UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 FORM 10-Q (Mark One)x
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the quarterly period
ended June 30, 2007
 or
 o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For the transition period
from _____________________ to ______________________________________ Commission File Number:
1-5273-1 Sterling
Bancorp(Exact
name of registrant as specified in its charter)  New York

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

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

10019-6108(Address of principal
executive offices)

(Zip
Code)  212-757-3300(Registrants
telephone number, including area code)N/A(Former
name, former address and former fiscal year, if changed since last report) Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.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 Filer
o
Accelerated Filer x
Non-Accelerated Filer
o Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).oYesxNo As of July 31, 2007 there were 18,017,668 shares of common
stock,
$1.00 par value, outstanding.    STERLING BANCORP

PagePART I FINANCIAL INFORMATIONItem 1.
Financial StatementsConsolidated
  Financial Statements (Unaudited)
3Notes to
  Consolidated Financial Statements
8Item 2.
Managements
  Discussion and Analysis of Financial Condition and Results of OperationsOverview
13Income
  Statement Analysis
14Balance
  Sheet Analysis
19Capital
23Recently
  Issued Accounting Pronouncements
24Cautionary
  Statement Regarding Forward-Looking Statements
24Average
  Balance Sheets
25Rate/Volume
  Analysis
27Regulatory
  Capital and Ratios
29Item 3.
Quantitative
  and Qualitative Disclosures About Market RiskAsset/Liability
  Management
30Interest
  Rate Sensitivity
35Item 4.
Controls
  and Procedures
36PART II
  OTHER INFORMATIONItem 2.
Unregistered
  Sales of Equity Securities and Use of Proceeds
37Item 4.
Submission
  of Matters to a Vote of Security Holders
38Item 6.
Exhibits
39SIGNATURES

40EXHIBIT
  INDEXExhibit 11
Statement Re: Computation
  of Per Share Earnings
42Exhibit 31.1
Certification of the CEO
  pursuant to Exchange Act Rule 13a-14(a)
43Exhibit 31.2
Certification of the CFO
  pursuant to Exchange Act Rule 13a-14(a)
44Exhibit 32.1
Certification of the CEO
  required by Section 1350 of Chapter 63 of Title 18 of the U.S. Code
45Exhibit 32.2
Certification of the CFO
  required by Section 1350 of Chapter 63 of Title 18 of the U.S. Code
462

STERLING BANCORP AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)

June 30,
2007

December 31,
2006ASSETSCash and due from
banks

$
70,030,220

$
50,058,593Interest-bearing deposits with
other banks


1,177,462


1,261,187Federal funds sold


10,000,000


20,000,000Securities available for sale
(at estimated
  fair value; pledged: $71,349,693 in 2007 and $90,583,854 in 2006)


145,899,741


148,420,887Securities held to maturity
(pledged:
  $193,736,735 in 2007 and $199,997,912 in 2006) (estimated fair value:
  $375,158,283 in 2007 and $411,650,690 in 2006)


386,406,886


420,903,430Total investment
securities


532,306,627


569,324,317Loans held for sale


46,356,968


33,319,789Loans held in portfolio, net of
unearned
  discounts


1,121,943,872


1,112,601,620Less allowance for loan
losses


15,582,026


16,287,974Loans, net


1,106,361,846


1,096,313,646Customers liability under
acceptances


33,787


98,399Goodwill


22,900,912


22,862,051Premises and equipment,
net


11,510,098


11,323,649Other real estate


2,057,365


2,242,419Accrued interest
receivable


4,893,910


5,844,868Bank owned life
insurance


28,487,841


27,949,160Other assets


49,635,004


43,696,511Total assets from continuing
operations


1,885,752,040


1,884,294,589Assets - discontinued
operations


1,226,062


1,662,697$
1,886,978,102

$
1,885,957,286LIABILITIES AND SHAREHOLDERS
EQUITYDepositsDemand deposits

$
520,432,739

$
546,442,704Savings, NOW and money market
deposits


476,878,619


447,600,898Time deposits


536,516,305


527,986,821Total deposits


1,533,827,663


1,522,030,423Securities sold under
agreements to
  repurchase - customers


76,530,242


52,802,796Commercial paper


27,444,077


27,561,567Short-term borrowings -
other


1,718,389


3,411,630Long-term borrowings -
FHLB


10,000,000


20,000,000Long-term borrowings -
subordinated
  debentures


25,774,000


25,774,000Total borrowings


141,466,708


129,549,993Acceptances
outstanding


33,787


98,399Accrued expenses and other
liabilities


89,608,141


101,679,342Liabilities - discontinued
operations


129,255


336,358Total liabilities


1,765,065,554


1,753,694,515Shareholders equityCommon stock, $1 par value.
Authorized
  50,000,000 shares; issued 21,262,170 and 21,177,084 shares, respectively


21,262,170


21,177,084Capital surplus


168,651,246


167,960,063Retained earnings


17,043,353


16,693,987Accumulated other comprehensive
loss, net
  of tax


(12,347,079
)

(11,842,908
)194,609,690


193,988,226LessCommon shares in treasury at
cost,
  3,244,502 and 2,572,368 shares, respectively


72,697,142


61,725,455Total shareholders
equity


121,912,548


132,262,771$
1,886,978,102

$
1,885,957,286See Notes to Consolidated Financial
Statements.

3

STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)

Three Months Ended
June 30,

Six Months Ended
June 30,2007

2006

2007

2006INTEREST INCOMELoans

$
23,121,500

$
21,588,986

$
44,848,117

$
40,969,040Investment
securitiesAvailable for
sale


1,701,584


1,978,003


3,546,298


4,179,789Held to
maturity


4,698,726


5,551,640


9,567,851


11,295,114Federal funds
sold


367,338


34,886


1,002,646


74,871Deposits with
other banks


36,694


20,563


67,378


50,644Total interest
income


29,925,842


29,174,078


59,032,290


56,569,458INTEREST EXPENSEDepositsSavings, NOW
and money market


3,279,559


1,672,459


6,138,965


3,455,379Time


6,581,415


4,714,822


13,128,913


9,175,673Securities
sold under agreements to
  repurchase-
customers


804,625


767,373


1,879,619


1,462,221-
dealers





1,344,154





2,328,142Federal funds
purchased


23,369


251,081


35,748


386,221Commercial
paper


355,519


537,923


705,258


942,524Short-term
borrowings - FHLB





642,197





835,365Short-term
borrowings - other


15,694


7,369


27,562


17,781Long-term
borrowings - FHLB


136,522


460,501


361,023


1,046,852Long-term
borrowings - subordinated debt


523,437


523,437


1,046,875


1,046,875Total interest
expense


11,720,140


10,921,316


23,323,963


20,697,033Interest
expense allocated to discontinued
  operations





(878,229
)




(1,652,223
)Net interest income


18,205,702


19,130,991


35,708,327


37,524,648Provision for loan
losses


1,078,332


377,229


2,328,332


1,742,229Net interest income after
provision for
  loan losses


17,127,370


18,753,762


33,379,995


35,782,419Total noninterest
income


9,051,511


9,005,707


18,280,807


14,790,560Total noninterest
expenses


20,228,031


18,805,582


39,911,781


37,327,934Income from continuing
operations before
  income taxes


5,950,850


8,953,887


11,749,021


13,245,045Provision for income
taxes


2,159,412


3,571,596


4,385,910


1,377,862Income from continuing
operations


3,791,438


5,382,291


7,363,111


11,867,183Income/(Loss) from discontinued
operations,
  net of tax


71,252


(516,806
)

(20,719
)

(561,565
)Net income

$
3,862,690

$
4,865,485

$
7,342,392

$
11,305,618Average number of common shares
outstandingBasic


18,439,318


18,754,271


18,524,871


18,769,265Diluted


18,856,903


19,286,286


18,994,625


19,310,135Income from continuing operations, per average common shareBasic

$
0.21

$
0.29

$
0.40

$
0.63Diluted


0.20


0.28


0.39


0.61Net income,
per average common shareBasic


0.21


0.26


0.40


0.60Diluted


0.20


0.25


0.39


0.58Dividends per common
share


0.19


0.19


0.38


0.38See Notes to Consolidated Financial Statements.

4

STERLING BANCORP AND SUBSIDIARIESConsolidated Statements of
Comprehensive Income(Unaudited)

Three Months Ended
June 30,

Six Months Ended
June 30,2007

2006

2007

2006Net Income

$
3,862,690

$
4,865,485

$
7,342,392

$
11,305,618Other comprehensive
(loss)/income, net of tax:Unrealized holding losses
arising during
  the period


(1,233,699
)

(985,184
)

(897,251
)

(2,219,531
)Reclassification adjustment for
losses/(gains)
  included in net income


1,098


(8,148
)

1,098


243,702Amortization of:Prior service cost


13,544





27,089


Net actuarial losses


182,447





364,893


Comprehensive
  income

$
2,826,080

$
3,872,153

$
6,838,221

$
9,329,789See Notes to Consolidated Financial
Statements.

