Edgar Filing: STERLING BANCORP

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2005

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________________ to ___________________________

Commission File Number: 1-5273-1

Sterling Bancorp

(Exact name of registrant as specified in its charter)


New York		13-2565216

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification)

650 Fifth Avenue, New York, N.Y.		10019-6108

(Address of principal executive offices)		(Zip Code)

212-757-3300

(Registrant’s telephone number, including area code)

N/A

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

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

x Yes o No

Indicate by check mark whether the registrant is an accelerated filer as defined in Rule 12b-2 of the Exchange Act,

x Yes o No

As of October 31, 2005 there were 18,260,089 shares of common stock,
$1.00 par value, outstanding.

STERLING BANCORP


				Page

PART I FINANCIAL INFORMATION

	Item 1.	Financial Statements

		Consolidated Financial Statements (Unaudited)		3
		Notes to Consolidated Financial Statements		8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

		Overview		13
		Income Statement Analysis		14
		Balance Sheet Analysis		18
		Capital		23
		Cautionary Statement Regarding Forward-Looking Statements		24
		Average Balance Sheets		25
		Rate/Volume Analysis		27
		Regulatory Capital and Ratios		29

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk

		Asset/Liability Management		30
		Interest Rate Sensitivity		35

	Item 4.	Controls and Procedures		36

PART II OTHER INFORMATION

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		38

	Item 6.	Exhibits		39

SIGNATURES				40

EXHIBIT INDEX

	Exhibit 11		Statement Re: Computation of Per Share Earnings	42

	Exhibit 31.1		Certifications of the CEO pursuant to Exchange Act Rule 13a-14(a)	43

	Exhibit 31.2		Certifications of the CFO pursuant to Exchange Act Rule 13a-14(a)	44

	Exhibit 32		Certifications of the CEO and CFO required by Section 1350 of Chapter 63 of Title 18 of the U.S. Code	45

STERLING BANCORP AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)


	September 30, 2005			December 31, 2004

ASSETS
Cash and due from banks	$	83,504,142		$	48,842,418
Interest-bearing deposits with other banks		3,086,437			1,329 103

Securities available for sale (at estimated fair value; pledged: $133,584,919 in 2005 and $64,933,098 in 2004)		210,903,120			233,762,171
Securities held to maturity (pledged: $256,622,008 in 2005 and $122,309,904 in 2004) (estimated fair value: $490,103,563 in 2005 and $448,173,450 in 2004)		496,107,388			446,457,563

Total investment securities		707,010,508			680,219,734


Loans held for sale		50,136,610			37,058,673

Loans held in portfolio, net of unearned discounts		1,100,749,310			1,022,286,479
Less allowance for loan losses		16,234,273			16,328,528

Loans, net		1,084,515,037			1,005,957,951

Customers’ liability under acceptances		1,935,369			628,965
Excess cost over equity in net assets of the banking subsidiary		21,158,440			21,158,440
Premises and equipment, net		11,190,231			10,674,708
Other real estate		327,400			766,620
Accrued interest receivable		5,774,238			5,604,781
Bank owned life insurance		26,705,447			26,553,145
Other assets		39,787,082			32,317,224

	$	2,035,130,941		$	1,871,111,762


LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits
Noninterest-bearing deposits	$	540,030,392		$	511,307,018
Interest-bearing deposits		937,462,047			832,544,097

Total deposits		1,477,492,439			1,343,851,115
Securities sold under agreements to repurchase - customers		57,919,814			55,934,170
Securities sold under agreements to repurchase - dealers		59,894,000			33,882,000
Federal funds purchased		29,100,000			32,500,000
Commercial paper		39,402,045			25,991,038
Other short-term borrowings		21,169,041			2,517,375
Acceptances outstanding		1,935,369			628,965
Accrued expenses and other liabilities		88,993,126			91,329,506
Long-term debt		105,774,000			135,774,000

Total liabilities		1,881,679,834			1,722,408,169


Shareholders’ equity
Common stock, $1 par value. Authorized 50,000,000 shares; issued 20,143,131 and 19,880,521 shares, respectively		20,143,131			19,880,521
Capital surplus		149,094,423			145,310,745
Retained earnings		36,317,106			28,664,568
Accumulated other comprehensive loss, net of tax		(4,146,620	)		(1,921,060	)

		201,408,040			191,934,774
Less
Common shares in treasury at cost, 1,866,042 and 1,642,996 shares, respectively		47,868,914			42,939,969
Unearned compensation		88,019			291,212

Total shareholders’ equity		153,451,107			148,703,593

	$	2,035,130,941		$	1,871,111, 762

See Notes to Consolidated Financial Statements.

STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2005		2004		2005		2004

INTEREST INCOME
Loans	$	21,221,500	$	16,897,670	$	59,075,349	$	47,392,037
Investment securities
Available for sale		2,309,023		3,211,403		7,277,809		10,357,118
Held to maturity		5,626,580		4,624,665		16,569,371		14,008,129
Federal funds sold		60,791		72,779		283,287		128,915
Deposits with other banks		16,160		5,902		38,261		13,078

Total interest income		29,234,054		24,812,419		83,244,077		71,899,277


INTEREST EXPENSE
Deposits		4,953,676		3,015,262		12,491,348		7,862,397
Securities sold under agreements to repurchase		1,066,185		325,203		2,488,857		1,006,563
Federal funds purchased		209,462		9,041		387,495		72,484
Commercial paper		237,243		106,502		619,730		247,861
Other short-term borrowings		57,755		33,970		124,051		239,541
Long-term debt		1,356,940		1,559,688		4,212,205		4,679,063

Total interest expense		7,881,261		5,049,666		20,323,686		14,107,909


Net interest income		21,352,793		19,762,753		62,920,391		57,791,368
Provision for loan losses		2,508,000		2,338,500		7,162,000		7,235,500

Net interest income after provision for loan losses		18,844,793		17,424,253		55,758,391		50,555,868


NONINTEREST INCOME
Factoring income		1,561,136		1,915,761		4,615,245		5,110,102
Mortgage banking income		4,601,005		3,846,269		13,034,852		11,392,079
Service charges on deposit accounts		1,486,342		1,258,129		3,941,596		3,480,649
Trade finance income		596,520		688,276		1,558,786		1,699,083
Trust fees		149,446		160,311		472,969		508,046
Other service charges and fees		322,906		394,754		1,006,220		1,349,983
Bank owned life insurance income		460,209		498,530		1,147,573		975,264
Securities gains		—		285,918		196,680		970,722
Other income		175,035		126,880		688,432		459,615

