Edgar Filing: STERLING BANCORP

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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


For the quarterly period ended	March 31, 2010

	or

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

For the transition period from ____________________________to ____________________________________________


Commission File Number:	1-5273-1

Sterling Bancorp

(Exact name of registrant as specified in its charter)


New York		13-2565216

(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(17 CFR § 232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yes o No

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

Large Accelerated Filer o Accelerated Filer x Non-Accelerated Filer o Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No

As of April 30, 2010 there were 26,840,763 shares of common stock,
$1.00 par value, outstanding.

STERLING BANCORP


				Page

PART I FINANCIAL INFORMATION

	Item 1.	Financial Statements

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

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

		Overview		29
		Income Statement Analysis		30
		Balance Sheet Analysis		34
		Capital		41
		Recently Issued Accounting Pronouncements		42
		Cautionary Statement Regarding Forward-Looking Statements		42
		Average Balance Sheets		43
		Rate/Volume Analysis		44
		Regulatory Capital and Ratios		45

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk

		Asset/Liability Management		46
		Interest Rate Sensitivity		50

	Item 4.	Controls and Procedures		51

PART II OTHER INFORMATION

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		52

	Item 6.	Exhibits		52

SIGNATURES				53

EXHIBIT INDEX

	Exhibit 11		Statement Re: Computation of Per Share Earnings	55

	Exhibit 31.1		Certification of the CEO pursuant to Exchange Act Rule 13a-14(a)	56

	Exhibit 31.2		Certification of the CFO pursuant to Exchange Act Rule 13a-14(a)	57

	Exhibit 32.1		Certification of the CEO required by Section 1350 of Chapter 63 of Title 18 of the U.S. Code	58

	Exhibit 32.2		Certification of the CFO required by Section 1350 of Chapter 63 of Title 18 of the U.S. Code	59

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


	March 31, 2010			December 31, 2009

ASSETS
Cash and due from banks	$	29,315		$	24,911
Interest-bearing deposits with other banks		46,657			36,958

Securities available for sale (at estimated fair value; pledged: $147,115 in 2010 and $150,034 in 2009)		425,339			346,526
Securities held to maturity (pledged: $215,482 in 2010 and $278,598 in 2009) (estimated fair value: $345,649 in 2010 and $396,150 in 2009)		337,355			390,539

Total investment securities		762,694			737,065

Loans held for sale		20,885			33,889

Loans held in portfolio, net of unearned discounts		1,195,042			1,195,415
Less allowance for loan losses		19,963			19,872

Loans, net		1,175,079			1,175,543

Federal Reserve and Federal Home Loan Bank stock, at cost		8,032			8,482
Customers’ liability under acceptances		928			27
Goodwill		22,901			22,901
Premises and equipment, net		11,556			9,658
Other real estate		874			1,385
Accrued interest receivable		7,576			9,001
Cash surrender value of life insurance policies		49,537			49,009
Other assets		58,280			56,780

	$	2,194,314		$	2,165,609

LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits
Noninterest-bearing demand deposits	$	509,453		$	546,337
Savings, NOW and money market deposits		562,688			592,015
Time deposits		541,901			442,315

Total deposits		1,614,042			1,580,667

Securities sold under agreements to repurchase - customers		21,060			21,048
Federal funds purchased		—			41,000
Commercial paper		15,847			17,297
Short-term borrowings - FRB		—			50,000
Short-term borrowings - other		3,290			2,509
Long-term borrowings - FHLB		120,000			130,000
Long-term borrowings - subordinated debentures		25,774			25,774

Total borrowings		185,971			287,628

Acceptances outstanding		928			27
Accrued interest payable		1,556			1,291
Due to factored clients		88,471			82,401
Accrued expenses and other liabilities		75,182			51,645

Total liabilities		1,966,150			2,003,659

Shareholders’ equity
Preferred stock, Series A, $5 par value; $1,000 liquidation value Authorized 644,389 shares; issued 42,000 shares, respectively		40,224			40,113
Common stock, $1 par value. Authorized 50,000,000 shares; issued 31,138,545 and 22,226,425 shares, respectively		31,139			22,227
Warrants to purchase common stock		2,615			2,615
Capital surplus		236,200			178,734
Retained earnings		16,125			15,828
Accumulated other comprehensive loss		(11,583	)		(12,399	)
Common shares in treasury at cost, 4,297,782 and 4,107,191 shares, respectively		(86,556	)		(85,168	)

Total shareholders’ equity		228,164			161,950

	$	2,194,314		$	2,165,609

See Notes to Consolidated Financial Statements.

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


	Three Months Ended March 31,

	2010		2009

INTEREST INCOME
Loans	$	16,511	$	17,552
Investment securities
Available for sale		2,953		5,470
Held to maturity		4,412		3,534
FRB and FHLB stock		121		19
Deposits with other banks		19		10

Total interest income		24,016		26,585

INTEREST EXPENSE
Deposits
Savings, NOW and money market		965		1,125
Time		1,675		2,166
Securities sold under agreements to repurchase - customers		61		115
Federal funds purchased		4		34
Commercial paper		13		23
Short-term borrowings - FHLB		—		11
Short-term borrowings - FRB		9		99
Short-term borrowings - other		—		1
Long-term borrowings - FHLB		871		1,122
Long-term borrowings - subordinated debentures		523		523

Total interest expense		4,121		5,219

Net interest income		19,895		21,366
Provision for loan losses		6,000		6,200

Net interest income after provision for loan losses		13,895		15,166

Total noninterest income		11,102		10,804

Total noninterest expenses		21,336		20,052


Income before income taxes		3,661		5,918
Provision for income taxes		1,098		2,306

Net income		2,563		3,612
Dividends on preferred shares and accretion		636		842

Net income available to common shareholders	$	1,927	$	2,770


Average number of common shares outstanding
Basic		19,208,189		18,100,407
Diluted		19,212,768		18,277,196

Net income available to common shareholders, per average common share
Basic	$	0.10	$	0.15
Diluted		0.10		0.15

Dividends per common share		0.09		0.19

See Notes to Consolidated Financial Statements.

