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, 2005 or oTRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period
from ________________________ to ___________________________ Commission File Number:
1-5273-1 Sterling
  Bancorp(Exact
  name of registrant as specified in its charter)  New
  York
  
  13-2565216(State
  or other jurisdiction of
  incorporation or organization)
  
  (I.R.S.
  Employer
  Identification)650
  Fifth Avenue, New York, N.Y.
  
  10019-6108(Address
  of principal executive offices)
  
  (Zip
  Code)  212-757-3300(Registrants
  telephone number, including area code)N/A(Former
  name, former address and former fiscal year, if changed since last report) Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. x Yes o No
 Indicate
by check mark whether the registrant is an accelerated filer as defined in Rule
12b-2 of the Exchange Act, x Yes o No
 As of October 31, 2005 there were 18,260,089 shares of common stock,
$1.00 par value, outstanding.    STERLING BANCORP

PagePART I FINANCIAL
  INFORMATIONItem 1.
  Financial StatementsConsolidated
  Financial Statements (Unaudited)
  3Notes to
  Consolidated Financial Statements
  8Item 2.
  Managements Discussion and Analysis of Financial
  Condition and Results of OperationsOverview
  13Income
  Statement Analysis
  14Balance
  Sheet Analysis
  18Capital
  23Cautionary
  Statement Regarding Forward-Looking Statements
  24Average
  Balance Sheets
  25Rate/Volume
  Analysis
  27Regulatory Capital and Ratios
  29Item 3.
  Quantitative and Qualitative Disclosures About Market
  RiskAsset/Liability
  Management
  30Interest
  Rate Sensitivity
  35Item 4.
  Controls
  and Procedures
  36PART II
  OTHER INFORMATIONItem 2.
  Unregistered Sales of Equity Securities and Use of
  Proceeds
  38Item 6.
  Exhibits
  39SIGNATURES
  40EXHIBIT
  INDEXExhibit 11
  Statement
  Re: Computation of Per Share Earnings
  42Exhibit 31.1
  Certifications
  of the CEO pursuant to Exchange Act Rule 13a-14(a)
  43Exhibit 31.2
  Certifications
  of the CFO pursuant to Exchange Act Rule 13a-14(a)
  44Exhibit 32
  Certifications
  of the CEO and CFO required by Section 1350 of Chapter 63
  of Title 18 of the U.S. Code
  452


STERLING BANCORP AND SUBSIDIARIES
Consolidated Balance Sheets(Unaudited)

September
        30,
        2005
    
    December
        31,
        2004ASSETSCash
        and due from banks
    
    $
    83,504,142
    
    $
    48,842,418Interest-bearing
        deposits with other banks
    
    
    3,086,437
    
    
    1,329
        103Securities
        available for sale (at estimated fair value; pledged: $133,584,919 in
        2005 and $64,933,098 in 2004)
    
    
    210,903,120
    
    
    233,762,171Securities
        held to maturity (pledged: $256,622,008 in 2005 and $122,309,904 in 2004)
        (estimated fair value: $490,103,563 in 2005 and $448,173,450 in 2004)
    
    
    496,107,388
    
    
    446,457,563Total
        investment securities
    
    
    707,010,508
    
    
    680,219,734Loans
        held for sale
    
    
    50,136,610
    
    
    37,058,673Loans
        held in portfolio, net of unearned discounts
    
    
    1,100,749,310
    
    
    1,022,286,479Less
        allowance for loan losses
    
    
    16,234,273
    
    
    16,328,528Loans,
        net
    
    
    1,084,515,037
    
    
    1,005,957,951Customers
        liability under acceptances
    
    
    1,935,369
    
    
    628,965Excess
        cost over equity in net assets of the banking subsidiary
    
    
    21,158,440
    
    
    21,158,440Premises
        and equipment, net
    
    
    11,190,231
    
    
    10,674,708Other
        real estate
    
    
    327,400
    
    
    766,620Accrued
        interest receivable
    
    
    5,774,238
    
    
    5,604,781Bank
        owned life insurance
    
    
    26,705,447
    
    
    26,553,145Other
        assets
    
    
    39,787,082
    
    
    32,317,224$
    2,035,130,941
    
    $
    1,871,111,762LIABILITIES
        AND SHAREHOLDERS EQUITYDepositsNoninterest-bearing
        deposits
    
    $
    540,030,392
    
    $
    511,307,018Interest-bearing
        deposits
    
    
    937,462,047
    
    
    832,544,097Total
        deposits
    
    
    1,477,492,439
    
    
    1,343,851,115Securities
        sold under agreements to repurchase - customers
    
    
    57,919,814
    
    
    55,934,170Securities
        sold under agreements to repurchase - dealers
    
    
    59,894,000
    
    
    33,882,000Federal
        funds purchased
    
    
    29,100,000
    
    
    32,500,000Commercial
        paper
    
    
    39,402,045
    
    
    25,991,038Other
        short-term borrowings
    
    
    21,169,041
    
    
    2,517,375Acceptances
        outstanding
    
    
    1,935,369
    
    
    628,965Accrued
        expenses and other liabilities
    
    
    88,993,126
    
    
    91,329,506Long-term
        debt
    
    
    105,774,000
    
    
    135,774,000Total
        liabilities
    
    
    1,881,679,834
    
    
    1,722,408,169Shareholders
        equityCommon
        stock, $1 par value. Authorized 50,000,000 shares; issued 20,143,131 and
        19,880,521 shares, respectively
    
    
    20,143,131
    
    
    19,880,521Capital
        surplus
    
    
    149,094,423
    
    
    145,310,745Retained
        earnings
    
    
    36,317,106
    
    
    28,664,568Accumulated
        other comprehensive loss, net of tax
    
    
    (4,146,620
    )
    
    (1,921,060
    )201,408,040
    
    
    191,934,774LessCommon
        shares in treasury at cost, 1,866,042 and 1,642,996 shares, respectively
    
    
    47,868,914
    
    
    42,939,969Unearned
        compensation
    
    
    88,019
    
    
    291,212Total
        shareholders equity
    
    
    153,451,107
    
    
    148,703,593$
    2,035,130,941
    
    $
    1,871,111,
        762See Notes to Consolidated Financial
Statements.

3


STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)

Three
        Months Ended
        September 30,
    
    Nine
        Months Ended
        September 30,2005
    
    2004
    
    2005
    
    2004INTEREST
        INCOMELoans
    
    $
    21,221,500
    
    $
    16,897,670
    
    $
    59,075,349
    
    $
    47,392,037Investment
        securitiesAvailable
        for sale
    
    
    2,309,023
    
    
    3,211,403
    
    
    7,277,809
    
    
    10,357,118Held
        to maturity
    
    
    5,626,580
    
    
    4,624,665
    
    
    16,569,371
    
    
    14,008,129Federal
        funds sold
    
    
    60,791
    
    
    72,779
    
    
    283,287
    
    
    128,915Deposits
        with other banks
    
    
    16,160
    
    
    5,902
    
    
    38,261
    
    
    13,078Total
        interest income
    
    
    29,234,054
    
    
    24,812,419
    
    
    83,244,077
    
    
    71,899,277INTEREST
        EXPENSEDeposits
    
    
    4,953,676
    
    
    3,015,262
    
    
    12,491,348
    
    
    7,862,397Securities
        sold under agreements to repurchase
    
    
    1,066,185
    
    
    325,203
    
    
    2,488,857
    
    
    1,006,563Federal
        funds purchased
    
    
    209,462
    
    
    9,041
    
    
    387,495
    
    
    72,484Commercial
        paper
    
    
    237,243
    
    
    106,502
    
    
    619,730
    
    
    247,861Other
        short-term borrowings
    
    
    57,755
    
    
    33,970
    
    
    124,051
    
    
    239,541Long-term
        debt
    
    
    1,356,940
    
    
    1,559,688
    
    
    4,212,205
    
    
    4,679,063Total
        interest expense
    
    
    7,881,261
    
    
    5,049,666
    
    
    20,323,686
    
    
    14,107,909Net
        interest income
    
    
    21,352,793
    
    
    19,762,753
    
    
    62,920,391
    
    
    57,791,368Provision
        for loan losses
    
    
    2,508,000
    
    
    2,338,500
    
    
    7,162,000
    
    
    7,235,500Net
        interest income after provision for loan losses
    
    
    18,844,793
    
    
    17,424,253
    
    
    55,758,391
    
    
    50,555,868NONINTEREST
        INCOMEFactoring
        income
    
    
    1,561,136
    
    
    1,915,761
    
    
    4,615,245
    
    
    5,110,102Mortgage
        banking income
    
    
    4,601,005
    
    
    3,846,269
    
    
    13,034,852
    
    
    11,392,079Service
        charges on deposit accounts
    
    
    1,486,342
    
    
    1,258,129
    
    
    3,941,596
    
    
    3,480,649Trade
        finance income
    
    
    596,520
    
    
    688,276
    
    
    1,558,786
    
    
    1,699,083Trust
        fees
    
    
    149,446
    
    
    160,311
    
    
    472,969
    
    
    508,046Other
        service charges and fees
    
    
    322,906
    
    
    394,754
    
    
    1,006,220
    
    
    1,349,983Bank
        owned life insurance income
    
    
    460,209
    
    
    498,530
    
    
    1,147,573
    
    
    975,264Securities
        gains
    
    
    
    
    
    285,918
    
    
    196,680
    
    
    970,722Other
        income
    
    
    175,035
    
    
    126,880
    
    
    688,432
    
    
    459,615Total
        noninterest income
    
    
    9,352,599
    
    
    9,174,828
    
    
    26,662,353
    
    
    25,945,543NONINTEREST
        EXPENSESSalaries
    
    
    8,465,092
    
    
    7,787,817
    
    
    24,820,290
    
    
    22,849,669Employee
        benefits
    
    
    2,482,452
    
    
    2,464,874
    
    
    6,577,315
    
    
    6,720,517Total
        personnel expense
    
    
    10,947,544
    
    
    10,252,691
    
    
    31,397,605
    
    
    29,570,186Occupancy
        expenses, net
    
    
    1,463,444
    
    
    1,315,456
    
    
    4,126,590
    
    
    3,779,166Equipment
        expenses
    
    
    867,464
    
    
    755,738
    
    
    2,462,369
    
    
    2,169,997Advertising
        and marketing
    
    
    937,004
    
    
    974,755
    
    
    3,067,397
    
    
    2,992,678Professional
        fees
    
    
    737,415
    
    
    952,253
    
    
    3,702,823
    
    
    2,939,885Data
        processing fees
    
    
    310,745
    
    
    272,292
    
    
    893,623
    
    
    860,235Stationery
        and printing
    
    
    223,753
    
    
    141,816
    
    
    656,051
    
    
    602,821Communications
    
    
    393,010
    
    
    363,698
    
    
    1,260,824
    
    
    1,161,891Other
        expenses
    
    
    2,184,844
    
    
    1,464,884
    
    
    5,665,035
    
    
    4,557,191Total
        noninterest expenses
    
    
    18,065,223
    
    
    16,493,583
    
    
    53,232,317
    
    
    48,634,050Income
        before income taxes
    
    
    10,132,169
    
    
    10,105,498
    
    
    29,188,427
    
    
    27,867,361Provision
        for income taxes
    
    
    3,858,220
    
    
    3,555,324
    
    
    11,091,602
    
    
    9,545,652Net
        income
    
    $
    6,273,949
    
    $
    6,550,174
    
    $
    18,096,825
    
    $
    18,321,709Average
        number of common shares outstandingBasic
    
    
    18,324,683
    
    
    18,207,370
    
    
    18,304,920
    
    
    18,248,585Diluted
    
    
    18,917,332
    
    
    19,025,500
    
    
    18,877,569
    
    
    19,113,791Earnings
        per average common shareBasic
    
    $
    0.34
    
    $
    0.36
    
    $
    0.99
    
    $
    1.00Diluted
    
    
    0.33
    
    
    0.35
    
    
    0.96
    
    
    0.96Dividends
        per common share
    
    
    0.19
    
    
    0.16
    
    
    0.57
    
    
    0.48See Notes to Consolidated Financial
Statements.