Total noninterest income		9,352,599		9,174,828		26,662,353		25,945,543


NONINTEREST EXPENSES
Salaries		8,465,092		7,787,817		24,820,290		22,849,669
Employee benefits		2,482,452		2,464,874		6,577,315		6,720,517

Total personnel expense		10,947,544		10,252,691		31,397,605		29,570,186
Occupancy expenses, net		1,463,444		1,315,456		4,126,590		3,779,166
Equipment expenses		867,464		755,738		2,462,369		2,169,997
Advertising and marketing		937,004		974,755		3,067,397		2,992,678
Professional fees		737,415		952,253		3,702,823		2,939,885
Data processing fees		310,745		272,292		893,623		860,235
Stationery and printing		223,753		141,816		656,051		602,821
Communications		393,010		363,698		1,260,824		1,161,891
Other expenses		2,184,844		1,464,884		5,665,035		4,557,191

Total noninterest expenses		18,065,223		16,493,583		53,232,317		48,634,050


Income before income taxes		10,132,169		10,105,498		29,188,427		27,867,361
Provision for income taxes		3,858,220		3,555,324		11,091,602		9,545,652

Net income	$	6,273,949	$	6,550,174	$	18,096,825	$	18,321,709


Average number of common shares outstanding
Basic		18,324,683		18,207,370		18,304,920		18,248,585
Diluted		18,917,332		19,025,500		18,877,569		19,113,791

Earnings per average common share
Basic	$	0.34	$	0.36	$	0.99	$	1.00
Diluted		0.33		0.35		0.96		0.96

Dividends per common share		0.19		0.16		0.57		0.48

See Notes to Consolidated Financial Statements.

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


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2005			2004			2005			2004


Net Income	$	6,273,949		$	6,550,174		$	18,096,825		$	18,321,709

Other comprehensive income, net of tax:
Unrealized holding (losses) /gains arising during the period		(1,255,031	)		2,347,046			(1,608,327	)		(1,206,796	)

Reclassification adjustment for gains included in net income		—			(154,681	)		(106,404	)		(525,160	)

Unrealized (losses) /gains supplemental pension		43,566			(29,921	)		(510,829	)		215,466


Comprehensive income	$	5,062,484		$	8,712,618		$	15,871,265		$	16,805,219

See Notes to Consolidated Financial Statements.

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


	Nine Months Ended
	September 30,
	2005			2004

Preferred Stock
Balance at January 1	$	—		$	2,244,320
Conversions of Series D shares		—			(2,244,320	)

Balance at September 30	$	—		$	—

Common Stock
Balance at January 1	$	19,880,521		$	19,275,964
Conversions of preferred shares into common shares		—			428,304
Common shares issued under stock incentive plan		262,610			123,130

Balance at September 30	$	20,143,131		$	19,827,398

Capital Surplus
Balance at January 1	$	145,310,745		$	141,179,832
Conversions of preferred shares into common shares		—			1,816,016
Common shares issued under stock incentive plan and related tax benefits		3,783,678			l,729,973

Balance at September 30	$	149,094,423		$	144,725,821

Retained Earnings
Balance at January 1	$	28,664,568		$	16,166,517
Net Income		18,096,825			18,321,709
Cash dividends paid - common shares		(10,444,287	)		(8,658,428	)

Balance at September 30	$	36,317,106		$	25,829,798

Accumulated Other Comprehensive Income
Balance at January 1	$	(1,921,060	)	$	(1,131,803	)

Unrealized holding (losses)/gains arising during the period:
Before tax		(2,990,018	)		(2,230,677	)
Tax effect		1,381,691			1,023,881

Net of tax		(1,608,327	)		(1,206,796	)


Reclassification adjustment for gains included in net income:
Before tax		(196,680	)		(970,722	)
Tax effect		90,276			445,562

Net of tax		(106,404	)		(525,160	)

Unrealized (losses)/gains supplemental pension:
Before tax		(945,876	)		398,273
Tax effect		435,047			(182,807	)

Net of tax		(510,829	)		215,466

Balance at September 30	$	(4,146,620	)	$	(2,648,293	)

Treasury Stock
Balance at January 1	$	(42,939,969	)	$	(33,577,847	)
Purchase of common shares		(3,322,666	)		(8,310,004	)
Surrender of shares issued under incentive compensation plan		(1,606,279	)		(409,258	)

Balance at September 30	$	(47,868,914	)	$	(42,297,109	)

Unearned Compensation
Balance at January 1	$	(291,212	)	$	(894,976	)
Amortization of unearned compensation		203,193			522,281

Balance at September 30	$	(88,019	)	$	(372,695	)

Total Shareholders’ Equity
Balance at January 1	$	148,703,593		$	143,262,007
Net changes during the period		4,747,514			1,802,913

Balance at September 30	$	153,451,107		$	145,064,920

See Notes to Consolidated Financial Statements.

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


	Nine Months Ended September 30,
	2005			2004

Operating Activities
Net Income	$	18,096,825		$	18,321,709
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for loan losses		7,162,000			7,235,500
Depreciation and amortization of premises and equipment		1,505,815			1,318,157
Securities gains		(196,680	)		(970,722	)
Income from bank owned life insurance		(1,147,573	)		(975,264	)
Deferred income tax benefit		(1,034,027	)		(300,878	)
Net change in loans held for sale		(13,077,937	)		1,746,014
Amortization of unearned compensation		203,193			522,281
Amortization of premiums on securities		758,630			1,198,486
Accretion of discounts on securities		(473,278	)		(394,808	)
Increase in accrued interest receivable		(169,457	)		(70,917	)
Decrease in accrued expenses and other liabilities		(2,336,380	)		10,934,829
Increase in other assets		(4,910,163	)		(5,353,733	)
Other, net		305,985			861,992

Net cash provided by operating activities		4,686,953			34,072,646

Investing Activities
Purchase of premises and equipment		(2,021,338	)		(2,079,148	)
Net increase in interest-bearing deposits with other banks		(1,757,334	)		(1,013,176	)
Net increase in loans held in portfolio		(85,719,086	)		(73,608,868	)
Decrease (Increase) in other real estate		439,220			(189,239	)
Proceeds from prepayments, redemptions or maturities of securities - held to maturity		77,508,464			105,510,986
Purchases of securities - held to maturity		(127,413,506	)		(123,394,828	)
Proceeds from sales of securities - available for sale		2,932,250			73,254,718
Proceeds from prepayments, redemptions or maturities of securities - available for sale		53,354,017			84,957,982
Purchases of securities - available for sale		(36,447,371	)		(130,365,143	)