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


	Three Months Ended March 31,

	2010			2009

Net Income	$	2,563		$	3,612


Other comprehensive income (loss), net of tax:
Unrealized gains on securities:
Unrealized holding gains on available for sale securities and other investments arising during the year		1,214			21

Reclassification adjustment for (gains) included in net income		(820	)		(1,674	)

Reclassification adjustment for amortization of:
Prior service cost		9			9
Net actuarial losses		413			354

Other comprehensive income (loss)		816			(1,290	)

Comprehensive income	$	3,379		$	2,322

See Notes to Consolidated Financial Statements.

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


	Three Months Ended March 31,

	2010			2009

Preferred Stock
Balance at January 1,	$	40,113		$	39,440
Discount accretion		111			317

Balance at March 31,	$	40,224		$	39,757


Common Stock
Balance at January 1,	$	22,227		$	22,203
Common shares issued		8,625			—
Restricted shares issued		84			—
Common shares issued under stock incentive plan		203			24

Balance at March 31,	$	31,139		$	22,227


Warrants to Purchase Common Stock
Balance at January 1,	$	2,615		$	2,615

Balance at March 31,	$	2,615		$	2,615


Capital Surplus
Balance at January 1,	$	178,734		$	178,417
Common shares issued		56,240			—
Restricted shares issued		(84	)		—
Common shares issued under stock incentive plan and related tax benefits		1,274			185
Stock option compensation expense		36			33

Balance at March 31,	$	236,200		$	178,635


Retained Earnings
Balance at January 1,	$	15,828		$	19,088
Net income		2,563			3,612
Cash dividends paid - preferred shares		(525	)		(303	)
Cash dividends paid - common shares		(1,630	)		(3,437	)
Discount accretion on series A preferred stock		(111	)		(317	)

Balance at March 31,	$	16,125		$	18,643


Accumulated Other Comprehensive Loss
Balance at January 1,	$	(12,399	)	$	(16,259	)
Other comprehensive income (loss), net of tax		816			(1,290	)

Balance at March 31,	$	(11,583	)	$	(17,549	)


Treasury Stock
Balance at January 1,	$	(85,168	)	$	(85,024	)
Surrender of shares issued under stock incentive plan		(1,388	)		(144	)

Balance at March 31,	$	(86,556	)	$	(85,168	)


Total Shareholders’ Equity
Balance at January 1,	$	161,950		$	160,480
Net changes during the period		66,214			(1,320	)

Balance at March 31,	$	228,164		$	159,160

See Notes to Consolidated Financial Statements.

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


	Three Months Ended March 31,

	2010			2009

Operating Activities
Net Income	$	2,563		$	3,612

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for loan losses		6,000			6,200
Depreciation and amortization of premises and equipment		551			590
Securities gains		(1,502	)		(3,065	)
Income from life insurance policies, net		(54	)		(323	)
Deferred income tax benefit		(512	)		(1,127	)
Proceeds from sale of loans		104,778			139,642
Gains on sales of loans, net		(1,685	)		(2,105	)
Originations of loans held for sale		(90,089	)		(158,964	)
Amortization of premiums on securities		657			317
Accretion of discounts on securities		(198	)		(159	)
Decrease in accrued interest receivable		1,425			1,879
Increase (decrease) in accrued interest payable		265			(90	)
Increase in due to factored clients		6,070			2,706
Increase (decrease) in accrued expenses and other liabilities		2,349			(16,131	)
Increase in other assets		(1,831	)		(294	)
(Gain) loss on other real estate owned		(14	)		2

Net cash provided by (used in) operating activities		28,773			(27,310	)


Investing Activities
Purchase of premises and equipment		(2,449	)		(249	)
Net increase in interest-bearing deposits with other banks		(9,699	)		(1,665	)
Net decrease in loans held in portfolio		5,513			21,222
Net increase in short-term factored receivables		(11,127	)		(109	)
Decrease in other real estate		604			239
Proceeds from prepayments, redemptions or maturities of securities - held to maturity		14,414			15,860
Purchases of securities - held to maturity		(14,508	)		(20,852	)
Proceeds from calls of securities - held to maturity		54,380			—
Proceeds from calls/sales of securities - available for sale		123,285			130,612
Proceeds from prepayments, redemptions or maturities of securities - available for sale		28,286			10,468
Purchases of securities - available for sale		(208,128	)		(66,720	)
Proceeds from redemptions or maturities of securities - FHLB & FRB stock		450			3,375

Net cash (used in) provided by investing activities		(18,979	)		92,181


Financing Activities
Net decrease in noninterest-bearing demand deposits		(36,884	)		(7,309	)
Net (decrease) increase in savings, NOW and money market deposits		(29,327	)		1,638
Net increase (decrease) in time deposits		99,586			(6,671	)
Net decrease in Federal funds purchased		(41,000	)		(86,000	)
Net increase (decrease) in securities sold under agreements to repurchase		12			(750	)
Net (decrease) increase in commercial paper and other short-term borrowings		(50,669	)		36,666
Decrease in long-term borrowings		(10,000	)		—
Proceeds from exercise of stock options		182			98
Proceeds from issuance of common stock		64,865			—
Cash dividends paid on preferred stock		(525	)		(303	)
Cash dividends paid on common stock		(1,630	)		(3,437	)

Net cash used in financing activities		(5,390	)		(66,068	)


Net increase (decrease) in cash and due from banks		4,404			(1,197	)
Cash and due from banks - beginning of period		24,911			31,832

Cash and due from banks - end of period	$	29,315		$	30,635


Supplemental disclosures:
Interest paid	$	3,856		$	5,302
Income taxes paid		904			3,161
Loans transferred to other real estate		79			120
Due from brokers on sales of securities - AFS		—			73,361
Due to brokers on purchases of securities - AFS		20,830			—
Due to brokers on purchases of securities - HTM		1,074			—

See Notes to Consolidated Financial Statements.

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

Note 1. Significant Accounting Policies

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

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

Basis of Presentation. The consolidated financial statements include the accounts of Sterling Bancorp and its subsidiaries, principally the bank, after elimination of intercompany transactions. The consolidated financial statements as of and for the interim periods ended March 31, 2010 and 2009 are unaudited; however, in the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of such periods have been made. Certain reclassifications have been made to the prior year’s consolidated financial statements to conform to the current presentation. The interim consolidated financial statements should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2009 (the “2009 Form 10-K”).