4


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

Three
  Months Ended
  
  Nine
  Months EndedSeptember
  30,
  
  September
  30,2005
  
  2004
  
  2005
  
  2004Net Income
  
  $
  6,273,949
  
  $
  6,550,174
  
  $
  18,096,825
  
  $
  18,321,709Other comprehensive income, net of tax:Unrealized holding (losses) /gains arising
  during the period
  
  
  (1,255,031
  )
  
  2,347,046
  
  
  (1,608,327
  )
  
  (1,206,796
  )Reclassification adjustment for gains
  included in net income
  
  
  
  
  
  (154,681
  )
  
  (106,404
  )
  
  (525,160
  )Unrealized (losses) /gains supplemental pension
  
  
  43,566
  
  
  (29,921
  )
  
  (510,829
  )
  
  215,466Comprehensive income
  
  $
  5,062,484
  
  $
  8,712,618
  
  $
  15,871,265
  
  $
  16,805,219See Notes to Consolidated Financial
Statements.

5


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

Nine
  Months EndedSeptember
  30,2005
  
  2004Preferred StockBalance at January 1
  
  $
  
  
  $
  2,244,320Conversions of Series D shares
  
  
  
  
  
  (2,244,320
  )Balance at September 30
  
  $
  
  
  $
  Common StockBalance at January 1
  
  $
  19,880,521
  
  $
  19,275,964Conversions of preferred shares into common
  shares
  
  
  
  
  
  428,304Common shares issued under stock incentive
  plan
  
  
  262,610
  
  
  123,130Balance at September 30
  
  $
  20,143,131
  
  $
  19,827,398Capital SurplusBalance at January 1
  
  $
  145,310,745
  
  $
  141,179,832Conversions of preferred shares into common
  shares
  
  
  
  
  
  1,816,016Common shares issued under stock incentive
  plan and related tax benefits
  
  
  3,783,678
  
  
  l,729,973Balance at September 30
  
  $
  149,094,423
  
  $
  144,725,821Retained EarningsBalance at January 1
  
  $
  28,664,568
  
  $
  16,166,517Net Income
  
  
  18,096,825
  
  
  18,321,709Cash dividends paid - common shares
  
  
  (10,444,287
  )
  
  (8,658,428
  )Balance at September 30
  
  $
  36,317,106
  
  $
  25,829,798Accumulated Other Comprehensive IncomeBalance at January 1
  
  $
  (1,921,060
  )
  $
  (1,131,803
  )Unrealized holding (losses)/gains arising during the
period:Before tax
  
  
  (2,990,018
  )
  
  (2,230,677
  )Tax effect
  
  
  1,381,691
  
  
  1,023,881Net of tax
  
  
  (1,608,327
  )
  
  (1,206,796
  )Reclassification adjustment for gains
  included in net income:Before tax
  
  
  (196,680
  )
  
  (970,722
  )Tax effect
  
  
  90,276
  
  
  445,562Net of tax
  
  
  (106,404
  )
  
  (525,160
  )Unrealized (losses)/gains supplemental
  pension:Before tax
  
  
  (945,876
  )
  
  398,273Tax effect
  
  
  435,047
  
  
  (182,807
  )Net of tax
  
  
  (510,829
  )
  
  215,466Balance at September 30
  
  $
  (4,146,620
  )
  $
  (2,648,293
  )Treasury StockBalance at January 1
  
  $
  (42,939,969
  )
  $
  (33,577,847
  )Purchase of common shares
  
  
  (3,322,666
  )
  
  (8,310,004
  )Surrender of shares issued under incentive
  compensation plan
  
  
  (1,606,279
  )
  
  (409,258
  )Balance at September 30
  
  $
  (47,868,914
  )
  $
  (42,297,109
  )Unearned CompensationBalance at January 1
  
  $
  (291,212
  )
  $
  (894,976
  )Amortization of unearned compensation
  
  
  203,193
  
  
  522,281Balance at September 30
  
  $
  (88,019
  )
  $
  (372,695
  )Total Shareholders EquityBalance at January 1
  
  $
  148,703,593
  
  $
  143,262,007Net changes during the period
  
  
  4,747,514
  
  
  1,802,913Balance at September 30
  
  $
  153,451,107
  
  $
  145,064,920See Notes to Consolidated Financial
Statements.

6


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

Nine MonthsEndedSeptember 30,2005
  
  2004Operating ActivitiesNet Income
  
  $
  18,096,825
  
  $
  18,321,709Adjustments to reconcile net income to net cash
  provided by (used in) operating activities:Provision for loan losses
  
  
  7,162,000
  
  
  7,235,500Depreciation and amortization of premises and
  equipment
  
  
  1,505,815
  
  
  1,318,157Securities gains
  
  
  (196,680
  )
  
  (970,722
  )Income from bank owned life insurance
  
  
  (1,147,573
  )
  
  (975,264
  )Deferred income tax benefit
  
  
  (1,034,027
  )
  
  (300,878
  )Net change in loans held for sale
  
  
  (13,077,937
  )
  
  1,746,014Amortization of unearned compensation
  
  
  203,193
  
  
  522,281Amortization of premiums on securities
  
  
  758,630
  
  
  1,198,486Accretion of discounts on securities
  
  
  (473,278
  )
  
  (394,808
  )Increase in accrued interest
receivable
  
  
  (169,457
  )
  
  (70,917
  )Decrease in accrued expenses and other
liabilities
  
  
  (2,336,380
  )
  
  10,934,829Increase in other assets
  
  
  (4,910,163
  )
  
  (5,353,733
  )Other, net
  
  
  305,985
  
  
  861,992Net cash provided by operating
activities
  
  
  4,686,953
  
  
  34,072,646Investing ActivitiesPurchase of premises and equipment
  
  
  (2,021,338
  )
  
  (2,079,148
  )Net increase in interest-bearing deposits with
  other banks
  
  
  (1,757,334
  )
  
  (1,013,176
  )Net increase in loans held in
portfolio
  
  
  (85,719,086
  )
  
  (73,608,868
  )Decrease (Increase) in other real
estate
  
  
  439,220
  
  
  (189,239
  )Proceeds from prepayments, redemptions or
  maturities of securities - held to maturity
  
  
  77,508,464
  
  
  105,510,986Purchases of securities - held to
maturity
  
  
  (127,413,506
  )
  
  (123,394,828
  )Proceeds from sales of securities - available
  for sale
  
  
  2,932,250
  
  
  73,254,718Proceeds from prepayments, redemptions or
  maturities of securities - available for sale
  
  
  53,354,017
  
  
  84,957,982Purchases of securities - available for
sale
  
  
  (36,447,371
  )
  
  (130,365,143
  )Net cash used in investing activities
  
  
  (119,124,684
  )
  
  (66,926,716
  )Financing ActivitiesNet increase (decrease) in noninterest-bearing
  deposits
  
  
  28,723,374
  
  
  (49,557,132
  )Net increase in interest-bearing
deposits
  
  
  104,917,950
  
  
  137,185,949Decrease in Federal funds purchased
  
  
  (3,400,000
  )
  
  (10,000,000
  )Net increase in securities sold under
  agreements to repurchase
  
  
  27,997,644
  
  
  9,777,016Net increase (decrease) in commercial paper and
other short-term
  borrowings
  
  
  32,062,673
  
  
  (49,608,633
  )Net decrease in long-term borrowings
  
  
  (30,000,000
  )
  
  Purchase of treasury stock
  
  
  (3,322,666
  )
  
  (8,310,004
  )Proceeds from exercise of stock
options
  
  
  2,564,767
  
  
  1,342,069Cash dividends paid on common stock
  
  
  (10,444,287
  )
  
  (8,658,428
  )Net cash provided by financing
activities
  
  
  149,099,455
  
  
  22,170,837Net increase (decrease) in cash and due from
  banks
  
  
  34,661,724
  
  
  (10,683,233
  )Cash and due from banks - beginning of period
  
  
  48,842,418
  
  
  63,947,722Cash and due from banks - end of period
  
  $
  83,504,142
  
  $
  53,264,489Supplemental disclosures:Interest paid
  
  $
  19,517,578
  
  $
  13,800,992Income taxes
  paid
  
  
  13,020,100
  
  
  10,869,100See 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, 2005 and 2004 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 2004 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, 2004.  The Company
  effected a six-for-five stock split on December 8, 2004 and a five-for-four
  stock split on September 10, 2003 and paid stock dividends as follows: 20% on
  December 9, 2002;  10% on December 10,
  2001;  10% on December 11, 2000; and
  5% on December 14, 1999.  Fractional
  shares were cashed-out and payments were made to shareholders in lieu of
  fractional shares.  All capital and
  share amounts as well as basic and diluted average number of shares
  outstanding and earnings per average common share information for all prior
  reporting periods presented, reflect the effect of the stock splits and stock
  dividends.2.
  At September
  30, 2005, the Company has a stock-based employee compensation plan, which is
  described more fully in Note 1 and Note 15 to the consolidated financial
  statements in the Companys annual report on Form 10-K for the year ended
  December 31, 2004.  The Company
  accounts for this plan under the recognition and measurement principles of
  Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees,
  and related Interpretations.  No
  stock-based employee compensation cost is reflected in net income, as all
  options granted under those plans had an exercise price equal to the market
  value of the underlying common stock on the date of grant.  In accordance with Statement of Financial
  Accounting Standards (SFAS) No. 148, the following table illustrates the
  effect on net income and earnings per average common share if the Company had
  applied the fair value recognition provisions of  SFAS No. 123, Accounting for
  Stock-Based Compensation, to the stock-based employee compensation
  plans.Three Months Ended September 30,
  
  2005
  
  2004Net income available for common
  shareholders
  
  $
  6,273,949
  
  $
  6,550,174Deduct: Total stock-based employee
  compensation expense determined under fair value based method for all
  awards, net of related tax effects
  
  
  (65,577
  )
  
  (59,528
  )Pro forma, net income
  
  $
  6,208,372
  
  $
  6,490,646Earnings per average common share:Basic- as reported
  
  $
  0.34
  
  $
  0.36Basic- pro forma
  
  
  0.34
  
  
  0.36Diluted- as reported
  
  
  0.33
  
  
  0.35Diluted- pro forma
  
  
  0.33
  
  
  0.348


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

Nine Months Ended September 30,
  
  2005
  
  2004Net income available for common
  shareholders
  
  $
  18,096,825
  
  $
  18,321,709Deduct: Total stock-based employee
  compensation expense determined under fair value based method for all
  awards, net of related tax effects
  
