---

---

|                                                                                          |                   
|----------------------------------------------------------------------------------------- | ------------------
|UNITED STATES                                                                            
|SECURITIES AND EXCHANGE COMMISSION                                                       
|Washington, D.C. 20549                                                                   
|                                                                                          |                   
|FORM 10-Q                                                                                
|                                                                                          |                   
|                                                                                          |                   
|(Mark One)                                                                               
|xQUARTERLY REPORT PURSUANT TO SECTION 13 or
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|                                                                                          |                   
|For the quarterly period ended                                                            | September 30, 2010
|                                                                                          |                   
|                                                                                          |                   
|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                                                       |  | 12-2565216                      
|                                                               |  |                                 
|(State or
other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification)
|                                                               |  |                                 
|                                                               |  |                                 
|650 Fifth
Avenue, New York, N.Y.                               |  | 10019-6108                      
|                                                               |  |                                 
|(Address
of principal executive offices)                       |  | (Zip Code)                      

212-757-3300
(Registrants telephone number, including area code)

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

Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.


xYesoNo


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


oYesoNo


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

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




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


As of October 31, 2010 there were 26,840,763 shares
  of common stock,
$1.00 par value, outstanding.

---

---



STERLING BANCORP

|                             |              |    |                                                                                                      |  |      | 
|---------------------------- | ------------ | -- | ---------------------------------------------------------------------------------------------------- |  | ---- | 
|                             |              |    |                                                                                                      |  | Page
|                             |              |    |                                                                                                      |  |     
|PART I
FINANCIAL INFORMATION |              |    |                                                                                                     
|                             |              |    |                                                                                                      |  |      | 
|                             | Item 1.      |    | Financial
Statements                                                                                 |  |      | 
|                             |              |    |                                                                                                      |  |      | 
|                             |              |    | Consolidated Financial Statements (Unaudited)                                                        |  | 3    | 
|                             |              |    | Notes to Consolidated Financial Statements                                                           |  | 8    | 
|                             |              |    |                                                                                                      |  |      | 
|                             | Item 2.      |    | Managements Discussion and Analysis of Financial Condition and
Results of Operations                |  |      | 
|                             |              |    |                                                                                                      |  |      | 
|                             |              |    | Overview                                                                                             |  | 28   | 
|                             |              |    | Recent Legislation Impacting The Financial Services Industry                                         |  | 29   | 
|                             |              |    | Income Statement Analysis                                                                            |  | 30   | 
|                             |              |    | Balance Sheet Analysis                                                                               |  | 34   | 
|                             |              |    | Capital                                                                                              |  | 41   | 
|                             |              |    | Recently Issued Accounting Pronouncements                                                            |  | 42   | 
|                             |              |    | Cautionary Statement Regarding Forward-Looking Statements                                            |  | 42   | 
|                             |              |    | Average Balance Sheets                                                                               |  | 43   | 
|                             |              |    | Rate/Volume Analysis                                                                                 |  | 45   | 
|                             |              |    | Regulatory Capital and Ratios                                                                        |  | 47   | 
|                             |              |    |                                                                                                      |  |      | 
|                             | Item 3.      |    | Quantitative and Qualitative Disclosures About Market Risk                                           |  |      | 
|                             |              |    |                                                                                                      |  |      | 
|                             |              |    | Asset/Liability Management                                                                           |  | 48   | 
|                             |              |    | Interest Rate Sensitivity                                                                            |  | 52   | 
|                             |              |    |                                                                                                      |  |      | 
|                             | Item 4.      |    | Controls and Procedures                                                                              |  | 53   | 
|                             |              |    |                                                                                                      |  |      | 
|PART II OTHER INFORMATION    |              |    |                                                                                                     
|                             |              |    |                                                                                                      |  |      | 
|                             | Item 6.      |    | Exhibits                                                                                             |  | 54   | 
|                             |              |    |                                                                                                      |  |      | 
|SIGNATURES                   |              | 55 |                                                                                                     
|                             |              |    |                                                                                                      |  |      | 
|EXHIBITS
INDEX               |              |    |                                                                                                     
|                             |              |    |                                                                                                      |  |      | 
|                             | Exhibit 11   |    | Statement
Re: Computation of Per Share Earnings                                                      |  | 57   | 
|                             |              |    |                                                                                                      |  |      | 
|                             | Exhibit 31.1 |    | Certification
of the CEO pursuant to Exchange Act Rule 13a-14(a)                                     |  | 58   | 
|                             |              |    |                                                                                                      |  |      | 
|                             | Exhibit 31.2 |    | Certification
of the CFO pursuant to Exchange Act Rule 13a-14(a)                                     |  | 59   | 
|                             |              |    |                                                                                                      |  |      | 
|                             | Exhibit 32.1 |    | Certification
    of the CEO required by Section 1350 of Chapter 63 of Title 18 of the U.S.
    Code |  | 60   | 
|                             |              |    |                                                                                                      |  |      | 
|                             | Exhibit 32.2 |    | Certification
    of the CFO required by Section 1350 of Chapter 63 of Title 18 of the U.S. Code     |  | 61   | 

2

---



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

|                                                                                                                                           |  |                    |           |                   |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------ | --------- | ----------------- | - | --------- | -
|                                                                                                                                           |  |                    |           |                   |   |           |  
|                                                                                                                                           |  | September 30,
2010 |           | December 31,
2009 |  
|                                                                                                                                           |  |                    |           |                   |  
|ASSETS                                                                                                                                     |  |                    |           |                   |   |           |  
|Cash and due from banks                                                                                                                    |  | $                  | 37,193    |                   | $ | 24,911    |  
|Interest-bearing deposits with other banks                                                                                                 |  |                    | 19,300    |                   |   | 36,958    |  
|                                                                                                                                           |  |                    |           |                   |   |           |  
|Securities available for sale (at estimated fair
value; pledged: $124,405 in 2010 and $150,034 in 2009)                                    |  |                    | 421,984   |                   |   | 346,526   |  
|Securities held to maturity (pledged: $161,416 in
2010 and $278,598 in 2009) (estimated fair value: $355,462 in 2010 and
$396,150 in 2009) |  |                    | 342,477   |                   |   | 390,539   |  
|                                                                                                                                           |  |                    |           |                   |   |           |  
|Total investment securities                                                                                                                |  |                    | 764,461   |                   |   | 737,065   |  
|                                                                                                                                           |  |                    |           |                   |   |           |  
|                                                                                                                                           |  |                    |           |                   |   |           |  
|Loans held for sale                                                                                                                        |  |                    | 34,046    |                   |   | 33,889    |  
|                                                                                                                                           |  |                    |           |                   |   |           |  
|Loans held in portfolio, net of unearned discounts                                                                                         |  |                    | 1,296,166 |                   |   | 1,195,415 |  
|Less allowance for loan losses                                                                                                             |  |                    | 18,152    |                   |   | 19,872    |  
|                                                                                                                                           |  |                    |           |                   |   |           |  
|Loans, net                                                                                                                                 |  |                    | 1,278,014 |                   |   | 1,175,543 |  
|                                                                                                                                           |  |                    |           |                   |   |           |  
|                                                                                                                                           |  |                    |           |                   |   |           |  
|Federal Reserve and Federal Home Loan Bank stock, at
cost                                                                                  |  |                    | 9,381     |                   |   | 8,482     |  
|Customers liability under acceptances                                                                                                     |  |                    | 313       |                   |   | 27        |  
|Goodwill                                                                                                                                   |  |                    | 22,901    |                   |   | 22,901    |  
|Premises and equipment, net                                                                                                                |  |                    | 15,725    |                   |   | 9,658     |  
|Other real estate                                                                                                                          |  |                    | 744       |                   |   | 1,385     |  
|Accrued interest receivable                                                                                                                |  |                    | 9,216     |                   |   | 9,001     |  
|Cash surrender value of life insurance policies                                                                                            |  |                    | 50,877    |                   |   | 49,009    |  
|Other assets                                                                                                                               |  |                    | 61,306    |                   |   | 56,780    |  
|                                                                                                                                           |  |                    |           |                   |   |           |  
|                                                                                                                                           |  | $                  | 2,303,477 |                   | $ | 2,165,609 |  
|                                                                                                                                           |  |                    |           |                   |   |           |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                       |  |                    |           |                   |   |           |  
|Deposits                                                                                                                                   |  |                    |           |                   |   |           |  
|Noninterest-bearing demand deposits                                                                                                        |  | $                  | 539,633   |                   | $ | 546,337   |  
|Savings, NOW and money market deposits                                                                                                     |  |                    | 555,262   |                   |   | 592,015   |  
|Time deposits                                                                                                                              |  |                    | 550,718   |                   |   | 442,315   |  
|                                                                                                                                           |  |                    |           |                   |   |           |  
|Total deposits                                                                                                                             |  |                    | 1,645,613 |                   |   | 1,580,667 |  
|                                                                                                                                           |  |                    |           |                   |   |           |  
|Securities sold under agreements to repurchase -
customers                                                                                 |  |                    | 21,084    |                   |   | 21,048    |  
|Securities sold under agreements to repurchase - dealers                                                                                   |  |                    | 5,000     |                   |   |          |  
|Federal funds purchased                                                                                                                    |  |                    | 60,000    |                   |   | 41,000    |  
|Commercial paper                                                                                                                           |  |                    | 15,245    |                   |   | 17,297    |  
|Short-term borrowings - FRB                                                                                                                |  |                    |          |                   |   | 50,000    |  
|Short-term borrowings - other                                                                                                              |  |                    | 2,221     |                   |   | 2,509     |  
|Long-term borrowings - FHLB                                                                                                                |  |                    | 144,528   |                   |   | 130,000   |  
|Long-term borrowings - subordinated debentures                                                                                             |  |                    | 25,774    |                   |   | 25,774    |  
|                                                                                                                                           |  |                    |           |                   |   |           |  
|Total borrowings                                                                                                                           |  |                    | 273,852   |                   |   | 287,628   |  
|                                                                                                                                           |  |                    |           |                   |   |           |  
|Acceptances outstanding                                                                                                                    |  |                    | 313       |                   |   | 27        |  
|Accrued interest payable                                                                                                                   |  |                    | 1,639     |                   |   | 1,291     |  
|Due to factored clients                                                                                                                    |  |                    | 92,854    |                   |   | 82,401    |  
|Accrued expenses and other liabilities                                                                                                     |  |                    | 64,828    |                   |   | 51,645    |  
|                                                                                                                                           |  |                    |           |                   |   |           |  
|Total liabilities                                                                                                                          |  |                    | 2,079,099 |                   |   | 2,003,659 |  
|                                                                                                                                           |  |                    |           |                   |   |           |  
|Shareholders equity                                                                                                                       |  |                    |           |                   |   |           |  
|Preferred stock, Series A, $5 par value; $1,000
liquidation value. Authorized 644,389 shares; issued 42,000 shares,
respectively           |  |                    | 40,472    |                   |   | 40,113    |  
|Common stock, $1 par value. Authorized 50,000,000
shares; issued 31,138,545 and 22,226,425 shares, respectively                            |  |                    | 31,139    |                   |   | 22,227    |  
|Warrants to purchase common stock                                                                                                          |  |                    | 2,615     |                   |   | 2,615     |  
|Capital surplus                                                                                                                            |  |                    | 236,368   |                   |   | 178,734   |  
|Retained earnings                                                                                                                          |  |                    | 10,306    |                   |   | 15,828    |  
|Accumulated other comprehensive loss                                                                                                       |  |                    | (9,966    | )                 |   | (12,399   | )
|Common shares in treasury at cost, 4,297,782 and
4,119,934 shares, respectively                                                            |  |                    | (86,556   | )                 |   | (85,168   | )
|                                                                                                                                           |  |                    |           |                   |   |           |  
|Total shareholders equity                                                                                                                 |  |                    | 224,378   |                   |   | 161,950   |  
|                                                                                                                                           |  |                    |           |                   |   |           |  
|                                                                                                                                           |  | $                  | 2,303,477 |                   | $ | 2,165,609 |  
|                                                                                                                                           |  |                    |           |                   |   |           |  

See Notes to Consolidated Financial
Statements.

3

---



STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)(dollars
in thousands, except per share data)

|                                                                             |  |                                  |            |                                 |   |            |  |      |            |  |   |            | 
|---------------------------------------------------------------------------- |  | -------------------------------- | ---------- | ------------------------------- | - | ---------- |  | ---- | ---------- |  | - | ---------- | 
|                                                                             |  | Three Months Ended
September 30, |            | Nine Months Ended
September 30, |  
|                                                                             |  |                                  |            |                                 |  
|                                                                             |  | 2010                             |            | 2009                            |   | 2010       |  | 2009 |           
|                                                                             |  |                                  |            |                                 |   |            |  |      |           
|INTEREST INCOME                                                              |  |                                  |            |                                 |   |            |  |      |            |  |   |            | 
|Loans                                                                        |  | $                                | 18,275     |                                 | $ | 18,024     |  | $    | 51,907     |  | $ | 53,840     | 
|Investment securities                                                        |  |                                  |            |                                 |   |            |  |      |            |  |   |            | 
|Available for sale                                                           |  |                                  | 2,985      |                                 |   | 4,123      |  |      | 9,315      |  |   | 13,751     | 
|Held to maturity                                                             |  |                                  | 3,320      |                                 |   | 4,357      |  |      | 11,622     |  |   | 11,485     | 
|FRB and FHLB stock                                                           |  |                                  | 112        |                                 |   | 191        |  |      | 296        |  |   | 387        | 
|Deposits with other banks                                                    |  |                                  | 10         |                                 |   | 27         |  |      | 53         |  |   | 46         | 
|                                                                             |  |                                  |            |                                 |   |            |  |      |            |  |   |            | 
|Total interest income                                                        |  |                                  | 24,702     |                                 |   | 26,722     |  |      | 73,193     |  |   | 79,509     | 
|                                                                             |  |                                  |            |                                 |   |            |  |      |            |  |   |            | 
|                                                                             |  |                                  |            |                                 |   |            |  |      |            |  |   |            | 
|INTEREST EXPENSE                                                             |  |                                  |            |                                 |   |            |  |      |            |  |   |            | 
|Deposits                                                                     |  |                                  |            |                                 |   |            |  |      |            |  |   |            | 
|Savings, NOW and money market                                                |  |                                  | 746        |                                 |   | 872        |  |      | 2,536      |  |   | 2,940      | 
|Time                                                                         |  |                                  | 1,545      |                                 |   | 1,933      |  |      | 4,857      |  |   | 6,148      | 
|Securities sold under agreements to repurchase - customers                   |  |                                  | 49         |                                 |   | 79         |  |      | 175        |  |   | 282        | 
|Securities sold under agreements to repurchase -
dealers                     |  |                                  | 23         |                                 |   |           |  |      | 28         |  |   |           | 
|Federal funds purchased                                                      |  |                                  | 44         |                                 |   | 2          |  |      | 67         |  |   | 43         | 
|Commercial paper                                                             |  |                                  | 12         |                                 |   | 15         |  |      | 34         |  |   | 55         | 
|Short-term borrowings - FHLB                                                 |  |                                  |           |                                 |   |           |  |      |           |  |   | 11         | 
|Short-term borrowings - FRB                                                  |  |                                  |           |                                 |   | 131        |  |      | 9          |  |   | 356        | 
|Short-term borrowings - other                                                |  |                                  | 14         |                                 |   |           |  |      | 18         |  |   | 1          | 
|Long-term borrowings - FHLB                                                  |  |                                  | 871        |                                 |   | 1,197      |  |      | 2,591      |  |   | 3,453      | 
|Long-term borrowings - subordinated debentures                               |  |                                  | 523        |                                 |   | 523        |  |      | 1,570      |  |   | 1,570      | 
|                                                                             |  |                                  |            |                                 |   |            |  |      |            |  |   |            | 
|Total interest expense                                                       |  |                                  | 3,827      |                                 |   | 4,752      |  |      | 11,885     |  |   | 14,859     | 
|                                                                             |  |                                  |            |                                 |   |            |  |      |            |  |   |            | 
|                                                                             |  |                                  |            |                                 |   |            |  |      |            |  |   |            | 
|Net interest income                                                          |  |                                  | 20,875     |                                 |   | 21,970     |  |      | 61,308     |  |   | 64,650     | 
|                                                                             |  |                                  |            |                                 |   |            |  |      |            |  |   |            | 
|Provision for loan losses                                                    |  |                                  | 14,000     |                                 |   | 6,950      |  |      | 25,500     |  |   | 19,950     | 
|                                                                             |  |                                  |            |                                 |   |            |  |      |            |  |   |            | 
|Net interest income after provision for loan losses                          |  |                                  | 6,875      |                                 |   | 15,020     |  |      | 35,808     |  |   | 44,700     | 
|                                                                             |  |                                  |            |                                 |   |            |  |      |            |  |   |            | 
|                                                                             |  |                                  |            |                                 |   |            |  |      |            |  |   |            | 
|Total noninterest income                                                     |  |                                  | 13,058     |                                 |   | 11,735     |  |      | 35,521     |  |   | 33,337     | 
|                                                                             |  |                                  |            |                                 |   |            |  |      |            |  |   |            | 
|                                                                             |  |                                  |            |                                 |   |            |  |      |            |  |   |            | 
|Total noninterest expenses                                                   |  |                                  | 23,753     |                                 |   | 23,177     |  |      | 67,228     |  |   | 67,372     | 
|                                                                             |  |                                  |            |                                 |   |            |  |      |            |  |   |            | 
|                                                                             |  |                                  |            |                                 |   |            |  |      |            |  |   |            | 
|(Loss) Income before income taxes                                            |  |                                  | (3,820     | )                               |   | 3,578      |  |      | 4,101      |  |   | 10,665     | 
|                                                                             |  |                                  |            |                                 |   |            |  |      |            |  |   |            | 
|(Benefit) Provision for income taxes                                         |  |                                  | (1,146     | )                               |   | 1,180      |  |      | 1,230      |  |   | 3,880      | 
|                                                                             |  |                                  |            |                                 |   |            |  |      |            |  |   |            | 
|                                                                             |  |                                  |            |                                 |   |            |  |      |            |  |   |            | 
|Net (loss) income                                                            |  |                                  | (2,674     | )                               |   | 2,398      |  |      | 2,871      |  |   | 6,785      | 
|Dividends on preferred shares and accretion                                  |  |                                  | 654        |                                 |   | 646        |  |      | 1,934      |  |   | 2,125      | 
|                                                                             |  |                                  |            |                                 |   |            |  |      |            |  |   |            | 
|                                                                             |  |                                  |            |                                 |   |            |  |      |            |  |   |            | 
|Net (loss) income available to common shareholders                           |  | $                                | (3,328     | )                               | $ | 1,752      |  | $    | 937        |  | $ | 4,660      | 
|                                                                             |  |                                  |            |                                 |   |            |  |      |            |  |   |            | 
|                                                                             |  |                                  |            |                                 |   |            |  |      |            |  |   |            | 
|Average number of common shares outstanding                                  |  |                                  |            |                                 |   |            |  |      |            |  |   |            | 
|Basic                                                                        |  |                                  | 26,840,763 |                                 |   | 18,106,491 |  |      | 23,787,733 |  |   | 18,104,057 | 
|Diluted                                                                      |  |                                  | 26,840,763 |                                 |   | 18,120,412 |  |      | 23,791,160 |  |   | 18,192,585 | 
|                                                                             |  |                                  |            |                                 |   |            |  |      |            |  |   |            | 
|Net income (loss) available to common shareholders,
per average common share |  |                                  |            |                                 |   |            |  |      |            |  |   |            | 
|Basic                                                                        |  | $                                | (0.12      | )                               | $ | 0.10       |  | $    | 0.04       |  | $ | 0.26       | 
|Diluted                                                                      |  |                                  | (0.12      | )                               |   | 0.10       |  |      | 0.04       |  |   | 0.26       | 
|                                                                             |  |                                  |            |                                 |   |            |  |      |            |  |   |            | 
|Dividends per common share                                                   |  |                                  | 0.09       |                                 |   | 0.09       |  |      | 0.27       |  |   | 0.47       | 

See Notes to Consolidated Financial
Statements.

4

---



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

|                                                                                                        |  |                                  |        |                                 |   |       |   |      |        |   |   |        |  
|------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ------ | ------------------------------- | - | ----- | - | ---- | ------ | - | - | ------ | -
|                                                                                                        |  | Three Months Ended
September 30, |        | Nine Months Ended
September 30, |  
|                                                                                                        |  |                                  |        |                                 |  
|                                                                                                        |  | 2010                             |        | 2009                            |   | 2010  |   | 2009 |       
|                                                                                                        |  |                                  |        |                                 |   |       |   |      |       
|                                                                                                        |  |                                  |        |                                 |   |       |   |      |        |   |   |        |  
|Net (loss) income                                                                                       |  | $                                | (2,674 | )                               | $ | 2,398 |   | $    | 2,871  |   | $ | 6,785  |  
|                                                                                                        |  |                                  |        |                                 |   |       |   |      |        |   |   |        |  
|                                                                                                        |  |                                  |        |                                 |   |       |   |      |        |   |   |        |  
|Other comprehensive income, net of tax:                                                                 |  |                                  |        |                                 |   |       |   |      |        |   |   |        |  
|Unrealized gains on securities:                                                                         |  |                                  |        |                                 |   |       |   |      |        |   |   |        |  
|Unrealized holding gains on available for sale
securities and other investments arising during the year |  |                                  | 921    |                                 |   | 2,664 |   |      | 3,081  |   |   | 4,352  |  
|                                                                                                        |  |                                  |        |                                 |   |       |   |      |        |   |   |        |  
|Reclassification adjustment for gains included in net
income                                            |  |                                  | (638   | )                               |   | (666  | ) |      | (1,866 | ) |   | (2,818 | )
|                                                                                                        |  |                                  |        |                                 |   |       |   |      |        |   |   |        |  
|Reclassification adjustment for amortization of:                                                        |  |                                  |        |                                 |   |       |   |      |        |   |   |        |  
|Prior service cost                                                                                      |  |                                  | 9      |                                 |   | 9     |   |      | 27     |   |   | 27     |  
|Net actuarial losses                                                                                    |  |                                  | 354    |                                 |   | 532   |   |      | 1,191  |   |   | 1,404  |  
|                                                                                                        |  |                                  |        |                                 |   |       |   |      |        |   |   |        |  
|                                                                                                        |  |                                  |        |                                 |   |       |   |      |        |   |   |        |  
|Other comprehensive income                                                                              |  |                                  | 646    |                                 |   | 2,539 |   |      | 2,433  |   |   | 2,965  |  
|                                                                                                        |  |                                  |        |                                 |   |       |   |      |        |   |   |        |  
|                                                                                                        |  |                                  |        |                                 |   |       |   |      |        |   |   |        |  
|Comprehensive (loss) income                                                                             |  | $                                | (2,028 | )                               | $ | 4,937 |   | $    | 5,304  |   | $ | 9,750  |  
|                                                                                                        |  |                                  |        |                                 |   |       |   |      |        |   |   |        |  

See Notes to Consolidated Financial
Statements.

5

---



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

|                                                                         |  |                                 |         |      |   |         |  
|------------------------------------------------------------------------ |  | ------------------------------- | ------- | ---- | - | ------- | -
|                                                                         |  | Nine Months Ended
September 30, |        
|                                                                         |  |                                 |        
|                                                                         |  | 2010                            |         | 2009 |  
|                                                                         |  |                                 |         |      |  
|Preferred Stock                                                          |  |                                 |         |      |   |         |  
|Balance at January 1,                                                    |  | $                               | 40,113  |      | $ | 39,440  |  
|Discount accretion                                                       |  |                                 | 359     |      |   | 550     |  
|                                                                         |  |                                 |         |      |   |         |  
|Balance at September 30,                                                 |  | $                               | 40,472  |      | $ | 39,990  |  
|                                                                         |  |                                 |         |      |   |         |  
|                                                                         |  |                                 |         |      |   |         |  
|Common Stock                                                             |  |                                 |         |      |   |         |  
|Balance at January 1,                                                    |  | $                               | 22,227  |      | $ | 22,203  |  
|Common shares issued                                                     |  |                                 | 8,625   |      |   | 24      |  
|Restricted shares issued                                                 |  |                                 | 84      |      |   |        |  
|Common shares issued under stock incentive plan                          |  |                                 | 203     |      |   |        |  
|                                                                         |  |                                 |         |      |   |         |  
|Balance at September 30,                                                 |  | $                               | 31,139  |      | $ | 22,227  |  
|                                                                         |  |                                 |         |      |   |         |  
|                                                                         |  |                                 |         |      |   |         |  
|Warrants to Purchase Common Stock                                        |  |                                 |         |      |   |         |  
|Balance at January 1, and September 30,                                  |  | $                               | 2,615   |      | $ | 2,615   |  
|                                                                         |  |                                 |         |      |   |         |  
|                                                                         |  |                                 |         |      |   |         |  
|Capital Surplus                                                          |  |                                 |         |      |   |         |  
|Balance at January 1,                                                    |  | $                               | 178,734 |      | $ | 178,417 |  
|Common shares issued                                                     |  |                                 | 56,256  |      |   |        |  
|Restricted shares issued                                                 |  |                                 | (84     | )    |   |        |  
|Common shares issued under stock incentive plan and
related tax benefits |  |                                 | 1,274   |      |   | 185     |  
|Stock option compensation expense                                        |  |                                 | 188     |      |   | 99      |  
|                                                                         |  |                                 |         |      |   |         |  
|Balance at September 30,                                                 |  | $                               | 236,368 |      | $ | 178,701 |  
|                                                                         |  |                                 |         |      |   |         |  
|                                                                         |  |                                 |         |      |   |         |  
|Retained Earnings                                                        |  |                                 |         |      |   |         |  
|Balance at January 1,                                                    |  | $                               | 15,828  |      | $ | 19,088  |  
|Net income                                                               |  |                                 | 2,871   |      |   | 6,785   |  
|Cash dividends paid - preferred shares                                   |  |                                 | (1,575  | )    |   | (1,353  | )
|Cash dividends paid - common shares                                      |  |                                 | (6,459  | )    |   | (8,503  | )
|Discount accretion on series A preferred stock                           |  |                                 | (359    | )    |   | (550    | )
|                                                                         |  |                                 |         |      |   |         |  
|Balance at September 30,                                                 |  | $                               | 10,306  |      | $ | 15,467  |  
|                                                                         |  |                                 |         |      |   |         |  
|                                                                         |  |                                 |         |      |   |         |  
|Accumulated Other Comprehensive Loss                                     |  |                                 |         |      |   |         |  
|Balance at January 1,                                                    |  | $                               | (12,399 | )    | $ | (16,259 | )
|Other comprehensive income, net of tax                                   |  |                                 | 2,433   |      |   | 2,965   |  
|                                                                         |  |                                 |         |      |   |         |  
|Balance at September 30,                                                 |  | $                               | (9,966  | )    | $ | (13,294 | )
|                                                                         |  |                                 |         |      |   |         |  
|                                                                         |  |                                 |         |      |   |         |  
|Treasury Stock                                                           |  |                                 |         |      |   |         |  
|Balance at January 1,                                                    |  | $                               | (85,168 | )    | $ | (85,024 | )
|Surrender of shares issued under stock incentive plan                    |  |                                 | (1,388  | )    |   | (144    | )
|                                                                         |  |                                 |         |      |   |         |  
|Balance at September 30,                                                 |  | $                               | (86,556 | )    | $ | (85,168 | )
|                                                                         |  |                                 |         |      |   |         |  
|                                                                         |  |                                 |         |      |   |         |  
|Total Shareholders Equity                                               |  |                                 |         |      |   |         |  
|Balance at January 1,                                                    |  | $                               | 161,950 |      | $ | 160,480 |  
|Net changes during the period                                            |  |                                 | 62,428  |      |   | 58      |  
|                                                                         |  |                                 |         |      |   |         |  
|Balance at September 30,                                                 |  | $                               | 224,378 |      | $ | 160,538 |  
|                                                                         |  |                                 |         |      |   |         |  

See Notes to Consolidated Financial
Statements.