Net cash used in investing activities		(119,124,684	)		(66,926,716	)

Financing Activities
Net increase (decrease) in noninterest-bearing deposits		28,723,374			(49,557,132	)
Net increase in interest-bearing deposits		104,917,950			137,185,949
Decrease in Federal funds purchased		(3,400,000	)		(10,000,000	)
Net increase in securities sold under agreements to repurchase		27,997,644			9,777,016
Net increase (decrease) in commercial paper and other short-term borrowings		32,062,673			(49,608,633	)
Net decrease in long-term borrowings		(30,000,000	)		—
Purchase of treasury stock		(3,322,666	)		(8,310,004	)
Proceeds from exercise of stock options		2,564,767			1,342,069
Cash dividends paid on common stock		(10,444,287	)		(8,658,428	)

Net cash provided by financing activities		149,099,455			22,170,837

Net increase (decrease) in cash and due from banks		34,661,724			(10,683,233	)
Cash and due from banks - beginning of period		48,842,418			63,947,722

Cash and due from banks - end of period	$	83,504,142		$	53,264,489

Supplemental disclosures:
Interest paid	$	19,517,578		$	13,800,992
Income taxes paid		13,020,100			10,869,100

See Notes to Consolidated Financial Statements.

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 September 30, 2005 and 2004 are unaudited; however, in the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of such periods have been made. Certain reclassifications have been made to the 2004 consolidated financial statements to conform to the current presentation. The interim consolidated financial statements should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2004. The Company effected a six-for-five stock split on December 8, 2004 and a five-for-four stock split on September 10, 2003 and paid stock dividends as follows: 20% on December 9, 2002; 10% on December 10, 2001; 10% on December 11, 2000; and 5% on December 14, 1999. Fractional shares were cashed-out and payments were made to shareholders in lieu of fractional shares. All capital and share amounts as well as basic and diluted average number of shares outstanding and earnings per average common share information for all prior reporting periods presented, reflect the effect of the stock splits and stock dividends.

2.	At September 30, 2005, the Company has a stock-based employee compensation plan, which is described more fully in Note 1 and Note 15 to the consolidated financial statements in the Company’s annual report on Form 10-K for the year ended December 31, 2004. The Company accounts for this plan under the recognition and measurement principles of Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 148, the following table illustrates the effect on net income and earnings per average common share if the Company had applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, to the stock-based employee compensation plans.


Three Months Ended September 30,	2005			2004

Net income available for common shareholders	$	6,273,949		$	6,550,174
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(65,577	)		(59,528	)


Pro forma, net income	$	6,208,372		$	6,490,646


Earnings per average common share:
Basic- as reported	$	0.34		$	0.36
Basic- pro forma		0.34			0.36
Diluted- as reported		0.33			0.35
Diluted- pro forma		0.33			0.34

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


Nine Months Ended September 30,	2005			2004

Net income available for common shareholders	$	18,096,825		$	18,321,709
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(188,367	)		(174,954	)


Pro forma, net income	$	17,908,458		$	18,146,755


Earnings per average common share:
Basic- as reported	$	0.99		$	1.00
Basic- pro forma		0.98			0.99
Diluted- as reported		0.96			0.96
Diluted- pro forma		0.95			0.95


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


	September 30,

	2005		2004


Loans held for sale
Real estate-mortgage	$	50,136,610	$	38,810,366


Loans held in portfolio
Commercial and industrial	$	636,289,748	$	585,288,435
Lease financing		202,451,011		181,671,932
Real estate-residential mortgage		146,013,910		111,841,103
Real estate- commercial mortgage		118,573,523		94,705,763
Real estate-construction		2,309,103		2,329,491
Installment		11,766,058		15,270,005
Loans to depository institutions		10,000,000		—


Loans held in portfolio, gross		1,127,403,353		991,106,729

Less unearned discounts		26,654,043		23,033,619

Loans held in portfolio, net of unearned discounts	$	1,100,749,310	$	968,073,110


4.	In February 2004, 224,432 Series D preferred shares were converted into 428,304 common shares.

5.	SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, established standards for the way that public business enterprises report and disclose selected information about operating segments in interim financial statements provided to stockholders.

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

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

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


	Corporate Lending		Real Estate Lending		Company-wide Treasury		Totals

Three Months Ended September 30, 2005
Net interest income	$	10,053,884	$	5,928,749	$	5,143,317	$	21,125,950
Noninterest income		3,550,947		4,689,523		537,257		8,777,727
Depreciation and amortization		113,635		103,254		620		217,509
Segment income before taxes		5,329,839		5,636,868		5,613,007		16,579,714
Segment assets		801,394,089		367,284,929		839,492,676		2,008,171,694

Three Months Ended September 30, 2004
Net interest income	$	9,486,019	$	4,125,387	$	5,958,732	$	19,570,138
Noninterest income		3,587,898		3,929,044		884,953		8,401,895
Depreciation and amortization		80,415		102,964		920		184,299
Segment income before taxes		5,224,737		4,327,299		6,536,387		16,088,423
Segment assets		721,671,407		286,075,699		778,890,835		1,786,637,941

Nine Months Ended September 30, 2005
Net interest income	$	29,521,527	$	16,141,238	$	16,590,184	$	62,252,949
Noninterest income		9,674,187		13,302,619		1,741,781		24,718,587
Depreciation and amortization		304,132		282,824		1,838		588,794
Segment income before taxes		14,926,978		16,018,794		18,074,853		49,020,625
Segment assets		801,394,089		367,284,929		839,492,676		2,008,171,694

Nine Months Ended September 30, 2004
Net interest income	$	27,049,062	$	11,788,083	$	18,408,890	$	57,246,035
Noninterest income		9,762,453		11,606,416		2,167,548		23,536,417
Depreciation and amortization		221,579		302,679		920		525,178
Segment income before taxes		13,650,937		12,534,701		20,230,073		46,415,711
Segment assets		721,671,407		286,075,699		778,890,835		1,786,637,941

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

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


	Three Months Ended September 30,						Nine Months Ended September 30,

	2005			2004			2005			2004


Net interest income:
Total for reportable operating segments	$	21,125,950		$	19,570,138		$	62,252,949		$	57,246,035
Other ^[1]		226,843			192,615			667,442			545,333


Consolidated net interest income	$	21,352,793		$	19,762,753		$	62,920,391		$	57,791,368


Noninterest income:
Total for reportable operating segments	$	8,777,727		$	8,401,895		$	24,718,587		$	23,536,417
Other ^[1]		574,872			772,933			1,943,766			2,409,126


