 13 |   |
|                                               |                   | Income                Statement Analysis                                                                                                |   | 14 |   |
|                                               |                   | Balance Sheet                Analysis                                                                                                   |   | 19 |   |
|                                               |                   | Capital                                                                                                                                 |   | 24 |   |
|                                               |                   | Recently                Issued Accounting Pronouncements                                                                                |   | 25 |   |
|                                               |                   | Cautionary                Statement Regarding Forward-Looking Statements                                                                |   | 25 |   |
|                                               |                   | Average                Balance Sheets                                                                                                   |   | 26 |   |
|                                               |                   | Rate/Volume                Analysis                                                                                                     |   | 28 |   |
|                                               |                   | Regulatory                Capital and Ratios                                                                                            |   | 30 |   |
|                                               |                   |                                                                                                                                    |   |   |   |
|                                               | Item 3.                | Quantitative                and Qualitative Disclosures About Market Risk                                                               |   |   |   |
|                                               |                   |                                                                                                                                    |   |   |   |
|                                               |                   | Asset/Liability                Management                                                                                               |   | 31 |   |
|                                               |                   | Interest                Rate Sensitivity                                                                                                |   | 36 |   |
|                                               |                   |                                                                                                                                    |   |   |   |
|                                               | Item 4.                | Controls and                Procedures                                                                                                  |   | 37 |   |
|                                               |                   |                                                                                                                                    |   |   |   |
| PART II                  OTHER INFORMATION    |                   |                                                                                                                                    |   |
|                                               |                   |                                                                                                                                    |   |   |   |
|                                               | Item 2.                | Unregistered                Sales of Equity Securities and Use of Proceeds                                                              |   | 38 |   |
|                                               |                   |                                                                                                                                    |   |   |   |
|                                               | Item 6.                | Exhibits                                                                                                                                |   | 39 |   |
|                                               |                   |                                                                                                                                    |   |   |   |
| SIGNATURES                                         |                   |                                                                                                                                    | 40 |   |
|                                               |                   |                                                                                                                                    |   |   |
| EXHIBIT                INDEX                       |                   |                                                                                                                                    |   |   |
|                                               |                   |                                                                                                                                    |   |   |
|                                               | Exhibit 11             | Statement                Re: Computation of Per Share Earnings                                                                          |   | 42 |   |
|                                               |                   |                                                                                                                                    |   |   |   |
|                                               | Exhibit 31.1           | Certification                of the CEO pursuant to Exchange Act Rule 13a-14(a)                                                         |   | 43 |   |
|                                               |                   |                                                                                                                                    |   |   |   |
|                                               | Exhibit 31.2           | Certification                of the CFO pursuant to Exchange Act Rule 13a-14(a)                                                    |   | 44 |   |
|                                               |                   |                                                                                                                                    |   |   |   |
|                                               | Exhibit 32.1           | Certification                of the CEO required by Section 1350 of Chapter 63 of Title 18 of the U.S.                Code              |   | 45 |   |
|                                               |                   |                                                                                                                                    |   |   |   |
|                                               | Exhibit 32.2           | Certification                of the CFO required by Section 1350 of Chapter 63 of Title 18 of the U.S.                Code              |   | 46 |   |

| 2 |
|---|

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

|                                                                                                                                                                 | September 30,                2007 |          | December 31,                2006 |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------|---------------|----------------------------------|--------|
||
| ASSETS                                                                                                                                                          |                              |          |                             |   |   |   |
| Cash and due                from banks                                                                                                                          | $                                 | 49,547,009    |                             | $      | 50,058,593 |   |
| Interest-bearing deposits with                other banks                                                                                                       |                              | 3,014,475     |                             |   | 1,261,187 |   |
| Federal funds                sold                                                                                                                               |                              | —       |                             |   | 20,000,000 |   |
|                                                                                                                                                       |
|                                                                                                                                                                 |                                   |               |
| Securities                available for sale (at estimated fair value;                  pledged: $77,231,475 in 2007 and $90,583,854 in 2006)         |                              | 215,426,488   |                             |   | 148,420,887 |   |
| Securities                held to maturity (pledged: $188,776,122 in 2007                  and $199,997,912 in 2006) (estimated fair value:           |                              |          |                             |   |   |   |
|   $386,393,154 in                2007 and $411,650,690 in 2006)                                                                                       |                              | 393,501,270   |                             |   | 420,903,430 |   |
|                                                                                                                                                                 |                                   |               |                                  |        |
|         Total                investment securities                                                                      |                              | 608,927,758   |                             |   | 569,324,317 |   |
|                                                                                                                                                                 |                                   |               |                                  |        |
|                                                                                                                                                                 |                                   |               |
|                                                                                                                                                       |
| Loans held for                sale                                                                                                                              |                              | 32,895,991    |                             |   | 33,319,789 |   |
|                                                                                                                                                                 |                                   |               |                                  |        |
| Loans held in                portfolio, net of unearned discounts                                                                                               |                              | 1,178,197,584 |                             |   | 1,112,601,620 |   |
| Less allowance                for loan losses                                                                                                                   |                              | 15,038,912    |                             |   | 16,287,974 |   |
|                                                                                                                                                                 |                                   |               |                                  |        |
|         Loans,                net                                                                                       |                              | 1,163,158,672 |                             |   | 1,096,313,646 |   |
|                                                                                                                                                                 |                                   |               |                                  |        |
| Customers’ liability                under acceptances                                                                                                     |                              | 128,851       |                             |   | 98,399 |   |
| Goodwill                                                                                                                                                        |                              | 22,900,912    |                             |   | 22,862,051 |   |
| Premises and                equipment, net                                                                                                                      |                              | 11,434,937    |                             |   | 11,323,649 |   |
| Other real                estate                                                                                                                                |                              | 1,826,035     |                             |   | 2,242,419 |   |
| Accrued                interest receivable                                                                                                                      |                              | 6,974,825     |                             |   | 5,844,868 |   |
| Bank owned                life insurance                                                                                                                        |                              | 28,766,799    |                             |   | 27,949,160 |   |
| Other                assets                                                                                                                                     |                              | 51,163,055    |                             |   | 43,696,511 |   |
|                                                                                                                                                                 |                                   |               |                                  |        |
|         Total                assets from continuing operations                                                          |                              | 1,980,739,319 |                             |   | 1,884,294,589 |   |
| Assets -                discontinued operations                                                                                                                 |                              | —       |                             |   | 1,662,697 |   |
|                                                                                                                                                                 |                                   |               |                                  |        |
|                                                                                                                                                            | $                                 | 1,980,739,319 |                             | $      | 1,885,957,286 |   |
|                                                                                                                                                                 |                                   |               |                                  |        |
|                                                                                                                                                                 |                                   |               |
|                                                                                                                                                       |
| LIABILITIES                AND SHAREHOLDERS’ EQUITY                                                                                                       |                              |          |                             |   |   |   |
| Deposits                                                                                                                                                        |                              |          |                             |   |   |   |
|   Demand                deposits                                                                                                                      | $                                 | 490,194,816   |                             | $      | 546,442,704 |   |
|   Savings, NOW and                money market deposits                                                                                               |                              | 542,466,423   |                             |   | 447,600,898 |   |
|   Time                deposits                                                                                                                        |                              | 534,176,014   |                             |   | 527,986,821 |   |
|                                                                                                                                                                 |                                   |               |                                  |        |
|         Total                deposits                                                                                   |                              | 1,566,837,253 |                             |   | 1,522,030,423 |   |
|                                                                                                                                                                 |                                   |               |                                  |        |
| Securities                sold under agreements to repurchase - customers                                                                                       |                              | 62,563,685    |                             |   | 52,802,796 |   |
| Federal funds                purchased                                                                                                                          |                              | 44,200,000    |                             |   | — |   |
| Commercial                paper                                                                                                                                 |                              | 28,571,010    |                             |   | 27,561,567 |   |
| Short-term                borrowings - FHLB                                                                                                                     |                              | 25,000,000    |                             |   | — |   |
| Short-term                borrowings - other                                                                                                                    |                              | 303,185       |                             |   | 3,411,630 |   |
| Long-term                borrowings - FHLB                                                                                                                      |                              | 10,000,000    |                             |   | 20,000,000 |   |
| Long-term                borrowings - subordinated debentures                                                                                                   |                              | 25,774,000    |                             |   | 25,774,000 |   |
|                                                                                                                                                                 |                                   |               |                                  |        |
|         Total                borrowings                                                                                 |                              | 196,411,880   |                             |   | 129,549,993 |   |
|                                                                                                                                                                 |                                   |               |                                  |        |
| Acceptances                outstanding                                                                                                                          |                              | 128,851       |                             |   | 98,399 |   |
| Accrued                expenses and other liabilities                                                                                                           |                              | 97,426,678    |                             |   | 101,679,342 |   |
| Liabilities -                discontinued operations                                                                                                            |                              | —       |                             |   | 336,358 |   |
|                                                                                                                                                                 |                                   |               |                                  |        |
|         Total                liabilities                                                                                |                              | 1,860,804,662 |                             |   | 1,753,694,515 |   |
|                                                                                                                                                                 |                                   |               |                                  |        |
|                                                                                                                                                                 |                                   |               |
|                                                                                                                                                       |
| Shareholders’                equity                                                                                                                       |                              |          |                             |   |   |   |
| Common stock,                $1 par value. Authorized 50,000,000 shares;                   issued 21,262,170 and 21,177,084 shares, respectively |                              | 21,262,170    |                             |   | 21,177,084 |   |
| Capital                surplus                                                                                                                                  |                              | 168,682,564   |                             |   | 167,960,063 |   |
| Retained                earnings                                                                                                                                |                              | 16,730,599    |                             |   | 16,693,987 |   |
| Accumulated                other comprehensive loss, net of tax                                                                                                 |                              | (10,937,606   | )                                |   | (11,842,908 | ) |
|                                                                                                                                                                 |                                   |               |                                  |        |
|                                                                                                                                                            |                              | 195,737,727   |                             |   | 193,988,226 |   |
|                                                                                                                                                       |
| Less                                                                                                                                                            |                              |          |                             |   |   |   |
|   Common shares in                treasury at cost, 3,459,302                    and 2,572,368 shares, respectively               |                              | 75,803,070    |                             |   | 61,725,455 |   |
|                                                                                                                                                                 |                                   |               |
|                                                                                                                                                       |
|                                                                                                                                                                 |                                   |               |                                  |        |
|         Total                shareholders’ equity                                                                 |                              | 119,934,657   |                             |   | 132,262,771 |   |
|                                                                                                                                                                 |                                   |               |                                  |        |
|                                                                                                                                                            | $                                 | 1,980,739,319 |                             | $      | 1,885,957,286 |   |
|                                                                                                                                                                 |                                   |               |                                  |        |

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

| 3 |
|---|

| STERLING                BANCORP AND SUBSIDIARIES                Consolidated Statements of Operations                (Unaudited) |
|----------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                             |

|                                                                                                             | Three Months Ended                September 30, |       | Nine Months Ended                September 30, |   |
|-------------------------------------------------------------------------------------------------------------|-------------------------------------------------|------------|------------------------------------------------|--------|
||
||
| INTEREST                INCOME                                                                              |                                            |       |                                           |   |   |   |   |   |   |   |   |   |
|  Loans                                                                                                 | $                                               | 24,148,041 |                                           | $      | 22,600,005 |   | $ | 68,996,158 |   | $ | 63,569,045 |   |
|  Investment                securities                                                                  |                                            |       |                                           |   |   |   |   |   |   |   |   |   |
|    Available for                sale                                                         |                                            | 2,112,770  |                                           |   | 1,900,888 |   |   | 5,659,068 |   |   | 6,080,677 |   |
|    Held to                maturity                                                           |                                            | 4,730,546  |                                           |   | 5,231,002 |   |   | 14,298,397 |   |   | 16,526,116 |   |
|  Federal                funds sold                                                                     |                                            | 227,637    |                                           |   | 12,865 |   |   | 1,230,283 |   |   | 87,736 |   |
|  Deposits                with other banks                                                              |                                            | 23,798     |                                           |   | 22,477 |   |   | 91,176 |   |   | 73,121 |   |
|                                                                                                             |                                                 |            |                                                |        |  |  |  |  |
|         Total                interest income                        |                                            | 31,242,792 |                                           |   | 29,767,237 |   |   | 90,275,082 |   |   | 86,336,695 |   |
|                                                                                                             |                                                 |            |                                                |        |  |  |  |  |
| INTEREST                EXPENSE                                                                             |                                            |       |                                           |   |   |   |   |   |   |   |   |   |
|  Deposits                                                                                              |                                            |       |                                           |   |   |   |   |   |   |   |   |   |
|    Savings, NOW                and money market                                              |                                            | 3,829,336  |                                           |   | 2,406,401 |   |   | 9,968,301 |   |   | 5,861,780 |   |
|    Time                                                                                      |                                            | 6,458,001  |                                           |   | 5,169,986 |   |   | 19,586,914 |   |   | 14,345,659 |   |
|  Securities sold under                agreements                   to repurchase        |                                            |       |                                           |   |   |   |   |   |   |   |   |   |
|      -                customers                                                    |                                            | 701,653    |                                           |   | 974,239 |   |   | 2,581,272 |   |   | 2,436,460 |   |
|      -                dealers                                                      |                                            | —    |                                           |   | 1,113,743 |   |   | — |   |   | 3,441,885 |   |
|  Federal                funds purchased                                                                |                                            | 71,555     |                                           |   | 305,155 |   |   | 107,303 |   |   | 691,376 |   |
|  Commercial                paper                                                                       |                                            | 367,650    |                                           |   | 610,623 |   |   | 1,072,908 |   |   | 1,553,147 |   |
|  Short-term borrowings -                FHLB                                                           |                                            | 53,071     |                                           |   | 725,385 |   |   | 53,071 |   |   | 1,560,750 |   |
|  Short-term borrowings -                other                                                          |                                            | 19,949     |                                           |   | 5,327 |   |   | 47,511 |   |   | 23,108 |   |
|  Long-term borrowings -                FHLB                                                            |                                            | 117,500    |                                           |   | 297,176 |   |   | 478,523 |   |   | 1,344,028 |   |
|  Long-term borrowings                -                   subordinated debt              |                                            | 523,438    |                                           |   | 523,438 |   |   | 1,570,313 |   |   | 1,570,313 |   |
|                                                                                                             |                                                 |            |                                                |        |  |  |  |  |
|        Total                interest expense                             |                                            | 12,142,153 |                                           |   | 12,131,473 |   |   | 35,466,116 |   |   | 32,828,506 |   |
|  Interest                expense allocated to                   discontinued operations |                                            | —    |                                           |   | (855,869 | ) |   | — |   |   | (2,508,092 | ) |
|                                                                                                             |                                                 |            |                                                |        |  |  |  |  |
| Net interest                income                                                                          |                                            | 19,100,639 |                                           |   | 18,491,633 |   |   | 54,808,966 |   |   | 56,016,281 |   |
| Provision for                loan losses                                                                    |                                            | 2,125,000  |                                           |   | 1,510,367 |   |   | 4,453,332 |   |   | 3,252,596 |   |
|                                                                                                             |                                                 |            |                                                |        |  |  |  |  |
| Net interest                income after provision                  for loan losses               |                                            | 16,975,639 |                                           |   | 16,981,266 |   |   | 50,355,634 |   |   | 52,763,685 |   |
|                                                                                                             |                                                 |            |                                                |        |  |  |  |  |
| Total                noninterest income                                                                     |                                            | 7,812,024  |                                           |   | 9,250,994 |   |   | 26,092,831 |   |   | 24,041,554 |   |
|                                                                                                             |                                                 |            |                                                |        |  |  |  |  |
| Total                noninterest expenses                                                                   |                                            | 19,421,788 |                                           |   | 19,455,237 |   |   | 59,333,569 |   |   | 56,783,171 |   |
|                                                                                                             |                                                 |            |                                                |        |  |  |  |  |
| Income from                continuing operations                 before income taxes                   |                                            | 5,365,875  |                                           |   | 6,777,023 |   |   | 17,114,896 |   |   | 20,022,068 |   |
| Provision for                income taxes                                                                   |                                            | 1,524,818  |                                           |   | 1,755,457 |   |   | 5,910,728 |   |   | 3,133,319 |   |
|                                                                                                             |                                                 |            |                                                |        |  |  |  |  |
| Income from                continuing operations                                                            |                                            | 3,841,057  |                                           |   | 5,021,566 |   |   | 11,204,168 |   |   | 16,888,749 |   |
| Discontinued                operations:                                                                     |                                            |       |                                           |   |   |   |   |   |   |   |   |   |
|  (Loss)/Income, net of                tax                                                              |                                            | (774,315   | )                                              |   | 150,752 |   |   | (795,034 | ) |   | (410,813 | ) |
|  Loss on                sale, net of tax                                                               |                                            | —    |                                           |   | (9,604,166 | ) |   | — |   |   | (9,604,166 | ) |
|                                                                                                             |                                                 |            |                                                |        |  |  |  |  |
| Net                income/(loss)                                                                            | $                                               | 3,066,742  |                                           | $      | (4,431,848 | ) | $ | 10,409,134 |   | $ | 6,873,770 |   |
|                                                                                                             |                                                 |            |                                                |        |  |  |  |  |
|                                                                                                   |
| Average number                of common                 shares outstanding                             |                                            |       |                                           |   |   |   |   |   |   |   |   |   |
|   Basic                                                                                           |                                            | 17,910,268 |                                           |   | 18,712,072 |   |   | 18,329,750 |   |   | 18,752,107 |   |
|   Diluted                                                                                         |                                            | 18,221,555 |                                           |   | 19,230,823 |   |   | 18,749,866 |   |   | 19,274,858 |   |
|                                                                                                   |
| Income from                continuing operations,                 per average common share             |                                            |       |                                           |   |   |   |   |   |   |   |   |   |
|   Basic                                                                                           | $                                               | 0.21       |                                           | $      | 0.27 |   | $ | 0.61 |   | $ | 0.90 |   |
|   Diluted                                                                                         |                                            | 0.21       |                                           |   | 0.27 |   |   | 0.60 |   |   | 0.88 |   |
|                                                                                                   |
| Net                income/(loss), per average                  common share                       |                                            |       |                                           |   |   |   |   |   |   |   |   |   |
|   Basic                                                                                           |                                            | 0.17       |                                           |   | (0.23 | ) |   | 0.57 |   |   | 0.37 |   |
|   Diluted                                                                                         |                                            | 0.17       |                                           |   | (0.23 | )(1) |   | 0.56 |   |   | 0.36 |   |
|                                                                                                   |
| Dividends per                common share                                                                   |                                            | 0.19       |                                           |   | 0.19 |   |   | 0.57 |   |   | 0.57 |   |
|                                                                                                             |                                                 |            |                                                |        |

|                                                                                                                                           |
|------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) Due to a loss for the                period, zero incremental shares are included because the effect would be                antidilutive. |
|                                                                                                                                           |
| *See Notes to                Consolidated Financial Statements.*                                                                               |

| 4 |
|---|

| STERLING                BANCORP AND SUBSIDIARIES                Consolidated Statements of Comprehensive Income/(Loss)                (Unaudited) |
|---------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                              |

|                                                                                                                     | Three Months Ended                September 30, |      | Nine Months Ended                September 30, |   |
|---------------------------------------------------------------------------------------------------------------------|-------------------------------------------------|-----------|------------------------------------------------|--------|
||
||
|                                                                                                           |
| Net                Income/(Loss)                                                                                    | $                                               | 3,066,742 |                                           | $      | (4,431,848 | ) | $ | 10,409,134 |   | $ | 6,873,770 |   |
|                                                                                                           |
| Other                comprehensive income/(loss),                 net of tax:                                  |                                            |      |                                           |   |   |   |   |   |   |   |   |   |
|  Unrealized holding                gains/(losses)                   arising during the period   |                                            | 1,150,300 |                                           |   | 1,871,726 |   |   | 254,135 |   |   | (347,805 | ) |
|                                                                                                           |
|  Reclassification                adjustment for                   losses included in net income |                                            | —   |                                           |   | — |   |   | 12 |   |   | 243,702 |   |
|                                                                                                           |
|  Amortization                of:                                                                               |                                            |      |                                           |   |   |   |   |   |   |   |   |   |
|    Prior service                cost                                                                 |                                            | 15,917    |                                           |   | — |   |   | 43,006 |   |   | — |   |
|    Net actuarial                losses                                                               |                                            | 243,256   |                                           |   | — |   |   | 608,149 |   |   | — |   |
|                                                                                                           |
|                                                                                                                     |                                                 |           |                                                |        |  |  |  |  |
| Comprehensive                income/(loss)                                                                          | $                                               | 4,476,215 |                                           | $      | (2,560,122 | ) | $ | 11,314,436 |   | $ | 6,769,667 |   |
|                                                                                                                     |                                                 |           |                                                |        |  |  |  |  |