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

STERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

Note 2. Investment Securities

The following tables present information regarding securities available for sale:


March 31, 2010	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value


Obligations of U.S. government corporations and government sponsored enterprises
Mortgage-backed securities CMO’s (Federal National Mortgage Association)	$	2,790	$	6	$	—	$	2,796
CMO’s (Federal Home Loan Mortgage Corporation)		5,313		198		—		5,511
CMO’s (Government National Mortgage Association)		28,690		—		297		28,393
Federal National Mortgage Association		15,485		664		62		16,087
Federal Home Loan Mortgage Corporation		1,364		85		—		1,449
Government National Mortgage Association		3,585		315		—		3,900

Total mortgage-backed securities		57,227		1,268		359		58,136

Agency Notes
Federal National Mortgage Association		55,285		25		498		54,812
Federal Home Loan Bank		86,843		69		139		86,773
Federal Home Loan Mortgage Corporation		64,975		17		179		64,813
Federal Farm Credit Bank		10,000		—		44		9,956

Total obligations of U.S. government corporations and government sponsored enterprises		274,330		1,379		1,219		274,490

Obligations of state and political institutions-New York Bank Qualified		22,796		978		16		23,758
Single-issuer, trust preferred securities		3,878		11		236		3,653
Corporate debt securities		113,077		471		155		113,393
Other securities		10,037		13		5		10,045

Total	$	424,118	$	2,852	$	1,631	$	425,339

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


December 31, 2009	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value


Obligations of U.S. government corporations and government sponsored enterprises
Mortgage-backed securities CMO’s (Federal National Mortgage Association)	$	2,882	$	—	$	5	$	2,877
CMO’s (Federal Home Loan Mortgage Corporation)		5,563		171		—		5,734
CMO’s (Government National Mortgage Association)		9,181		—		133		9,048
Federal National Mortgage Association		21,055		868		71		21,852
Federal Home Loan Mortgage Corporation		10,321		299		—		10,620
Government National Mortgage Association		6,807		351		1		7,157

Total mortgage-backed securities		55,809		1,689		210		57,288

Agency Notes
Federal National Mortgage Association		20,291		—		835		19,456
Federal Home Loan Bank		83,983		6		1,039		82,950
Federal Home Loan Mortgage Corporation		4,995		—		96		4,899
Federal Farm Credit Bank		24,999		—		669		24,330

Total obligations of U.S. government corporations and government sponsored enterprises		190,077		1,695		2,849		188,923

Obligations of state and political institutions-New York Bank Qualified		22,820		1,061		17		23,864
Single-issuer, trust preferred securities		4,878		—		395		4,483
Corporate debt securities		127,900		1,382		82		129,200
Other securities		44		12		—		56

Total	$	345,719	$	4,150	$	3,343	$	346,526

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

The following tables present information regarding securities held to maturity:


March 31, 2010	Carrying Value		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value


Obligations of U.S. government corporations and government sponsored enterprises
Mortgage-backed securities CMO’s (Federal National Mortgage Association)	$	10,468	$	288	$	11	$	10,745
CMO’s (Federal Home Loan Mortgage Corporation)		15,825		510		—		16,335
Federal National Mortgage Association		96,457		4,455		2		100,910
Federal Home Loan Mortgage Corporation		55,867		2,161		—		58,028
Government National Mortgage Association		5,727		565		—		6,292

Total mortgage-backed securities		184,344		7,979		13		192,310

Agency Notes
Federal National Mortgage Association		62,773		255		150		62,878
Federal Home Loan Bank		9,851		99		—		9,950
Federal Farm Credit Bank		5,085		38		—		5,123

Total obligations of U.S. government corporations and government sponsored enterprises		262,053		8,371		163		270,261

Obligations of state and political institutions-New York Bank Qualified		75,052		689		603		75,138
Debt securities issued by foreign governments		250		—		—		250

Total	$	337,355	$	9,060	$	766	$	345,649

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


December 31, 2009	Carrying Value		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value


Obligations of U.S. government corporations and government sponsored enterprises
Mortgage-backed securities CMO’s (Federal National Mortgage Association)	$	10,863	$	339	$	—	$	11,202
CMO’s (Federal Home Loan Mortgage Corporation)		16,964		573		—		17,537
Federal National Mortgage Association		103,821		4,329		2		108,148
Federal Home Loan Mortgage Corporation		61,095		2,005		—		63,100
Government National Mortgage Association		5,989		501		—		6,490

Total mortgage-backed securities		198,732		7,747		2		206,477

Agency Notes
Federal National Mortgage Association		97,147		14		1,742		95,419
Federal Home Loan Bank		19,849		—		474		19,375
Federal Home Loan Mortgage Corporation		10,000		—		218		9,782
Federal Farm Credit Bank		5,088		—		94		4,994

Total obligations of U.S. government corporations and government sponsored enterprises		330,816		7,761		2,530		336,047

Obligations of state and political institutions-New York Bank Qualified		59,473		737		357		59,853
Debt securities issued by foreign governments		250		—		—		250

Total	$	390,539	$	8,498	$	2,887	$	396,150

STERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

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


	Less Than 12 Months				12 Months or Longer				Total

March 31, 2010	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses

Obligations of U.S. government corporations and government sponsored enterprises
Mortgage-backed securities CMO’s (Government National Mortgage Association)	$	24,757	$	287	$	3,637	$	9	$	28,394	$	296
Federal National Mortgage Association		2,058		63		—		—		2,058		63
Government National Mortgage Association		—		—		121		—		121		—

Total mortgage-backed securities		26,815		350		3,758		9		30,573		359

Agency Notes
Federal National Mortgage Association		39,788		498		—		—		39,788		498
Federal Home Loan Bank		41,704		139		—		—		41,704		139
Federal Home Loan Mortgage Corporation		54,796		179		—		—		54,796		179
Federal Farm Credit Bank		—		—		9,956		44		9,956		44