Consolidated noninterest income	$	9,352,599		$	9,174,828		$	26,662,353		$	25,945,543


Income before taxes:
Total for reportable operating segments	$	16,579,714		$	16,088,423		$	49,020,625		$	46,415,711
Other ^[1]		(6,447,545	)		(5,982,925	)		(19,832,198	)		(18,548,350	)


Consolidated income before income taxes	$	10,132,169		$	10,105,498		$	29,188,427		$	27,867,361


Assets:
Total for reportable operating segments	$	2,008,171,694		$	1,786,637,941		$	2,008,171,694		$	1,786,637,941
Other ^[1]		26,959,247			23,670,225			26,959,247			23,670,225


Consolidated assets	$	2,035,130,941		$	1,810,308,166		$	2,035,130,941		$	1,810,308,166

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


6.	The following information is provided in connection with the sales of available for sale securities:


Three Months Ended September 30,	2005		2004

Proceeds	$	—	$	26,149,573

Gross Gains		—		285,918

Gross Losses		—		—


Nine Months Ended September 30,	2005		2004

Proceeds	$	2,932,250	$	73,254,718

Gross Gains		196,680		970,722

Gross Losses		—		—

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


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


	Three Months Ended September 30,						Nine Months Ended September 30,

	2005			2004			2005			2004


COMPONENTS OF NET PERIODIC COST
Service Cost	$	395,231		$	388,090		$	1,202,917		$	1,191,131
Interest Cost		559,634			492,931			1,578,620			1,507,418
Expected return on plan assets		(480,328	)		(417,379	)		(1,365,426	)		(1,292,898	)
Amortization of prior service cost		18,324			19,331			56,556			57,993
Recognized actuarial loss		291,769			216,556			706,477			643,647


Net periodic benefit cost		784,630			699,529			2,179,144			2,107,291
Settlement gain		—			—			—			(1,331,190	)

Net benefit cost	$	784,630		$	699,529		$	2,179,144		$	776,101


	The Company contributed $3,000,000 to the defined benefit pension plan as of September 30, 2005.

8.	SFAS No. 123R, Share-Based Payment, will be effective for the Company beginning January 1, 2006. SFAS No. 123R provides alternative transition methods, and the Company has not yet determined which transition method it will apply upon adoption of SFAS No. 123R. The impact on the Company’s consolidated financial statements will depend on the transition method selected.

9.	In May, 2005, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 154, Accounting Changes and Error Corrections. This statement replaces APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements, and changes the requirements for the accounting for and reporting of a change in accounting principle. This statement applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. When a pronouncement includes specific transition provisions, those provisions should be followed. SFAS No. 154 establishes retrospective application as the required method for reporting a voluntary change in accounting principle and for adopting a new accounting pronouncement in the unusual instance that the pronouncement does not include specific transition guidance. SFAS No. 154 provides guidance for determining whether retrospective application of a change in accounting principle is impracticable and for reporting a change when retrospective application is impracticable. The reporting of a correction of an error by restating previously issued financial statements is also addressed by SFAS No. 154. SFAS No. 154 is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. The Company expects to adopt SFAS No. 154 on January 1, 2006.


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

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

OVERVIEW

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

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

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

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

Although management endeavors to minimize the credit risk inherent in the Company’s loan portfolio, it must necessarily make various assumptions and judgments about the collectibility of the loan portfolio based on its experience

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

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

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

INCOME STATEMENT ANALYSIS

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

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

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

Net Interest Income

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

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

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

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

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

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

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

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

Provision for Loan Losses

Based on management’s continuing evaluation of the loan portfolio (discussed under “Asset Quality” below), the provision for loan losses for the third quarter of 2005 increased to $2.5 million from $2.3 million for the prior year period. Factors affecting the level of provision included the growth in the loan portfolios, changes in general economic conditions and the amount of nonaccrual loans.

Noninterest Income

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

Noninterest Expenses

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

Provision for Income Taxes

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

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

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

Net Interest Income

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

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

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

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

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

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

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

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

Noninterest Income

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

Noninterest Expenses

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

Provision for Income Taxes

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

BALANCE SHEET ANALYSIS

Securities

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

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

The following table presents information regarding securities available for sale:


	Gross		Gross		Gross
	Amortized		Unrealized		Unrealized		Market
September 30, 2005	Cost		Gains		Losses		Value


Mortgage-Backed Securities
CMOs (Federal Home Loan Mortgage Corporation)	$	35,374,264	$	—	$	1,348,910	$	34,025,354
Federal National Mortgage Association		58,647,440		122,940		1,056,250		57,714,130
Federal Home Loan Mortgage Corporation		49,535,706		46,899		787,574		48,795,031
Government National Mortgage Association		6,125,964		232,420		4,755		6,353,629

Total Mortgage-Backed Securities		149,683,374		402,259		3,197,489		146,888,144
Federal Home Loan Bank		14,996,818		—		303,068		14,693,750
Federal Farm Credit Bank		10,000,000		—		203,125		9,796,875
Obligations of state and political institutions		26,567,076		385,368		65,816		26,886,628
Other debt securities		5,000,000		—		—		5,000,000
Federal Reserve Bank and other equity securities		7,619,242		18,481		—		7,637,723

Total	$	213,866,510	$	806,108	$	3,769,498	$	210,903,120

The following table presents information regarding securities held to maturity:


			Gross		Gross		Estimated
	Carrying		Unrealized		Unrealized		Market
September 30, 2005	Value		Gains		Losses		Value


Mortgage-Backed Securities
CMOs (Federal National Mortgage Association)	$	10,843,086	$	—	$	365,230	$	10,477,856
CMOs (Federal Home Loan Mortgage Corporation)		32,501,879		—		929,786		31,572,093
Federal National Mortgage Association		207,022,218		638,542		2,639,922		205,020,838
Federal Home Loan Mortgage Corporation		175,311,844		234,919		2,922,153		172,624,610
Government National Mortgage Association		19,447,078		663,115		464		20,109,729

Total Mortgage-Backed Securities		445,126,105		1,536,576		6,857,555		439,805,126

Federal Home Loan Bank		29,981,283		—		303,158		29,678,125
Federal Farm Credit Bank		20,000,000		—		379,688		19,620,312
Debt securities issued by foreign governments		1,000,000		—		—		1,000,000