  
  (188,367
  )
  
  (174,954
  )Pro forma,
  net income
  
  $
  17,908,458
  
  $
  18,146,755Earnings per average common share:Basic- as reported
  
  $
  0.99
  
  $
  1.00Basic- pro forma
  
  
  0.98
  
  
  0.99Diluted- as reported
  
  
  0.96
  
  
  0.96Diluted- pro forma
  
  
  0.95
  
  
  0.953.
  The major
  components of domestic loans held for sale and loans held in portfolio are as
  follows:September
        30,2005
    
    2004Loans
        held for saleReal
        estate-mortgage
    
    $
    50,136,610
    
    $
    38,810,366Loans
        held in portfolioCommercial
        and industrial
    
    $
    636,289,748
    
    $
    585,288,435Lease
        financing
    
    
    202,451,011
    
    
    181,671,932Real
        estate-residential mortgage
    
    
    146,013,910
    
    
    111,841,103Real
        estate- commercial mortgage
    
    
    118,573,523
    
    
    94,705,763Real
        estate-construction
    
    
    2,309,103
    
    
    2,329,491Installment
    
    
    11,766,058
    
    
    15,270,005Loans
        to depository institutions
    
    
    10,000,000
    
    
    Loans
        held in portfolio, gross
    
    
    1,127,403,353
    
    
    991,106,729Less
        unearned discounts
    
    
    26,654,043
    
    
    23,033,619Loans
        held in portfolio, net of unearned discounts
    
    $
    1,100,749,310
    
    $
    968,073,1104.
  In February 2004, 224,432 Series D
  preferred shares were converted into 428,304 common shares.5.
  SFAS No.
  131, Disclosures about Segments of an
  Enterprise and Related Information, established standards for the
  way that public business enterprises
  report and disclose selected information about operating segments in interim
  financial statements provided to stockholders.9


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

The Company
provides a broad range of financial products and services, including commercial
loans, asset-based financing, factoring and accounts receivable management
services, trade financing, equipment leasing, corporate and consumer deposit
services, commercial and residential mortgage lending and brokerage, trust and
estate administration and investment management services.  The Companys primary source of earnings is
net interest income, which represents the difference between interest earned on
interest-earning assets and the interest incurred on interest-bearing
liabilities. The Companys 2005 year-to-date average interest-earning assets
were 58.5% loans (corporate lending was 66.7% and real estate lending was 29.7%
of total loans, respectively) and 40.5% investment securities and money market
investments.  There are no industry
concentrations exceeding 10% of loans, gross, in the corporate loan
portfolio.  Approximately 72% of loans
are to borrowers located in the metropolitan New York area.  In order to comply with SFAS No. 131, the
Company has determined that it has three reportable operating segments:
corporate lending, real estate lending and company-wide treasury.

The following
tables provide certain information regarding the Companys operating segments
for the three and nine month periods ended September 30, 2005 and 2004:

Corporate
  Lending
  
  Real
  Estate
  Lending
  
  Company-wide
  Treasury
  
  TotalsThree Months Ended September 30, 2005Net interest income
  
  $
  10,053,884
  
  $
  5,928,749
  
  $
  5,143,317
  
  $
  21,125,950Noninterest income
  
  
  3,550,947
  
  
  4,689,523
  
  
  537,257
  
  
  8,777,727Depreciation and amortization
  
  
  113,635
  
  
  103,254
  
  
  620
  
  
  217,509Segment income before taxes
  
  
  5,329,839
  
  
  5,636,868
  
  
  5,613,007
  
  
  16,579,714Segment assets
  
  
  801,394,089
  
  
  367,284,929
  
  
  839,492,676
  
  
  2,008,171,694Three Months Ended September 30, 2004Net interest income
  
  $
  9,486,019
  
  $
  4,125,387
  
  $
  5,958,732
  
  $
  19,570,138Noninterest income
  
  
  3,587,898
  
  
  3,929,044
  
  
  884,953
  
  
  8,401,895Depreciation and amortization
  
  
  80,415
  
  
  102,964
  
  
  920
  
  
  184,299Segment income before taxes
  
  
  5,224,737
  
  
  4,327,299
  
  
  6,536,387
  
  
  16,088,423Segment assets
  
  
  721,671,407
  
  
  286,075,699
  
  
  778,890,835
  
  
  1,786,637,941Nine Months Ended September 30, 2005Net interest income
  
  $
  29,521,527
  
  $
  16,141,238
  
  $
  16,590,184
  
  $
  62,252,949Noninterest income
  
  
  9,674,187
  
  
  13,302,619
  
  
  1,741,781
  
  
  24,718,587Depreciation and amortization
  
  
  304,132
  
  
  282,824
  
  
  1,838
  
  
  588,794Segment income before taxes
  
  
  14,926,978
  
  
  16,018,794
  
  
  18,074,853
  
  
  49,020,625Segment assets
  
  
  801,394,089
  
  
  367,284,929
  
  
  839,492,676
  
  
  2,008,171,694Nine Months Ended September 30, 2004Net interest income
  
  $
  27,049,062
  
  $
  11,788,083
  
  $
  18,408,890
  
  $
  57,246,035Noninterest income
  
  
  9,762,453
  
  
  11,606,416
  
  
  2,167,548
  
  
  23,536,417Depreciation and amortization
  
  
  221,579
  
  
  302,679
  
  
  920
  
  
  525,178Segment income before taxes
  
  
  13,650,937
  
  
  12,534,701
  
  
  20,230,073
  
  
  46,415,711Segment assets
  
  
  721,671,407
  
  
  286,075,699
  
  
  778,890,835
  
  
  1,786,637,94110


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

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

Three
  Months Ended September 30,
  
  Nine Months Ended September 30,2005
  
  2004
  
  2005
  
  2004Net interest income:Total for reportable operating segments
  
  $
  21,125,950
  
  $
  19,570,138
  
  $
  62,252,949
  
  $
  57,246,035Other [1]
  
  
  226,843
  
  
  192,615
  
  
  667,442
  
  
  545,333Consolidated net interest income
  
  $
  21,352,793
  
  $
  19,762,753
  
  $
  62,920,391
  
  $
  57,791,368Noninterest income:Total for reportable operating segments
  
  $
  8,777,727
  
  $
  8,401,895
  
  $
  24,718,587
  
  $
  23,536,417Other [1]
  
  
  574,872
  
  
  772,933
  
  
  1,943,766
  
  
  2,409,126Consolidated noninterest income
  
  $
  9,352,599
  
  $
  9,174,828
  
  $
  26,662,353
  
  $
  25,945,543Income before taxes:Total for reportable operating segments
  
  $
  16,579,714
  
  $
  16,088,423
  
  $
  49,020,625
  
  $
  46,415,711Other [1]
  
  
  (6,447,545
  )
  
  (5,982,925
  )
  
  (19,832,198
  )
  
  (18,548,350
  )Consolidated income before income taxes
  
  $
  10,132,169
  
  $
  10,105,498
  
  $
  29,188,427
  
  $
  27,867,361Assets:Total for reportable operating segments
  
  $
  2,008,171,694
  
  $
  1,786,637,941
  
  $
  2,008,171,694
  
  $
  1,786,637,941Other [1]
  
  
  26,959,247
  
  
  23,670,225
  
  
  26,959,247
  
  
  23,670,225Consolidated assets
  
  $
  2,035,130,941
  
  $
  1,810,308,166
  
  $
  2,035,130,941
  
  $
  1,810,308,166[1] Represents operations not considered to be a reportable
segment and/or general operating expenses of the Company.

6.
  The following information
  is provided in connection with the sales of available for sale securities:Three Months Ended September 30,
  
  2005
  
  2004Proceeds
  
  $
  
  
  $
  26,149,573Gross Gains
  
  
  
  
  
  285,918Gross Losses
  
  
  
  
  
  Nine Months Ended September 30,
  
  2005
  
  2004Proceeds
  
  $
  2,932,250
  
  $
  73,254,718Gross
  Gains
  
  
  196,680
  
  
  970,722Gross
  Losses
  
  
  
  
  
  11


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

7.
  The
  following table sets forth components of
  net periodic benefit cost and net 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 30,2005
  
  2004
  
  2005
  
  2004COMPONENTS OF NET PERIODIC COSTService
  Cost
  
  $
  395,231
  
  $
  388,090
  
  $
  1,202,917
  
  $
  1,191,131Interest
  Cost
  
  
  559,634
  
  
  492,931
  
  
  1,578,620
  
  
  1,507,418Expected
  return on plan assets
  
  
  (480,328
  )
  
  (417,379
  )
  
  (1,365,426
  )
  
  (1,292,898
  )Amortization
  of prior service cost
  
  
  18,324
  
  
  19,331
  
  
  56,556
  
  
  57,993Recognized
  actuarial loss
  
  
  291,769
  
  
  216,556
  
  
  706,477
  
  
  643,647Net
  periodic benefit cost
  
  
  784,630
  
  
  699,529
  
  
  2,179,144
  
  
  2,107,291Settlement
  gain
  
  
  
  
  
  
  
  
  
  
  
  (1,331,190
  )Net
  benefit cost
  
  $
  784,630
  
  $
  699,529
  
  $
  2,179,144
  
  $
  776,101The
Company contributed $3,000,000 to the defined benefit pension plan as of
September 30, 2005.8.
  SFAS No.
  123R, Share-Based Payment,will
  be effective for the Company beginning January 1, 2006.  SFAS No. 123R provides alternative
  transition methods, and the Company has not yet determined which transition
  method it will apply upon adoption of SFAS No. 123R.  The impact on the Companys consolidated
  financial statements will depend on the transition method selected.9.
  In May,
  2005, the Financial Accounting Standards Board (FASB) issued SFAS No. 154, Accounting Changes and Error
Corrections.  This statement replaces APB Opinion No.
  20, Accounting Changes,and
  SFAS No. 3, Reporting Accounting Changes
  in Interim Financial Statements, and changes the requirements for
  the accounting for and reporting of a change in accounting principle.  This statement applies to all voluntary
  changes in accounting principle.  It
  also applies to changes required by an accounting pronouncement in the
  unusual instance that the pronouncement does not include specific transition
  provisions.  When a pronouncement
  includes specific transition provisions, those provisions should be
  followed.  SFAS No. 154 establishes
  retrospective application as the required method  for reporting a voluntary change in accounting principle and
  for adopting a new accounting pronouncement in the unusual instance that the
  pronouncement does not include specific transition guidance.  SFAS No. 154 provides guidance for
  determining whether retrospective application of a change in accounting
  principle is impracticable and for reporting a change when retrospective
  application is impracticable.  The
  reporting of a correction of an error by restating previously issued
  financial statements is also addressed by SFAS No. 154.  SFAS No. 154 is effective for accounting
  changes and correction of errors made in fiscal years beginning after
  December 15, 2005.  The Company
  expects to adopt SFAS No. 154 on January 1, 2006.12


ITEM 2.
  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
  RESULTS OF OPERATIONSThe following commentary presents managements discussion and analysis
of the financial condition and results of operations of Sterling Bancorp (the
parent company), a financial holding company under the Gramm-Leach-Bliley Act
of 1999, and its subsidiaries, principally Sterling National Bank (the bank).
Throughout this discussion and analysis, the term the Company refers to
Sterling Bancorp and its subsidiaries. This discussion and analysis should be
read in conjunction with the consolidated financial statements and supplemental
data contained elsewhere in this quarterly report and the Companys annual
report on Form 10-K for the year ended December 31, 2004. Certain
reclassifications have been made to prior years financial data to conform to
current financial statement presentations as well as to reflect the effect of
the six-for-five stock split effected on December 8, 2004.