6

---



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

|                                                                                        |  |                                 |          |      |   |          |  
|--------------------------------------------------------------------------------------- |  | ------------------------------- | -------- | ---- | - | -------- | -
|                                                                                        |  | Nine Months Ended
September 30, |         
|                                                                                        |  |                                 |         
|                                                                                        |  | 2010                            |          | 2009 |  
|                                                                                        |  |                                 |          |      |  
|Operating Activities                                                                    |  |                                 |          |      |   |          |  
|Net Income                                                                              |  | $                               | 2,871    |      | $ | 6,785    |  
|Adjustments to reconcile net income to net cash
provided by operating activities:       |  |                                 |          |      |   |          |  
|Provision for loan losses                                                               |  |                                 | 25,500   |      |   | 19,950   |  
|Depreciation and amortization of premises and
equipment                                 |  |                                 | 1,171    |      |   | 1,679    |  
|Securities gains                                                                        |  |                                 | (3,419   | )    |   | (5,160   | )
|Income from life insurance policies, net                                                |  |                                 | (757     | )    |   | (1,094   | )
|Deferred income tax provision (benefit)                                                 |  |                                 | 361      |      |   | (2,076   | )
|Proceeds from sale of loans                                                             |  |                                 | 330,050  |      |   | 492,589  |  
|Gains on sales of loans, net                                                            |  |                                 | (5,645   | )    |   | (7,146   | )
|Originations of loans held for sale                                                     |  |                                 | (325,826 | )    |   | (487,822 | )
|Amortization of premiums on securities                                                  |  |                                 | 4,793    |      |   | 1,386    |  
|Accretion of discounts on securities                                                    |  |                                 | (446     | )    |   | (1,035   | )
|(Increase) Decrease in accrued interest receivable                                      |  |                                 | (215     | )    |   | 776      |  
|Increase (Decrease) in accrued interest payable                                         |  |                                 | 348      |      |   | (509     | )
|Increase in due to factored clients                                                     |  |                                 | 10,453   |      |   | 39,111   |  
|Increase in accrued expenses and other liabilities                                      |  |                                 | 5,057    |      |   | (14,742  | )
|Increase in other assets                                                                |  |                                 | (8,517   | )    |   | (1,872   | )
|Loss (Gain) on other real estate owned                                                  |  |                                 | 17       |      |   | (39      | )
|                                                                                        |  |                                 |          |      |   |          |  
|Net cash provided by operating activities                                               |  |                                 | 35,796   |      |   | 40,781   |  
|                                                                                        |  |                                 |          |      |   |          |  
|Investing Activities                                                                    |  |                                 |          |      |   |          |  
|Purchase of premises and equipment                                                      |  |                                 | (7,238   | )    |   | (641     | )
|Net decrease (increase) in interest-bearing deposits
with other banks                   |  |                                 | 17,658   |      |   | (7,171   | )
|Net (increase) decrease in loans held in portfolio                                      |  |                                 | (80,961  | )    |   | 21,254   |  
|Net increase in short-term factored receivables                                         |  |                                 | (46,279  | )    |   | (42,870  | )
|Decrease in other real estate                                                           |  |                                 | 1,157    |      |   | 1,284    |  
|Proceeds from prepayments, redemptions or maturities
of securities - held to maturity   |  |                                 | 48,597   |      |   | 60,172   |  
|Purchases of securities - held to maturity                                              |  |                                 | (122,185 | )    |   | (183,996 | )
|Proceeds from calls of securities - held to maturity                                    |  |                                 | 132,380  |      |   | 30,000   |  
|Proceeds from calls/sales of securities - available
for sale                            |  |                                 | 400,719  |      |   | 366,526  |  
|Proceeds from prepayments, redemptions or maturities
of securities - available for sale |  |                                 | 170,701  |      |   | 95,607   |  
|Purchases of securities - available for sale                                            |  |                                 | (645,514 | )    |   | (285,516 | )
|Proceeds from redemptions or maturities of securities
- FHLB & FRB stock                |  |                                 | 961      |      |   | 3,375    |  
|Purchases of securities - FHLB & FRB stock                                              |  |                                 | (1,860   | )    |   | (503     | )
|Cash paid in acquisition                                                                |  |                                 |         |      |   | (21,333  | )
|                                                                                        |  |                                 |          |      |   |          |  
|Net cash (used in) provided by investing activities                                     |  |                                 | (131,864 | )    |   | 36,188   |  
|                                                                                        |  |                                 |          |      |   |          |  
|Financing Activities                                                                    |  |                                 |          |      |   |          |  
|Net (decrease) increase in noninterest-bearing demand
deposits                          |  |                                 | (6,704   | )    |   | 5,819    |  
|Net decrease in savings, NOW and money market
deposits                                  |  |                                 | (36,753  | )    |   | (18,376  | )
|Net increase in time deposits                                                           |  |                                 | 108,403  |      |   | 63,258   |  
|Net increase (decrease) in Federal funds purchased                                      |  |                                 | 19,000   |      |   | (105,325 | )
|Net increase in securities sold under agreements to
repurchase                          |  |                                 | 5,036    |      |   | 11,294   |  
|Net decrease in commercial paper and other short-term
borrowings                        |  |                                 | (52,340  | )    |   | (34,590  | )
|Increase in long-term borrowings                                                        |  |                                 | 14,528   |      |   | 10,000   |  
|Proceeds from exercise of stock options                                                 |  |                                 | 333      |      |   | 163      |  
|Proceeds from issuance of common stock                                                  |  |                                 | 64,881   |      |   |         |  
|Cash dividends paid on preferred stock                                                  |  |                                 | (1,575   | )    |   | (1,353   | )
|Cash dividends paid on common stock                                                     |  |                                 | (6,459   | )    |   | (8,503   | )
|                                                                                        |  |                                 |          |      |   |          |  
|Net cash provided by (used in) financing activities                                     |  |                                 | 108,350  |      |   | (77,613  | )
|                                                                                        |  |                                 |          |      |   |          |  
|                                                                                        |  |                                 |          |      |   |          |  
|Net increase (decrease) in cash and due from banks                                      |  |                                 | 12,282   |      |   | (644     | )
|Cash and due from banks - beginning of period                                           |  |                                 | 24,911   |      |   | 31,832   |  
|                                                                                        |  |                                 |          |      |   |          |  
|                                                                                        |  |                                 |          |      |   |          |  
|Cash and due from banks - end of period                                                 |  | $                               | 37,193   |      | $ | 31,188   |  
|                                                                                        |  |                                 |          |      |   |          |  
|                                                                                        |  |                                 |          |      |   |          |  
|Supplemental disclosures:                                                               |  |                                 |          |      |   |          |  
|Interest paid                                                                           |  | $                               | 11,537   |      | $ | 15,368   |  
|Income taxes paid                                                                       |  |                                 | 3,716    |      |   | 5,746    |  
|Loans held for sale transferred to portfolio                                            |  |                                 | 1,264    |      |   |         |  
|Loans transferred to other real estate                                                  |  |                                 | 533      |      |   | 1,538    |  
|Due to brokers on purchases of securities - AFS                                         |  |                                 |         |      |   | 5,000    |  
|Due to brokers on purchases of securities - HTM                                         |  |                                 | 10,300   |      |   | 613      |  

See Notes to Consolidated Financial Statements.

7

---



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

Note 1. Significant Accounting Policies

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

The Companys financial statements are
prepared in accordance with U.S. generally accepted accounting principles
(U.S. GAAP) which, effective for all interim and annual periods ending after
September 15, 2009, principally consist of the Financial Accounting Standards
Board Accounting Standards Codification (FASB Codification). FASB
Codification Topic 105: Generally Accepted Accounting Principles
establishes the FASB codification as the source of authoritative accounting
principles recognized by the FASB to be applied by nongovernmental entities in
the preparation of financial statements in conformity with generally accepted
accounting principles. Rules and interpretive releases of the Securities and
Exchange Commission (SEC) under authority of federal securities laws are also
sources of authoritative guidance for SEC registrants. All guidance contained
in the FASB Codification carries an equal level of authority. All
non-grandfathered, non-SEC accounting literature not included in the FASB
Codification is superseded and deemed non-authoritative.

Basis of Presentation. The consolidated financial statements include
the accounts of Sterling Bancorp and its subsidiaries, principally the bank,
after elimination of intercompany transactions. The consolidated financial
statements as of and for the interim periods ended September 30, 2010 and 2009
are unaudited; however, in the opinion of management, all adjustments,
consisting of normal recurring accruals, necessary for a fair presentation of
such periods have been made. Certain reclassifications have been made to the
prior years consolidated financial statements to conform to the current
presentation. 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, 2009 (the 2009 Form 10-K).

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

8

---



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

Note 2. Investment Securities

The following tables present
information regarding securities available for sale:

|                                                                                        |  |               |         |                      |   |                       |  |   |           |  |   |         | 
|--------------------------------------------------------------------------------------- |  | ------------- | ------- | -------------------- | - | --------------------- |  | - | --------- |  | - | ------- | 
|September
 30, 2010                                                                     |  | AmortizedCost |         | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | FairValue | 
|                                                                                        |  |               |         |                      |   |                       |  |   |           | 
|                                                                                       
|Obligations of U.S. government corporations and government sponsored
 enterprises       |  |               |         |                      |   |                       |  |   |           |  |   |         | 
|Mortgage-backed securities                                                              |  |               |         |                      |   |                       |  |   |           |  |   |         | 
|CMOs (Federal Home Loan Mortgage Corporation)                                          |  | $             | 1,109   |                      | $ | 31                    |  | $ |          |  | $ | 1,140   | 
|CMOs (Government National Mortgage Association)                                        |  |               | 12,535  |                      |   | 311                   |  |   |          |  |   | 12,846  | 
|Federal National Mortgage Association                                                   |  |               | 7,075   |                      |   | 339                   |  |   |          |  |   | 7,414   | 
|Federal Home Loan Mortgage Corporation                                                  |  |               | 238     |                      |   | 26                    |  |   | 1         |  |   | 263     | 
|Government National Mortgage Association                                                |  |               | 2,220   |                      |   | 272                   |  |   |          |  |   | 2,492   | 
|                                                                                        |  |               |         |                      |   |                       |  |   |           |  |   |         | 
|Total mortgage-backed securities                                                        |  |               | 23,177  |                      |   | 979                   |  |   | 1         |  |   | 24,155  | 
|                                                                                       
|Agency Notes                                                                            |  |               |         |                      |   |                       |  |   |           |  |   |         | 
|Federal National Mortgage Association                                                   |  |               | 45,087  |                      |   | 191                   |  |   |          |  |   | 45,278  | 
|Federal Home Loan Bank                                                                  |  |               | 15,000  |                      |   | 114                   |  |   |          |  |   | 15,114  | 
|Federal Home Loan Mortgage Corporation                                                  |  |               | 89,962  |                      |   | 449                   |  |   |          |  |   | 90,411  | 
|Federal Farm Credit Bank                                                                |  |               | 10,000  |                      |   | 50                    |  |   |          |  |   | 10,050  | 
|                                                                                        |  |               |         |                      |   |                       |  |   |           |  |   |         | 
|Total obligations of U.S. government corporations and government
 sponsored enterprises |  |               | 183,226 |                      |   | 1,783                 |  |   | 1         |  |   | 185,008 | 
|                                                                                       
|Obligations of state and
 political institutions-New York Bank Qualified                |  |               | 22,658  |                      |   | 1,415                 |  |   |          |  |   | 24,073  | 
|Single-issuer, trust
 preferred securities                                              |  |               | 3,878   |                      |   | 76                    |  |   | 26        |  |   | 3,928   | 
|Corporate debt securities                                                               |  |               | 203,646 |                      |   | 470                   |  |   | 210       |  |   | 203,906 | 
|Other securities                                                                        |  |               | 5,044   |                      |   | 25                    |  |   |          |  |   | 5,069   | 
|                                                                                        |  |               |         |                      |   |                       |  |   |           |  |   |         | 
|Total                                                                                   |  | $             | 418,452 |                      | $ | 3,769                 |  | $ | 237       |  | $ | 421,984 | 
|                                                                                        |  |               |         |                      |   |                       |  |   |           |  |   |         | 

9

---



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

|                                                                                        |  |               |         |                      |   |                       |  |           |       |  |   |         | 
|--------------------------------------------------------------------------------------- |  | ------------- | ------- | -------------------- | - | --------------------- |  | --------- | ----- |  | - | ------- | 
|                                                                                        |  |               |         |                      |   |                       |  |           |       |  |   |         | 
|December
 31, 2009                                                                      |  | AmortizedCost |         | GrossUnrealizedGains |   | GrossUnrealizedLosses |  | FairValue |      
|                                                                                        |  |               |         |                      |   |                       |  |           |      
|                                                                                        |  |               |         |                      |   |                       |  |           |       |  |   |         | 
|                                                                                        |  |               |         |                      |   |                       |  |           |       |  |   |         | 
|Obligations of U.S. government corporations and government sponsored
 enterprises       |  |               |         |                      |   |                       |  |           |       |  |   |         | 
|Mortgage-backed securities                                                              |  |               |         |                      |   |                       |  |           |       |  |   |         | 
|CMOs (Federal National Mortgage Association)                                           |  | $             | 2,882   |                      | $ |                      |  | $         | 5     |  | $ | 2,877   | 
|CMOs (Federal Home Loan Mortgage Corporation)                                          |  |               | 5,563   |                      |   | 171                   |  |           |      |  |   | 5,734   | 
|CMOs (Government National Mortgage Association)                                        |  |               | 9,181   |                      |   |                      |  |           | 133   |  |   | 9,048   | 
|Federal National Mortgage Association                                                   |  |               | 21,055  |                      |   | 868                   |  |           | 71    |  |   | 21,852  | 
|Federal Home Loan Mortgage Corporation                                                  |  |               | 10,321  |                      |   | 299                   |  |           |      |  |   | 10,620  | 
|Government National Mortgage Association                                                |  |               | 6,807   |                      |   | 351                   |  |           | 1     |  |   | 7,157   | 
|                                                                                        |  |               |         |                      |   |                       |  |           |       |  |   |         | 
|Total mortgage-backed securities                                                        |  |               | 55,809  |                      |   | 1,689                 |  |           | 210   |  |   | 57,288  | 
|                                                                                        |  |               |         |                      |   |                       |  |           |       |  |   |         | 
|Agency Notes                                                                            |  |               |         |                      |   |                       |  |           |       |  |   |         | 
|Federal National Mortgage Association                                                   |  |               | 20,291  |                      |   |                      |  |           | 835   |  |   | 19,456  | 
|Federal Home Loan Bank                                                                  |  |               | 83,983  |                      |   | 6                     |  |           | 1,039 |  |   | 82,950  | 
|Federal Home Loan Mortgage Corporation                                                  |  |               | 4,995   |                      |   |                      |  |           | 96    |  |   | 4,899   | 
|Federal Farm Credit Bank                                                                |  |               | 24,999  |                      |   |                      |  |           | 669   |  |   | 24,330  | 
|                                                                                        |  |               |         |                      |   |                       |  |           |       |  |   |         | 
|Total obligations of U.S. government corporations and government
 sponsored enterprises |  |               | 190,077 |                      |   | 1,695                 |  |           | 2,849 |  |   | 188,923 | 
|                                                                                        |  |               |         |                      |   |                       |  |           |       |  |   |         | 
|                                                                                        |  |               |         |                      |   |                       |  |           |       |  |   |         | 
|Obligations of state and
 political institutions-New York Bank Qualified                |  |               | 22,820  |                      |   | 1,061                 |  |           | 17    |  |   | 23,864  | 
|Single-issuer, trust
 preferred securities                                              |  |               | 4,878   |                      |   |                      |  |           | 395   |  |   | 4,483   | 
|Corporate debt securities                                                               |  |               | 127,900 |                      |   | 1,382                 |  |           | 82    |  |   | 129,200 | 
|Other securities                                                                        |  |               | 44      |                      |   | 12                    |  |           |      |  |   | 56      | 
|                                                                                        |  |               |         |                      |   |                       |  |           |       |  |   |         | 
|Total                                                                                   |  | $             | 345,719 |                      | $ | 4,150                 |  | $         | 3,343 |  | $ | 346,526 | 
|                                                                                        |  |               |         |                      |   |                       |  |           |       |  |   |         | 

10

---



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

The following tables present information
regarding securities held to maturity:

|                                                                                        |  |               |         |                      |   |                       |  |           |     |  |   |         | 
|--------------------------------------------------------------------------------------- |  | ------------- | ------- | -------------------- | - | --------------------- |  | --------- | --- |  | - | ------- | 
|                                                                                        |  |               |         |                      |   |                       |  |           |     |  |   |         | 
|September
 30, 2010                                                                     |  | CarryingValue |         | GrossUnrealizedGains |   | GrossUnrealizedLosses |  | FairValue |    
|                                                                                        |  |               |         |                      |   |                       |  |           |    
|                                                                                       
|Obligations of U.S.
 government corporations and government sponsored enterprises       |  |               |         |                      |   |                       |  |           |     |  |   |         | 
|Mortgage-backed securities                                                              |  |               |         |                      |   |                       |  |           |     |  |   |         | 
|CMOs (Federal National Mortgage Association)                                           |  | $             | 8,846   |                      | $ | 448                   |  | $         |    |  | $ | 9,294   | 
|CMOs (Federal Home Loan Mortgage Corporation)                                          |  |               | 13,558  |                      |   | 667                   |  |           |    |  |   | 14,225  | 
|Federal National Mortgage Association                                                   |  |               | 77,289  |                      |   | 4,324                 |  |           |    |  |   | 81,613  | 
|Federal Home Loan Mortgage Corporation                                                  |  |               | 45,564  |                      |   | 2,291                 |  |           |    |  |   | 47,855  | 
|Government National Mortgage Association                                                |  |               | 5,191   |                      |   | 590                   |  |           |    |  |   | 5,781   | 
|                                                                                        |  |               |         |                      |   |                       |  |           |     |  |   |         | 
|Total mortgage-backed securities                                                        |  |               | 150,448 |                      |   | 8,320                 |  |           |    |  |   | 158,768 | 
|                                                                                       
|Agency Notes                                                                            |  |               |         |                      |   |                       |  |           |     |  |   |         | 
|Federal National Mortgage Association                                                   |  |               | 34,989  |                      |   | 36                    |  |           | 19  |  |   | 35,006  | 
|Federal Home Loan Bank                                                                  |  |               | 19,990  |                      |   | 7                     |  |           | 6   |  |   | 19,991  | 
|Federal Home Loan Mortgage Corporation                                                  |  |               | 14,995  |                      |   | 50                    |  |           |    |  |   | 15,045  | 
|Federal Farm Credit Bank                                                                |  |               | 5,081   |                      |   | 2                     |  |           |    |  |   | 5,083   | 
|                                                                                        |  |               |         |                      |   |                       |  |           |     |  |   |         | 
|Total obligations of U.S. government corporations and government
 sponsored enterprises |  |               | 225,503 |                      |   | 8,415                 |  |           | 25  |  |   | 233,893 | 
|                                                                                       
|Obligations of state and
 political institutions-New York Bank Qualified                |  |               | 116,974 |                      |   | 4,679                 |  |           | 84  |  |   | 121,569 | 
|                                                                                        |  |               |         |                      |   |                       |  |           |     |  |   |         | 
|Total                                                                                   |  | $             | 342,477 |                      | $ | 13,094                |  | $         | 109 |  |   | 355,462 | 
|                                                                                        |  |               |         |                      |   |                       |  |           |     |  |   |         | 

11

---



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

|                                                                                        |  |               |         |                      |   |                       |  |           |       |  |   |         | 
|--------------------------------------------------------------------------------------- |  | ------------- | ------- | -------------------- | - | --------------------- |  | --------- | ----- |  | - | ------- | 
|December
 31, 2009                                                                      |  | CarryingValue |         | GrossUnrealizedGains |   | GrossUnrealizedLosses |  | FairValue |      
|                                                                                        |  |               |         |                      |   |                       |  |           |      
|                                                                                       
|Obligations of U.S. government corporations and government sponsored
 enterprises       |  |               |         |                      |   |                       |  |           |       |  |   |         | 
|Mortgage-backed securities                                                              |  |               |         |                      |   |                       |  |           |       |  |   |         | 
|CMOs (Federal National Mortgage Association)                                           |  | $             | 10,863  |                      | $ | 339                   |  | $         |      |  | $ | 11,202  | 
|CMOs (Federal Home Loan Mortgage Corporation)                                          |  |               | 16,964  |                      |   | 573                   |  |           |      |  |   | 17,537  | 
|Federal National Mortgage Association                                                   |  |               | 103,821 |                      |   | 4,329                 |  |           | 2     |  |   | 108,148 | 
|Federal Home Loan Mortgage Corporation                                                  |  |               | 61,095  |                      |   | 2,005                 |  |           |      |  |   | 63,100  | 
|Government National Mortgage Association                                                |  |               | 5,989   |                      |   | 501                   |  |           |      |  |   | 6,490   | 
|                                                                                        |  |               |         |                      |   |                       |  |           |       |  |   |         | 
|Total mortgage-backed securities                                                        |  |               | 198,732 |                      |   | 7,747                 |  |           | 2     |  |   | 206,477 | 
|                                                                                       
|Agency Notes                                                                            |  |               |         |                      |   |                       |  |           |       |  |   |         | 
|Federal National Mortgage Association                                                   |  |               | 97,147  |                      |   | 14                    |  |           | 1,742 |  |   | 95,419  | 
|Federal Home Loan Bank                                                                  |  |               | 19,849  |                      |   |                      |  |           | 474   |  |   | 19,375  | 
|Federal Home Loan Mortgage Corporation                                                  |  |               | 10,000  |                      |   |                      |  |           | 218   |  |   | 9,782   | 
|Federal Farm Credit Bank                                                                |  |               | 5,088   |                      |   |                      |  |           | 94    |  |   | 4,994   | 
|                                                                                        |  |               |         |                      |   |                       |  |           |       |  |   |         | 
|Total obligations of U.S. government corporations and government
 sponsored enterprises |  |               | 330,816 |                      |   | 7,761                 |  |           | 2,530 |  |   | 336,047 | 
|                                                                                       
|Obligations of state and
 political institutions-New York Bank Qualified                |  |               | 59,473  |                      |   | 737                   |  |           | 357   |  |   | 59,853  | 
|Debt securities issued by
 foreign governments                                          |  |               | 250     |                      |   |                      |  |           |      |  |   | 250     | 
|                                                                                        |  |               |         |                      |   |                       |  |           |       |  |   |         | 
|Total                                                                                   |  | $             | 390,539 |                      | $ | 8,498                 |  | $         | 2,887 |  | $ | 396,150 | 
|                                                                                        |  |               |         |                      |   |                       |  |           |       |  |   |         | 

12

---



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

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

|                                                                                  |  |                     |        |                     |   |             |  |                    |       |             |   |                    |  |   |        |  |   |     | 
|--------------------------------------------------------------------------------- |  | ------------------- | ------ | ------------------- | - | ----------- |  | ------------------ | ----- | ----------- | - | ------------------ |  | - | ------ |  | - | --- | 
|                                                                                  |  | Less Than 12 Months |        | 12 Months or Longer |   | Total       | 
|                                                                                  |  |                     |        |                     |   |             | 
|September 30, 2010                                                                |  | Fair
 Value         |        | Unrealized
 Losses  |   | Fair
 Value |  | Unrealized
 Losses |       | Fair
 Value |   | Unrealized
 Losses | 
|                                                                                  |  |                     |        |                     |   |             |  |                    |       |             |   |                    | 
|                                                                                  |  |                     |        |                     |   |             |  |                    |       |             |   |                    | 
|Obligations of U.S. government corporations
 and government sponsored enterprises |  |                     |        |                     |   |             |  |                    |       |             |   |                    |  |   |        |  |   |     | 
|Federal Home Loan Mortgage Corporation                                            |  | $                   | 29     |                     | $ | 1           |  | $                  |      |             | $ |                   |  | $ | 29     |  | $ | 1   | 
|                                                                                  |  |                     |        |                     |   |             |  |                    |       |             |   |                    |  |   |        |  |   |     | 
|Total mortgage-backed securities                                                  |  |                     | 29     |                     |   | 1           |  |                    |      |             |   |                   |  |   | 29     |  |   | 1   | 
|                                                                                  |  |                     |        |                     |   |             |  |                    |       |             |   |                    |  |   |        |  |   |     | 
|Single-issuer, trust preferred securities                                         |  |                     |       |                     |   |            |  |                    | 2,110 |             |   | 26                 |  |   | 2,110  |  |   | 26  | 
|Corporate debt securities                                                         |  |                     | 58,625 |                     |   | 210         |  |                    |      |             |   |                   |  |   | 58,625 |  |   | 210 | 
|                                                                                  |  |                     |        |                     |   |             |  |                    |       |             |   |                    |  |   |        |  |   |     | 
|Total                                                                             |  | $                   | 58,654 |                     | $ | 211         |  | $                  | 2,110 |             | $ | 26                 |  | $ | 60,764 |  | $ | 237 | 
|                                                                                  |  |                     |        |                     |   |             |  |                    |       |             |   |                    |  |   |        |  |   |     | 

|                                                                                        |  |   |         |  |   |       |  |   |        |  |   |     |  |   |         |  |   |       | 
|--------------------------------------------------------------------------------------- |  | - | ------- |  | - | ----- |  | - | ------ |  | - | --- |  | - | ------- |  | - | ----- | 
|December 31, 2009                                                                       |  |   |         |  |   |       |  |   |        |  |   |     |  |   |         |  |   |       | 
|                                                                                        |  |   |         |  |   |       |  |   |        |  |   |     |  |   |         |  |   |       | 
|                                                                                        |  |   |         |  |   |       |  |   |        |  |   |     |  |   |         |  |   |       | 
|Obligations of U.S. government corporations
 and government sponsored enterprises       |  |   |         |  |   |       |  |   |        |  |   |     |  |   |         |  |   |       | 
|Mortgage-backed securities                                                              |  |   |         |  |   |       |  |   |        |  |   |     |  |   |         |  |   |       | 
|CMOs (Federal National Mortgage
 Association)                                          |  | $ | 2,877   |  | $ | 5     |  | $ |       |  | $ |    |  | $ | 2,877   |  | $ | 5     | 
|CMOs (Government National Mortgage
 Association)                                       |  |   | 4,926   |  |   | 91    |  |   | 4,122  |  |   | 42  |  |   | 9,048   |  |   | 133   | 
|Federal National Mortgage Association                                                   |  |   | 2,057   |  |   | 71    |  |   |       |  |   |    |  |   | 2,057   |  |   | 71    | 
|Government National Mortgage Association                                                |  |   |        |  |   |      |  |   | 123    |  |   | 1   |  |   | 123     |  |   | 1     | 
|                                                                                        |  |   |         |  |   |       |  |   |        |  |   |     |  |   |         |  |   |       | 
|Total mortgage-backed securities                                                        |  |   | 9,860   |  |   | 167   |  |   | 4,245  |  |   | 43  |  |   | 14,105  |  |   | 210   | 
|                                                                                        |  |   |         |  |   |       |  |   |        |  |   |     |  |   |         |  |   |       | 
|Agency Notes                                                                            |  |   |         |  |   |       |  |   |        |  |   |     |  |   |         |  |   |       | 
|Federal National Mortgage Association                                                   |  |   | 19,456  |  |   | 835   |  |   |       |  |   |    |  |   | 19,456  |  |   | 835   | 
|Federal Home Loan Bank                                                                  |  |   | 68,231  |  |   | 751   |  |   | 9,713  |  |   | 288 |  |   | 77,944  |  |   | 1,039 | 
|Federal Home Loan Mortgage Corporation                                                  |  |   | 4,899   |  |   | 96    |  |   |       |  |   |    |  |   | 4,899   |  |   | 96    | 
|Federal Farm Credit Bank                                                                |  |   | 24,330  |  |   | 669   |  |   |       |  |   |    |  |   | 24,330  |  |   | 669   | 
|                                                                                        |  |   |         |  |   |       |  |   |        |  |   |     |  |   |         |  |   |       | 
|Total obligations of U.S. government
 corporations and government sponsored enterprises |  |   | 126,776 |  |   | 2,518 |  |   | 13,958 |  |   | 331 |  |   | 140,734 |  |   | 2,849 | 
|                                                                                        |  |   |         |  |   |       |  |   |        |  |   |     |  |   |         |  |   |       | 
|Obligations of state and political
 institutions-New York Bank Qualified                |  |   | 872     |  |   | 17    |  |   |       |  |   |    |  |   | 872     |  |   | 17    | 
|Single-issuer, trust preferred securities                                               |  |   |        |  |   |      |  |   | 3,540  |  |   | 395 |  |   | 3,540   |  |   | 395   | 
|Corporate debt securities                                                               |  |   | 23,575  |  |   | 82    |  |   |       |  |   |    |  |   | 23,575  |  |   | 82    | 
|                                                                                        |  |   |         |  |   |       |  |   |        |  |   |     |  |   |         |  |   |       | 
|Total                                                                                   |  | $ | 151,223 |  | $ | 2,617 |  | $ | 17,498 |  | $ | 726 |  | $ | 168,721 |  | $ | 3,343 | 
|                                                                                        |  |   |         |  |   |       |  |   |        |  |   |     |  |   |         |  |   |       | 