5

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

Six Months Ended
June 30,2007

2006Common StockBalance at
January 1

$
21,177,084

$
21,066,916Common shares
issued under stock incentive
  plan


85,086


110,168Balance at
June 30

$
21,262,170

$
21,177,084Capital
  SurplusBalance at
January 1

$
167,960,063

$
166,313,566Common shares
issued under stock incentive
  plan and related tax benefits


691,183


1,613,243Balance at
June 30

$
168,651,246

$
167,926,809Retained
  EarningsBalance at
January 1

$
16,693,987

$
20,739,352Net
Income


7,342,392


11,305,618Cash dividends
paid - common shares


(6,993,026
)

(7,124,063
)Balance at
June 30

$
17,043,353

$
24,920,907Accumulated
  Other Comprehensive LossBalance at
January 1

$
(11,842,908
)
$
(5,229,620
)Unrealized
holding losses arising during
  the period:Before
tax


(1,635,526
)

(3,837,020
)Tax
effect


738,275


1,617,489Net of
tax


(897,251
)

(2,219,531
)Reclassification
  adjustment for losses included in net income:Before
tax


2,001


444,631Tax
effect


(903
)

(200,929
)Net of
tax


1,098


243,702Amortization
  of prior service cost and net actuarial losses:Before
tax


714,512


Tax
effect


(322,530
)

Net of
tax


391,982


Balance at
  June 30

$
(12,347,079
)
$
(7,205,449
)Treasury
  StockBalance at
January 1

$
(61,725,455
)
$
(55,280,647
)Purchase of
common shares


(10,515,732
)

(3,809,856
)Surrender of
shares issued under stock
  incentive plan


(455,955
)

(613,792
)Balance at
June 30

$
(72,697,142
)
$
(59,704,295
)Unearned
  CompensationBalance at
January 1

$


$
(22,007
)Amortization
of unearned compensation





22,007Balance at
June 30

$


$
Total
  Shareholders EquityBalance at
January 1

$
132,262,771

$
147,587,560Net changes
during the period


(10,350,223
)

(472,504
)Balance at
June 30

$
121,912,548

$
147,115,056See Notes to Consolidated Financial
Statements.

6

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

Six Months Ended
June 30,2007

2006Operating
  ActivitiesNet
Income

$
7,342,392

$
11,305,618Loss from
discontinued operations included
  below in operating cash flows from discontinued operations


20,719


561,565Income from
continuing operations


7,363,111


11,867,183Adjustments to
reconcile income from
  continuing operations to net cash (used in) provided by operating activities:Provision for
loan losses


2,328,332


1,742,229Depreciation
and amortization of premises
  and equipment


1,297,663


1,118,244Securities
losses


2,001


444,631Income from
bank owned life insurance


(538,681
)

(488,365
)Deferred
income tax provision


207,295


1,282,520Proceeds from
sale of loans


272,674,045


312,440,005Gains on
sales of loans, net


(5,376,076
)

(4,783,972
)Originations
of loans held for sale


(280,335,148
)

(296,310,746
)Amortization
of unearned compensation





22,007Amortization
of premiums on securities


231,135


318,295Accretion of
discounts on securities


(180,222
)

(262,433
)Decrease in
accrued interest receivable


950,958


1,047,191Decrease in
accrued expenses and other
  liabilities


(12,071,201
)

(15,900,429
)Increase
in other assets


(5,338,491
)

(759,477
)Other,
net


(17,854
)

(762,003
)Net cash (used in)
provided by operating activities


(18,803,133
)

11,014,880Investing
  ActivitiesPurchase of
premises and equipment


(1,484,112
)

(770,429
)Net decrease
in interest-bearing deposits
  with other banks


83,725


56,613Net decrease
in federal funds sold


10,000,000


Net (increase)
decrease in loans held in
  portfolio


(12,376,532
)

43,541,960Decrease
(Increase) in other real estate


185,054


(605,280
)Proceeds from
calls of securities - held to
  maturity


18,125,000


Proceeds from
prepayments, redemptions or
  maturities of securities - held to maturity


41,344,375


40,563,283Purchases of
securities - held to maturity


(25,003,500
)

(115,870
)Proceeds from
sales of securities -
  available for sale


2,750


25,369,800Proceeds from
prepayments, redemptions or
  maturities of securities - available for sale


31,703,892


21,208,122Purchases of
securities - available for
  sale


(30,996,171
)

(10,045,571
)Cash paid in
acquisition





(44,901,402
)Net cash provided
by investing activities


31,584,481


74,301,226Financing
  ActivitiesNet increase
(decrease) in deposits


11,797,240


(42,951,065
)Long-term borrowings called


10,000,000


Net increase
(decrease) in borrowings


21,916,715


(22,394,330
)Purchase of
treasury stock


(10,515,732
)

(3,809,856
)Net proceeds
from issuance of common stock
  including the exercise of stock options and related tax benefits


776,269


1,723,411Cash dividends
paid on common stock


(6,993,026
)

(7,124,063
)Net cash used in
financing activities


6,981,466


(74,555,903
)Cash flows
  from discontinued operationsOperating cash
flows


208,813


2,819,401Investing cash
flows





(171,907
)Total


208,813


2,647,494Net
  (decrease) increase in cash and due from banks


19,971,627


13,407,697Cash and due
  from banks - beginning of period


50,058,593


68,562,037Cash and due
  from banks - end of period

$
70,030,220

$
81,969,734Supplemental
  disclosures:Interest
paid

$
23,508,403

$
20,833,908Income taxes
paid


949,459


4,216,362See Notes to Consolidated Financial Statements.

7

STERLING BANCORP AND
SUBSIDIARIES
Notes 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, 2007 and 2006 are unaudited; however, in the
  opinion of management, all adjustments, consisting of normal recurring
  accruals, necessary for a fair presentation of such periods have been made.
  Certain reclassifications have been made to the 2006 consolidated financial
  statements to conform to the current presentation. The interim consolidated
  financial statements should be read in conjunction with the Companys annual
  report on Form 10-K for the year ended December 31, 2006.2.
The major
  components of domestic loans held for sale and loans held in portfolio are as
  follows:June 30,
2007

December 31,
2006Loans held
  for saleReal
estate-residential mortgage

$
46,356,968

$
33,319,789Loans held
  in portfolioCommercial and
industrial

$
596,781,663

$
622,476,925Lease
financing


262,631,023


239,225,533Real
estate-residential mortgage


131,462,145


120,056,900Real
estate-commercial mortgage


92,718,380


93,214,668Real
estate-construction


38,146,578


30,030,684Installment


10,333,376


12,380,848Loans to
depository institutions


25,000,000


27,000,000Loans held in
portfolio, gross


1,157,073,165


1,144,385,558Less unearned
discounts


35,129,293


31,783,938Loans held in
portfolio, net of unearned
  discounts

$
1,121,943,872

$
1,112,601,6203.
The
following information is provided in connection with the sales and/or calls of
available for sale securities:Three Months EndedJune 30,
     
     
     Six Months EndedJune 30,2007
     
     2006
     
     
     2007
     
     2006Proceeds
     
     
     $
     2,750
     
     $
     831,300
     
     
     
     
     $
     2,750
     
     $
     25,369,800Gross Gains
     
        
     14,866
        
     
     
        
     14,866Gross Losses
     22
        
     
        
     
     22
        
     459,497During
the first quarter of 2006 the Company sold lower yielding available for sale securities at
a loss to partially fund the acquisition of Sterling Resource Funding Corp.The
following information is provided in connection with the calls of held to maturity
securities:Three Months EndedJune 30,
     
     
     Six Months EndedJune 30,2007
     
     2006
     
     
     2007
     
     2006Proceeds
     
     
     $
     18,125,000
     
     $
     
     
     
     
     
     $
     18,125,000
     
     $
     Gross Gains
     
        
     
        
     
     
        
     Gross Losses
     1,979
        
     
        
     
     1,979
        
     8

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

4.
The
  following table sets forth components of net periodic benefit cost for the
  Companys noncontributory defined benefit pension plan and unfunded
  supplemental retirement plan.Three
Months EndedJune 30,

Six
Months Ended June 30,2007

2006

2007

2006COMPONENTS OF NET PERIODIC BENEFITCOSTService cost

$
409,271

$
446,747

$
818,542

$
914,246Interest
  cost


567,201


583,642


1,134,402


1,200,542Expected
  return on plan assets


(475,457
)