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

| 5 |
|---|

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

|                                                                                                                                            | Nine Months Ended                September 30, |        |
|--------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------|-------------|
||
||
| Common                Stock                                                                                                                |                                           |        |   |   |   |   |
|   Balance at January                1                                                                                            | $                                              | 21,177,084  |   | $ | 21,066,916 |   |
|   Common shares                issued under stock incentive plan                                                                 |                                           | 85,086      |   |   | 110,168 |   |
|                                                                                                                                            |                                                |             |  |  |
|   Balance at                September 30                                                                                         | $                                              | 21,262,170  |   | $ | 21,177,084 |   |
|                                                                                                                                            |                                                |             |  |  |
|                                                                                                                                            |                                                |             |
| Capital                Surplus                                                                                                             |                                           |        |   |   |   |   |
|   Balance at January                1                                                                                            | $                                              | 167,960,063 |   | $ | 166,313,566 |   |
|   Common shares                issued under stock incentive plan                    and related tax benefits |                                           | 722,501     |   |   | 1,624,825 |   |
|                                                                                                                                            |                                                |             |  |  |
|   Balance at                September 30                                                                                         | $                                              | 168,682,564 |   | $ | 167,938,391 |   |
|                                                                                                                                            |                                                |             |  |  |
|                                                                                                                                            |                                                |             |
| Retained                Earnings                                                                                                           |                                           |        |   |   |   |   |
|   Balance at January                1                                                                                            | $                                              | 16,693,987  |   | $ | 20,739,352 |   |
|   Net                Income                                                                                                      |                                           | 10,409,134  |   |   | 6,873,770 |   |
|   Cash dividends paid                - common shares                                                                             |                                           | (10,372,522 | ) |   | (10,676,307 | ) |
|                                                                                                                                            |                                                |             |  |  |
|   Balance at                September 30                                                                                         | $                                              | 16,730,599  |   | $ | 16,936,815 |   |
|                                                                                                                                            |                                                |             |  |  |
|                                                                                                                                            |                                                |             |
| Accumulated                Other Comprehensive Loss                  Balance at January 1                                        | $                                              | (11,842,908 | ) | $ | (5,229,620 | ) |
|                                                                                                                                            |                                                |             |  |  |
|   Unrealized holding                gains/(losses)                    arising during the period:             |                                           |        |   |   |   |   |
|      Before                tax                                                                                    |                                           | 461,392     |   |   | (422,066 | ) |
|      Tax                effect                                                                                    |                                           | (207,257    | ) |   | 74,261 |   |
|                                                                                                                                            |                                                |             |  |  |
|        Net                of tax                                                                        |                                           | 254,135     |   |   | (347,805 | ) |
|                                                                                                                                            |                                                |             |  |  |
|   Reclassification                adjustment for losses                   included in net income:                 |                                           |        |   |   |   |   |
|      Before                tax                                                                                    |                                           | 22          |   |   | 444,631 |   |
|      Tax                effect                                                                                    |                                           | (10         | ) |   | (200,929 | ) |
|                                                                                                                                            |                                                |             |  |  |
|        Net                of tax                                                                        |                                           | 12          |   |   | 243,702 |   |
|                                                                                                                                            |                                                |             |  |  |
|   Amortization of                prior service cost and net                   actuarial losses:                   |                                           |        |   |   |   |   |
|      Before                tax                                                                                    |                                           | 1,182,199   |   |   | — |   |
|      Tax                effect                                                                                    |                                           | (531,044    | ) |   | — |   |
|                                                                                                                                            |                                                |             |  |  |
|        Net                of tax                                                                        |                                           | 651,155     |   |   | — |   |
|                                                                                                                                            |                                                |             |  |  |
|   Balance at                September 30                                                                                         | $                                              | (10,937,606 | ) | $ | (5,333,723 | ) |
|                                                                                                                                            |                                                |             |  |  |
|                                                                                                                                            |                                                |             |
| Treasury                Stock                                                                                                              |                                           |        |   |   |   |   |
|   Balance at January                1                                                                                            | $                                              | (61,725,455 | ) | $ | (55,280,647 | ) |
|   Purchase of common                shares                                                                                       |                                           | (13,621,660 | ) |   | (3,810,106 | ) |
|   Surrender of shares                issued under stock incentive plan                                                           |                                           | (455,955    | ) |   | (613,792 | ) |
|                                                                                                                                            |                                                |             |  |  |
|   Balance at                September 30                                                                                         | $                                              | (75,803,070 | ) | $ | (59,704,545 | ) |
|                                                                                                                                            |                                                |             |  |  |
|                                                                                                                                            |                                                |             |
| Unearned                Compensation                                                                                                       |                                           |        |   |   |   |   |
|   Balance at January                1                                                                                            | $                                              | —     |   | $ | (22,007 | ) |
|   Amortization of                unearned compensation                                                                           |                                           | —     |   |   | 22,007 |   |
|                                                                                                                                            |                                                |             |  |  |
|   Balance at                September 30                                                                                         | $                                              | —     |   | $ | — |   |
|                                                                                                                                            |                                                |             |  |  |
|                                                                                                                                            |                                                |             |
| Total                Shareholders’ Equity                                                                                            |                                           |        |   |   |   |   |
|   Balance at January                1                                                                                            | $                                              | 132,262,771 |   | $ | 147,587,560 |   |
|   Net changes during                the period                                                                                   |                                           | (12,328,114 | ) |   | (6,573,538 | ) |
|                                                                                                                                            |                                                |             |  |  |
|   Balance at                September 30                                                                                         | $                                              | 119,934,657 |   | $ | 141,014,022 |   |
|                                                                                                                                            |                                                |             |  |  |

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

| 6 |
|---|

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

|                                                                                                                                                                                               | Nine Months Ended                September 30, |         |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------|--------------|
||
||
| Operating                Activities                                                                                                                                                           |                                           |         |   |   |   |   |
|   Net                Income                                                                                                                                                         | $                                              | 10,409,134   |   | $ | 6,873,770 |   |
|   Loss from                discontinued operations included below in                   operating cash flows from discontinued operations                             |                                           | 795,034      |   |   | 10,014,979 |   |
|                                                                                                                                                                                               |                                                |              |  |  |
|   Income from                continuing operations                                                                                                                                  |                                           | 11,204,168   |   |   | 16,888,749 |   |
|   Adjustments to                reconcile income from continuing operations                   to net cash provided by (used in) operating                activities: |                                           |         |   |   |   |   |
|     Provision                for loan losses                                                                                                                              |                                           | 4,453,332    |   |   | 3,252,596 |   |
|     Depreciation                and amortization of premises and equipment                                                                                                |                                           | 1,925,057    |   |   | 1,719,800 |   |
|     Securities                losses                                                                                                                                      |                                           | 3,076        |   |   | 444,631 |   |
|     Income                from bank owned life insurance                                                                                                                  |                                           | (817,640     | ) |   | (712,876 | ) |
|     Deferred                income tax provision                                                                                                                          |                                           | 1,946,436    |   |   | 1,688,384 |   |
|     Proceeds                from sale of loans                                                                                                                            |                                           | 412,544,668  |   |   | 453,049,782 |   |
|     Gains                on sales of loans, net                                                                                                                           |                                           | (5,463,453   | ) |   | (7,115,048 | ) |
|     Originations                of loans held for sale                                                                                                                    |                                           | (406,657,417 | ) |   | (435,004,762 | ) |
|     Amortization                of unearned compensation                                                                                                                  |                                           | —      |   |   | 22,007 |   |
|     Amortization                of premiums on securities                                                                                                                 |                                           | 320,227      |   |   | 451,606 |   |
|     Accretion                of discounts on securities                                                                                                                   |                                           | (307,776     | ) |   | (361,529 | ) |
|     (Increase)                Decrease in accrued interest receivable                                                                                                     |                                           | (1,129,957   | ) |   | 611,641 |   |
|     Decrease                in accrued expenses and other liabilities                                                                                                     |                                           | (4,252,664   | ) |   | (2,212,370 | ) |
|     (Increase)                Decrease in other assets                                                                                                                    |                                           | (9,623,043   | ) |   | 1,417,679 |   |
|     Other,                net                                                                                                                                             |                                           | 233,974      |   |   | (609,993 | ) |
|                                                                                                                                                                                               |                                                |              |  |  |
|      Net                cash provided by operating activities                                                                                                        |                                           | 4,378,988    |   |   | 33,530,297 |   |
|                                                                                                                                                                                               |                                                |              |  |  |
| Investing                Activities                                                                                                                                                           |                                           |         |   |   |   |   |
|   Purchase of                premises and equipment                                                                                                                                 |                                           | (2,036,345   | ) |   | (1,287,069 | ) |
|   Net increase in                interest-bearing deposits                   with other banks                                                                        |                                           | (1,753,288   | ) |   | (136,206 | ) |
|   Net decrease in                federal funds sold                                                                                                                                 |                                           | 20,000,000   |   |   | — |   |
|   Net (increase)                decrease in loans held in portfolio                                                                                                                 |                                           | (71,298,358  | ) |   | (50,233,911 | ) |
|   Decrease (Increase)                in other real estate                                                                                                                           |                                           | 416,384      |   |   | (1,193,651 | ) |
|   Proceeds from calls                of securities - held to maturity                                                                                                               |                                           | 25,003,054   |   |   | — |   |
|   Proceeds from                prepayments, redemptions or maturities                   of securities - held to maturity                                             |                                           | 51,478,298   |   |   | 63,676,853 |   |
|   Purchases of                securities - held to maturity                                                                                                                         |                                           | (49,114,923  | ) |   | (115,870 | ) |
|   Proceeds from sales                of securities - available for sale                                                                                                             |                                           | 2,750        |   |   | 25,369,800 |   |
|   Proceeds from                prepayments, redemptions or maturities                   of securities - available for sale                                           |                                           | 71,831,485   |   |   | 32,406,104 |   |
|   Purchases of                securities - available for sale                                                                                                                       |                                           | (138,351,993 | ) |   | (12,816,790 | ) |
|   Cash paid in                acquisition                                                                                                                                           |                                           | —      |   |   | (44,901,402 | ) |
|                                                                                                                                                                                               |                                                |              |  |  |
|      Net                cash (used in) provided by investing activities                                                                                              |                                           | (93,822,936  | ) |   | 10,767,858 |   |
|                                                                                                                                                                                               |                                                |              |  |  |
| Financing                Activities                                                                                                                                                           |                                           |         |   |   |   |   |
|   Net increase                (decrease) in deposits                                                                                                                                |                                           | 44,806,830   |   |   | (22,950,481 | ) |
|   Long-term                borrowings called                                                                                                                                        |                                           | (10,000,000  | ) |   | — |   |
|   Net increase                (decrease) in Federal funds purchased                                                                                                                 |                                           | 44,200,000   |   |   | (35,000,000 | ) |
|   Net increase                (decrease) in other borrowings                                                                                                                        |                                           | 32,661,887   |   |   | (73,884,881 | ) |
|   Purchase of                treasury stock                                                                                                                                         |                                           | (13,621,660  | ) |   | (3,810,106 | ) |
|   Net proceeds from                issuance of common stock including                   the exercise of stock options and related tax                benefits        |                                           | 726,524      |   |   | 1,734,993 |   |
|   Cash dividends paid                on common stock                                                                                                                                |                                           | (10,372,522  | ) |   | (10,676,307 | ) |
|                                                                                                                                                                                               |                                                |              |  |  |
|      Net                cash provided by (used in) financing activities                                                                                              |                                           | 88,401,059   |   |   | (144,586,782 | ) |
|                                                                                                                                                                                          |                                                |         |  |   |
|                                                                                                                                                                                     |
| Operating cash                flows from discontinued operations                                                                                                                              |                                           | 531,305      |   |   | 102,891,164 |   |
|                                                                                                                                                                                          |                                                |         |  |   |
|                                                                                                                                                                                     |
| Net (decrease)                increase in cash and due from banks                                                                                                                             |                                           | (511,584     | ) |   | 2,602,537 |   |
| Cash and due                from banks - beginning of period                                                                                                                                  |                                           | 50,058,593   |   |   | 68,562,037 |   |
|                                                                                                                                                                                          |                                                |         |  |   |
| Cash and due                from banks - end of period                                                                                                                                        | $                                              | 49,547,009   |   | $ | 71,164,574 |   |
|                                                                                                                                                                                          |                                                |         |  |   |
| Supplemental                disclosures:                                                                                                                                                      |                                           |         |   |   |   |   |
|   Interest                paid                                                                                                                                                      | $                                              | 35,724,085   |   | $ | 32,745,564 |   |
|   Income taxes                paid                                                                                                                                                  |                                           | 953,887      |   |   | 7,467,452 |   |

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

| 7 |
|---|

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

| 1.     | The consolidated                        financial statements include the accounts of Sterling Bancorp (the                        “parent company”) and its subsidiaries, principally Sterling                        National Bank and its subsidiaries (the “bank”), after                        elimination of material intercompany transactions. The term the                        “Company” refers to Sterling Bancorp and its subsidiaries. The                        consolidated financial statements as of and for the interim periods ended                        September 30, 2007 and 2006 are unaudited; however, in the opinion of                        management, all adjustments, consisting of normal recurring accruals,                        necessary for a fair presentation of such periods have been made. Certain                        reclassifications have been made to the 2006 consolidated financial                        statements to conform to the current presentation. The interim consolidated                        financial statements should be read in conjunction with the Company’s                        annual report on Form 10-K for the year ended December 31, 2006. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 2.     | The major components of                        domestic loans held for sale and loans held in portfolio are as                        follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |

|         |                                                                                                                                                                                                     | September                30,                2007 |          | December                31,                2006 |   |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------|---------------|-------------------------------------------------|--------|
||
|         |                                                                                                                                                                                                |                                             |          |                                            |   |   |   |
|         | Loans held for                sale, net of valuation reserve                   ($880,648 at September 30, 2007 and                    $-0- at December 31, 2006) |                                             |          |                                            |   |   |   |
|         |   Real                estate-residential mortgage                                                                                                                                         | $                                                | 32,895,991    |                                            | $      | 33,319,789 |   |
|         |                                                                                                                                                                                                |                                                  |          |                                                 |   |
|         | Loans held in                portfolio                                                                                                                                                              |                                             |          |                                            |   |   |   |
|         |   Commercial and                industrial                                                                                                                                                | $                                                | 537,378,204   |                                            | $      | 522,009,835 |   |
|         |   Lease                financing                                                                                                                                                          |                                             | 278,643,030   |                                            |   | 239,225,533 |   |
|         |   Factored                receivables                                                                                                                                                     |                                             | 113,732,748   |                                            |   | 100,467,090 |   |
|         |   Real                estate-residential mortgage                                                                                                                                         |                                             | 117,675,508   |                                            |   | 120,056,900 |   |
|         |   Real                estate-commercial mortgage                                                                                                                                          |                                             | 97,574,507    |                                            |   | 93,214,668 |   |
|         |   Real                estate-construction                                                                                                                                                 |                                             | 33,522,340    |                                            |   | 30,030,684 |   |
|         |   Installment                                                                                                                                                                             |                                             | 9,978,748     |                                            |   | 12,380,848 |   |
|         |   Loans to depository                institutions                                                                                                                                         |                                             | 27,000,000    |                                            |   | 27,000,000 |   |
|         |                                                                                                                                                                                                |                                                  |          |                                                 |   |
|    |
|         |   Loans held in                portfolio, gross                                                                                                                                           |                                             | 1,215,505,085 |                                            |   | 1,144,385,558 |   |
|         |   Less unearned                discounts                                                                                                                                                  |                                             | 37,307,501    |                                            |   | 31,783,938 |   |
|         |                                                                                                                                                                                                |                                                  |          |                                                 |   |
|         |   Loans held in                portfolio, net of                    unearned discounts                                                                                | $                                                | 1,178,197,584 |                                            | $      | 1,112,601,620 |   |
|         |                                                                                                                                                                                                |                                                  |          |                                                 |   |

