UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 FORM 10-Q (Mark
  One)x QUARTERLY
  REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the
  quarterly period ended June 30, 2006oro TRANSITION
  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________to
____________________ Commission File Number: 1-5273-1 Sterling Bancorp(Exact name of registrant as specified in its
charter)  New
  York

13-2565216(State or
  other jurisdiction of
  incorporation or organization)

(I.R.S. Employer
  Identification)650 Fifth
  Avenue, New York, N.Y.

10019-6108(Address
  of principal executive offices)

(Zip Code)  212-757-3300(Registrants telephone number, including area
code)N/A(Former
  name, former address and former fiscal year, if changed since last report) Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.xYesoNo Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of accelerated
filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check
one): Large
  Accelerated Filero
Accelerated
  Filerx
Non-Accelerated
  Filero Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).oYesxNo As of July 31, 2006 there were 18,712,072 shares of
common stock,
$1.00 par value, outstanding.    STERLING BANCORP


PagePART
        I FINANCIAL INFORMATIONItem
        1.
    
    Financial
        StatementsConsolidated
        Financial Statements (Unaudited)
    
    3Notes
        to Consolidated Financial Statements
    
    8Item
        2.
    
    Managements
        Discussion and Analysis of Financial Condition and Results of OperationsOverview
    
    14Income
        Statement Analysis
    
    15Balance
        Sheet Analysis
    
    20Capital
    
    24Cautionary
        Statement Regarding Forward-Looking Statements
    
    24Average
        Balance Sheets
    
    26Rate/Volume
        Analysis
    
    28Regulatory
        Capital and Ratios
    
    30Item
        3.
    
    Quantitative
        and Qualitative Disclosures About Market RiskAsset/Liability
        Management
    
    31Interest
        Rate Sensitivity
    
    36Item
        4.
    
    Controls
        and Procedures
    
    37PART
        II OTHER INFORMATIONItem
        2.
    
    Unregistered
        Sales of Equity Securities and Use of Proceeds
    
    38Item
        4.
    
    Submission
        of matters to a vote of security holders
    
    39Item
        6.
    
    Exhibits
    
    40SIGNATURES
    
    41EXHIBIT
        INDEXExhibit
        11
    
    Statement
        Re: Computation of Per Share Earnings
    
    43Exhibit
        31.1
    
    Certification
        of the CEO pursuant to Exchange Act Rule 13a-14(a)
    
    44Exhibit
        31.2
    
    Certification
        of the CFO pursuant to Exchange Act Rule 13a-14(a)
    
    45Exhibit
        32.1
    
    Certification
        of the CEO required by Section 1350 of Chapter 63 of Title 18 of the U.S.
        Code
    
    46Exhibit
        32.2
    
    Certification
        of the CFO required by Section 1350 of Chapter 63 of Title 18 of the U.S.
        Code
    
    472

STERLING BANCORP AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)

June 30,
  2006

December 31,
  2005ASSETSCash and due from
banks

$
83,340,064

$
69,148,683Interest-bearing deposits
with other banks


1,155,614


1,212,227Securities available for
sale (at estimated fair
  value; pledged: $116,248,999 in 2006 and $111,233,053 in 2005)


161,001,519


201,259,112Securities held to maturity
(pledged: $319,056,478
  in 2006 and $301,246,338 in 2005) (estimated fair value: $454,700,045 in 2006
  and $504,514,084 in 2005)


473,568,235


514,039,476Total
investment securities


634,569,754


715,298,588Loans held for
sale


29,632,251


40,977,538Loans held in portfolio, net
of unearned discounts


1,142,967,782


1,128,799,286Less allowance for loan
losses


17,901,479


16,517,330Loans,
net


1,125,066,303


1,112,281,956Customers liability
under acceptances


136,234


589,667Goodwill


22,962,416


21,158,440Premises and equipment,
net


11,081,561


10,903,870Other real
estate


1,464,821


859,541Accrued interest
receivable


5,068,916


6,116,107Bank owned life
insurance


27,452,940


26,964,575Other assets


53,002,808


50,531,294$
1,994,933,682

$
2,056,042,486LIABILITIES AND
SHAREHOLDERS EQUITYDepositsDemand
deposits

$
495,256,813

$
510,883,966Savings,
NOW and money market deposits


436,929,418


436,173,517Time
deposits


483,256,309


501,268,657Total
deposits


1,415,442,540


1,448,326,140Securities sold under
agreements to repurchase -
  customers


57,932,072


61,067,073Securities sold under
agreements to repurchase -
  dealers


110,346,000


88,729,000Federal funds
purchased


20,000,000


55,000,000Commercial
paper


43,717,120


38,191,016Short-term borrowings -
FHLB


56,000,000


35,000,000Short-term borrowings -
other


1,448,813


3,851,246Long-term borrowings -
FHLB


30,000,000


60,000,000Long-term borrowings -
subordinated debentures


25,774,000


25,774,000Total
borrowings


345,218,005


367,612,335Acceptances
outstanding


136,234


589,667Accrued expenses and other
liabilities


87,021,847


91,926,784Total
liabilities


1,847,818,626


1,908,454,926Shareholders
equityCommon stock, $1 par value.
Authorized 50,000,000
  shares; issued 21,177,084 and 21,066,916 shares, respectively


21,177,084


21,066,916Capital
surplus


167,926,809


166,313,566Retained
earnings


24,920,907


20,739,352Accumulated other
comprehensive loss, net of tax


(7,205,449
)

(5,229,620
)206,819,351


202,890,214LessCommon
shares in treasury at cost, 2,465,012 and
  2,231,442 shares, respectively


59,704,295


55,280,647Unearned
compensation





22,007Total
shareholders equity


147,115,056


147,587,560$
1,994,933,682

$
2,056,042,486See Notes to Consolidated Financial
Statements.

3

STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)

Three Months Ended
  June 30,

Six Months Ended
  June 30,2006

2005

2006

2005INTEREST
INCOMELoans

$
24,408,636

$
19,477,434

$
46,433,878

$
37,853,849Investment
securitiesAvailable
for sale


1,978,003


2,467,142


4,179,789


4,968,786Held to
maturity


5,551,640


5,732,568


11,295,114


10,942,791Federal
funds sold


34,886


112,635


74,871


222,496Deposits
with other banks


20,563


15,918


50,644


22,101Total
interest income


31,993,728


27,805,697


62,034,296


54,010,023INTEREST
EXPENSEDepositsSavings,
NOW and money market


1,672,459


766,102


3,455,379


1,395,359Time


4,714,822


3,319,975


9,175,673


6,142,313Securities
sold under agreements to repurchase-
customers


767,373


416,717


1,462,221


753,752-
dealers


1,344,153


420,308


2,328,141


668,920Federal
funds purchased


251,081


157,251


386,221


178,033Commercial
paper


537,923


222,421


942,524


382,487Short-term
borrowings - FHLB


642,197


55,836


835,365


55,836Short-term
borrowings - other


7,369


5,457


17,781


10,460Long-term
borrowings - FHLB


460,501


852,874


1,046,852


1,808,390Long-term
borrowings - subordinated debt


523,437


523,438


1,046,875


1,046,875Total
interest expense


10,921,315


6,740,379


20,697,032


12,442,425Net interest
income


21,072,413


21,065,318


41,337,264


41,567,598Provision for loan
losses


2,477,229


2,005,500


5,042,229


4,654,000Net interest income after
provision for loan losses


18,595,184


19,059,818


36,295,035


36,913,598NONINTEREST
INCOMECustomer
related service charges and fees


6,054,378


3,894,505


9,694,467


7,295,689Mortgage
banking income


2,567,420


4,558,000


4,783,972


8,433,847Trust
fees


137,798


151,245


289,520


323,523Bank owned
life insurance income


268,305


437,350


488,365


687,364Securities
gains/(losses)


14,866





(444,631
)

196,680Other
income


57,314


272,454


170,899


372,651Total
noninterest income


9,100,081


9,313,554


14,982,592


17,309,754NONINTEREST
EXPENSESSalaries


9,677,399


8,198,595


17,983,208


16,355,198Employee
benefits


2,829,116


2,344,658


5,785,723


4,094,863Total
personnel expense


12,506,515


10,543,253


23,768,931


20,450,061Occupancy
and equipment expenses, net


2,503,283


2,179,211


4,819,451


4,258,051Advertising
and marketing


822,700


1,014,070


1,856,898


2,130,393Professional fees


825,990


1,434,229


2,749,730


2,965,408Communications


481,245


484,533


912,959


867,814Other
expenses


2,542,553


2,535,370


4,942,139


4,495,367Total
noninterest expenses


19,682,286


18,190,666


39,050,108


35,167,094Income before income
taxes


8,012,979


10,182,706


12,227,519


19,056,258Provision for income
taxes


3,147,494


4,126,553


921,901


7,233,382Net income

$
4,865,485

$
6,056,153

$
11,305,618

$
11,822,876Average number of common
shares outstandingBasic


18,754,271


19,249,263


18,769,265


19,207,818Diluted


19,286,286


19,923,379


19,310,135


19,826,021Earnings per average common
shareBasic

$
0.26

$
0.32

$
0.60

$
0.62Diluted


0.26


0.31


0.59


0.60Dividends per common
share


0.19


0.18


0.38


0.36See Notes to Consolidated Financial
Statements.