(565,806
)

(950,914
)

(1,108,782
)Amortization
  of prior service cost


24,689


18,115


49,378


37,806Recognized
  actuarial loss


332,567


319,270


665,134


656,188Net periodic
  benefit cost

$
858,271

$
801,968

$
1,716,542

$
1,700,000The Company currently expects to contribute approximately $3,000,000 to the
defined benefit pension plan in 2007. No contribution has been made as of June
30, 2007.5.
The
  following tables set forth the significant components of noninterest income
  and noninterest expenses:Three
Months Ended June 30,

Six
Months Ended June 30,2007

2006

2007

2006NONINTEREST INCOMEAccounts
receivable management/factoring
  commissions and other fees

$
3,820,957

$
3,880,218

$
7,488,576

$
5,224,980Service
charges on deposit accounts


1,424,778


1,282,000


2,906,390


2,686,004Other customer
related service charges and
  fees


743,002


812,854


1,433,110


1,620,922Mortgage
banking income


2,543,656


2,567,420


5,376,076


4,783,972Trust
fees


125,180


137,798


266,383


289,520Bank owned
life insurance income


286,130


268,305


538,681


488,365Securities
(losses)/gains


(2,001
)

14,866


(2,001
)

(444,631
)Other
income


109,809


42,246


273,592


141,428Total
noninterest income

$
9,051,511

$
9,005,707

$
18,280,807

$
14,790,560Three
Months Ended June 30,

Six
Months Ended June 30,2007

2006

2007

2006NONINTEREST EXPENSESSalaries

$
8,450,719

$
9,110,770

$
17,448,231

$
16,873,588Employee
  benefits


2,734,833


2,770,949


5,224,394


5,672,272Total
personnel expense


11,185,552


11,881,719


22,672,625


22,545,860Occupancy
  and equipment expenses, net


2,638,634


2,480,026


5,346,337


4,782,975Advertising
  and marketing


1,121,979


806,572


2,085,880


1,805,598Professional
  fees


1,950,928


692,443


3,290,703


2,515,606Communications


453,841


451,143


970,111


845,715Other
  expenses


2,877,097


2,493,679


5,546,125


4,832,180Total
noninterest expense

$
20,228,031

$
18,805,582

$
39,911,781

$
37,327,9346.
Statement
          of Financial Accounting Standards (SFAS) No. 131, Disclosures
          about Segments of an Enterprise and Related Information, established
          standards for the way that public business enterprises report and disclose
          selected information about operating segments in interim financial statements
          provided to stockholders.The Company
          provides a broad range of financial products and services, including
          commercial loans, asset-based financing, factoring and accounts receivable
          management services, trade financing, equipment leasing, corporate and
          consumer deposit services, commercial and residential mortgage lending
          and brokerage, trust and estate administration and investment management
          services. The Companys primary source of earnings is net interest
          income, which represents the difference between interest earned on interest-earning
          assets and interest incurred on interest-bearing liabilities. The
          Companys 2007 year-to-date average interest-earning assets were9

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

64.0% loans
          (corporate lending was 68.1% and real estate lending was 27.2% of total
          loans, respectively) and 33.6% investment securities and money market
          investments. There are no industry concentrations exceeding 10% of loans,
          gross, in the corporate lending segment. Approximately 72% of loans
          are to borrowers located in the metropolitan New York area. In order
          to comply with the provisions of SFAS No. 131, the Company has determined
          that it has three reportable operating segments: corporate lending,
          real estate lending and company-wide treasury.The following
tables provide certain information regarding the Companys operating segments
for the three and six month periods ended June 30, 2007 and 2006 (all amounts
are from continuing operations except where designated as discontinued):

Corporate
Lending

Real Estate
Lending

Company-wide
Treasury

TotalsThree Months Ended June 30,
2007Net interest income

$
6,591,874

$
5,394,533

$
5,967,782

$
17,954,189Noninterest income


5,651,376


2,572,330


376,751


8,600,457Depreciation and
amortization


190,536


94,181


615


285,332Segment income from continuing
operations
  before income taxes


4,175,336


3,856,976


5,702,458


13,734,770Segment income from
discontinued operations
  before income taxes


129,732








129,732Segment assets from continuing
operations


744,023,452


399,817,522


715,189,386


1,859,030,360Segment assets from
discontinued operations


1,226,062








1,226,062Three Months Ended June 30,
2006Net interest income

$
9,462,733

$
5,414,600

$
3,994,866

$
18,872,199Noninterest income


5,467,205


2,621,722


348,091


8,437,018Depreciation and
amortization


174,891


101,271


615


276,777Segment income from continuing
operations
  before income taxes


8,119,492


3,268,018


3,387,009


14,774,519Segment loss from discontinued
operations
  before income taxes


(940,908
)







(940,908
)Segment assets from continuing
operations


763,475,411


337,932,342


750,566,462


1,851,974,215Segment assets from
discontinued operations


114,265,781








114,265,781Six Months Ended June 30,
2007Net interest income

$
12,817,524

$
10,368,705

$
12,021,830

$
35,208,059Noninterest income


11,233,401


5,493,329


712,474


17,439,204Depreciation and
amortization


370,940


186,489


1,229


558,658Segment income from continuing
operations
  before income taxes


8,297,305


8,104,876


11,448,675


27,850,856Segment loss from discontinued
operations
  before income taxes


(37,722
)







(37,722
)Segment assets from continuing
operations


744,023,452


399,817,522


715,189,386


1,859,030,360Segment assets from
discontinued operations


1,226,062








1,226,062Six Months Ended June 30,
2006Net interest income

$
17,573,494

$
10,839,233

$
8,581,267

$
36,993,994Noninterest income


8,618,674


4,937,193


186,442


13,742,309Depreciation and
amortization


278,293


202,002


1,229


481,524Segment income from continuing
operations
  before income taxes


12,947,430


6,191,656


7,681,298


26,820,384Segment loss from discontinued
operations
  before income taxes


(1,017,526
)







(1,017,526
)Segment assets from continuing
operations


763,475,411


337,932,342


750,566,462


1,851,974,215Segment assets from
discontinued operations


114,265,781








114,265,78110

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

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

Three Months Ended June 30,

Six Months Ended June 30,2007

2006

2007

2006Net interest income:Total for
reportable operating segments

$
17,954,189

$
18,872,199

$
35,208,059

$
36,993,994Other
[1]


251,513


258,792


500,268


530,654Consolidated net interest
income

$
18,205,702

$
19,130,991

$
35,708,327

$
37,524,648Noninterest income:Total for
reportable operating segments

$
8,600,457

$
8,437,018

$
17,439,204

$
13,742,309Other
[1]


451,054


568,689


841,603


1,048,251Consolidated noninterest
income

$
9,051,511

$
9,005,707

$
18,280,807

$
14,790,560Income from continuing operations before income taxes:Total for
reportable operating segments

$
13,734,770

$
14,774,519

$
27,850,856

$
26,820,384Other
[1]


(7,783,920
)

(5,820,632
)

(16,101,835
)

(13,575,339
)Consolidated income from continuing operations before
income taxes

$
5,950,850

$
8,953,887

$
11,749,021

$
13,245,045Assets:Total for
reportable operating segments:-
continuing operations

$
1,859,030,360

$
1,851,974,215

$
1,859,030,360

$
1,851,974,215-
discontinued operations


1,226,062


114,265,781


1,226,062


114,265,781Other
[1]


26,721,680


28,693,686


26,721,680


28,693,686Consolidated assets

$
1,886,978,102

$
1,994,933,682

$
1,886,978,102

$
1,994,933,682[1]     Represents operations not considered to be a reportable
segment and/or general operating expenses of the Company.