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

|   |                            | Three Months                Ended September 30, |         | Nine Months                Ended September 30, |        |
|--------|----------------------------|-------------------------------------------------|---------|------------------------------------------------|--------|
||
||
||
|   | Proceeds                   | $                                               | — |                                           | $      | — |   | $ | 2,750 |   | $ | 25,369,800 |   |
|   | Gross                Gains |                                            | — |                                           |   | — |   |   | — |   |   | 14,866 |   |
|   | Gross Losses               |                                            | — |                                           |   | — |   |   | 22 |   |   | 459,497 |   |

|   |
|--------|
|   | During the first                        quarter of 2006 the Company sold lower yielding available for sale                        securities at a loss to partially fund the acquisition of Sterling Resource                        Funding Corp. |
|   |
|   | The following information                is provided in connection with the calls of held to maturity                securities: |
|   |   |

|         |                            | Three Months                Ended September 30, |           | Nine Months                Ended September 30, |        |
|--------------|----------------------------|-------------------------------------------------|-----------|------------------------------------------------|--------|
||
||
||
|    |
|         | Proceeds                   | $                                               | 6,875,000 |                                           | $      | — |   | $ | 25,000,000 |   | $ | — |   |
|         | Gross                Gains |                                            | —   |                                           |   | — |   |   | — |   |   | — |   |
|         | Gross Losses               |                                            | 1,075     |                                           |   | — |   |   | 3,054 |   |   | — |   |

| 8 |
|---|

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

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

|   |                                                                                   | Three Months                Ended                September 30, |           | Nine Months                Ended                September 30, |        |
|--------|-----------------------------------------------------------------------------------|----------------------------------------------------------------|-----------|---------------------------------------------------------------|--------|
||
||
||
||
|   | COMPONENTS OF                NET PERIODIC                  BENEFIT COST |                                                           |      |                                                          |   |   |   |   |   |   |   |   |   |
|   | Service                cost                                                       | $                                                              | 577,851   |                                                          | $      | 445,618 |   | $ | 1,396,393 |   | $ | 1,359,864 |   |
|   | Interest                cost                                                      |                                                           | 769,360   |                                                          |   | 600,700 |   |   | 1,903,762 |   |   | 1,801,242 |   |
|   | Expected                return on plan assets                                     |                                                           | (720,456  | )                                                             |   | (538,923 | ) |   | (1,671,370 | ) |   | (1,647,705 | ) |
|   | Amortization                of prior service cost                                 |                                                           | 28,702    |                                                          |   | 18,985 |   |   | 78,080 |   |   | 56,791 |   |
|   | Recognized                actuarial loss                                          |                                                           | 438,985   |                                                          |   | 332,861 |   |   | 1,104,119 |   |   | 989,049 |   |
|   |                                                                              |                                                                |      |                                                               |   |  |   |  |   |
|   | Net periodic                benefit cost                                          | $                                                              | 1,094,442 |                                                          | $      | 859,241 |   | $ | 2,810,984 |   | $ | 2,559,241 |   |
|   |                                                                              |                                                                |      |                                                               |   |  |   |  |   |

|   |                                                                                                                                         |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------|
|   | The Company has contributed                $3,000,000 to the defined benefit pension plan in 2007.                                           |
|   |                                                                                                                                         |
| 5.     | The following tables set                forth the significant components of noninterest income and noninterest                expenses: |
|   |                                                                                                                                         |

|   |                                                                                                                                                                               | Three Months                Ended                September 30, |           | Nine Months                Ended                September 30, |        |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------|-----------|---------------------------------------------------------------|--------|
||
||
||
||
|   | **NONINTEREST                INCOME**                                                                                                                                         |                                                           |      |                                                          |   |   |   |   |   |   |   |   |   |
|   |   Accounts receivable                management/                    factoring commissions and                    other fees | $                                                              | 4,048,691 |                                                          | $      | 3,998,257 |   | $ | 11,537,267 |   | $ | 9,223,237 |   |
|   |   Service charges on                deposit                    accounts                                                                         |                                                           | 1,407,530 |                                                          |   | 1,351,341 |   |   | 4,313,920 |   |   | 4,037,345 |   |
|   |   Other customer                related service                    chargesand fees                                                              |                                                           | 830,485   |                                                          |   | 990,203 |   |   | 2,263,595 |   |   | 2,611,125 |   |
|   |   Mortgage banking                income                                                                                                                            |                                                           | 887,025   |                                                          |   | 2,331,076 |   |   | 6,263,101 |   |   | 7,115,048 |   |
|   |   Trust                fees                                                                                                                                         |                                                           | 131,896   |                                                          |   | 147,641 |   |   | 398,279 |   |   | 437,161 |   |
|   |   Bank owned life                insurance income                                                                                                                   |                                                           | 278,959   |                                                          |   | 224,511 |   |   | 817,640 |   |   | 712,876 |   |
|   |   Securities                (losses)/gains                                                                                                                          |                                                           | (1,075    | )                                                             |   | — |   |   | (3,076 | ) |   | (444,631 | ) |
|   |   Other                income                                                                                                                                       |                                                           | 228,513   |                                                          |   | 207,965 |   |   | 502,105 |   |   | 349,393 |   |
|   |                                                                                                                                                                          |                                                                |      |                                                               |   |  |   |  |   |
|   |             Total                noninterest income                                                               | $                                                              | 7,812,024 |                                                          | $      | 9,250,994 |   | $ | 26,092,831 |   | $ | 24,041,554 |   |
|   |                                                                                                                                                                          |                                                                |      |                                                               |   |  |   |  |   |
|   |                                                                                                                                                                          |                                                           |      |                                                          |   |   |   |   |   |

|   |                                                                              | Three Months                Ended                September 30, |            | Nine Months                Ended                September 30, |        |
|--------|------------------------------------------------------------------------------|----------------------------------------------------------------|------------|---------------------------------------------------------------|--------|
||
||
||
||
|   | **NONINTEREST                EXPENSES**                                      |                                                           |       |                                                          |   |   |   |   |   |   |   |   |   |
|   | Salaries                                                                     | $                                                              | 8,610,215  |                                                          | $      | 8,699,038 |   | $ | 26,058,446 |   | $ | 25,572,626 |   |
|   | Employee benefits                                                            |                                                           | 2,615,019  |                                                          |   | 2,393,846 |   |   | 7,839,413 |   |   | 8,066,118 |   |
|   |                                                                         |                                                                |       |                                                               |   |  |   |  |   |
|   |   Total personnel                expense                           |                                                           | 11,225,234 |                                                          |   | 11,092,884 |   |   | 33,897,859 |   |   | 33,638,744 |   |
|   | Occupancy and equipment                expenses, net                         |                                                           | 2,606,269  |                                                          |   | 2,549,552 |   |   | 7,952,606 |   |   | 7,332,527 |   |
|   | Advertising                and marketing                                     |                                                           | 888,460    |                                                          |   | 973,882 |   |   | 2,974,340 |   |   | 2,779,480 |   |
|   | Professional fees                                                            |                                                           | 1,543,628  |                                                          |   | 1,620,677 |   |   | 4,834,331 |   |   | 4,136,283 |   |
|   | Communications                                                               |                                                           | 484,929    |                                                          |   | 486,003 |   |   | 1,455,040 |   |   | 1,331,718 |   |
|   | Other expenses                                                               |                                                           | 2,673,268  |                                                          |   | 2,732,239 |   |   | 8,219,393 |   |   | 7,564,419 |   |
|   |                                                                         |                                                                |       |                                                               |   |  |   |  |   |
|   |       Total                noninterest expense | $                                                              | 19,421,788 |                                                          | $      | 19,455,237 |   | $ | 59,333,569 |   | $ | 56,783,171 |   |
|   |                                                                         |                                                                |       |                                                               |   |  |   |  |   |

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

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

| 9 |
|---|

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

|   | 64.5%                    loans (corporate lending was 68.2% and real estate lending was 27.2% of total                    loans, respectively) and 35.5% investment securities and money market                    investments. There are no industry concentrations exceeding 10% of loans,                    gross, in the corporate lending segment. Approximately 71% of loans are to                    borrowers located in the metropolitan New York area. In order to comply with                    the provisions of SFAS No. 131, the Company has determined that it has three                    reportable operating segments: corporate lending, real estate lending and                    company-wide treasury. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

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

|                                                                                                                 | Corporate                Lending |        | Real Estate                Lending |   | Company-wide                Treasury |   | Totals |        |
|-----------------------------------------------------------------------------------------------------------------|----------------------------------|-------------|------------------------------------|--------|--------------------------------------|--------|--------|-------------|
||
| Three Months Ended September                30, 2007                                                            |                             |        |                               |   |                                 |   |   |        |   |   |   |   |
| Net interest                income                                                                              | $                                | 6,998,194   |                               | $      | 5,498,701                            |   | $      | 6,339,623   |   | $ | 18,836,518 |   |
| Noninterest                income                                                                               |                             | 5,992,283   |                               |   | 949,973                              |   |   | 353,452     |   |   | 7,295,708 |   |
| Depreciation                and amortization                                                                    |                             | 165,464     |                               |   | 88,343                               |   |   | 614         |   |   | 254,421 |   |
| Segment income                from continuing operations                   before income taxes   |                             | 5,295,787   |                               |   | 2,610,963                            |   |   | 6,056,388   |   |   | 13,963,138 |   |
| Segment loss                from discontinued operations                   before income taxes   |                             | (1,269,143  | )                                  |   | —                              |   |   | —     |   |   | (1,269,143 | ) |
| Segment assets                from continuing operations                                                        |                             | 808,342,295 |                               |   | 376,312,543                          |   |   | 765,055,742 |   |   | 1,949,710,580 |   |
| Segment assets                from discontinued operations                                                      |                             | —     |                               |   | —                              |   |   | —     |   |   | — |   |
|                                                                                                            |                             |        |                               |   |                                 |   |   |        |   |   |   |   |
| Three                Months Ended September 30, 2006                                                            |                             |        |                               |   |                                 |   |   |        |   |   |   |   |
| Net interest                income                                                                              | $                                | 9,667,017   |                               | $      | 5,420,192                            |   | $      | 3,150,192   |   | $ | 18,237,401 |   |
| Noninterest                income                                                                               |                             | 6,014,122   |                               |   | 2,408,098                            |   |   | 425,911     |   |   | 8,848,131 |   |
| Depreciation                and amortization                                                                    |                             | 168,349     |                               |   | 91,891                               |   |   | 614         |   |   | 260,854 |   |
| Segment income                from continuing operations                   before income taxes   |                             | 6,915,956   |                               |   | 3,429,499                            |   |   | 2,969,068   |   |   | 13,314,523 |   |
| Segment income                from discontinued operations                   before income taxes |                             | 327,967     |                               |   | —                              |   |   | —     |   |   | 327,967 |   |
| Segment assets                from continuing operations                                                        |                             | 775,097,961 |                               |   | 371,995,560                          |   |   | 755,315,897 |   |   | 1,902,409,418 |   |
| Segment assets                from discontinued operations                                                      |                             | 7,016,412   |                               |   | —                              |   |   | —     |   |   | 7,016,412 |   |
|                                                                                                            |                             |        |                               |   |                                 |   |   |        |   |   |   |   |
| Nine Months                Ended September 30, 2007                                                             |                             |        |                               |   |                                 |   |   |        |   |   |   |   |
| Net interest                income                                                                              | $                                | 19,815,718  |                               | $      | 15,867,406                           |   | $      | 18,361,453  |   | $ | 54,044,577 |   |
| Noninterest                income                                                                               |                             | 17,225,684  |                               |   | 6,443,302                            |   |   | 1,065,926   |   |   | 24,734,912 |   |
| Depreciation                and amortization                                                                    |                             | 536,404     |                               |   | 274,832                              |   |   | 1,843       |   |   | 813,079 |   |
| Segment income                from continuing operations                   before income taxes   |                             | 13,593,092  |                               |   | 10,715,839                           |   |   | 17,505,063  |   |   | 41,813,994 |   |
| Segment loss                from discontinued operations                   before income taxes   |                             | (1,306,865  | )                                  |   | —                              |   |   | —     |   |   | (1,306,865 | ) |
| Segment assets                from continuing operations                                                        |                             | 808,342,295 |                               |   | 376,312,543                          |   |   | 765,055,742 |   |   | 1,949,710,580 |   |
| Segment assets                from discontinued operations                                                      |                             | —     |                               |   | —                              |   |   | —     |   |   | — |   |
|                                                                                                            |                             |        |                               |   |                                 |   |   |        |   |   |   |   |
| Nine Months                Ended September 30, 2006                                                             |                             |        |                               |   |                                 |   |   |        |   |   |   |   |
| Net interest                income                                                                              | $                                | 27,240,511  |                               | $      | 16,259,425                           |   | $      | 11,731,459  |   | $ | 55,231,395 |   |
| Noninterest                income                                                                               |                             | 14,632,797  |                               |   | 7,345,291                            |   |   | 612,353     |   |   | 22,590,441 |   |
| Depreciation                and amortization                                                                    |                             | 446,642     |                               |   | 293,893                              |   |   | 1,843       |   |   | 742,378 |   |
| Segment income                from continuing operations                   before income taxes   |                             | 19,863,386  |                               |   | 9,621,155                            |   |   | 10,650,366  |   |   | 40,134,907 |   |
| Segment loss                from discontinued operations                   before income taxes   |                             | (689,560    | )                                  |   | —                              |   |   | —     |   |   | (689,560 | ) |
| Segment assets                from continuing operations                                                        |                             | 775,097,961 |                               |   | 371,995,560                          |   |   | 755,315,897 |   |   | 1,902,409,418 |   |
| Segment assets                from discontinued operations                                                      |                             | 7,016,412   |                               |   | —                              |   |   | —     |   |   | 7,016,412 |   |

| 10 |
|----|

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

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

|                                                                                                                          | Three Months                Ended September 30, |               | Nine Months                Ended September 30, |        |
|--------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------|---------------|------------------------------------------------|--------|
||
||
||
|                                                                                                           |
| Net interest                income:                                                                                      |                                            |          |                                           |   |   |   |   |   |   |   |   |   |
|     Total                for reportable operating segments                                           | $                                               | 18,836,518    |                                           | $      | 18,237,401 |   | $ | 54,044,577 |   | $ | 55,231,395 |   |
|     Other                [1]                                                                         |                                            | 264,121       |                                           |   | 254,232 |   |   | 764,389 |   |   | 784,886 |   |
|                                                                                                                     |                                                 |          |                                                |   |  |   |  |   |
|                                                                                                           |
| Consolidated                net interest income                                                                          | $                                               | 19,100,639    |                                           | $      | 18,491,633 |   | $ | 54,808,966 |   | $ | 56,016,281 |   |
|                                                                                                                     |                                                 |          |                                                |   |  |   |  |   |
|                                                                                                           |
| Noninterest                income:                                                                                       |                                            |          |                                           |   |   |   |   |   |   |   |   |   |
|     Total                for reportable operating segments                                           | $                                               | 7,295,708     |                                           | $      | 8,848,131 |   | $ | 24,734,912 |   | $ | 22,590,441 |   |
|     Other                [1]                                                                         |                                            | 516,316       |                                           |   | 402,863 |   |   | 1,357,919 |   |   | 1,451,113 |   |
|                                                                                                                     |                                                 |          |                                                |   |  |   |  |   |
|                                                                                                           |
| Consolidated                noninterest income                                                                           | $                                               | 7,812,024     |                                           | $      | 9,250,994 |   | $ | 26,092,831 |   | $ | 24,041,554 |   |
|                                                                                                                     |                                                 |          |                                                |   |  |   |  |   |
| Income from                continuing operations before                  income taxes:                         |                                            |          |                                           |   |   |   |   |   |   |   |   |   |
|     Total                for reportable operating segments                                           | $                                               | 13,963,138    |                                           | $      | 13,314,523 |   | $ | 41,813,994 |   | $ | 40,134,907 |   |
|     Other                [1]                                                                         |                                            | (8,597,263    | )                                              |   | (6,537,500 | ) |   | (24,699,098 | ) |   | (20,112,839 | ) |
|                                                                                                                     |                                                 |          |                                                |   |  |   |  |   |
|                                                                                                           |
| Consolidated                income from continuing operations                    before income taxes | $                                               | 5,365,875     |                                           | $      | 6,777,023 |   | $ | 17,114,896 |   | $ | 20,022,068 |   |
|                                                                                                                     |                                                 |          |                                                |   |  |   |  |   |
|                                                                                                           |
| Assets:                                                                                                                  |                                            |          |                                           |   |   |   |   |   |   |   |   |   |
|     Total                for reportable operating segments:                                          |                                            |          |                                           |   |   |   |   |   |   |   |   |   |
|      -                continuing operations                                                     | $                                               | 1,949,710,580 |                                           | $      | 1,902,409,418 |   | $ | 1,949,710,580 |   | $ | 1,902,409,418 |   |
|      -                discontinued operations                                                   |                                            | —       |                                           |   | 7,016,412 |   |   | — |   |   | 7,016,412 |   |
|     Other                [1]                                                                         |                                            | 31,028,739    |                                           |   | 31,789,541 |   |   | 31,028,739 |   |   | 31,789,541 |   |
|                                                                                                                     |                                                 |          |                                                |   |  |   |  |   |
|                                                                                                           |
| Consolidated                assets                                                                                       | $                                               | 1,980,739,319 |                                           | $      | 1,941,215,371 |   | $ | 1,980,739,319 |   | $ | 1,941,215,371 |   |
|                                                                                                                     |                                                 |          |                                                |   |  |   |  |   |

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

| 11 |
|----|

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

| 7.     | The Company adopted                        Emerging Issues Task Force Issue No. 06-5, *Accounting for Purchases of                        Life Insurance-Determining the Amount that Could be Realized in Accordance                        with FASB Technical Bulletin* No. *85-4*, *Accounting for                        Purchases of Life Insurance,* and Statement of Financial Accounting                        Standards (“SFAS”) No. 156, *Accounting for Servicing of                        Financial Assets-An Amendment of FASB Statement No. 140*, as of January                        1, 2007. There was no material impact on the Company’s results of                        operations or financial condition upon adoption.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | The                    Company also adopted Financial Accounting Standards Board (“FASB”)                    Interpretation No. 48 (“FIN 48”) as of January 1, 2007. The                    implementation of FIN 48 did not have an impact on our financial position or                    results of operations. At the adoption date of January 1, 2007, we had                    approximately $644,000 of unrecognized tax benefits, all of which would affect                    our effective tax rate if recognized. Approximately $341,000 of the                    unrecognized tax benefits were recognized during the third quarter of 2007 due                    to the expiration of the statute of limitations related to the taxation of                    certain income items. The Company recognizes interest accrued related to                    unrecognized tax benefits and penalties in noninterest operating expenses. Such                    accrued interest payable was approximately $235,000 at January 1, 2007 and                    $117,000 at September 30, 2007. The Company and its subsidiaries are subject to                    U.S. federal income tax as well as income tax of multiple state jurisdictions.                    The Company’s federal income tax returns for 2002 through 2005 are                    currently either under examination or subject to examination. The                    Company’s New York State and New York City tax returns for years prior to                    2003 are no longer subject to examination.