4

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

Three Months Ended
  June 30,

Six Months Ended
  June 30,2006

2005

2006

2005Net Income

$
4,865,485

$
6,056,153

$
11,305,618

$
11,822,876Other comprehensive
(loss)/income, net of tax:Unrealized
holding (losses)/gains arising during the
  period


(985,184
)

1,328,455


(2,219,531
)

(907,691
)Reclassification adjustment for (gains)/losses
  included in net income


(8,148
)




243,702


(106,404
)Comprehensive
income

$
3,872,153

$
7,384,608

$
9,329,789

$
10,808,781See Notes to Consolidated Financial
Statements.

5

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

Six Months Ended
  June 30,2006

2005Common StockBalance at
January 1

$
21,066,916

$
19,880,521Common
shares issued under stock incentive plan


110,168


175,328Balance at
June 30

$
21,177,084

$
20,055,849Capital
SurplusBalance at
January 1

$
166,313,566

$
145,310,745Common
shares issued under stock incentive plan and
  related tax benefits


1,613,243


2,936,384Balance at
June 30

$
167,926,809

$
148,247,129Retained
EarningsBalance at
January 1

$
20,739,352

$
28,664,568Net
Income


11,305,618


11,822,876Cash
dividends paid - common shares


(7,124,063
)

(6,963,472
)Balance at
June 30

$
24,920,907

$
33,523,972Accumulated Other
Comprehensive LossBalance at
January 1

$
(5,229,620
)
$
(1,921,060
)Unrealized
holding losses arising during the period:Before
tax


(3,837,020
)

(1,684,476
)Tax
effect


1,617,489


776,785Net of
tax


(2,219,531
)

(907,691
)Reclassification adjustment for losses/(gains)
  included in net income:Before
tax


444,631


(196,680
)Tax
effect


(200,929
)

90,276Net of
tax


243,702


(106,404
)Balance at
June 30

$
(7,205,449
)
$
(2,935,155
)Treasury StockBalance at
January 1

$
(55,280,647
)
$
(42,939,969
)Purchase of
common shares


(3,809,856
)

(547,460
)Surrender
of shares issued under stock incentive plan


(613,792
)

(444,787
)Balance at
June 30

$
(59,704,295
)
$
(43,932,216
)Unearned
CompensationBalance at
January 1

$
(22,007
)
$
(291,212
)Amortization of unearned compensation


22,007


137,181Balance at
June 30

$


$
(154,031
)Total Shareholders
EquityBalance at
January 1

$
147,587,560

$
148,703,593Net changes
during the period


(472,504
)

6,101,955Balance at
June 30

$
147,115,056

$
154,805,548See Notes to Consolidated Financial Statements.

6

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

Six
        Months Ended
        June 30,2006
    
    2005Operating
        ActivitiesNet
        Income
    
    $
    11,305,618
    
    $
    11,822,876Adjustments
        to reconcile net income to net cash provided by (used in) operating activities:Provision
        for loan losses
    
    
    5,042,229
    
    
    4,654,000Depreciation and amortization of premises and equipment
    
    
    1,131,812
    
    
    1,006,556Securities losses (gains)
    
    
    444,631
    
    
    (196,680
    )Income
        from bank owned life insurance
    
    
    (488,365
    )
    
    (687,364
    )Deferred
        income tax provision (benefit)
    
    
    1,282,520
    
    
    (1,463,038
    )Proceeds
        from sale of loans
    
    
    312,440,005
    
    
    317,419,323Gains
        on sales of loans, net
    
    
    (4,783,972
    )
    
    (8,433,847
    )Originations of loans held for sale
    
    
    (296,310,746
    )
    
    (308,694,015
    )Amortization of unearned compensation
    
    
    22,007
    
    
    137,181Amortization of premiums on securities
    
    
    318,295
    
    
    480,003Accretion
        of discounts on securities
    
    
    (262,433
    )
    
    (296,378
    )Decrease
        (Increase) in accrued interest receivable
    
    
    1,047,191
    
    
    (45,152
    )Decrease
        in accrued expenses and other liabilities
    
    
    (15,824,054
    )
    
    (14,413,984
    )Increase
        in other assets
    
    
    (768,454
    )
    
    (2,750,536
    )Other,
        net
    
    
    (762,004
    )
    
    465,604Net
        cash provided by (used in) operating activities
    
    
    13,834,280
    
    
    (995,451
    )Investing
        ActivitiesPurchase
        of premises and equipment
    
    
    (776,411
    )
    
    (1,246,316
    )Net
        decrease in interest-bearing deposits with other banks
    
    
    56,613
    
    
    289,609Net
        decrease in loans held in portfolio
    
    
    44,159,720
    
    
    9,265,460(Increase)
        Decrease in other real estate
    
    
    (605,280
    )
    
    471,568Proceeds
        from prepayments, redemptions or maturities of securities - held to maturity
    
    
    40,563,283
    
    
    47,443,324Purchases
        of securities - held to maturity
    
    
    (115,870
    )
    
    (112,476,006
    )Proceeds
        from sales of securities - available for sale
    
    
    25,369,800
    
    
    2,932,250Proceeds
        from prepayments, redemptions or maturities of securities - available
        for sale
    
    
    21,208,122
    
    
    41,938,821Purchases
        of securities - available for sale
    
    
    (10,045,571
    )
    
    (25,706,370
    )Cash
        paid in acquisition
    
    
    (44,901,402
    )
    
    Net
        cash provided by (used in) investing activities
    
    
    74,913,004
    
    
    (37,087,660
    )Financing
        ActivitiesNet
        (decrease) increase in deposits
    
    
    (42,951,065
    )
    
    30,786,959Net
        (decrease) increase in borrowings
    
    
    (22,394,330
    )
    
    15,387,165Purchase
        of treasury stock
    
    
    (3,809,856
    )
    
    (547,460
    )Net
        proceeds from issuance of common stock including
        the exercise of stock options
    
    
    1,723,411
    
    
    2,121,001Cash
        dividends paid on common stock
    
    
    (7,124,063
    )
    
    (6,963,472
    )Net
        cash (used in) provided by financing activities
    
    
    (74,555,903
    )
    
    40,784,193Net
        increase in cash and due from banks
    
    
    14,191,381
    
    
    2,701,082Cash
        and due from banks - beginning of period
    
    
    69,148,683
    
    
    48,842,418Cash
        and due from banks - end of period
    
    $
    83,340,064
    
    $
    51,543,500Supplemental
        disclosures:Interest
        paid
    
    $
    20,833,908
    
    $
    11,720,360Income
        taxes paid
    
    
    4,216,362
    
    
    10,501,100See Notes to Consolidated Financial
Statements.

7

STERLING BANCORP AND SUBSIDIARIESNotes to Consolidated Financial Statements
(Unaudited)

1.
The consolidated financial
  statements include the accounts of Sterling Bancorp (the parent company)
  and its subsidiaries, principally Sterling National Bank and its subsidiaries
  (the bank), after elimination of material intercompany transactions. The
  term the Company refers to Sterling Bancorp and its subsidiaries. The
  consolidated financial statements as of and for the interim periods ended
  June 30, 2006 and 2005 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 2005 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, 2005. The Company effected a 5% stock
  dividend on December 12, 2005. Fractional shares were cashed-out and payments
  were made to shareholders in lieu of fractional shares. All capital and share
  amounts as well as basic and diluted average number of shares outstanding and
  earnings per average common share information for all prior reporting periods
  have been restated to reflect the effect of the stock dividend.2.
As of April 3, 2006, Sterling Resource Funding Corp., a subsidiary of the bank, completed the acquisition of the business and certain
  assets ($64.1 million) and liabilities ($21.0 million) of PL Services, L.P., a provider of credit and
  accounts receivable management services to the staffing industry, in an all
  cash transaction. A general allowance for loan losses in the amount of $1.8
  million was carried over. Preliminary goodwill recognized in this transaction
  amounted to $1.8 million and was assigned to the Corporate Lending segment.This acquisition when considered under
  relevant disclosure guidance does not require the presentation of separate
  pro forma financial information.3.
At June 30, 2006, the
  Company has a stock-based employee compensation plan, which is described more
  fully in Note 1 and Note 14 to the consolidated financial statements in the
  Companys annual report on Form 10-K for the year ended December 31, 2005.
  Prior to January 1, 2006, the Company accounted for this plan under the
  recognition and measurement principles of Accounting Principles Board (APB)
  Opinion No. 25, Accounting for Stock
  Issued to Employees, and related Interpretations. No stock-based
  employee compensation cost was reflected in net income, as all options
  granted under those plans had an exercise price equal to the market value of
  the underlying common stock on the date of grant. In accordance with
  Statement of Financial Accounting Standards (SFAS) No. 148, the following
  table illustrates the effect on net income and earnings per average common
  share if the Company had applied the fair value recognition provisions of
  SFAS No. 123, Accounting for Stock-Based
  Compensation, to the stock-based employee compensation plans.Three Months
  Ended
  June 30, 2005

Six Months
  Ended
  June 30, 2005Net income available for common
shareholders

$
6,056,153

$
11,822,876Deduct: Total stock-based
employee compensation expense determined
  under fair value based method for all awards, net of related tax effects


(61,395
)

(122,790
)Pro forma, net income

$
5,994,758

$
11,700,086Earnings per average common
share:Basic- as
reported

$
0.32

$
0.62Basic- pro
forma


0.31


0.61Diluted- as
reported


0.31


0.60Diluted- pro
forma


0.30


0.598

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

As of January 1, 2006, the
  Company adopted SFAS No. 123R, Share-Based
  Payment, which among other provisions, eliminated the ability to
  account for stock-based compensation using APB 25 and requires that such
  transactions be recognized as compensation cost in the income statement for
  awards expected to be vested based on their fair values on the measurement
  date, which is generally the date of the grant. On June 30, 2006, 2,000
  nonqualified stock options were granted to each nonmanagement member of the
  Companys Board of Directors; the exercise price was equal to the closing
  price of the Companys common shares on that date. These options expire five
  years from the date of grant and become excercisable in four annual
  installments starting one year from the date of grant, or upon the earlier
  death or disability of the grantee.4.
The major components of
  domestic loans held for sale and loans held in portfolio are as follows:June 30,2006