Total	$	496,107,388	$	1,536,576	$	7,540,401	$	490,103,563

Loan Portfolio

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

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

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


	September 30,

	2005					2004

	($ in thousands)
	Balances		% of Total			Balances		% of Total

Domestic
Commercial and industrial	$	635,770		55.3	%	$	584,754		58.1	%
Equipment lease financing		176,316		15.3			159,175		15.8
Real estate - residential mortgage		196,151		17.0			150,651		15.0
Real estate - commercial mortgage		118,574		10.3			94,706		9.4
Real estate - construction		2,309		0.2			2,329		0.2
Installment - individuals		11,766		1.0			15,268		1.5
Loans to depository institutions		10,000		0.9			—		—



Loans, net of unearned discounts	$	1,150,886		100.0	%	$	1,006,883		100.0	%

Asset Quality

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

Management views the allowance for loan losses as a critical accounting policy due to its subjectivity. The allowance for loan losses is maintained through the provision for loan losses, which is a charge to operating earnings. The adequacy of the provision and the resulting allowance for loan losses is determined by a management evaluation process of the loan portfolio, including identification and review of individual problem situations that may affect the borrower’s ability to repay, review of overall portfolio quality through an analysis of current charge-offs, delinquency and nonperforming loan data, estimates of the value of any underlying collateral, an assessment of current and expected economic conditions and changes in the size and character of the loan portfolio. Other data utilized by management in determining the adequacy of the allowance for loan losses includes, but is not limited to, the results of regulatory reviews, the amount of, trend of and/or borrower characteristics on loans that are identified as requiring special attention as part of the credit review process, and peer group comparisons. The impact of this other data might result in an allowance which will be greater than that indicated by the evaluation process previously described. The allowance reflects management’s evaluation both of loans presenting identified loss potential and of the risk inherent in various components of the loan portfolio, including loans identified as impaired as required by SFAS No. 114. Thus, an increase in the size of the portfolio or in any of its components could necessitate an increase in the allowance even though there may not be a decline in credit quality or an increase in potential problem loans. A significant change in any of the evaluation factors described above could result in future additions to the allowance.

At September 30, 2005, the ratio of the allowance to loans held in portfolio, net of unearned discounts, was 1.47% and the allowance was $16.2 million. At such date, the Company’s nonaccrual loans amounted to $4.0 million; $0.7 million of such loans was judged to be impaired within the scope of SFAS No. 114. Loans 90 days past due and still accruing amounted to $0.8 million. Nonaccrual loans and loans 90 days past due and still accruing include leases, in the amount of $0.5 million and $0.6 million, respectively, of telecommunications equipment from a company that went into bankruptcy in July 2004. The service provider to the lessees discontinued service, resulting in the failure of certain lessees to make payments. While pursuing collection of the lease payments, past due amounts accrue. Legal action is typically commenced against lessees whose accounts are not paid within 180 days and are placed in nonaccrual status. Lessees remain unconditionally obligated to make payments. All are creditworthy and personally guaranteed; the reported delinquencies are not due to credit issues. Based on the foregoing, as well as management’s judgment as to the current risks inherent in loans held in portfolio, the Company’s allowance for loan losses was deemed adequate to absorb all reasonably anticipated losses on specifically known and other possible credit risks associated with the portfolio as of September 30, 2005. Net losses within loans held in portfolio are not statistically predictable and changes in conditions in the next twelve months could result in future provisions for loan losses varying from the level taken in the first nine months of 2005. Potential problem loans, which are loans that are currently performing under present loan repayment terms but where known information about possible credit problems of borrowers causes management to have serious doubts as to the ability of the borrowers to continue to comply with the present repayment terms, aggregated $2.6 million at September 30, 2005.

Deposits

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

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


	September 30,

	2005					2004

	($ in thousands)
	Balances		% of Total			Balances		% of Total

Domestic
Demand	$	540,030		36.6	%	$	424,534		32.6	%
NOW		158,660		10.7			111,868		8.6
Savings		26,939		1.8			29,488		2.3
Money market		226,202		15.3			226,655		17.4
Time deposits		522,643		35.4			503,824		38.8


Total domestic deposits		1,474,474		99.8			1,296,369		99.7
Foreign
Time deposits		3,018		0.2			3,000		0.3


Total deposits	$	1,477,492		100.0	%	$	1,299,369		100.0	%

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

CAPITAL

The Company and the bank are subject to risk-based capital regulations which quantitatively measure capital against risk-weighted assets, including certain off-balance sheet items. These regulations define the elements of the Tier 1 and Tier 2 components of Total Capital and establish minimum ratios of 4% for Tier 1 capital and 8% for Total Capital for capital adequacy purposes. Supplementing these regulations is a leverage requirement. This requirement establishes a minimum leverage ratio (at least 3% to 5%) which is calculated by dividing Tier 1 capital by adjusted quarterly average assets (after deducting goodwill). Information regarding the Company’s and the bank’s risk-based capital is presented on page 29. In addition, the bank is subject to the Federal Deposit Insurance Corporation Improvement Act of 1981 (“FDICIA”) which imposes a number of mandatory supervisory measures. Among other matters, five capital categories, ranging from “well capitalized” to “critically under capitalized”, are used by regulatory agencies to determine a bank’s deposit insurance premium, approval of applications authorizing institutions to increase their asset size or otherwise expand business activities or acquire other institutions. Under FDICIA, a “well capitalized” bank must maintain minimum leverage, Tier 1 and Total Capital ratios of 5%, 6% and 10%, respectively. The Federal Reserve Board applies comparable tests for holding companies such as the Company. At September 30, 2005, the Company and the bank exceeded the requirements for “well capitalized” institutions.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

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

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


	2005								2004

	Average Balance			Interest		Average Rate			Average Balance			Interest		Average Rate

ASSETS
Interest-bearing deposits with other banks	$	3,455		$	16		1.45	%	$	3,799		$	6		0.62	%

Securities available for sale		190,371			2,055		4.32			266,551			2,885		4.33
Securities held to maturity		504,688			5,626		4.46			386,851			4,624		4.78
Securities tax-exempt [2]		24,701			416		6.68			29,267			528		7.18

Total investment securities		719,760			8,097		4.50			682,669			8,037		4.71
Federal funds sold		6,935			61		3.43			19,620			73		1.45
Loans, net of unearned discounts [3]		1,087,282			21,222		8.02			951,941			16,898		7.31

TOTAL INTEREST-EARNING ASSETS		1,817,432			29,396		6.54	%		1,658,029			25,014		6.11	%

Cash and due from banks		60,457								53,476
Allowance for loan losses		(17,100	)							(16,158	)
Goodwill		21,158								21,158
Other assets		82,170								70,050