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

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

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

| 12 |
|----|

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

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

**OVERVIEW**

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

For the                    three months ended September 30, 2007, the bank’s average earning assets                    represented approximately 99.7% of the Company’s average earning assets.                    Loans represented 65.5% and investment securities represented 33.4% of the                    bank’s average earning assets for the third quarter of 2007.

For the                    nine months ended September 30, 2007, the bank’s average earning assets                    represented approximately 99.7% of the Company’s average earning assets.                    Loans represented 64.4% and investment securities represented 33.6% of the                    bank’s average earning assets for the nine months ended September 30,                    2007.

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

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

| 13 |
|----|

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

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

**INCOME                    STATEMENT ANALYSIS**

Net                    interest income, which represents the difference between interest earned on                    interest-earning assets and interest incurred on interest-bearing liabilities,                    is the Company’s primary source of earnings. Net interest income can be                    affected by changes in market interest rates as well as the level and                    composition of assets, liabilities and shareholders’ equity. Net interest                    spread is the difference between the average rate earned, on a tax-equivalent                    basis, on interest-earning assets and the average rate paid on interest-bearing                    liabilities. The net yield on interest-earning assets (“net interest                    margin”) is calculated by dividing tax-equivalent net interest income by                    average interest-earning assets. Generally, the net interest margin will exceed                    the net interest spread because a portion of interest-earning assets are funded                    by various noninterest-bearing sources, principally noninterest-bearing                    deposits and shareholders’ equity. The increases (decreases) in the                    components of interest income and interest expense, expressed in terms of                    fluctuation in average volume and rate, are provided in the Rate/Volume                    Analysis shown on pages 28 and 29. Information as to the components of interest                    income and interest expense and average rates is provided in the Average                    Balance Sheets shown on pages 26 and 27.

**Comparison of the Three                    Months Ended September 30, 2007 and 2006**

The                    Company reported income from continuing operations, after income taxes, for the                    three months ended September 30, 2007 of $3.8 million, representing $0.21 per                    share, calculated on a diluted basis, compared to $5.0 million, or $0.27 per                    share calculated on a diluted basis, for the third quarter of 2006. This                    decrease reflects higher interest expense, lower noninterest income and an                    increase in the provision for loan losses, which were only partially offset by                    an increase in interest income and a decrease in the provision for income                    taxes. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 14 |
|----|

| *Net                    Interest Income*  

Net                    interest income, on a tax-equivalent basis, was $19.2 million for the third                    quarter of 2007 compared to $18.6 million for the 2006 period. Net interest                    income benefited from higher loan balances and lower balances from borrowed                    funds. Partially offsetting those benefits was the impact of lower balances for                    investment securities and higher interest-bearing deposit balances along with                    higher rates paid for those funds. The net interest margin, on a tax-equivalent                    basis, was 4.41% for the third quarter of 2007 compared to 4.49% for the                    2006 period. The net interest margin was impacted by the higher interest rate                    environment in 2007, the higher level of noninterest-bearing demand deposits                    and the higher average loans outstanding. The more competitive pricing                    practices in the Company’s markets have caused the costs of deposits to                    increase faster than the yield on earning assets.

Total                    interest income, on a tax-equivalent basis, aggregated $31.4 million for the                    third quarter of 2007 compared to $29.9 million for the 2006 period. The                    tax-equivalent yield on interest-earning assets was 7.31% for the third quarter                    of 2007 compared to 7.24% for the 2006 period.

Interest                    earned on loans amounted to $24.1 million for the third quarter of 2007, up                    from $22.6 million for the prior year period. Average loan balances amounted to                    $1,133.0 million, an increase of $81.5 million from an average of $1,051.5                    million in the prior year period. The increase in average loans (across many                    segments of the Company’s loan portfolio), primarily due to the                    Company’s business development activities, accounted for $2.1 million of                    the $1.5 million increase in interest earned on loans. The decrease in the                    yield on the loan portfolio to 8.68% for the third quarter of 2007 from 8.94%                    for the 2006 period was primarily attributable to the mix of average                    outstanding balances among the components of the loan portfolio and the                    competitive pricing practices in the Company’s markets.

Interest                    earned on investment securities, on a tax-equivalent basis, decreased to $7.0                    million for the third quarter of 2007 from $7.3 million in the prior year                    period. Average outstandings decreased to $575.3 million (33.3% of average                    earning assets) for the third quarter of 2007 from $629.3 million (37.4% of                    average earning assets) in the prior year period. The estimated average life of                    the securities portfolio was approximately 5.6 years at September 30, 2007                    compared to 4.6 years at September 30, 2006.

Total                    interest expense increased by $0.9 million for the third quarter of 2007 from                    $11.3 million for the 2006 period, primarily due to the impact of higher                    balances and higher rates paid for interest-bearing deposits partially offset                    by the impact of lower borrowed funds balances.

Interest                    expense on deposits increased to $10.3 million for the third quarter of 2007                    from $7.6 million for the 2006 period, due to an increase in deposit balances                    and the cost of those funds. Average interest-bearing deposits increased to                    $1,093.3 million for the third quarter of 2007 from $933.5 million for the 2006                    period as a result of the Company’s business development activities. The                    average rate paid on interest-bearing deposits was 3.73% which was 51 basis                    points higher than the prior year period. The increase in average cost of                    deposits reflects the higher interest rate environment during 2007. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 15 |
|----|

| Interest                    expense on borrowings decreased to $1.9 million for the third quarter of 2007                    from $4.6 million for the 2006 period, primarily due to a decrease in average                    balances. Average borrowings decreased to $144.3 million for the third quarter                    of 2007 from $348.7 million in the prior year period, reflecting less reliance                    by the Company on wholesale funding.

*Provision for Loan                    Losses*

Based on                    management’s continuing evaluation of the loan portfolio (discussed under                    “Asset Quality” below), the provision for loan losses for the third                    quarter of 2007 was $2.1 million, compared to $1.5 million for the prior year                    period. Factors affecting the level of the provision included the growth in and                    the changing mix of loans in the loan portfolio, changes in general economic                    conditions and the amount of nonaccrual loans.

*Noninterest                    Income*

Noninterest income                    decreased to $7.8 million for the third quarter of 2007 from $9.3 million in                    the 2006 period, primarily due to a decrease in mortgage banking income as a                    result of a revaluation charge to reduce the carrying value of residential                    mortgage loans held for sale to the lower of cost or market and a charge for                    settlement of potential repurchase obligations as part of our loss                    mitigation efforts. Without those charges, mortgage banking income would have                    been $2.6 million for the third quarter of 2007 compared to $ 2.3 million for                    the 2006 period as a result of an increased emphasis by the Company’s                    mortgage banking unit on originating FHA-insured loans and other high quality                    products.

*Provision for Income                    Taxes*

The                    provision for income taxes for the third quarter of 2007 was $1.5 million                    compared to $1.8 million for the third quarter of 2006. The decrease was                    primarily due to the lower level of pre-tax income in the 2007 period. As a                    result of the closure of certain years for local tax purposes, $0.3 million of                    reserves for local taxes, net of federal and state tax effect, were                    reversed in the third quarter of 2007 compared to $0.7 million in the 2006                    period.

*Discontinued                    Operations*

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

Loss                    from discontinued operations, net of tax, was $0.8 million for the third                    quarter of 2007, primarily related to the final disposition of assets                    associated with the discontinued operation. For the 2006 period, there was                    income of $0.2 million.

Income                    taxes applicable to discontinued operations in the third quarter of 2007 and                    2006 were calculated at the Company’s overall marginal tax rates of                    44.92% and 45.19%, respectively. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 16 |
|----|

| **Comparison of the Nine                    Months Ended September 30, 2007 and 2006**

The                    Company reported income from continuing operations, after income taxes, for the                    nine months ended September 30, 2007 of $11.2 million, representing $0.60 per                    share, calculated on a diluted basis, compared to $16.9 million, or $0.88 per                    share, calculated on a diluted basis, for the first nine months of 2006. This                    decrease reflects higher interest and noninterest expenses and increases in the                    provision for loan losses and the provision for income taxes, which were only                    partially offset by increases in both interest and noninterest                    income.

*Net                    Interest Income*  

Net                    interest income, on a tax-equivalent basis, was $55.2 million for the first                    nine months of 2007 compared to $56.6 million for the 2006 period, as the                    positive impact of higher balances for loans and lower balances for borrowings                    in the first nine months of 2007 was more than offset by the effects of lower                    balances for investment securities and higher interest-bearing deposit balances                    along with higher rates paid for those funds compared to the 2006 period. The                    net interest margin, on a tax-equivalent basis, was 4.44% for the first                    nine months of 2007 compared to 4.60% for the 2006 period. The net                    interest margin was impacted by the higher interest rate environment in 2007,                    the higher level of noninterest-bearing demand deposits and the higher average                    loans outstanding. The more competitive pricing practices in the                    Company’s markets have caused the costs of deposits and borrowings to                    increase faster than the yield on earning assets.

Total                    interest income, on a tax-equivalent basis, aggregated $90.6 million for the                    first nine months of 2007, up $3.8 million from the 2006 period. The                    tax-equivalent yield on interest-earning assets was 7.34% for the first nine                    months of 2007 compared to 7.10% for the 2006 period.

Interest                    earned on loans amounted to $69.0 million for the first nine months of 2007, up                    from $63.6 million for the prior year period. Average loan balances amounted to                    $1,097.3 million, an increase of $78.4 million from an average of $1,018.9                    million in the prior year period. The increase in average loans (across many                    segments of the Company’s loan portfolio), primarily due to the                    acquisition of Sterling Resource Funding Corp. (completed April 1, 2006)                    coupled with the Company’s other business development activities,                    accounted for $5.5 million of the $5.4 million increase in interest earned on                    loans.

Interest                    earned on investment securities, on a tax-equivalent basis, decreased to $20.3                    million for the first nine months of 2007 from $23.2 million in the prior year                    period. Average outstandings decreased to $569.9 million (33.5% of average                    earning assets) for the first nine months of 2007 from $666.2 million (39.4% of                    average earning assets) in the prior year period. The estimated average life of                    the securities portfolio was approximately 5.6 years at September 30, 2007                    compared to 4.6 years at September 30, 2006.

Total                    interest expense increased by $5.1 million for the first nine months of 2007                    from $30.3 million for the 2006 period, primarily due to the impact of higher                    interest-bearing deposit balances coupled with higher rates paid for those                    deposits, partially offset by the impact of lower borrowed funds                    balances.

Interest                    expense on deposits increased to $29.6 million for the first nine                    months of 2007 from $20.2 million for the 2006 period, due to increases in                    interest-bearing deposit balances and in the cost of those funds. Average                    interest-bearing deposit balances increased to $1,053.8 million for the first                    nine months of 2007 from $940.5 million in the 2006 period primarily the result                    of the Company’s branching initiatives and other business development                    activities. The average rate paid on interest-bearing deposits was 3.75% which                    was 88 basis points higher than the prior year period. The increase in average                    cost of deposits reflects the higher interest rate environment during                    2007. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 17 |
|----|

| Interest                    expense on borrowings decreased to $5.9 million for the first nine months of                    2007 from $12.6 million for the 2006 period, primarily due to a decrease in                    average balances. Average borrowings decreased to $153.0 million for the                    first nine months of 2007 from $346.5 million in the prior year period,                    reflecting less reliance by the Company on wholesale funding.

*Provision for Loan                    Losses*

Based on                    management’s continuing evaluation of the loan portfolio (discussed under                    “Asset Quality” below), the provision for loan losses for the first                    nine months of 2007 was $4.5 million, compared to $3.3 million for the prior                    year period. Factors affecting the level of the provision included the growth                    in and the changing mix of loans in the loan portfolio, changes in general                    economic conditions and the amount of nonaccrual loans.

*Noninterest                    Income*

Noninterest income                    increased to $26.1 million for the first nine months of 2007 from $24.0 million                    in the 2006 period. Higher accounts receivable management/ factoring                    commissions and other fees were primarily due to revenues attributable to the                    acquisition of Sterling Resource Funding Corp. Also contributing to the                    increase were higher revenue from service charges on deposit accounts and a                    $0.4 million decrease in losses on sales of securities. Mortgage banking income                    decreased as a result of the revluation charge to reduce the carrying value of                    residential mortgage loans held for sale to the lower of cost or market and a                    charge for settlement of potential repurchase obligations as part of our loss                    mitigation efforts. Without those charges mortgage banking income would have                    been $8.0 million for the nine months of 2007 compared to $7.1 million for the                    2006 period as a result of a change in product mix towards more profitable                    market segments and away from the less profitable, higher risk wholesale                    business.

*Noninterest                    Expenses*

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

*Provision for Income                    Taxes*

The                    provision for income taxes increased by $2.8 million to $5.9 million for the                    first nine months of 2007. The increase was primarily due to a $3.7 million                    reversal of state and local taxes, net of federal tax effect, in the first                    quarter of 2006 as a result of the closure of certain years for local tax                    purposes.

*Discontinued                    Operations*

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

Loss                    from discontinued operations, net of tax, was $0.8 million for the first nine                    months of 2007, which included a loss of $0.8 million for the third quarter                    related to the final disposition of assets associated with the discontinued                    operation. For the 2006 period, there was a loss of $0.4 million.

Income                    taxes applicable to discontinued operations in the first nine months of 2007                    and 2006 were calculated at the Company’s overall marginal tax rate of                    44.92% and 45.19%, respectively. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 18 |
|----|

| **BALANCE                    SHEET ANALYSIS**

*Securities*                     

The                    Company’s securities portfolios are comprised principally of                    mortgage-backed securities and agency notes of U.S. government corporations and                    government sponsored enterprises, and obligations of state and political                    institutions. At September 30, 2007, the Company’s portfolio of                    securities totaled $608.9 million, of which mortgage-backed securities and                    collateralized mortgage obligations of U.S. government corporations and                    government sponsored enterprises having an estimated average life of                    approximately 4.8 years amounted to $473.1 million. The Company has the intent                    and ability to hold to maturity securities classified as “held to                    maturity.” These securities are carried at cost, adjusted for                    amortization of premiums and accretion of discounts. The gross unrealized gains                    and gross unrealized losses on “held to maturity” securities were                    $1.0 million and $7.6 million, respectively. Securities classified as                    “available for sale” may be sold in the future, prior to maturity.                    These securities are carried at market value. Net aggregate unrealized gains or                    losses on these securities are included in a valuation allowance account and                    are shown net of taxes, as a component of shareholders’ equity. Given the                    generally high credit quality of the portfolio, management expects to realize                    all of its investment upon market recovery or the maturity of such instruments                    and thus believes that any market value impairment is interest rate related and                    therefore temporary. “Available for sale” securities included gross                    unrealized gains of $0.1 million and gross unrealized losses of $4.0                    million.