2005Loans held for saleReal
estate-residential mortgage

$
29,632,251

$
36,767,212Loans held in
portfolioCommercial and
industrial

$
660,101,277

$
547,377,444Lease
financing


245,719,670


190,449,866Real
estate-residential mortgage


137,112,336


140,079,784Real
estate-commercial mortgage


118,890,969


113,965,155Real
estate-construction





2,310,464Installment


14,213,090


11,463,248Loans to
depository institutions





27,000,000Loans held in
portfolio, gross


1,176,037,342


1,032,645,961Less unearned
discounts


33,069,560


24,451,546Loans held in
portfolio, net of unearned discounts

$
1,142,967,782

$
1,008,194,4155.
SFAS No. 131, Disclosures about Segments of an Enterprise and
  Related Information, established standards for the way that
  public business enterprises report and disclose selected information about
  operating segments in interim financial statements provided to stockholders.The Company provides a
  broad range of financial products and services, including commercial loans,
  asset-based financing, factoring and accounts receivable management services,
  trade financing, equipment leasing, corporate and consumer deposit services,
  commercial and residential mortgage lending and brokerage, trust and estate
  administration and investment management services. The Companys primary
  source of earnings is net interest income, which represents the difference
  between interest earned on interest-earning assets and the interest incurred
  on interest-bearing liabilities. The Companys 2006 year-to-date average
  interest-earning assets were 61.8% loans (corporate lending was 68.7% and
  real estate lending was 27.4% of total loans, respectively) and 38.2%
  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 provisions of SFAS
  No. 131, the Company has determined that it has three reportable operating
  segments: corporate lending, real estate lending and company-wide treasury.9

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

The following tables provide
certain information regarding the Companys operating segments for the three-and
six-month periods ended June 30, 2006 and 2005:

Corporate
  Lending

Real Estate
  Lending

Company-wide
  Treasury

TotalsThree Months Ended June
30, 2006Net interest
income

$
11,404,154

$
5,414,600

$
3,994,866

$
20,813,620Noninterest
income


5,561,581


2,621,722


348,091


8,531,394Depreciation and
amortization


178,689


101,271


615


280,575Segment income before
taxes


7,178,584


3,268,018


3,387,009


13,833,611Segment assets


877,741,192


337,932,342


750,566,462


1,966,239,996Three Months Ended June
30, 2005Net interest
income

$
9,752,277

$
5,358,477

$
5,727,296

$
20,838,050Noninterest
income


3,159,755


4,675,451


680,231


8,515,437Depreciation and
amortization


97,688


90,610


612


188,910Segment income before
taxes


4,705,504


5,282,423


6,388,429


16,376,356Segment assets


694,763,164


341,785,149


849,383,287


1,885,931,600Six Months Ended June
30, 2006Net interest
income

$
21,386,109

$
10,839,233

$
8,581,267

$
40,806,609Noninterest
income


8,810,707


4,937,193


186,442


13,934,342Depreciation and
amortization


285,879


202,002


1,229


489,110Segment income before
taxes


11,929,904


6,191,656


7,681,298


25,802,858Segment assets


877,741,192


337,932,342


750,566,462


1,966,239,996Six Months Ended June
30, 2005Net interest
income

$
19,467,643

$
10,212,489

$
11,446,867

$
41,126,999Noninterest
income


6,123,240


8,613,096


1,204,524


15,940,860Depreciation and
amortization


190,497


179,570


1,218


371,285Segment income before
taxes


9,597,139


10,381,926


12,461,846


32,440,911Segment assets


694,763,164


341,785,149


849,383,287


1,885,931,60010

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

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

Three Months Ended
  June 30,

Six Months Ended
  June 30,2006

2005

2006

2005Net interest
income:Total for
reportable operating segments

$
20,813,620

$
20,838,050

$
40,806,609

$
41,126,999Other
[1]


258,793


227,268


530,655


440,599Consolidated net interest
income

$
21,072,413

$
21,065,318

$
41,337,264

$
41,567,598Noninterest
income:Total for
reportable operating segments

$
8,531,394

$
8,515,437

$
13,934,342

$
15,940,860Other
[1]


568,687


798,117


1,048,250


1,368,894Consolidated noninterest
income

$
9,100,081

$
9,313,554

$
14,982,592

$
17,309,754Income before
taxes:Total for
reportable operating segments

$
13,833,611

$
16,376,356

$
25,802,858

$
32,440,911Other
[1]


(5,820,632
)

(6,193,650
)

(13,575,339
)

(13,384,653
)Consolidated income before
income taxes

$
8,012,979

$
10,182,706

$
12,227,519

$
19,056,258Assets:Total for reportable
operating segments

$
1,966,239,996

$
1,885,931,600

$
1,966,239,996

$
1,885,931,600Other [1]


28,693,686


22,879,868


28,693,686


22,879,868Consolidated
assets

$
1,994,933,682

$
1,908,811,468

$
1,994,933,682

$
1,908,811,468[1]
Represents operations not considered to be a reportable segment
and/or general operating expenses of the Company.11

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

6.
The following information
  is provided in connection with the sales and/or calls of available for sale
  securities:Three Months Ended June 30,

2006

2005Proceeds

$
831,300

$
Gross
Gains


14,866


Gross
Losses





Six Months Ended June 30,

2006

2005Proceeds

$
25,369,800

$
2,932,250Gross
Gains


14,866


196,680Gross
Losses


459,497


During
      the first quarter of 2006, the Company sold lower yielding available for
      sale securities at a loss to partially fund the acquisition of PL Services,
      L.P.7.
    The
        following table sets forth components of net periodic benefit cost for
        the Companys noncontributory defined benefit pension plan and unfunded
        supplemental retirement plan.Three
  Months Ended June 30,

Six Months
  Ended June 30,2006

2005

2006

2005COMPONENTS OF NET PERIODIC
BENEFIT COSTService cost

$
446,747

$
403,843

$
914,246

$
807,686Interest cost


583,642


509,493


1,200,542


1,018,986Expected return on plan
assets


(565,806
)

(442,549
)

(1,108,782
)

(885,098
)Amortization of prior service
cost


18,115


19,116


37,806


38,232Recognized actuarial
loss


319,270


207,354


656,188


414,708Net periodic benefit
cost

$
801,968

$
697,257

$
1,700,000

$
1,394,514The Company previously
  disclosed in its financial statements for the year ended December 31, 2005,
  that it expected to contribute approximately $1,000,000 to the defined
  benefit pension plan in 2006. No contribution has been made as of June 30,
  2006.8.
In July 2006, the Financial
  Accounting Standards Board (FASB) issued Financial Accounting Standards
  Interpretation No. 48 (FIN 48 ),
  Accounting for Uncertainty in Income Taxes.FIN 48 clarifies the
  accounting for uncertainty in income taxes recognized in an enterprises  financial statements in accordance with Statement
  of Financial Accounting Standards (SFAS) No. 109,Accounting for Income Taxes. FIN 48 prescribes a
  recognition threshold and measurement attributable for the financial
  statement recognition and measurement of a tax position taken or expected to
  be taken in a tax return. FIN 48 also provides guidance on derecognition,
  classification, interest and penalties, accounting in interim periods,
  disclosures and transition. FIN 48 is effective for fiscal years beginning
  after December 15, 2006. The Company is currently analyzing the effects of
  FIN 48.12

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

In March 2006, the FASB issued
SFAS No. 156, Accounting for Servicing of
Financial Assets(SFAS No. 156). This statement amends SFAS No.
140 with respect to the accounting for separately recognized servicing assets and
servicing liabilities. SFAS No. 156 requires companies to recognize a servicing
asset or servicing liability each time it undertakes an obligation to service a
financial asset by entering into a servicing contract. The statement permits a
company to choose either the amortized cost method or fair value measurement
method for each class of separately recognized servicing assets or servicing
liabilities. This statement is effective as of the beginning of the Companys
first fiscal year that begins after September 15, 2006. The Company is still in
the process of analyzing the impact of SFAS No. 156 on its financial
statements.

In February 2006, the FASB
issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments, (SFAS No. 155). SFAS No. 155
amends SFAS No.133, Accounting for Derivative Instruments and Hedging
Activities, (SFAS No. 133) and SFAS No. 140,Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities (SFAS No. 140). SFAS No. 155 (1) permits fair value
remeasurement for any hybrid financial instrument that contains an embedded
derivative that otherwise would require bifurcation, (2) clarifies which
interest-only strips and principal-only strips are not subject to the
requirements of SFAS No. 133, (3) establishes a requirement to evaluate
interests in securitized financial assets to identify interests that are
freestanding derivatives or that are hybird financial instruments that contain
an embedded derivative requiring bifurcation, (4) clarifies that concentrations
of credit risk in the form of subordination are not embedded derivatives, and
(5) amends SFAS No. 140 to eliminate the prohibition on a qualifying special
purpose entity from holding a derivative financial instrument that pertains to
a beneficial interest other than another derivative financial instrument. This
statement is effective for all financial instruments acquired or issued after
the beginning of the Companys first fiscal year that begins after September
15, 2006. The Company is still in the process of analyzing the impact of SFAS
No. 155 on its financial statements.