TOTAL ASSETS	$	1,964,117							$	1,786,555

LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits
Domestic
Savings	$	28,148			31		0.44	%	$	29,991			28		0.37	%
NOW		143,101			278		0.77			133,357			162		0.48
Money market		247,613			873		1.40			217,612			348		0.64
Time		531,234			3,763		2.81			469,319			2,469		2.09
Foreign
Time		3,016			8		1.42			3,000			8		1.10

Total interest-bearing deposits		953,112			4,953		2.06			853,279			3,015		1.41

Borrowings
Securities sold under agreements to repurchase - customers		87,049			548		2.50			90,654			272		1.19
Securities sold under agreements to repurchase - dealers		57,755			518		3,56			14,910			54		1.43
Federal funds purchased		23,438			210		3.55			2,500			9		1.44
Commercial paper		34,341			237		2.74			34,394			107		1.23
Other short-term debt		6,109			58		3.75			6,293			34		2.15
Long-term debt		105,774			1,357		5.13			135,774			1,559		4.59

Total borrowings		314,466			2,928		3.71			284,525			2,035		2.86

TOTAL INTEREST-BEARING LIABILITIES		1,267,578			7,881		2.47	%		1,137,804			5,050		1.77	%

Noninterest-bearing deposits		461,418								424,974
Other liabilities		82,278								83,603

Total liabilities		1,811,274								1,646,381

Shareholders’ equity		152,843								140,174

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,964,117							$	1,786,555

Net interest income/spread					21,515		4.07	%					19,964		4.34	%

Net yield on interest-earning assets (margin)							4.76	%							4.84	%

Less: Tax equivalent adjustment					162								202

Net interest income				$	21,353							$	19,762


[1]	The average balances of assets, liabilities and shareholders’ equity are computed on the basis of daily averages. Average rates are presented on a tax-equivalent basis. Certain reclassifications have been made to amounts for prior periods to conform to the current presentation.

[2]	Interest on tax-exempt securities is presented on a tax-equivalent basis.

[3]	Includes loans held for sale and loans held in portfolio; all loans are domestic. Nonaccrual loans are included in amounts outstanding and income has been included to the extent earned.

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


	2005								2004

	Average Balance			Interest		Average Rate			Average Balance			Interest		Average Rate

ASSETS
Interest-bearing deposits with other banks	$	3,000		$	38		1.71	%	$	3,151		$	13		0.55	%

Securities available for sale		197,229			6,454		4.36			282,504			9,364		4.37
Securities held to maturity		492,838			16,569		4.48			385,548			14,008		4.84
Securities tax-exempt [2]		25,415			1,350		7.10			30,217			1,619		7.16

Total investment securities		715,482			24,373		4.54			698,269			24,991		4.75
Federal funds sold		13,810			283		2.71			14,361			129		1.18
Loans, net of unearned discounts [3]		1,033,435			59,076		8.04			905,402			47,392		7.38

TOTAL INTEREST-EARNING ASSETS		1,765,727			83,770		6.52	%		1,621,183			72,525		6.13	%

Cash and due from banks		61,895								59,477
Allowance for loan losses		(17,332	)							(15,694	)
Goodwill		21,158								21,158
Other assets		80,433								70,370

TOTAL ASSETS	$	1,911,881							$	1,756,494


LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits
Domestic
Savings	$	28,583			85		0.40	%	$	31,851			93		0.39	%
NOW		146,845			740		0.67			134,237			463		0.46
Money market		229,700			1,752		1.02			210,257			909		0.58
Time		516,273			9,889		2.56			435,991			6,373		1.95
Foreign
Time		3,010			25		1.09			3,000			24		1.09

Total interest-bearing deposits		924,411			12,491		1.81			815,336			7,862		1.29


Borrowings
Securities sold under agreements to repurchase - customers		86,540			1,302		2.01			81,625			702		1.15
Securities sold under agreements to repurchase - dealers		50,237			1,187		3.16			34,018			305		1.20
Federal funds purchased		15,739			388		3.25			8,580			72		1.11
Commercial paper		35,714			620		2.32			28,733			248		1.15
Other short- term debt		4,901			124		3.38			16,603			240		1.93
Long-term debt		112,074			4,212		5.01			135,774			4,679		4.59

Total borrowings		305,205			7,833		3.42			305,333			6,246		2.73

TOTAL INTEREST-BEARING LIABILITIES		1,229,616			20,324		2.21	%		1,120,669			14,108		1.68	%

Noninterest-bearing deposits		448,038								411,916
Other liabilities		83,924								81,928

Total liabilities		1,761,578								1,614,513

Shareholders’ equity		150,303								141,981

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,911,881							$	1,756,494

Net interest income/spread					63,446		4.31	%					58,417		4.45	%

Net yield on interest-earning assets (margin)							4.92	%							4.92	%

Less: Tax equivalent adjustment					526								626

Net interest income				$	62,920							$	57,791


[1]	The average balances of assets, liabilities and shareholders’ equity are computed on the basis of daily averages. Average rates are presented on a tax-equivalent basis. Certain reclassifications have been made to amounts for prior periods to conform to the current presentation.

[2]	Interest on tax-exempt securities is presented on a tax-equivalent basis.

[3]	Includes loans held for sale and loans held in portfolio; all loans are domestic. Nonaccrual loans are included in amounts outstanding and income has been included to the extent earned.

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

(in thousands)


	Increase/ (Decrease) Three Months Ended September 30, 2005 to September 30, 2004

	Volume			Rate			Net [2]

INTEREST INCOME
Interest-bearing deposits with other banks	$	(1	)	$	11		$	10

Securities available for sale		(823	)		(7	)		(830	)
Securities held to maturity		1,333			(331	)		1,002
Securities tax-exempt		(77	)		(35	)		(112	)

Total investment securities		433			(373	)		60


Federal funds sold		(66	)		54			(12	)

Loans, net of unearned discounts [3]		2,569			1,755			4,324


TOTAL INTEREST INCOME	$	2,935		$	1,447		$	4,382


INTEREST EXPENSE
Interest-bearing deposits
Domestic
Savings	$	(2	)	$	5		$	3
NOW		13			103			116
Money market		54			471			525
Time		358			936			1,294
Foreign
Time		—			—			—

Total interest-bearing deposits		423			1,515			1,938


Borrowings
Securities sold under agreements to repurchase - customers		(11	)		287			276
Securities sold under agreements to repurchase - dealers		305			159			464
Federal funds purchased		172			29			201
Commercial paper		—			130			130
Other short-term debt		(1	)		25			24
Long-term debt		(373	)		171			(202	)

Total borrowings		92			801			893


TOTAL INTEREST EXPENSE	$	515		$	2,316		$	2,831


NET INTEREST INCOME	$	2,420		$	(869	)	$	1,551


[1]	This table is presented on a tax-equivalent basis.