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

|                                                                                           | Estimated                Weighted Average Life |                           | Weighted                Average Yield |        |
|-------------------------------------------------------------------------------------------|------------------------------------------------|---------------------------|---------------------------------------|--------|
||
||
||
|                                                                                      |                                           |                      |                                  |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed                  securities                                     |                                           | 5.2 years                 |                                  |   | 4.6 years |   |   | 4.81 | % |   |   | 4.63 | % |
| Agency                notes                                                               |                                           | 11.8                years |                                  |   | 7.1                years |   |   | 6.12 | % |   |   | 4.69 | % |
| Obligations of                state                  and political institutions |                                           | 5.7                years  |                                  |   | — |   |   | 6.29 | % | (1) |   | — |   |

|                              |
|-----------------------------------|
| (1) tax                equivalent |

| 19 |
|----|

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

| September 30,                2007                                                                                                                                                                                                                                                                                                                        |   | Amortized                Cost |        | Gross                Unrealized                Gains |   | Gross                Unrealized                Losses |   | Estimated                Market                Value |      |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|-------------|------------------------------------------------------|--------|-------------------------------------------------------|--------|------------------------------------------------------|-----------|
||
| Mortgage-backed                securities                                                                                                                                                                                                                                                                                                                |   |                          |        |                                                 |   |                                                  |   |                                                 |      |   |   |   |   |
|   CMOs (Federal                National                    Mortgage Association)                                                                                                                                                                                                                                           |   | $                             | 8,872,358   |                                                 | $      | —                                               |   | $                                                    | 433,234   |   | $ | 8,439,124 |   |
|   CMOs (Federal Home                Loan                    Mortgage Corporation)                                                                                                                                                                                                                                          |   |                          | 22,398,469  |                                                 |   | —                                               |   |                                                 | 1,151,608 |   |   | 21,246,861 |   |
|   CMOs (Government                National                    Mortgage Association)                                                                                                                                                                                                                                        |   |                          | 9,691,802   |                                                 |   | —                                               |   |                                                 | 38,706    |   |   | 9,653,096 |   |
|   Federal National                Mortgage                    Association                                                                                                                                                                                                                                                  |   |                          | 44,655,878  |                                                 |   | 77,559                                                |   |                                                 | 1,100,287 |   |   | 43,633,150 |   |
|   Federal Home Loan                Mortgage                    Corporation                                                                                                                                                                                                                                                 |   |                          | 38,399,216  |                                                 |   | 8,640                                                 |   |                                                 | 1,019,310 |   |   | 37,388,546 |   |
|   Government National                Mortgage                    Association                                                                                                                                                                                                                                               |   |                          | 3,533,044   |                                                 |   | 107,645                                               |   |                                                 | 3,498     |   |   | 3,637,191 |   |
|                                                                                                                                                                                                                                                                                                                                                     |   |                               |        |                                                      |   |                                                       |   |                                                      |      |
|       Total                mortgage-backed                        securities                                                                                                                                                                                                       |   |                          | 127,550,767 |                                                 |   | 193,844                                               |   |                                                 | 3,746,643 |   |   | 123,997,968 |   |
| Agency                Notes                                                                                                                                                                                                                                                                                                                              |   |                          |        |                                                 |   |                                                  |   |                                                 |      |   |   |   |   |
|   Federal Home Loan                Bank                                                                                                                                                                                                                                                                                                        |   |                          | 25,205,870  |                                                 |   | 178,206                                               |   |                                                 | —   |   |   | 25,384,076 |   |
|   Federal Farm Credit                Bank                                                                                                                                                                                                                                                                                                      |   |                          | 19,990,010  |                                                 |   | 59,375                                                |   |                                                 | 2,510     |   |   | 20,046,875 |   |
|                                                                                                                                                                                                                                                                                                                                                     |   |                               |        |                                                      |   |                                                       |   |                                                      |      |
|      Total                obligations of U.S.                       Government corporations                         and government sponsored                            enterprises |   |                          | 172,746,647 |                                                 |   | 431,425                                               |   |                                                 | 3,749,153 |   |   | 169,428,919 |   |
| Obligations of                state and                  political institutions                                                                                                                                                                                                                                                                |   |                          | 19,841,457  |                                                 |   | 111,100                                               |   |                                                 | 67,679    |   |   | 19,884,878 |   |
| Corporate                bonds                                                                                                                                                                                                                                                                                                                           |   |                          | 8,701,878   |                                                 |   | 119,680                                               |   |                                                 | 31,238    |   |   | 8,790,320 |   |
| Commercial                paper                                                                                                                                                                                                                                                                                                                          |   |                          | 9,981,944   |                                                 |   | 1,705                                                 |   |                                                 | —   |   |   | 9,983,649 |   |
| Trust                preferred securities                                                                                                                                                                                                                                                                                                                |   |                          | 2,916,057   |                                                 |   | 7,036                                                 |   |                                                 | 146,934   |   |   | 2,776,159 |   |
| Federal                Reserve Bank stock                                                                                                                                                                                                                                                                                                                |   |                          | 1,130,700   |                                                 |   | —                                               |   |                                                 | —   |   |   | 1,130,700 |   |
| Federal Home                Loan Bank stock                                                                                                                                                                                                                                                                                                              |   |                          | 3,109,700   |                                                 |   | —                                               |   |                                                 | —   |   |   | 3,109,700 |   |
| Other                securities                                                                                                                                                                                                                                                                                                                          |   |                          | 304,442     |                                                 |   | 17,721                                                |   |                                                 | —   |   |   | 322,163 |   |
|                                                                                                                                                                                                                                                                                                                                                     |   |                               |        |                                                      |   |                                                       |   |                                                      |      |
|         Total                                                                                                                                                                                                                                                                                                    |   | $                             | 218,732,825 |                                                 | $      | 688,667                                               |   | $                                                    | 3,995,004 |   | $ | 215,426,488 |   |
|                                                                                                                                                                                                                                                                                                                                                     |   |                               |        |                                                      |   |                                                       |   |                                                      |      |

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

| September 30,                2007                                                                                                                                                                                                                                                                                          |   | Carrying                Value |        | Gross                Unrealized                Gains |   | Gross                Unrealized                Losses |   | Estimated                Market                Value |      |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|-------------|------------------------------------------------------|--------|-------------------------------------------------------|--------|------------------------------------------------------|-----------|
||
| Mortgage-backed                securities                                                                                                                                                                                                                                                                                  |   |                          |        |                                                 |   |                                                  |   |                                                 |      |   |   |   |   |
|   CMOs (Federal                National                    Mortgage Association)                                                                                                                                                                                                             |   | $                             | 12,380,857  |                                                 | $      | —                                               |   | $                                                    | 460,052   |   | $ | 11,920,805 |   |
|   CMOs (Federal Home                Loan                    Mortgage Corporation)                                                                                                                                                                                                            |   |                          | 21,392,620  |                                                 |   | —                                               |   |                                                 | 825,634   |   |   | 20,566,986 |   |
|   Federal National                Mortgage                    Association                                                                                                                                                                                                                    |   |                          | 179,645,179 |                                                 |   | 254,642                                               |   |                                                 | 3,008,423 |   |   | 176,891,398 |   |
|   Federal Home Loan                Mortgage                    Corporation                                                                                                                                                                                                                   |   |                          | 126,637,929 |                                                 |   | 103,191                                               |   |                                                 | 3,285,367 |   |   | 123,455,753 |   |
|   Government National                Mortgage                    Association                                                                                                                                                                                                                 |   |                          | 9,086,869   |                                                 |   | 219,305                                               |   |                                                 | 732       |   |   | 9,305,442 |   |
|                                                                                                                                                                                                                                                                                                                       |   |                               |        |                                                      |   |                                                       |   |                                                      |      |
|       Total                mortgage-backed                        securities                                                                                                                                                                         |   |                          | 349,143,454 |                                                 |   | 577,138                                               |   |                                                 | 7,580,208 |   |   | 342,140,384 |   |
| Agency                Notes                                                                                                                                                                                                                                                                                                |   |                          |        |                                                 |   |                                                  |   |                                                 |      |   |   |   |   |
|   Federal Home Loan                Bank                                                                                                                                                                                                                                                                          |   |                          | 24,996,414  |                                                 |   | 396,875                                               |   |                                                 | 4,226     |   |   | 25,389,063 |   |
|   Federal Farm Credit                Bank                                                                                                                                                                                                                                                                        |   |                          | 19,111,402  |                                                 |   | 9,985                                                 |   |                                                 | 6,250     |   |   | 19,115,137 |   |
|                                                                                                                                                                                                                                                                                                                       |   |                               |        |                                                      |   |                                                       |   |                                                      |      |
|     Total                obligations of U.S.                      government corporations                        and government sponsored                          enterprises |   |                          | 393,251,270 |                                                 |   | 983,998                                               |   |                                                 | 7,590,684 |   |   | 386,644,584 |   |
|  Debt                securities issued by                   foreign governments                                                                                                                                                                                                                        |   |                          | 250,000     |                                                 |   | —                                               |   |                                                 | 1,430     |   |   | 248,570 |   |
|                                                                                                                                                                                                                                                                                                                       |   |                               |        |                                                      |   |                                                       |   |                                                      |      |
|         Total                                                                                                                                                                                                                                                                      |   | $                             | 393,501,270 |                                                 | $      | 983,998                                               |   | $                                                    | 7,592,114 |   | $ | 386,893,154 |   |
|                                                                                                                                                                                                                                                                                                                       |   |                               |        |                                                      |   |                                                       |   |                                                      |      |

| 20 |
|----|

| The                    Company invests principally in obligations of U.S. government corporations and                    government sponsored enterprises and other securities that have an                    “A” or better rating. The unrealized losses were the result of                    changes in interest rates and other market related conditions. As of September                    30, 2007, the Company has the ability and intent to hold these securities until                    maturity or for a period of time sufficient for a recovery of cost and                    therefore, does not consider them to be other-than-temporarily-impaired at that                    date.

*Loan                    Portfolio*

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

The                    Company’s commercial and industrial loan portfolio represents                    approximately 44% of all loans. Loans in this category are typically made to                    small and medium-sized businesses and range between $25,000 and $10 million.                    The Company’s real estate mortgage portfolio, which represents                    approximately 23% of all loans, is secured by mortgages on real property                    located principally in the states of New York, New Jersey, Virginia and North                    Carolina. The Company’s leasing portfolio, which consists of finance                    leases for various types of business equipment, represents approximately 20% of                    all loans. Sources of repayment are from the borrower’s operating                    profits, cash flows and liquidation of pledged collateral. Based on                    underwriting standards, loans may be secured in whole or in part by collateral                    such as liquid assets, accounts receivable, equipment, inventory, and real                    property. The collateral securing any loan or lease may depend on the type of                    loan or lease and may vary in value based on market conditions.

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

|                                                                     | September                30, |           |
|---------------------------------------------------------------------|------------------------------|-----------|
||
||
||
||
||
||
| Domestic                                                            |                         |      |   |   |   |   |   |   |   |   |   |   |
|    Commercial                and industrial          | $                            | 537,358   |   |   | 44.4 | % | $ | 491,516 |   |   | 42.7 | % |
|    Equipment                lease financing          |                         | 241,828   |   |   | 20.0 |   |   | 212,588 |   |   | 18.5 |   |
|    Factored                receivables               |                         | 113,261   |   |   | 9.4 |   |   | 123,808 |   |   | 10.7 |   |
|    Real estate -                residential mortgage |                         | 150,571   |   |   | 12.3 |   |   | 158,393 |   |   | 13.8 |   |
|    Real estate -                commercial mortgage  |                         | 97,575    |   |   | 8.1 |   |   | 121,051 |   |   | 10.5 |   |
|    Real estate -                construction         |                         | 33,522    |   |   | 2.8 |   |   | 3,733 |   |   | 0.3 |   |
|    Installment -                individuals          |                         | 9,979     |   |   | 0.8 |   |   | 14,156 |   |   | 1.2 |   |
|    Loans to                depository institutions   |                         | 27,000    |   |   | 2.2 |   |   | 27,000 |   |   | 2.3 |   |
|                                                                |                         |      |   |   |   |   |   |   |   |   |   |   |
|                                                                |                              |      |  |   |  |   |  |   |
|                                                           |
|    Loans, net of                unearned discounts   | $                            | 1,211,094 |   |   | 100.0 | % | $ | 1,152,245 |   |   | 100.0 | % |
|                                                                |                              |      |  |   |  |   |  |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *Asset                    Quality*

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

| 21 |
|----|

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

|                                                                                                                                                                        | Three Months                Ended                September 30, |           | Nine Months                Ended                September 30, |        |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------|-----------|---------------------------------------------------------------|--------|
||
||
||
|                                                                                                                                                              |
| Average loans                held in portfolio, net                  of unearned discounts, during period                                                    | $                                                              | 1,081,629 |                                                          | $      | 1,016,837 |   | $ | 1,049,625 |   | $ | 976,991 |   |
|                                                                                                                                                                   |                                                                |      |
|                                                                                                                                                              |
| Allowance for                loan losses:                                                                                                                              |                                                           |      |                                                          |   |   |   |   |   |   |   |   |   |
|   Balance at                beginning of period                                                                                                              | $                                                              | 15,582    |                                                          | $      | 17,220 |   | $ | 16,288 |   | $ | 15,369 |   |
|                                                                                                                                                                   |                                                                |      |
|                                                                                                                                                              |
| Charge-offs:                                                                                                                                                           |                                                           |      |                                                          |   |   |   |   |   |   |   |   |   |
|   Commercial and                industrial                                                                                                                   |                                                           | 1,304     |                                                          |   | 209 |   |   | 1,994 |   |   | 623 |   |
|   Lease                financing                                                                                                                             |                                                           | 802       |                                                          |   | 1,748 |   |   | 2,559 |   |   | 2,840 |   |
|   Factored                receivables                                                                                                                        |                                                           | 27        |                                                          |   | 7 |   |   | 204 |   |   | 123 |   |
|   Real estate -                residential mortgage                                                                                                          |                                                           | 115       |                                                          |   | 5 |   |   | 215 |   |   | 24 |   |
|   Installment                                                                                                                                                |                                                           | —   |                                                          |   | — |   |   | 67 |   |   | — |   |
|                                                                                                                                                                   |                                                                |      |
|     Total                charge-offs                                                                                                               |                                                           | 2,248     |                                                          |   | 1,969 |   |   | 5,039 |   |   | 3,610 |   |
|                                                                                                                                                                   |                                                                |      |
|                                                                                                                                                              |
| Recoveries:                                                                                                                                                            |                                                           |      |                                                          |   |   |   |   |   |   |   |   |   |
|   Commercial and                industrial                                                                                                                   |                                                           | 8         |                                                          |   | 90 |   |   | 37 |   |   | 100 |   |
|   Lease                financing                                                                                                                             |                                                           | 76        |                                                          |   | 99 |   |   | 260 |   |   | 164 |   |
|   Factored                receivables                                                                                                                        |                                                           | 3         |                                                          |   | 2 |   |   | 17 |   |   | 32 |   |
|   Real estate -                residential mtg                                                                                                               |                                                           | 30        |                                                          |   | — |   |   | 30 |   |   | — |   |
|   Installment                                                                                                                                                |                                                           | 6         |                                                          |   | 8 |   |   | 89 |   |   | 27 |   |
|                                                                                                                                                                   |                                                                |      |
|     Total                recoveries                                                                                                                |                                                           | 123       |                                                          |   | 199 |   |   | 433 |   |   | 323 |   |
|                                                                                                                                                                   |                                                                |      |
|                                                                                                                                                              |
| Subtract:                                                                                                                                                              |                                                           |      |                                                          |   |   |   |   |   |   |   |   |   |
|   Net                charge-offs                                                                                                                             |                                                           | 2,125     |                                                          |   | 1,770 |   |   | 4,606 |   |   | 3,287 |   |
|                                                                                                                                                                   |                                                                |      |
|                                                                                                                                                              |
| Provision for                loan losses                                                                                                                               |                                                           | 2,125     |                                                          |   | 1,511 |   |   | 4,453 |   |   | 3,253 |   |
|                                                                                                                                                                   |                                                                |      |
|                                                                                                                                                              |
| Add allowance                from acquisition                                                                                                                          |                                                           | —   |                                                          |   | — |   |   | — |   |   | 1,845 |   |
|                                                                                                                                                                   |                                                                |      |
|                                                                                                                                                              |
| Less loss on                transfers to                  other real estate owned                                                                            |                                                           | 543       |                                                          |   | 377 |   |   | 1,096 |   |   | 596 |   |
|                                                                                                                                                                   |                                                                |      |
|                                                                                                                                                              |
| Balance at end                of period                                                                                                                                | $                                                              | 15,039    |                                                          | $      | 16,584 |   | $ | 15,039 |   | $ | 16,584 |   |
|                                                                                                                                                                   |                                                                |      |
|                                                                                                                                                              |
| Ratio of                annualized net charge-offs                  to average loans held in portfolio,                  net of unearned discounts |                                                           | 0.79      | %                                                             |   | 0.70 | % |   | 0.59 | % |   | 0.45 | % |
|                                                                                                                                                                   |                                                                |      |

| 22 |
|----|

| Management views the                    allowance for loan losses as a critical accounting policy due to its                    subjectivity. The allowance for loan losses is maintained through the provision                    for loan losses, which is a charge to operating earnings. The adequacy of the                    provision and the resulting allowance for loan losses is determined by a                    management evaluation process of the loan portfolio, including identification                    and review of individual problem situations that may affect the                    borrower’s ability to repay, review of overall portfolio quality through                    an analysis of current charge-offs, delinquency and nonperforming loan data,                    estimates of the value of any underlying collateral, an assessment of current                    and expected future economic conditions and changes in the size and character                    of the loan portfolio. Other data utilized by management in determining the                    adequacy of the allowance for loan losses include, but are not limited to, the                    results of regulatory reviews, the amount of, trend of and/or borrower                    characteristics on loans that are identified as requiring special attention as                    part of the credit review process, and peer group comparisons. The impact of                    this other data might result in an allowance which will be greater than that                    indicated by the evaluation process previously described. The allowance                    reflects management’s evaluation both of loans presenting identified loss                    potential and of the risk inherent in various components of the loan portfolio,                    including loans identified as impaired as required by SFAS No. 114. Thus, an                    increase in the size of the portfolio or in any of its components could                    necessitate an increase in the allowance even though there may not be a decline                    in credit quality or an increase in potential problem loans. A significant                    change in any of the evaluation factors described above could result in future                    additions to the allowance. At September 30, 2007, the ratio of the                    allowance to loans held in portfolio, net of unearned discounts, was 1.28% and                    the allowance was $15.0 million. At such date, the Company’s nonaccrual                    loans amounted to $6.2 million; $0.5 million of such loans was judged to be                    impaired within the scope of SFAS No. 114. There were no loans 90 days past due                    and still accruing. 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 $0.9 million at September 30, 2007.

Based on                    the foregoing, as well as management’s judgment as to the current risks                    inherent in loans held in portfolio, the Company’s allowance for loan                    losses was deemed adequate to absorb all reasonably anticipated losses on                    specifically known and other potential credit risks associated with the                    portfolio as of September 30, 2007. Net losses within loans held in                    portfolio are not statistically predictable and changes in conditions in the                    next twelve months could result in future provisions for loan losses varying                    from the level taken in the first nine months of 2007. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 23 |
|----|

| *Deposits*

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

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

|                                                                                  | September                30, |           |
|----------------------------------------------------------------------------------|------------------------------|-----------|
||
||
||
||
||
||
|                                                                        |
| Domestic                                                                         |                         |      |   |   |   |   |   |   |   |   |   |   |
|    Demand                                                         | $                            | 490,195   |   |   | 31.3 | % | $ | 507,367 |   |   | 35.3 | % |
|    NOW                                                            |                         | 233,616   |   |   | 14.9 |   |   | 189,952 |   |   | 13.3 |   |
|    Savings                                                        |                         | 19,150    |   |   | 1.2 |   |   | 20,711 |   |   | 1.4 |   |
|    Money                market                                    |                         | 289,700   |   |   | 18.5 |   |   | 194,291 |   |   | 13.6 |   |
|    Time                deposits                                   |                         | 533,601   |   |   | 34.0 |   |   | 520,091 |   |   | 36.2 |   |
|                                                                             |                              |      |  |   |  |   |  |   |
|                                                                        |
|        Total                domestic deposits |                         | 1,566,262 |   |   | 99.9 |   |   | 1,432,412 |   |   | 99.8 |   |
| Foreign                                                                          |                         |      |   |   |   |   |   |   |   |   |   |   |
|    Time                deposits                                   |                         | 575       |   |   | 0.1 |   |   | 3,031 |   |   | 0.2 |   |
|                                                                             |                              |      |  |   |  |   |  |   |
|                                                                        |
|       Total                deposits                | $                            | 1,566,837 |   |   | 100.0 | % | $ | 1,435,443 |   |   | 100.0 | % |
|                                                                             |                              |      |  |   |  |   |  |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Fluctuations of balances in                    total or among categories at any date may occur based on the Company’s                    mix of assets and liabilities as well as on customers’ balance sheet                    strategies. Historically, however, average balances for deposits have been                    relatively stable. Information regarding these average balances is presented on                    pages 26 and 27.