13

ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
  AND RESULTS OF OPERATIONSThe following
commentary presents managements discussion and analysis of the financial
condition and results of operations of Sterling Bancorp (the parent company),
a financial holding company under the Gramm-Leach-Bliley Act of 1999, and its
subsidiaries, principally Sterling National Bank (the bank). Throughout this
discussion and analysis, the term the Company refers to Sterling Bancorp and
its subsidiaries. This discussion and analysis should be read in conjunction
with the consolidated financial statements and supplemental data contained
elsewhere in this quarterly report and the Companys annual report on Form 10-K
for the year ended December 31, 2005. Certain reclassifications have been made
to prior years financial data to conform to current financial statement
presentations as well as to reflect the effect of the 5% stock dividend
effected on December 12, 2005.

OVERVIEW

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

For the three
months ended June 30, 2006, the banks average earning assets represented
approximately 96.4% of the Companys average earning assets. Loans represented
61.8% and investment securities represented 38.0% of the banks average earning
assets for the second quarter of 2006.

For the six
months ended June 30, 2006, the banks average earning assets represented
approximately 96.4% of the Companys average earning assets. Loans represented
60.3% and investment securities represented 39.3% of the banks average earning
assets for the six months ended June 30, 2006.

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.

14

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.

INCOME STATEMENT ANALYSIS

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

15

Comparison of the Three Months Ended June 30,
2006 and 2005

The Company
reported net income for the three months ended June 30, 2006 of $4.9 million,
representing $0.26 per share, calculated on a diluted basis, compared to $6.1
million, or $0.31 per share calculated on a diluted basis, for the second
quarter of 2005. This decrease reflects higher interest and noninterest expenses
coupled with a higher provision for loan losses and lower noninterest income
which were partially offset by an increase in interest income coupled with a
decrease in provision for income taxes.

Net Interest Income

Net interest
income, on a tax-equivalent basis, was $21.3 million for the second quarter of
2006 compared to $21.2 million for the 2005 period, as the higher rates paid on
interest-bearing deposits and borrowings and higher balances for borrowings in
the second quarter of 2006 substantially offset the effects of higher earning
assets outstanding and higher average yield on loans for that quarter. The net
interest margin, on a tax-equivalent basis, was 4.71% for the second quarter of
2006 compared to 4.84% for the 2005 period. The net interest margin was
impacted by the flattening of the yield curve, the higher interest rate
environment in 2006, the level of noninterest-bearing demand deposits and the
effect of higher average loans outstanding. The flattening yield curve and more
competitive pricing practices in the Companys markets have caused the costs of
deposits and borrowings to increase faster than the yield on earning assets.

Total interest
income, on a tax-equivalent basis, aggregated $32.2 million for the second
quarter of 2006, up from $28.0 million for the 2005 period. The tax-equivalent
yield on interest-earning assets was 7.23% for the second quarter of 2006
compared to 6.42% for the 2005 period.

Interest
earned on the loan portfolio amounted to $24.4 million for the second quarter
of 2006, up $4.9 million from a year ago. Average loan balances amounted to
$1,141.4 million, an increase of $122.2 million from an average of $1,019.2
million in the prior year period. The increase in average loans (across
virtually all segments of the Companys loan portfolio), primarily due to the
acquisition of PL Services, L.P. coupled with the Companys other
business development activities and the ongoing consolidation of banks in the
Companys marketing area, accounted for $2.5 million of the $4.9 million
increase in interest earned on loans. The increase in the yield on the loan
portfolio to 8.83% for the second quarter of 2006 from 7.92% for the 2005
period was primarily attributable to the mix (including the acquisition of
PL Services, L.P) of average outstanding balances among the
components of the loan portfolio and the higher interest rate environment in
2006.

Interest
earned on the securities portfolio, on a tax-equivalent basis, decreased to
$7.7 million for the second quarter of 2006 from $8.4 million in the prior year
period. Average outstandings decreased to $661.6 million (36.6% of average
earning assets) for the second quarter of 2006 from $733.8 million (41.4% of
average earning assets) in the prior year period. The average life of the
securities portfolio was approximately 4.5 years at June 30, 2006 compared to
4.2 years at June 30, 2005.

16

Total interest
expense increased by $4.2 million for the second quarter of 2006 from $6.7
million for the 2005 period, primarily due to higher rates paid for
interest-bearing deposits and for borrowed funds and higher average balances
for borrowed funds.

Interest
expense on deposits increased to $6.4 million for the second quarter of 2006
from $4.1 million for the 2005 period primarily due to an increase in the cost
of those funds. Average rate paid on interest-bearing deposits was 2.81% which
was 104 basis points higher than the prior year period. The increase in average
cost of deposits reflects the higher interest rate environment during 2006.

Interest
expense on borrowings increased to $4.5 million for the second quarter of 2006
from $2.7 million for the 2005 period due to an increase in the cost of those
funds coupled with higher average balances. The average rate paid in borrowings
was 4.87% which was 149 basis points higher than the prior year period. The
increase in average cost of borrowings reflects the higher interest rate
environment during 2006. Average borrowing balances increased to $373.7 million
for the second quarter of 2006 from $314.4 million on the 2005 period.

Provision for Loan Losses

Based on
managements continuing evaluation of the loan portfolio (discussed under
Asset Quality below), the provision for loan losses for the second quarter of
2006 increased to $2.5 million from $2.0 million for the prior year period.
Factors affecting the level of provision included the growth in the loan
portfolios, changes in general economic conditions and the amount of nonaccrual
loans.

Noninterest Income

Noninterest
income decreased to $9.1 million for the second quarter of 2006 from $9.3
million in the 2005 period, primarily due to lower mortgage banking income,
income from bank owned life insurance, and other income.
The decrease in mortgage banking income was principally due to the continued
yield compression in the secondary market for loans which is impacting the entire industry. Partially
offsetting these decreases were higher customer related service charges and fees
primarily due to revenues attributable to the acquisition of PL Services, L.P.

Noninterest Expenses

Noninterest
expenses increased $1.5 million for the second quarter of 2006 when compared to
the 2005 period. The increase was primarily due to higher salaries, employee
benefits and occupancy and equipment expenses, primarily due to investments in
the Sterling franchise, including the acquisition of Sterling Resource Funding
Corp. Also contributing to higher employee benefits expense were increases in
pension costs coupled with higher payroll taxes and life insurance costs,
primarily due to timing of recognition. Partially offsetting those increases
were lower expenses for advertising and marketing and professional fees.

Provision for Income Taxes

The provision
for income taxes decreased by $1.0 million to $3.1 million for the second
quarter of 2006 from an expense of $4.1 million for the 2005 period. The
decrease was primarily due to the lower level of pre-tax income in the 2006
period.

17

Comparisons of the Six Months Ended June 30,
2006 and 2005

The Company
reported net income for the six months ended June 30, 2006 of $11.3 million,
representing $0.59 per share, calculated on a diluted basis, compared to $11.8
million, or $0.60 per share calculated on a diluted basis, for the first half
of 2005. This decrease reflected higher interest and noninterest expenses
coupled with a higher provision for loan losses and lower noninterest income
which were partially offset by an increase in interest income coupled with a
decrease in the provision for income taxes.

Net Interest Income

Net interest
income, on a tax-equivalent basis, decreased to $41.7 million for the first six
months of 2006 from $41.9 million for the 2005 period, due to higher rates paid
on interest-bearing deposits and borrowed funds coupled with higher balances
for interest-bearing deposits and borrowed funds partially offset by higher
average earning assets outstanding coupled with a higher average yield on
loans. The net interest margin, on a tax-equivalent basis, was 4.70% for the
first six months of 2006 compared to 4.94% for the 2005 period. The net
interest margin was impacted by the flattening of the yield curve, the higher
interest rate environment in 2006, the level of noninterest-bearing demand
deposits and the effect of higher average loans outstanding. The flattening
yield curve and more competitive pricing practices in the Companys markets
have caused the costs of deposits and borrowings to increase faster than the
yield on earning assets.

Total interest
income, on a tax-equivalent basis, aggregated $62.4 million for the first six
months of 2006, up from $54.4 million for the 2005 period. The tax-equivalent
yield on interest-earning assets was 7.10% for the first six months of 2006
compared to 6.43% for the 2005 period.

Interest
earned on the loan portfolio amounted to $46.4 million for the first six months
of 2006, up $8.6 million from a year ago. Average loan balances amounted to
$1,115.6 million an increase of $109.5 million from an average of $1,006.1
million in the prior year period. The increase in average loans (across
virtually all segments of the Companys loan portfolio), primarily due to the
acquisition of PL Services, L.P. coupled with the Companys other
business development activities and the ongoing consolidation of banks in the
Companys marketing area, accounted for $4.5 million of the $8.6 million
increase in interest earned on loans. The increase in the yield on the loan
portfolio to 8.71% for the first six months of 2006 from 7.94% for the 2005
period was primarily attributable to the mix (including the acquisition of
PL Services, L.P.) of outstanding balances on average among the
components of the loan portfolio and the higher interest rate environment in
2006.

Interest
earned on the securities portfolio, on a tax-equivalent basis, decreased to
$15.9 million for the first six months of 2006 from $16.3 million in the prior
year period. Average outstandings increased to $685.0 million (37.9% of average
earning assets for the first six months of 2006) from $713.3 million (41.0% of
average earning assets) in the prior year period. The average life of the
securities portfolio was approximately 4.5 years at June 30, 2006 compared to
4.2 years at June 30, 2005.