13

---



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

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

|                                                                                        |  |                     |        |                     |   |             |  |                    |   |             |   |                    |  |   |        |  |   |     | 
|--------------------------------------------------------------------------------------- |  | ------------------- | ------ | ------------------- | - | ----------- |  | ------------------ | - | ----------- | - | ------------------ |  | - | ------ |  | - | --- | 
|                                                                                        |  | Less Than 12 Months |        | 12 Months or Longer |   | Total       | 
|                                                                                        |  |                     |        |                     |   |             | 
|September
 30, 2010                                                                     |  | Fair
 Value         |        | Unrealized
 Losses  |   | Fair
 Value |  | Unrealized
 Losses |   | Fair
 Value |   | Unrealized
 Losses | 
|                                                                                        |  |                     |        |                     |   |             |  |                    |   |             |   |                    | 
|                                                                                        |  |                     |        |                     |   |             |  |                    |   |             |   |                    | 
|Obligations of U.S. government corporations
 and government sponsored enterprises -     |  |                     |        |                     |   |             |  |                    |   |             |   |                    |  |   |        |  |   |     | 
|Agency Notes                                                                            |  |                     |        |                     |   |             |  |                    |   |             |   |                    |  |   |        |  |   |     | 
|Federal National Mortgage Association                                                   |  | $                   | 14,977 |                     | $ | 19          |  | $                  |  |             | $ |                   |  | $ | 14,977 |  | $ | 19  | 
|Federal Home Loan Bank                                                                  |  |                     | 4,986  |                     |   | 6           |  |                    |  |             |   |                   |  |   | 4,986  |  |   | 6   | 
|                                                                                        |  |                     |        |                     |   |             |  |                    |   |             |   |                    |  |   |        |  |   |     | 
|Total obligations of U.S. government
 corporations and government sponsored enterprises |  |                     | 19,963 |                     |   | 25          |  |                    |  |             |   |                   |  |   | 19,963 |  |   | 25  | 
|Obligations of state and political
 institutions-New York Bank Qualified                |  |                     | 5,064  |                     |   | 84          |  |                    |  |             |   |                   |  |   | 5,064  |  |   | 84  | 
|                                                                                        |  |                     |        |                     |   |             |  |                    |   |             |   |                    |  |   |        |  |   |     | 
|                                                                                        |  |                     |        |                     |   |             |  |                    |   |             |   |                    |  |   |        |  |   |     | 
|Total                                                                                   |  | $                   | 25,027 |                     | $ | 109         |  | $                  |  |             | $ |                   |  | $ | 25,027 |  | $ | 109 | 
|                                                                                        |  |                     |        |                     |   |             |  |                    |   |             |   |                    |  |   |        |  |   |     | 

|                                                                                        |  |   |         |  |   |       |  |   |     |  |   |   |  |   |         |  |   |       | 
|--------------------------------------------------------------------------------------- |  | - | ------- |  | - | ----- |  | - | --- |  | - | - |  | - | ------- |  | - | ----- | 
|December
 31, 2009                                                                      |  |   |         |  |   |       |  |   |     |  |   |   |  |   |         |  |   |       | 
|                                                                                        |  |   |         |  |   |       |  |   |     |  |   |   |  |   |         |  |   |       | 
|                                                                                        |  |   |         |  |   |       |  |   |     |  |   |   |  |   |         |  |   |       | 
|Obligations of U.S. government corporations
 and government sponsored enterprises -     |  |   |         |  |   |       |  |   |     |  |   |   |  |   |         |  |   |       | 
|Mortgage-backed securities                                                              |  |   |         |  |   |       |  |   |     |  |   |   |  |   |         |  |   |       | 
|Federal National Mortgage Association                                                   |  | $ |        |  | $ |      |  | $ | 459 |  | $ | 2 |  | $ | 459     |  | $ | 2     | 
|                                                                                        |  |   |         |  |   |       |  |   |     |  |   |   |  |   |         |  |   |       | 
|Total mortgage-backed securities                                                        |  |   |        |  |   |      |  |   | 459 |  |   | 2 |  |   | 459     |  |   | 2     | 
|                                                                                        |  |   |         |  |   |       |  |   |     |  |   |   |  |   |         |  |   |       | 
|Agency Notes                                                                            |  |   |         |  |   |       |  |   |     |  |   |   |  |   |         |  |   |       | 
|Federal National Mortgage Association                                                   |  |   | 86,027  |  |   | 1,742 |  |   |    |  |   |  |  |   | 86,027  |  |   | 1,742 | 
|Federal Home Loan Bank                                                                  |  |   | 19,375  |  |   | 474   |  |   |    |  |   |  |  |   | 19,375  |  |   | 474   | 
|Federal Home Loan Mortgage Corporation                                                  |  |   | 9,782   |  |   | 218   |  |   |    |  |   |  |  |   | 9,782   |  |   | 218   | 
|Federal Farm Credit Bank                                                                |  |   | 4,994   |  |   | 94    |  |   |    |  |   |  |  |   | 4,994   |  |   | 94    | 
|                                                                                        |  |   |         |  |   |       |  |   |     |  |   |   |  |   |         |  |   |       | 
|Total obligations of U.S. government
 corporations and government sponsored enterprises |  |   | 120,178 |  |   | 2,528 |  |   | 459 |  |   | 2 |  |   | 120,637 |  |   | 2,530 | 
|Obligations of state and political
 institutions-New York Bank Qualified                |  |   | 16,478  |  |   | 357   |  |   |    |  |   |  |  |   | 16,478  |  |   | 357   | 
|                                                                                        |  |   |         |  |   |       |  |   |     |  |   |   |  |   |         |  |   |       | 
|                                                                                        |  |   |         |  |   |       |  |   |     |  |   |   |  |   |         |  |   |       | 
|Total                                                                                   |  | $ | 136,656 |  | $ | 2,885 |  | $ | 459 |  | $ | 2 |  | $ | 137,115 |  | $ | 2,887 | 
|                                                                                        |  |   |         |  |   |       |  |   |     |  |   |   |  |   |         |  |   |       | 

14

---



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

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

At September 30, 2010, approximately $120.7 million, representing
approximately 15.8%, of the Companys held to maturity and available for sale
securities are comprised of securities issued by financial service
companies/banks including single-issuer trust preferred securities (6 issuers),
corporate debt (20 issuers) and equity securities (8 issuers). These
investments may pose a higher risk of future impairment charges as a result of a
possible further deterioration of the U.S. economy. Some of the single-issuer
trust preferred securities held by the Company are financial institutions that
are participating in the U.S. Treasurys TARP Capital Purchase Program (CPP).
It is possible that these financial institutions may elect to defer future
interest payments on such securities based upon recommendations by the U.S.
Government and the banking regulators or management decisions driven by
potential liquidity needs. Such elections could result in future impairment
charges if collection of deferred and accrued interest (or principal upon
maturity) is deemed unlikely by management. The Company would be required to
recognize impairment charges on these securities if they suffer a decline in
value that is considered other-than-temporary. Numerous factors, including lack
of liquidity for re-sales of certain investment securities, absence of reliable
pricing information for investment securities, adverse changes in business
climate, adverse actions by regulators or unanticipated changes in the
competitive environment could have a negative effect on the Companys
investment portfolio and may result in other-than-temporary impairment on
certain investment securities in future periods.

At September 30, 2010, the Company held 6 securities positions of
single-issuer, trust preferred securities and 42 security positions of
corporate debt securities issued by financial institutions, in the available
for sale portfolio, all of which are paying in accordance with their terms and
have no deferrals of interest or other deferrals. In addition, management
analyzes the performance of the issuers on a periodic basis, including a review
of each issuers most recent bank regulatory report to assess credit risk and
the probability of impairment of the contractual cash flows of the applicable
securities. Based upon managements third quarter review, all of the issuers
have maintained performance levels adequate to support the contractual cash
flows of the securities.

15

---



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

The
following table presents information regarding single-issuer, trust preferred
securities at September 30, 2010:

|                                                 |  |                 |     |                |  |                 |  |             |       |                         |   |       |  |   |     |  
|------------------------------------------------ |  | --------------- | --- | -------------- |  | --------------- |  | ----------- | ----- | ----------------------- | - | ----- |  | - | --- | -
|Issuer                                           |  | TARP
 Recipient |     | Credit
 Rating |  | Amortized
 Cost |  | Fair
 Value |       | Unrealized
 Gain/(Loss) |  
|                                                 |  |                 |     |                |  |                 |  |             |       |                         |  
|                                                 |  |                 |     |                |  |                 |  |             |       |                         |   |       |  |   |     |  
|Sterling Bancorp Trust I, 8.375%,
 due 3/31/2032 |  |                 | Yes |                |  | NA              |  | $           | 980   |                         | $ | 1,036 |  | $ | 56  |  
|                                                 |  |                 |     |                |  |                 |  |             |       |                         |   |       |  |   |     |  
|NPB Capital Trust II, 7.85%, due
 9/30/2032      |  |                 | Yes |                |  | NA              |  |             | 126   |                         |   | 121   |  |   | (5  | )
|                                                 |  |                 |     |                |  |                 |  |             |       |                         |   |       |  |   |     |  
|VNB Capital Trust I, 7.75%, due
 12/15/2031      |  |                 | Yes | *              |  | BBB-            |  |             | 22    |                         |   | 22    |  |   |    |  
|                                                 |  |                 |     |                |  |                 |  |             |       |                         |   |       |  |   |     |  
|HSBC Finance, 6.875%, due
 1/30/2033,            |  |                 | No  |                |  | A               |  |             | 740   |                         |   | 760   |  |   | 20  |  
|owned by HSBC Group, PLC                         |  |                 | No  |                |  |                 |  |             |       |                         |   |       |  |   |     |  
|                                                 |  |                 |     |                |  |                 |  |             |       |                         |   |       |  |   |     |  
|Citigroup Capital VII, 7.125%, due
 7/31/2031    |  |                 | Yes | *              |  | BB-             |  |             | 1,508 |                         |   | 1,488 |  |   | (20 | )
|                                                 |  |                 |     |                |  |                 |  |             |       |                         |   |       |  |   |     |  
|Fleet Capital Trust VIII, 7.20%,
 due 3/15/2032, |  |                 | No  |                |  | BB              |  |             | 502   |                         |   | 501   |  |   | (1  | )
|owned by Bank of America
 Corporation            |  |                 | Yes | *              |  |                 |  |             |       |                         |   |       |  |   |     |  
|                                                 |  |                 |     |                |  |                 |  |             |       |                         |   |       |  |   |     |  
|                                                 |  |                 |     |                |  |                 |  |             |       |                         |   |       |  |   |     |  
|                                                 |  |                 |     |                |  |                 |  |             |       |                         |   |       |  |   |     |  
|                                                 |  |                 |     |                |  |                 |  | $           | 3,878 |                         | $ | 3,928 |  | $ | 50  |  
|                                                 |  |                 |     |                |  |                 |  |             |       |                         |   |       |  |   |     |  

* TARP obligation was repaid
prior to September 30, 2010.

16

---



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

The following tables present
information regarding securities available for sale and securities held to
maturity at September 30, 2010, based on contractual maturity. Expected
maturities will differ from contractual maturities because issuers may have the
right to call or prepay obligations with or without call or prepayment
penalties.

|                                                                                        |  |                 |         |             |   |         | 
|--------------------------------------------------------------------------------------- |  | --------------- | ------- | ----------- | - | ------- | 
|Available
 for sale                                                                     |  | Amortized
 Cost |         | Fair
 Value |  
|                                                                                        |  |                 |         |             |  
|                                                                                        |  |                 |         |             |   |         | 
|Obligations of U.S.
 government corporations and government sponsored enterprises       |  |                 |         |             |   |         | 
|Mortgage-backed securities                                                              |  |                 |         |             |   |         | 
|CMOs (Federal Home Loan Mortgage Corporation)                                          |  | $               | 1,109   |             | $ | 1,140   | 
|CMOs (Government National Mortgage Association)                                        |  |                 | 12,535  |             |   | 12,846  | 
|Federal National Mortgage Association                                                   |  |                 | 7,075   |             |   | 7,414   | 
|Federal Home Loan Mortgage Corporation                                                  |  |                 | 238     |             |   | 263     | 
|Government National Mortgage Association                                                |  |                 | 2,220   |             |   | 2,492   | 
|                                                                                        |  |                 |         |             |   |         | 
|Total mortgage-backed securities                                                        |  |                 | 23,177  |             |   | 24,155  | 
|                                                                                        |  |                 |         |             |   |         | 
|Agency Notes                                                                            |  |                 |         |             |   |         | 
|Federal National Mortgage Association                                                   |  |                 |         |             |   |         | 
|Due after 1 year but within 5 years                                                     |  |                 | 29,988  |             |   | 30,117  | 
|Due after 5 years but within 10 years                                                   |  |                 | 15,099  |             |   | 15,161  | 
|Federal Home Loan Bank                                                                  |  |                 |         |             |   |         | 
|Due after 5 years but within 10 years                                                   |  |                 | 15,000  |             |   | 15,114  | 
|Federal Home Loan Mortgage Corporation                                                  |  |                 |         |             |   |         | 
|Due after 1 year but within 5 years                                                     |  |                 | 29,982  |             |   | 30,130  | 
|Due after 5 years but within 10 years                                                   |  |                 | 59,980  |             |   | 60,281  | 
|Federal Farm Credit Bank                                                                |  |                 |         |             |   |         | 
|Due after 10 years                                                                      |  |                 | 10,000  |             |   | 10,050  | 
|                                                                                        |  |                 |         |             |   |         | 
|                                                                                        |  |                 |         |             |   |         | 
|Total obligations of U.S. government corporations and government
 sponsored enterprises |  |                 | 183,226 |             |   | 185,008 | 
|                                                                                        |  |                 |         |             |   |         | 
|                                                                                        |  |                 |         |             |   |         | 
|Obligations
 of state and political institutions - New York Bank Qualified              |  |                 |         |             |   |         | 
|Due within 1 year                                                                       |  |                 | 1,469   |             |   | 1,491   | 
|Due after 1 year but within 5 years                                                     |  |                 | 11,679  |             |   | 12,424  | 
|Due after 5 years but within 10 years                                                   |  |                 | 4,928   |             |   | 5,377   | 
|Due after 10 years                                                                      |  |                 | 4,582   |             |   | 4,781   | 
|                                                                                        |  |                 |         |             |   |         | 
|                                                                                        |  |                 |         |             |   |         | 
|Total obligations of state and political institutions-New York Bank
 Qualified          |  |                 | 22,658  |             |   | 24,073  | 
|                                                                                        |  |                 |         |             |   |         | 
|                                                                                        |  |                 |         |             |   |         | 
|Single-issuer,
 trust preferred securities                                              |  |                 |         |             |   |         | 
|Due after 10 years                                                                      |  |                 | 3,878   |             |   | 3,928   | 
|                                                                                        |  |                 |         |             |   |         | 
|Corporate
 debt securities                                                              |  |                 |         |             |   |         | 
|Due within 6 months                                                                     |  |                 | 85,933  |             |   | 86,020  | 
|Due after 6 months but within 1 year                                                    |  |                 | 84,235  |             |   | 84,464  | 
|Due after 1 year but within 2 years                                                     |  |                 | 24,478  |             |   | 24,478  | 
|Due after 2 years but within 5 years                                                    |  |                 | 9,000   |             |   | 8,944   | 
|                                                                                        |  |                 |         |             |   |         | 
|Total corporate debt securities                                                         |  |                 | 203,646 |             |   | 203,906 | 
|                                                                                        |  |                 |         |             |   |         | 
|                                                                                        |  |                 |         |             |   |         | 
|Other
 securities                                                                       |  |                 | 5,044   |             |   | 5,069   | 
|                                                                                        |  |                 |         |             |   |         | 
|Total                                                                                   |  | $               | 418,452 |             | $ | 421,984 | 
|                                                                                        |  |                 |         |             |   |         | 

17

---



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

|                                                                                        |  |  |  |  |  |                 |  |             |         |  |   |         | 
|--------------------------------------------------------------------------------------- |  |  |  |  |  | --------------- |  | ----------- | ------- |  | - | ------- | 
|Held to
 maturity                                                                       |  |  |  |  |  | Carrying
 Value |  | Fair
 Value |        
|                                                                                        |  |  |  |  |  |                 |  |             |        
|                                                                                        |  |  |  |  |  |                 |  |             |         |  |   |         | 
|Obligations of U.S. government corporations and government sponsored
 enterprises       |  |  |  |  |  |                 | 
|Mortgage-backed securities                                                              |  |  |  |  |  |                 |  |             |         |  |   |         | 
|CMOs (Federal National Mortgage Association)                                           |  |  |  |  |  |                 |  | $           | 8,846   |  | $ | 9,294   | 
|CMOs (Federal Home Loan Mortgage Corporation)                                          |  |  |  |  |  |                 |  |             | 13,558  |  |   | 14,225  | 
|Federal National Mortgage Association                                                   |  |  |  |  |  |                 |  |             | 77,289  |  |   | 81,613  | 
|Federal Home Loan Mortgage Corporation                                                  |  |  |  |  |  |                 |  |             | 45,564  |  |   | 47,855  | 
|Government National Mortgage Association                                                |  |  |  |  |  |                 |  |             | 5,191   |  |   | 5,781   | 
|                                                                                        |  |  |  |  |  |                 |  |             |         |  |   |         | 
|Total mortgage-backed securities                                                        |  |  |  |  |  |                 |  |             | 150,448 |  |   | 158,768 | 
|                                                                                        |  |  |  |  |  |                 |  |             |         |  |   |         | 
|Agency Notes                                                                            |  |  |  |  |  |                 |  |             |         |  |   |         | 
|Federal National Mortgage Association                                                   |  |  |  |  |  |                 |  |             |         |  |   |         | 
|Due after 1 year but within 5 years                                                     |  |  |  |  |  |                 |  |             | 19,995  |  |   | 19,992  | 
|Due after 5 years but within 10 years                                                   |  |  |  |  |  |                 |  |             | 9,994   |  |   | 10,000  | 
|Due after 10 years                                                                      |  |  |  |  |  |                 |  |             | 5,000   |  |   | 5,014   | 
|Federal Home Loan Bank                                                                  |  |  |  |  |  |                 |  |             |         |  |   |         | 
|Due after 1 year but within 5 years                                                     |  |  |  |  |  |                 |  |             | 14,990  |  |   | 14,988  | 
|Due after 5 years but within 10 years                                                   |  |  |  |  |  |                 |  |             | 5,000   |  |   | 5,003   | 
|Federal Home Loan Mortgage Corporation                                                  |  |  |  |  |  |                 |  |             |         |  |   |         | 
|Due after 1 year but within 5 years                                                     |  |  |  |  |  |                 |  |             | 14,995  |  |   | 15,045  | 
|Federal Farm Credit Bank                                                                |  |  |  |  |  |                 |  |             |         |  |   |         | 
|Due after 5 years but within 10 years                                                   |  |  |  |  |  |                 |  |             | 5,081   |  |   | 5,083   | 
|                                                                                        |  |  |  |  |  |                 |  |             |         |  |   |         | 
|                                                                                        |  |  |  |  |  |                 |  |             |         |  |   |         | 
|Total obligations of U.S. government corporations and government
 sponsored enterprises |  |  |  |  |  |                 |  |             | 225,503 |  |   | 233,893 | 
|                                                                                        |  |  |  |  |  |                 |  |             |         |  |   |         | 
|Obligations of state and political institutions - New York Bank
 Qualified              |  |  |  |  |  |                 |  |             |         |  |   |         | 
|Due after 5 years but within 10 years                                                   |  |  |  |  |  |                 |  |             | 886     |  |   | 947     | 
|Due after 10 years                                                                      |  |  |  |  |  |                 |  |             | 116,088 |  |   | 120,622 | 
|                                                                                        |  |  |  |  |  |                 |  |             |         |  |   |         | 
|                                                                                        |  |  |  |  |  |                 |  |             |         |  |   |         | 
|Total obligations of state and political institutions-New York Bank
 Qualified          |  |  |  |  |  |                 |  |             | 116,974 |  |   | 121,569 | 
|                                                                                        |  |  |  |  |  |                 |  |             |         |  |   |         | 
|Total                                                                                   |  |  |  |  |  |                 |  | $           | 342,477 |  | $ | 355,462 | 
|                                                                                        |  |  |  |  |  |                 |  |             |         |  |   |         | 

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

|             |  |                                   |         |                                  |   |         |  |      |         |  |   |         | 
|------------ |  | --------------------------------- | ------- | -------------------------------- | - | ------- |  | ---- | ------- |  | - | ------- | 
|             |  | Three Months Ended
 September 30, |         | Nine Months Ended
 September 30, |  
|             |  |                                   |         |                                  |  
|             |  | 2010                              |         | 2009                             |   | 2010    |  | 2009 |        
|             |  |                                   |         |                                  |   |         |  |      |        
|             |  |                                   |         |                                  |   |         |  |      |        
|Proceeds     |  | $                                 | 133,919 |                                  | $ | 143,682 |  | $    | 400,719 |  | $ | 396,526 | 
|Gross gains  |  |                                   | 846     |                                  |   | 1,221   |  |      | 3,339   |  |   | 5,160   | 
|Gross losses |  |                                   | 3       |                                  |   |        |  |      | 288     |  |   |        | 

Information regarding calls
of held to maturity securities is as follows:

|             |  |                                   |        |                                  |   |      |  |      |         |  |   |   | 
|------------ |  | --------------------------------- | ------ | -------------------------------- | - | ---- |  | ---- | ------- |  | - | - | 
|             |  | Three Months Ended
 September 30, |        | Nine Months Ended
 September 30, |  
|             |  |                                   |        |                                  |  
|             |  | 2010                              |        | 2009                             |   | 2010 |  | 2009 |        
|             |  |                                   |        |                                  |   |      |  |      |        
|             |  |                                   |        |                                  |   |      |  |      |        
|Proceeds     |  | $                                 | 65,500 |                                  | $ |     |  | $    | 132,380 |  | $ |  | 
|Gross gains  |  |                                   | 328    |                                  |   |     |  |      | 368     |  |   |  | 
|Gross losses |  |                                   |       |                                  |   |     |  |      |        |  |   |  | 

18

---



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

Note 3. Loans

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

|                                                                                                       |  |  |  |  |  |  |  |                     |           |                    |   |           | 
|------------------------------------------------------------------------------------------------------ |  |  |  |  |  |  |  | ------------------- | --------- | ------------------ | - | --------- | 
|                                                                                                       |  |  |  |  |  |  |  | September 30,
 2010 |           | December 31,
 2009 |  
|                                                                                                       |  |  |  |  |  |  |  |                     |           |                    |  
|Loans held for sale, net of valuation reserve ($42 at September 30,
 2010 and $7 at December 31, 2009) |  |  |  |  |  |  |  |                     |           |                    |   |           | 
|Real estate - residential mortgage                                                                     |  |  |  |  |  |  |  | $                   | 34,046    |                    | $ | 33,889    | 
|                                                                                                       |  |  |  |  |  |  |  |                     |           |                    |   |           | 
|Loans held in portfolio                                                                                |  |  |  |  |  |  |  |                     |           |                    |   |           | 
|Commercial and industrial                                                                              |  |  |  |  |  |  |  | $                   | 698,647   |                    | $ | 587,038   | 
|Lease financing
 receivables                                                                           |  |  |  |  |  |  |  |                     | 168,816   |                    |   | 219,198   | 
|Factored receivables                                                                                   |  |  |  |  |  |  |  |                     | 186,435   |                    |   | 140,265   | 
|Real estate - residential mortgage                                                                     |  |  |  |  |  |  |  |                     | 129,072   |                    |   | 124,681   | 
|Real estate - commercial mortgage                                                                      |  |  |  |  |  |  |  |                     | 96,022    |                    |   | 92,614    | 
|Real estate - construction and land development                                                        |  |  |  |  |  |  |  |                     | 25,092    |                    |   | 24,277    | 
|Loans to individuals                                                                                   |  |  |  |  |  |  |  |                     | 12,401    |                    |   | 12,984    | 
|Loans to depository institutions                                                                       |  |  |  |  |  |  |  |                     |          |                    |   | 20,000    | 
|                                                                                                       |  |  |  |  |  |  |  |                     |           |                    |   |           | 
|                                                                                                       |  |  |  |  |  |  |  |                     |           |                    |   |           | 
|Loans held in portfolio, gross                                                                         |  |  |  |  |  |  |  |                     | 1,316,485 |                    |   | 1,221,057 | 
|Less unearned discounts                                                                                |  |  |  |  |  |  |  |                     | 20,319    |                    |   | 25,642    | 
|                                                                                                       |  |  |  |  |  |  |  |                     |           |                    |   |           | 
|                                                                                                       |  |  |  |  |  |  |  |                     |           |                    |   |           | 
|Loans held in portfolio, net of unearned discounts                                                     |  |  |  |  |  |  |  | $                   | 1,296,166 |                    | $ | 1,195,415 | 
|                                                                                                       |  |  |  |  |  |  |  |                     |           |                    |   |           | 