**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 30. In addition, the bank is subject to the                    Federal Deposit Insurance Corporation Improvement Act of 1991                    (“FDICIA”) which imposes a number of mandatory supervisory                    measures. Among other matters, FDICIA established five capital categories,                    ranging from “well capitalized” to “critically                    undercapitalized”, which are used by regulatory agencies to determine a                    bank’s deposit insurance premium, approval of applications authorizing                    institutions to increase their asset size or otherwise expand business                    activities or acquire other institutions. Under FDICIA, a “well                    capitalized” bank must maintain minimum leverage, Tier 1 and Total                    Capital ratios of 5%, 6% and 10%, respectively. The Federal Reserve Board                    applies comparable tests for holding companies such as the Company. At                    September 30, 2007, the Company and the bank exceeded the requirements for                    “well capitalized” institutions. |

| 24 |
|----|

| **RECENTLY                    ISSUED ACCOUNTING PRONOUNCEMENTS**

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

**CAUTIONARY                    STATEMENT REGARDING FORWARD-LOOKING STATEMENTS**

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

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

| 25 |
|----|

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

|                                                                                                                                                                                                                                                                 | 2007   |           | 2006   |        |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|--------|--------|
||
||
||
| ASSETS                                                                                                                                                                                                                                                          |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing deposits                  with other banks                                                                                                                                                                                           | $      | 2,486     |   | $      | 24 |   |   | 3.80 | % | $ | 2,346 |   | $ | 23 |   |   | 3.80 | % |
|                                                                                                                                                                                                                                                       |
| Securities                available for sale                                                                                                                                                                                                                    |   | 154,518   |   |   | 1,932 |   |   | 5.00 |   |   | 140,167 |   |   | 1,660 |   |   | 4.74 |   |
| Securities                held to maturity                                                                                                                                                                                                                      |   | 401,664   |   |   | 4,731 |   |   | 4.71 |   |   | 464,408 |   |   | 5,231 |   |   | 4.51 |   |
| Securities                tax-exempt [2]                                                                                                                                                                                                                        |   | 19,127    |   |   | 298 |   |   | 6.18 |   |   | 24,728 |   |   | 396 |   |   | 6.35 |   |
|                                                                                                                                                                                                                                                            |        |      |        |   |   |   |  |   |  |   |   |   |
|    Total                investment securities                                                                                                                                                                                                    |   | 575,309   |   |   | 6,961 |   |   | 4.84 |   |   | 629,303 |   |   | 7,287 |   |   | 4.63 |   |
| Federal funds                sold                                                                                                                                                                                                                               |   | 17,228    |   |   | 227 |   |   | 5.17 |   |   | 978 |   |   | 13 |   |   | 5.15 |   |
| Loans, net of                unearned discounts [3]                                                                                                                                                                                                             |   | 1,133,034 |   |   | 24,148 |   |   | 8.68 |   |   | 1,051,501 |   |   | 22,600 |   |   | 8.94 |   |
|                                                                                                                                                                                                                                                            |        |      |        |   |   |   |  |   |  |   |   |   |
| TOTAL                INTEREST-EARNING ASSETS                                                                                                                                                                                                                    |   | 1,728,057 |   |   | 31,360 |   |   | 7.31 | % |   | 1,684,128 |   |   | 29,923 |   |   | 7.24 | % |
|                                                                                                                                                                                                                                                            |   |           |   |        |   |   |  |   |  |   |
| Cash and due                from banks                                                                                                                                                                                                                          |   | 72,253    |   |   |   |   |   |   |   |   | 57,430 |   |
| Allowance for                loan losses                                                                                                                                                                                                                        |   | (16,146   | )      |   |   |   |   |   |   |   | (17,503 | ) |
| Goodwill                                                                                                                                                                                                                                                        |   | 22,901    |   |   |   |   |   |   |   |   | 22,958 |   |
| Other                assets                                                                                                                                                                                                                                     |   | 94,296    |   |   |   |   |   |   |   |   | 92,396 |   |
|                                                                                                                                                                                                                                                            |        |      |   |   |  |   |   |   |   |   |
| Total                assets-continuing operations                                                                                                                                                                                                               |   | 1,901,361 |   |   |   |   |   |   |   |   | 1,839,409 |   |
| Assets-discontinued                operations                                                                                                                                                                                                                   |   | 1,203     |   |   |   |   |   |   |   |   | 109,391 |   |
|                                                                                                                                                                                                                                                            |        |      |   |   |  |   |   |   |   |   |
|                   TOTAL                ASSETS                                                                                                                         | $      | 1,902,564 |   |   |   |   |   |   |   | $ | 1,948,800 |   |   |   |   |
|                                                                                                                                                                                                                                                            |        |      |   |   |  |   |   |   |   |   |
|                                                                                                                                                                                                                                                            |   |      |   |   |   |   |
| LIABILITIES                AND SHAREHOLDERS’                  EQUITY                                                                                                                                                                            |
| Interest-bearing                deposits                                                                                                                                                                                                                        |
|   Domestic                                                                                                                                                                                                                                            |
|    Savings                                                                                                                                                                                                                                       | $      | 18,705    |   |   | 26 |   |   | 0.55 | % | $ | 22,559 |   |   | 25 |   |   | 0.44 | % |
|    NOW                                                                                                                                                                                                                                           |   | 241,789   |   |   | 1,519 |   |   | 2.49 |   |   | 210,116 |   |   | 1,097 |   |   | 2.07 |   |
|    Money                market                                                                                                                                                                                                                   |   | 282,436   |   |   | 2,284 |   |   | 3.21 |   |   | 201,523 |   |   | 1,285 |   |   | 2.53 |   |
|    Time                                                                                                                                                                                                                                          |   | 549,832   |   |   | 6,456 |   |   | 4.66 |   |   | 496,304 |   |   | 5,162 |   |   | 4.13 |   |
|   Foreign                                                                                                                                                                                                                                             |
|    Time                                                                                                                                                                                                                                          |   | 575       |   |   | 2 |   |   | 1.09 |   |   | 3,030 |   |   | 8 |   |   | 0.99 |   |
|                                                                                                                                                                                                                                                            |        |      |        |   |   |   |  |   |  |   |   |   |
|         Total                interest-bearing deposits                                                                                                                                                                  |   | 1,093,337 |   |   | 10,287 |   |   | 3.73 |   |   | 933,532 |   |   | 7,577 |   |   | 3.22 |   |
|                                                                                                                                                                                                                                                            |        |      |        |   |   |   |  |   |  |   |   |   |
| Borrowings                                                                                                                                                                                                                                                      |
|   Securities sold                under agreements                    to repurchase - customers                                                                                                                                    |   | 68,396    |   |   | 701 |   |   | 4.07 |   |   | 89,672 |   |   | 974 |   |   | 4.31 |   |
|   Securities sold                under agreements                    to repurchase - dealers                                                                                                                                      |   | —   |   |   | — |   |   | — |   |   | 81,701 |   |   | 1,114 |   |   | 5.41 |   |
|   Federal funds                purchased                                                                                                                                                                                                              |   | 6,006     |   |   | 71 |   |   | 4.66 |   |   | 22,568 |   |   | 305 |   |   | 5.29 |   |
|   Commercial                paper                                                                                                                                                                                                                     |   | 28,397    |   |   | 368 |   |   | 5.14 |   |   | 50,076 |   |   | 610 |   |   | 4.84 |   |
|   Short-term                borrowings - FHLB                                                                                                                                                                                                         |   | 4,185     |   |   | 53 |   |   | 5.03 |   |   | 52,953 |   |   | 726 |   |   | 5.43 |   |
|   Short-term                borrowings - other                                                                                                                                                                                                        |   | 1,553     |   |   | 21 |   |   | 5.10 |   |   | 395 |   |   | 5 |   |   | 5.35 |   |
|   Long-term                borrowings - FHLB                                                                                                                                                                                                          |   | 10,000    |   |   | 118 |   |   | 4.70 |   |   | 25,543 |   |   | 297 |   |   | 4.65 |   |
|   Long-term                borrowings - sub debt                                                                                                                                                                                                      |   | 25,774    |   |   | 523 |   |   | 8.37 |   |   | 25,774 |   |   | 523 |   |   | 8.38 |   |
|                                                                                                                                                                                                                                                            |        |      |        |   |   |   |  |   |  |   |   |   |
|                 Total                borrowings                                                                                                                                 |   | 144,311   |   |   | 1,855 |   |   | 5.14 |   |   | 348,682 |   |   | 4,554 |   |   | 5.20 |   |
|                                                                                                                                                                                                                                                            |        |      |        |   |   |   |  |   |  |   |   |   |
| Interest-bearing liabilities                allocated                  to discontinued operations                                                                                                                                                     |   | —   |   |   | — |   |   | — |   |   | (99,377 | ) |   | (856 | ) |   | 3.74 |   |
|                                                                                                                                                                                                                                                            |        |      |        |   |   |   |  |   |  |   |   |   |
| TOTAL                INTEREST-BEARING LIABILITIES                                                                                                                                                                                                               |   | 1,237,648 |   |   | 12,142 |   |   | 3.90 | % |   | 1,182,837 |   |   | 11,275 |   |   | 3.76 | % |
|                                                                                                                                                                                                                                                            |   |           |   |        |   |   |  |   |  |   |
| Noninterest-bearing                deposits                                                                                                                                                                                                                     |   | 455,093   |   |   |   |   |   |   |   |   | 424,834 |   |
| Other                liabilities                                                                                                                                                                                                                                |   | 91,267    |   |   |   |   |   |   |   |   | 96,085 |   |
| Liabilities-discontinued                operations                                                                                                                                                                                                              |   | 129       |   |   |   |   |   |   |   |   | 99,784 |   |
|                                                                                                                                                                                                                                                            |        |      |   |   |  |   |   |   |   |   |
|                Total                liabilities                                                                                                                                      |   | 1,784,137 |   |   |   |   |   |   |   |   | 1,803,540 |   |
| Shareholders’                equity                                                                                                                                                                                                                       |   | 118,427   |   |   |   |   |   |   |   |   | 145,260 |   |
|                                                                                                                                                                                                                                                            |        |      |   |   |  |   |   |   |   |   |
|              TOTAL                LIABILITIES AND                              SHAREHOLDERS’                EQUITY | $      | 1,902,564 |   |   |   |   |   |   |   | $ | 1,948,800 |   |   |   |   |
|                                                                                                                                                                                                                                                            |        |      |   |   |  |   |   |   |   |   |
| Net interest                income/spread                                                                                                                                                                                                                       |   |      |   |   | 19,218 |   |   | 3.41 | % |   |   |   |   | 18,648 |   |   | 3.48 | % |
|                                                                                                                                                                                                                                                            |   |      |        |   |   |   |   |  |   |
| Net yield on                interest-earning                  assets (margin)                                                                                                                                                                         |   |      |   |   |   |   |   | 4.41 | % |   |   |   |   |   |   |   | 4.49 | % |
|                                                                                                                                                                                                                                                            |   |      |        |   |   |   |   |  |   |
|                                                                                                                                                                                                                                                       |
| Less: Tax                equivalent adjustment                                                                                                                                                                                                                  |   |      |   |   | 117 |   |   |   |   |   |   |   |   | 155 |   |
|                                                                                                                                                                                                                                                            |   |           |   |   |   |  |   |   |   |
|                                                                                                                                                                                                                                                       |
| Net interest                income                                                                                                                                                                                                                              |   |      |   | $      | 19,101 |   |   |   |   |   |   |   | $ | 18,493 |   |   |   |   |
|                                                                                                                                                                                                                                                            |   |           |   |   |   |  |   |   |   |

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

| 26 |
|----|

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

|                                                                                                                                                                                                                       | 2007   |      | 2006   |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|--------|--------|
||
||
||
| ASSETS                                                                                                                                                                                                                |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing deposits                  with other banks                                                                                                                                                 | $      | 2,732     |   | $      | 91 |   |   | 4.46 | % | $ | 2,390 |   | $ | 73 |   |   | 4.09 | % |
| Securities                available for sale                                                                                                                                                                          |   | 138,994   |   |   | 5,080 |   |   | 4.87 |   |   | 151,265 |   |   | 5,231 |   |   | 4.61 |   |
| Securities                held to maturity                                                                                                                                                                            |   | 410,729   |   |   | 14,299 |   |   | 4.64 |   |   | 486,263 |   |   | 16,526 |   |   | 4.53 |   |
| Securities                tax-exempt [2]                                                                                                                                                                              |   | 20,150    |   |   | 951 |   |   | 6.31 |   |   | 28,721 |   |   | 1,400 |   |   | 6.52 |   |
|                                                                                                                                                                                                                  |        |      |        |   |   |   |  |   |  |   |   |   |
|    Total                investment securities                                                                                                                                                          |   | 569,873   |   |   | 20,330 |   |   | 4.76 |   |   | 666,249 |   |   | 23,157 |   |   | 4.63 |   |
| Federal funds                sold                                                                                                                                                                                     |   | 30,861    |   |   | 1,230 |   |   | 5.26 |   |   | 2,454 |   |   | 88 |   |   | 4.71 |   |
| Loans, net of                unearned discounts [3]                                                                                                                                                                   |   | 1,097,307 |   |   | 68,996 |   |   | 8.83 |   |   | 1,018,876 |   |   | 63,569 |   |   | 8.84 |   |
|                                                                                                                                                                                                                  |        |      |        |   |   |   |  |   |  |   |   |   |
| TOTAL                INTEREST-EARNING ASSETS                                                                                                                                                                          |   | 1,700,773 |   |   | 90,647 |   |   | 7.34 | % |   | 1,689,969 |   |   | 86,887 |   |   | 7.10 | % |
|                                                                                                                                                                                                                  |   |           |   |        |   |   |   |  |   |  |   |
| Cash and due                from banks                                                                                                                                                                                |   | 67,770    |   |   |   |   |   |   |   |   | 60,594 |   |   |   |   |   |   |   |
| Allowance for                loan losses                                                                                                                                                                              |   | (16,445   | )      |   |   |   |   |   |   |   | (16,589 | ) |   |   |   |   |   |   |
| Goodwill                                                                                                                                                                                                              |   | 22,879    |   |   |   |   |   |   |   |   | 22,671 |   |   |   |   |   |   |   |
| Other                assets                                                                                                                                                                                           |   | 90,950    |   |   |   |   |   |   |   |   | 90,320 |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                  |        |      |   |   |  |   |   |   |   |   |
| Total                assets-continuing operations                                                                                                                                                                     |   | 1,865,927 |   |   |   |   |   |   |   |   | 1,846,965 |   |   |   |   |   |   |   |
| Assets-discontinued                operations                                                                                                                                                                         |   | 1,211     |   |   |   |   |   |   |   |   | 112,521 |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                  |        |      |   |   |  |   |   |   |   |   |
|           TOTAL                ASSETS                                                                                                                               | $      | 1,867,138 |   |   |   |   |   |   |   | $ | 1,959,486 |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                  |        |      |   |   |  |   |   |   |   |   |
|                                                                                                                                                                                                             |
| LIABILITIES                AND SHAREHOLDERS’                  EQUITY                                                                                                                                  |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                deposits                                                                                                                                                                              |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Domestic                                                                                                                                                                                                  |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Savings                                                                                                                                                                                             | $      | 20,244    |   |   | 78 |   |   | 0.51 | % | $ | 23,956 |   |   | 76 |   |   | 0.42 | % |
|    NOW                                                                                                                                                                                                 |   | 236,569   |   |   | 4,489 |   |   | 2.54 |   |   | 189,741 |   |   | 2,522 |   |   | 1.78 |   |
|    Money                market                                                                                                                                                                         |   | 237,154   |   |   | 5,401 |   |   | 3.05 |   |   | 216,014 |   |   | 3,264 |   |   | 2.02 |   |
|    Time                                                                                                                                                                                                |   | 559,224   |   |   | 19,582 |   |   | 4.68 |   |   | 507,732 |   |   | 14,323 |   |   | 3.77 |   |
|   Foreign                                                                                                                                                                                                   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Time                                                                                                                                                                                                |   | 574       |   |   | 5 |   |   | 1.09 |   |   | 3,027 |   |   | 23 |   |   | 1.03 |   |
|                                                                                                                                                                                                                  |        |      |        |   |   |   |  |   |  |   |   |   |
|    Total                interest-bearing deposits                                                                                                                                                      |   | 1,053,765 |   |   | 29,555 |   |   | 3.75 |   |   | 940,470 |   |   | 20,208 |   |   | 2.87 |   |
|                                                                                                                                                                                                                  |        |      |        |   |   |   |  |   |  |   |   |   |
| Borrowings                                                                                                                                                                                                            |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Securities sold                under agreements                    to repurchase - customers                                                                                          |   | 79,747    |   |   | 2,581 |   |   | 4.33 |   |   | 83,760 |   |   | 2,436 |   |   | 3.89 |   |
|   Securities sold                under agreements                    to repurchase - dealers                                                                                            |   | —   |   |   | — |   |   | — |   |   | 91,634 |   |   | 3,442 |   |   | 5.02 |   |
|   Federal funds                purchased                                                                                                                                                                    |   | 2,922     |   |   | 107 |   |   | 4.84 |   |   | 18,291 |   |   | 691 |   |   | 4.98 |   |
|   Commercial                paper                                                                                                                                                                           |   | 28,070    |   |   | 1,073 |   |   | 5.11 |   |   | 47,225 |   |   | 1,553 |   |   | 4.40 |   |
|   Short-term                borrowings - FHLB                                                                                                                                                               |   | 1,410     |   |   | 53 |   |   | 5.03 |   |   | 40,264 |   |   | 1,561 |   |   | 5.18 |   |
|   Short-term                borrowings - other                                                                                                                                                              |   | 1,213     |   |   | 48 |   |   | 5.24 |   |   | 628 |   |   | 23 |   |   | 4.92 |   |
|   Long-term                borrowings - FHLB                                                                                                                                                                |   | 13,846    |   |   | 479 |   |   | 4.61 |   |   | 38,938 |   |   | 1,344 |   |   | 4.60 |   |
|   Long-term                borrowings - sub debt                                                                                                                                                            |   | 25,774    |   |   | 1,570 |   |   | 8.38 |   |   | 25,774 |   |   | 1,570 |   |   | 8.38 |   |
|                                                                                                                                                                                                                  |        |      |        |   |   |   |  |   |  |   |   |   |
|   Total                borrowings                                                                                                                                                                           |   | 152,982   |   |   | 5,911 |   |   | 5.19 |   |   | 346,514 |   |   | 12,620 |   |   | 4.87 |   |
|                                                                                                                                                                                                                  |        |      |        |   |   |   |  |   |  |   |   |   |
| Interest-bearing liabilities                allocated                  to discontinued operations                                                                                                           |   | —   |   |   | — |   |   | — |   |   | (101,790 | ) |   | (2,508 | ) |   | 3.36 |   |
|                                                                                                                                                                                                                  |        |      |        |   |   |   |  |   |  |   |   |   |
| TOTAL                INTEREST-BEARING LIABILITIES                                                                                                                                                                     |   | 1,206,747 |   |   | 35,466 |   |   | 3.93 | % |   | 1,185,194 |   |   | 30,320 |   |   | 3.42 | % |
|                                                                                                                                                                                                                  |   |           |   |        |   |   |   |  |   |  |   |
|                                                                                                                                                                                                                  |   |      |   |   |   |   |
| Noninterest-bearing                deposits                                                                                                                                                                           |   | 444,828   |   |   |   |   |   |   |   |   | 436,006 |   |   |   |   |   |   |   |
| Other                liabilities                                                                                                                                                                                      |   | 89,694    |   |   |   |   |   |   |   |   | 91,147 |   |   |   |   |   |   |   |
| Liabilities-discontinued                operations                                                                                                                                                                    |   | 238       |   |   |   |   |   |   |   |   | 102,284 |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                  |        |      |   |   |  |   |   |   |   |   |
|           Total                liabilities                                                                                                                          |   | 1,741,507 |   |   |   |   |   |   |   |   | 1,814,631 |   |   |   |   |   |   |   |
| Shareholders'                equity                                                                                                                                                                                   |   | 125,631   |   |   |   |   |   |   |   |   | 144,855 |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                  |        |      |   |   |  |   |   |   |   |   |
|           TOTAL                LIABILITIES AND                          SHAREHOLDERS’                EQUITY | $      | 1,867,138 |   |   |   |   |   |   |   | $ | 1,959,486 |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                  |        |      |   |   |  |   |   |   |   |   |
| Net interest                income/spread                                                                                                                                                                             |   |      |   |   | 55,181 |   |   | 3.41 | % |   |   |   |   | 56,567 |   |   | 3.68 | % |
|                                                                                                                                                                                                                  |   |      |        |   |   |   |   |  |   |
| Net yield on                interest-earning                  assets (margin)                                                                                                                               |   |      |   |   |   |   |   | 4.44 | % |   |   |   |   |   |   |   | 4.60 | % |
|                                                                                                                                                                                                                  |   |      |        |   |   |   |   |  |   |
|                                                                                                                                                                                                             |
| Less: Tax                equivalent adjustment                                                                                                                                                                        |   |      |   |   | 372 |   |   |   |   |   |   |   |   | 550 |   |   |   |   |
|                                                                                                                                                                                                                  |   |           |   |   |   |  |   |   |   |
|                                                                                                                                                                                                             |
| Net interest                income                                                                                                                                                                                    |   |      |   | $      | 54,809 |   |   |   |   |   |   |   | $ | 56,017 |   |   |   |   |
|                                                                                                                                                                                                                  |   |           |   |   |   |  |   |   |   |
|                                                                                                                                                                                                                       |        |           |        |        |  |  |