11

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

  7.
      The
          Company adopted Emerging Issues Task Force Issue
          No. 06-5, Accounting for Purchases of Life Insurance-Determining
          the Amount that Could be Realized in Accordance with FASB Technical
          Bulletin No. 85-4, Accounting for Purchases of Life Insurance, and Statement of Financial Accounting Standards (SFAS) No. 156, Accounting for
          Servicing of Financial Assets-An Amendment of FASB Statement No. 140, as of January 1, 2007. There was no material
          impact on the Companys results of operations or financial condition
          upon adoption.The
          Company also adopted Financial Accounting Standards Board (FASB) Interpretation
          No. 48 (FIN 48) as of January 1, 2007. The implementation
          of FIN 48 did not have an impact on our financial position or results
          of operations. At the adoption date of January 1, 2007 and at June 30, 2007, we had approximately $644,000 of unrecognized tax benefits,
          all of which would affect our effective tax rate if recognized. Approximately
          50% of the unrecognized tax benefits are expected to be recognized during
          the second half of 2007 due to the expiration of the statute of limitations
          related to the taxation of certain income items. The Company recognizes
          interest accrued related to unrecognized tax benefits and penalties
          in noninterest operating expenses. Such accrued interest payable was
          approximately $235,000 at January 1, 2007. The Company and its subsidiaries
          are subject to U.S. federal income tax as well as income tax of multiple
          state jurisdictions. The Companys federal income tax returns for
          2002 through 2005 are currently either under examination or subject
          to examination. The Companys New York State and New York City
          tax returns for years prior to 2003 are no longer subject to examination.SFAS
          No. 155, Accounting for Certain Hybrid Financial Instruments 
          An Amendment of FASB Statements No. 133 and 140, which became effective
          for certain hybrid financial instruments acquired or issued by the Company
          on or after January 1, 2007, has had no impact on the Companys
          consolidated financial statements because the Company has not acquired
          or issued the type of instruments covered by SFAS No. 155.In
          February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets
          and Financial Liabilities Including An Amendment of FASB Statement
          No. 115(SFAS No. 159). SFAS No. 159 provides companies
          with an option to report selected financial assets and liabilities at
          estimated fair value. Most of the provisions of SFAS No. 159 are elective;
          however, the amendment to SFAS No. 115, Accounting for Certain Investments
          in Debt and Equity Securities,applies to all entities that own
          trading and available for sale securities. The fair value option created
          by SFAS No. 159 permits an entity to measure eligible items at fair
          value as of specified election dates. The fair value option (a) may
          generally be applied instrument by instrument, (b) is irrevocable unless
          a new election date occurs, and (c) must be applied to the entire instrument
          and not to only a portion of the instrument. SFAS No. 159 is effective
          for the Company as of January 1, 2008. The Company is currently analyzing
          the potential effects of SFAS No. 159 on its financial statements.In
          September 2006, FASB issued SFAS No. 157, Fair Value Measurements,
          which defines fair value, establishes a framework for measuring fair
          value under generally accepted accounting principles, and requires expanded
          disclosures regarding fair value measurements. SFAS No. 157 is effective
          for the Company on January 1, 2008 and is not expected to have a significant
          impact on the Companys financial statements.12

ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
  RESULTS OF OPERATIONSThe following commentary presents
managements discussion and analysis of the financial condition and results of
operations of Sterling Bancorp (the parent company), a financial holding
company under the Gramm-Leach-Bliley Act of 1999, and its subsidiaries,
principally Sterling National Bank (the bank). Throughout this discussion and
analysis, the term the Company refers to Sterling Bancorp and its
subsidiaries. This discussion and analysis should be read in conjunction with
the consolidated financial statements and supplemental data contained elsewhere
in this quarterly report and the Companys annual report on Form 10-K for the
year ended December 31, 2006. Certain reclassifications have been made to prior
years financial data to conform to current financial statement presentations.

OVERVIEW

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

For the three months ended June 30, 2007, the
banks average earning assets represented approximately 99.9% of the Companys
average earning assets. Loans represented 65.3% and investment securities
represented 32.9% of the banks average earning assets for the second quarter
of 2007.

For the six months ended June 30, 2007, the
banks average earning assets represented approximately 99.7% of the Companys
average earning assets. Loans represented 63.9% and investment securities
represented 33.7% of the banks average earning assets for the six months ended
June 30, 2007.

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

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

13

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

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

INCOME
STATEMENT ANALYSIS

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

Comparison of the
Three Months Ended June 30, 2007 and 2006

The Company reported income from continuing
operations, after income taxes, for the three months ended June 30, 2007 of
$3.8 million, representing $0.20 per share, calculated on a diluted basis,
compared to $5.4 million, or $0.28 per share calculated on a diluted basis, for
the second quarter of 2006. This decrease reflects higher interest and
noninterest expenses and an increase in provision for loan losses which were
only partially offset by increases in both interest and noninterest income
and a decrease in provision for income taxes.

14

Net Interest Income

Net interest income, on a tax-equivalent
basis, was $18.3 million for the second quarter of 2007 compared to $19.3
million for the 2006 period, as the higher rates paid on interest-bearing
deposits and borrowings in the second quarter of 2007 more than offset the
effects of higher balances for loans and lower balances for borrowings and
investment securities for that quarter. The net interest margin, on a
tax-equivalent basis, was 4.35% for the second quarter of 2007 compared to
4.58% for the 2006 period. The net interest margin was impacted by the flat
yield curve, the higher interest rate environment in 2007, the higher level of
noninterest-bearing demand deposits and the effect of higher average loans
outstanding. The flat 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 $30.0 million for the second quarter of 2007 compared to $29.4
million for the 2006 period. The tax-equivalent yield on interest-earning
assets was 7.24% for the second quarter of 2007 compared to 7.06% for the 2006
period.

Interest earned on the loan portfolio
amounted to $23.1 million for the second quarter of 2007, up from $21.6 million
the prior year period. Average loan balances amounted to $1,104.7 million, an
increase of $76.4 million from an average of $1,028.3 million in the prior year
period. The increase in average loans (across many segments of the Companys
loan portfolio), primarily due to the Companys business development activities,
accounted for $1.7 million of the $1.5 million increase in interest earned on
loans. The decrease in the yield on the loan portfolio to 8.66% for the second
quarter of 2007 from 8.72% for the 2006 period was primarily attributable to
the mix of average outstanding balances among the components of the loan portfolio and the competitive pricing
practices in the Companys markets.

Interest earned on the securities portfolio,
on a tax-equivalent basis, decreased to $6.5 million for the second quarter of
2007 from $7.7 million in the prior year period. Average outstandings decreased
to $554.6 million (32.8% of average earning assets) for the second quarter of
2007 from $661.6 million (39.0% of average earning assets) in the prior year
period. The average life of the securities portfolio was approximately 4.4
years at June 30, 2007 compared to 4.5 years at June 30, 2006.

Total interest expense increased by $1.7
million for the second quarter of 2007 from $10.0 million for the 2006 period,
primarily due to the impact of higher rates paid for interest-bearing deposits
partially offset by the impact of lower borrowed funds balances.

Interest expense on deposits increased to
$9.9 million for the second quarter of 2007 from $6.4 million for the 2006
period, primarily due to an increase in the cost of those funds. The average
rate paid on interest-bearing deposits was 3.77% which was 96 basis points
higher than the prior year period. The increase in average cost of deposits
reflects the higher interest rate environment during 2007.

15

Interest expense on borrowings decreased to
$1.9 million for the second quarter of 2007 from $4.5 million for the 2006
period, primarily due to a decrease in average balances. Average borrowings
decreased to $144.4 million for the second quarter of 2007 from $373.7 million
in the prior year period, reflecting less reliance by the Company on wholesale
funding.

Provision for Loan
Losses

Based on managements continuing evaluation
of the loan portfolio (discussed under Asset Quality below), the provision
for loan losses for the second quarter of 2007 was $1.1 million, compared to
$0.4 million for the prior year period. Factors affecting the level of
provision included the growth in the loan portfolios, changes in general
economic conditions and the amount of nonaccrual loans.

Noninterest Income

Noninterest income increased to $9.1 million
for the second quarter of 2007 from $9.0 million in the 2006 period, primarily
due to an increase in service charges on deposit accounts.

Noninterest Expenses

Noninterest expenses for the second quarter
of 2007 increased $1.4 million when compared to the 2006 period primarily due
to an increase in professional fees; during the second quarter of 2006,
professional fee expense benefitted from a recovery of $1.1 million.

Provision for Income
Taxes

The provision for income taxes decreased by
$1.4 million to $2.2 million for the second quarter of 2007. The decrease was
primarily due to the lower level of pre-tax income in the 2007 period.

Discontinued
Operations

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

Income from discontinued operations, net of tax, was $71
thousand for the second quarter of 2007, compared to a loss of $517 thousand
for the second quarter of 2006.

Income taxes applicable to discontinued
operations were calculated at the Companys overall marginal tax rate of
45.14%.

16

Comparison of the Six Months Ended June 30,
2007 and 2006

The Company reported income from continuing operations, after income
taxes, for the six months ended June 30, 2007 of $7.4 million, representing
$0.39 per share, calculated on a diluted basis, compared to $11.9 million, or
$0.61 per share, calculated on a diluted basis, for the first six months of 2006.
This decrease reflects higher interest and noninterest expenses and increases
in provision for loan losses and provision for income taxes which were only
partially offset by increases in both interest and noninterest income.