[2]	Changes in interest income and interest expense due to a combination of both volume and rate have been allocated to the change due to volume and the change due to rate in proportion to the relationship of the change due solely to each.

[3]	Includes loans held for sale and loans held in portfolio; all loans are domestic. Nonaccrual loans are included in amounts outstanding and income has been included to the extent earned.

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

(in thousands)


	Increase/ (Decrease) Nine Months Ended September 30, 2005 to September 30, 2004

	Volume			Rate			Net [2]

INTEREST INCOME
Interest-bearing deposits with other banks	$	(1	)	$	26		$	25


Securities available for sale		(2,888	)		(22	)		(2,910	)
Securities held to maturity		3,648			(1,087	)		2,561
Securities tax-exempt		(255	)		(14	)		(269	)

Total investment securities		505			(1,123	)		(618	)


Federal funds sold		(5	)		159			154

Loans, net of unearned discounts [3]		7,092			4,592			11,684

TOTAL INTEREST INCOME	$	7,591		$	3,654		$	11,245


INTEREST EXPENSE
Interest-bearing deposits
Domestic
Savings	$	(10	)	$	2		$	(8	)
NOW		45			232			277
Money market		89			754			843
Time		1,290			2,226			3,516
Foreign
Time		1			—			1

Total interest-bearing deposits		1,415			3,214			4,629


Borrowings
Securities sold under agreements to repurchase - customers		42			558			600
Securities sold under agreements to repurchase - dealers		199			683			882
Federal funds purchased		95			221			316
Commercial paper		71			301			372
Other short-term debt		(231	)		115			(116	)
Long-term debt		(873	)		406			(467	)

Total borrowings		(697	)		2,284			1,587


TOTAL INTEREST EXPENSE	$	718		$	5,498		$	6,216


NET INTEREST INCOME	$	6,873		$	(1,844	)	$	5,029


[1]	This table is presented on a tax-equivalent basis.

[2]	Changes in interest income and interest expense due to a combination of both volume and rate have been allocated to the change due to volume and the change due to rate in proportion to the relationship of the change due solely to each. The effect of the extra day in 2004 has been included in the change in volume.

[3]	Includes loans held for sale and loans held in portfolio; all loans are domestic. Nonaccrual loans are included in amounts outstanding and income has been included to the extent earned.

STERLING BANCORP AND SUBSIDIARIES
Regulatory Capital and Ratios

Ratios and Minimums
(dollars in thousands)


	Actual					For Capital Adequacy Minimum					To Be Well Capitalized

	Amount		Ratio			Amount		Ratio			Amount		Ratio

As of September 30, 2005
Total Capital (to Risk Weighted Assets) :
The Company	$	177,523		13.80	%	$	102,924		8.00	%	$	128,656		10.00	%
The bank		140,193		11.53			97,248		8.00			121,560		10.00

Tier 1 Capital (to Risk Weighted Assets) :
The Company		161,439		12.55			51,462		4.00			77,193		6.00
The bank		124,996		10.28			48,624		4.00			72,936		6.00

Tier 1 Leverage Capital (to Average Assets) :
The Company		161,439		8.31			77,718		4.00			97,148		5.00
The bank		124,996		6.68			74,860		4.00			93,575		5.00

As of December 31, 2004
Total Capital (to Risk Weighted Assets) :
The Company	$	169,226		14.35	%	$	94,334		8.00	%	$	117,917		10.00	%
The bank		129,267		11.56			89,466		8.00			111,832		10.00

Tier 1 Capital (to Risk Weighted Assets) :
The Company		154,467		13.10			47,167		4.00			70,750		6,00
The bank		115,262		10.31			44,733		4.00			67,099		6.00

Tier 1 Leverage Capital (to Average Assets) :
The Company		154,467		8.49			72,792		4.00			90,990		5.00
The bank		115,262		6.56			70,270		4,00			87,837		5.00


ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ASSET/LIABILITY MANAGEMENT

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

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

Market Risk

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

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

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

The Company’s balance sheet structure is primarily short-term in nature with a substantial portion of assets and liabilities repricing or maturing within one year. The Company’s gap analysis at September 30, 2005, presented on page 35, indicates that net interest income would increase during periods of rising interest rates and decrease during periods of falling interest rates, but, as mentioned above, gap analysis may not be an accurate predictor of net interest income.

As part of its asset/liability management program, the Company may use interest rate floors or swaps to reduce its sensitivity to interest rate fluctuations. The Company has written policy guidelines, approved by the Board of Directors, governing the use of off-balance sheet financial instruments, including approved counterparties, risk limits and appropriate internal control procedures. The credit risk of derivatives arises principally from the potential for a counterparty to fail to meet its obligation to settle a contract on a timely basis.

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

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

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

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

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

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

The Company’s interest rate sensitivity is determined by identifying the probable impact of changes in market interest rates on the yields on the Company’s assets and the rates that would be paid on its liabilities. This modeling technique involves a degree of estimation based on certain assumptions that management believes to be reasonable. Utilizing this process, management projects the impact of changes in interest rates on net interest margin. The Company has established certain policy limits for the potential volatility of its net interest margin assuming certain levels of changes in market interest rates with the objective of maintaining a stable net interest margin under various probable rate scenarios. Management generally has maintained a risk position well within the policy limits. As of September 30, 2005, the model indicated the impact of a 200 basis point parallel and pro rata rise in rates over 12 months would approximate a 1.8% ($1.6 million) increase in net interest income, while the impact of a 200 basis point decline in rates over the same period would approximate a 2.2% ($1.9 million) decline from an unchanged rate environment.

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

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

The shape of the yield curve can cause downward pressure on net interest income. In general, if and to the extent that the yield curve is flatter (i.e., the differences between interest rates for different maturities are relatively smaller) than previously anticipated, then the yield on the Company’s interest-earning assets and its cash flows will tend to be lower. Management believes that a relatively flat yield curve shape could adversely affect the Company’s results in 2005.