|   |                                                                                                                                                                                                                                                                                                                                                                                     |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| [1]    | The average balances of                        assets, liabilities and shareholders’ equity are computed on the                        basis of daily averages. Average rates are presented on a tax-equivalent                        basis. Certain reclassifications have been made to amounts for prior                        periods to conform to the current presentation. |
|   |                                                                                                                                                                                                                                                                                                                                                                                     |
| [2]    | Interest on tax-exempt                        securities is presented on a tax-equivalent basis.                                                                                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                     |
| [3]    | Includes loans held for                        sale and loans held in portfolio; all loans are domestic. Nonaccrual loans                        are included in amounts outstanding and income has been included to the                        extent earned.                                                                                                                           |

| 27 |
|----|

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

|                                                                                                                                          | Increase/(Decrease)                Three Months Ended                September 30, 2007 to September 30, 2006 |         |
|------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------|---------|
||
||
|                                                                                                                                     |                                                                                                               |         |  |  |  |  |
| INTEREST INCOME                                                                                                                          |                                                                                                          |    |   |   |   |   |   |   |   |
| Interest-bearing deposits                with other banks                                                                                | $                                                                                                             | 1       |   | $ | — |   | $ | 1 |   |
|                                                                                                                                     |                                                                                                               |         |  |  |  |  |
|                                                                                                                                |
| Securities available for                sale                                                                                             |                                                                                                          | 177     |   |   | 95 |   |   | 272 |   |
| Securities held to                maturity                                                                                               |                                                                                                          | (729    | ) |   | 229 |   |   | (500 | ) |
| Securities                tax-exempt                                                                                                     |                                                                                                          | (87     | ) |   | (11 | ) |   | (98 | ) |
|                                                                                                                                          |                                                                                                               |         |  |  |  |  |
|       Total                investment securities                                                           |                                                                                                          | (639    | ) |   | 313 |   |   | (326 | ) |
|                                                                                                                                          |                                                                                                               |         |  |  |  |  |
|                                                                                                                                |
| Federal funds                sold                                                                                                        |                                                                                                          | 214     |   |   | — |   |   | 214 |   |
|                                                                                                                                |
| Loans, net of unearned                discounts [3]                                                                                      |                                                                                                          | 2,128   |   |   | (580 | ) |   | 1,548 |   |
|                                                                                                                                          |                                                                                                               |         |  |  |  |  |
|                                                                                                                                     |                                                                                                          |    |   |   |   |   |   |   |   |
| TOTAL INTEREST                INCOME                                                                                                     | $                                                                                                             | 1,704   |   | $ | (267 | ) | $ | 1,437 |   |
|                                                                                                                                          |                                                                                                               |         |  |  |  |  |
| INTEREST EXPENSE                                                                                                                         |
| Interest-bearing                deposits                                                                                                 |
|   Domestic                                                                                                                     |
|     Savings                                                                                                          | $                                                                                                             | (4      | ) | $ | 5 |   | $ | 1 |   |
|     NOW                                                                                                              |                                                                                                          | 180     |   |   | 242 |   |   | 422 |   |
|     Money                market                                                                                      |                                                                                                          | 599     |   |   | 400 |   |   | 999 |   |
|     Time                                                                                                             |                                                                                                          | 591     |   |   | 703 |   |   | 1,294 |   |
|   Foreign                                                                                                                      |
|     Time                                                                                                             |                                                                                                          | (7      | ) |   | 1 |   |   | (6 | ) |
|                                                                                                                                          |                                                                                                               |         |  |  |  |  |
|       Total                interest-bearing deposits                                                       |                                                                                                          | 1,359   |   |   | 1,351 |   |   | 2,710 |   |
|                                                                                                                                          |                                                                                                               |         |  |  |  |  |
| Borrowings                                                                                                                               |
|   Securities sold                under agreements                    to repurchase - customers             |                                                                                                          | (221    | ) |   | (52 | ) |   | (273 | ) |
|   Securities sold                under agreements                    to repurchase - dealers               |                                                                                                          | (1,114  | ) |   | — |   |   | (1,114 | ) |
|   Federal funds                purchased                                                                                       |                                                                                                          | (201    | ) |   | (33 | ) |   | (234 | ) |
|   Commercial                paper                                                                                              |                                                                                                          | (278    | ) |   | 36 |   |   | (242 | ) |
|   Short-term                borrowings - FHLB                                                                                  |                                                                                                          | (623    | ) |   | (50 | ) |   | (673 | ) |
|   Short-term                borrowings - other                                                                                 |                                                                                                          | 16      |   |   | — |   |   | 16 |   |
|   Long-term                borrowings - FHLB                                                                                   |                                                                                                          | (182    | ) |   | 3 |   |   | (179 | ) |
|   Long-term                borrowings - sub debt                                                                               |                                                                                                          | — |   |   | — |   |   | — |   |
|                                                                                                                                          |                                                                                                               |         |  |  |  |  |
|       Total                borrowings                                                                      |                                                                                                          | (2,603  | ) |   | (96 | ) |   | (2,699 | ) |
|                                                                                                                                     |                                                                                                               |         |  |  |  |  |
| Less: interest-bearing                liabilities allocated      to discontinued                operations |                                                                                                          | 856     |   |   | — |   |   | 856 |   |
|                                                                                                                                          |                                                                                                               |         |  |  |  |  |
|                                                                                                                                |
| TOTAL INTEREST                EXPENSE                                                                                                    | $                                                                                                             | (388    | ) | $ | 1,255 |   | $ | 867 |   |
|                                                                                                                                          |                                                                                                               |         |  |  |  |  |
|                                                                                                                                |
| NET INTEREST                INCOME                                                                                                       | $                                                                                                             | 2,092   |   | $ | (1,522 | ) | $ | 570 |   |
|                                                                                                                                          |                                                                                                               |         |  |  |  |  |

|   |                                                                                                                                                                                                                                                                                                             |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| [1]    | This table is presented                        on a tax-equivalent basis.                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                  |
| [2]    | Changes in interest                        income and interest expense due to a combination of both volume and rate                        have been allocated to the change due to volume and the change due to rate                        in proportion to the relationship of the change due solely to each. |
|   |                                                                                                                                                                                                                                                                                                                  |
| [3]    | Includes loans held for                        sale and loans held in portfolio; all loans are domestic. Nonaccrual loans                        are included in amounts outstanding and income has been included to the                        extent earned.                                                   |

| 28 |
|----|

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

|                                                                                                                                                                                              | Increase/(Decrease)                Nine Months Ended                September 30, 2007 to September 30, 2006 |         |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------|---------|
||
||
||
||
| INTEREST                INCOME                                                                                                                                                               |                                                                                                         |    |   |   |   |   |   |   |   |
| Interest-bearing deposits with                other banks                                                                                                                                    | $                                                                                                            | 11      |   | $ | 7 |   | $ | 18 |   |
|                                                                                                                                                                                              |                                                                                                              |         |  |  |  |  |
||
| Securities                available for sale                                                                                                                                                 |                                                                                                         | (436    | ) |   | 285 |   |   | (151 | ) |
| Securities                held to maturity                                                                                                                                                   |                                                                                                         | (2,618  | ) |   | 391 |   |   | (2,227 | ) |
| Securities                tax-exempt                                                                                                                                                         |                                                                                                         | (406    | ) |   | (43 | ) |   | (449 | ) |
|                                                                                                                                                                                              |                                                                                                              |         |  |  |  |  |
|             Total                investment securities                                                                           |                                                                                                         | (3,460  | ) |   | 633 |   |   | (2,827 | ) |
|                                                                                                                                                                                              |                                                                                                              |         |  |  |  |  |
||
| Federal funds                sold                                                                                                                                                            |                                                                                                         | 1,131   |   |   | 11 |   |   | 1,142 |   |
||
| Loans, net of                unearned discounts [3]                                                                                                                                          |                                                                                                         | 5,498   |   |   | (71 | ) |   | 5,427 |   |
|                                                                                                                                                                                              |                                                                                                              |         |  |  |  |  |
||
| TOTAL INTEREST                INCOME                                                                                                                                                         | $                                                                                                            | 3,180   |   | $ | 580 |   | $ | 3,760 |   |
|                                                                                                                                                                                              |                                                                                                              |         |  |  |  |  |
||
| INTEREST                EXPENSE                                                                                                                                                              |                                                                                                         |    |   |   |   |   |   |   |   |
| Interest-bearing                deposits                                                                                                                                                     |                                                                                                         |    |   |   |   |   |   |   |   |
|     Domestic                                                                                                                                                             |                                                                                                         |    |   |   |   |   |   |   |   |
|         Savings                                                                                                                                      | $                                                                                                            | (13     | ) | $ | 15 |   | $ | 2 |   |
|         NOW                                                                                                                                          |                                                                                                         | 720     |   |   | 1,247 |   |   | 1,967 |   |
|         Money                market                                                                                                                  |                                                                                                         | 344     |   |   | 1,793 |   |   | 2,137 |   |
|         Time                                                                                                                                         |                                                                                                         | 1,556   |   |   | 3,703 |   |   | 5,259 |   |
|     Foreign                                                                                                                                                              |                                                                                                         |    |   |   |   |   |   |   |   |
|         Time                                                                                                                                         |                                                                                                         | (19     | ) |   | 1 |   |   | (18 | ) |
|                                                                                                                                                                                              |                                                                                                              |         |  |  |  |  |
|             Total                interest-bearing deposits                                                                       |                                                                                                         | 2,588   |   |   | 6,759 |   |   | 9,347 |   |
|                                                                                                                                                                                              |                                                                                                              |         |  |  |  |  |
||
| Borrowings                                                                                                                                                                                   |                                                                                                         |    |   |   |   |   |   |   |   |
|     Securities                sold under agreements                        to repurchase -                customers              |                                                                                                         | (121    | ) |   | 266 |   |   | 145 |   |
|     Securities                sold under agreements                        to repurchase - dealers                               |                                                                                                         | (3,442  | ) |   | — |   |   | (3,442 | ) |
|     Federal                funds purchased                                                                                                                               |                                                                                                         | (565    | ) |   | (19 | ) |   | (584 | ) |
|     Commercial                paper                                                                                                                                      |                                                                                                         | (702    | ) |   | 222 |   |   | (480 | ) |
|     Short-term                borrowings - FHLB                                                                                                                          |                                                                                                         | (1,464  | ) |   | (44 | ) |   | (1,508 | ) |
|     Short-term                borrowings - other                                                                                                                         |                                                                                                         | 23      |   |   | 2 |   |   | 25 |   |
|     Long-term                borrowings - FHLB                                                                                                                           |                                                                                                         | (868    | ) |   | 3 |   |   | (865 | ) |
|     Long-term                borrowings - sub debt                                                                                                                       |                                                                                                         | — |   |   | — |   |   | — |   |
|                                                                                                                                                                                              |                                                                                                              |         |  |  |  |  |
|             Total                borrowings                                                                                      |                                                                                                         | (7,139  | ) |   | 430 |   |   | (6,709 | ) |
|                                                                                                                                                                                              |                                                                                                              |         |  |  |  |  |
| Less:                interest-bearing liabilities allocated                            to                discontinued operations |                                                                                                         | 2,508   |   |   | — |   |   | 2,508 |   |
|                                                                                                                                                                                              |                                                                                                              |         |  |  |  |  |
||
| TOTAL INTEREST                EXPENSE                                                                                                                                                        | $                                                                                                            | (2,043  | ) | $ | 7,189 |   | $ | 5,146 |   |
|                                                                                                                                                                                              |                                                                                                              |         |  |  |  |  |
||
| NET INTEREST                INCOME                                                                                                                                                           | $                                                                                                            | 5,223   |   | $ | (6,609 | ) | $ | (1,386 | ) |
|                                                                                                                                                                                              |                                                                                                              |         |  |  |  |  |
|                                                                                                                                                                                              |                                                                                                         |         |   |  |   |  |

| [1]          | This table is presented                        on a tax-equivalent basis.                                                                                                                                                                                                                                        |
|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |
| [2]          | Changes in interest                        income and interest expense due to a combination of both volume and rate                        have been allocated to the change due to volume and the change due to rate                        in proportion to the relationship of the change due solely to each. |
|    |
| [3]          | Includes loans held for                        sale and loans held in portfolio; all loans are domestic. Nonaccrual loans                        are included in amounts outstanding and income has been included to the                        extent earned.                                                   |

| 29 |
|----|

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

|                                                             |        | Actual |         | For Capital                Adequacy Minimum |        | To Be Well                Capitalized |        |
|-------------------------------------------------------------|--------|--------|---------|---------------------------------------------|--------|---------------------------------------|--------|
||
||
||
| Total Capital                (to Risk Weighted Assets):     |   |   |    |                                        |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     The                Company          |   | $      | 148,228 |                                        |   | 10.77                                 | %      | $ | 110,147 |   |   | 8.00 | % | $ | 137,684 |   |   | 10.00 | % |
|     The                bank             |   |   | 143,013 |                                        |   | 10.37                                 |   |   | 110,283 |   |   | 8.00 |   |   | 137,853 |   |   | 10.00 |   |
|                                                        |   |   |    |                                        |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier 1 Capital                (to Risk Weighted Assets):    |   |   |    |                                        |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     The                Company          |   |   | 132,973 |                                        |   | 9.66                                  |   |   | 55,074 |   |   | 4.00 |   |   | 82,610 |   |   | 6.00 |   |
|     The                bank             |   |   | 127,758 |                                        |   | 9.27                                  |   |   | 55,141 |   |   | 4.00 |   |   | 82,712 |   |   | 6.00 |   |
|                                                        |   |   |    |                                        |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier 1                Leverage Capital (to Average Assets): |   |   |    |                                        |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     The                Company          |   |   | 132,973 |                                        |   | 7.07                                  |   |   | 75,187 |   |   | 4.00 |   |   | 93,983 |   |   | 5.00 |   |
|     The                bank             |   |   | 127,758 |                                        |   | 6.81                                  |   |   | 75,091 |   |   | 4.00 |   |   | 93,864 |   |   | 5.00 |   |
|                                                        |   |   |    |                                        |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| As of December                31, 2006                      |   |   |    |                                        |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                             |   |   |    |                                        |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Capital                (to Risk Weighted Assets):     |   |   |    |                                        |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     The                Company          |   | $      | 162,232 |                                        |   | 12.74                                 | %      | $ | 102,299 |   |   | 8.00 | % | $ | 127,874 |   |   | 10.00 | % |
|     The                bank             |   |   | 138,651 |                                        |   | 11.00                                 |   |   | 101,288 |   |   | 8.00 |   |   | 126,610 |   |   | 10.00 |   |
|                                                        |   |   |    |                                        |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier 1 Capital                (to Risk Weighted Assets):    |   |   |    |                                        |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     The                Company          |   |   | 146,244 |                                        |   | 11.49                                 |   |   | 51,150 |   |   | 4.00 |   |   | 76,725 |   |   | 6.00 |   |
|     The                bank             |   |   | 122,819 |                                        |   | 9.75                                  |   |   | 50,644 |   |   | 4.00 |   |   | 75,966 |   |   | 6.00 |   |
|                                                        |   |   |    |                                        |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier 1                Leverage Capital (to Average Assets): |   |   |    |                                        |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     The                Company          |   |   | 146,244 |                                        |   | 7.82                                  |   |   | 75,131 |   |   | 4.00 |   |   | 93,913 |   |   | 5.00 |   |
|     The                bank             |   |   | 122,819 |                                        |   | 6.60                                  |   |   | 74,788 |   |   | 4.00 |   |   | 93,485 |   |   | 5.00 |   |

| 30 |
|----|

| **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. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 31 |
|----|

| The                    Company’s balance sheet structure is primarily short-term in nature with                    a substantial portion of assets and liabilities repricing or maturing within                    one year. The Company’s gap analysis at September 30, 2007, presented on                    page 36, indicates that net interest income would decrease during periods of                    rising interest rates and increase during periods of falling interest rates,                    but, as mentioned above, gap analysis may not be an accurate predictor of net                    interest income.