18

Total interest
expense increased to $20.7 million for the first six months of 2006 from $12.4
million for the 2005 period, primarily due to higher rates paid for
interest-bearing deposits and for borrowed funds and higher average balances.

Interest
expense on deposits increased to $12.6 million for the first six months of 2006
from $7.5 million for the 2005 period primarily due to an increase in the cost
of those funds. Average rate paid on interest-bearing deposits was 2.70% which
was 103 basis points higher than the prior year period. The increase in average
cost of deposits reflects the higher interest rate environment during 2006.
Average interest-bearing deposit balances increased to $944.0 million for the
first six months of 2006 from $909.8 million in the 2005 period primarily the
result of the Companys branching initiatives and other business development
activities.

Interest
expense on borrowings increased to $8.1 million for the first six months of
2006 from $4.9 million  for the 2005 period primarily due to the higher interest rate
environment during 2006. The average rate paid on borrowed funds was 4.71%
which was 144 basis points higher than the prior year period. The increase in
average cost of borrowings reflects the high interest rate environment during
2006. Average borrowing balances increased to $345.4 million for the first six
months of 2006 from $300.5 million in the 2005 period.

Provision for Loan Losses

Based on
managements continuing evaluation of the loan portfolio (discussed under
Asset Quality below), the provision for loan losses for the first half of
2006 increased to $5.0 million from $4.7 million for the prior year period.
Factors affecting the level of provision included the growth in the loan
portfolios, changes in general economic conditions and the amount of nonaccrual
loans.

Noninterest Income

Noninterest
income decreased to $15.0 million for the first six months of 2006 from $17.3
million in the 2005 period, primarily due to lower revenues from mortgage
banking activities, bank owned life insurance and other income coupled with
higher losses from sales of available for sale securities. The decrease in
mortgage banking income was principally due to the continued yield compression
in the secondary market for loans which is impacting the entire industry.
Partially offsetting
these decreases was increased revenues from customer related service charges
and fees primarily due to revenues attributable to the acquisition of PL Services, L.P.

Noninterest Expenses

Noninterest
expenses increased to $39.1 million for the first six months of 2006 from $35.2
million in the 2005 period. Increases in salaries, employee benefits and
occupancy and equipment expenses reflected the continued investments in the
Sterling franchise, including the acquisition of PL Services, L.P. and the impact of new branches. Also contributing to higher employee
benefits expense were increases in pension costs coupled with higher payroll
taxes and life insurance costs, primarily due to timing of recognition.

Provision for Income Taxes

The provision
for income taxes for the first six months of 2006 decreased by $6.3 million
from the 2005 period. The decrease was primarily due to a $3.7 million reversal
(during the first quarter of 2006) of reserve for state and local taxes,

19

net of federal
tax effect, as a result of the resolution of certain state tax issues, and to
the lower level of pre-tax income.

BALANCE SHEET ANALYSIS

Securities

The Companys
securities portfolios are comprised principally of mortgage-backed securities
of U.S. government corporations and government sponsored enterprises, and
obligations of state and political institutions, along with other debt and
equity securities. At June 30, 2006, the Companys portfolio of securities
totaled $634.6 million, of which mortgage-backed securities and collateralized
mortgage obligations of U.S. government corporations and government sponsored
enterprises having an average life of approximately 4.8 years amounted to
$554.8 million. The Company has the intent and ability to hold to maturity
securities classified as held to maturity. These securities are carried at
cost, adjusted for amortization of premiums and accretion of discounts. The
gross unrealized gains and losses on held to maturity securities were $0.3
million and $19.3 million, respectively. Securities classified as available
for sale may be sold in the future, prior to maturity. These securities are
carried at market value. Net aggregate unrealized gains or losses on these
securities are included in a valuation allowance account and are shown net of
taxes, as a component of shareholders equity. Given the generally high credit
quality of the portfolio, management expects to realize all of its investment
upon market recovery or the maturity of such instruments and thus believes that any market value
impairment is interest rate related and therefore temporary. Available for sale securities included gross
unrealized gains of $0.2 million and gross unrealized losses of $7.7 million.

The following
table presents information regarding securities available for sale:

June 30, 2006

Gross
  Amortized
  Cost

Gross
  Unrealized
  Gains

Gross
  Unrealized
  Losses

Market
  ValueMortgage-backed
securitiesCMOs (Federal
National Mortgage
  Association)

$
9,006,970

$


$
711,739

$
8,295,231CMOs (Federal
Home Loan Mortgage Company)


23,085,253





1,725,685


21,359,568Federal
National Mortgage Association


50,700,504


13,273


2,492,227


48,221,550Federal Home
Loan Mortgage Company


46,885,681


3,997


2,360,880


44,528,798Government
National Mortgage Association


4,766,264


77,637


6,229


4,837,672Total
mortgage-backed securities


134,444,672


94,907


7,296,760


127,242,819Obligations of state and
political
  institutions


25,662,217


101,052


357,527


25,405,742Federal Reserve Bank
stock


1,130,700








1,130,700Federal Home Loan Bank
stock


5,689,100








5,689,100Other securities


1,482,467


52,276


1,585


1,533,158Total

$
168,409,156

$
248,235

$
7,655,872

$
161,001,51920

The following table presents information
regarding securities held to maturity:

June 30, 2006

Carrying
  Value

Gross
  Unrealized
  Gains

Gross
  Unrealized
  Losses

Estimated
  Market
  ValueMortgage-backed
securitiesCMOs
(Federal National Mortgage
Association)

$
13,287,392

$


$
845,291

$
12,442,101CMOs
(Federal Home Loan Mortgage Company)


23,983,114





1,611,755


22,371,359Federal
National Mortgage Association


224,896,399


167,004


8,790,506


216,272,897Federal
Home Loan Mortgage Company


153,394,596


58,131


7,257,553


146,195,174Government
National Mortgage Association


12,020,428


157,245


53,632


12,124,041Total
mortgage-backed securities


427,581,929


382,380


18,558,737


409,405,572Federal
Home Loan Bank


24,986,306





261,306


24,725,000Federal
Farm Credit Bank


20,000,000





425,000


19,575,000Total
obligations of U.S. government
corporations and agencies


472,568,235


382,380


19,245,043


453,705,572Debt
securities issued by foreign
governments


1,000,000





5,527


994,473Total

$
473,568,235

$
382,380

$
19,250,570

$
454,700,045Loan Portfolio

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

The Companys commercial and industrial loan
portfolio represents approximately 56% of all loans. Loans in this category are
typically made to small and medium-sized businesses and range between $25,000
and $10 million. The Companys real estate mortgage portfolio, which represents
approximately 24% of all loans, is secured by mortgages on real property
located principally in the states of New York, New Jersey, Virginia and North
Carolina. The Companys leasing portfolio, which consists of finance leases for
various types of business equipment, represents approximately 18% of all loans.
Sources of repayment are from the borrowers operating profits, cash flows and
liquidation of pledged collateral. Based on underwriting standards, loans may
be secured in whole or in part by collateral such as liquid assets, accounts
receivable, equipment, inventory, and real property. The collateral securing
any loan or lease may depend on the type of loan or lease and may vary in value
based on market conditions.

21

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

June 30,2006

2005($ in thousands)Balances

% of
  Total

Balances

% of
  TotalDomesticCommercial and
industrial

$
659,859


56.3
%
$
547,142


52.4
%Equipment
lease financing


212,892


18.2


166,236


15.9Real estate -
residential mortgage


166,745


14.2


176,847


16.9Real estate-
commercial mortgage


118,891


10.1


113,965


10.9Real estate -
construction








2,310


0.2Installment -
individuals


14,213


1.2


11,462


1.1Loans to
depository institutions








27,000


2.6Loans, net of
unearned discounts

$
1,172,600


100.0
%
$
1,044,962


100.0
%Asset Quality

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

Management views the allowance for loan
losses as a critical accounting policy due to its subjectivity. The allowance
for loan losses is maintained through the provision for loan losses, which is a
charge to operating earnings. The adequacy of the provision and the resulting
allowance for loan losses is determined by a 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 which will be greater
than that indicated by the evaluation process previously described. The
allowance reflects managements evaluation both of loans presenting identified
loss potential and of the risk inherent in various components of the loan
portfolio, including loans identified as impaired as required by SFAS No. 114.
Thus, an increase in the size of the portfolio or in any of its components
could necessitate an increase in the allowance even though there may not be a
decline in credit quality or an increase in potential problem loans. A
significant change in any of the evaluation factors described above could
result in future additions to the allowance. At June

22

30, 2006, the ratio of the allowance to loans
held in portfolio, net of unearned discounts, was 1.57% and the allowance was
$17.9 million, including a general allowance of $1.8 million carried over as a
result of the acquisition of Sterling Resource Funding Corp. At such date, the
Companys nonaccrual loans amounted to $4.0 million; $0.7 million of such loans
was judged to be impaired within the scope of SFAS No. 114. Loans 90 days
past due and still accruing amounted to $2.0 million. Based on the foregoing,
as well as managements judgment as to the current risks inherent in loans held
in portfolio, the Companys allowance for loan losses was deemed adequate to
absorb all reasonably anticipated losses on specifically known and other
possible credit risks associated with the portfolio as of June 30, 2006. Net
losses within loans held in portfolio are not statistically predictable and
changes in conditions in the next twelve months could result in future
provisions for loan losses varying from the level taken in the first six months
of 2006. Potential problem loans, which are loans that are currently performing
under present loan repayment terms but where known information about possible
credit problems of borrowers causes management to have serious doubts as to the
ability of the borrowers to continue to comply with the present repayment
terms, aggregated $2.5 million at June 30, 2006.