Liquidity Risk

Liquidity is the ability to meet cash needs arising from changes in various categories of assets and liabilities. Liquidity is constantly monitored and managed at both the parent company and the bank levels. Liquid assets consist of cash and due from banks, interest-bearing deposits in banks and Federal funds sold and securities available for sale. Primary funding sources include core deposits,

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

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

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

At September 30, 2005, the parent company’s short-term debt, consisting principally of commercial paper used to finance ongoing current business activities, was approximately $39.4 million. The parent company had cash, interest-bearing deposits with banks and other current assets aggregating $34.0 million. The parent company also has back-up credit lines with banks of $24.0 million. Since 1979, the parent company has had no need to use the available back-up lines of credit.

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


	Payments Due by Period

Contractual Obligations	Total		Less than 1 Year		1-3 Years		4-5 Years		After 5 Years

	(in thousands)

Long-Term Debt	$	105,774	$	—	$	35,774	$	—	$	70,000
Operating Leases		27,142		3,462		6,787		5,549		11,344


Total Contractual Cash Obligations	$	132,916	$	3,462	$	42,561	$	5,549	$	81,344

The following table sets forth information regarding the Company’s obligations under other commercial commitments as of September 30, 2005:


	Amount of Commitment Expiration Per Period

Other Commercial Commitments	Total Amount Committed		Less than 1 Year		1-3 Years		4-5 Years		After 5 Years

	(in thousands)

Residential Loans	$	26,830	$	26,830	$	—	$	—	$	—
Commercial Loans		19,123		6,470		10,647		2,006		—

Total Loans		45,953		33,300		10,647		2,006		—
Standby Letters of Credit		25,883		24,152		1,731		—		—
Other Commercial Commitments		14,947		14,748		—		—		199


Total Commercial Commitments	$	86,783	$	72,200	$	12,378	$	2,006	$	199

INFORMATION AVAILABLE ON OUR WEB SITE

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

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

STERLING BANCORP AND SUBSIDIARIES
Interest Rate Sensitivity

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


	Repricing Date

	3 Months or Less		More than 3 Months to 1 Year			More than 1 Year to 5 Years		Over 5 Years		Nonrate Sensitive			Total

ASSETS
Interest-bearing deposits with other banks	$	3,086	$	—		$	—	$	—	$	—		$	3,086
Federal funds sold		—		—			—		—		—			—
Investment securities		10,396		19,743			154,001		515,233		7,638			707,011
Loans, net of unearned discounts
Commercial and industrial		587,946		15,509			26,766		6,068		(519	)		635,770
Loans to depository institutions		10,000		—			—		—		—			10,000
Lease financing		14,345		13,358			163,433		11,315		(26,135	)		176,316
Real estate		104,163		12,324			161,969		38,578		—			317,034
Installment		11,766		—			—		—		—			11,766
Noninterest-earning assets and allowance for loan losses		—		—			—		—		174,148			174,148

Total Assets		741,702		60,934			506,169		571,194		155,132			2,035,131

LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits
Savings [1]		—		—			26,939		—		—			26,939
NOW [1]		—		—			158,660		—		—			158,660
Money market [1]		185,163		—			41,039		—		—			226,202
Time - domestic		227,747		224,104			70,731		61		—			522,643
- foreign		1,373		1,645			—		—		—			3,018
Securities sold u/a/r - cust		57,920		—			—		—		—			57,920
Securities sold u/a/r - deal		59,894		—			—		—		—			59,894
Federal funds purchased		29,100		—			—		—		—			29,100
Commercial paper		39,402		—			—		—		—			39,402
Other short-term borrowings		21,169		—			—		—		—			21,169
Long-term borrowings - FHLB		—		—			10,000		70,000		25,774			105,774
Noninterest-bearing liabilities and shareholders’ equity		—		—			—		—		784,410			784,410

Total Liabilities and Shareholders ‘ Equity		621,768		225,749			307,369		70,061		810,184			2,035,131


Net Interest Rate Sensitivity Gap	$	119,934	$	(164,815	)	$	198,800	$	501,133	$	(655,052	)	$	—


Cumulative Gap September 30, 2005	$	119,934	$	(44,881	)	$	153,919	$	655,052	$	—		$	—


Cumulative Gap September 30, 2004	$	194,162	$	52, 113		$	71,052	$	570, 573	$	—		$	—


Cumulative Gap December 31, 2004	$	250,603	$	160,810		$	187,606		663,246	$	—		$	—


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

ITEM 4. CONTROLS AND PROCEDURES

Changes in internal control over financial reporting

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

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

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

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

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

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

Evaluation of disclosure controls and procedures

As required under the Securities Exchange Act of 1934, the Company’s management, with the participation of the Company’s principal executive and principal financial officers, evaluated the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation and management’s conclusion that the previously reported material weakness in the Company’s internal control over financial reporting described above no longer exists, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that, as of the end of the period covered by this quarterly report, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

PART II - OTHER INFORMATION

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

Under its share repurchase program, the Company buys back common shares from time to time. The following table discloses the Company’s repurchases of the Company’s common shares during the third quarter of 2005.


ISSUER PURCHASES OF EQUITY SECURITIES


Period	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 Programs


July 1-31, 2005		24,200	$	22.33		24,200		892,619

August 1-31, 2005		46,500		22.11		46,500		846,119

September 1-30, 2005		65,300		21.46		65,300		780,819


Total		136,000				136,000

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

The Board of Directors initially authorized the repurchase of common shares in 1997 and since then has approved increases in the number of common shares that the Company is authorized to repurchase. The last increase was announced on June 16, 2005, when the Board of Directors increased the Company’s authority to repurchase common shares by an additional 800,000 shares. As of June 30, 2005, the remaining number of shares that could be repurchased was 916,819.

Item 6. Exhibits


The following exhibits are filed as part of this report:

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

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

11.		Statement Re: Computation of Per Share Earnings.

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

32.		Certifications of the CEO and CFO required by Section 1350 of Chapter 63 of Title 18 of the U.S. Code.

SIGNATURES

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


			STERLING BANCORP

			(Registrant)

Date	November 8, 2005	/s/	Louis J. Cappelli

			Louis J. Cappelli Chairman and Chief Executive Officer

Date	November 8, 2005	/s/	John W. Tietjen

			John W. Tietjen Executive Vice President and Chief Financial Officer

STERLING BANCORP AND SUBSIDIARIES

EXHIBIT INDEX


Exhibit Number	Description	Sequential Page No.


11	Statement re: Computation of Per Share Earnings.	42

31.1	Certifications of the CEO pursuant to Exchange Act Rule 13a-14(a).	43

31.2	Certifications of the CFO pursuant to Exchange Act Rule 13a-14(a).	44

32	Certifications of the CEO and CFO required by Section 1350 of Chapter 63 of Title 18 of the U.S. Code.	45