Net Interest Income

Net interest income, on a tax-equivalent basis, was $36.0 million for
the first six months of 2007 compared to $37.9 million for the 2006 period, as
the higher rates paid on interest-bearing deposits and borrowings in the first
six months of 2007 more than offset the effects of higher average yield on
loans, higher balances for loans, lower balances for borrowings and investment
securities compared to the 2006 period. The net interest margin, on a tax-equivalent
basis, was 4.34% for the first six months of 2007 compared to 4.58% for the
2006 period. The net interest margin was impacted by the flat yield curve, the
higher interest rate environment in 2007, the lower level of noninterest-bearing
demand deposits and the effect of higher average loans outstanding. The flat
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 $59.3
million for the first six months of 2007, up $2.3 million from the 2006
period. The tax-equivalent yield on interest-earning assets was 7.24% for the
first six months of 2007 compared to 6.94% for the 2006 period.

Interest earned on the loan portfolio amounted to $44.8 million for the
first six months of 2007, up from $41.0 million the prior year period. Average
loan balances amounted to $1,079.1 million, an increase of $76.9 million from
an average of $1,002.3 million in the prior year period. The increase in
average loans (across many segments of the Companys loan portfolio), primarily
due to the acquisition of Sterling Resource Funding Corp. (completed April 1,
2006) coupled with the Companys other business development activities,
accounted for $3.3 million of the $3.9 million increase in interest earned on
loans. The increase in the yield on the loan portfolio to 8.74% for the first
six months of 2007 from 8.62% for the 2006 period was primarily attributable to
the mix (including the acquisition of Sterling Resource Funding Corp.) of
average outstanding balances among the components of the loan portfolio and the
higher interest rate environment in 2007.

Interest earned on the securities portfolio, on a tax-equivalent basis,
decreased to $13.4 million for the first six months of 2007 from $15.9 million
in the prior year period. Average outstandings decreased to $566.8 million
(33.6% of average earning assets) for the first six months of 2007 from $685.0
million (40.5% of average earning assets) in the prior year period. The average
life of the securities portfolio was approximately 4.4 years at June 30, 2007
compared to 4.5 years at June 30, 2006.

Total interest expense increased by $4.3 million for the first six
months of 2007 from $19.0 million for the 2006 period, primarily due to the
impact of higher interest-bearing deposit balances coupled with higher rates
paid for those deposits partially offset by the impact of lower borrowed funds
balances.

Interest expense on deposits increased to $19.3 million for the first
six months of 2007 from $12.6 million for the 2006 period, primarily due to an
increase in the cost of those funds. Average interest-bearing deposit balances
increased to $1,033.7 million for the first six months of 2007 from $944.0
million in the 2006

17

period primarily the result of the Companys branching initiatives and
other business development activities. The average rate paid on
interest-bearing deposits was 3.76% which was 106 basis points higher than the
prior year period. The increase in average cost of deposits reflects the higher
interest rate environment during 2007.

Interest expense on borrowings decreased to $4.1 million for the first
six months of 2007 from $8.1 million for the 2006 period, primarily due to a
decrease in average balances. Average borrowings decreased to $157.4 million
for the first six months of 2007 from $345.4 million in the prior year period,
reflecting less reliance by the Company on wholesale funding.

Provision for Loan Losses

Based on managements continuing evaluation of the loan portfolio
(discussed under Asset Quality below), the provision for loan losses for the
first six months of 2007 was $2.3 million, compared to $1.7 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 increased to $18.3 million for the first six months
of 2007 from $14.8 million in the 2006 period. Higher accounts receivable
management/ factoring commissions and other fees were primarily due to revenues
attributable to the acquisition of Sterling Resource Funding Corp. Mortgage
banking income increased due to a change in product mix towards more profitable
market segments and away from the less profitable, higher risk wholesale
business. Also contributing to the increase were higher revenue from service
charges on deposit accounts and a $0.4 million decrease in losses on sales of securities.

Noninterest Expenses

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

Provision for Income Taxes

The provision for income taxes increased by $3.0 million to $4.4
million for the first six months of 2007. The increase was primarily due to a
$3.7 million reversal of state and local taxes, net of federal tax effect, in
the first quarter of 2006 as a result of the closure of certain years for local
tax purposes.

Discontinued Operations

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

Loss from discontinued operations, net of tax, was $21 thousand for the first six months
of 2007, compared to $562 thousand for the first six months of 2006.

Income taxes applicable to discontinued operations were calculated at
the Companys overall marginal tax rate of 45.14%.

18

BALANCE SHEET ANALYSIS

Securities

The Companys securities portfolios are comprised principally of
mortgage-backed securities and agency notes of U.S. government corporations and
government sponsored enterprises, and obligations of state and political
institutions. At June 30, 2007, the Companys portfolio of securities totaled
$532.3 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 4.5 years amounted to
$476.6 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 $0.4
million and $11.7 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 $5.8 million.

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

Weighted
  Average Life

Weighted
  Average YieldJune 30,
  2007


AFS

HTM

AFS

HTMMortgage-backed
securities


5.3 years

4.3 years

4.66
%
4.63
%Agency notes




1.2 years



4.31
%Obligations of state and
political
  institutions


5.2 years



6.35
% (1)
(1)     tax equivalent

19

The following
table presents information regarding securities available for sale:

June 30,
2007

Gross
Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

EstimatedMarket
ValueMortgage-backed
securitiesCMOs (Federal
National Mortgage
  Association)

$
8,872,390

$


$
661,270

$
8,211,120CMOs (Federal
Home Loan Mortgage
  Corporation)


22,532,866





1,555,532


20,977,334Federal
National Mortgage Association


42,618,870


36,698


1,722,419


40,933,149Federal Home
Loan Mortgage Corporation


40,261,333


7,085


1,583,558


38,684,860Government
National Mortgage Association


3,701,983


101,022


3,738


3,799,267Total
mortgage-backed securities


117,987,442


144,805


5,526,517


112,605,730Obligations of state and
political
  institutions


17,877,746


38,547


270,662


17,645,631Trust and money market
preferred securities


12,177,116


39,600


7,114


12,209,602Federal Reserve Bank
stock


1,130,700








1,130,700Federal Home Loan Bank
stock


1,984,700








1,984,700Other securities


304,442


18,936





323,378Total

$
151,462,146

$
241,888

$
5,804,293

$
145,899,741The following
table presents information regarding securities held to maturity:

June 30,
2007

Carrying
Value

Gross
Unrealized
Gains

Gross
Unrealized
Losses

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

$
12,521,964

$


$
728,280

$
11,793,684CMOs (Federal
Home Loan Mortgage
  Corporation)


21,889,193





1,270,179


20,619,014Federal
National Mortgage Association


188,084,592


183,552


5,105,195


183,162,949Federal Home
Loan Mortgage Corporation


132,012,336


55,031


4,444,398


127,622,969Government
National Mortgage Association


9,527,285


189,829


23,111


9,694,003Total
mortgage-backed securities


364,035,370


428,412


11,571,163


352,892,619Agency
NotesFederal Home
Loan Bank


11,871,516





44,954


11,826,562Federal Farm
Credit Bank


10,000,000





59,375


9,940,625Total
obligations of U.S. government corporations
  and agencies


385,906,886


428,412


11,675,492


374,659,806Debt
securities issued by foreign
  governments


500,000





1,523


498,477Total

$
386,406,886

$
428,412

$
11,677,015

$
375,158,28320

Loan Portfolio

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

The Companys
commercial and industrial loan portfolio represents approximately 51% 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 26% of all loans, is secured
by mortgages on real property located principally in the states of New York,
New Jersey, Virginia and North Carolina. The Companys leasing portfolio, which
consists of finance leases for various types of business equipment, represents
approximately 20% of all loans. Sources of repayment are from the borrowers
operating profits, cash flows and liquidation of pledged collateral. Based on
underwriting standards, loans may be secured in whole or in part by collateral such
as liquid assets, accounts receivable, equipment, inventory, and real property.
The collateral securing any loan or lease may depend on the type of loan or
lease and may vary in value based on market conditions.