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

As of                    September 30, 2007, the Company was a party to one interest rate floor                    agreement with a notional amount of $25,000,000 and a maturity of September 14,                    2008. The interest rate floor contract requires the counterparty to pay the                    Company at specified future dates the amount, if any, by which the specified                    interest (prime rate) falls below the fixed floor rates, applied to the                    notional amounts. The Company utilizes the financial instrument to adjust its                    interest rate risk position without exposing itself to principal risk and                    funding requirements. This financial instrument is being used as part of the                    Company’s interest rate risk management and not for trading purposes. At                    September 30, 2007, the counterparty has an investment grade credit rating from                    the major rating agencies. Each counterparty is specifically approved for                    applicable credit exposure.

The                    interest rate floor contract requires the Company to pay a fee for the right to                    receive a fixed interest payment. The Company paid an up-front premium of                    $80,000. At September 30, 2007, there were no amounts receivable under this                    contract.

The                    interest rate floor agreement was not designated as a hedge for accounting                    purposes and therefore changes in the fair values of the instrument are                    required to be recognized as current income or expense in the Company’s                    consolidated financial statements. At September 30, 2007 and 2006, the fair                    value of the interest rate floor was $5,924 and $6,091, respectively. For the                    three months ended September 30, 2007 and 2006, $5,759 and $4,158,                    respectively, were credited to interest income from loans. For the nine months                    ended September 30, 2007 and 2006, $3,258 was credited to interest income from                    loans, and $15,217 was charged against interest income from loans,                    respectively.

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 that 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. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 32 |
|----|

| The                    Company’s interest rate sensitivity is determined by identifying the                    probable impact of changes in market interest rates on the yields on the                    Company’s assets and the rates that would be paid on its liabilities.                    This modeling technique involves a degree of estimation based on certain                    assumptions that management believes to be reasonable. Utilizing this process,                    management projects the impact of changes in interest rates on net interest                    margin. The Company has established certain policy limits for the potential                    volatility of its net interest margin assuming certain levels of changes in                    market interest rates with the objective of maintaining a stable net interest                    margin under various probable rate scenarios. Management generally has                    maintained a risk position well within the policy limits. As of September 30,                    2007, the model indicated the impact of a 200 basis point parallel and pro rata                    rise in rates over 12 months would approximate a 3.9% ($3.4 million) increase                    in net interest income, while the impact of a 200 basis point decline in rates                    over the same period would approximate a 2.9% ($2.6 million) decline from an                    unchanged rate environment.

The                    preceding sensitivity analysis does not represent a Company forecast and should                    not be relied upon as being indicative of expected operating results. These                    hypothetical estimates are based upon numerous assumptions including: the                    nature and timing of interest rate levels including yield curve shape,                    prepayments on loans and securities, deposit decay rates, pricing decisions on                    loans and deposits, reinvestment/replacement of asset and liability cash flows,                    and others. While assumptions are developed based upon current economic and                    local market conditions, the Company cannot provide any assurances as to the                    predictive nature of these assumptions, including how 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 would continue to adversely affect                    the Company’s results in 2007. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 33 |
|----|

| ***Liquidity                    Risk***

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

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

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

At                    September 30, 2007, the parent company’s short-term debt, consisting                    principally of commercial paper used to finance ongoing current business                    activities, was approximately $28.6 million. The parent company had cash,                    interest-bearing deposits with banks and other current assets aggregating $37.0                    million. The parent company also has back-up credit lines with banks of $24.0                    million. Since 1979, the parent company has had no need to use the available                    back-up lines of credit. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 34 |
|----|

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

|                                                   | Payments Due                by Period |        |
|---------------------------------------------------|---------------------------------------|--------|
||
||
||
||
||
| Long-Term                Debt                     | $                                     | 35,774 |   | $ | — |   | $ | — |   | $ | 10,000 |   | $ | 25,774 |   |
||
| Operating                Leases                   |                                  | 23,157 |   |   | 4,158 |   |   | 6,896 |   |   | 4,364 |   |   | 7,739 |   |
|                                              |                                       |   |  |   |  |   |  |   |  |   |
||
| Total                Contractual Cash Obligations | $                                     | 58,931 |   | $ | 4,158 |   | $ | 6,896 |   | $ | 14,364 |   | $ | 33,513 |   |
|                                              |                                       |   |  |   |  |   |  |   |  |   |

|                                                                                                                                                                                            |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) Based on contractual                maturity dates                                                                                                                                          |
|                                                                                                                                                                                            |
| The following table                        sets forth information regarding the Company’s obligations under                        other commercial commitments as of September 30, 2007: |
|                                                                                                                                                                                            |

|                                             | Amount of                Commitment Expiration Per Period |         |
|---------------------------------------------|-----------------------------------------------------------|---------|
||
||
||
||
||
| Residential                Loans            | $                                                         | 8,628   |   | $ | 8,628 |   | $ | — |   | $ | — |   | $ | — |   |
| Commercial                Loans             |                                                      | 53,012  |   |   | 36,760 |   |   | 16,089 |   |   | 163 |   |   | — |   |
|                                        |                                                           |    |  |   |  |   |  |   |  |   |
| Total                Loans                  |                                                      | 61,640  |   |   | 45,388 |   |   | 16,089 |   |   | 163 |   |   | — |   |
| Standby                Letters of Credit    |                                                      | 35,560  |   |   | 32,593 |   |   | 2,967 |   |   | — |   |   | — |   |
| Other                Commercial Commitments |                                                      | 14,668  |   |   | 14,383 |   |   | — |   |   | — |   |   | 285 |   |
|                                        |                                                           |    |  |   |  |   |  |   |  |   |
||
| Total                Commercial Commitments | $                                                         | 111,868 |   | $ | 92,364 |   | $ | 19,056 |   | $ | 163 |   | $ | 285 |   |
|                                        |                                                           |    |  |   |  |   |  |   |  |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **INFORMATION AVAILABLE ON                    OUR WEB SITE**

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

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

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

| 35 |
|----|

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

|                                                                                                                                              | Repricing                Date |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------|---------|
||
||
||
| ASSETS                                                                                                                                            |                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Interest-bearing                deposits  with other                banks                                                         | $                             | 3,014   |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | 3,014 |   |
|  Investment                securities                                                                                                        |                          | 20,871  |   |   | 9,945 |   |   | 89,806 |   |   | 483,744 |   |   | 4,562 |   |   | 608,928 |   |
|  Commercial and industrial                loans                                                                                              |                          | 349,255 |   |   | 45,630 |   |   | 123,014 |   |   | 19,480 |   |   | (21 | ) |   | 537,358 |   |
|  Equipment lease                financing                                                                                                    |                          | 1,307   |   |   | 9,162 |   |   | 256,556 |   |   | 11,618 |   |   | (36,815 | ) |   | 241,828 |   |
|  Factored                receivables                                                                                                         |                          | 113,733 |   |   | — |   |   | — |   |   | — |   |   | (472 | ) |   | 113,261 |   |
|  Real estate-residential                mortgage                                                                                             |                          | 44,193  |   |   | 9,211 |   |   | 76,022 |   |   | 21,145 |   |   | — |   |   | 150,571 |   |
|  Real                estate-commercial mortgage                                                                                              |                          | 35,677  |   |   | 5,037 |   |   | 43,938 |   |   | 12,923 |   |   | — |   |   | 97,575 |   |
|  Real estate-construction                loans                                                                                               |                          | — |   |   | — |   |   | 33,522 |   |   | — |   |   | — |   |   | 33,522 |   |
|  Installment-individuals                                                                                                                     |                          | 9,979   |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 9,979 |   |
|  Loans to depository                institutions                                                                                             |                          | 27,000  |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 27,000 |   |
|  Noninterest-earning                assets &                  allowance for loan losses                                        |                          | — |   |   | — |   |   | — |   |   | — |   |   | 157,703 |   |   | 157,703 |   |
|                                                                                                                                              |                               |    |  |   |  |   |  |   |  |   |  |   |
|       Total                Assets                                                                                   |                          | 605,029 |   |   | 78,985 |   |   | 622,858 |   |   | 548,910 |   |   | 124,957 |   |   | 1,980,739 |   |
|                                                                                                                                              |                               |    |  |   |  |   |  |   |  |   |  |   |
|                                                                                                                                         |
| LIABILITIES                ANDSHAREHOLDERS’                EQUITY                                                                           |                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Interest-bearing                deposits                                                                                                    |                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Savings                [1]                                                                                                      |                          | — |   |   | — |   |   | 19,150 |   |   | — |   |   | — |   |   | 19,150 |   |
|    NOW                [1]                                                                                                          |                          | — |   |   | — |   |   | 233,616 |   |   | — |   |   | — |   |   | 233,616 |   |
|    Money market                [1]                                                                                                 |                          | 233,839 |   |   | — |   |   | 55,861 |   |   | — |   |   | — |   |   | 289,700 |   |
|    Time -                domestic                                                                                                  |                          | 252,756 |   |   | 230,378 |   |   | 50,437 |   |   | 30 |   |   | — |   |   | 533,601 |   |
|              -                foreign                                            |                          | 180     |   |   | 395 |   |   | — |   |   | — |   |   | — |   |   | 575 |   |
|  Securities sold under                agreement   to repurchase -                customer                                     |                          | 50,064  |   |   | 12,500 |   |   | — |   |   | — |   |   | — |   |   | 62,564 |   |
|  Federal                funds purchased                                                                                                      |                          | 44,200  |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 44,200 |   |
|  Commercial                paper                                                                                                             |                          | 28,571  |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 28,571 |   |
|  Short-term borrowings -                FHLB                                                                                                 |                          | 25,000  |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 25,000 |   |
|  Short-term borrowings -                other                                                                                                |                          | 303     |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 303 |   |
|  Long-term borrowings -                FHLB                                                                                                  |                          | — |   |   | — |   |   | 10,000 |   |   | — |   |   | — |   |   | 10,000 |   |
|  Long-term borrowings                -  subordinated                debentures                                                     |                          | — |   |   | — |   |   | — |   |   | 25,774 |   |   | — |   |   | 25,774 |   |
|  Noninterest-bearing                liabilities  & shareholders’                equity                                   |                          | — |   |   | — |   |   | — |   |   | — |   |   | 707,685 |   |   | 707,685 |   |
|                                                                                                                                              |                               |    |  |   |  |   |  |   |  |   |  |   |
|                                                                                                                                         |
|       Total                Liabilities and        Shareholders’Equity |                          | 634,913 |   |   | 243,273 |   |   | 369,064 |   |   | 25,804 |   |   | 707,685 |   |   | 1,980,739 |   |
|                                                                                                                                              |                               |    |  |   |  |   |  |   |  |   |  |   |
|                                                                                                                                         |
|  Net                Interest Rate   Sensitivity                Gap                                                            | $                             | (29,884 | ) | $ | (164,288 | ) | $ | 253,794 |   | $ | 523,106 |   | $ | (582,728 | ) | $ | — |   |
|                                                                                                                                              |                               |    |  |   |  |   |  |   |  |   |  |   |
|                                                                                                                                         |
|  Cumulative                Gap    September 30,                2007                                                      | $                             | (29,884 | ) | $ | (194,172 | ) | $ | 59,622 |   | $ | 582,728 |   | $ | — |   | $ | — |   |
|                                                                                                                                              |                               |    |  |   |  |   |  |   |  |   |  |   |
|                                                                                                                                         |
|  Cumulative                Gap    September 30,                2006                                                      | $                             | 110,912 |   | $ | 23,548 |   | $ | 122,975 |   | $ | 626,343 |   | $ | — |   | $ | — |   |
|                                                                                                                                              |                               |    |  |   |  |   |  |   |  |   |  |   |
|                                                                                                                                         |
|  Cumulative                Gap    December 31,                2006                                                       | $                             | 130,609 |   | $ | (31,621 | ) | $ | 170,278 |   | $ | 684,751 |   | $ | — |   | $ | — |   |
|                                                                                                                                              |                               |    |  |   |  |   |  |   |  |   |  |   |

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

| 36 |
|----|

| **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 September 30, 2007 that has materially                    affected, or is reasonably likely to materially affect, the Company’s                    internal control over financial reporting. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 37 |
|----|

| PART II -                    OTHER INFORMATION

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

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

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

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

| ISSUER PURCHASES OF EQUITY                SECURITIES |        |
|------------------------------------------------------|--------|
||
||
||
||
||
|  July                1-31, 2007                 |   | — |   | $ | — |   |   | — |   |   | 285,763 |   |
||
|  August                1-31, 2007               |   | 214,800 |   |   | 14.46 |   |   | 214,800 |   |   | 870,963 |   |
||
|  September 1-30,                2007            |   | — |   |   | — |   |   | — |   |   | 870,963 |   |
|                                                 |        |   |   |   |  |   |   |   |
||
| Total                                                |   | 214,800 |   |   |   |   |   | 214,800 |   |   |   |   |
|                                                 |        |   |   |   |  |   |   |   |

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

| 38 |
|----|

| Item                    6. Exhibits

The following exhibits                    are filed as part of this report: |
|------------------------------------------------------------------------------------------------------------------|
|                                                                                                             |

|   | 3.                (i)        | Restated Certificate of                        Incorporation filed with the State of New York Department of State, October                        28, 2004 (Filed as Exhibit 3(i) to the Registrant’s Form 10-Q for the                        quarter ended September 30, 2004 and incorporated herein by                        reference). |
|--------|------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                         |                                                                                                                                                                                                                                                                                                                                                |
|   |     (ii) | By-Laws as in effect on                        August 5, 2004 (Filed as Exhibit 3(ii)(A) to the Registrant’s Form                        10-Q for the quarter ended June 30, 2004 and incorporated herein by                        reference).                                                                                               |
|   |                         |                                                                                                                                                                                                                                                                                                                                                |
|   | 11.                          | Statement                Re: Computation of Per Share Earnings.                                                                                                                                                                                                                                                                                     |
|   |                         |                                                                                                                                                                                                                                                                                                                                                |
|   | 31.1                         | Certification                of the CEO pursuant to Exchange Act Rule 13a-14(a).                                                                                                                                                                                                                                                                    |
|   |                         |                                                                                                                                                                                                                                                                                                                                                |
|   | 31.2                         | Certification                of the CFO pursuant to Exchange Act Rule 13a-14(a).                                                                                                                                                                                                                                                                    |
|   |                         |                                                                                                                                                                                                                                                                                                                                                |
|   | 32.1                         | Certification                of the CEO required by Section 1350 of Chapter 63 of Title 18 of the U.S.                Code.                                                                                                                                                                                                                         |
|   |                         |                                                                                                                                                                                                                                                                                                                                                |
|   | 32.2                         | Certification                of the CFO required by Section 1350 of Chapter 63 of Title 18 of the U.S.                Code.                                                                                                                                                                                                                         |

| 39 |
|----|

| SIGNATURES

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

|                            |
|---------------------------------|
| STERLING                BANCORP |
|                            |
|                                 |
|  (Registrant)              |
|                            |

|   | Date:  | November 9,                2007 |   | /s/    | Louis J.                Cappelli       |
|--------|--------|---------------------------------|--------|--------|----------------------------------------|
|   |   |                                 |   |   |                                        |
|   |   |                            |   |   | Louis J.                Cappelli       |
|   |   |                            |   |   | Chairman and                           |
|   |   |                            |   |   | Chief Executive                Officer |
|   |   |                            |   |   |                                   |
|   |   |                            |   |   |                                   |

|   | Date:  | November 9,                2007 |   | /s/    | John W. Tietjen                            |
|--------|--------|---------------------------------|--------|--------|--------------------------------------------|
|   |   |                                 |   |   |                                            |
|   |   |                            |   |   | John W. Tietjen                            |
|   |   |                            |   |   | Executive Vice President         |
|   |   |                            |   |   | and Chief Financial                Officer |

| 40 |
|----|

| STERLING BANCORP AND                    SUBSIDIARIES

EXHIBIT                    INDEX |
|----------------------------------------------------------------------------------------|
|                                                                                   |

| **Exhibit** |   |            |                                                                                                                 | **Sequential**              |
|-------------|--------|-----------------|----------------------------------------------------------------------------------------------------------------------|-----------------------------|
| **Number**  |   | **Description** |                                                                                                                 | **Page                No.** |
|             |   |                 |                                                                                                                 |                             |
|        |   |            |                                                                                                                 |                        |   |
|        | 11     |            | Statement                re: Computation of Per Share Earnings.                                                      |                        | 42 |
|        |   |            |                                                                                                                 |                        |   |
|        | 31.1   |            | Certification                of the CEO pursuant to Exchange Act Rule 13a-14(a).                                     |                        | 43 |
|        |   |            |                                                                                                                 |                        |   |
|        | 31.2   |            | Certification                of the CFO pursuant to Exchange Act Rule 13a-14(a).                                     |                        | 44 |
|        |   |            |                                                                                                                 |                        |   |
|        | 32.1   |            | Certification of the CEO required by Section 1350 of Chapter 63 of Title 18                        of the U.S. Code. |                        | 45 |
|        |   |            |                                                                                                                 |                        |   |
|        | 32.2   |            | Certification of the CFO required by Section 1350 of Chapter 63 of Title 18                        of the U.S. Code. |                        | 46 |

| 41 |
|----|