Total obligations of U.S. government corporations and government sponsored enterprises		163,103		1,166		13,714		53		176,817		1,219

Obligations of state and political institutions-New York Bank Qualified		1,425		16		—		—		1,425		16
Single-issuer, trust preferred securities		—		—		1,900		236		1,900		236
Corporate debt securities		40,497		155		—		—		40,497		155
Other securities		9,988		5		—		—		9,988		5

Total	$	215,013	$	1,342	$	15,614	$	289	$	230,627	$	1,631


December 31, 2009

Obligations of U.S. government corporations and government sponsored enterprises
Mortgage-backed securities CMO’s (Federal National Mortgage Association)	$	2,877	$	5	$	—	$	—	$	2,877	$	5
CMO’s (Government National Mortgage Association)		4,926		91		4,122		42		9,048		133
Federal National Mortgage Association		2,057		71		—		—		2,057		71
Government National Mortgage Association		—		—		123		1		123		1

Total mortgage-backed securities		9,860		167		4,245		43		14,105		210

Agency Notes
Federal National Mortgage Association		19,456		835		—		—		19,456		835
Federal Home Loan Bank		68,231		751		9,713		288		77,944		1,039
Federal Home Loan Mortgage Corporation		4,899		96		—		—		4,899		96
Federal Farm Credit Bank		24,330		669		—		—		24,330		669

Total obligations of U.S. government corporations and government sponsored enterprises		126,776		2,518		13,958		331		140,734		2,849

Obligations of state and political institutions-New York Bank Qualified		872		17		—		—		872		17
Single-issuer, trust preferred securities		—		—		3,540		395		3,540		395
Corporate debt securities		23,575		82		—		—		23,575		82

Total	$	151,223	$	2,617	$	17,498	$	726	$	168,721	$	3,343

STERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

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


	Less Than 12 Months				12 Months or Longer				Total

March 31, 2010	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses


Obligations of U.S. government corporations and government sponsored enterprises
Mortgage-backed securities CMO’s (Federal National Mortgage Association)	$	1,679	$	11	$	—	$	—	$	1,679	$	11
Federal National Mortgage Association		—		—		398		2		398		2
Federal Home Loan Mortgage Corporation		—		—		3		—		3		—

Total mortgage-backed securities		1,679		11		401		2		2,080		13

Agency Notes
Federal National Mortgage Association		32,745		150		—		—		32,745		150

Total obligations of U.S. government corporations and government sponsored enterprises		34,424		161		401		2		34,825		163
Obligations of state and political institutions-New York Bank Qualified		30,111		603		—		—		30,111		603

Total	$	64,535	$	764	$	401	$	2	$	64,936	$	766


December 31, 2009

Obligations of U.S. government corporations and government sponsored enterprises
Mortgage-backed securities Federal National Mortgage Association	$	—	$	—	$	459	$	2	$	459	$	2

Total mortgage-backed securities		—		—		459		2		459		2

Agency Notes
Federal National Mortgage Association		86,027		1,742		—		—		86,027		1,742
Federal Home Loan Bank		19,375		474		—		—		19,375		474
Federal Home Loan Mortgage Corporation		9,782		218		—		—		9,782		218
Federal Farm Credit Bank		4,994		94		—		—		4,994		94

Total obligations of U.S. government corporations and government sponsored enterprises		120,178		2,528		459		2		120,637		2,530
Obligations of state and political institutions-New York Bank Qualified		16,478		357		—		—		16,478		357

Total	$	136,656	$	2,885	$	459	$	2	$	137,115	$	2,887

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

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

At March 31, 2010, approximately $54.7 million, representing approximately 7.2%, of the Company’s held to maturity and available for sale securities are comprised of securities issued by financial service companies/banks including single-issuer trust preferred securities (6 issuers), corporate debt (12 issuers) and equity securities (8 issuers). These investments may pose a higher risk of future impairment charges as result of a possible further deterioration of the U.S. economy. The Company would be required to recognize impairment charges on these securities if they suffer a decline in value that is considered other-than-temporary. Numerous factors, including lack of liquidity for re-sales of certain investment securities, absence of reliable pricing information for investment securities, adverse changes in business climate, adverse actions by regulators or unanticipated changes in the competitive environment could have a negative effect on the Company’s investment portfolio and may result in other-than-temporary impairment on certain investment securities in future periods.

At March 31, 2010, the Company held 1 issue of a residential mortgage-backed security issued by U.S. government sponsored enterprises and 1 issue of a U.S. government agency debt security, in the available for sale portfolio, that were in an unrealized loss position for more than 12 months. Management has concluded that the unrealized losses are due to changes in market interest rates and/or changes in securities markets which resulted from temporary illiquidity and/or uncertainty in those markets. As a result, the unrealized losses are deemed to be temporary.

At March 31, 2010, the Company held 25 debt securities positions issued by commercial and industrial enterprises, in the available for sale portfolio, all of which are paying in accordance with their terms and have no deferrals of interest or principal. All of these debt securities mature within the next 18 months. Management performs an initial credit review prior to purchasing these securities and monitors their performance on a quarterly basis. Based upon management’s review of the issuers, their performance record for paying all principal and interest when due and the relatively short-term maturity of each issue, the unrealized losses are deemed to be temporary.

At March 31, 2010, the Company held 6 securities positions of single-issuer, trust preferred securities and 20 security positions of corporate debt securities issued by financial institutions, in the available for sale portfolio, all of which are paying in accordance with their terms and have no deferrals of interest or other deferrals. In addition, management analyzes the performance of the issuers on a periodic basis, including a review of the issuers most recent bank regulatory report to assess credit risk and the probability of impairment of the contractual cash flows of the applicable securities. Based upon management’s first quarter review, all of the issuers have maintained performance levels adequate to support the contractual cash flows of the securities.

STERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

The following table presents information regarding single-issuer, trust preferred securities at March 31, 2010:


Issuer	TARP Recipient		Credit Rating		Amortized Cost		Fair Value		Unrealized Gain/(Loss)

					(in thousands)


Sterling Bancorp Trust I, 8.375%, due 3/31/2032		Yes		NA	$	979	$	983	$	4

NPB Capital Trust II, 7.85%, due 9/30/2032		Yes		NA		127		120		(7	)

VNB Capital Trust I, 7.75%, due 12/15/2031		Yes		BBB-		22		22		0

HSBC Finance, 6.875%, due 1/30/2033, owned by HSBC Group, plc		No No		A		740		747		7

Citigroup Capital VII, 7.125%, due 7/31/2031		Yes		BB-		1,508		1,320		(188	)


Fleet Capital Trust VIII, 7.20%, due 3/15/2032, owned by Bank of America Corporation		No Yes		BB		502		461		(41	)

					$	3,878	$	3,653	$	(225	)

At March 31, 2010, the Company held 2 mortgage-backed debt securities, in the held to maturity portfolio, that were in an unrealized loss position for more than 12 months. Both of these securities were obligations of U.S. government corporations or government sponsored enterprises which guarantee principal and interest payments. Management has concluded that the unrealized losses are due to changes in market interest rates and/or changes in securities markets which resulted from temporary illiquidity and/or uncertainty in those markets. Further, management has made an evaluation that it has the intent to hold these securities until maturity and it is not more likely than not that the Company would be required to sell before anticipated recovery. As a result, the unrealized losses are deemed to be temporary.


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

The following tables present information regarding securities available for sale and securities held to maturity at March 31, 2010, based on contractual maturity. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.


Available for sale	Amortized Cost		Fair Value


Obligations of U.S. government corporations and government sponsored enterprises
Mortgage-backed securities
CMO’s (Federal National Mortgage Association)	$	2,790	$	2,796
CMO’s (Federal Home Loan Mortgage Corporation)		5,313		5,511
CMO’s (Government National Mortgage Association)		28,690		28,393
Federal National Mortgage Association		15,485		16,087
Federal Home Loan Mortgage Corporation		1,364		1,449
Government National Mortgage Association		3,585		3,900

Total mortgage-backed securities		57,227		58,136

Agency Notes
Federal National Mortgage Association
Due after 1 year but within 5 years		30,000		29,856
Due after 5 years but within 10 years		5,000		5,000
Due after 10 years		20,285		19,956
Federal Home Loan Bank
Due after 1 year but within 5 years		61,850		61,739
Due after 5 years but within 10 years		14,993		14,984
Due after 10 years		10,000		10,050
Federal Home Loan Mortgage Corporation
Due after 1 year but within 5 years		34,995		34,932
Due after 5 years but within 10 years		29,980		29,881
Federal Farm Credit Bank
Due after 10 years		10,000		9,956

Total obligations of U.S. government corporations and government sponsored enterprises		274,330		274,490


Obligations of state and political institutions - New York Bank Qualified
Due within 1 year		401		409
Due after 1 year but within 5 years		12,486		13,165
Due after 5 years but within 10 years		4,032		4,266
Due after 10 years		5,877		5,918

Total obligations of state and political institutions - New York Bank Qualified		22,796		23,758


Single-issuer, trust preferred securities
Due after 10 years		3,878		3,653


Corporate debt securities
Due within 6 months		56,192		56,483
Due after 6 months but within 1 year		28,850		28,944
Due after 1 year but within 2 years		28,035		27,966

Total corporate debt securities		113,077		113,393


Other securities		10,037		10,045

Total	$	424,118	$	425,339

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


Held to maturity	Carrying Value		Fair Value


Obligations of U.S. government corporations and government sponsored enterprises
Mortgage-backed securities
CMO’s (Federal National Mortgage Association)	$	10,468	$	10,745
CMO’s (Federal Home Loan Mortgage Corporation)		15,825		16,335
Federal National Mortgage Association		96,457		100,910
Federal Home Loan Mortgage Corporation		55,867		58,028
Government National Mortgage Association		5,727		6,292

Total mortgage-backed securities		184,344		192,310

Agency Notes
Federal National Mortgage Association
Due after 10 years		62,773		62,878
Federal Home Loan Bank
Due after 10 years		9,851		9,950
Federal Farm Credit Bank
Due after 5 years but within 10 years		5,085		5,123

Total obligations of U.S. government corporations and government sponsored enterprises		262,053		270,261

Obligations of state and political institutions - New York Bank Qualified
Due after 5 years but within 10 years		887		905
Due after 10 years		74,165		74,233

Total obligations of state and political institutions-New York Bank Qualified		75,052		75,138

Debt securities issued by foreign governments
Due within 1 year		250		250

Total	$	337,355	$	345,649

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


	Three Months Ended March 31,

	2010		2009


Proceeds	$	123,285	$	203,973
Gross gains		1,500		3,065
Gross losses		1		—


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

	Three Months Ended March 31,

	2010		2009


Proceeds	$	54,380	$	—
Gross gains		3		—
Gross losses		—		—


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

Note 3. Loans

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


	March 31, 2010		December 31, 2009


Loans held for sale, net of valuation reserve ($-0- at March 31, 2010 and $7 at December 31, 2009)
Real estate-residential mortgage	$	20,885	$	33,889

Loans held in portfolio
Commercial and industrial	$	606,046	$	587,038
Lease financing receivables		201,248		219,198
Factored receivables		151,306		140,265
Real estate-residential mortgage		127,453		124,681
Real estate-commercial mortgage		96,670		92,614
Real estate-construction and land development		22,386		24,277
Loans to individuals		13,043		12,984
Loans to depository institutions		—		20,000

Loans held in portfolio, gross		1,218,152		1,221,057
Less unearned discounts		23,110		25,642

Loans held in portfolio, net of unearned discounts	$	1,195,042	$	1,195,415


Note 4. Noninterest income and expenses

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

	Three Months Ended March 31,

	2010		2009

NONINTEREST INCOME
Accounts receivable management/factoring commissions and other fees	$	5,127	$	3,243
Service charges on deposit accounts		1,473		1,383
Trade finance income		492		405
Other customer related fees		155		274
Mortgage banking income		1,677		2,106
Trust fees		84		139
Income from life insurance policies		264		259
Securities gains		1,502		3,065
Gain (Loss) on other real estate owned		13		(2	)
Other income		315		(68	)