OVERVIEW

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

For the three months ended September 30, 2005, the banks average
earning assets represented approximately 96.5% of the Companys average earning
assets. Loans represented 58.4% and investment securities represented 41.0% of
the banks average earning assets for the three months ended September 30,
2005.

For the nine months ended September 30, 2005, the banks average
earning assets represented approximately 96.5% of the Companys average earning
assets. Loans represented 57.0% and investment securities represented 42.0% of
the banks average earning assets for the nine months ended September 30, 2005.

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

13


and evaluation of economic conditions. If such assumptions or judgments
prove to be incorrect, the current allowance for loan losses may not be
sufficient to cover loan losses and additions to the allowance may be
necessary, which would have a negative impact on net income.

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

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

INCOME STATEMENT ANALYSIS

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

Comparisons of the Three Months Ended
September 30, 2005 and 2004

The Company reported net income for the three months ended September
30, 2005 of $6.3 million, representing $0.33 per share, calculated on a diluted
basis, compared to $6.6 million, or $0.35 per share calculated on a diluted
basis, for the third quarter of 2004. Net income benefitted from continued
growth in net interest income and higher noninterest income, but these benefits
were more than offset by increases in noninterest expenses, in the provision
for income taxes and in the provision for loan losses.

14


Net Interest Income

Net interest income, on a tax-equivalent basis, increased to $21.5
million for the third quarter of 2005 from $20.0 million for the 2004 period,
due to higher average earning assets outstanding coupled with higher average
yield on loans partially offset by higher balances for interest-bearing
deposits coupled with higher rates paid on interest-bearing deposit balances
and borrowed funds. The net interest margin, on a tax-equivalent basis, was
4.76% for the third quarter of 2005 compared to 4.84% for the 2004 period. The
net interest margin was affected by the higher interest rate environment in
2005 and by increases in average investment securities, loan outstandings and
noninterest-bearing deposits, offset by the impact of higher average
interest-bearing deposits.

Total interest income, on a tax-equivalent basis, aggregated $29.4
million for the third quarter of 2005, up from $25.0 million for the 2004
period. The tax-equivalent yield on interest-earning assets was 6.54% for the
third quarter of 2005 compared to 6.11% for the 2004 period.

Interest earned on the loan portfolio amounted to $21.2 million for the
third quarter of 2005, up $4.3 million from a year ago. Average loan balances
amounted to $1,087.3 million, an increase of $135.4 million from an average of
$951.9 million in the prior year period. The increase in average loans (across
virtually all segments of the Companys loan portfolio), primarily due to the
Companys business development activities and the ongoing consolidation of
banks in the Companys marketing area, accounted for $2.6 million of the $4.3
million increase in interest earned on loans. The increase in the yield on the
domestic loan portfolio to 8.02% for the third quarter of 2005 from 7.31% for
the 2004 period was primarily attributable to the mix of average outstanding
balances among the components of the loan portfolio and the higher interest
rate environment in 2005.

Interest earned on the securities portfolio, on a tax-equivalent basis,
increased to $8.1 million for the third quarter of 2005 from $8.0 million in
the prior year period. Average outstandings increased to $719.8 million (39.6%
of average earning assets for the third quarter of 2005) from $682.7 million
(41.2% of average earning assets) in the prior year period. The average life of
the securities portfolio was approximately 3.8 years at September 30, 2005
compared to 4.2 years at September 30, 2004, reflecting the impact of purchases.
The decrease in yields on most of the securities portfolio reflects the impact
of the continued flattening of the yield curve.

Total interest expense increased to $7.9 million for the third quarter
of 2005 from $5.1 million for the 2004 period, primarily due to higher rates
paid for interest-bearing deposits and for borrowed funds and higher average
balances for interest-bearing deposits.

Interest expense on deposits increased to $5.0 million for the third
quarter of 2005 from $3.0 million for the 2004 period primarily due to the
higher interest rate environment in 2005, coupled with an increase in average
balances, primarily for time deposits. Average rate paid on interest-bearing
deposits was 2.06%

15


which was 65 basis points higher than the prior year period. Average
interest-bearing deposit balances increased to $953.1 million for the third
quarter of 2005 from $853.3 million in the 2004 period, primarily as a result of
the Companys branching initiatives and other business development activities.

Interest expense on borrowings increased to $2.9 million for the third
quarter of 2005 from $2.0 million for the 2004 period, primarily due to the
higher interest rate environment during 2005. The average rate paid on borrowed
funds was 3.71% which was 85 basis points higher than the prior year period.

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 2005 increased to $2.5 million from $2.3 million for the prior
year period. Factors affecting the level of provision included the growth in
the loan portfolios, changes in general economic conditions and the amount of
nonaccrual loans.

Noninterest Income

Noninterest income increased to $9.4 million for the third quarter of
2005 from $9.2 million in the 2004 period, primarily due to higher revenues
from mortgage banking activities and fees for deposit services. Partially
offsetting those increases were lower gains on sales of available for sale
securities and fees for factoring services.

Noninterest Expenses

Noninterest expenses increased $1.6 million for the third quarter of
2005 when compared to the 2004 period. The increase was primarily due to higher
salaries and professional fees related to compliance efforts and investments in
the Sterling franchise, including the new branches, with higher expenses
related to salaries, equipment and occupancy costs. These increases were
partially offset by a reversal of $1.0 million of litigation settlement costs
originally charged to noninterest expenses in 2001. The increase in other
expenses was principally due to increases in appraisal fees, credit reports,
mortgage taxes, insurance and interest on potential tax liability.

Provision for Income Taxes

The provision for income taxes for the third quarter of 2005 increased
to $3.9 million from $3.6 million for the prior year period, primarily due to
the higher effective tax rate in 2005.

Comparisons of the Nine Months Ended
September 30, 2005 and 2004

The Company reported net income for the nine months ended September 30,
2005 of $18.1 million, representing $0.96 per share, calculated on a diluted
basis, compared to $18.3 million, or $0.96 per share calculated on a diluted
basis, for the first nine months of 2004. Net income benefitted from continued
growth in net interest income, a lower provision for loan losses and higher
noninterest income, which were more than offset by increases in noninterest
expenses and in the provision for income taxes.

16


Net Interest Income

Net interest income, on a tax-equivalent basis, increased to $63.4
million for the first nine months of 2005 from $58.4 million for the 2004
period, due to higher average earning assets outstanding coupled with higher
average yield on loans partially offset by higher balances for interest-bearing
deposits coupled with higher rates paid on interest-bearing deposit balances
and borrowed funds. The net interest margin, on a tax-equivalent basis, was
4.92% for the first nine months of 2005, unchanged from the 2004 period. Net
interest margin was affected by the higher interest rate environment in 2005
and by increases in average loan outstandings and noninterest-bearing deposits,
substantially offset by the impact of higher average interest-bearing deposits.

Total interest income, on a tax-equivalent basis, aggregated $83.8
million for the first nine months of 2005, up from $72.5 million for the 2004
period. The tax-equivalent yield on interest-earning assets was 6.52% for the
first nine months of 2005 compared to 6.13% for the 2004 period.

Interest earned on the loan portfolio amounted to $59.1 million for the
first nine months of 2005, up $11.7 million from a year ago. Average loan
balances amounted to $1,033.4 million, an increase of $128.0 million from an
average of $905.4 million in the prior year period. The increase in average loans
(across virtually all segments of the Companys loan portfolio), primarily due
to the Companys business development activities and the ongoing consolidation
of banks in the Companys marketing area, accounted for $7.1 million of the
$11.7 million increase in interest earned on loans. The increase in the yield
on the domestic loan portfolio to 8.04% for the first nine months of 2005 from
7.38% for the 2004 period was primarily attributable to the mix of average
outstanding balances among the components of the loan portfolio and the higher
interest rate environment in 2005.

Interest earned on the securities portfolio, on a tax-equivalent basis,
decreased to $24.4 million for the first nine months of 2005 from $25.0 million
in the prior year period. The decrease in yields on most of the securities
portfolio reflects the impact of the continued flattening of the yield curve.
Average outstandings increased to $715.5 million (40.5% of average earning
assets for the first nine months of 2005) from $698.3 million (43.1% of average
earning assets) in the prior year period. The average life of the securities
portfolio was approximately 3.8 years at September 30, 2005 compared to 4.2
years at September 30, 2004, reflecting the impact of purchases.

Total interest expense increased to $20.3 million for the first nine
months of 2005 from $14.1 million for the 2004 period, primarily due to higher
rates paid for interest-bearing deposits and for borrowed funds and higher
average balances for interest-bearing deposits.

Interest expense on deposits increased to $12.5 million for the first
nine months of 2005 from $7.9 million for the 2004 period primarily due to the
higher interest rate environment in 2005, coupled with an increase in average
balances, primarily for time deposits. Average rate paid on interest-bearing
deposits was 1.81% which was 52 basis points higher than the prior year period.
Average

17


interest-bearing deposit balances increased to $924.4 million for the
first nine months of 2005 from $815.3 million in the 2004 period, primarily as a
result of the Companys branching initiatives and other business development
activities.

Interest expense on borrowings increased to $7.8 million for the first
nine months of 2005 from $6.2 for the 2004 period, primarily due to the higher
interest rate environment during 2005. The average rate paid on borrowed funds
was 3.42% which was 69 basis points higher than the prior year period.

Noninterest Income

Noninterest income increased to $26.7 million for the first nine months
of 2005 from $25.9 million in the 2004 period, primarily due to higher revenues
from mortgage banking activities, bank owned life insurance and fees for
deposit services. Partially offsetting those increases were lower gains on
sales of available for sale securities and fees for factoring services.

Noninterest Expenses

Noninterest expenses increased $4.6 million for the first nine months
of 2005 when compared to the 2004 period. The increase was primarily due to
higher salaries and professional fees related to compliance efforts and
investments in the Sterling franchise, including the new branches, with higher
expenses related to salaries, equipment and occupancy costs. These increases
were partially offset by a reversal during the third quarter of 2005 of $1.0
million of litigation settlement costs originally charged to noninterest
expenses in 2001. The increase in other expenses was principally due to
increases in appraisal fees, credit reports, mortgage taxes, insurance and
interest on potential tax liability.

Provision for Income Taxes

The provision for income taxes for the first nine months of 2005
increased by $1.5 million from the 2004 period. The lower provision for taxes
in the 2004 period was due primarily to the resolution, during the second quarter
of 2004, of certain state tax issues for the years 1999-2001.

BALANCE SHEET ANALYSIS

Securities

The Companys securities portfolios are comprised principally of
mortgage-backed securities of U.S. government corporations and government
sponsored enterprises. At September 30, 2005, the Companys portfolio of
securities totaled $707.0 million, of which mortgage-backed securities and
collateralized mortgage obligations of U.S. government corporations and
government sponsored enterprises having an average life of approximately 4.1
years amounted to $592.0 million. The Company has the intent and ability to
hold to maturity securities classified as held to maturity. These securities
are carried at cost, adjusted for amortization of premiums and accretion of discounts.
The gross unrealized gains and losses on held to maturity securities were
$1.5 million and $7.5 million, respectively.