Note 4. Noninterest income and expenses

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

|                                                                     |  |                                   |        |                                  |   |        |  |      |        |  |   |        | 
|-------------------------------------------------------------------- |  | --------------------------------- | ------ | -------------------------------- | - | ------ |  | ---- | ------ |  | - | ------ | 
|                                                                     |  | Three Months Ended
 September 30, |        | Nine Months Ended
 September 30, |  
|                                                                     |  |                                   |        |                                  |  
|                                                                     |  | 2010                              |        | 2009                             |   | 2010   |  | 2009 |       
|                                                                     |  |                                   |        |                                  |   |        |  |      |       
|                                                                     |  |                                   |        |                                  |   |        |  |      |        |  |   |        | 
|NONINTEREST
 INCOME                                                  |  |                                   |        |                                  |   |        |  |      |        |  |   |        | 
|Accounts receivable management/ factoring commissions and other fees |  | $                                 | 6,454  |                                  | $ | 4,997  |  | $    | 17,527 |  | $ | 13,098 | 
|Service charges on deposit accounts                                  |  |                                   | 1,606  |                                  |   | 1,553  |  |      | 4,627  |  |   | 4,296  | 
|Trade finance income                                                 |  |                                   | 657    |                                  |   | 569    |  |      | 1,650  |  |   | 1,411  | 
|Other customer related fees                                          |  |                                   | 250    |                                  |   | 248    |  |      | 576    |  |   | 725    | 
|Mortgage banking income                                              |  |                                   | 2,458  |                                  |   | 2,505  |  |      | 5,631  |  |   | 7,152  | 
|Trust fees                                                           |  |                                   | 81     |                                  |   | 110    |  |      | 247    |  |   | 366    | 
|Income from life insurance policies                                  |  |                                   | 290    |                                  |   | 280    |  |      | 850    |  |   | 828    | 
|Securities gains                                                     |  |                                   | 1,171  |                                  |   | 1,221  |  |      | 3,419  |  |   | 5,160  | 
|(Loss) Gain on other real estate owned                               |  |                                   | (11    | )                                |   | 19     |  |      | 17     |  |   | 39     | 
|Other income                                                         |  |                                   | 102    |                                  |   | 233    |  |      | 977    |  |   | 262    | 
|                                                                     |  |                                   |        |                                  |   |        |  |      |        |  |   |        | 
|Total noninterest income                                             |  | $                                 | 13,058 |                                  | $ | 11,735 |  | $    | 35,521 |  | $ | 33,337 | 
|                                                                     |  |                                   |        |                                  |   |        |  |      |        |  |   |        | 
|                                                                     |  |                                   |        |                                  |   |        |  |      |        |  |   |        | 
|NONINTEREST
 EXPENSES                                                |  |                                   |        |                                  |   |        |  |      |        |  |   |        | 
|Salaries                                                             |  | $                                 | 10,689 |                                  | $ | 9,960  |  | $    | 30,809 |  | $ | 29,934 | 
|Employee benefits                                                    |  |                                   | 2,834  |                                  |   | 3,206  |  |      | 9,537  |  |   | 9,151  | 
|                                                                     |  |                                   |        |                                  |   |        |  |      |        |  |   |        | 
|Total personnel expense                                              |  |                                   | 13,523 |                                  |   | 13,166 |  |      | 40,346 |  |   | 39,085 | 
|Occupancy and equipment expenses, net                                |  |                                   | 3,375  |                                  |   | 2,806  |  |      | 8,967  |  |   | 8,381  | 
|Advertising and marketing                                            |  |                                   | 816    |                                  |   | 916    |  |      | 2,500  |  |   | 2,596  | 
|Professional fees                                                    |  |                                   | 1,540  |                                  |   | 1,847  |  |      | 3,913  |  |   | 4,870  | 
|Communications                                                       |  |                                   | 392    |                                  |   | 429    |  |      | 1,302  |  |   | 1,295  | 
|Deposit insurance                                                    |  |                                   | 1,033  |                                  |   | 1,195  |  |      | 2,557  |  |   | 3,059  | 
|Other expenses                                                       |  |                                   | 3,074  |                                  |   | 2,818  |  |      | 7,643  |  |   | 8,086  | 
|                                                                     |  |                                   |        |                                  |   |        |  |      |        |  |   |        | 
|Total noninterest expenses                                           |  | $                                 | 23,753 |                                  | $ | 23,177 |  | $    | 67,228 |  | $ | 67,372 | 
|                                                                     |  |                                   |        |                                  |   |        |  |      |        |  |   |        | 

19

---



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

Note 5. Common Stock and Stock Incentive Plan

On March 19, 2010, the Company completed an underwritten public
offering of 8,625,000 common shares at an offering price of $8.00 per share,
which resulted in net proceeds of $64.9 million after underwriting discounts
and expenses.

On March 25, 2010, the Board of Directors, upon recommendation by the
Compensation and Corporate Governance Committees, granted a total of 40,000
shares of restricted stock to the 8 non-management directors (director
restricted shares) and 43,728 restricted shares to the Chairman, President and
5 Executive Vice Presidents (officer restricted shares). The director
restricted shares will vest 25% annually over four years beginning on the first
anniversary of the grant date. The officer restricted shares vest 50% on the
second anniversary of the grant date and 25% on each of the third and fourth
anniversaries of the grant date and are also limited by the 2008 agreement
between the Company and the U.S. Treasury. The director restricted shares and
the officer restricted shares were issued at $9.23 per share, the closing price
on the date of the grant. The agreements for both the director restricted shares
and the officer restricted shares have additional provisions regarding
transferability and accelerated vesting of the shares and the continuation of
performing substantial services for the Company.

Note 6. Employee Benefit Plans

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

|                                    |  |                                   |       |                                  |   |       |   |      |        |   |   |        |  
|----------------------------------- |  | --------------------------------- | ----- | -------------------------------- | - | ----- | - | ---- | ------ | - | - | ------ | -
|                                    |  | Three Months Ended
 September 30, |       | Nine Months Ended
 September 30, |  
|                                    |  |                                   |       |                                  |  
|                                    |  | 2010                              |       | 2009                             |   | 2010  |   | 2009 |       
|                                    |  |                                   |       |                                  |   |       |   |      |       
|Service Cost                        |  | $                                 | 494   |                                  | $ | 620   |   | $    | 1,632  |   | $ | 1,626  |  
|Interest
 Cost                      |  |                                   | 914   |                                  |   | 959   |   |      | 2,811  |   |   | 2,467  |  
|Expected
 return on plan assets     |  |                                   | (721  | )                                |   | (760  | ) |      | (2,299 | ) |   | (1,906 | )
|Amortization
 of prior service cost |  |                                   | 17    |                                  |   | 17    |   |      | 50     |   |   | 50     |  
|Recognized
 actuarial loss          |  |                                   | 650   |                                  |   | 974   |   |      | 2,181  |   |   | 2,570  |  
|                                    |  |                                   |       |                                  |   |       |   |      |        |   |   |        |  
|Net periodic
 benefit cost          |  | $                                 | 1,354 |                                  | $ | 1,810 |   | $    | 4,375  |   | $ | 4,807  |  
|                                    |  |                                   |       |                                  |   |       |   |      |        |   |   |        |  

The Company contributed $1.7 million to the defined benefit pension
plan in the 2010 third quarter.

Note 7. Income Taxes

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

Note 8. Segment Reporting

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 2010
year-to-date average interest-earning assets were 60.4% loans (corporate
lending was 72.6% and real estate lending was 23.4% of total loans,
respectively) and 39.2% investment securities and money market investments.
There are no industry concentrations exceeding 10% of loans, gross, in the
corporate lending segment. Approximately 67% of loans are to borrowers located
in the metropolitan New York area. In order to comply with the segment
reporting guidance under U.S. GAAP, the Company has determined that it has
three reportable operating segments: corporate lending, real estate lending and
company-wide treasury.

20

---



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

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

|                                       |  |                  |         |                    |   |                      |  |        |         |  |   |           | 
|-------------------------------------- |  | ---------------- | ------- | ------------------ | - | -------------------- |  | ------ | ------- |  | - | --------- | 
|                                       |  | CorporateLending |         | Real EstateLending |   | Company-wideTreasury |  | Totals |        
|                                       |  |                  |         |                    |   |                      |  |        |        
|                                       |  | (in
 thousands)  |        
|Three Months Ended September 30, 2010  |  |                  |         |                    |   |                      |  |        |         |  |   |           | 
|Net interest income                    |  | $                | 10,630  |                    | $ | 4,824                |  | $      | 5,199   |  | $ | 20,653    | 
|Noninterest income                     |  |                  | 8,971   |                    |   | 2,486                |  |        | 1,473   |  |   | 12,930    | 
|Depreciation and
 amortization         |  |                  | 178     |                    |   | 28                   |  |        |        |  |   | 206       | 
|Segment income before
 income taxes    |  |                  | 7,849   |                    |   | 3,284                |  |        | 6,281   |  |   | 17,414    | 
|Segment assets                         |  |                  | 935,960 |                    |   | 397,953              |  |        | 919,790 |  |   | 2,253,703 | 
|                                       |  |                  |         |                    |   |                      |  |        |         |  |   |           | 
|Three Months Ended
 September 30, 2009 |  |                  |         |                    |   |                      |  |        |         |  |   |           | 
|Net interest income                    |  | $                | 9,815   |                    | $ | 4,966                |  | $      | 6,984   |  | $ | 21,765    | 
|Noninterest income                     |  |                  | 7,059   |                    |   | 2,536                |  |        | 1,609   |  |   | 11,204    | 
|Depreciation and
 amortization         |  |                  | 158     |                    |   | 29                   |  |        | 1       |  |   | 188       | 
|Segment income before
 income taxes    |  |                  | 8,273   |                    |   | 4,745                |  |        | 8,374   |  |   | 21,392    | 
|Segment assets                         |  |                  | 822,485 |                    |   | 383,694              |  |        | 897,699 |  |   | 2,103,878 | 
|                                       |  |                  |         |                    |   |                      |  |        |         |  |   |           | 
|Nine Months Ended
 September 30, 2010  |  |                  |         |                    |   |                      |  |        |         |  |   |           | 
|Net interest income                    |  | $                | 29,480  |                    | $ | 13,364               |  | $      | 17,805  |  | $ | 60,649    | 
|Noninterest income                     |  |                  | 24,625  |                    |   | 5,936                |  |        | 4,583   |  |   | 35,144    | 
|Depreciation and
 amortization         |  |                  | 532     |                    |   | 86                   |  |        | 2       |  |   | 620       | 
|Segment income before
 income taxes    |  |                  | 21,891  |                    |   | 10,303               |  |        | 21,260  |  |   | 53,454    | 
|Segment assets                         |  |                  | 935,960 |                    |   | 397,953              |  |        | 919,790 |  |   | 2,253,703 | 
|                                       |  |                  |         |                    |   |                      |  |        |         |  |   |           | 
|Nine Months Ended
 September 30, 2009  |  |                  |         |                    |   |                      |  |        |         |  |   |           | 
|Net interest income                    |  | $                | 28,493  |                    | $ | 14,884               |  | $      | 20,701  |  | $ | 64,078    | 
|Noninterest income                     |  |                  | 18,740  |                    |   | 7,274                |  |        | 5,984   |  |   | 31,998    | 
|Depreciation and
 amortization         |  |                  | 512     |                    |   | 106                  |  |        | 2       |  |   | 620       | 
|Segment income before
 income taxes    |  |                  | 20,381  |                    |   | 13,511               |  |        | 25,876  |  |   | 59,768    | 
|Segment assets                         |  |                  | 822,485 |                    |   | 383,694              |  |        | 897,699 |  |   | 2,103,878 | 

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 total:

|                                        |  |                                 |           |                                |   |           |   |      |           |   |   |           |  
|--------------------------------------- |  | ------------------------------- | --------- | ------------------------------ | - | --------- | - | ---- | --------- | - | - | --------- | -
|                                        |  | Three Months EndedSeptember 30, |           | Nine Months EndedSeptember 30, |  
|                                        |  |                                 |           |                                |  
|                                        |  | 2010                            |           | 2009                           |   | 2010      |   | 2009 |          
|                                        |  |                                 |           |                                |   |           |   |      |          
|                                        |  | (in
 thousands)                 |          
|Net interest income:                    |  |                                 |           |                                |   |           |   |      |           |   |   |           |  
|Total for reportable operating segments |  | $                               | 20,653    |                                | $ | 21,765    |   | $    | 60,649    |   | $ | 64,078    |  
|Other [1]                               |  |                                 | 222       |                                |   | 205       |   |      | 659       |   |   | 572       |  
|                                        |  |                                 |           |                                |   |           |   |      |           |   |   |           |  
|Consolidated net interest income        |  | $                               | 20,875    |                                | $ | 21,970    |   | $    | 61,308    |   | $ | 64,650    |  
|                                        |  |                                 |           |                                |   |           |   |      |           |   |   |           |  
|                                        |  |                                 |           |                                |   |           |   |      |           |   |   |           |  
|Noninterest income:                     |  |                                 |           |                                |   |           |   |      |           |   |   |           |  
|Total for reportable operating segments |  | $                               | 12,930    |                                | $ | 11,204    |   | $    | 35,144    |   | $ | 31,998    |  
|Other [1]                               |  |                                 | 128       |                                |   | 531       |   |      | 377       |   |   | 1,339     |  
|                                        |  |                                 |           |                                |   |           |   |      |           |   |   |           |  
|Consolidated noninterest income         |  | $                               | 13,058    |                                | $ | 11,735    |   | $    | 35,521    |   | $ | 33,337    |  
|                                        |  |                                 |           |                                |   |           |   |      |           |   |   |           |  
|                                        |  |                                 |           |                                |   |           |   |      |           |   |   |           |  
|Income before taxes:                    |  |                                 |           |                                |   |           |   |      |           |   |   |           |  
|Total for reportable operating segments |  | $                               | 17,414    |                                | $ | 21,392    |   | $    | 53,454    |   | $ | 59,768    |  
|Other [1]                               |  |                                 | (21,234   | )                              |   | (17,814   | ) |      | (49,353   | ) |   | (49,103   | )
|                                        |  |                                 |           |                                |   |           |   |      |           |   |   |           |  
|Consolidated income before income taxes |  | $                               | (3,820    | )                              | $ | 3,578     |   | $    | 4,101     |   | $ | 10,665    |  
|                                        |  |                                 |           |                                |   |           |   |      |           |   |   |           |  
|                                        |  |                                 |           |                                |   |           |   |      |           |   |   |           |  
|Assets:                                 |  |                                 |           |                                |   |           |   |      |           |   |   |           |  
|Total for reportable operating segments |  | $                               | 2,253,703 |                                | $ | 2,103,878 |   | $    | 2,253,703 |   | $ | 2,103,878 |  
|Other [1]                               |  |                                 | 49,774    |                                |   | 34,119    |   |      | 49,774    |   |   | 34,119    |  
|                                        |  |                                 |           |                                |   |           |   |      |           |   |   |           |  
|Consolidated assets                     |  | $                               | 2,303,477 |                                | $ | 2,137,997 |   | $    | 2,303,477 |   | $ | 2,137,997 |  
|                                        |  |                                 |           |                                |   |           |   |      |           |   |   |           |  

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

21

---



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

Note 9. Other Comprehensive Income

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

|                                                                          |  |                                 |        |                                |   |        |   |      |        |   |   |        |  
|------------------------------------------------------------------------- |  | ------------------------------- | ------ | ------------------------------ | - | ------ | - | ---- | ------ | - | - | ------ | -
|                                                                          |  | Three Months EndedSeptember 30, |        | Nine Months EndedSeptember 30, |  
|                                                                          |  |                                 |        |                                |  
|                                                                          |  | 2010                            |        | 2009                           |   | 2010   |   | 2009 |       
|                                                                          |  |                                 |        |                                |   |        |   |      |       
|Other Comprehensive Income                                                |  |                                 |        |                                |   |        |   |      |        |   |   |        |  
|Unrealized holding gains on securities, arising during the period:        |  |                                 |        |                                |   |        |   |      |        |   |   |        |  
|Before tax                                                                |  | $                               | 1,686  |                                | $ | 4,878  |   | $    | 5,640  |   | $ | 7,968  |  
|Tax effect                                                                |  |                                 | (765   | )                              |   | (2,214 | ) |      | (2,559 | ) |   | (3,616 | )
|                                                                          |  |                                 |        |                                |   |        |   |      |        |   |   |        |  
|Net of tax                                                                |  |                                 | 921    |                                |   | 2,664  |   |      | 3,081  |   |   | 4,352  |  
|                                                                          |  |                                 |        |                                |   |        |   |      |        |   |   |        |  
|                                                                          |  |                                 |        |                                |   |        |   |      |        |   |   |        |  
|Reclassification adjustment for securities gains included in net
 income: |  |                                 |        |                                |   |        |   |      |        |   |   |        |  
|Before tax                                                                |  |                                 | (1,168 | )                              |   | (1,221 | ) |      | (3,416 | ) |   | (5,160 | )
|Tax effect                                                                |  |                                 | 530    |                                |   | 555    |   |      | 1,550  |   |   | 2,342  |  
|                                                                          |  |                                 |        |                                |   |        |   |      |        |   |   |        |  
|Net of tax                                                                |  |                                 | (638   | )                              |   | (666   | ) |      | (1,866 | ) |   | (2,818 | )
|                                                                          |  |                                 |        |                                |   |        |   |      |        |   |   |        |  
|                                                                          |  |                                 |        |                                |   |        |   |      |        |   |   |        |  
|Reclassification adjustment for amortization of prior service cost:       |  |                                 |        |                                |   |        |   |      |        |   |   |        |  
|Before tax                                                                |  |                                 | 17     |                                |   | 17     |   |      | 50     |   |   | 50     |  
|Tax effect                                                                |  |                                 | (8     | )                              |   | (8     | ) |      | (23    | ) |   | (23    | )
|                                                                          |  |                                 |        |                                |   |        |   |      |        |   |   |        |  
|Net of tax                                                                |  |                                 | 9      |                                |   | 9      |   |      | 27     |   |   | 27     |  
|                                                                          |  |                                 |        |                                |   |        |   |      |        |   |   |        |  
|                                                                          |  |                                 |        |                                |   |        |   |      |        |   |   |        |  
|Reclassification adjustment for amortization of net actuarial losses:     |  |                                 |        |                                |   |        |   |      |        |   |   |        |  
|Before tax                                                                |  |                                 | 650    |                                |   | 974    |   |      | 2,181  |   |   | 2,570  |  
|Tax effect                                                                |  |                                 | (296   | )                              |   | (442   | ) |      | (990   | ) |   | (1,166 | )
|                                                                          |  |                                 |        |                                |   |        |   |      |        |   |   |        |  
|Net of tax                                                                |  |                                 | 354    |                                |   | 532    |   |      | 1,191  |   |   | 1,404  |  
|                                                                          |  |                                 |        |                                |   |        |   |      |        |   |   |        |  
|                                                                          |  |                                 |        |                                |   |        |   |      |        |   |   |        |  
|Other comprehensive income                                                |  | $                               | 646    |                                | $ | 2,539  |   | $    | 2,433  |   | $ | 2,965  |  
|                                                                          |  |                                 |        |                                |   |        |   |      |        |   |   |        |  

22

---



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

Note 10. Fair Value
Measurements

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

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

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

In general, fair value of securities is based
upon quoted market prices, where available (level 1 inputs). If such quoted
market prices are not available, fair value is based upon market prices
determined by an outside, independent entity that primarily uses as inputs,
observable market-based parameters (level 2 inputs). Fair value of loans held
for sale is based upon internally developed models that primarily use as
inputs, observable market-based parameters. Valuation adjustments may be made
to ensure that financial instruments are recorded at fair value. These adjustments
may include amounts to reflect counterparty credit quality, the Companys
creditworthiness, among other things, as well as unobservable parameters (level
3 inputs). Any such valuation adjustments are applied consistently over time.
The Company valuation methodologies may produce a fair value calculation that
may not be indicative of net realizable value or reflective of future fair
values. While management believes the Companys valuation methodologies are
appropriate and consistent with other market participants, the use of different
methodologies or assumptions to determine the fair value of certain financial
instruments could result in a different estimate of fair value at the reporting
date. A more detailed description of the valuation methodologies used for
assets and liabilities measured at fair value is set forth in the 2009 Form
10-K.

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

23

---



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

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

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

|                                                                                                               |  |   |                 |  |                 |         |                 |   |                   |  |   |         |  | 
|-------------------------------------------------------------------------------------------------------------- |  | - | --------------- |  | --------------- | ------- | --------------- | - | ----------------- |  | - | ------- |  | 
|September
 30, 2010                                                                                            |  |   | Level 1
 Inputs |  | Level 2
 Inputs |         | Level 3
 Inputs |   | Total
 Fair Value | 
|                                                                                                               |  |   |                 |  |                 |         |                 |   |                   | 
|Securities available for sale:                                                                                 |  |   |                 |  |                 |         |                 |   |                   |  |   |         | 
|Obligations of U.S. government corporations and government sponsored
 enterprises 
 Mortgage-backed securities |  | $ |                |  | $               | 24,155  |                 | $ |                  |  | $ | 24,155  | 
|Agency Notes                                                                                                   |  |   |                |  |                 | 160,853 |                 |   |                  |  |   | 160,853 | 
|                                                                                                               |  |   |                 |  |                 |         |                 |   |                   |  |   |         | 
|Total obligations of U.S. government corporations and government
 sponsored enterprises                        |  |   |                |  |                 | 185,008 |                 |   |                  |  |   | 185,008 | 
|Obligations of state and political institutions - New York Bank
 Qualified                                     |  |   |                |  |                 | 24,073  |                 |   |                  |  |   | 24,073  | 
|Single-issuer, trust preferred securities                                                                      |  |   | 3,928           |  |                 |        |                 |   |                  |  |   | 3,928   | 
|Corporate debt securities                                                                                      |  |   |                |  |                 | 203,906 |                 |   |                  |  |   | 203,906 | 
|Equity and other securities                                                                                    |  |   | 5,069           |  |                 |        |                 |   |                  |  |   | 5,069   | 
|                                                                                                               |  |   |                 |  |                 |         |                 |   |                   |  |   |         | 
|Total                                                                                                          |  | $ | 8,997           |  | $               | 412,987 |                 | $ |                  |  | $ | 421,984 | 
|                                                                                                               |  |   |                 |  |                 |         |                 |   |                   |  |   |         | 
|                                                                                                               |  |   |                 |  |                 |         |                 |   |                   |  |   |         | 
|Other investments                                                                                              |  | $ | 10,987          |  | $               | 6,108   |                 | $ |                  |  | $ | 17,095  | 
|                                                                                                               |  |   |                 |  |                 |         |                 |   |                   |  |   |         | 



|                                                                                                               |  |   |       |  |   |         |  |   |   |  |   |         | 
|-------------------------------------------------------------------------------------------------------------- |  | - | ----- |  | - | ------- |  | - | - |  | - | ------- | 
|December 31, 2009                                                                                              |  |   |       |  |   |         |  |   |   |  |   |         | 
|                                                                                                               |  |   |       |  |   |         |  |   |   |  |   |         | 
|Securities available for sale:                                                                                 |  |   |       |  |   |         |  |   |   |  |   |         | 
|Obligations of U.S. government corporations and government sponsored
 enterprises 
 Mortgage-backed securities |  | $ |      |  | $ | 57,288  |  | $ |  |  | $ | 57,288  | 
|Agency Notes                                                                                                   |  |   |      |  |   | 131,635 |  |   |  |  |   | 131,635 | 
|                                                                                                               |  |   |       |  |   |         |  |   |   |  |   |         | 
|Total obligations of U.S. government corporations and government
 sponsored enterprises                        |  |   |      |  |   | 188,923 |  |   |  |  |   | 188,923 | 
|Obligations of state and political institutions - New York Bank
 Qualified                                     |  |   |      |  |   | 23,864  |  |   |  |  |   | 23,864  | 
|Single-issuer, trust preferred securities                                                                      |  |   | 4,483 |  |   |        |  |   |  |  |   | 4,483   | 
|Corporate debt securities                                                                                      |  |   |      |  |   | 129,200 |  |   |  |  |   | 129,200 | 
|Equity and other securities                                                                                    |  |   | 56    |  |   |        |  |   |  |  |   | 56      | 
|                                                                                                               |  |   |       |  |   |         |  |   |   |  |   |         | 
|Total                                                                                                          |  | $ | 4,539 |  | $ | 341,987 |  | $ |  |  | $ | 346,526 | 
|                                                                                                               |  |   |       |  |   |         |  |   |   |  |   |         | 
|                                                                                                               |  |   |       |  |   |         |  |   |   |  |   |         | 
|Other investments                                                                                              |  | $ | 9,128 |  | $ | 5,484   |  | $ |  |  | $ | 14,612  | 
|                                                                                                               |  |   |       |  |   |         |  |   |   |  |   |         | 

24

---



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

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

|                         |  |                     |       |                    |   |       | 
|------------------------ |  | ------------------- | ----- | ------------------ | - | ----- | 
|                         |  | September 30,
 2010 |       | December 31,
 2009 |  
|                         |  |                     |       |                    |  
|Impaired
 loans          |  | $                   | 5,961 |                    | $ | 2,329 | 
|Other real
 estate owned |  |                     | 744   |                    |   | 1,385 | 

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

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

Other real estate owned (comprised of foreclosed assets), which is
  measured at the lower of carrying value or fair value less costs to sell, had a
  net carrying amount of $744 thousand, which is made up of the outstanding
  balance of $1,162 thousand, net of a valuation allowance of $418 thousand at
  September 30, 2010. Certain of these assets, upon initial recognition, were
  re-measured and reported at fair value through a charge-off to the allowance
  for loan losses based upon the fair value of the foreclosed asset. The fair
  value of a foreclosed asset, upon initial recognition, is estimated using Level
  2 inputs based on observable market data or Level 3 inputs based on customized
  discount criteria. In connection with the measurement and initial recognition
  of the foregoing foreclosed assets, the Company recognized charge-offs in the
allowance for loan losses totaling $538 thousand.