Total noninterest income	$	11,102	$	10,804


NONINTEREST EXPENSES
Salaries	$	9,658	$	9,989
Employee benefits		3,504		2,677

Total personnel expense		13,162		12,666
Occupancy and equipment expenses, net		2,540		2,672
Advertising and marketing		1,006		654
Professional fees		1,353		1,123
Communications		348		431
Deposit insurance		754		351
Other expenses		2,173		2,155

Total noninterest expenses	$	21,336	$	20,052

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

Note 5. Common Stock and Stock Incentive Plan

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

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

Note 6. Employee Benefit Plans

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


	Three Months Ended March 31,

	2010			2009

Service cost	$	565		$	391
Interest cost		938			580
Expected return on plan assets		(789	)		(446	)
Amortization of prior service cost		17			17
Recognized actuarial loss		756			648

Net periodic benefit cost	$	1,487		$	1,190

The Company expects to contribute approximately $2.0 million to the defined benefit pension plan in 2010.

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

Note 7. Income Taxes

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

Note 8. Segment Reporting

The Company provides a broad range of financial products and services, including commercial loans, asset-based financing, factoring and accounts receivable management services, trade financing, equipment leasing, corporate and consumer deposit services, commercial and residential mortgage lending and brokerage, trust and estate administration and investment management services. The Company’s primary source of earnings is net interest income, which represents the difference between interest earned on interest-earning assets and the interest incurred on interest-bearing liabilities. The Company’s 2010 year-to-date average interest-earning assets were 60.8% loans (corporate lending was 71.4% and real estate lending was 24.3% of total loans, respectively) and 38.8% investment securities and money market investments. There are no industry concentrations exceeding 10% of loans, gross, in the corporate lending segment. Approximately 76% of loans are to borrowers located in the metropolitan New York area. In order to comply with the segment reporting guidance under U.S. GAAP, the Company has determined that it has three reportable operating segments: corporate lending, real estate lending and company-wide treasury.

STERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

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


	Corporate Lending		Real Estate Lending		Company-wide Treasury		Totals

Three Months Ended March 31, 2010
Net interest income	$	8,195	$	4,218	$	7,264	$	19,677
Noninterest income		6,939		1,702		2,338		10,979
Depreciation and amortization		174		28		1		203
Segment income before income taxes		6,327		3,421		8,033		17,781
Segment assets		829,351		355,521		966,572		2,151,444

Three Months Ended March 31, 2009
Net interest income	$	8,470	$	4,848	$	7,874	$	21,192
Noninterest income		5,093		2,125		3,186		10,404
Depreciation and amortization		176		38		1		215
Segment income before income taxes		5,544		4,153		10,246		19,943
Segment assets		772,919		418,431		880,857		2,072,207

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


	Three Months Ended
	March 31,
	2010			2009

Net interest income:
Total for reportable operating segments	$	19,677		$	21,192
Other [1]		218			174

Consolidated net interest income	$	19,895		$	21,366


Noninterest income:
Total for reportable operating segments	$	10,979		$	10,404
Other [1]		123			400

Consolidated noninterest income	$	11,102		$	10,804


Income before taxes:
Total for reportable operating segments	$	17,781		$	19,943
Other [1]		(14,120	)		(14,025	)


Consolidated income before income taxes	$	3,661		$	5,918


Assets:
Total for reportable operating segments	$	2,151,444		$	2,072,207
Other [1]		42,870			29,103

Consolidated assets	$	2,194,314		$	2,101,310

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

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

Note 9. Accumulated Other Comprehensive Income (Loss)

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


	Three Months Ended March 31,

	2010			2009


Other Comprehensive Income (Loss)
Unrealized holding gains on securities, arising during the period:
Before tax	$	2,223		$	39
Tax effect		(1,009	)		(18	)

Net of tax		1,214			21


Reclassification adjustment for securities (gains) included in net income:
Before tax		(1,502	)		(3,065	)
Tax effect		682			1,391

Net of tax		(820	)		(1,674	)


Reclassification adjustment for amortization of prior service cost:
Before tax		17			17
Tax effect		(8	)		(8	)

Net of tax		9			9


Reclassification adjustment for amortization of net actuarial losses:
Before tax		756			648
Tax effect		(343	)		(294	)

Net of tax		413			354


Other comprehensive income (loss)	$	816		$	(1,290	)

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

Note 10. Fair Value Measurements

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

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


	•	Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Examples of financial instruments generally included in this level are U.S. Treasury securities, equity and trust preferred securities that trade in active markets and listed derivative instruments.

	•	Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means. Examples of financial instruments generally included in this level are corporate debt, mortgage-backed certificates issued by U.S. government corporations and government sponsored enterprises, equity securities that trade in less active markets and certain derivative instruments.

	•	Level 3 Inputs - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own judgments about the assumptions that market participants would use in pricing the assets or liabilities. Examples of financial instruments generally included in this level are private equities, certain loans held for sale and other alternative investments.

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

Securities available for sale and other investments. Securities classified as available for sale and other investments (included in “Other assets” on the Consolidated Balance Sheet) are generally reported at fair value utilizing Level 1 and Level 2 inputs. Investments in fixed income securities, exclusive of preferred stock and mortgage-backed securities, are valued based on

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

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

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

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


	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value

March 31, 2010
Securities available for sale:
Obligations of U.S. government corporations and government sponsored enterprises Mortgage-backed securities	$	—	$	58,136	$	—	$	58,136
Agency Notes		—		216,354		—		216,354

Total obligations of U.S. government corporations and government sponsored enterprises		—		274,490		—		274,490
Obligations of state and political institutions-New York Bank Qualified		—		23,758		—		23,758
Single-issuer, trust preferred securities		3,653		—		—		3,653
Corporate debt securities		—		113,393		—		113,393
Equity and other securities		10,045		—		—		10,045

Total marketable securities	$	13,698	$	411,641	$	—	$	425,339


Other investments	$	9,333	$	5,777	$	—	$	15,110


December 31, 2009

Securities available for sale:
Obligations of U.S. government corporations and government sponsored enterprises Mortgage-backed securities	$	—	$	57,288	$	—	$	57,288
Agency Notes		—		131,635		—		131,635

Total obligations of U.S. government corporations and government sponsored enterprises		—		188,923		—		188,923
Obligations of state and political institutions-New York Bank Qualified		—		23,864		—		23,864
Single-issuer, trust preferred securities		4,483		—		—		4,483
Corporate debt securities		—		129,200		—		129,200
Equity and other securities		56		—		—		56

Total marketable securities	$	4,539	$	341,987	$	—	$	346,526


Other investments	$	9,128	$	5,484	$	—	$	14,612

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

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


	March 31, 2010		December 31, 2009

Impaired loans	$	2,496	$	2,329
Other real estate owned		874		1,385
Loans for sale		20,885		33,889

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

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

Loans held for sale. Loans held for sale are carried at the lower of cost or fair value, as determined by outstanding commitments, from third party investors.