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:

June 30,2006

2005($ in thousands)Balances

% of
  Total

Balances

% of
  TotalDomesticDemand

$
495,257


35.0
%
$
457,565


33.3
%NOW


213,823


15.1


144,646


10.5Savings


22,579


1.6


27,698


2.0Money
market


200,528


14.2


233,474


17.0Time
deposits


480,228


33.9


508,240


37.0Total domestic
deposits


1,412,415


99.8


1,371,623


99.8ForeignTime
deposits


3,028


0.2


3,015


0.2Total
deposits

$
1,415,443


100.0
%
$
1,374,638


100.0
%Fluctuations
of balances in total or among categories at any date may occur based on the
Companys mix of assets and liabilities as well as on customers balance sheet
strategies. Historically, however, average balances for deposits have been
relatively stable. Information regarding these average balances is presented on
pages 26 and 27.

23

CAPITAL

The Company
and the bank are subject to risk-based capital regulations which quantitatively
measure capital against risk-weighted assets, including certain off-balance
sheet items. These regulations define the elements of the Tier 1 and Tier 2
components of Total Capital and establish minimum ratios of 4% for Tier 1
capital and 8% for Total Capital for capital adequacy purposes. Supplementing
these regulations is a leverage requirement. This requirement establishes a
minimum leverage ratio (at least 3% or 4%, depending upon an institutions
regulatory status) which is calculated by dividing Tier 1 capital by adjusted quarterly
average assets (after deducting goodwill). Information regarding the Companys
and the banks risk-based capital is presented on page 30. In addition, the
bank is subject to the Federal Deposit Insurance Corporation Improvement Act of
1991 (FDICIA) which imposes a number of mandatory supervisory measures. Among
other matters, FDICIA established five capital categories, ranging from well
capitalized to critically under capitalized, which are used by regulatory
agencies to determine a banks deposit insurance premium, approval of
applications authorizing institutions to increase their asset size or otherwise
expand business activities or acquire other institutions. Under FDICIA, a well
capitalized bank must maintain minimum leverage, Tier 1 and Total Capital
ratios of 5%, 6% and 10%, respectively. The Federal Reserve Board applies
comparable tests for holding companies such as the Company. At June 30, 2006,
the Company and the bank exceeded the requirements for well capitalized
institutions.

CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS

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

Factors that
could cause our actual results to differ materially from those in the
forward-looking statements include, but are not limited to, the following:
inflation, interest rates, market and monetary fluctuations; geopolitical
developments including acts of war and terrorism and their impact on economic
conditions; the effects of, and changes in, trade, monetary and fiscal policies
and laws, including interest rate policies of the Federal Reserve Board;
changes, particularly declines, in general economic conditions and in the local
economies in which the Company operates; the financial condition of the
Companys borrowers; competitive pressures on loan and deposit pricing and
demand; changes in technology and their impact on the marketing of new products
and services and the acceptance of these products and services by new and
existing customers; the willingness of customers to substitute competitors products
and services for the Companys products and services; the impact of changes in
financial services laws and

24

regulations
(including laws concerning taxes, banking, securities and insurance); changes
in accounting principles, policies and guidelines; the success of the Company
at managing the risks involved in the foregoing as well as other risks and
uncertainties detailed from time to time in press releases and other public
filings. The foregoing list of important factors is not exclusive, and we will
not update any forward-looking statement, whether written or oral, that may be
made from time to time.

25

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

2006




2005Average 
  Balance

Interest

Average
  Rate

Average
  Balance

Interest

Average
  RateASSETSInterest-bearing deposits
with other banks

$
1,788

$
20


4.61
%
$
3,155

$
16


2.02
%Securities available for
sale


143,428


1,684


4.70


197,236


2,185


4.43Securities held to
maturity


488,398


5,551


4.55


511,387


5,733


4.48Securities tax-exempt
[2]


29,793


485


6.53


25,130


459


7.33Total
investment securities


661,619


7,720


4.67


733,753


8,377


4.57Federal funds
sold


2,802


35


4.93


16,066


112


2.77Loans, net of unearned
discounts [3]


1,141,393


24,409


8.83


1,019,245


19,478


7.92TOTAL INTEREST-EARNING
ASSETS


1,807,602


32,184


7.23
%

1,772,219


27,983


6.42
%Cash and due from
banks


62,980








61,229Allowance for loan
losses


(17,365
)







(17,652
)Goodwill


23,070








21,158Other assets


90,737








79,013TOTAL
ASSETS

$
1,967,024







$
1,915,967LIABILITIES AND
SHAREHOLDERS EQUITYInterest-bearing
depositsDomesticSavings

$
23,646


24


0.41
%
$
28,577


28


0.40
%NOW


176,292


691


1.57


155,218


269


0.69Money
market


205,165


957


1.87


214,740


469


0.88Time


504,428


4,707


3.74


523,697


3,312


2.54ForeignTime


3,027


8


1.02


3,012


8


1.09Total
interest-bearing deposits


912,558


6,387


2.81


925,244


4,086


1.77BorrowingsSecurities
sold under agreements to
  repurchase - customers


81,439


767


3.78


86,793


417


1.93Securities
sold under agreements to
  repurchase - dealers


106,438


1,344


5.07


54,284


420


3.11Federal funds
purchased


19,912


251


4.99


20,223


157


3.12Commercial
paper


49,371


538


4.37


37,211


223


2.40Short-term borrowings -
FHLB


50,498


642


5.10


7,045


56


3.18Short-term borrowings -
other


581


7


5.09


715


5


3.06Long-term borrowings -
FHLB


39,670


461


4.64


82,308


854


4.14Long-term borrowings - sub
debt


25,774


524


8.37


25,774


523


8.38Total
borrowings


373,683


4,534


4.87


314,353


2,655


3.38TOTAL INTEREST-BEARING
LIABILITIES


1,286,241


10,921


3.41
%

1,239,597


6,741


2.18
%Noninterest-bearing
deposits


441,630








445,933Other
liabilities


93,828








79,973Total
liabilities


1,821,699








1,765,503Shareholders
equity


145,325








150,464TOTAL
LIABILITIES AND SHAREHOLDERS EQUITY

$
1,967,024







$
1,915,967Net interest
income/spread





21,263


3.82
%




21,242


4.24
%Net yield on
interest-earning assets
  (margin)








4.71
%







4.84
%Less: Tax equivalent
adjustment





191








177Net interest
income




$
21,072







$
21,065[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. Certainreclassifications have been made to amounts for prior
  periods to conform to the current presentation.[2]
Interest
  on tax-exempt securities is presented on a tax-equivalent basis.[3]
Includes
  loans held for sale and loans held in portfolio; all loans are domestic.
  Nonaccrual loans are included in amounts outstanding and income has been
  included to the extent earned.26

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

2006





2005Average
  Balance

Interest

Average
  Rate

Average
  Balance

Interest

Average
  RateASSETSInterest-bearing deposits
with other banks

$
2,413

$
50


4.23
%
$
2,770

$
22


1.61
%Securities available for
sale


156,907


3,571


4.55


200,717


4,399


4.38Securities held to
maturity


497,371


11,295


4.54


486,814


10,943


4.50Securities tax-exempt
[2]


30,752


1,004


6.59


25,777


930


7.28Total
investment securities


685,030


15,870


4.64


713,308


16,272


4.56Federal funds
sold


3,204


75


4.65


17,304


222


2.56Loans, net of unearned
discounts [3]


1,115,592


46,434


8.71


1,006,064


37,854


7.94TOTAL INTEREST-EARNING
ASSETS


1,806,239


62,429


7.10
%

1,739,446


54,370


6.43
%Cash and due from
banks


64,122








62,625Allowance for loan
losses


(17,301
)







(17,450
)Goodwill


22,120








21,158Other assets


89,740








79,559TOTAL
ASSETS

$
1,964,920







$
1,885,338LIABILITIES AND
SHAREHOLDERS EQUITYInterest-bearing
depositsDomesticSavings

$
24,666


50


0.41
%
$
28,804


54


0.38
%NOW


179,385


1,426


1.60


148,748


463


0.63Money
market


223,379


1,979


1.79


220,595


879


0.80Time


513,542


9,160


3.60


508,667


6,126


2.43ForeignTime


3,025


16


1.06


3,007


16


1.09Total
interest-bearing deposits


943,997


12,631


2.70


909,821


7,538


1.67BorrowingsSecurities
sold under agreements to
  repurchase - customers


80,756


1,462


3.65


86,281


754


1.76Securities
sold under agreements to
  repurchase - dealers


96,683


2,328


4.86


46,416


669


2.91Federal
funds purchased


16,117


386


4.77


11,826


178


2.99Commercial
paper


45,776


943


4.15


36,412


383


2.12Short-term
borrowings - FHLB


33,814


835


4.98


3,542


56


3.18Short-term
borrowings - other


746


18


4.81


745


10


2.83Long-term
borrowings - FHLB


45,746


1,047


4.58


89,502


1,808


4.04Long-term
borrowings - sub debt


25,774


1,047


8.38


25,774


1,047


8.38Total
borrowings


345,412


8,066


4.71


300,498


4,905


3.27TOTAL INTEREST-BEARING
LIABILITIES


1,289,409


20,697


3.24
%

1,210,319


12,443


2.07
%Noninterest-bearing
deposits


441,683








441,247Other
liabilities


89,179








84,760Total
liabilities


1,820,271








1,736,326Shareholders
equity


144,649








149,012TOTAL
LIABILITIES AND SHAREHOLDERS EQUITY

$
1,964,920







$
1,885,338Net interest
income/spread





41,732


3.86
%




41,927


4.36
%Net yield on
interest-earning assets
  (margin)