18


Securities classified as available
for sale may be sold in the future, prior to maturity.  These securities are
carried at market value.  Net aggregate unrealized gains or losses on these securities
are included in a valuation allowance account and are shown net of taxes, as a component
of shareholdersequity.  Available for sale securities includes gross
unrealized gains of $0.8 million and gross unrealized losses of $3.8 million.  Given the
generally high credit quality of the portfolio, management expects to realize all of its
investment upon the maturity of such instruments and thus believes that any market value
impairment is temporary.

The following
table presents information regarding securities available for sale:

Gross
    
    Gross
    
    GrossAmortized
    
    Unrealized
    
    Unrealized
    
    MarketSeptember 30, 2005
    
    Cost
    
    Gains
    
    Losses
    
    ValueMortgage-Backed
        SecuritiesCMOs
        (Federal Home Loan Mortgage Corporation)
    
    $
    35,374,264
    
    $
    
    
    $
    1,348,910
    
    $
    34,025,354Federal
        National Mortgage Association
    
    
    58,647,440
    
    
    122,940
    
    
    1,056,250
    
    
    57,714,130Federal
        Home Loan Mortgage Corporation
    
    
    49,535,706
    
    
    46,899
    
    
    787,574
    
    
    48,795,031Government
        National Mortgage Association
    
    
    6,125,964
    
    
    232,420
    
    
    4,755
    
    
    6,353,629Total
        Mortgage-Backed Securities
    
    
    149,683,374
    
    
    402,259
    
    
    3,197,489
    
    
    146,888,144Federal Home Loan
        Bank
    
    
    14,996,818
    
    
    
    
    
    303,068
    
    
    14,693,750Federal Farm Credit
        Bank
    
    
    10,000,000
    
    
    
    
    
    203,125
    
    
    9,796,875Obligations
        of state and political institutions
    
    
    26,567,076
    
    
    385,368
    
    
    65,816
    
    
    26,886,628Other debt securities
    
    
    5,000,000
    
    
    
    
    
    
    
    
    5,000,000Federal
        Reserve Bank and other equity securities
    
    
    7,619,242
    
    
    18,481
    
    
    
    
    
    7,637,723Total
    
    $
    213,866,510
    
    $
    806,108
    
    $
    3,769,498
    
    $
    210,903,12019


The following
table presents information regarding securities held to maturity:

Gross
  
  Gross
  
  EstimatedCarrying
  
  Unrealized
  
  Unrealized
  
  MarketSeptember 30, 2005
  
  Value
  
  Gains
  
  Losses
  
  ValueMortgage-Backed SecuritiesCMOs (Federal
  National Mortgage Association)
  
  $
  10,843,086
  
  $
  
  
  $
  365,230
  
  $
  10,477,856CMOs (Federal Home Loan Mortgage
  Corporation)
  
  
  32,501,879
  
  
  
  
  
  929,786
  
  
  31,572,093Federal National Mortgage Association
  
  
  207,022,218
  
  
  638,542
  
  
  2,639,922
  
  
  205,020,838Federal Home Loan Mortgage Corporation
  
  
  175,311,844
  
  
  234,919
  
  
  2,922,153
  
  
  172,624,610Government National Mortgage
Association
  
  
  19,447,078
  
  
  663,115
  
  
  464
  
  
  20,109,729Total Mortgage-Backed Securities
  
  
  445,126,105
  
  
  1,536,576
  
  
  6,857,555
  
  
  439,805,126Federal Home Loan Bank
  
  
  29,981,283
  
  
  
  
  
  303,158
  
  
  29,678,125Federal Farm Credit Bank
  
  
  20,000,000
  
  
  
  
  
  379,688
  
  
  19,620,312Debt securities issued by foreign
  governments
  
  
  1,000,000
  
  
  
  
  
  
  
  
  1,000,000Total
  
  $
  496,107,388
  
  $
  1,536,576
  
  $
  7,540,401
  
  $
  490,103,56320


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 55% of all
loans. Loans in this category are typically made to small and medium-sized
businesses and range between $25,000 and $10 million. Sources of repayment are
from the borrowers operating profits, cash flows and liquidation of pledged
collateral. Based on underwriting standards, loans may be secured in whole or
in part by collateral such as liquid assets, accounts receivable, equipment,
inventory, and real property. The Companys real estate loan portfolio, which
represents approximately 28% of all loans, is secured by mortgages on real
property located principally in the states of New York and Virginia. The
Companys leasing portfolio, which consists of finance leases for various types
of business equipment, represents approximately 15% of all loans. The
collateral securing any loan may vary in value based on market conditions.

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

September
        30,2005
    
    2004($
        in thousands)Balances
    
    % of
        
        Total
    
    Balances
    
    % of
        TotalDomesticCommercial
        and industrial
    
    $
    635,770
    
    
    55.3
    %
    $
    584,754
    
    
    58.1
    %Equipment
        lease financing
    
    
    176,316
    
    
    15.3
    
    
    159,175
    
    
    15.8Real
        estate - residential mortgage
    
    
    196,151
    
    
    17.0
    
    
    150,651
    
    
    15.0Real
        estate - commercial mortgage
    
    
    118,574
    
    
    10.3
    
    
    94,706
    
    
    9.4Real
        estate - construction
    
    
    2,309
    
    
    0.2
    
    
    2,329
    
    
    0.2Installment
        - individuals
    
    
    11,766
    
    
    1.0
    
    
    15,268
    
    
    1.5Loans
        to depository institutions
    
    
    10,000
    
    
    0.9
    
    
    
    
    
    Loans,
        net of unearned discounts
    
    $
    1,150,886
    
    
    100.0
    %
    $
    1,006,883
    
    
    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 be increased.
While management endeavors to minimize this risk, it recognizes that loan
losses will occur and that the amount of these losses will fluctuate depending
on the risk characteristics of the loan portfolio, which in turn depend on
current and expected economic conditions, the financial condition of borrowers,
the realization of collateral, and the credit management process.

21


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
economic conditions and changes in the size and character of the loan
portfolio. Other data utilized by management in determining the adequacy of the
allowance for loan losses includes, but is not limited to, the results of
regulatory reviews, the amount of, trend of and/or borrower characteristics on
loans that are identified as requiring special attention as part of the credit
review process, and peer group comparisons. The impact of this other data might
result in an allowance which will be greater than that indicated by the
evaluation process previously described. The allowance reflects managements
evaluation both of loans presenting identified loss potential and of the risk
inherent in various components of the loan portfolio, including loans
identified as impaired as required by SFAS No. 114. Thus, an increase in the
size of the portfolio or in any of its components could necessitate an increase
in the allowance even though there may not be a decline in credit quality or an
increase in potential problem loans. A significant change in any of the
evaluation factors described above could result in future additions to the
allowance.

At September
30, 2005, the ratio of the allowance to loans held in portfolio, net of
unearned discounts, was 1.47% and the allowance was $16.2 million. At such
date, the Companys nonaccrual loans amounted to $4.0 million; $0.7 million of
such loans was judged to be impaired within the scope of SFAS No. 114. Loans 90
days past due and still accruing amounted to $0.8 million. Nonaccrual loans and
loans 90 days past due and still accruing include leases, in the amount of $0.5
million and $0.6 million, respectively, of telecommunications equipment from a
company that went into bankruptcy in July 2004. The service provider to the
lessees discontinued service, resulting in the failure of certain lessees to
make payments. While pursuing collection of the lease payments, past due
amounts accrue. Legal action is typically commenced against lessees whose
accounts are not paid within 180 days and are placed in nonaccrual status.
Lessees remain unconditionally obligated to make payments. All are creditworthy
and personally guaranteed; the reported delinquencies are not due to credit
issues. Based on the foregoing, as well as managements judgment as to the
current risks inherent in loans held in portfolio, the Companys allowance for
loan losses was deemed adequate to absorb all reasonably anticipated losses on
specifically known and other possible credit risks associated with the
portfolio as of September 30, 2005. 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 2005. 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 $2.6 million at
September 30, 2005.

22


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
        30,2005
    
    2004($
        in thousands)Balances
    
    % of
        
        Total
    
    Balances
    
    % of
        TotalDomesticDemand
    
    $
    540,030
    
    
    36.6
    %
    $
    424,534
    
    
    32.6
    %NOW
    
    
    158,660
    
    
    10.7
    
    
    111,868
    
    
    8.6Savings
    
    
    26,939
    
    
    1.8
    
    
    29,488
    
    
    2.3Money
        market
    
    
    226,202
    
    
    15.3
    
    
    226,655
    
    
    17.4Time
        deposits
    
    
    522,643
    
    
    35.4
    
    
    503,824
    
    
    38.8Total
        domestic deposits
    
    
    1,474,474
    
    
    99.8
    
    
    1,296,369
    
    
    99.7ForeignTime
        deposits
    
    
    3,018
    
    
    0.2
    
    
    3,000
    
    
    0.3Total
        deposits
    
    $
    1,477,492
    
    
    100.0
    %
    $
    1,299,369
    
    
    100.0
    %Fluctuations
of balances in total or among categories at any date may occur based on the
Companys mix of assets and liabilities as well as on customers balance sheet
strategies. Historically, however, average balances for deposits have been
relatively stable. Information regarding these average balances is presented on
pages 25 and 26.

CAPITAL

The Company and the bank are
subject to risk-based capital regulations which quantitatively measure capital
against risk-weighted assets, including certain off-balance sheet items. These
regulations define the elements of the Tier 1 and Tier 2 components of Total
Capital and establish minimum ratios of 4% for Tier 1 capital and 8% for Total
Capital for capital adequacy purposes. Supplementing these regulations is a
leverage requirement. This requirement establishes a minimum leverage ratio (at
least 3% to 5%) which is calculated by dividing Tier 1 capital by adjusted
quarterly average assets (after deducting goodwill). Information regarding the
Companys and the banks risk-based capital is presented on page 29. In
addition, the bank is subject to the Federal Deposit Insurance Corporation
Improvement Act of 1981 (FDICIA) which imposes a number of mandatory
supervisory measures. Among other matters, five capital categories, ranging
from well capitalized to critically under capitalized, are used by
regulatory agencies 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, 2005, the Company and the bank exceeded the requirements for
well capitalized institutions.



23


CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS

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

Factors that
could cause our actual results to differ materially from those in the
forward-looking statements include, but are not limited to, the following:
inflation, interest rates, market and monetary fluctuations; geopolitical
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 Board of Governors of the
Federal Reserve System; changes, particularly declines, in general economic
conditions and in the local economies in which the Company operates; the
financial condition of the Companys borrowers;
competitive pressures on loan and deposit pricing and demand; changes in technology
and their impact on the marketing of new products and services and the
acceptance of these products and services by new and existing customers; the
willingness of customers to substitute competitors products and services for
the Companys products and services; the impact of changes in the financial
services laws and regulations (including laws concerning taxes, banking,
securities and insurance); changes in accounting principles, policies and
guidelines; the success of the Company at managing the risks involved in the
foregoing as well as other risks and uncertainties indicated 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.