Reporting units measured at fair value in the first step of a goodwill impairment test and certain non-financial assets measured at fair value on a non-recurring basis (such as those measured at fair value in the second step of a goodwill impairment test and other non-financial long-lived assets measured at fair value for impairment assessment) have been measured at fair value in accordance with the guidance in FASB Codification Topic 820 beginning January 1, 2009.

Other real estate owned (comprised of foreclosed assets), which is measured at the lower of carrying or fair value less costs to sell, had a net carrying amount of $0.9 million, which is made up of the outstanding balance of $1.1 million, net of a valuation allowance of $0.2 million at March 31, 2010. Certain of these assets, upon initial recognition, were re-measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the foreclosed asset. The fair value of a foreclosed asset, upon initial recognition, is estimated using level 2 inputs based on observable market data or level 3 inputs based on customized discount criteria. In connection with the measurement and initial recognition of the foregoing foreclosed assets, the Company recognized charge-offs in the allowance for loan losses totalling $39 thousand. Other than foreclosed assets measured at fair value upon initial recognition, two properties were re-measured at fair value during the three months ended March 31, 2010, resulting in a $57 thousand charge to noninterest expense.

Loans held for sale, which are carried at the lower of cost or fair value, were carried at the fair value of $20.9 million, which is made up of the outstanding balance of $20.9 million, net of a valuation allowance of zero at March 31, 2010.

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

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

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

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

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


	March 31, 2010

	Carrying Amount		Fair Value


FINANCIAL ASSETS
Cash and due from banks	$	29,315	$	29,315
Interest-bearing deposits with other banks		46,657		46,657
Investment securities		762,694		770,998
Loans held for sale		20,885		20,885
Loans held in portfolio, net		1,195,042		1,194,038
Customers’ liability under acceptances		928		928
Accrued interest receivable		7,576		7,576
FINANCIAL LIABILITIES
Demand, NOW, savings and money market deposits		1,072,141		1,072,141
Time deposits		541,901		544,163
Securities sold under agreements to repurchase		21,060		21,060
Commercial paper		15,847		15,847
Other short-term borrowings		3,290		3,290
Acceptances outstanding		928		928
Accrued interest payable		1,556		1,556
Long-term borrowings		145,774		148,355

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

Note 11. New Accounting Standards

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

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

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

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


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

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

OVERVIEW

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

For the three months ended March 31, 2010, the bank’s average earning assets represented approximately 99.2% of the Company’s average earning assets. Loans represented 60.5% and investment securities represented 36.8% of the bank’s average earning assets for the first three months of 2010.

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

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

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

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

Recent economic conditions during 2010, such as the continuing decrease in real estate values in the principal markets the Company serves and illiquid credit markets, have reduced demands for corporate and real estate lending. If these trends continue, the Company would expect its income from corporate and real estate lending to decrease from the current levels in the near term. In addition, due to the geographic concentration of the Company’s loan portfolio in the New York metropolitan area, representing approximately 76% of total loans at March 31, 2010, an adverse change in market conditions in that geographic area could result in a decrease in our income from corporate and real estate lending. A significant prolonged decrease in income from our lending segments, if realized, may have a severe adverse impact on the operations of the Company.

INCOME STATEMENT ANALYSIS

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

Comparison of the Three Months Ended March 31, 2010 and 2009

The Company reported net income available to common shareholders for the three months ended March 31, 2010 of $1.9 million, representing $0.10 per share calculated on a diluted basis, compared to $2.8 million, or $0.15 per share calculated on a diluted basis, for the first quarter of 2009. The decrease in net income available to common shareholders was primarily due to a $1.5 million decrease in net interest income and a $1.2 increase in noninterest expenses, which more than offset a $0.2 million decrease in the provision for loan losses, a $0.3 million increase in noninterest income and a $0.2 million decrease in accretion related to the preferred shares issued to the U.S. Treasury under the TARP Capital Purchase Program.

Net Interest Income

Net interest income, on a tax-equivalent basis, was $20.4 million for the first quarter of 2010 compared to $21.5 million for the 2009 period. Net interest income benefitted from lower cost of funding. That benefit was more than offset by the impact of lower yields on loans and investment securities, lower investment securities outstanding and higher interest-bearing deposits balances. The net interest margin, on a tax-equivalent basis, was 4.37% for the first quarter of 2010 compared to 4.50% for the 2009 period. The net interest margin was impacted by the mix of earning assets and funding, including the higher level of noninterest-bearing demand deposits.

Total interest income, on a tax-equivalent basis, aggregated $24.5 million for the first quarter of 2010, down $2.2 million from the 2009 period. The tax-equivalent yield on interest-earning assets was 5.28% for the first quarter of 2010 compared to 5.63% for the 2009 period.

Interest earned on the loan portfolio decreased to $16.5 million for the first quarter of 2010 from $17.6 million in the prior year period primarily due to a lower yield on loans in the 2010 quarter. The decrease in the yield on the loan portfolio to 5.98% for the first quarter of 2010 from 6.19% for the 2009 period was primarily attributable to the mix of average outstanding balances among the components of the loan portfolio.