4.70
%







4.94
%Less: Tax equivalent
adjustment





395








360Net interest
income




$
41,337







$
41,567[1]
The
  average balances of assets, liabilities and shareholders equity are computed
  on the basis of daily averages. Average rates are presented on a
  tax-equivalent basis. Certain reclassifications have been made to amounts for
  prior periods to conform to the current presentation.[2]
Interest
  on tax-exempt securities is presented on a tax-equivalent basis.[3]
Includes
  loans held for sale and loans held in portfolio; all loans are domestic.
  Nonaccrual  loans are included in
  amounts outstanding and income has been included to the extent earned.27

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

(in
thousands)

Increase/ (Decrease
)Three
Months EndedJune 30,
2006 to June 30, 2005Volume

Rate

Net [2]INTEREST
INCOMEInterest-bearing deposits with other banks

$
(9
)
$
13

$
4Securities
available for sale


(627
)

126


(501
)Securities
held to maturity


(267
)

85


(182
)Securities
tax-exempt


79


(53
)

26Total
investment securities


(815
)

158


(657
)Federal funds
sold


(129
)

52


(77
)Loans, net of
unearned discounts [3]


2,518


2,413


4,931TOTAL INTEREST
INCOME

$
1,565

$
2,636

$
4,201INTEREST
EXPENSEInterest-bearing depositsDomesticSavings

$
(5
)
$
1

$
(4
)NOW


40


382


422Money
market


(22
)

510


488Time


(126
)

1,521


1,395ForeignTime








Total
interest-bearing deposits


(113
)

2,414


2,301BorrowingsSecurities
sold under agreements to
repurchase - customers


(27
)

377


350Securities
sold under agreements to
repurchase - dealers


558


366


924Federal funds
purchased


(2
)

96


94Commercial
paper


90


225


315Short-term
borrowings - FHLB


533


53


586Short-term
borrowings - other


(1
)

3


2Long-term
borrowings - FHLB


(485
)

92


(393
)Long-term
borrowings - sub debt





1


1Total
borrowings


666


1,213


1,879TOTAL INTEREST
EXPENSE

$
553

$
3,627

$
4,180NET INTEREST
INCOME

$
1,012

$
(991
)
$
21[1]
This table is presented on
a tax-equivalent basis.[2]
Changes in interest income
and interest expense due to a combination of both volume and rate have been
allocated to the change due to volume and the change due to rate in
proportion to the relationship of the change due solely to each.[3]
Includes loans held for
sale and loans held in portfolio; all loans are domestic. Nonaccrual loans
are included in amounts outstanding and income has been included to the
extent earned.28

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

(in
thousands)

Increase/ (Decrease
)Six Months
EndedJune 30,
2006 to June 30, 2005Volume

Rate

Net [2]INTEREST
INCOMEInterest-bearing deposits with other banks

$
(3
)
$
31

$
28Securities
available for sale


(990
)

162


(828
)Securities
held to maturity


249


103


352Securities
tax-exempt


109


(35
)

74Total
investment securities


(632
)

230


(402
)Federal funds
sold


(253
)

106


(147
)Loans, net of
unearned discounts [3]


4,538


4,042


8,580TOTAL INTEREST
INCOME

$
3,650

$
4,409

$
8,059INTEREST
EXPENSEInterest-bearing depositsDomesticSavings

$
(8
)
$
4

$
(4
)NOW


114


849


963Money
market


11


1,089


1,100Time


59


2,975


3,034ForeignTime








Total
interest-bearing deposits


176


4,917


5,093BorrowingsSecurities
sold under agreements to
repurchase - customers


(51
)

759


708Securities
sold under agreements to
repurchase - dealers


1,024


635


1,659Federal funds
purchased


79


129


208Commercial
paper


118


442


560Short-term
borrowings - FHLB


730


49


779Short-term
borrowings - other





8


8Long-term
borrowings - FHLB


(974
)

213


(761
)Long-term
borrowings - sub debt








Total
borrowings


926


2,235


3,161TOTAL INTEREST
EXPENSE

$
1,102

$
7,152

$
8,254NET INTEREST
INCOME

$
2,548

$
(2,743
)
$
(195
)[1]
This table is presented on
a tax-equivalent basis.[2]
Changes in interest income
and interest expense due to a combination of both volume and rate have been
allocated to the change due to volume and the change due to rate in
proportion to the relationship of the change due solely to each.[3]
Includes loans held for
sale and loans held in portfolio; all loans are domestic. Nonaccrual loans
are included in amounts outstanding and income has been included to the
extent earned.29

STERLING BANCORP AND SUBSIDIARIESRegulatory Capital and Ratios

Ratios and
Minimums(dollars in
thousands)

For
Capital

To Be WellActual

Adequacy
Minimum

CapitalizedAmount

Ratio

Amount

Ratio

Amount

RatioAs of June 30, 2006Total Capital
(to Risk Weighted Assets):The
Company

$
173,064


12.96
%
$
106,821


8.00
%
$
133,527


10.00
%The
bank


136,483


10.81


101,026


8.00


126,283


10.00Tier 1 Capital
(to Risk Weighted Assets):The
Company


156,358


11.71


53,411


4.00


80,116


6.00The
bank


120,686


9.56


50,513


4.00


75,770


6.00Tier 1
Leverage Capital (to Average Assets):The
Company


156,358


8.04


77,762


4.00


97,203


5.00The
bank


120,686


6.46


74,780


4.00


93,475


5.00As of
December 31, 2005Total Capital
(to Risk Weighted Assets):The
Company

$
172,946


13.28
%
$
104,219


8.00
%
$
130,274


10.00
%The
bank


135,307


10.99


98,520


8.00


123,150


10.00Tier 1 Capital
(to Risk Weighted Assets):The
Company


156,659


12.03


52,110


4.00


78,165


6.00The
bank


119,910


9.74


49,260


4.00


73,890


6.00Tier 1
Leverage Capital (to Average Assets):The
Company


156,659


7.96


78,680


4.00


98,350


5.00The
bank


119,910


6.33


75,722


4.00


94,653


5.0030

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

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

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

Market Risk

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

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

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

31

The Companys
balance sheet structure is primarily short-term in nature with a substantial
portion of assets and liabilities repricing or maturing within one year. The
Companys gap analysis at June 30, 2006, presented on page 36, indicates that
net interest income would decrease during periods of rising interest rates and
increase during periods of falling interest rates, but, as mentioned above, gap
analysis may not be an accurate predictor of net interest income.

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

As of June
30, 2006, the Company was a party to two interest rate floor agreements with
notional amounts of $50,000,000 each and maturities of September 14, 2007 and
September 14, 2008, respectively. Interest rate floor contracts require the
counterparty to pay the Company at specified future dates the amount, if any, by
which the specified interest (prime rate) falls below the fixed floor rates,
applied to the notional amounts. The Company utilizes the financial instruments
to adjust its interest rate risk position without exposing itself to principal
risk and funding requirements. These financial instruments are being used as
part of the Companys interest rate risk management and not for trading
purposes. At June 30, 2006, all counterparties have investment grade credit
ratings from the major rating agencies. Each counterparty is specifically
approved for applicable credit exposure.

The interest
rate floor contracts require the Company to pay a fee for the right to receive
a fixed interest payment. The Company paid up-front premiums of $141,250. At
June 30, 2006, there were no amounts receivable under these contracts. At June
30, 2005, the Company was not a party to any derivative contracts.

The interest
rate floor agreements were not designated as hedges for accounting purposes and
therefore changes in the fair values of the instruments are required to be
recognized as income or expenses in the Companys financial statements. At June
30, 2006 the aggregate fair value of the interest rate floors was $1,782, and
$4,362 and $26,248 was charged to Other Expenses for the three and
six months ended June 30, 2006, respectively.

The Company
utilizes income simulation models to complement its traditional gap analysis.
While the Asset/Liability Committee routinely monitors simulated net interest
income sensitivity over a rolling two-year horizon, it also utilizes additional
tools to monitor potential longer-term interest rate risk. The income
simulation models measure the Companys net interest income volatility or
sensitivity to interest rate changes utilizing statistical techniques that
allow the Company to consider various factors 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.

32

The Companys
interest rate sensitivity is determined by identifying the probable impact of
changes in market interest rates on the yields on the Companys assets and the
rates that would be paid on its liabilities. This modeling technique involves a
degree of estimation based on certain assumptions that management believes to
be reasonable. Utilizing this process, management projects the impact of
changes in interest rates on net interest margin. The Company has established
certain policy limits for the potential volatility of its net interest margin
assuming certain levels of changes in market interest rates with the objective
of maintaining a stable net interest margin under various probable rate
scenarios. Management generally has maintained a risk position well within the
policy limits. As of June 30, 2006, the model indicated the impact of a 200
basis point parallel and pro rata rise in rates over 12 months would
approximate a 0.8% ($0.6 million) increase in net interest income, while the
impact of a 200 basis point decline in rates over the same period would
approximate a 1.6% ($1.4 million) decline from an unchanged rate environment.