24


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

2005
    
    2004Average
        
        Balance
    
    Interest
    
    Average
        
        Rate
    
    Average
        
        Balance
    
    Interest
    
    Average
        
        RateASSETSInterest-bearing
        deposits with other banks
    
    $
    3,455
    
    $
    16
    
    
    1.45
    %
    $
    3,799
    
    $
    6
    
    
    0.62
    %Securities
        available for sale
    
    
    190,371
    
    
    2,055
    
    
    4.32
    
    
    266,551
    
    
    2,885
    
    
    4.33Securities
        held to maturity
    
    
    504,688
    
    
    5,626
    
    
    4.46
    
    
    386,851
    
    
    4,624
    
    
    4.78Securities
        tax-exempt [2]
    
    
    24,701
    
    
    416
    
    
    6.68
    
    
    29,267
    
    
    528
    
    
    7.18Total
        investment securities
    
    
    719,760
    
    
    8,097
    
    
    4.50
    
    
    682,669
    
    
    8,037
    
    
    4.71Federal
        funds sold
    
    
    6,935
    
    
    61
    
    
    3.43
    
    
    19,620
    
    
    73
    
    
    1.45Loans,
        net of unearned discounts [3]
    
    
    1,087,282
    
    
    21,222
    
    
    8.02
    
    
    951,941
    
    
    16,898
    
    
    7.31TOTAL
        INTEREST-EARNING ASSETS
    
    
    1,817,432
    
    
    29,396
    
    
    6.54
    %
    
    1,658,029
    
    
    25,014
    
    
    6.11
    %Cash
        and due from banks
    
    
    60,457
    
    
    
    
    
    
    
    
    53,476Allowance
        for loan losses
    
    
    (17,100
    )
    
    
    
    
    
    
    
    (16,158
    )Goodwill
    
    
    21,158
    
    
    
    
    
    
    
    
    21,158Other
        assets
    
    
    82,170
    
    
    
    
    
    
    
    
    70,050TOTAL
        ASSETS
    
    $
    1,964,117
    
    
    
    
    
    
    
    $
    1,786,555LIABILITIES
        AND SHAREHOLDERS EQUITYInterest-bearing
        depositsDomesticSavings
    
    $
    28,148
    
    
    31
    
    
    0.44
    %
    $
    29,991
    
    
    28
    
    
    0.37
    %NOW
    
    
    143,101
    
    
    278
    
    
    0.77
    
    
    133,357
    
    
    162
    
    
    0.48Money
        market
    
    
    247,613
    
    
    873
    
    
    1.40
    
    
    217,612
    
    
    348
    
    
    0.64Time
    
    
    531,234
    
    
    3,763
    
    
    2.81
    
    
    469,319
    
    
    2,469
    
    
    2.09ForeignTime
    
    
    3,016
    
    
    8
    
    
    1.42
    
    
    3,000
    
    
    8
    
    
    1.10Total
        interest-bearing deposits
    
    
    953,112
    
    
    4,953
    
    
    2.06
    
    
    853,279
    
    
    3,015
    
    
    1.41BorrowingsSecurities
        sold under agreements to repurchase - customers
    
    
    87,049
    
    
    548
    
    
    2.50
    
    
    90,654
    
    
    272
    
    
    1.19Securities
        sold under agreements to repurchase - dealers
    
    
    57,755
    
    
    518
    
    
    3,56
    
    
    14,910
    
    
    54
    
    
    1.43Federal
        funds purchased
    
    
    23,438
    
    
    210
    
    
    3.55
    
    
    2,500
    
    
    9
    
    
    1.44Commercial
        paper
    
    
    34,341
    
    
    237
    
    
    2.74
    
    
    34,394
    
    
    107
    
    
    1.23Other
        short-term debt
    
    
    6,109
    
    
    58
    
    
    3.75
    
    
    6,293
    
    
    34
    
    
    2.15Long-term
        debt
    
    
    105,774
    
    
    1,357
    
    
    5.13
    
    
    135,774
    
    
    1,559
    
    
    4.59Total
        borrowings
    
    
    314,466
    
    
    2,928
    
    
    3.71
    
    
    284,525
    
    
    2,035
    
    
    2.86TOTAL
        INTEREST-BEARING LIABILITIES
    
    
    1,267,578
    
    
    7,881
    
    
    2.47
    %
    
    1,137,804
    
    
    5,050
    
    
    1.77
    %Noninterest-bearing
        deposits
    
    
    461,418
    
    
    
    
    
    
    
    
    424,974Other
        liabilities
    
    
    82,278
    
    
    
    
    
    
    
    
    83,603Total
        liabilities
    
    
    1,811,274
    
    
    
    
    
    
    
    
    1,646,381Shareholders
        equity
    
    
    152,843
    
    
    
    
    
    
    
    
    140,174TOTAL
        LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    1,964,117
    
    
    
    
    
    
    
    $
    1,786,555Net
        interest income/spread
    
    
    
    
    
    21,515
    
    
    4.07
    %
    
    
    
    
    19,964
    
    
    4.34
    %Net
        yield on interest-earning assets (margin)
    
    
    
    
    
    
    
    
    4.76
    %
    
    
    
    
    
    
    
    4.84
    %Less:
        Tax equivalent adjustment
    
    
    
    
    
    162
    
    
    
    
    
    
    
    
    202Net
        interest income
    
    
    
    
    $
    21,353
    
    
    
    
    
    
    
    $
    19,762[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.25


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

2005
    
    2004Average
        Balance
    
    Interest
    
    Average
        Rate
    
    Average
        Balance
    
    Interest
    
    Average
        RateASSETSInterest-bearing
        deposits with other banks
    
    $
    3,000
    
    $
    38
    
    
    1.71
    %
    $
    3,151
    
    $
    13
    
    
    0.55
    %Securities
        available for sale
    
    
    197,229
    
    
    6,454
    
    
    4.36
    
    
    282,504
    
    
    9,364
    
    
    4.37Securities
        held to maturity
    
    
    492,838
    
    
    16,569
    
    
    4.48
    
    
    385,548
    
    
    14,008
    
    
    4.84Securities
        tax-exempt [2]
    
    
    25,415
    
    
    1,350
    
    
    7.10
    
    
    30,217
    
    
    1,619
    
    
    7.16Total
        investment securities
    
    
    715,482
    
    
    24,373
    
    
    4.54
    
    
    698,269
    
    
    24,991
    
    
    4.75Federal
        funds sold
    
    
    13,810
    
    
    283
    
    
    2.71
    
    
    14,361
    
    
    129
    
    
    1.18Loans,
        net of unearned discounts [3]
    
    
    1,033,435
    
    
    59,076
    
    
    8.04
    
    
    905,402
    
    
    47,392
    
    
    7.38TOTAL
        INTEREST-EARNING ASSETS
    
    
    1,765,727
    
    
    83,770
    
    
    6.52
    %
    
    1,621,183
    
    
    72,525
    
    
    6.13
    %Cash
        and due from banks
    
    
    61,895
    
    
    
    
    
    
    
    
    59,477Allowance
        for loan losses
    
    
    (17,332
    )
    
    
    
    
    
    
    
    (15,694
    )Goodwill
    
    
    21,158
    
    
    
    
    
    
    
    
    21,158Other
        assets
    
    
    80,433
    
    
    
    
    
    
    
    
    70,370TOTAL
        ASSETS
    
    $
    1,911,881
    
    
    
    
    
    
    
    $
    1,756,494LIABILITIES
        AND SHAREHOLDERS EQUITYInterest-bearing
        depositsDomesticSavings
    
    $
    28,583
    
    
    85
    
    
    0.40
    %
    $
    31,851
    
    
    93
    
    
    0.39
    %NOW
    
    
    146,845
    
    
    740
    
    
    0.67
    
    
    134,237
    
    
    463
    
    
    0.46Money
        market
    
    
    229,700
    
    
    1,752
    
    
    1.02
    
    
    210,257
    
    
    909
    
    
    0.58Time
    
    
    516,273
    
    
    9,889
    
    
    2.56
    
    
    435,991
    
    
    6,373
    
    
    1.95ForeignTime
    
    
    3,010
    
    
    25
    
    
    1.09
    
    
    3,000
    
    
    24
    
    
    1.09Total
        interest-bearing deposits
    
    
    924,411
    
    
    12,491
    
    
    1.81
    
    
    815,336
    
    
    7,862
    
    
    1.29BorrowingsSecurities
        sold under agreements to repurchase - customers
    
    
    86,540
    
    
    1,302
    
    
    2.01
    
    
    81,625
    
    
    702
    
    
    1.15Securities
        sold under agreements to repurchase - dealers
    
    
    50,237
    
    
    1,187
    
    
    3.16
    
    
    34,018
    
    
    305
    
    
    1.20Federal
        funds purchased
    
    
    15,739
    
    
    388
    
    
    3.25
    
    
    8,580
    
    
    72
    
    
    1.11Commercial
        paper
    
    
    35,714
    
    
    620
    
    
    2.32
    
    
    28,733
    
    
    248
    
    
    1.15Other
        short- term debt
    
    
    4,901
    
    
    124
    
    
    3.38
    
    
    16,603
    
    
    240
    
    
    1.93Long-term
        debt
    
    
    112,074
    
    
    4,212
    
    
    5.01
    
    
    135,774
    
    
    4,679
    
    
    4.59Total
        borrowings
    
    
    305,205
    
    
    7,833
    
    
    3.42
    
    
    305,333
    
    
    6,246
    
    
    2.73TOTAL
        INTEREST-BEARING LIABILITIES
    
    
    1,229,616
    
    
    20,324
    
    
    2.21
    %
    
    1,120,669
    
    
    14,108
    
    
    1.68
    %Noninterest-bearing
        deposits
    
    
    448,038
    
    
    
    
    
    
    
    
    411,916Other
        liabilities
    
    
    83,924
    
    
    
    
    
    
    
    
    81,928Total
        liabilities
    
    
    1,761,578
    
    
    
    
    
    
    
    
    1,614,513Shareholders
        equity
    
    
    150,303
    
    
    
    
    
    
    
    
    141,981TOTAL
        LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    1,911,881
    
    
    
    
    
    
    
    $
    1,756,494Net
        interest income/spread
    
    
    
    
    
    63,446
    
    
    4.31
    %
    
    
    
    
    58,417
    
    
    4.45
    %Net
        yield on interest-earning assets (margin)
    
    
    
    
    
    
    
    
    4.92
    %
    
    
    
    
    
    
    
    4.92
    %Less:
        Tax equivalent adjustment
    
    
    
    
    
    526
    
    
    
    
    
    
    
    
    626Net
        interest income
    
    
    
    
    $
    62,920
    
    
    
    
    
    
    
    $
    57,791[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 Rate/Volume Analysis [1] 
(Unaudited)

(in thousands)

Increase/ (Decrease)
  Three Months Ended
  September 30, 2005 to September 30, 2004Volume
  
  Rate
  
  Net [2]INTEREST INCOMEInterest-bearing
  deposits with other banks
  
  $
  (1
  )
  $
  11
  
  $
  10Securities available for sale
  
  
  (823
  )
  
  (7
  )
  
  (830
  )Securities held to maturity
  
  
  1,333
  
  
  (331
  )
  
  1,002Securities tax-exempt
  
  
  (77
  )
  
  (35
  )
  
  (112
  )Total investment securities
  
  
  433
  
  
  (373
  )
  
  60Federal funds sold
  
  
  (66
  )
  
  54
  
  
  (12
  )Loans, net of unearned discounts [3]
  