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

25

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

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

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

A more detailed description of the methods, factors and significant
assumptions utilized in estimating the fair values for significant categories
of financial instruments is set forth in the 2009 Form 10-K.

|                                               |  |                    |           |            |   |           | 
|---------------------------------------------- |  | ------------------ | --------- | ---------- | - | --------- | 
|                                               |  | September 30, 2010 |          
|                                               |  |                    |          
|                                               |  | Carrying Amount    |           | Fair Value |  
|                                               |  |                    |           |            |  
|FINANCIAL
 ASSETS                              |  |                    |           |            |   |           | 
|Cash and due from banks                        |  | $                  | 37,193    |            | $ | 37,193    | 
|Interest-bearing deposits with other banks     |  |                    | 19,300    |            |   | 19,300    | 
|Investment securities                          |  |                    | 764,461   |            |   | 777,446   | 
|Loans held for sale                            |  |                    | 34,046    |            |   | 34,046    | 
|Loans held in portfolio, net                   |  |                    | 1,278,014 |            |   | 1,282,342 | 
|Accrued interest receivable                    |  |                    | 9,216     |            |   | 9,216     | 
|FINANCIAL
 LIABILITIES                         |  |                    |           |            |   |           | 
|Demand, NOW, savings and money market deposits |  |                    | 1,094,895 |            |   | 1,094,895 | 
|Time deposits                                  |  |                    | 550,718   |            |   | 552,962   | 
|Securities sold under agreements to repurchase |  |                    | 26,084    |            |   | 26,131    | 
|Federal funds purchased                        |  |                    | 60,000    |            |   | 60,000    | 
|Commercial paper                               |  |                    | 15,245    |            |   | 15,245    | 
|Other short-term borrowings                    |  |                    | 2,221     |            |   | 2,221     | 
|Accrued interest payable                       |  |                    | 1,639     |            |   | 1,639     | 
|Long-term borrowings                           |  |                    | 170,302   |            |   | 176,316   | 

26

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

Note 11. New Accounting Standards

Financial Accounting Standards Board (FASB) Codification Topic 860:Transfers and Servicingincludes
amendments to improve the relevance, representational faithfulness and
comparability of the information that a reporting entity provides in its
financial statements about a transfer of financial assets; the effects of a
transfer on its financial position, financial performance and cash flows; and a
transferors continuing involvement, if any, in transferred financial assets.
The amendments to U.S. GAAP guidance on transfer and servicing of financial
assets eliminate the concept of a qualifying special-purpose entity, change
the requirements for derecognizing financial assets and requires additional
disclosures about all continuing involvements with transferred financial
information about gains and losses (resulting from transfers) during the
period. These amendments were effective January 1, 2010 and did not have a
significant impact on the Companys financial statements.

Amendments to FASB Codification Topic 810: Consolidation change how a company determines when an entity
that is insufficiently capitalized or is not controlled through voting (or
similar rights) should be consolidated. The determination of whether a company
is required to consolidate an entity is based on, among other things, an
entitys purpose and design as well as its ability to direct the activities of
the entity that most significantly impact the entitys economic performance.
The amendments to U.S. GAAP require additional disclosures about the reporting
entitys involvement with variable-interest entities, as well as any
significant changes in risk exposure due to that involvement and its effect on
the entitys financial statements. These amendments were effective January 1,
2010 and did not have a significant impact on the Companys financial
statements.

Accounting Standards Update (ASU) No.
2010-06, Fair Value Measurements and Disclosures (Topic 820)- Improving
Disclosures About Fair Value Measurements.ASU
2010-06 requires expanded disclosures related to fair value measurements
including (i) the amounts of significant transfers of assets or liabilities
between Levels 1 and 2 of the fair value hierarchy and the reasons for the
transfers (ii) the reasons for transfers of assets or liabilities in or out of
Level 3 of the fair value hierarchy, which significant transfers disclosed
separately, (iii) the policy for determining when transfers between levels of
the fair value hierarchy are recognized and (iv) for recurring fair value
measurements of assets and liabilities in Level 3 of the fair value hierarchy,
a gross presentation of information about purchased, sales, issuances and
settlements. ASU 2010-06 further clarifies that (i) fair value measurement
disclosures should be provided for each class and liabilities (rather major
category), which would generally be a subject of assets or liabilities within a
line in statement of financial position and (ii) companys should provide
disclosures about the valuation techniques and inputs used to measure fair
value for both recurring and nonrecurring fair value measurements for each
class of assets and liabilities included in Levels 2 and 3 of the fair value
hierarchy. The disclosures related to the gross presentation of purchased,
sales, issuances and settlements of assets and liabilities included in Level 3
of the fair value hierarchy will be required for the Company beginning January
1, 2011. The remaining disclosure requirements and clarifications made by ASU
2010-06 became effective for the Company on January 1, 2010. See Note 10 - Fair
Value Measurements.

ASU No. 2010-11, Derivatives and Hedging (Topic 815) - Scope
Exception Related to Embedded Credit Derivatives. ASU 2010-11
clarifies that the only form of an embedded credit derivative that is exempt embedded
derivative bifurcation requirements are those that relate to the subordination
of one financial instrument to another. As a result, entities that have
contracts containing an embedded credit derivative feature in a form other than
such subordination may need to separately account for the embedded credit
derivative feature. The provisions of ASU 2010-11 were effective for the
Company on July 1, 2010 and did not have a significant impact on
the Companys financial statements.

ASU No. 2010-20, Receivables (Topic 830) -
Disclosures about the Credit Quality of Financing Receivables and the Allowance
for Credit Losses. ASU 2010-20 requires entities to
provide disclosures designed to facilitate financial statement users
evaluation of (i) the nature of credit risk inherent in the entitys portfolio
of financing receivables, (ii) how that risk is analyzed and assessed in
arriving at the allowance for credit losses and (iii) the changes and reasons
for those changes in the allowance for credit losses. Disclosures must be
disaggregated by portfolio segment, the level at which an entity develops and
documents a systematic method for determining its allowance for credit losses,
and class of financing receivables, which is generally a disaggregation of
portfolio segment. The required disclosures include, among other things a
rollforward of the allowance for credit losses as well as information about
modified, impaired, non-accrual and past due loans and credit quality
indicators. ASU 2010-20 will be effective for the Companys financial
statements as of December 31, 2010, as it relates to disclosures required as of
the end of a reporting period. Disclosures that relates to activity during a
reporting period will be required for the Companys financial statements that
include periods beginning on or after January 1, 2011.

27

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

The following commentary presents managements discussion and analysis
of the financial condition and results of operations of Sterling Bancorp (the
parent company), a financial holding company under the Gramm-Leach-Bliley Act
of 1999, and its subsidiaries, principally Sterling National Bank. Throughout
this discussion and analysis, the term the Company refers to Sterling Bancorp
and its subsidiaries and the term the bank refers to Sterling National Bank
and its subsidiaries. This discussion and analysis should be read in
conjunction with the consolidated financial statements and supplemental data
contained elsewhere in this quarterly report and the Companys annual report on
Form 10-K for the year ended December 31, 2009 (the 2009 Form 10-K). Certain
reclassifications have been made to prior years financial data to conform to
current financial statement presentations. Throughout managements discussion
and analysis of financial condition and results of operations, dollar amounts
in tables are presented in thousands, except per share data.

OVERVIEW

The Company provides a broad range of financial products and services,
including business and consumer loans, commercial and residential mortgage
lending and brokerage, 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 principally in New York, New Jersey and Connecticut (the New
York metropolitan area) and conducts business throughout the United States.
The general state of the U.S. economy and, in particular, economic and market
conditions in the New York metropolitan area have a significant impact on loan
demand, the ability of borrowers to repay these loans and the value of any
collateral securing these loans and may also affect deposit levels.
Accordingly, future general economic conditions are a key uncertainty that
management expects will materially affect the Companys results of operations.

For the nine months ended September 30, 2010, the banks average
earning assets represented approximately 98.1% of the Companys average earning
assets. Loans represented 60.8% and investment securities represented 37.5% of
the banks average earning assets for the first nine months of 2010.

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

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

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

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

Recent economic conditions during 2010, such as the continuing decrease
in real estate values in the principal markets the Company serves and illiquid
credit markets, have reduced demands for corporate and real estate lending. If
these trends continue, the Company would expect its income from corporate and
real estate lending to decrease from the current levels in the near term. In
addition, due to the geographic concentration of the Companys loan portfolio in
the New York metropolitan area, representing approximately 67% of total loans
at September 30, 2010, an adverse change in market conditions in that
geographic area could result in a decrease in our income from corporate and
real estate lending. A significant prolonged decrease in income from our
lending segments, if realized, may have a severe adverse impact on the
operations of the Company.

28

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RECENT
LEGISLATION IMPACTING THE FINANCIAL SERVICES INDUSTRY

On July 21, 2010, President Obama signed into law the sweeping
financial regulatory reform act entitled the Dodd-Frank Wall Street Reform and
Consumer Protection Act (the Dodd-Frank Act). The Dodd-Frank Act will result
in sweeping changes in the regulation of financial institutions aimed at strengthening
the sound operation of the financial services sector. The Dodd-Frank Acts
provisions that have received the most public attention generally have been
those applying to or more likely to affect larger institutions. However, it
contains numerous other provisions that will affect all banks and bank holding
companies, and will fundamentally change the system of oversight described in
Part I, Item 1 of our 2009 Form 10-K under the caption Supervision and
Regulation. The Dodd-Frank Act includes provisions that, among other things:

| |   |                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Centralize responsibility for consumer financial protection by
 creating a new agency responsible for implementing, examining and enforcing
 compliance with federal consumer financial laws.                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                                                                                                                   
| |  | Restrict the preemption of state law by federal law and disallow
 subsidiaries and affiliates of national banks such as the bank from availing
 themselves of such preemption.                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                   
| |  | Apply the same leverage and risk-based capital requirements that
 apply to insured depository institutions to most bank holding companies.                                                                                                                                                                                                        
| |   |                                                                                                                                                                                                                                                                                                                                                   
| |  | Require the OCC to seek to make its capital requirements for national
 banks, such as the bank, countercyclical.                                                                                                                                                                                                                                  
| |   |                                                                                                                                                                                                                                                                                                                                                   
| |  | Require financial holding companies such as the parent company to be
 well-capitalized and well-managed as of July 21, 2011. Bank holding companies
 and banks must also be both well-capitalized and well-managed in order to
 acquire banks located outside their home state.                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                   
| |  | Implement corporate governance revisions, including with regard to
 executive compensation and proxy access by shareholders that apply to all
 public companies, not just financial institutions.                                                                                                                                                 
| |   |                                                                                                                                                                                                                                                                                                                                                   
| |  | Make permanent the $250 thousand limit for federal deposit insurance
 and increase the cash limit of Securities Investor Corporation protection
 from $100 thousand to $250 thousand, and provide unlimited federal deposit
 insurance until January 1, 2013, for noninterest-bearing demand transaction
 accounts at all depository institutions.
| |   |                                                                                                                                                                                                                                                                                                                                                   
| |  | Repeal the federal prohibitions on the payment of interest on
 business transaction and other accounts.                                                                                                                                                                                                                                           
| |   |                                                                                                                                                                                                                                                                                                                                                   
| |  | Increase the authority of the Federal Reserve to examine the Company
 and its non-bank subsidiaries.                                                                                                                                                                                                                                              

Some of these provisions may have the consequence of increasing our expenses,
decreasing our revenues, and changing the activities in which we choose to
engage. The environment in which banking organizations will operate after the
financial crisis, including legislative and regulatory changes affecting
capital, liquidity, supervision, permissible activities, corporate governance
and compensation, changes in fiscal policy and steps to eliminate government
support for banking organizations, may have long-term effects on the business
model and profitability of banking organizations that cannot now be foreseen.
The specific impact of the Dodd-Frank Act on our current activities or new
financial activities we may consider in the future, our financial performance
and the markets in which we operate will depend on the manner in which the
relevant agencies develop and implement the required rules and the reaction of
market participants to these regulatory developments. Many aspects of the
Dodd-Frank Act are subject to rulemaking and will take effect over several
years, making it difficult to anticipate the overall financial impact on the
Company, its customers or the financial industry more generally.

29

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INCOME STATEMENT
ANALYSIS

Net interest income, which represents the difference between interest
earned on interest-earning assets and interest incurred on interest-bearing
liabilities, is the Companys primary source of earnings. Net interest income
can be affected by changes in market interest rates as well as the level and
composition of assets, liabilities and shareholders equity. Net interest
spread is the difference between the average rate earned, on a tax-equivalent
basis, on interest-earning assets and the average rate paid on interest-bearing
liabilities. The net yield on interest-earning assets (net interest margin)
is calculated by dividing tax-equivalent net interest income by average
interest-earning assets. Generally, the net interest margin will exceed the net
interest spread because a portion of interest-earning assets are funded by
various noninterest-bearing sources, principally noninterest-bearing deposits
and shareholders equity. The increases (decreases) in the components of
interest income and interest expense, expressed in terms of fluctuation in
average volume and rate, are provided in the Rate/Volume Analysis shown on
pages 45 and 46. Information as to the components of interest income and
interest expense and average rates is provided in the Average Balance Sheets
shown on pages 43 and 44.

Comparison of the Three Months Ended
September 30, 2010 and 2009

The Company reported a net loss available to common shareholders for
the three months ended September 30, 2010 of $3.3 million, representing $0.12
per share calculated on a diluted basis, compared to net income available to
common shareholders of $1.8 million, or $0.10 per share calculated on a diluted
basis, for the third quarter of 2009. The decrease in net income available to
common shareholders was primarily due to a $7.0 million increase in the
provision for loan losses, a $1.1 million decrease in net interest income and a
$0.6 million increase in noninterest expenses which more than offset a $1.3
million increase in noninterest income and a $2.3 million decrease in the
provision for income taxes.

Net Interest Income

Net interest income, on a tax-equivalent basis, was $21.6 million for
the third quarter of 2010 compared to $22.3 million for the 2009 period. Net
interest income benefitted from lower cost of funding, lower levels of
borrowings and higher levels of loans and investment securities. Those benefits
were more than offset by the impact of lower yields on loans and investment
securities and higher interest-bearing deposits balances. The net interest
margin, on a tax-equivalent basis, was 4.11% for the third quarter of 2010
compared to 4.57% for the 2009 period. The net interest margin was impacted by
the mix of earning assets and funding, including the higher level of
noninterest-bearing demand deposits.

Total interest income, on a tax-equivalent basis, aggregated $25.4
million for the third quarter of 2010, down $1.6 million from the 2009 period.
The tax-equivalent yield on interest-earning assets was 4.86% for the third
quarter of 2010 compared to 5.56% for the 2009 period.

Interest earned on the loan portfolio increased to $18.3 million for
the third quarter of 2010 from $18.0 million in the prior year period primarily
due to increased loans outstanding on average partially offset by a lower yield
on loans in the 2010 quarter. Average loan balances amounted to $1,314.8
million, an increase of $125.8 million from an average of $1,189.0 million in
the prior year period. The increase in average loans, primarily due to the Company’s business development activities, accounted for a $1.9 million increase in interest earned on loans. The decrease in the yield on the loan portfolio to 5.71%
for the third quarter of 2010 from 6.25% for the 2009 period was primarily
attributable to the mix of average outstanding balances among the components of
the loan portfolio.

Interest earned on the securities portfolio, on a tax-equivalent basis,
amounted to $7.0 million for the third quarter of 2010 compared to $8.8 million
in the prior year period. Average outstandings increased to $783.9 million
(36.9% of average earning assets) for the third quarter of 2010 from $726.9
million (36.8% of average earning assets) in the prior year period. The
increase reflects the impact of the Companys asset/liability management
strategy designed to shorten the average life of the portfolio. The average
life of the securities portfolio was approximately 2.6 years at September 30,
2010 compared to 4.6 years at September 30, 2009. The average yield in the
investment securities portfolio decreased to 3.59% from 4.84% reflecting the
impact of the above referenced asset/liability management strategy coupled with
calls of higher yielding securities.

30

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Total interest expense decreased by $0.9 million for the third quarter
of 2010 from $4.7 million for the 2009 period, primarily due to the impact of
lower rates paid for interest-bearing deposits and borrowings and lower levels
of borrowings partially offset by the impact of higher interest-bearing
deposits.

Interest expense on deposits decreased to $2.3 million for the third
quarter of 2010 from $2.8 million for the 2009 period, due to decreases in the
cost of those funds partially offset by the impact of higher balances. The
average rate paid on interest-bearing deposits was 0.81%, which was 42 basis
points lower than the prior year period. The decrease in average cost of
interest-bearing deposits reflects the impact of deposit pricing strategies and
the Companys purchase of certificates of deposit from the Certificate of
Deposit Account Registry Service (CDARS) which provided certificate of
deposit balances at lower rates than rates paid for traditional certificates of
deposit products. Average interest-bearing deposits were $1,125.3 million for
the third quarter of 2010 compared to $903.9 million for the prior year period,
reflecting the impact of the Companys business development activities as well
the purchase of funds from CDARS.

Interest expense on borrowings decreased to $1.5 million for the third
quarter of 2010 from $1.9 million for the 2009 period, primarily due to lower
balances partially offset by the impact of the changes in mix. Average
borrowings decreased to $316.8 million for the third quarter of 2010 from
$490.8 million in the prior year period, reflecting a lesser reliance by the
Company on wholesale borrowed funds. The change in mix resulted in an increase
in the blended cost of borrowings to 1.93% from 1.58%.

Provision for Loan Losses

In light of recent economic developments and continued economic
uncertainty, during the third quarter, the Company decided, after consultation
with external professionals and regulators, to implement an accelerated
resolution of certain categories of nonaccrual loans. As a result, net charge-offs
of loans to small business borrowers (primarily in the lease financing
portfolio) increased $10.9 million when compared to the second quarter of 2010.
Based on managements continuing evaluation of the loan portfolio (discussed
under Asset Quality on page 36), the provision for loan losses for the third quarter
of 2010 was $14.0 million, compared to $7.0 million for the prior year period.

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

During 2010, the allowance for loan losses decreased $1.7 million from
$19.9 million at December 31, 2009 primarily due to a reduction in the allowance allocated to lease financing receivables ($5.7 million)
partially offset by increases in the allowance allocated to commercial and industrial loans ($0.8 million), factored receivables
($0.6 million), real estate residential mortgage ($0.8 million) and real estate commercial mortgage ($1.6 million). The allowance
allocated to lease financing receivables decreased primarily as a result of the lower level of lease financing receivables nonaccrual
balances following charge-offs during the third quarter of 2010. The increase of the allowance allocated to commercial and industrial loans was primarily the result of the unsteady economic
recovery. The allowance allocated to factored receivables increased based on the continued weakening in the consumer sectors. The
increase in the allowance allocated to real estate  residential mortgage was primarily due to the persistent decline in residential
real estate values. As a result of the disruption in the commercial real estate markets,
the allowance allocated to real estate commercial mortgage was increased.

Noninterest Income

Noninterest income increased to $13.1 million for the third quarter of
2010 from $11.7 million in the 2009 period. The increase principally resulted
from the benefit derived from increased accounts receivable
management/factoring commissions and other fees. Commissions and other fees
earned from accounts receivable management and factoring services were higher
primarily due to increased volumes in our factoring unit and billings by
clients providing temporary staffing services.

31

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Noninterest Expenses

Noninterest expenses for the third quarter of 2010 increased $0.6
million when compared to the 2009 period. The increase was primarily due to
higher personnel and occupancy expenses. Partially offsetting those increases
was the impact of lower professional fees. The increase in personnel expenses
was related to our business development activities offset by a reduction in
retirement plan expenses. Occupancy expenses were higher due to our leasing
additional space to support our business development activities. The reduction
in professional fees reflects primarily reduced utilization of various
providers.

Provision for Income Taxes

Reflecting a reduction in pre-tax income of $7.4 million, the benefit
for income taxes for the third quarter of 2010 was $1.1 million, reflecting an
effective tax rate of 30.0%, compared with a provision for income taxes of $1.2
million for the third quarter of 2009 reflecting an effective tax rate of
33.0%. The reduction in the effective tax rate was primarily due to a higher
proportion of tax exempt income in the 2010 period compared to 2009 period.

Comparison of the Nine Months Ended September
30, 2010 and 2009

The Company reported net income available to common shareholders for
the nine months ended September 30, 2010 of $0.9 million, representing $0.04
per share calculated on a diluted basis, compared to $4.7 million, or $0.26 per
share calculated on a diluted basis, for the first nine months of 2009. This
decrease reflects lower net interest income and higher provision for loan
losses partially offset by an increase in noninterest income and a decrease in
provision for income taxes.

Net Interest Income

Net interest income, on a tax-equivalent basis, was $63.1 million for
the first nine months of 2010 compared to $65.3 million for the 2009 period.
Net interest income benefitted from higher average loan and investment
securities balances, and lower cost of funding. Offsetting those benefits was
the impact of lower yield on loans and investment securities, lower borrowed
funds and higher interest-bearing deposit balances. The net interest margin, on
a tax-equivalent basis, was 4.26% for the first nine months of 2010 compared to
4.60% for the 2009 period. The net interest margin was impacted by the lower
interest rate environment in 2010, the higher level of noninterest-bearing demand
deposits and the effect of higher average loans outstanding.

Total interest income, on a tax-equivalent basis, aggregated $75.0
million for the first nine months of 2010, down $5.1 million from the 2009
period. The tax-equivalent yield on interest-earning assets was 5.07% for the
first nine months of 2010 compared to 5.66% for the 2009 period.

Interest earned on the loan portfolio decreased to $51.9 million for
the first nine months of 2010 from $53.8 million for the prior year period.
Average loan balances amounted to $1,232.0 million, an increase of $47.0
million from an average of $1,185.0 million in the prior year period. The
increase in average loans, primarily due to the Companys business development
activities, accounted for a $1.8 million increase in interest earned on loans.
The yield on the loan portfolio decreased to 5.96% for the first nine months of
2010 from 6.32% for the 2009 period, which was primarily attributable to the
lower interest rate environment in 2010 and the mix of average outstanding
balances among the components of the loan portfolio.

Interest earned on the securities portfolio, on a tax-equivalent basis,
decreased to $22.8 million for the first nine months of 2010 from $25.9 million
in the prior year period. Average outstandings increased to $772.4 million
(37.9% of average earning assets) for the first nine months of 2010 from $712.2
million (36.8% of average earning assets) in the prior year period. The
increase reflects the impact of the Companys asset/liability management
strategy designed to shorten the average life of the portfolio. The average
life of the securities portfolio was approximately 2.6 years at September 30,
2010 compared to 4.6 years at September 30, 2009. The average yield on the
investment securities portfolio decreased to 3.93% from 4.84%, reflecting the
impact of the above referenced asset/liability management strategy coupled with
calls of higher yielding securities.

32

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Total interest expense decreased by $3.0 million for the first nine
months of 2010 from $14.9 million for the 2009 period, primarily due to the
impact of lower rates paid for interest-bearing deposits and borrowings and
lower balances of borrowed funds partially offset by the impact of higher
interest-bearing deposit balances.

Interest expense on deposits decreased to $7.4 million for the first
nine months of 2010 from $9.1 million for the 2009 period, primarily due to a
decrease in the cost of those funds partially offset by the impact of higher
average interest-bearing deposit balances. The average rate paid on
interest-bearing deposits was 0.89%, which was 46 basis points lower than the
prior year period. The decrease in the average cost of interest-bearing
deposits reflects the impact of deposit pricing strategies and the Companys
purchase of certificates of deposit from CDARS which provided deposit balances
at lower rates than paid for traditional certificate of deposit products.
Average interest-bearing deposits were $1,107.7 million for the first nine
months of 2010 compared to $902.4 million for the prior year period, reflecting
an increase in certificates of deposit, largely related to the CDARS program
which is a lower cost product than traditional certificates of deposit.

Interest expense on borrowings decreased to $4.5 million for the first
nine months of 2010 from $5.8 million for the 2009 period, primarily due to
lower balances partially offset by the impact of the changes in mix. Average
borrowings decreased to $278.3 million for the first nine months of 2010 from
$482.9 million in the prior year period, reflecting a lesser reliance by the
Company on wholesale borrowed funds. The change in mix resulted in an increase
in the blended cost of borrowings to 2.16% from 1.60%.

Provision for Loan Losses

In light of recent economic developments and continued economic
uncertainty, during the third quarter the Company decided, after consultation with external professionals and regulators, to implement an accelerated
resolution of certain categories of nonaccrual loans. As a result, net charge-offs
during the nine months of 2010 of loans to small business borrowers (primarily
in the lease financing portfolio) increased $10.4 million when compared to the
comparable 2009 period. Based on managements continuing evaluation of the loan
portfolio (discussed under Asset Quality on page 36), the provision for loan
losses for the first nine months of 2010 was $25.5 million, compared to $20.0
million for the prior year period.

Noninterest Income

Noninterest income increased to $35.5 million for the first nine months
of 2010 from $33.3 million in the 2009 period. The increase principally
resulted from higher income related to accounts receivable management and
factoring services offset partly by lower mortgage banking income and
securities gains. Commissions and other fees earned from accounts receivable
management and factoring services were higher primarily due to the impact of
the acquisition of the business of DCD Finance Inc. on April 6, 2009. Increased
volumes at our factoring unit and billings by clients providing temporary
staffing also contributed to the improved level of fee income. Mortgage banking
income declined due to a lower volume of loans closed and a change in the mix
of products being sold. Securities gains declined but reflected a continuation
of the asset liability management program commenced in 2009 that was designed
to reduce the average life of the investment securities portfolio. The Company
sold approximately $143.3 million of securities with a weighted average life of
approximately 2.3 years. The Company expects to reinvest a significant portion
of the proceeds in securities with an average life of less than two years.

Noninterest Expenses

Noninterest expenses for the first nine months of 2010 decreased $0.1
million when compared to the 2009 period. The expense decrease was mainly
related to lower expenses related to professional fees and deposit insurance
partially offset by higher personnel and occupancy expenses. The decrease in
professional fees was primarily due to reduced utilization of various outside
service providers. The decrease in deposit insurance was the result of the
inclusion in the 2009 period of a special one-time assessment of $1.0 million.
The increase in personnel expenses was related to our business development
activities, partially offset by a reduction in retirement plan expenses.

Provision for Income Taxes

The provision for income taxes for the first nine months of 2010
decreased to $1.2 million from $3.9 million for the first nine months of 2009.
The decrease was primarily due to lower taxable income and a lower effective
income tax rate in the 2010 period (30.0%) compared to the 2009 period (36.4%).
The decrease in the effective tax rate is primarily related to the higher
proportion of tax exempt income achieved in 2010 compared to the 2009 period.