The preceding
sensitivity analysis does not represent a Company forecast and should not be
relied upon as being indicative of expected operating results. These
hypothetical estimates are based upon numerous assumptions including: the
nature and timing of interest rate levels including yield curve shape,
prepayments on loans and securities, deposit decay rates, pricing decisions on
loans and deposits, reinvestment/replacement of asset and liability cash flows,
and others. While assumptions are developed based upon current economic and
local market conditions, the Company cannot provide any assurances as to the
predictive nature of these assumptions, including how customers 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 shape could continue to adversely affect the Companys results
in 2006.

33

Liquidity Risk

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

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

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

At June 30,
2006, the parent companys short-term debt, consisting principally of
commercial paper used to finance ongoing current business activities, was
approximately $43.7 million. The parent company had cash, interest-bearing
deposits with banks and other current assets aggregating $36.5 million. The
parent company also has back-up credit lines with banks of $24.0 million. Since
1979, the parent company has had no need to use the available back-up lines of
credit.

34

The following
table sets forth information regarding the Companys obligations and
commitments to make future payments under contract as of June 30, 2006:

Payments Due by PeriodContractual
  Obligations

Total

Less than
  1 Year

1-3
  Years

4-5
  Years

After 5
  Years(in thousands)Long-Term Debt

$
55,774

$


$
10,000

$
20,000

$
25,774
(1)Operating
  Leases


28,257


4,130


8,182


5,722


10,223Total Contractual Cash Obligations

$
84,031

$
4,130

$
18,182

$
25,722

$
35,997(1) May be redeemed by the
Company on or after March 31, 2007 at a price equal to principal amount plus
accrued interest to the date of redemption.

The following
table sets forth information regarding the Companys obligations under other
commercial commitments as of June 30, 2006:

Amount of Commitment Expiration Per PeriodOther
  Commercial
  Commitments

Total Amount
  Committed

Less than
  1 Year

1-3
  Years

4-5
  Years

After 5
  Years(in thousands)Residential
  Loans

$
24,179

$
24,179

$


$


$
Commercial
  Loans


39,017


23,158


15,105


754


Total Loans


63,196


47,337


15,105


754


Standby
  Letters of Credit


31,580


29,091


2,489





Other
  Commercial Commitments


25,221


25,123


46





52Total Commercial Commitments

$
119,997

$
101,551

$
17,640

$
754

$
52INFORMATION AVAILABLE ON OUR WEB SITE

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

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

35

STERLING BANCORP AND SUBSIDIARIES
Interest Rate Sensitivity

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


Repricing
  Date3 Monthsor Less

More than3 Monthsto 1 Year

More than 
  1 Year to5 Years

Over5 Years

NonrateSensitive

TotalASSETSInterest-bearing deposits with other banks

$
1,156

$


$


$


$


$
1,156Investment
securities


2,244


36,057


99,128


489,998


7,143


634,570Commercial and
industrial loans


619,178


16,066


18,869


5,989


(243
)

659,859Equipment
lease financing


1,599


7,548


219,915


16,657


(32,827
)

212,892Real
estate-residential mortgage


37,569


5,390


97,427


26,359





166,745Real
estate-commercial mortgage


31,016


49,429


33,087


1,613





115,145Real
estate-construction loans


3,746














3,746Installment-individuals


14,213














14,213Loans to
depository institutions

















Noninterest-earning assets & allowance for loan losses














186,608


186,608Total
Assets


710,721


114,490


468,426


540,616


160,681


1,994,934LIABILITIES AND
SHAREHOLDERS EQUITYInterest-bearing depositsSavings
[1]








22,579








22,579NOW
[1]








213,823








213,823Money market
[1]


164,283





36,245








200,528Time -
domestic


220,928


197,691


61,609








480,228-
  foreign


2,850


178











3,028Securities sold under
  agreement to repurchase - customer


57,932














57,932Securities sold under agreement
to repurchase - dealer


110,346














110,346Federal funds
purchased


20,000














20,000Commercial paper


43,717














43,717Short-term borrowings -
FHLB


56,000














56,000Short-term borrowings -
other


1,449














1,449Long-term borrowings -
FHLB








20,000


10,000





30,000Long-term borrowings -
subordinated debentures














25,774


25,774Noninterest-bearing liabilities
& shareholders equity














729,530


729,530Total
Liabilities and Shareholders Equity


677,505


197,869


354,256


10,000


755,304


1,994,934Net Interest Rate Sensitivity
Gap

$
33,216

$
(83,379
)
$
114,170

$
530,616

$
(594,623
)
$
Cumulative Gap June 30,
2006

$
33,216

$
(50,163
)
$
64,007

$
594,623

$


$
Cumulative Gap June 30,
2005

$
130,636

$
(23,842
)
$
70,744

$
586,783

$


$
Cumulative Gap December 31,
2005

$
37,715

$
(51,516
)
$
82,734

$
628,269

$


$
[1]
Historically, balances in
non-maturity deposit accounts have remained relatively stable despite changes
in levels of interest rates. Balances are shown in repricing periods based on
managements historical repricing practices and run-off experience.36

ITEM 4. CONTROLS AND PROCEDURES

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

No change in
the Companys internal control over financial reporting (as defined in Rule
13a-15(f) under the Securities Exchange Act of 1934) occurred during the fiscal
quarter ended June 30, 2006 that has materially affected, or is reasonably
likely to materially affect, the Companys internal control over financial
reporting.

37

PART II - OTHER INFORMATION

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

Under its
share repurchase program, the Company buys back common shares from time to
time. The following table discloses the Companys repurchases of the Companys  common shares during the second quarter of
2006.

ISSUER
PURCHASES OF EQUITY SECURITIESPeriod

TotalNumber ofSharesPurchased

AveragePrice Paid
  Per Share

Total
  Number of
  Shares
  Purchased asPart of PubliclyAnnounced Plans
  or Programs

MaximumNumber 
  of Shares
  that May
  Yet Be
  PurchasedUnder the Plansor ProgramsApril 1-30, 2006




$






363,319May
  1-31, 2006


48,000


18.69


48,000


315,319June
  1-30, 2006


75,000


18.41


75,000


240,319Total


123,000





123,000All shares
were repurchased through the Companys share repurchase program.

The Board of Directors
initially authorized the repurchase of common shares in 1997 and since then has
approved increases in the number of common shares that the Company is authorized
to repurchase. The latest increase was announced on June 16, 2005, when the
Board of Directors increased the Companys authority to repurchase common
shares by an additional 800,000 shares.

38

Item 4. Submission of Matters to a Vote of Security Holders




The following sets forth the voting results as to each matter voted upon at the
Annual Meeting of Shareholders of the Company held on May 2, 2006:(1)
        Election of Directors


Nominee
    
    Total
        Votes For
    
    Total
        Votes WithheldRobert
        Abrams
          
          16,317,140
          
          199,320Joseph
        M. Adamko
    
    15,856,312
    
    660,148Louis
              J. Cappelli
          
          16,014,095
          
          502,365Walter
        Feldesman
    
    15,947,702
    
    568,758Fernando
        Ferrer
          
          16,314,018
          
          202,442Allan
        F. Hershfield
    
    16,008,349
    
    508,111Henry
              J. Humphreys
          
          15,947,086
          
          569,374Robert
        Lazar
    
    16,314,845
    
    201,615John
        C. Millman
          
          16,014,716
          
          501,744Eugene
        T. Rossides
    
    15,856,438
    
    660,022There
        were no abstentions or broker nonvotes.




(2)
        Reapproval of the Sterling Bancorp Key Executive Incentive Bonus Plan, which was originally approved by the Companys shareholders in 2001.

Total
          Votes For

    15,145,248Total
        Votes Against

          521,194Total
          Absentions

    850,015





39

Item 6.ExhibitsThe
        following exhibits are filed as part of this report:3.
    (i)
    Restated
        Certificate of Incorporation filed with the State of New York Department
        of State, October 28, 2004 (Filed as Exhibit 3(i) to the Registrants
        Form 10-Q for the quarter ended September 30, 2004 and incorporated herein
        by reference).(ii)
    By-Laws
        as in effect on August 5, 2004 (Filed as Exhibit 3(ii)(A) to the Registrants
        Form 10-Q for the quarter ended June 30, 2004 and incorporated herein
        by reference).11.
    
    Statement
        Re: Computation of Per Share Earnings.31.1
    
    Certification
        of the CEO pursuant to Exchange Act Rule 13a-14(a).31.2
    
    Certification
        of the CFO pursuant to Exchange Act Rule 13a-14(a).32.1
    
    Certification
        of the CEO required by Section 1350 of Chapter 63 of Title 18 of the U.S.
        Code.32.2
    
    Certification
        of the CFO required by Section 1350 of Chapter 63 of Title 18 of the U.S.
        Code.40

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 August 9, 2006
/s/
Louis J.
  CappelliLouis J.
  CappelliChairman andChief
  Executive OfficerDate August 9, 2006
/s/
John W.
  TietjenJohn W.
  TietjenExecutive
  Vice Presidentand Chief
  Financial Officer41

STERLING BANCORP AND SUBSIDIARIES

EXHIBIT INDEX

Exhibit
        Number
    
    Description
    Sequential
        Page No.11
    
    Statement
        re: Computation of Per Share Earnings.
    4331.1
    
    Certification
        of the CEO pursuant to Exchange Act Rule 13a-14(a).
    4431.2
    
    Certification
        of the CFO pursuant to Exchange Act Rule 13a-14(a).
    4532.1
    
    Certification
        of the CEO required by Section 1350 of Chapter 63 of Title 18 of the U.S.
        Code.
    4632.2
    
    Certification
        of the CFO required by Section 1350 of Chapter 63 of Title 18 of the U.S.
        Code.
    4742