  
  2,569
  
  
  1,755
  
  
  4,324TOTAL INTEREST INCOME
  
  $
  2,935
  
  $
  1,447
  
  $
  4,382INTEREST
  EXPENSEInterest-bearing depositsDomesticSavings
  
  $
  (2
  )
  $
  5
  
  $
  3NOW
  
  
  13
  
  
  103
  
  
  116Money market
  
  
  54
  
  
  471
  
  
  525Time
  
  
  358
  
  
  936
  
  
  1,294ForeignTime
  
  
  
  
  
  
  
  
  Total interest-bearing deposits
  
  
  423
  
  
  1,515
  
  
  1,938BorrowingsSecurities sold under agreements to
  repurchase - customers
  
  
  (11
  )
  
  287
  
  
  276Securities sold under agreements to
  repurchase - dealers
  
  
  305
  
  
  159
  
  
  464Federal funds purchased
  
  
  172
  
  
  29
  
  
  201Commercial paper
  
  
  
  
  
  130
  
  
  130Other short-term debt
  
  
  (1
  )
  
  25
  
  
  24Long-term debt
  
  
  (373
  )
  
  171
  
  
  (202
  )Total borrowings
  
  
  92
  
  
  801
  
  
  893TOTAL INTEREST EXPENSE
  
  $
  515
  
  $
  2,316
  
  $
  2,831NET INTEREST INCOME
  
  $
  2,420
  
  $
  (869
  )
  $
  1,551[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.27


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

(in
thousands)

Increase/ (Decrease)
  Nine Months Ended
  September 30, 2005 to September 30, 2004Volume
  
  Rate
  
  Net [2]INTEREST INCOMEInterest-bearing deposits with other banks
  
  $
  (1
  )
  $
  26
  
  $
  25Securities available for sale
  
  
  (2,888
  )
  
  (22
  )
  
  (2,910
  )Securities held
  to maturity
  
  
  3,648
  
  
  (1,087
  )
  
  2,561Securities
  tax-exempt
  
  
  (255
  )
  
  (14
  )
  
  (269
  )Total investment
  securities
  
  
  505
  
  
  (1,123
  )
  
  (618
  )Federal funds
  sold
  
  
  (5
  )
  
  159
  
  
  154Loans, net of
  unearned discounts [3]
  
  
  7,092
  
  
  4,592
  
  
  11,684TOTAL INTEREST
  INCOME
  
  $
  7,591
  
  $
  3,654
  
  $
  11,245INTEREST EXPENSEInterest-bearing depositsDomesticSavings
  
  $
  (10
  )
  $
  2
  
  $
  (8
  )NOW
  
  
  45
  
  
  232
  
  
  277Money market
  
  
  89
  
  
  754
  
  
  843Time
  
  
  1,290
  
  
  2,226
  
  
  3,516ForeignTime
  
  
  1
  
  
  
  
  
  1Total
  interest-bearing deposits
  
  
  1,415
  
  
  3,214
  
  
  4,629BorrowingsSecurities sold
  under agreements to repurchase - customers
  
  
  42
  
  
  558
  
  
  600Securities sold
  under agreements to repurchase - dealers
  
  
  199
  
  
  683
  
  
  882Federal funds
  purchased
  
  
  95
  
  
  221
  
  
  316Commercial paper
  
  
  71
  
  
  301
  
  
  372Other short-term
  debt
  
  
  (231
  )
  
  115
  
  
  (116
  )Long-term debt
  
  
  (873
  )
  
  406
  
  
  (467
  )Total borrowings
  
  
  (697
  )
  
  2,284
  
  
  1,587TOTAL INTEREST
  EXPENSE
  
  $
  718
  
  $
  5,498
  
  $
  6,216NET INTEREST
  INCOME
  
  $
  6,873
  
  $
  (1,844
  )
  $
  5,029[1]
  This table is presented on a tax-equivalent basis.[2]
  Changes in interest income and interest expense due
  to a combination of both volume and rate have been allocated to the change
  due to volume and the change due to rate in proportion to the relationship of
  the change due solely to each. The effect of the extra day in 2004 has been
  included in the change in volume.[3]
  Includes loans held for sale and loans held in
  portfolio; all loans are domestic. Nonaccrual loans are included in amounts
  outstanding and income has been included to the extent earned.28


STERLING
BANCORP AND SUBSIDIARIESRegulatory Capital and Ratios

Ratios and Minimums
(dollars in thousands)

Actual
  
  For Capital
  Adequacy Minimum
  
  To Be Well
  CapitalizedAmount
  
  Ratio
  
  Amount
  
  Ratio
  
  Amount
  
  RatioAs
  of September 30, 2005Total
  Capital (to Risk Weighted Assets) :The
  Company
  
  $
  177,523
  
  
  13.80
  %
  $
  102,924
  
  
  8.00
  %
  $
  128,656
  
  
  10.00
  %The
  bank
  
  
  140,193
  
  
  11.53
  
  
  97,248
  
  
  8.00
  
  
  121,560
  
  
  10.00Tier
  1 Capital (to Risk Weighted Assets) :The
  Company
  
  
  161,439
  
  
  12.55
  
  
  51,462
  
  
  4.00
  
  
  77,193
  
  
  6.00The
  bank
  
  
  124,996
  
  
  10.28
  
  
  48,624
  
  
  4.00
  
  
  72,936
  
  
  6.00Tier
  1 Leverage Capital (to Average Assets) :The
  Company
  
  
  161,439
  
  
  8.31
  
  
  77,718
  
  
  4.00
  
  
  97,148
  
  
  5.00The
  bank
  
  
  124,996
  
  
  6.68
  
  
  74,860
  
  
  4.00
  
  
  93,575
  
  
  5.00As
  of December 31, 2004Total
  Capital (to Risk Weighted Assets) :The
  Company
  
  $
  169,226
  
  
  14.35
  %
  $
  94,334
  
  
  8.00
  %
  $
  117,917
  
  
  10.00
  %The
  bank
  
  
  129,267
  
  
  11.56
  
  
  89,466
  
  
  8.00
  
  
  111,832
  
  
  10.00Tier
  1 Capital (to Risk Weighted Assets) :The
  Company
  
  
  154,467
  
  
  13.10
  
  
  47,167
  
  
  4.00
  
  
  70,750
  
  
  6,00The
  bank
  
  
  115,262
  
  
  10.31
  
  
  44,733
  
  
  4.00
  
  
  67,099
  
  
  6.00Tier
  1 Leverage Capital (to Average Assets) :The
  Company
  
  
  154,467
  
  
  8.49
  
  
  72,792
  
  
  4.00
  
  
  90,990
  
  
  5.00The
  bank
  
  
  115,262
  
  
  6.56
  
  
  70,270
  
  
  4,00
  
  
  87,837
  
  
  5.0029


ITEM 3.
  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKASSET/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.

30


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, 2005, presented on page 35, indicates that net interest income
would increase during periods of rising interest rates and decrease during
periods of falling interest rates, but, as mentioned above, gap analysis may
not be an accurate predictor of net interest income.

As part of its asset/liability management
program, the Company may use interest rate floors or swaps to reduce its
sensitivity to interest rate fluctuations. The Company has written policy
guidelines, approved by the Board of Directors, governing the use of
off-balance sheet 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.

During the third quarter of 2005, the Company
entered into two interest rate floor agreements with notional amounts of
$50,000,000 each and maturities of September 14, 2007 and September 14, 2008,
respectively. Interest rate floor contracts require the counterparty to pay the
Company at specified future dates the amount, if any, by which the specified
interest (prime rate) falls below the fixed floor rates, applied to the
notional amounts. The Company utilizes these financial instruments to adjust
its interest rate risk position without exposing itself to principal risk and
funding requirements. These financial instruments are being used as part of the
Companys interest rate risk management and not for trading purposes. At
September 30, 2005, all counterparties have investment grade credit ratings
from the major rating agencies. Each counterparty is specifically approved for
applicable credit exposure.

The interest rate floor contracts require the
Company to pay a fee for the right to receive a fixed interest payment. The
Company paid up front premiums of $141,250. At September 30, 2005, there were
no amounts receivable under these contracts.

The interest rate floor agreements were not
designated as hedges for accounting purposes and therefore changes in the fair
values of the instruments are required to be recognized as income or expense in
our financial statements. At September 30, 2005 the aggregate fair value of the
interest rate floors was $57,314; $83,936 was charged to other expenses.

The Company utilizes income simulation models
to complement its traditional gap analysis. While the Asset/Liability Committee
routinely monitors simulated net interest income sensitivity over a rolling
two-year horizon, it also utilizes additional tools to monitor potential
longer-term interest rate risk.

The income simulation models measure the
Companys net interest income volatility or sensitivity to interest rate
changes utilizing statistical techniques that allow the Company to consider
various factors which impact net interest income. These factors include actual
maturities, estimated cash flows, repricing characteristics, deposits
growth/retention and, most importantly, the relative sensitivity of the
Companys assets and liabilities to changes in market interest rates. This
relative sensitivity is important to consider as the Companys core deposit
base has not been subject to the same degree of interest rate sensitivity as
its assets. The core deposit costs are internally managed and tend to exhibit
less sensitivity

31


to changes in interest rates than the
Companys adjustable rate assets whose yields are based on external indices and
generally change in concert with market interest rates.

The Companys interest rate sensitivity is
determined by identifying the probable impact of changes in market interest
rates on the yields on the Companys assets and the rates that would be paid on
its liabilities. This modeling technique involves a degree of estimation based
on certain assumptions that management believes to be reasonable. Utilizing
this process, management projects the impact of changes in interest rates on
net interest margin. The Company has established certain policy limits for the
potential volatility of its net interest margin assuming certain levels of
changes in market interest rates with the objective of maintaining a stable net
interest margin under various probable rate scenarios. Management generally has
maintained a risk position well within the policy limits. As of September 30,
2005, the model indicated the impact of a 200 basis point parallel and pro rata
rise in rates over 12 months would approximate a 1.8% ($1.6 million) increase
in net interest income, while the impact of a 200 basis point decline in rates
over the same period would approximate a 2.2% ($1.9 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, pre-payments on loans and securities, deposit
decay rates, pricing decisions on loans and deposits, reinvestment/replacement
of asset and liability cash flows, and others. While assumptions are developed
based upon current economic and local market conditions, the Company cannot
provide any assurances as to the predictive nature of these assumptions,
including how customer preferences or competitor influences might change.

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

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 shape could
adversely affect the Companys results in 2005.

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,

32


capital market funds and other money market
sources. Core deposits include domestic noninterest-bearing and
interest-bearing retail deposits, which historically have been relatively
stable. The parent company and the bank believe that they have significant
unused borrowing capacity. Contingency plans exist which we believe could be
implemented on a timely basis to mitigate the impact of any dramatic change in
market conditions.

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

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

At September
30, 2005, the parent companys short-term debt, consisting principally of
commercial paper used to finance ongoing current business activities, was
approximately $39.4 million. The parent company had cash, interest-bearing
deposits with banks and other current assets aggregating $34.0 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.