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

June 30,2007

2006($ in thousands)% of




% ofBalances

Total

Balances

TotalDomesticCommercial and
industrial

$
596,624


51.1
%
$
542,606


51.2
%Equipment lease
financing


227,660


19.5


212,893


20.1Real estate - residential
mortgage


177,819


15.2


166,745


15.8Real estate- commercial
mortgage


92,718


7.9


118,891


11.2Real estate -
construction


38,147


3.3


3,746


0.4Installment -
individuals


10,333


0.9


14,213


1.3Loans to depository
institutions


25,000


2.1





Loans, net of unearned
discounts

$
1,168,301


100.0
%
$
1,059,094


100.0
%Asset Quality

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

21

Management
views the allowance for loan losses as a critical accounting policy due to its
subjectivity. The allowance for loan losses is maintained through the provision
for loan losses, which is a charge to operating earnings. The adequacy of the
provision and the resulting allowance for loan losses is determined by a
management evaluation process of the loan portfolio, including identification
and review of individual problem situations that may affect the borrowers
ability to repay, review of overall portfolio quality through an analysis of
current charge-offs, delinquency and nonperforming loan data, estimates of the
value of any underlying collateral, an assessment of current and expected
future economic conditions and changes in the size and character of the loan
portfolio. Other data utilized by management in determining the adequacy of the
allowance for loan losses include, but are not limited to, the results of regulatory
reviews, the amount of, trend of and/or borrower characteristics on loans that
are identified as requiring special attention as part of the credit review
process, and peer group comparisons. The impact of this other data might result
in an allowance which will be greater than that indicated by the evaluation
process previously described. The allowance reflects managements evaluation
both of loans presenting identified loss potential and of the risk inherent in
various components of the loan portfolio, including loans identified as
impaired as required by SFAS No. 114. Thus, an increase in the size of the
portfolio or in any of its components could necessitate an increase in the
allowance even though there may not be a decline in credit quality or an
increase in potential problem loans. A significant change in any of the
evaluation factors described above could result in future additions to the
allowance. At June 30, 2007, the ratio of the allowance to loans held in
portfolio, net of unearned discounts, was 1.39% and the allowance was $15.6
million. At such date, the Companys nonaccrual loans amounted to $5.9 million;
$0.3 million of such loans was judged to be impaired within the scope of SFAS
No. 114. There were no loans 90 days past due and still accruing. Based on the
foregoing, as well as managements judgment as to the current risks inherent in
loans held in portfolio, the Companys allowance for loan losses was deemed
adequate to absorb all reasonably anticipated losses on specifically known and
other potential credit risks associated with the portfolio as of June 30, 2007.
Net losses within loans held in portfolio are not statistically predictable and
changes in conditions in the next twelve months could result in future
provisions for loan losses varying from the level taken in the first six months
of 2007. 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 $1.3 million at June 30, 2007.

22

Deposits

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

The
following table provides certain information with respect to the Companys
deposits:

June 30,2007

2006($ in thousands)% of




% ofBalances

Total

Balances

TotalDomesticDemand

$
520,433


33.9
%
$
495,257


35.0
%NOW


231,391


15.1


213,823


15.1Savings


19,679


1.3


22,579


1.6Money market


225,809


14.7


200,528


14.2Time deposits


535,941


34.9


480,228


33.9Total domestic
deposits


1,533,253


99.9


1,412,415


99.8ForeignTime deposits


575


0.1


3,028


0.2Total deposits

$
1,533,828


100.0
%
$
1,415,443


100.0
%Fluctuations
of balances in total or among categories at any date may occur based on the
Companys mix of assets and liabilities as well as on customers balance sheet
strategies. Historically, however, average balances for deposits have been
relatively stable. Information regarding these average balances is presented on
pages 25 and 26.

CAPITAL

The Company
and the bank are subject to risk-based capital regulations which quantitatively
measure capital against risk-weighted assets, including certain off-balance
sheet items. These regulations define the elements of the Tier 1 and Tier 2
components of Total Capital and establish minimum ratios of 4% for Tier 1
capital and 8% for Total Capital for capital adequacy purposes. Supplementing
these regulations is a leverage requirement. This requirement establishes a
minimum leverage ratio (at least 3% 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 29. In
addition, the bank is subject to the Federal Deposit Insurance Corporation
Improvement Act of 1991 (FDICIA) which imposes a number of mandatory
supervisory measures. Among other matters, FDICIA established five capital
categories, ranging from well capitalized to critically undercapitalized,
which are used by regulatory agencies to determine a banks deposit insurance
premium, approval of applications authorizing institutions to increase their
asset size or otherwise expand business activities or acquire other
institutions. Under FDICIA, a well capitalized bank must maintain minimum
leverage, Tier 1 and Total Capital ratios of 5%, 6% and 10%, respectively. The
Federal Reserve Board applies comparable tests for holding companies such as
the Company. At June 30, 2007, the Company and the bank exceeded the
requirements for well capitalized institutions.

23

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

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

CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS

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

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

24

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

2007

2006Average
  Balance

Interest

Average
  Rate

Average
  Balance

Interest

Average
  RateASSETSInterest-bearing deposits with
other banks

$
2,881


$
36



5.11
%
$
1,788


$
20



4.61
%Securities available for
sale


127,616



1,510



4.73


143,428



1,684



4.70Securities held to
maturity


407,034



4,699



4.62


488,398



5,551



4.55Securities tax-exempt
[2]


19,993



314



6.30


29,793



485



6.53Total
investment securities


554,643



6,523



4.71


661,619



7,720



4.67Federal funds sold


27,967



368



5.20


2,802



35



4.93Loans, net of unearned
discounts [3]


1,104,708



23,121



8.66


1,028,304



21,589



8.72TOTAL
INTEREST-EARNING ASSETS


1,690,199



30,048



7.24
%

1,694,513



29,364



7.06
%Cash and due from
banks


63,451










60,953Allowance for loan
losses


(16,320
)









(16,248
)Goodwill


22,875










23,886Other assets


92,000










89,855Total assets-continuing
operations


1,852,205










1,852,959Assets-discontinued
operations


1,328










114,065TOTAL
ASSETS

$
1,853,533









$
1,967,024LIABILITIES AND
SHAREHOLDERS EQUITYInterest-bearing depositsDomesticSavings

$
21,149



27



0.51
%
$
23,646



24



0.41
%NOW


245,682



1,572



2.57


176,292



691



1.57Money
market


221,135



1,681



3.05


205,165



957



1.87Time


561,843



6,579



4.70


504,428



4,707



3.74ForeignTime


574



2



1.09


3,027



8



1.02Total
interest-bearing deposits


1,050,383



9,861



3.77


912,558



6,387



2.81BorrowingsSecurities
sold under agreements to repurchase - customers


76,091



805



4.24


81,439



767



3.78Securities
sold under agreements to repurchase - dealers













106,438



1,344



5.07Federal funds
purchased


1,758



24



5.26


19,912



251



4.99Commercial
paper


27,906



355



5.11


49,371



538



4.37Short-term
borrowings - FHLB













50,498



642



5.10Short-term
borrowings - other


1,179



15



5.34


581



7



5.09Long-term
borrowings - FHLB


11,648



136



4.69


39,670



461



4.64Long-term
borrowings - sub debt


25,774



524



8.38


25,774



524



8.37Total
borrowings


144,356



1,859



5.19


373,683



4,534



4.87Interest-bearing liabilities
allocated to discontinued operations













(103,508
)


(878
)


3.36TOTAL
INTEREST-BEARING LIABILITIES


1,194,739



11,720



3.94
%

1,182,733



10,043



3.41
%Noninterest-bearing
deposits


444,369










441,630Other liabilities


86,095










93,675Liabilities-discontinued
operations


180










103,661Total
liabilities


1,725,383










1,821,699Shareholders
equity


128,150










145,325TOTAL
LIABILITIES AND SHAREHOLDERS EQUITY

$
1,853,533









$
1,967,024Net interest
income/spread






18,328



3.30
%





19,321



3.65
%Net yield on interest-earning
assets (margin)










4.35
%









4.58
%Less: Tax equivalent
adjustment






123










191Net interest income





$
18,205









$
19,130[1]
The average balances of
  assets, liabilities and shareholders equity are computed on the basis of
  daily averages. Average rates are presented on a tax-equivalent basis.
  Certain reclassifications have been made to amounts for prior periods to
  conform to the current presentation.[2]
Interest on tax-exempt
  securities is presented on a tax-equivalent basis.[3]
Includes loans held for
  sale and loans held in portfolio; all loans are domestic. Nonaccrual loans
  are included in amounts outstanding and income has been included to the
  extent earned.25

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

(dollars in
thousands)

2007

2006Average
  Balance

Interest

Average
  Rate

Average
  Balance

Interest

AverageRateASSETSInterest-bearing deposits with
other banks

$
2,856

$
67


5.24
%
$
2,413

$
50


4.47
%Securities available for
sale


131,105


3,149


4.80


156,907


3,571


4.55Securities held to
maturity


415,032


9,568


4.61


497,371


11,295


4.54Securities tax-exempt
[2]


20,669


653


6.37


30,752


1,004


6.59Total
investment securities


566,806


13,370


4.72


685,030


15,870


4.64Federal funds sold


37,790


1,003


5.28


3,204


75


4.65Loans, net of unearned
discounts [3]