33

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BALANCE SHEET
ANALYSIS

Securities

At September 30, 2010, the Companys portfolio of securities totaled
$764.5 million, of which obligations of U.S. government corporations and
government sponsored enterprises amounted to $410.5 million which is
approximately 53.7% of the total. The Company has the intent and ability to
hold to maturity securities classified as held to maturity, at which time it
will receive full value for these securities. These securities are carried at
cost, adjusted for amortization of premiums and accretion of discounts. The
gross unrealized gains and losses on held to maturity securities were $13.1
million and $0.1 million, respectively. Securities classified as available for
sale may be sold in the future, prior to maturity. These securities are carried
at fair value. Net aggregate unrealized gains or losses on these securities are
included, net of taxes, as a component of shareholders equity. Given the
generally high credit quality of the portfolio, management expects to realize
all of its investments upon market recovery or, the maturity of such
instruments and thus believes that any impairment in value is interest rate
related and therefore temporary. Available for sale securities included gross
unrealized gains of $3.8 million and gross unrealized losses of $0.2 million.
As of September 30, 2010, management does not have the intent to sell any of
the securities classified as available for sale in the table on page 17 and
management believes that it is more likely than not that the Company will not
have to sell any such securities before a recovery of cost.

In connection with an asset liability management program designed to
reduce the average life of the investment securities portfolio, the Company
sold approximately $143.3 million of securities with a weighted average life of
approximately 2.3 years during the first nine months of 2010 and approximately
$206.4 million of securities with a weighted average life of approximately 3.5
years in the same period of 2009. The Company reinvested a significant portion
of the proceeds in securities with an average life of less than two years.

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

|                                                                          |  |                       |  |                        |  |      |      |      |     
|------------------------------------------------------------------------- |  | --------------------- |  | ---------------------- |  | ---- | ---- | ---- | ----
|September
 30, 2010                                                       |  | Weighted Average Life |  | Weighted Average Yield | 
|                                                                          |  |                       |  |                        | 
|                                                                          |  | AFS                   |  | HTM                    |  | AFS  |      | HTM  |     
|                                                                          |  |                       |  |                        |  |      |      |      |     
|Mortgage-backed securities                                                |  | 3.2
 Years            |  | 2.5
 Years             |  | 3.45 | %    | 4.60 | %   
|Agency notes (with original call dates ranging between 3 and 36
 months)  |  | 0.4
 Years            |  | 2.4
 Years             |  | 2.22 | %    | 1.37 | %   
|Corporate debt securities                                                 |  | 0.8
 Years            |  |                       |  | 2.30 | %    |     |     
|Obligations of state and political
 subdivisionsNew York
 Bank Qualified |  | 4.3
 Years            |  | 8.3
 Years             |  | 5.35 | %[1] | 5.86 | %[1]
|                                                                          |  |                       |  |                        |  |      |      |      |     
|[1]tax
 equivalent                                                        |  |                       |  |                        |  |      |      |      |     

34

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

|                                                                                        |  |                     |         |                    |  |          |   |             |         |  |  |        |  
|--------------------------------------------------------------------------------------- |  | ------------------- | ------- | ------------------ |  | -------- | - | ----------- | ------- |  |  | ------ | -
|                                                                                        |  | September
 30, 2010 |         | December
 31, 2009 | 
|                                                                                        |  |                     |         |                    | 
|                                                                                        |  | Balances            |         | % of
 Total        |  | Balances |   | % of
 Total |        
|                                                                                        |  |                     |         |                    |  |          |   |             |        
|                                                                                       
|Obligations of U.S.
 government corporations and government sponsored enterprises       |  |                     |         |                    |  |          |   |             |         |  |  |        |  
|Mortgage-backed securities                                                              |  |                     |         |                    |  |          |   |             |         |  |  |        |  
|CMOs (Federal National Mortgage Association)                                           |  | $                   | 8,846   |                    |  | 1.16     | % | $           | 13,740  |  |  | 1.86   | %
|CMOs (Federal Home Loan Mortgage Corporation)                                          |  |                     | 14,698  |                    |  | 1.92     |   |             | 22,698  |  |  | 3.08   |  
|CMOs (Government National Mortgage Association)                                        |  |                     | 12,846  |                    |  | 1.68     |   |             | 9,048   |  |  | 1.23   |  
|Federal National Mortgage Association                                                   |  |                     | 84,703  |                    |  | 11.08    |   |             | 125,673 |  |  | 17.05  |  
|Federal Home Loan Mortgage Corporation                                                  |  |                     | 45,827  |                    |  | 6.00     |   |             | 71,715  |  |  | 9.73   |  
|Government National Mortgage Association                                                |  |                     | 7,683   |                    |  | 1.01     |   |             | 13,146  |  |  | 1.78   |  
|                                                                                        |  |                     |         |                    |  |          |   |             |         |  |  |        |  
|Total mortgage-backed securities                                                        |  |                     | 174,603 |                    |  | 22.85    |   |             | 256,020 |  |  | 34.73  |  
|                                                                                        |  |                     |         |                    |  |          |   |             |         |  |  |        |  
|Agency Notes                                                                            |  |                     |         |                    |  |          |   |             |         |  |  |        |  
|Federal National Mortgage Association                                                   |  |                     | 80,267  |                    |  | 10.50    |   |             | 116,603 |  |  | 15.82  |  
|Federal Home Loan Bank                                                                  |  |                     | 35,104  |                    |  | 4.59     |   |             | 102,799 |  |  | 13.95  |  
|Federal Home Loan Mortgage Corporation                                                  |  |                     | 105,406 |                    |  | 13.79    |   |             | 14,899  |  |  | 2.02   |  
|Federal Farm Credit Bank                                                                |  |                     | 15,131  |                    |  | 1.98     |   |             | 29,418  |  |  | 3.99   |  
|                                                                                        |  |                     |         |                    |  |          |   |             |         |  |  |        |  
|Total obligations of U.S. government corporations and government
 sponsored enterprises |  |                     | 410,511 |                    |  | 53.71    |   |             | 519,739 |  |  | 70.51  |  
|                                                                                        |  |                     |         |                    |  |          |   |             |         |  |  |        |  
|Obligations of state and political institutions-New York Bank
 Qualified                |  |                     | 141,047 |                    |  | 18.45    |   |             | 83,337  |  |  | 11.31  |  
|Single-issuer, trust preferred securities                                               |  |                     | 3,928   |                    |  | 0.51     |   |             | 4,483   |  |  | 0.61   |  
|Corporate debt securities                                                               |  |                     | 203,906 |                    |  | 26.67    |   |             | 129,200 |  |  | 17.53  |  
|Other securities                                                                        |  |                     | 5,069   |                    |  | 0.66     |   |             | 56      |  |  | 0.01   |  
|                                                                                        |  |                     |         |                    |  |          |   |             |         |  |  |        |  
|Total marketable securities                                                             |  |                     | 764,461 |                    |  | 100.00   |   |             | 736,815 |  |  | 99.97  |  
|Debt securities issued by
 foreign governments                                          |  |                     |        |                    |  |         |   |             | 250     |  |  | 0.03   |  
|                                                                                        |  |                     |         |                    |  |          |   |             |         |  |  |        |  
|Total                                                                                   |  | $                   | 764,461 |                    |  | 100.00   | % | $           | 737,065 |  |  | 100.00 | %
|                                                                                        |  |                     |         |                    |  |          |   |             |         |  |  |        |  

35

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Loan Portfolio

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

The Companys commercial and industrial loan and factored receivables
portfolios represent approximately 66% of all loans. Loans in this category are
typically made to small- and medium-sized businesses and range between $250,000
and $15 million. The Companys real estate mortgage portfolio, which represents
approximately 21% of all loans, is comprised of mortgages secured by real
property located principally in the states of New York, New Jersey, Virginia
and North Carolina. The Companys leasing portfolio, which consists of finance
leases for various types of business equipment, represents approximately 11% of
all loans. Sources of repayment are the borrowers operating profits, cash
flows and liquidation of pledged collateral. Based on underwriting standards,
loans may be secured in whole or in part by collateral such as liquid assets,
accounts receivable, equipment, inventory and real property. The collateral
securing any loan or lease may depend on the type of loan or lease and may vary
in value based on market conditions.

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

|                                              |  |               |           |             |  |          |   |             |           |  |  |        |  
|--------------------------------------------- |  | ------------- | --------- | ----------- |  | -------- | - | ----------- | --------- |  |  | ------ | -
|                                              |  | September 30, |          
|                                              |  |               |          
|                                              |  | 2010          |           | 2009        | 
|                                              |  |               |           |             | 
|                                              |  | Balances      |           | % of
 Gross |  | Balances |   | % of
 Gross |          
|                                              |  |               |           |             |  |          |   |             |          
|Domestic                                      |  |               |           |             |  |          |   |             |           |  |  |        |  
|Commercial and industrial                     |  | $             | 696,460   |             |  | 52.36    | % | $           | 543,443   |  |  | 44.05  | %
|Lease financing receivables                   |  |               | 150,913   |             |  | 11.34    |   |             | 211,697   |  |  | 17.16  |  
|Factored receivables                          |  |               | 186,206   |             |  | 14.00    |   |             | 152,068   |  |  | 12.33  |  
|Real estate-residential mortgage              |  |               | 163,118   |             |  | 12.26    |   |             | 159,805   |  |  | 12.96  |  
|Real estate-commercial mortgage               |  |               | 96,022    |             |  | 7.22     |   |             | 103,785   |  |  | 8.41   |  
|Real estate-construction and land development |  |               | 25,092    |             |  | 1.89     |   |             | 24,112    |  |  | 1.95   |  
|Loans to individuals                          |  |               | 12,401    |             |  | 0.93     |   |             | 13,660    |  |  | 1.11   |  
|Loans to depository institutions              |  |               |          |             |  |         |   |             | 25,000    |  |  | 2.03   |  
|                                              |  |               |           |             |  |          |   |             |           |  |  |        |  
|                                              |  |               |           |             |  |          |   |             |           |  |  |        |  
|Loans, net of unearned discounts              |  | $             | 1,330,212 |             |  | 100.00   | % | $           | 1,233,570 |  |  | 100.00 | %
|                                              |  |               |           |             |  |          |   |             |           |  |  |        |  

Asset Quality

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

Nonaccrual loans at September 30, 2010 decreased $11.7 million compared
to December 31, 2009. This primarily reflected decreases of $3.1 million, $11.1
million and $0.6 million in commercial and industrial loans, lease financing
receivables and residential real estate mortgage loans, respectively. Partially
offsetting these items was a $3.1 million increase in commercial real estate
loans (related to two borrowers). Net loan charge-offs in the third quarter of 2010
were $10.9 million higher than net loan charge-offs in the second quarter of 2010
(primarily reflecting an increase of $7.3 million in net charge-offs for lease
financing receivables, $2.9 million for commercial and industrial loans, and
$0.4 million in factored receivables). A worsening of existing economic
conditions will likely result in levels of charge-offs and nonaccrual loans
that will be higher than historical levels.

36

---



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

|                                                  |  |               |           |      |   |           | 
|------------------------------------------------- |  | ------------- | --------- | ---- | - | --------- | 
|                                                  |  | September 30, |          
|                                                  |  |               |          
|                                                  |  | 2010          |           | 2009 |  
|                                                  |  |               |           |      |  
|Gross loans                                       |  | $             | 1,350,531 |      | $ | 1,261,938 | 
|                                                  |  |               |           |      |   |           | 
|Nonaccrual loans                                  |  |               |           |      |   |           | 
|Commercial and industrial                         |  | $             | 1,093     |      | $ | 3,809     | 
|Lease financing receivables                       |  |               | 820       |      |   | 13,276    | 
|Factored receivables                              |  |               |          |      |   |          | 
|Real estate-residential mortgage                  |  |               | 1,232     |      |   | 2,609     | 
|Real estate-commercial mortgage                   |  |               | 3,125     |      |   |          | 
|Real estate-construction and land development     |  |               |          |      |   |          | 
|Loans to individuals                              |  |               |          |      |   | 100       | 
|                                                  |  |               |           |      |   |           | 
|                                                  |  |               |           |      |   |           | 
|Total nonaccrual loans                            |  |               | 6,270     |      |   | 19,794    | 
|                                                  |  |               |           |      |   |           | 
|Other real estate owned                           |  |               | 744       |      |   | 1,837     | 
|                                                  |  |               |           |      |   |           | 
|Total non-performing assets                       |  | $             | 7,014     |      | $ | 21,631    | 
|                                                  |  |               |           |      |   |           | 
|                                                  |  |               |           |      |   |           | 
|Loans past due 90 days or more and still accruing |  | $             | 3,162     |      | $ | 1,523     | 
|                                                  |  |               |           |      |   |           | 

At September 30, 2010, commercial and industrial nonaccruals
represented 0.16% of commercial and industrial loans. There were 4 loans made
to small business borrowers located in 3 states with balances ranging between
approximately $76.0 thousand and $747.6 thousand.

At September 30, 2010, lease financing nonaccruals represented 0.49% of
lease financing receivables. The lessees of equipment are located in 11 states.
There were 18 leases ranging between approximately $0.7 thousand and $187.6
thousand, 16 of which were under $100 thousand. The value of the underlying
collateral related to lease financing nonaccruals varies depending on the type
and condition of equipment. While most leases are written on a recourse basis,
with personal guarantees of the principals, the current value of the collateral
is often less than the lease financing balance. Collection efforts include
repossession and/or sale of leased equipment, payment discussions with the
lessee, the principal and/or guarantors, and obtaining judgments against the
lessee, the principal and/or guarantors. The balance is charged off when it is
determined that collection efforts are no longer productive. Factors considered
in determining whether collection efforts are no longer productive include any
amounts currently being collected, the status of discussions or negotiations
with the lessee, the principal and/or guarantors, the cost of continuing
efforts to collect, the status of any foreclosure or other legal actions, the
value of the collateral, and any other pertinent factors.

At September 30, 2010, residential real estate nonaccruals represented
0.95% of residential real estate loans held in portfolio. There were 11 loans
ranging between approximately $6.4 thousand and $361.0 thousand secured by
properties located in 5 states.

At September 30, 2010, commercial real estate nonaccrual represented
3.25% of commercial real estate loans. There were 2 loans of approximately
$745.3 thousand and $2,379.1 thousand, respectively, secured by properties
located in New York.

At September 30, 2010, other real estate owned consisted of 5
properties with values between approximately $31.7 thousand and $293.2 thousand
located in 4 states.

37

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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 include, but are not limited to, the results
of regulatory reviews; the amount of, trend of and/or borrower characteristics on
loans that are identified as requiring special attention as part of the credit
review process and peer group comparisons. The impact of this other data might
result in an allowance greater than that indicated by the evaluation process
previously described. The allowance reflects managements best estimate of
probable losses within the existing loan portfolio and of the risk inherent in
various components of the loan portfolio. The allowance, in the judgment of
management, is necessary to reserve for estimated loan losses and risk inherent
in the loan portfolio. The Companys allowance for loan loss methodology is
based on guidance provided by the Interagency Policy Statement on the
Allowance for Loan and Lease losses issued by the Office of the Comptroller of
the Currency, Board of Governors of the Federal Reserve System, The Federal
Deposit Insurance Corporation, the National Credit Union Administration and the
Office of Thrift Supervision in December 2006 and includes an allowance
allocation calculated in accordance with the U.S. GAAP guidance on loans with
deteriorated credit quality in FASB Codification Topic 310: Receivables. The
Companys process for determining the appropriate level of the allowance for
loan losses is designed to account for credit deterioration as it occurs. The
provision for loan losses reflects loan quality trends, including the levels of
and trends related to nonaccrual loans, past due loans, potential problem
loans, criticized loans and net charge-offs or recoveries, among other factors.

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

At September 30, 2010, the ratio of the allowance to loans held in
portfolio, net of unearned discounts, was 1.40% and the allowance was $18.2
million. At such date, the Companys nonaccrual loans amounted to $6.3 million.
Loans 90 days past due and still accruing amounted to $3.2 million. At September
30, 2010, loans judged to be impaired under U.S. GAAP guidance on receivables,
amounted to $8.4 million and had a valuation allowance totaling $2.5 million,
which is included within the overall allowance for loan losses. Included in the
impaired loans are $4.3 million in accruing impaired restructured loans as
defined by U.S. GAAP guidance on receivables, with allowances for loan
impairment of $883 thousand. Based on the foregoing, as well as managements
judgment as to the current risk in loans held in portfolio, the Companys
allowance for loan losses was deemed adequate to absorb all probable losses on
specifically known and other credit risks associated with the portfolio as of
September 30, 2010. 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 provision recognized in the
first nine months of 2010. Potential problem loans, which are loans that are
currently performing under present loan repayment terms but where known
information about possible credit problems of borrowers causes management to
have serious doubts as to the ability of the borrowers to continue to comply
with the present repayment terms, aggregated $0.6 million at September 30, 2010
and $8.2 million at September 30, 2009, respectively.

38

---



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

|                                                                                                   |  |                                   |           |                                  |   |           |   |      |           |   |   |           |  
|-------------------------------------------------------------------------------------------------- |  | --------------------------------- | --------- | -------------------------------- | - | --------- | - | ---- | --------- | - | - | --------- | -
|                                                                                                   |  | Three Months Ended
 September 30, |           | Nine Months Ended
 September 30, |  
|                                                                                                   |  |                                   |           |                                  |  
|                                                                                                   |  | 2010                              |           | 2009                             |   | 2010      |   | 2009 |          
|                                                                                                   |  |                                   |           |                                  |   |           |   |      |          
|                                                                                                   |  |                                   |           |                                  |   |           |   |      |           |   |   |           |  
|Average loans held in portfolio, net of
 unearned discounts, during period                         |  | $                                 | 1,271,495 |                                  | $ | 1,144,597 |   | $    | 1,199,952 |   | $ | 1,141,475 |  
|                                                                                                   |  |                                   |           |                                  |   |           |   |      |           |   |   |           |  
|                                                                                                   |  |                                   |           |                                  |   |           |   |      |           |   |   |           |  
|Allowance for loan losses:                                                                         |  |                                   |           |                                  |   |           |   |      |           |   |   |           |  
|Balance at beginning of period                                                                     |  | $                                 | 20,512    |                                  | $ | 18,134    |   | $    | 19,872    |   | $ | 16,010    |  
|                                                                                                   |  |                                   |           |                                  |   |           |   |      |           |   |   |           |  
|                                                                                                   |  |                                   |           |                                  |   |           |   |      |           |   |   |           |  
|Charge-offs:                                                                                       |  |                                   |           |                                  |   |           |   |      |           |   |   |           |  
|Commercial and industrial                                                                          |  |                                   | 4,065     |                                  |   | 1,230     |   |      | 5,988     |   |   | 2,107     |  
|Lease financing receivables                                                                        |  |                                   | 11,379    |                                  |   | 4,517     |   |      | 20,427    |   |   | 14,144    |  
|Factored receivables                                                                               |  |                                   | 381       |                                  |   | 69        |   |      | 620       |   |   | 378       |  
|Real estate - residential mortgage                                                                 |  |                                   | 136       |                                  |   | 41        |   |      | 234       |   |   | 41        |  
|Real estate - commercial mortgage                                                                  |  |                                   |          |                                  |   |          |   |      | 129       |   |   |          |  
|Real estate - construction and land development                                                    |  |                                   |          |                                  |   |          |   |      |          |   |   |          |  
|Loans to individuals                                                                               |  |                                   | 155       |                                  |   |          |   |      | 218       |   |   |          |  
|                                                                                                   |  |                                   |           |                                  |   |           |   |      |           |   |   |           |  
|Total charge-offs                                                                                  |  |                                   | 16,116    |                                  |   | 5,857     |   |      | 27,616    |   |   | 16,670    |  
|                                                                                                   |  |                                   |           |                                  |   |           |   |      |           |   |   |           |  
|                                                                                                   |  |                                   |           |                                  |   |           |   |      |           |   |   |           |  
|Recoveries:                                                                                        |  |                                   |           |                                  |   |           |   |      |           |   |   |           |  
|Commercial and industrial                                                                          |  |                                   | 67        |                                  |   | 7         |   |      | 287       |   |   | 23        |  
|Lease financing receivables                                                                        |  |                                   | 170       |                                  |   | 79        |   |      | 453       |   |   | 221       |  
|Factored receivables                                                                               |  |                                   | 18        |                                  |   | 15        |   |      | 194       |   |   | 38        |  
|Real estate - residential mortgage                                                                 |  |                                   |          |                                  |   | 102       |   |      |          |   |   | 102       |  
|Real estate - commercial mortgage                                                                  |  |                                   |          |                                  |   |          |   |      |          |   |   |          |  
|Real estate - construction and land development                                                    |  |                                   |          |                                  |   |          |   |      |          |   |   |          |  
|Loans to individuals                                                                               |  |                                   |          |                                  |   |          |   |      |          |   |   |          |  
|                                                                                                   |  |                                   |           |                                  |   |           |   |      |           |   |   |           |  
|Total recoveries                                                                                   |  |                                   | 255       |                                  |   | 203       |   |      | 934       |   |   | 384       |  
|                                                                                                   |  |                                   |           |                                  |   |           |   |      |           |   |   |           |  
|                                                                                                   |  |                                   |           |                                  |   |           |   |      |           |   |   |           |  
|Subtract:                                                                                          |  |                                   |           |                                  |   |           |   |      |           |   |   |           |  
|Net charge-offs                                                                                    |  |                                   | 15,861    |                                  |   | 5,654     |   |      | 26,682    |   |   | 16,286    |  
|                                                                                                   |  |                                   |           |                                  |   |           |   |      |           |   |   |           |  
|                                                                                                   |  |                                   |           |                                  |   |           |   |      |           |   |   |           |  
|Provision for loan losses                                                                          |  |                                   | 14,000    |                                  |   | 6,950     |   |      | 25,500    |   |   | 19,950    |  
|                                                                                                   |  |                                   |           |                                  |   |           |   |      |           |   |   |           |  
|                                                                                                   |  |                                   |           |                                  |   |           |   |      |           |   |   |           |  
|Less losses on transfers to other real
 estate owned                                               |  |                                   | 499       |                                  |   | 331       |   |      | 538       |   |   | 575       |  
|                                                                                                   |  |                                   |           |                                  |   |           |   |      |           |   |   |           |  
|                                                                                                   |  |                                   |           |                                  |   |           |   |      |           |   |   |           |  
|Balance at end of period                                                                           |  | $                                 | 18,152    |                                  | $ | 19,099    |   | $    | 18,152    |   | $ | 19,099    |  
|                                                                                                   |  |                                   |           |                                  |   |           |   |      |           |   |   |           |  
|                                                                                                   |  |                                   |           |                                  |   |           |   |      |           |   |   |           |  
|Ratio of annualized net charge-offs to
 average loans held in portfolio, net of unearned discounts |  |                                   | 4.99      | %                                |   | 1.98      | % |      | 2.96      | % |   | 1.90      | %
|                                                                                                   |  |                                   |           |                                  |   |           |   |      |           |   |   |           |  

39

---



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

|                                                |  |                     |        |                                                                     |  |        |   |                                                                     |        |  |  |        |  
|----------------------------------------------- |  | ------------------- | ------ | ------------------------------------------------------------------- |  | ------ | - | ------------------------------------------------------------------- | ------ |  |  | ------ | -
|                                                |  | September 30,
 2010 |        | December 31,
 2009                                                  | 
|                                                |  |                     |        |                                                                     | 
|                                                |  | Amount              |        | % of
 loans
 in each
 category
 to total
 loans
 held in
 portfolio |  | Amount |   | % of
 loans
 in each
 category
 to total
 loans
 held in
 portfolio |       
|                                                |  |                     |        |                                                                     |  |        |   |                                                                     |       
|Domestic                                        |  |                     |        |                                                                     |  |        |   |                                                                     |        |  |  |        |  
|                                                |  |                     |        |                                                                     |  |        |   |                                                                     |        |  |  |        |  
|Commercial and industrial                       |  | $                   | 6,853  |                                                                     |  | 53.73  | % | $                                                                   | 6,082  |  |  | 49.01  | %
|Loans to depository institutions                |  |                     |       |                                                                     |  |       |   |                                                                     |       |  |  | 1.67   |  
|Lease financing receivables                     |  |                     | 4,561  |                                                                     |  | 11.64  |   |                                                                     | 10,249 |  |  | 16.32  |  
|Factored receivables                            |  |                     | 1,522  |                                                                     |  | 14.36  |   |                                                                     | 971    |  |  | 11.70  |  
|Real estate - residential mortgage              |  |                     | 2,449  |                                                                     |  | 9.96   |   |                                                                     | 1,646  |  |  | 10.43  |  
|Real estate - commercial mortgage               |  |                     | 2,145  |                                                                     |  | 7.41   |   |                                                                     | 560    |  |  | 7.75   |  
|Real estate - construction and land development |  |                     | 287    |                                                                     |  | 1.94   |   |                                                                     | 149    |  |  | 2.03   |  
|Loans to individuals                            |  |                     | 142    |                                                                     |  | 0.96   |   |                                                                     | 80     |  |  | 1.09   |  
|Unallocated                                     |  |                     | 193    |                                                                     |  |       |   |                                                                     | 135    |  |  |       |  
|                                                |  |                     |        |                                                                     |  |        |   |                                                                     |        |  |  |        |  
|Total                                           |  | $                   | 18,152 |                                                                     |  | 100.00 | % | $                                                                   | 19,872 |  |  | 100.00 | %
|                                                |  |                     |        |                                                                     |  |        |   |                                                                     |        |  |  |        |  

During
2010, the allowance for loan losses decreased $1.7 million from $19.9 million
at December 31, 2009 primarily due to a reduction in the allowance allocated to
lease financing receivables ($5.7 million) partially offset by increases in the
allowance allocated to commercial and industrial loans ($0.8 million), factored
receivables ($0.6 million), real estate residential mortgage ($0.8 million),
and real estate commercial mortgage ($1.6 million). The allowance allocated to
lease financing receivables decreased primarily as a result of the lower level
of lease financing receivables nonaccrual balances following charge-offs during the third quarter of 2010. The increase of the
allowance allocated to commercial and industrial loans was primarily the result
of the unsteady economic recovery. The allowance allocated to factored
receivables increased based on the continued weakening in the consumer sectors.
The increase in the allowance allocated to real estate residential mortgage was
primarily due to the persistent decline in residential real estate values. As a
result of the disruption in the commercial real estate markets, the allowance
allocated to real estate commercial mortgage was increased.