33


The following
table sets forth information regarding the Companys obligations and
commitments to make future payments under contract as of September 30, 2005:

Payments
  Due by PeriodContractual 
  Obligations
  
  Total
  
  Less than 
  1 Year
  
  1-3 
  Years
  
  4-5 
  Years
  
  After 5 
  Years(in
  thousands)Long-Term Debt
  
  $
  105,774
  
  $
  
  
  $
  35,774
  
  $
  
  
  $
  70,000Operating
Leases
  
  
  27,142
  
  
  3,462
  
  
  6,787
  
  
  5,549
  
  
  11,344Total
Contractual Cash Obligations
  
  $
  132,916
  
  $
  3,462
  
  $
  42,561
  
  $
  5,549
  
  $
  81,344The following
table sets forth information regarding the Companys obligations under other
commercial commitments as of September 30, 2005:

Amount of
Commitment Expiration Per PeriodOther
  Commercial 
  Commitments
  
  Total Amount 
  Committed
  
  Less than 
  1 Year
  
  1-3
  Years
  
  4-5
  Years
  
  After 5 
  Years(in
thousands)Residential Loans
  
  $
  26,830
  
  $
  26,830
  
  $
  
  
  $
  
  
  $
  Commercial
Loans
  
  
  19,123
  
  
  6,470
  
  
  10,647
  
  
  2,006
  
  
  Total
Loans
  
  
  45,953
  
  
  33,300
  
  
  10,647
  
  
  2,006
  
  
  Standby Letters of
Credit
  
  
  25,883
  
  
  24,152
  
  
  1,731
  
  
  
  
  
  Other
Commercial Commitments
  
  
  14,947
  
  
  14,748
  
  
  
  
  
  
  
  
  199Total Commercial
Commitments
  
  $
  86,783
  
  $
  72,200
  
  $
  12,378
  
  $
  2,006
  
  $
  199INFORMATION 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.

34


STERLING BANCORP AND SUBSIDIARIES Interest Rate Sensitivity

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



Repricing
  Date3 Months
  or Less
  
  More than
  3 Months
  to 1 Year
  
  More than
  1 Year to
  5 Years
  
  Over5 Years
  
  NonrateSensitive
  
  TotalASSETSInterest-bearing deposits with other banks
  
  $
  3,086
  
  $
  
  
  $
  
  
  $
  
  
  $
  
  
  $
  3,086Federal funds sold
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  Investment securities
  
  
  10,396
  
  
  19,743
  
  
  154,001
  
  
  515,233
  
  
  7,638
  
  
  707,011Loans, net of unearned discountsCommercial and industrial
  
  
  587,946
  
  
  15,509
  
  
  26,766
  
  
  6,068
  
  
  (519
  )
  
  635,770Loans to depository institutions
  
  
  10,000
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  10,000Lease financing
  
  
  14,345
  
  
  13,358
  
  
  163,433
  
  
  11,315
  
  
  (26,135
  )
  
  176,316Real estate
  
  
  104,163
  
  
  12,324
  
  
  161,969
  
  
  38,578
  
  
  
  
  
  317,034Installment
  
  
  11,766
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  11,766Noninterest-earning assets and allowance for
loan
losses
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  174,148
  
  
  174,148Total Assets
  
  
  741,702
  
  
  60,934
  
  
  506,169
  
  
  571,194
  
  
  155,132
  
  
  2,035,131LIABILITIES AND SHAREHOLDERS EQUITYInterest-bearing depositsSavings [1]
  
  
  
  
  
  
  
  
  26,939
  
  
  
  
  
  
  
  
  26,939NOW [1]
  
  
  
  
  
  
  
  
  158,660
  
  
  
  
  
  
  
  
  158,660Money market [1]
  
  
  185,163
  
  
  
  
  
  41,039
  
  
  
  
  
  
  
  
  226,202Time - domestic
  
  
  227,747
  
  
  224,104
  
  
  70,731
  
  
  61
  
  
  
  
  
  522,643- foreign
  
  
  1,373
  
  
  1,645
  
  
  
  
  
  
  
  
  
  
  
  3,018Securities sold u/a/r - cust
  
  
  57,920
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  57,920Securities sold u/a/r - deal
  
  
  59,894
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  59,894Federal funds purchased
  
  
  29,100
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  29,100Commercial paper
  
  
  39,402
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  39,402Other short-term borrowings
  
  
  21,169
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  21,169Long-term borrowings - FHLB
  
  
  
  
  
  
  
  
  10,000
  
  
  70,000
  
  
  25,774
  
  
  105,774Noninterest-bearing liabilities and
  shareholders equity
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  784,410
  
  
  784,410Total Liabilities and Shareholders 
Equity
  
  
  621,768
  
  
  225,749
  
  
  307,369
  
  
  70,061
  
  
  810,184
  
  
  2,035,131Net Interest Rate 
  Sensitivity Gap
  
  $
  119,934
  
  $
  (164,815
  )
  $
  198,800
  
  $
  501,133
  
  $
  (655,052
  )
  $
  Cumulative Gap 
  September 30, 2005
  
  $
  119,934
  
  $
  (44,881
  )
  $
  153,919
  
  $
  655,052
  
  $
  
  
  $
  Cumulative Gap 
  September 30, 2004
  
  $
  194,162
  
  $
  52,
  113
  
  $
  71,052
  
  $
  570,
  573
  
  $
  
  
  $
  Cumulative Gap 
  December 31, 2004
  
  $
  250,603
  
  $
  160,810
  
  $
  187,606
  
  
  663,246
  
  $
  
  
  $
  [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.35


ITEM 4. CONTROLS AND PROCEDURES

Changes in
internal control over financial reporting

The management
of the Company is responsible for establishing and maintaining effective
internal control over financial reporting.
The Companys internal control system was designed to provide reasonable
assurance to the Companys management and Board of Directors regarding the
preparation and fair presentation of published financial statements.

As previously
reported, the management of the Company assessed the effectiveness of the
Companys internal control over financial reporting as of December 31,
2004.  In making its assessment of
internal control over financial reporting, management used the criteria issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)
in Internal ControlIntegrated Framework.  In connection with this assessment, the
following material weakness in internal control over financial reporting (as
such term is defined in Public Company Accounting Oversight Board Auditing Standard
No. 2) was identified:  As of December
31, 2004, the Company did not employ sufficient personnel with adequate
technical skills relative to accounting for Company-owned split-dollar life
insurance policies on the lives of certain officers of the Company.  As a result of this deficiency, employee
benefits expense in prior periods was materially misstated.  Accordingly, the Company restated its
audited consolidated financial statements for the years ended December 31, 2002
and 2003, and its unaudited condensed financial information for the three
months ended March 31, 2003 and 2004, the three months and six months ended
June 30, 2003 and 2004, and the three months and nine months ended September
30, 2003 and 2004, to reflect the correction of the errors in the Companys
accounting for split-dollar life insurance policies.  As a result of the material weakness described above, the
Companys management concluded that, as of December 31, 2004, the Companys
internal control over financial reporting was not effective based on the
criteria in Internal ControlIntegrated
Framework.

As previously
reported, the Company has implemented several changes in its internal control
over financial reporting.  During the
first quarter of 2005, the Company developed and implemented procedures for
quarterly expensing of premiums paid or prepaid for split-dollar life insurance
policies on the lives of certain officers of the Company, retained actuarial
assistance in determining the appropriate amounts to be expensed in respect of
the Companys obligations to pay future premiums on split-dollar life insurance
policies issued as part of a transaction in which an officer relinquishes his
right to receive pension payments in exchange for the insurance policy and in
respect of the Companys obligations to pay future post-retirement premiums on
certain split-dollar life insurance policies, and retained life insurance
consultants for assistance in determining the appropriate amounts to be
credited in respect of increases in the cash surrender values of these various
policies.  During the second quarter of
2005, the Company enhanced its staffing by hiring an additional person with
expertise in generally accepted accounting principles.

In developing
and implementing these procedures and changes in its internal control over
financial reporting, the Companys control objective is to account for
split-dollar life insurance policies in accordance with generally accepted
accounting principles.  In connection
with the preparation of its unaudited consolidated financial statements for the
three months and nine months ended September 30, 2005,

36


the Company
conducted tests of these procedures and changes in its internal control over
financial reporting.  Based on a review
of the results of these tests and of the design and implementation of these
procedures and changes, the Companys management concluded that, as of
September 30, 2005, these procedures and changes address the previously
reported material weakness in internal control over financial reporting
described above and achieve the control objective identified above, and that,
accordingly, as of September 30, 2005, such previously reported material
weakness no longer exists.

No other
change in the Companys internal control over financial reporting occurred
during the fiscal quarter ended September 30, 2005 that has materially
affected, or is reasonably likely to materially affect, the Companys internal
control over financial reporting.

Evaluation of disclosure controls and procedures

As required
under the Securities Exchange Act of 1934, 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 Exchange Act) as of the end of the period
covered by this quarterly report on Form 10-Q.
Based on this evaluation and managements conclusion that the previously
reported material weakness in the Companys internal control over financial reporting
described above no longer exists, the Companys management, including the Chief
Executive Officer and 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 Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in SEC rules and forms.

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 following table discloses the
Companys repurchases of the Companys
common shares during the third quarter of 2005.

ISSUER PURCHASES OF EQUITY SECURITIESPeriod
  
  Total 
  Number of 
  SharesPurchased
  
  AveragePrice Paid 
  Per Share
  
  Total 
  Number of 
  Shares 
  Purchased asPart of PubliclyAnnounced Plans
  or Programs
  
  Maximum 
  Number 
  of Sharesthat May 
  Yet BePurchased 
  Under the Plansor ProgramsJuly 1-31,
  2005
  
  
  24,200
  
  $
  22.33
  
  
  24,200
  
  
  
  892,619August 1-31,
  2005
  
  
  46,500
  
  
  22.11
  
  
  46,500
  
  
  
  846,119September
  1-30, 2005
  
  
  65,300
  
  
  21.46
  
  
  65,300
  
  
  
  780,819Total
  
  
  136,000
  
  
  
  
  
  136,000All shares
were repurchased through the Companys share repurchase program.

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 last increase was announced on June 16, 2005, when the Board of
Directors increased the Companys authority to repurchase common shares by an
additional 800,000 shares.  As of June
30, 2005, the remaining number of shares that could be repurchased was 916,819.

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 September 30, 2004 and incorporated herein by
  reference).11.




  
  Statement
  Re: Computation of Per Share Earnings.31.




  

  Certifications
  of the CEO and CFO pursuant to Exchange Act Rule 13a-14(a).32.




  

  Certifications
  of the CEO and CFO required by Section 1350 of Chapter 63 of Title 18 of the
  U.S. Code.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
  8, 2005
  
  /s/
  Louis J.
  CappelliLouis J.
  Cappelli
  Chairman and
  Chief Executive OfficerDate
  November
  8, 2005
  
  /s/
  John W.
  TietjenJohn W.
  Tietjen
  Executive Vice President
  and Chief Financial Officer40


STERLING BANCORP AND SUBSIDIARIES

EXHIBIT INDEX



Exhibit
  Number
  
  Description
  
  Sequential
  Page No.11
  
  Statement
  re: Computation of Per Share Earnings.
  
  4231.1
  
  Certifications of the CEO
  pursuant to Exchange Act Rule 13a-14(a).
  
  4331.2
  
  Certifications of the
  CFO pursuant to Exchange Act Rule 13a-14(a).
  
  4432
  
  Certifications of the CEO
  and CFO required by Section 1350 of Chapter 63 of Title 18 of the U.S. Code.
  
  4541