1,079,149


44,848


8.74


1,002,291


40,969


8.62TOTAL INTEREST-EARNING
ASSETS


1,686,601


59,288


7.24
%

1,692,938


56,964


6.94
%Cash and due from
banks


65,493








62,198Allowance for loan
losses


(16,596
)







(16,124
)Goodwill


22,868








22,530Other assets


89,551








89,263Total assets-continuing
operations


1,847,917








1,850,805Assets-discontinued
operations


1,215








114,115TOTAL
ASSETS

$
1,849,132







$
1,964,920LIABILITIES AND SHAREHOLDERS
EQUITYInterest-bearing
depositsDomesticSavings

$
21,026


52


0.50
%
$
24,666


50


0.41
%NOW


233,916


2,970


2.56


179,385


1,426


1.60Money
market


214,138


3,117


2.94


223,379


1,979


1.79Time


563,998


13,126


4.69


513,542


9,160


3.60ForeignTime


574


3


1.09


3,025


16


1.06Total
interest-bearing deposits


1,033,652


19,268


3.76


943,997


12,631


2.70BorrowingsSecurities
sold under agreements to
  repurchase - customers


85,517


1,880


4.43


80,756


1,462


3.65Securities
sold under agreements to
  repurchase - dealers











96,683


2,328


4.86Federal funds
purchased


1,354


36


5.25


16,117


386


4.77Commercial
paper


27,904


705


5.10


45,776


943


4.15Short-term
borrowings - FHLB











33,814


835


4.98Short-term
borrowings - other


1,040


27


5.34


746


18


4.81Long-term
borrowings - FHLB


15,801


361


4.57


45,746


1,047


4.58Long-term
borrowings - sub debt


25,774


1,047


8.38


25,774


1,047


8.38Total
borrowings


157,390


4,056


5.21


345,412


8,066


4.71Interest-bearing liabilities
allocated to
  discontinued operations











(103,015
)

(1,652
)

3.19TOTAL INTEREST-BEARING
LIABILITIES


1,191,042


23,324


3.95
%

1,186,394


19,045


3.24
%Noninterest-bearing
deposits


439,609








441,683Other liabilities


88,880








89,006Liabilities-discontinued
operations


308








103,188Total
liabilities


1,719,839








1,820,271Shareholders equity


129,293








144,649TOTAL
LIABILITIES AND SHAREHOLDERS EQUITY

$
1,849,132







$
1,964,920Net interest
income/spread





35,964


3.29
%




37,919


3.70
%Net yield on interest-earning
assets
  (margin)








4.34
%







4.58
%Less: Tax equivalent
adjustment





256








395Net interest income




$
35,708







$
37,524[1]
The average balances of
  assets, liabilities and shareholders equity are computed on the  basis of daily averages. Average rates are
  presented on a tax-equivalent basis. Certain
  reclassifications have been made to amounts for prior periods to
  conform to the current presentation.[2]
Interest on tax-exempt
  securities is presented on a tax-equivalent basis.[3]
Includes loans held for
  sale and loans held in portfolio; all loans are domestic. Nonaccrual loans
  are included in amounts outstanding and income has been included to the
  extent earned.26

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

(in
thousands)

Increase/(Decrease)
  Three Months Ended
  June 30, 2007 to June 30, 2006Volume

Rate

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

$
14

$
2

$
16Securities available for
sale


(185
)

11


(174
)Securities held to
maturity


(936
)

84


(852
)Securities tax-exempt


(155
)

(16
)

(171
)Total
investment securities


(1,276
)

79


(1,197
)Federal funds sold


331


2


333Loans, net of unearned
discounts [3]


1,684


(152
)

1,532TOTAL INTEREST INCOME

$
753

$
(69
)
$
684INTEREST EXPENSEInterest-bearing
depositsDomesticSavings

$
(3
)
$
6

$
3NOW


337


544


881Money
market


79


645


724Time


575


1,297


1,872ForeignTime


(7
)

1


(6
)Total
interest-bearing deposits


981


2,493


3,474BorrowingsSecurities
sold under agreements to
  repurchase - customers


(52
)

90


38Securities
sold under agreements to
  repurchase - dealers


(1,344
)




(1,344
)Federal funds
purchased


(239
)

12


(227
)Commercial
paper


(263
)

80


(183
)Short-term
borrowings - FHLB


(642
)




(642
)Short-term
borrowings - other


8





8Long-term
borrowings - FHLB


(330
)

5


(325
)Long-term
borrowings - sub debt








Total
borrowings


(2,862
)

187


(2,675
)Less: interest-bearing
liabilities
  allocated to discontinued operations


878





878TOTAL INTEREST
EXPENSE

$
(1,003
)
$
2,680

$
1,677NET INTEREST INCOME

$
1,756

$
(2,749
)
$
(993
)[1]
This table is presented on
  a tax-equivalent basis.[2]
Changes in interest income
  and interest expense due to a combination of both volume and rate have been
  allocated to the change due to volume and the change due to rate in
  proportion to the relationship of the change due solely to each.[3]
Includes loans held for
  sale and loans held in portfolio; all loans are domestic. Nonaccrual loans
  are included in amounts outstanding and income has been included to the
  extent earned.27

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

(in thousands)

Increase/(Decrease)
  Six Months Ended
  June 30, 2007 to June 30, 2006Volume

Rate

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

$
9

$
8

$
17Securities
  available for sale


(608
)

186


(422
)Securities
  held to maturity


(1,896
)

169


(1,727
)Securities
  tax-exempt


(318
)

(33
)

(351
)Total
investment securities


(2,822
)

322


(2,500
)Federal
  funds sold


917


11


928Loans, net
  of unearned discounts [3]


3,283


596


3,879TOTAL
  INTEREST INCOME

$
1,387

$
937

$
2,324INTEREST
  EXPENSEInterest-bearing
  depositsDomesticSavings

$
(8
)
$
10

$
2NOW


519


1,025


1,544Money
market


(85
)

1,223


1,138Time


972


2,994


3,966ForeignTime


(13
)




(13
)Total
interest-bearing deposits


1,385


5,252


6,637BorrowingsSecurities
sold under agreements to
  repurchase - customers


90


328


418Securities
sold under agreements to
  repurchase - dealers


(2,328
)




(2,328
)Federal funds
purchased


(384
)

34


(350
)Commercial
paper


(422
)

184


(238
)Short-term
borrowings - FHLB


(835
)




(835
)Short-term
borrowings - other


7


2


9Long-term
borrowings - FHLB


(684
)

(2
)

(686
)Long-term
borrowings - sub debt








Total
borrowings


(4,556
)

546


(4,010
)Less:
  interest-bearing liabilities allocated to discontinued operations


1,652





1,652TOTAL
  INTEREST EXPENSE

$
(1,519
)
$
5,798

$
4,279NET INTEREST
  INCOME

$
2,906

$
(4,861
)
$
(1,955
)[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
Regulatory Capital and Ratios

Ratios and Minimums(dollars in
thousands)

Actual

For Capital
  Adequacy Minimum

To Be Well
  CapitalizedAs of June 30, 2007

Amount

Ratio

Amount

Ratio

Amount

RatioTotal Capital (to Risk Weighted
Assets):The
Company

$
151,941



11.84
%

$
102,662



8.00
%

$
128,328



10.00
%The
bank


148,196



11.71



101,248



8.00



126,560



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


136,359



10.63



51,331



4.00



76,997



6.00The
bank


132,614



10.48



50,624



4.00



75,936



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


136,359



7.45



73,225



4.00



91,532



5.00The
bank


132,614



7.30



72,651



4.00



90,813



5.00As of
December 31, 2006Total Capital (to Risk Weighted
Assets):The
Company

$
162,232



12.74
%

$
102,299



8.00
%

$
127,874



10.00
%The
bank


138,651



11.00



101,288



8.00



126,610



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


146,244



11.49



51,150



4.00



76,725



6.00The
bank


122,819



9.75



50,644



4.00



75,966



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


146,244



7.82



75,131



4.00



93,913



5.00The
bank


122,819



6.60



74,788



4.00



93,485



5.0029

ITEM 3.     QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK

ASSET/LIABILITY MANAGEMENT

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

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

Market Risk

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

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

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

30

The Companys balance sheet structure is primarily short-term in nature
with a substantial portion of assets and liabilities repricing or maturing
within one year. The Companys gap analysis at June 30, 2007, presented on page
35, 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, 2007, 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, 2007, 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, 2007, there were no amounts receivable under
these contracts.

The interest rate floor agreements were not designated as hedges for
accounting purposes and therefore changes in the fair values of the instruments
are required to be recognized as income or expenses in the Companys financial
statements. At June 30, 2007 and 2006, the aggregate fair value of the interest
rate floors was $165 and $1,782, respectively. For the three months ended June
30, 2007 and 2006, $2,122 and $4,362, respectively, were charged to Other expenses.
For the six months ended June 30, 2007 and 2006 $2,503 and
$26,248, respectively, were charged to Other expenses.