40

---



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, |          
|                        |  |               |          
|                        |  | 2010          |           | 2009        | 
|                        |  |               |           |             | 
|                        |  | Balances      |           | % of
 Total |  | Balances |   | % of
 Total |          
|                        |  |               |           |             |  |          |   |             |          
|Domestic                |  |               |           |             |  |          |   |             |           |  |  |        |  
|Demand                  |  | $             | 539,633   |             |  | 32.79    | % | $           | 470,404   |  |  | 33.40  | %
|NOW                     |  |               | 193,364   |             |  | 11.75    |   |             | 195,372   |  |  | 13.87  |  
|Savings                 |  |               | 19,566    |             |  | 1.19     |   |             | 18,195    |  |  | 1.29   |  
|Money Market            |  |               | 342,332   |             |  | 20.80    |   |             | 332,262   |  |  | 23.59  |  
|Time deposits           |  |               | 550,718   |             |  | 33.47    |   |             | 391,713   |  |  | 27.81  |  
|                        |  |               |           |             |  |          |   |             |           |  |  |        |  
|Total domestic deposits |  |               | 1,645,613 |             |  | 100.00   |   |             | 1,407,946 |  |  | 99.96  |  
|                        |  |               |           |             |  |          |   |             |           |  |  |        |  
|Foreign                 |  |               |           |             |  |          |   |             |           |  |  |        |  
|Time deposits           |  |               |          |             |  |         |   |             | 579       |  |  | 0.04   |  
|                        |  |               |           |             |  |          |   |             |           |  |  |        |  
|Total deposits          |  | $             | 1,645,613 |             |  | 100.00   | % | $           | 1,408,525 |  |  | 100.00 | %
|                        |  |               |           |             |  |          |   |             |           |  |  |        |  

Fluctuations of balances in total or among categories at any date may
occur based on the Companys mix of assets and liabilities as well as on
customers balance sheet strategies. Historically, however, average balances
for deposits have been relatively stable. Information regarding these average
balances is presented on pages 43 and 44.

CAPITAL

The Company and the bank are subject to risk-based capital regulations
which quantitatively measure capital against risk-weighted assets, including
certain off-balance sheet items. These regulations define the elements of the
Tier 1 and Tier 2 components of total capital and establish minimum ratios of
4% for Tier 1 capital and 8% for total capital for capital adequacy purposes.
Supplementing these regulations is a leverage requirement. This requirement
establishes a minimum leverage ratio (at least 3% or 4%, depending upon an
institutions regulatory status) which is calculated by dividing Tier 1 capital
by adjusted quarterly average assets (after deducting goodwill). Information
regarding the Companys and the banks risk-based capital is presented on page
47. In addition, the bank is subject to the Federal Deposit Insurance
Corporation Improvement Act of 1991 (FDICIA) which imposes a number of
mandatory supervisory measures. Among other matters, FDICIA established five
capital categories, ranging from well capitalized to critically under
capitalized. Such classifications are used by regulatory agencies to determine
a banks deposit insurance premium, approval of applications authorizing
institutions to increase their asset size or otherwise expand business
activities or acquire other institutions. Under FDICIA, a well capitalized
bank must maintain minimum leverage, Tier 1 and total capital ratios of 5%, 6%
and 10%, respectively. The Federal Reserve Board applies comparable tests for
holding companies such as the Company. At September 30, 2010, the Company and
the bank exceeded the requirements for well capitalized institutions under
the tests pursuant to FDICIA and of the Federal Reserve Board.

The bank regulatory agencies have encouraged banking organizations,
including healthy, well-run banking organizations, to operate with capital
ratios substantially in excess of the stated ratios required to maintain well
capitalized status. This has resulted from, among other things, current
economic conditions, the global financial crisis, the Dodd Frank Act and the
Basel III proposals, as described below, and the likelihood, as described in
the 2009 Form 10-K, of increased formal capital requirements for banking
organizations.

As noted above, the Dodd-Frank Act enacted in July 2010 requires the
federal banking agencies to establish stricter risk-based capital requirements
and leverage limits to apply to banks and bank holding companies.

In addition, recent proposals published by the Basel Committee on
Banking Supervision (the Basel Committee), if adopted, could lead to
significantly higher capital requirements, higher capital charges and more
restrictive leverage and liquidity ratios. The final package of Basel III
reforms will be considered in November 2010 by the leaders of the Group of 20,
and then will be

41

---



subject to individual adoption by member nations, including the United
States. The ultimate impact of the new capital and liquidity standards on the Company
cannot be determined at this time and will depend on a number of factors,
including the treatment and implementation by the U.S. banking regulators.

During the first quarter 2010, we completed an underwritten public
offering of 8,625,000 shares of our common shares at an offering price of $8.00
per share, which resulted in net proceeds of $64.9 million after underwriting
discounts and expenses. The proceeds from the issuance of shares are to be used
for general corporate purposes which may including the financing of possible
acquisitions of complementary businesses or assets, including FDIC-assisted
transactions, the extension of credit to, or the funding of investments in our
subsidiaries, or the possible repurchase of Series A Preferred Shares,
separately or together with the warrant for 516,817 shares of our common shares
held by the U.S. Treasury, subject to the receipt of any required regulatory
approval.

Under its share repurchase program, the Company buys back common shares
from time to time. The Company did not repurchase any of its common shares
during the third quarter of 2010. At September 30, 2010, the maximum number of
shares that may yet be purchased under the share repurchase program was
870,963.

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

RECENTLY ISSUED
ACCOUNTING PRONOUNCEMENTS

For information regarding recently issued accounting pronouncements and
their expected impact on the Companys consolidated financial statements, see
Note 11 of the Companys unaudited consolidated financial statements in this
quarterly report on Form 10-Q.

CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained or incorporated by reference in this
quarterly report on Form 10-Q, including but not limited to, statements
concerning future results of operations or financial position, borrowing
capacity and future liquidity, future investment results, future credit
exposure, future loan losses and plans and objectives for future operations, the
economic environment, asset quality and future levels of nonaccrual loans,
charge-offs and provisions for loan losses, and the Companys position for
future growth and ability to benefit from an economic recovery, and other
statements contained herein regarding matters that are not historical facts,
are forward-looking statements as defined in the Securities Exchange Act of
1934. These statements are not historical facts but instead are subject to
numerous assumptions, risks and uncertainties, and represent only our belief
regarding future events, many of which, by their nature, are inherently
uncertain and outside our control. Any forward-looking statements we may make
speak only as of the date on which such statements are made. Our actual results
and financial position may differ materially from the anticipated results and
financial condition indicated in or implied by these forward-looking statements
and we make no commitment to update or revise forward-looking statements in
order to reflect new information, subsequent events or changes in expectations.

Factors that could cause our actual results to differ materially from
those in the forward-looking statements include, but are not limited to, the
following: inflation, interest rates, market and monetary fluctuations,
geopolitical developments, including acts of war and terrorism and their impact
on economic conditions; the effects of, and changes in, trade, monetary and
fiscal policies and laws, including interest rate policies of the Federal Reserve
Board and laws and regulations concerning taxes, banking and securities with
which the Company must comply; changes, particularly declines, in general
economic conditions and in the local economies in which the Company operates;
the financial condition of the Companys borrowers; competitive pressures on
loan and deposit pricing and demand; changes in technology and their impact on
the marketing of new products and services and the acceptance of these products
and services by new and existing customers; the willingness of customers to
substitute competitors products and services for the Companys products and
services; the impact of changes in financial services laws and regulations
(including laws concerning taxes, banking, securities and insurance); changes
in accounting principles, policies and guidelines; the risks and uncertainties
described in Risk Factors in the Companys annual report on Form 10-K for the
year ended December 31, 2009; and other risks and uncertainties detailed from
time to time in press releases and other public filings; and the Companys
performance in managing the risks involved in any of the foregoing. The
foregoing list of important factors is not exclusive, and we will not update
any forward-looking statement, whether written or oral, that may be made from
time to time.

42

---



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

|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|---------------------------------------------------------- |  | --------------- | --------- | -------- | - | ------------ |  | --------------- | ---- | -------- | - | ------------ | - | - | ------ |  |  | ---- | -
|                                                           |  | 2010            |           | 2009     |  
|                                                           |  |                 |           |          |  
|                                                           |  | Average
Balance |           | Interest |   | Average
Rate |  | Average
Balance |      | Interest |   | Average
Rate |  
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |  
|ASSETS                                                     |  |                 |           |          |   |              |  |                 |      |          |   |              |  
|Interest-bearing
deposits with other banks                 |  | $               | 14,180    |          | $ | 10           |  |                 | 0.27 | %        | $ | 50,385       |   | $ | 27     |  |  | 0.21 | %
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|Securities
available for sale                              |  |                 | 449,055   |          |   | 2,767        |  |                 | 2.46 |          |   | 320,494      |   |   | 3,903  |  |  | 4.87 |  
|Securities
held to maturity                                |  |                 | 198,280   |          |   | 2,172        |  |                 | 4.38 |          |   | 345,186      |   |   | 3,975  |  |  | 4.61 |  
|Securities
tax-exempt [2]                                  |  |                 | 136,533   |          |   | 2,102        |  |                 | 6.16 |          |   | 61,254       |   |   | 926    |  |  | 6.05 |  
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|Total investment securities                                |  |                 | 783,868   |          |   | 7,041        |  |                 | 3.59 |          |   | 726,934      |   |   | 8,804  |  |  | 4.84 |  
|FRB and FHLB
stock [2]                                     |  |                 | 8,810     |          |   | 113          |  |                 | 5.16 |          |   | 9,769        |   |   | 192    |  |  | 7.87 |  
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|Loans, net
of unearned discounts [3]                       |  |                 | 1,314,846 |          |   | 18,275       |  |                 | 5.71 |          |   | 1,189,030    |   |   | 18,024 |  |  | 6.25 |  
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|                                                          
|TOTAL
INTEREST-EARNING ASSETS                              |  |                 | 2,121,704 |          |   | 25,439       |  |                 | 4.86 | %        |   | 1,976,118    |   |   | 27,047 |  |  | 5.56 | %
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|Cash and due
from banks                                    |  |                 | 34,635    |          |   |              |  |                 |      |          |   | 28,342       |   |   |        |  |  |      |  
|Allowance
for loan losses                                  |  |                 | (22,735   | )        |   |              |  |                 |      |          |   | (20,307      | ) |   |        |  |  |      |  
|Goodwill                                                   |  |                 | 22,901    |          |   |              |  |                 |      |          |   | 22,901       |   |   |        |  |  |      |  
|Other assets                                               |  |                 | 137,699   |          |   |              |  |                 |      |          |   | 120,662      |   |   |        |  |  |      |  
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|                                                          
|TOTAL ASSETS                                               |  | $               | 2,294,204 |          |   |              |  |                 |      |          | $ | 2,127,716    |   |   |        |  |  |      |  
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|                                                          
|LIABILITIES
AND SHAREHOLDERS EQUITY                       |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|Interest-bearing
deposits                                  |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|Domestic                                                   |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|Savings                                                    |  | $               | 18,505    |          |   | 2            |  |                 | 0.05 | %        | $ | 18,022       |   |   | 3      |  |  | 0.07 | %
|NOW                                                        |  |                 | 183,780   |          |   | 67           |  |                 | 0.14 |          |   | 180,753      |   |   | 106    |  |  | 0.23 |  
|Money market                                               |  |                 | 342,615   |          |   | 677          |  |                 | 0.78 |          |   | 329,485      |   |   | 763    |  |  | 0.92 |  
|Time                                                       |  |                 | 580,328   |          |   | 1,545        |  |                 | 1.06 |          |   | 375,087      |   |   | 1,931  |  |  | 2.04 |  
|Foreign                                                    |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|Time                                                       |  |                 | 117       |          |   |             |  |                 | 1.10 |          |   | 579          |   |   | 2      |  |  | 1.09 |  
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|Total interest-bearing deposits                            |  |                 | 1,125,345 |          |   | 2,291        |  |                 | 0.81 |          |   | 903,926      |   |   | 2,805  |  |  | 1.23 |  
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|Borrowings                                                 |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|Securities sold under agreements to
repurchase - customers |  |                 | 41,880    |          |   | 49           |  |                 | 0.46 |          |   | 76,495       |   |   | 79     |  |  | 0.41 |  
|Securities sold under agreements to
repurchase - dealers   |  |                 | 13,093    |          |   | 23           |  |                 | 0.68 |          |   |             |   |   |       |  |  |     |  
|Federal funds purchased                                    |  |                 | 73,533    |          |   | 44           |  |                 | 0.23 |          |   | 6,911        |   |   | 2      |  |  | 0.16 |  
|Commercial paper                                           |  |                 | 14,424    |          |   | 12           |  |                 | 0.30 |          |   | 13,448       |   |   | 15     |  |  | 0.43 |  
|Short-term borrowings - FRB                                |  |                 |          |          |   |             |  |                 |     |          |   | 207,554      |   |   | 131    |  |  | 0.25 |  
|Short-term borrowings - other                              |  |                 | 16,239    |          |   | 14           |  |                 | 0.35 |          |   | 1,989        |   |   |       |  |  |     |  
|Long-term borrowings - FHLB                                |  |                 | 131,823   |          |   | 871          |  |                 | 2.62 |          |   | 158,592      |   |   | 1,197  |  |  | 2.99 |  
|Long-term borrowings - sub debt                            |  |                 | 25,774    |          |   | 523          |  |                 | 8.38 |          |   | 25,774       |   |   | 523    |  |  | 8.38 |  
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|Total borrowings                                           |  |                 | 316,766   |          |   | 1,536        |  |                 | 1.93 |          |   | 490,763      |   |   | 1,947  |  |  | 1.58 |  
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|                                                          
|TOTAL
INTEREST-BEARING LIABILITIES                         |  |                 | 1,442,111 |          |   | 3,827        |  |                 | 1.05 | %        |   | 1,394,689    |   |   | 4,752  |  |  | 1.35 | %
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|Noninterest-bearing
deposits                               |  |                 | 478,474   |          |   |              |  |                 |      |          |   | 437,551      |   |   |        |  |  |      |  
|Other
liabilities                                          |  |                 | 144,843   |          |   |              |  |                 |      |          |   | 138,486      |   |   |        |  |  |      |  
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|Total liabilities                                          |  |                 | 2,065,428 |          |   |              |  |                 |      |          |   | 1,970,726    |   |   |        |  |  |      |  
|                                                          
|Shareholders
equity                                       |  |                 | 228,776   |          |   |              |  |                 |      |          |   | 156,990      |   |   |        |  |  |      |  
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                 |  | $               | 2,294,204 |          |   |              |  |                 |      |          | $ | 2,127,716    |   |   |        |  |  |      |  
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|Net interest
income/spread                                 |  |                 |           |          |   | 21,612       |  |                 | 3.81 | %        |   |              |   |   | 22,295 |  |  | 4.21 | %
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|Net yield on
interest-earning assets (margin)              |  |                 |           |          |   |              |  |                 | 4.11 | %        |   |              |   |   |        |  |  | 4.57 | %
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|Less: Tax
equivalent adjustment                            |  |                 |           |          |   | 737          |  |                 |      |          |   |              |   |   | 325    |  |  |      |  
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|Net interest
income                                        |  |                 |           |          | $ | 20,875       |  |                 |      |          |   |              |   | $ | 21,970 |  |  |      |  
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  

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

43

---



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

|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|---------------------------------------------------------- |  | --------------- | --------- | -------- | - | ------------ |  | --------------- | ---- | -------- | - | ------------ | - | - | ------ |  |  | ---- | -
|                                                           |  | 2010            |           | 2009     |  
|                                                           |  |                 |           |          |  
|                                                           |  | Average
Balance |           | Interest |   | Average
Rate |  | Average
Balance |      | Interest |   | Average
Rate |  
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |  
|ASSETS                                                     |  |                 |           |          |   |              |  |                 |      |          |   |              |  
|Interest-bearing
deposits with other banks                 |  | $               | 27,243    |          | $ | 53           |  |                 | 0.26 | %        | $ | 29,761       |   | $ | 46     |  |  | 0.21 | %
|                                                          
|Securities
available for sale                              |  |                 | 405,340   |          |   | 8,670        |  |                 | 2.85 |          |   | 359,882      |   |   | 13,103 |  |  | 4.85 |  
|Securities
held to maturity                                |  |                 | 253,926   |          |   | 8,874        |  |                 | 4.66 |          |   | 312,075      |   |   | 10,974 |  |  | 4.69 |  
|Securities
tax-exempt [2]                                  |  |                 | 113,168   |          |   | 5,220        |  |                 | 6.15 |          |   | 40,198       |   |   | 1,783  |  |  | 5.91 |  
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|Total
investment securities                                |  |                 | 772,434   |          |   | 22,764       |  |                 | 3.93 |          |   | 712,155      |   |   | 25,860 |  |  | 4.84 |  
|FRB and FHLB
stock [2]                                     |  |                 | 8,363     |          |   | 299          |  |                 | 4.77 |          |   | 9,700        |   |   | 390    |  |  | 5.37 |  
|Loans, net
of unearned discounts [3]                       |  |                 | 1,231,970 |          |   | 51,907       |  |                 | 5.96 |          |   | 1,185,025    |   |   | 53,840 |  |  | 6.32 |  
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|                                                          
|TOTAL
INTEREST-EARNING ASSETS                              |  |                 | 2,040,010 |          |   | 75,023       |  |                 | 5.07 | %        |   | 1,936,641    |   |   | 80,136 |  |  | 5.66 | %
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|                                                          
|Cash and due
from banks                                    |  |                 | 35,408    |          |   |              |  |                 |      |          |   | 30,115       |   |   |        |  |  |      |  
|Allowance
for loan losses                                  |  |                 | (22,334   | )        |   |              |  |                 |      |          |   | (18,409      | ) |   |        |  |  |      |  
|Goodwill                                                   |  |                 | 22,901    |          |   |              |  |                 |      |          |   | 22,901       |   |   |        |  |  |      |  
|Other assets                                               |  |                 | 132,450   |          |   |              |  |                 |      |          |   | 116,584      |   |   |        |  |  |      |  
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|                                                          
|TOTAL ASSETS                                               |  | $               | 2,208,435 |          |   |              |  |                 |      |          | $ | 2,087,832    |   |   |        |  |  |      |  
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|                                                          
|LIABILITIES
AND SHAREHOLDERS EQUITY                       |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|Interest-bearing
deposits                                  |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|Domestic                                                   |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|Savings                                                    |  | $               | 18,324    |          |   | 9            |  |                 | 0.06 | %        | $ | 18,105       |   |   | 15     |  |  | 0.11 | %
|NOW                                                        |  |                 | 212,012   |          |   | 398          |  |                 | 0.25 |          |   | 201,238      |   |   | 400    |  |  | 0.27 |  
|Money market                                               |  |                 | 334,819   |          |   | 2,129        |  |                 | 0.85 |          |   | 336,470      |   |   | 2,525  |  |  | 1.00 |  
|Time                                                       |  |                 | 542,156   |          |   | 4,854        |  |                 | 1.20 |          |   | 346,034      |   |   | 6,143  |  |  | 2.37 |  
|Foreign                                                    |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|Time                                                       |  |                 | 423       |          |   | 3            |  |                 | 1.09 |          |   | 578          |   |   | 5      |  |  | 1.09 |  
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|Total
interest-bearing deposits                            |  |                 | 1,107,734 |          |   | 7,393        |  |                 | 0.89 |          |   | 902,425      |   |   | 9,088  |  |  | 1.35 |  
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|                                                          
|Borrowings                                                 |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|Securities sold under agreements to repurchase
- customers |  |                 | 49,046    |          |   | 175          |  |                 | 0.48 |          |   | 76,159       |   |   | 282    |  |  | 0.49 |  
|Securities sold under agreements to
repurchase - dealers   |  |                 | 5,827     |          |   | 28           |  |                 | 0.63 |          |   |             |   |   |       |  |  |     |  
|Federal funds purchased                                    |  |                 | 40,321    |          |   | 67           |  |                 | 0.22 |          |   | 25,390       |   |   | 43     |  |  | 0.23 |  
|Commercial paper                                           |  |                 | 14,604    |          |   | 34           |  |                 | 0.31 |          |   | 12,148       |   |   | 55     |  |  | 0.60 |  
|Short-term borrowings - FHLB                               |  |                 |          |          |   |             |  |                 |     |          |   | 4,560        |   |   | 11     |  |  | 0.31 |  
|Short-term borrowings - FRB                                |  |                 | 4,945     |          |   | 9            |  |                 | 0.25 |          |   | 184,249      |   |   | 356    |  |  | 0.26 |  
|Short-term borrowings - other                              |  |                 | 9,109     |          |   | 18           |  |                 | 0.27 |          |   | 1,733        |   |   | 1      |  |  | 0.05 |  
|Long-term borrowings - FHLB                                |  |                 | 128,628   |          |   | 2,591        |  |                 | 2.69 |          |   | 152,896      |   |   | 3,453  |  |  | 3.02 |  
|Long-term borrowings - sub debt                            |  |                 | 25,774    |          |   | 1,570        |  |                 | 8.38 |          |   | 25,774       |   |   | 1,570  |  |  | 8.38 |  
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|Total
borrowings                                           |  |                 | 278,254   |          |   | 4,492        |  |                 | 2.16 |          |   | 482,909      |   |   | 5,771  |  |  | 1.60 |  
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|                                                          
|TOTAL
INTEREST-BEARING LIABILITIES                         |  |                 | 1,385,988 |          |   | 11,885       |  |                 | 1.15 | %        |   | 1,385,334    |   |   | 14,859 |  |  | 1.43 | %
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|Noninterest-bearing deposits                               |  |                 | 471,081   |          |   |              |  |                 |      |          |   | 423,825      |   |   |        |  |  |      |  
|Other
liabilities                                          |  |                 | 142,113   |          |   |              |  |                 |      |          |   | 120,865      |   |   |        |  |  |      |  
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|Total liabilities                                          |  |                 | 1,999,182 |          |   |              |  |                 |      |          |   | 1,930,024    |   |   |        |  |  |      |  
|                                                          
|Shareholders
equity                                       |  |                 | 209,253   |          |   |              |  |                 |      |          |   | 157,808      |   |   |        |  |  |      |  
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                 |  | $               | 2,208,435 |          |   |              |  |                 |      |          | $ | 2,087,832    |   |   |        |  |  |      |  
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|                                                          
|Net interest
income/spread                                 |  |                 |           |          |   | 63,138       |  |                 | 3.92 | %        |   |              |   |   | 65,277 |  |  | 4.23 | %
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|                                                          
|Net yield on
interest-earning assets (margin)              |  |                 |           |          |   |              |  |                 | 4.26 | %        |   |              |   |   |        |  |  | 4.60 | %
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|Less: Tax
equivalent adjustment                            |  |                 |           |          |   | 1,830        |  |                 |      |          |   |              |   |   | 627    |  |  |      |  
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  
|                                                          
|Net interest
income                                        |  |                 |           |          | $ | 61,308       |  |                 |      |          |   |              |   | $ | 64,650 |  |  |      |  
|                                                           |  |                 |           |          |   |              |  |                 |      |          |   |              |   |   |        |  |  |      |  

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

44

---



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

|                                                            |  |                                                                                   |        |      |   |         |   |   |        |  
|----------------------------------------------------------- |  | --------------------------------------------------------------------------------- | ------ | ---- | - | ------- | - | - | ------ | -
|                                                            |  | Increase/(Decrease)
 Three Months Ended
 September 30, 2010 to September 30, 2009 |       
|                                                            |  |                                                                                   |       
|                                                            |  |                                                                                   |        |      |   |         |  
|                                                            |  | Volume                                                                            |        | Rate |   | Net [2] |  
|                                                            |  |                                                                                   |        |      |   |         |  
|INTEREST
 INCOME                                            |  |                                                                                   |        |      |   |         |   |   |        |  
|Interest-bearing
 deposits with other banks                 |  | $                                                                                 | (23    | )    | $ | 6       |   | $ | (17    | )
|                                                            |  |                                                                                   |        |      |   |         |   |   |        |  
|                                                            |  |                                                                                   |        |      |   |         |   |   |        |  
|Securities
 available for sale                              |  |                                                                                   | 1,235  |      |   | (2,371  | ) |   | (1,136 | )
|Securities
 held to maturity                                |  |                                                                                   | (1,614 | )    |   | (189    | ) |   | (1,803 | )
|Securities
 tax-exempt                                      |  |                                                                                   | 1,159  |      |   | 17      |   |   | 1,176  |  
|                                                            |  |                                                                                   |        |      |   |         |   |   |        |  
|Total investment securities                                 |  |                                                                                   | 780    |      |   | (2,543  | ) |   | (1,763 | )
|                                                            |  |                                                                                   |        |      |   |         |   |   |        |  
|                                                            |  |                                                                                   |        |      |   |         |   |   |        |  
|FRB and
 FHLB stock                                         |  |                                                                                   | (17    | )    |   | (62     | ) |   | (79    | )
|                                                            |  |                                                                                   |        |      |   |         |   |   |        |  
|                                                            |  |                                                                                   |        |      |   |         |   |   |        |  
|Loans,
 net of unearned discounts [3]                       |  |                                                                                   | 1,920  |      |   | (1,669  | ) |   | 251    |  
|                                                            |  |                                                                                   |        |      |   |         |   |   |        |  
|                                                            |  |                                                                                   |        |      |   |         |   |   |        |  
|TOTAL
 INTEREST INCOME                                      |  | $                                                                                 | 2,660  |      | $ | (4,268  | ) | $ | (1,608 | )
|                                                            |  |                                                                                   |        |      |   |         |   |   |        |  
|                                                            |  |                                                                                   |        |      |   |         |   |   |        |  
|INTEREST
 EXPENSE                                           |  |                                                                                   |        |      |   |         |   |   |        |  
|Interest-bearing
 deposits                                  |  |                                                                                   |        |      |   |         |   |   |        |  
|Domestic                                                    |  |                                                                                   |        |      |   |         |   |   |        |  
|Savings                                                     |  | $                                                                                 |       |      | $ | (1      | ) | $ | (1     | )
|NOW                                                         |  |                                                                                   | 2      |      |   | (41     | ) |   | (39    | )
|Money market                                                |  |                                                                                   | 30     |      |   | (116    | ) |   | (86    | )
|Time                                                        |  |                                                                                   | 781    |      |   | (1,167  | ) |   | (386   | )
|Foreign                                                     |  |                                                                                   |        |      |   |         |   |   |        |  
|Time                                                        |  |                                                                                   | (2     | )    |   |        |   |   | (2     | )
|                                                            |  |                                                                                   |        |      |   |         |   |   |        |  
|Total interest-bearing deposits                             |  |                                                                                   | 811    |      |   | (1,325  | ) |   | (514   | )
|                                                            |  |                                                                                   |        |      |   |         |   |   |        |  
|                                                            |  |                                                                                   |        |      |   |         |   |   |        |  
|Borrowings                                                  |  |                                                                                   |        |      |   |         |   |   |        |  
|Securities sold under agreements to repurchase -
 customers |  |                                                                                   | (39    | )    |   | 9       |   |   | (30    | )
|Securities sold under agreements to repurchase -
 dealers   |  |                                                                                   | 23     |      |   |        |   |   | 23     |  
|Federal funds purchased                                     |  |                                                                                   | 41     |      |   | 1       |   |   | 42     |  
|Commercial paper                                            |  |                                                                                   | 1      |      |   | (4      | ) |   | (3     | )
|Short-term borrowings - FRB                                 |  |                                                                                   | (131   | )    |   |        |   |   | (131   | )
|Short-term borrowings - other                               |  |                                                                                   |       |      |   | 14      |   |   | 14     |  
|Long-term borrowings - FHLB                                 |  |                                                                                   | (188   | )    |   | (138    | ) |   | (326   | )
|Long-term borrowings - sub debt                             |  |                                                                                   |       |      |   |        |   |   |       |  
|                                                            |  |                                                                                   |        |      |   |         |   |   |        |  
|Total borrowings                                            |  |                                                                                   | (293   | )    |   | (118    | ) |   | (411   | )
|                                                            |  |                                                                                   |        |      |   |         |   |   |        |  
|                                                            |  |                                                                                   |        |      |   |         |   |   |        |  
|TOTAL
 INTEREST EXPENSE                                     |  | $                                                                                 | 518    |      | $ | (1,443  | ) | $ | (925   | )
|                                                            |  |                                                                                   |        |      |   |         |   |   |        |  
|                                                            |  |                                                                                   |        |      |   |         |   |   |        |  
|NET
 INTEREST INCOME                                        |  | $                                                                                 | 2,142  |      | $ | (2,825  | ) | $ | (683   | )
|                                                            |  |                                                                                   |        |      |   |         |   |   |        |  

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

45

---



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

|                                                            |  |                                                                                  |        |      |   |         |   |   |        |  
|----------------------------------------------------------- |  | -------------------------------------------------------------------------------- | ------ | ---- | - | ------- | - | - | ------ | -
|                                                            |  | Increase/(Decrease)
 Nine Months Ended
 September 30, 2010 to September 30, 2009 |       
|                                                            |  |                                                                                  |       
|                                                            |  |                                                                                  |        |      |   |         |  
|                                                            |  | Volume                                                                           |        | Rate |   | Net [2] |  
|                                                            |  |                                                                                  |        |      |   |         |  
|INTEREST
 INCOME                                            |  |                                                                                  |        |      |   |         |   |   |        |  
|Interest-bearing
 deposits with other banks                 |  | $                                                                                | (4     | )    | $ | 11      |   | $ | 7      |  
|                                                            |  |                                                                                  |        |      |   |         |   |   |        |  
|                                                            |  |                                                                                  |        |      |   |         |   |   |        |  
|Securities
 available for sale                              |  |                                                                                  | 1,485  |      |   | (5,918  | ) |   | (4,433 | )
|Securities
 held to maturity                                |  |                                                                                  | (2,030 | )    |   | (70     | ) |   | (2,100 | )
|Securities
 tax-exempt                                      |  |                                                                                  | 3,362  |      |   | 75      |   |   | 3,437  |  
|                                                            |  |                                                                                  |        |      |   |         |   |   |        |  
|Total investment securities                                 |  |                                                                                  | 2,817  |      |   | (5,913  | ) |   | (3,096 | )
|                                                            |  |                                                                                  |        |      |   |         |   |   |        |  
|                                                            |  |                                                                                  |        |      |   |         |   |   |        |  
|FRB and
 FHLB stock                                         |  |                                                                                  | (50    | )    |   | (41     | ) |   | (91    | )
|                                                            |  |                                                                                  |        |      |   |         |   |   |        |  
|                                                            |  |                                                                                  |        |      |   |         |   |   |        |  
|Loans,
 net of unearned discounts [3]                       |  |                                                                                  | 1,825  |      |   | (3,758  | ) |   | (1,933 | )
|                                                            |  |                                                                                  |        |      |   |         |   |   |        |  
|                                                            |  |                                                                                  |        |      |   |         |   |   |        |  
|TOTAL
 INTEREST INCOME                                      |  | $                                                                                | 4,588  |      | $ | (9,701  | ) | $ | (5,113 | )
|                                                            |  |                                                                                  |        |      |   |         |   |   |        |  
|                                                            |  |                                                                                  |        |      |   |         |   |   |        |  
|INTEREST
 EXPENSE                                           |  |                                                                                  |        |      |   |         |   |   |        |  
|Interest-bearing
 deposits                                  |  |                                                                                  |        |      |   |         |   |   |        |  
|Domestic                                                    |  |                                                                                  |        |      |   |         |   |   |        |  
|Savings                                                     |  | $                                                                                |       |      | $ | (6      | ) | $ | (6     | )
|NOW                                                         |  |                                                                                  | 25     |      |   | (27     | ) |   | (2     | )
|Money market                                                |  |                                                                                  | (12    | )    |   | (384    | ) |   | (396   | )
|Time                                                        |  |                                                                                  | 2,548  |      |   | (3,837  | ) |   | (1,289 | )
|Foreign                                                     |  |                                                                                  |        |      |   |         |   |   |        |  
|Time                                                        |  |                                                                                  | (2     | )    |   |        |   |   | (2     | )
|                                                            |  |                                                                                  |        |      |   |         |   |   |        |  
|Total interest-bearing deposits                             |  |                                                                                  | 2,559  |      |   | (4,254  | ) |   | (1,695 | )
|                                                            |  |                                                                                  |        |      |   |         |   |   |        |  
|                                                            |  |                                                                                  |        |      |   |         |   |   |        |  
|Borrowings                                                  |  |                                                                                  |        |      |   |         |   |   |        |  
|Securities sold under agreements to repurchase -
 customers |  |                                                                                  | (101   | )    |   | (6      | ) |   | (107   | )
|Securities sold under agreements to repurchase -
 dealers   |  |                                                                                  | 28     |      |   |        |   |   | 28     |  
|Federal funds purchased                                     |  |                                                                                  | 26     |      |   | (2      | ) |   | 24     |  
|Commercial paper                                            |  |                                                                                  | 9      |      |   | (30     | ) |   | (21    | )
|Short-term borrowings - FHLB                                |  |                                                                                  | (11    | )    |   |        |   |   | (11    | )
|Short-term borrowings - FRB                                 |  |                                                                                  | (334   | )    |   | (13     | ) |   | (347   | )
|Short-term borrowings - other                               |  |                                                                                  | 8      |      |   | 9       |   |   | 17     |  
|Long-term borrowings - FHLB                                 |  |                                                                                  | (511   | )    |   | (351    | ) |   | (862   | )
|Long-term borrowings - sub debt                             |  |                                                                                  |       |      |   |        |   |   |       |  
|                                                            |  |                                                                                  |        |      |   |         |   |   |        |  
|Total borrowings                                            |  |                                                                                  | (886   | )    |   | (393    | ) |   | (1,279 | )
|                                                            |  |                                                                                  |        |      |   |         |   |   |        |  
|                                                            |  |                                                                                  |        |      |   |         |   |   |        |  
|TOTAL
 INTEREST EXPENSE                                     |  | $                                                                                | 1,673  |      | $ | (4,647  | ) | $ | (2,974 | )
|                                                            |  |                                                                                  |        |      |   |         |   |   |        |  
|                                                            |  |                                                                                  |        |      |   |         |   |   |        |  
|NET
 INTEREST INCOME                                        |  | $                                                                                | 2,915  |      | $ | (5,054  | ) | $ | (2,139 | )
|                                                            |  |                                                                                  |        |      |   |         |   |   |        |  

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

46

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STERLING BANCORP AND SUBSIDIARIES
Regulatory Capital and Ratios

Ratios and Minimums

|                                            |  |        |         |                               |  |                         |   |       |         |        |  |       |   |   |         |  |  |       |  
|------------------------------------------- |  | ------ | ------- | ----------------------------- |  | ----------------------- | - | ----- | ------- | ------ |  | ----- | - | - | ------- |  |  | ----- | -
|                                            |  | Actual |         | For Capital
 Adequacy Minimum |  | To Be Well
 Capitalized |  
|                                            |  |        |         |                               |  |                         |  
|As of
 September 30, 2010                   |  | Amount |         | Ratio                         |  | Amount                  |   | Ratio |         | Amount |  | Ratio |  
|                                            |  |        |         |                               |  |                         |   |       |         |        |  |       |  
|Total Capital(to Risk-Weighted Assets):     |  |        |         |                               |  |                         |   |       |         |        |  |       |   |   |         |  |  |       |  
|The Company                                 |  | $      | 253,574 |                               |  | 14.70                   | % | $     | 137,995 |        |  | 8.00  | % | $ | 172,493 |  |  | 10.00 | %
|The bank                                    |  |        | 198,988 |                               |  | 11.78                   |   |       | 135,149 |        |  | 8.00  |   |   | 168,936 |  |  | 10.00 |  
|                                            |  |        |         |                               |  |                         |   |       |         |        |  |       |   |   |         |  |  |       |  
|Tier 1 Capital(to Risk-Weighted Assets):    |  |        |         |                               |  |                         |   |       |         |        |  |       |   |   |         |  |  |       |  
|The Company                                 |  |        | 235,155 |                               |  | 13.63                   |   |       | 68,997  |        |  | 4.00  |   |   | 103,496 |  |  | 6.00  |  
|The bank                                    |  |        | 180,574 |                               |  | 10.69                   |   |       | 67,574  |        |  | 4.00  |   |   | 101,361 |  |  | 6.00  |  
|                                            |  |        |         |                               |  |                         |   |       |         |        |  |       |   |   |         |  |  |       |  
|Tier 1 Leverage Capital(to Average Assets): |  |        |         |                               |  |                         |   |       |         |        |  |       |   |   |         |  |  |       |  
|The Company                                 |  |        | 235,155 |                               |  | 10.35                   |   |       | 90,841  |        |  | 4.00  |   |   | 113,551 |  |  | 5.00  |  
|The bank                                    |  |        | 180,574 |                               |  | 8.12                    |   |       | 88,952  |        |  | 4.00  |   |   | 111,190 |  |  | 5.00  |  
|                                            |  |        |         |                               |  |                         |   |       |         |        |  |       |   |   |         |  |  |       |  
|As of December 31, 2009                     |  |        |         |                               |  |                         |   |       |         |        |  |       |   |   |         |  |  |       |  
|                                            |  |        |         |                               |  |                         |   |       |         |        |  |       |   |   |         |  |  |       |  
|Total Capital(to Risk-Weighted Assets):     |  |        |         |                               |  |                         |   |       |         |        |  |       |   |   |         |  |  |       |  
|The Company                                 |  | $      | 193,760 |                               |  | 12.75                   | % | $     | 121,606 |        |  | 8.00  | % | $ | 152,007 |  |  | 10.00 | %
|The bank                                    |  |        | 169,353 |                               |  | 11.25                   |   |       | 120,378 |        |  | 8.00  |   |   | 150,473 |  |  | 10.00 |  
|                                            |  |        |         |                               |  |                         |   |       |         |        |  |       |   |   |         |  |  |       |  
|Tier 1 Capital(to Risk-Weighted Assets):    |  |        |         |                               |  |                         |   |       |         |        |  |       |   |   |         |  |  |       |  
|The Company                                 |  |        | 174,746 |                               |  | 11.50                   |   |       | 60,803  |        |  | 4.00  |   |   | 91,204  |  |  | 6.00  |  
|The bank                                    |  |        | 150,529 |                               |  | 10.00                   |   |       | 60,189  |        |  | 4.00  |   |   | 90,284  |  |  | 6.00  |  
|                                            |  |        |         |                               |  |                         |   |       |         |        |  |       |   |   |         |  |  |       |  
|Tier 1 Leverage Capital(to Average Assets): |  |        |         |                               |  |                         |   |       |         |        |  |       |   |   |         |  |  |       |  
|The Company                                 |  |        | 174,746 |                               |  | 8.06                    |   |       | 86,757  |        |  | 4.00  |   |   | 108,447 |  |  | 5.00  |  
|The bank                                    |  |        | 150,529 |                               |  | 6.97                    |   |       | 86,385  |        |  | 4.00  |   |   | 107,981 |  |  | 5.00  |  

47

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|        |                                                           
|------- | ----------------------------------------------------------
|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ASSET/LIABILITY
MANAGEMENT

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

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

Market
Risk

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

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

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

The Companys balance sheet structure is primarily short-term in nature
with a substantial portion of assets and liabilities repricing or maturing
within one year. The Companys gap analysis at September 30, 2010, presented on
page 52, indicates that net interest income would increase during periods of
rising interest rates and decrease during periods of falling interest rates,
but, as mentioned above, gap analysis may not be an accurate predictor of net
interest income.

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

48

---



As of September 30, 2010, the Company was not a party to any financial
instrument derivative agreement.

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

The Companys interest rate sensitivity is determined by identifying
the probable impact of changes in market interest rates on the yields on the
Companys assets and the rates that would be paid on its liabilities. This
modeling technique involves a degree of estimation based on certain assumptions
that management believes to be reasonable. Utilizing this process, management
projects the impact of changes in interest rates on net interest margin. The
Company has established certain policy limits for the potential volatility of
its net interest margin assuming certain levels of changes in market interest
rates with the objective of maintaining a stable net interest margin under
various probable rate scenarios. Management generally has maintained a risk
position well within the policy limits. As of December 31, 2009, the model
indicated the impact of a 100 and 200 basis point parallel and pro rata rise in
rates over 12 months would approximate a 2.6% ($2.7 million) and a 4.9% ($5.1
million) increase in net interest income, respectively, while the impact of a
25 basis point decline in rates over the same period would approximate a 1.3%
($1.3 million) decline from an unchanged rate environment. The likelihood of a
decrease in interest rates beyond 25 basis points as of December 31, 2009 was
considered to be remote given then-current interest rate levels. As of
September 30, 2010, the model indicated the impact of a 100 and 200 basis point
parallel and pro rata rise in rates over 12 months would approximate a 2.1%
($2.4 million) and a 4.5% ($5.0 million) increase in net interest income,
respectively, while the impact of a 25 basis point decline in rates over the
same period would approximate a 0.8% ($0.9 million) decline from an unchanged
rate environment. The likelihood of a decrease in interest rates beyond 25
basis points as of September 30, 2010 was considered to be remote given
then-current interest rate levels.

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

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

The shape of the yield curve can cause downward pressure on net
interest income. In general, if and to the extent that the yield curve is
flatter (i.e., the differences between interest rates for different maturities
are relatively smaller) than previously anticipated, then the yield on the
Companys interest-earning assets and its cash flows will tend to be lower.
Management believes that a relatively flat yield curve could continue to
adversely affect the Companys results in 2010.

49

---



Liquidity
Risk

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

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

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

At September 30, 2010, the parent companys short-term debt, consisting
principally of commercial paper used to finance ongoing current business
activities, was approximately $16.2 million. The parent company had cash,
interest-bearing deposits with banks and other current assets aggregating $79.3
million. The parent company also has back-up credit lines with banks of $19.0
million. Since 1979, the parent company has had no need to use the available
back-up lines of credit.

50

---



The following
table sets forth information regarding the Companys obligations and
commitments to make future payments under contract as of September 30, 2010:

|                                     |  |                        |         |                  |   |           |  |           |         |               |   |        |  |   |        | 
|------------------------------------ |  | ---------------------- | ------- | ---------------- | - | --------- |  | --------- | ------- | ------------- | - | ------ |  | - | ------ | 
|                                     |  | Payments
Due by Period |        
|                                     |  |                        |        
|Contractural obligations (1)         |  | Total                  |         | Less
than
1 Year |   | 1-3
Years |  | 4-5
Years |         | After
5 Years |  
|                                     |  |                        |         |                  |   |           |  |           |         |               |  
|                                    
|Long-Term Debt                       |  | $                      | 170,302 |                  | $ | 30,000    |  | $         | 92,228  |               | $ | 2,300  |  | $ | 45,774 | 
|Operating Leases                     |  |                        | 45,659  |                  |   | 4,513     |  |           | 8,313   |               |   | 8,710  |  |   | 24,123 | 
|                                     |  |                        |         |                  |   |           |  |           |         |               |   |        |  |   |        | 
|Total Contractural Cash
 Obligations |  | $                      | 215,961 |                  | $ | 34,513    |  | $         | 100,541 |               | $ | 11,010 |  | $ | 69,897 | 
|                                     |  |                        |         |                  |   |           |  |           |         |               |   |        |  |   |        | 

(1) Based on contractural
maturity dates

The following table sets forth information regarding the Companys
obligations under other commercial commitments as of September 30, 2010:

|                              |  |                                            |         |                  |   |           |  |           |        |               |   |   |  |   |       | 
|----------------------------- |  | ------------------------------------------ | ------- | ---------------- | - | --------- |  | --------- | ------ | ------------- | - | - |  | - | ----- | 
|                              |  | Amount
of Commitment Expiration per Period |        
|                              |  |                                            |        
|Other Commercial
Commitments  |  | Total
Amount 
Committed                    |         | Less
Than
1 Year |   | 1-3
Years |  | 4-5
Years |        | After
5 Years |  
|                              |  |                                            |         |                  |   |           |  |           |        |               |  
|                              |  |                                            |         |                  |   |           |  |           |        |               |   |   |  |   |       | 
|Residential Loans             |  | $                                          | 59,670  |                  | $ | 59,670    |  | $         |       |               | $ |  |  | $ |      | 
|Commercial Loans              |  |                                            | 24,409  |                  |   | 11,512    |  |           | 10,963 |               |   |  |  |   | 1,934 | 
|                              |  |                                            |         |                  |   |           |  |           |        |               |   |   |  |   |       | 
|Total Loans                   |  |                                            | 84,079  |                  |   | 71,182    |  |           | 10,963 |               |   |  |  |   | 1,934 | 
|                              |  |                                            |         |                  |   |           |  |           |        |               |   |   |  |   |       | 
|Standby Letters of Credit     |  |                                            | 21,722  |                  |   | 18,617    |  |           | 3,105  |               |   |  |  |   |      | 
|Other Commercial Commitments  |  |                                            | 63,726  |                  |   | 62,920    |  |           |       |               |   |  |  |   | 806   | 
|                              |  |                                            |         |                  |   |           |  |           |        |               |   |   |  |   |       | 
|Total Commercial
 Commitments |  | $                                          | 169,527 |                  | $ | 152,719   |  | $         | 14,068 |               | $ |  |  | $ | 2,740 | 
|                              |  |                                            |         |                  |   |           |  |           |        |               |   |   |  |   |       | 

INFORMATION AVAILABLE ON OUR WEB SITE

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

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

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

51

---



|                                  
|----------------------------------
|STERLING
 BANCORP AND SUBSIDIARIES
|Interest Rate Sensitivity         

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

|                                                               |  |                      |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|-------------------------------------------------------------- |  | -------------------- | ------- | -------------------------- | - | ------------------------- |  | --------------------------- | ------- | ------------ | - | ---------------- |  | ----- | ------- |  | - | -------- | - | - | --------- | 
|                                                               |  | Repricing
      Date |         |                            |   |                          
|                                                               |  |                      |        
|                                                               |  | 3 Monthsor Less      |         | More than3 Monthsto 1 Year |   | More than1 Year to5 Years |  | More than5 Years to10 Years |         | Over10 Years |   | NonrateSensitive |  | Total |        
|                                                               |  |                      |         |                            |   |                           |  |                             |         |              |   |                  |  |       |        
|ASSETS                                                         |  |                      |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|Interest-bearing deposits with other banks                     |  | $                    | 19,300  |                            | $ |                          |  | $                           |        |              | $ |                 |  | $     |        |  | $ |         |   | $ | 19,300    | 
|Investment securities                                          |  |                      | 35,126  |                            |   | 206,397                   |  |                             | 255,627 |              |   | 52,604           |  |       | 214,707 |  |   |         |   |   | 764,461   | 
|Commercial and industrial loans                                |  |                      | 543,522 |                            |   | 84,485                    |  |                             | 65,670  |              |   | 4,885            |  |       | 85      |  |   | (2,187   | ) |   | 696,460   | 
|Lease financing receivables                                    |  |                      | 1,250   |                            |   | 10,547                    |  |                             | 153,538 |              |   | 3,481            |  |       |        |  |   | (17,903  | ) |   | 150,913   | 
|Factored receivables                                           |  |                      | 186,435 |                            |   |                          |  |                             |        |              |   |                 |  |       |        |  |   | (229     | ) |   | 186,206   | 
|Real
      estate-residential mortgage                         |  |                      | 32,912  |                            |   | 42,581                    |  |                             | 12,345  |              |   | 9,655            |  |       | 65,625  |  |   |         |   |   | 163,118   | 
|Real
      estate-commercial mortgage                          |  |                      | 12,176  |                            |   | 30,819                    |  |                             | 15,476  |              |   | 37,551           |  |       |        |  |   |         |   |   | 96,022    | 
|Real estate-construction and land development                  |  |                      |        |                            |   |                          |  |                             | 25,092  |              |   |                 |  |       |        |  |   |         |   |   | 25,092    | 
|Loans to
      individuals                                     |  |                      | 2,234   |                            |   | 2,192                     |  |                             | 6,341   |              |   | 1,634            |  |       |        |  |   |         |   |   | 12,401    | 
|Noninterest-earning assets & allowance for loan
      losses   |  |                      |        |                            |   |                          |  |                             |        |              |   |                 |  |       |        |  |   | 189,504  |   |   | 189,504   | 
|                                                               |  |                      |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|Total Assets                                                   |  |                      | 832,955 |                            |   | 377,021                   |  |                             | 534,089 |              |   | 109,810          |  |       | 280,417 |  |   | 169,185  |   |   | 2,303,477 | 
|                                                               |  |                      |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|                                                               |  |                      |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|LIABILITIES AND SHAREHOLDERS EQUITY                           |  |                      |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|Interest-bearing deposits                                      |  |                      |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|Savings [1]                                                    |  |                      |        |                            |   |                          |  |                             | 19,566  |              |   |                 |  |       |        |  |   |         |   |   | 19,566    | 
|NOW [1]                                                        |  |                      |        |                            |   |                          |  |                             | 193,364 |              |   |                 |  |       |        |  |   |         |   |   | 193,364   | 
|Money market [1]                                               |  |                      | 267,745 |                            |   |                          |  |                             | 74,587  |              |   |                 |  |       |        |  |   |         |   |   | 342,332   | 
|Time                                                           |  |                      | 243,107 |                            |   | 260,155                   |  |                             | 47,456  |              |   |                 |  |       |        |  |   |         |   |   | 550,718   | 
|Securities sold under agreement to repurchase -
      customer |  |                      | 21,084  |                            |   |                          |  |                             |        |              |   |                 |  |       |        |  |   |         |   |   | 21,084    | 
|Securities sold under agreement to repurchase -
      dealer   |  |                      |        |                            |   |                          |  |                             | 5,000   |              |   |                 |  |       |        |  |   |         |   |   | 5,000     | 
|Federal funds purchased                                        |  |                      | 60,000  |                            |   |                          |  |                             |        |              |   |                 |  |       |        |  |   |         |   |   | 60,000    | 
|Commercial paper                                               |  |                      | 14,730  |                            |   | 515                       |  |                             |        |              |   |                 |  |       |        |  |   |         |   |   | 15,245    | 
|Short-term borrowings - other                                  |  |                      | 2,221   |                            |   |                          |  |                             |        |              |   |                 |  |       |        |  |   |         |   |   | 2,221     | 
|Long-term borrowings - FHLB                                    |  |                      |        |                            |   | 30,000                    |  |                             | 94,528  |              |   | 20,000           |  |       |        |  |   |         |   |   | 144,528   | 
|Long-term borrowings - subordinated debentures                 |  |                      |        |                            |   |                          |  |                             |        |              |   |                 |  |       | 25,774  |  |   |         |   |   | 25,774    | 
|Noninterest-bearing liabilities & shareholders
      equity   |  |                      |        |                            |   |                          |  |                             |        |              |   |                 |  |       |        |  |   | 923,645  |   |   | 923,645   | 
|                                                               |  |                      |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|                                                               |  |                      |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|Total Liabilities and Shareholders Equity                     |  |                      | 608,887 |                            |   | 290,670                   |  |                             | 434,501 |              |   | 20,000           |  |       | 25,774  |  |   | 923,645  |   |   | 2,303,477 | 
|                                                               |  |                      |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|                                                               |  |                      |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|Net Interest Rate Sensitivity Gap                              |  | $                    | 224,068 |                            | $ | 86,351                    |  | $                           | 99,588  |              | $ | 89,810           |  | $     | 254,643 |  | $ | (754,460 | ) | $ |          | 
|                                                               |  |                      |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|                                                               |  |                      |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|Cumulative Gap September 30, 2010                              |  | $                    | 224,068 |                            | $ | 310,419                   |  | $                           | 410,007 |              | $ | 499,817          |  | $     | 754,460 |  | $ |         |   | $ |          | 
|                                                               |  |                      |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|                                                               |  |                      |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|Cumulative Gap September 30, 2009 [2]                          |  | $                    | 211,841 |                            | $ | 206,153                   |  | $                           | 153,245 |              | $ | 269,298          |  | $     | 646,997 |  | $ |         |   | $ |          | 
|                                                               |  |                      |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|                                                               |  |                      |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 
|Cumulative Gap December 31, 2009 [2]                           |  | $                    | 215,345 |                            | $ | 223,572                   |  | $                           | 238,762 |              | $ | 348,921          |  | $     | 707,012 |  | $ |         |   | $ |          | 
|                                                               |  |                      |         |                            |   |                           |  |                             |         |              |   |                  |  |       |         |  |   |          |   |   |           | 

|    |                                                                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|[1] | Historically, balances in non-maturity deposit accounts have remained relatively stable despite
changes in levels of interest rates. Balances are shown in repricing periods based on managements
historical repricing practices and run-off experience.
|    |                                                                                                                                                                                                                                                          
|[2] | Certain reclassifications have been made to conform to the current presentation.                                                                                                                                                                         

52

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ITEM 4. CONTROLS AND PROCEDURES

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

No change in the Companys internal control over financial reporting
(as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934)
occurred during the fiscal quarter ended September 30, 2010 that has materially
affected, or is reasonably likely to materially affect, the Companys internal
control over financial reporting.

53

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PART II - OTHER
INFORMATION

Item 6. Exhibits

The following
exhibits are filed as part of this report:

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

54

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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 4, 2010                      |  | /s/ Louis J.
 Cappelli |  | 
|      |                                       |  |                        |  | 
|      | Louis J.
 Cappelli                    | 
|      | Chairman and
 Chief Executive Officer | 
|     
|Date: | November 4, 2010                      |  | /s/ John W.
 Tietjen   |  | 
|      |                                       |  |                        |  | 
|      | John W.
 Tietjen                      | 
|      | Executive Vice President and          | 
|      | Chief
 Financial Officer              | 

55

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STERLING BANCORP AND SUBSIDIARIES

EXHIBIT INDEX

|                |  |                                                                                                |             |    |  |                     
|--------------- |  | ---------------------------------------------------------------------------------------------- | ----------- | -- |  | --------------------
|Exhibit
 Number |  |                                                                                                | Description |    |  | Sequential
 Page No.
|                |  |                                                                                                |             |    |  |                     
|                |  |                                                                                                |             |   
|11              |  | Statement
 re: Computation of per share earnings                                               |             | 57
|                |  |                                                                                                |             |   
|31.1            |  | Certification
 of the CEO pursuant to Exchange Act Rule 13a-14(a).                             |             | 58
|                |  |                                                                                                |             |   
|31.2            |  | Certification
 of the CFO pursuant to Exchange Act Rule 13a-14(a).                             |             | 59
|                |  |                                                                                                |             |   
|32.1            |  | Certification
 of the CEO required by Section 1350 of Chapter 63 of Title 18 of the U.S.
 Code |             | 60
|                |  |                                                                                                |             |   
|32.2            |  | Certification
 of the CFO required by Section 1350 of Chapter 63 of Title 18 of the U.S.
 Code |             | 61

56

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