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

31

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, 2007, the model
indicated the impact of a 200 basis point parallel and pro rata rise in rates
over 12 months would approximate a 4.7% ($3.9 million) increase in net interest
income, while the impact of a 200 basis point decline in rates over the same
period would approximate a 5.1% ($4.3 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 would continue to
adversely affect the Companys results in 2007.

32

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, 2007, the parent companys short-term debt, consisting
principally of commercial paper used to finance ongoing current business
activities, was approximately $27.4 million. The parent company had cash,
interest-bearing deposits with banks and other current assets aggregating $31.0
million. The parent company also has back-up credit lines with banks of $24.0
million. Since 1979, the parent company has had no need to use the available
back-up lines of credit.

33

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

Payments Due by PeriodContractual
  Obligations (1)

Total

Less than
  1 Year

1-3
  Years

4-5
  Years

After 5
  Years(in thousands)Long-Term
  Debt

$
35,774

$


$


$
10,000

$
25,774Operating
  Leases


24,129


4,157


7,245


4,496


8,231Total Contractual Cash Obligations

$
59,903

$
4,157

$
7,245

$
14,496

$
34,005(1)     Based on
  contractual maturity datesThe following table sets forth information regarding the Companys
obligations under other commercial commitments as of June 30, 2007:

Amount of Commitment Expiration Per PeriodOther CommercialCommitments

Total Amount
  Committed

Less than
  1 Year

1-3
  Years

4-5
  Years

After 5
  Years(in thousands)Residential
  Loans

$
22,357

$
22,357

$


$


$
Commercial
  Loans


62,423


33,800


28,398


225


Total Loans


84,780


56,157


28,398


225


Standby
  Letters of Credit


34,714


33,101


1,613





Other
  Commercial Commitments


19,426


18,824








602Total
  Commercial Commitments

$
138,920

$
108,082

$
30,011

$
225

$
602INFORMATION AVAILABLE ON OUR WEB SITE

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

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

34

STERLING BANCORP AND SUBSIDIARIES
Interest Rate Sensitivity

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

More
  than3 Months to 1 Year

More
  than1 Year to5 Years

Over5 Years

NonrateSensitive

TotalASSETSInterest-bearing deposits with
other banks

$
1,177

$


$


$


$


$
1,177Federal funds sold


10,000














10,000Investment securities


11,074


11,663


102,887


403,244


3,439


532,307Commercial and industrial
loans


413,283


45,630


118,389


19,480


(158
)

596,624Equipment lease
financing


1,111


8,696


242,970


9,854


(34,971
)

227,660Real estate-residential
mortgage


71,441


9,211


76,022


21,145





177,819Real estate-commercial
mortgage


30,820


5,037


43,938


12,923





92,718Real estate-construction
loans








38,147








38,147Installment-individuals


10,333














10,333Loans to depository
institutions


25,000














25,000Noninterest-earning assets
& allowance for loan losses














175,193


175,193Total Assets


574,239


80,237


622,353


466,646


143,503


1,886,978LIABILITIES AND
SHAREHOLDERS EQUITYInterest-bearing
depositsSavings [1]








19,679








19,679NOW [1]








231,391








231,391Money market [1]


181,452





44,357








225,809Time - domestic


258,395


240,550


36,766


230





535,941-
foreign


395


180











575Securities sold under agreement
to repurchase - customer


74,530


2,000











76,530Commercial paper


27,444














27,444Short-term borrowings -
other


1,718














1,718Long-term borrowings -
FHLB








10,000








10,000Long-term borrowings -
subordinated debentures











25,774





25,774Noninterest-bearing liabilities
& shareholders equity














732,117


732,117Total Liabilities and
Shareholders Equity


543,934


242,730


342,193


26,004


732,117


1,886,978Net Interest Rate Sensitivity
Gap

$
30,305

$
(162,493
)
$
280,160

$
440,642

$
(588,614
)
$
Cumulative Gap June 30,
2007

$
30,305

$
(132,188
)
$
147,972

$
588,614

$


$
Cumulative Gap June 30,
2006

$
33,216

$
(50,163
)
$
64,007

$
594,623

$


$
Cumulative Gap December 31,
2006

$
130,609

$
(31,621
)
$
170,278

$
684,751

$


$
[1]
Historically, balances in
  non-maturity deposit accounts have remained relatively stable despite changes
  in levels of interest rates. Balances are shown in repricing periods based on
  managements historical repricing practices and run-off experience.35

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, 2007 that has materially affected, or is
    reasonably likely to materially affect, the Companys internal control
    over financial reporting.

36

PART II - OTHER INFORMATION

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

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

The Board of
Directors initially authorized the repurchase of common shares in 1997 and
since then has approved increases in the number of common shares that the
Company is authorized to repurchase. The latest increase was announced on
February 15, 2007, when the Board of Directors increased the Companys
authority to repurchase common shares by an additional 800,000 shares.

The following
table discloses the Companys repurchase of the Companys common shares during
the second quarter of 2007:

ISSUER
  PURCHASES OF EQUITY SECURITIESPeriod

Total
  Number of
  Shares
  Purchased

Average
  Price Paid
  Per Share

Total
  Number of
  Shares
  Purchased as
  Part of Publicly
  Announced Plans
  or Programs

Maximum
  Number
  of Shares
  that May
  Yet Be
  Purchased
  Under the Plans
  or ProgramsApril
1-30, 2007





$






932,963May
1-31, 2007

315,000




16.45


315,000


617,963June
1-30, 2007

332,200




16.06


332,200


285,763Total

647,200







647,200All shares
were repurchased through the Companys share repurchase program.

37

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


(a)
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 3, 2007:(1)
Election of
  DirectorsNominee

Total
  Votes For

Total
  Votes WithheldRobert
Abrams

16,600,638

578,299Joseph M.
Adamko

16,087,737

1,091,200Louis J.
Cappelli

16,085,050

1,093,887Walter
Feldesman

16,053,417

1,125,520Fernando
Ferrer

16,602,940

575,997Allan F.
Hershfield

16,082,266

1,096,671Henry J.
Humphreys

16,080,219

1,098,718Robert
Lazar

16,603,526

575,411John C.
Millman

16,090,540

1,088,397Eugene T.
Rossides

15,456,453

1,722,484There were
  no abstentions or broker nonvotes.(2)
Ratification
  of the appointment by the Audit Committee of the Board of Directors of KPMG LLP as the Companys independent public
  accountants for fiscal year 2007.Total Votes
For


16,454,192Total Votes
Against


710,292Total
Absentions


14,45338

Item 6.      Exhibits

The following
exhibits are filed as part of this report:

3. (i)

Restated
  Certificate of Incorporation filed with the State of New York Department of
  State, October 28, 2004 (Filed as Exhibit 3(i) to the Registrants Form 10-Q
  for the quarter ended September 30, 2004 and incorporated herein by
  reference).(ii)

By-Laws as
  in effect on August 5, 2004 (Filed as Exhibit 3(ii)(A) to the Registrants
  Form 10-Q for the quarter ended June 30, 2004 and incorporated herein by
  reference).11.

Statement
  Re: Computation of Per Share Earnings.31.1

Certification
  of the CEO pursuant to Exchange Act Rule 13a-14(a).31.2

Certification
  of the CFO pursuant to Exchange Act Rule 13a-14(a).32.1

Certification
  of the CEO required by Section 1350 of Chapter 63 of Title 18 of the U.S.
  Code.32.2

Certification
  of the CFO required by Section 1350 of Chapter 63 of Title 18 of the U.S.
  Code.39

SIGNATURES

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

STERLING BANCORP(Registrant)Date:
August 9, 2007

/s/
Louis J.
CappelliLouis J.
CappelliChairman
andChief
Executive OfficerDate:
August 9, 2007

/s/
John W.
TietjenJohn W.
TietjenExecutive Vice Presidentand Chief
Financial Officer40

STERLING BANCORP AND SUBSIDIARIES

EXHIBIT INDEX

Exhibit
  Number
Description
Sequential
  Page No.11
Statement re: Computation of Per Share
Earnings.
4231.1
Certification of the CEO pursuant to Exchange Act Rule
13a-14(a).
4331.2
Certification of the CFO pursuant to Exchange Act Rule
13a-14(a).
4432.1
Certification of the CEO required by Section 1350 of
Chapter 63 of
  Title 18 of the U.S. Code.
4532.2
Certification of the CFO required by Section 1350 of
Chapter 63 of
  Title 18 of the U.S. Code.
4641