Interest earned on the securities portfolio, on a tax-equivalent basis, decreased to $7.9 million for the first quarter of 2010 from $9.1 million in the prior year period. Average outstandings decreased to $696.2 million (36.5% of average earning assets) for the first quarter of 2010 from $740.1 million (38.5% of average earning assets) in the prior year period. The decrease reflects the impact of the Company’s asset/liability management strategy designed to shorten the average life of the portfolio. The average life of the securities portfolio was approximately 4.4 years at March 31, 2010 compared to 4.6 years at March 31, 2009 The average yield in the investment securities portfolio decreased to 4.52% from 4.94% reflecting the impact of the above referenced asset/liability management strategy coupled with calls of higher yielding securities.

Total interest expense decreased by $1.1 million for the first quarter of 2010 from $5.2 million for the 2009 period, primarily due to the impact of lower rates paid for interest-bearing deposits and borrowings partially offset by the impact of higher interest-bearing deposits.

Interest expense on deposits decreased to $2.6 million for the first quarter of 2010 from $3.3 million for the 2009 period, due to decreases in the cost of those funds partially offset by the impact of higher balances. The average rate paid on interest-bearing deposits was 1.02%, which was 44 basis points lower than the prior year period. The decrease in average cost of deposits reflects the impact of deposit pricing strategies and the Company’s purchase of certificates of deposit from the Certificate of Deposit Account Registry Service (“CDARS”) which provided certificate of deposit balances at lower rates. Average interest-bearing deposits were $1,045.2 million for the first quarter of 2010 compared to $911.8 million for the prior year period, reflecting the impact of the Company’s business development activities as well the purchase of funds from CDARS.

Interest expense on borrowings decreased to $1.5 million for the first quarter of 2010 from $1.9 million for the 2009 period, primarily due to lower balances and the impact of the changes in mix. Average borrowings decreased to $250.8 million for the first quarter of 2010 from $476.8 million in the prior year period, reflecting a lesser reliance by the Company on wholesale borrowed funds. The rates paid on all categories of borrowings, except on subordinated debt, were lower in the first quarter of 2010 compared with those in the 2009 period. However, because of the impact of the change in mix, the blended cost of borrowings increased to 2.39% from 1.64%.

Provision for Loan Losses

Based on management’s continuing evaluation of the loan portfolio (discussed under “Asset Quality” on page 36), the provision for loan losses for the first quarter of 2010 was $6.0 million, compared to $6.2 million for the prior year period. Factors affecting the lower provision for the first quarter of 2010 included stable economic conditions during the quarter, a lower level of nonaccrual loans for the past three consecutive quarters, commencing with the second quarter of 2009 and changes in the mix of the components of the loan portfolio since December 31, 2009.

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

During 2010, the allowance for loan losses increased $0.1 million from $19.9 million at December 31, 2009 primarily due to increases in the allowance allocated to lease financing receivables ($0.4 million), real estate-residential mortgage ($0.1 million) and real estate- commercial mortgage ($0.1 million) partially offset by a reduction of $0.5 million in the allowance allocated to commercial and industrial loans. The allowance allocated to lease financing receivables increased primarily as a result of the continued elevated level of lease financing receivables charge-offs. The increase in the allowance allocated to residential mortgage loans was primarily the result of the higher levels of nonaccrual residential real estate loans. The increase in the allowance allocated to commercial mortgage loans was principally the result of increased commercial real estate loan charge-offs. The reduction of the allowance allocated to commercial and industrial loans was primarily the result of the lower level of charge-offs in the first quarter of 2010 compared to the fourth quarter of 2009.

Noninterest Income

Noninterest income increased to $11.1 million for the first quarter of 2010 from $10.8 million in the 2009 period. The increase principally resulted from the benefit derived from increased accounts receivable management/factoring commissions and other fees which was partially offset by lower securities gains and mortgage banking income. Commissions and other fees earned from accounts receivable management and factoring services were higher primarily due to the impact of the acquisition of the business of DCD Finance Inc. on April 6, 2009.

Noninterest Expenses

Noninterest expenses for the first quarter of 2010 increased $1.3 million when compared to the 2009 period. The increase was due to the impact of the acquisition of the business of DCD Finance Inc. on April 6, 2009 and higher benefit, advertising and deposit insurance costs. Partially offsetting those increases was a reduction in incentive compensation expense.

The increase in benefit costs was primarily due to higher expenses for pension, medical and life insurance. Advertising expenses increased to support the Company’s marketing and business development activities. The increase in deposit insurance cost was due to an increase in the FDIC insurance rate as well as increase in deposit balances.

The FDIC implemented a final rule on November 17, 2009 requiring insured institutions to prepay their estimated quarterly risk-based assessments for the fourth quarter of 2009 and for all of 2010, 2011 and 2012. The bank’s original prepaid amount to the FDIC was $8.3 million.

In April 2010, the FDIC approved an interim rule that extends the Transaction Account Guarantee (“TAG”) component of the Temporary Liquidity Guarantee Program. The TAG program provides full coverage for non-interest bearing transaction deposit accounts, certain negotiable order of withdrawal (“NOW”) accounts and Interest on Lawyers Trust accounts. Under the interim rule, the TAG program will be extended from June 30, 2010 to December 31, 2010. The TAG program may be extended an additional year beyond December 31, 2010 without additional rule making, provided the FDIC announces the extension before October 29, 2010. Beginning July 1, 2010, the maximum interest rate for qualifying as a NOW account under the TAG program will be 0.25%, down from 0.50%. The existing fee structure under the TAG program will not change; however, participants in the extended TAG program will be required to report deposit accounts subject to the TAG on an average daily balance basis, rather than the end of quarter basis as is currently the case. Current participants in the TAG program have a one-time, irrevocable opportunity to opt out of the TAG extension by notifying the FDIC by April 30, 2010. The Company has decided not opted out of the TAG extension.

The reduction in incentive compensation expenses was based on the current estimate of anticipated payout.

Provision for Income Taxes

The provision for income taxes for the first quarter of 2010 decreased to $1.1 million, reflecting an effective tax rate of 30.0%, compared with $2.3 million for the first quarter of 2009 reflecting an effective tax rate of 39.0%. The decrease was primarily due to the lower level of pre-tax income in the 2010 period. Contributing to the lower rate was the impact of the lower level of taxable income, which caused the Company to be in the alternative tax category for New York City and New York State in 2010 versus being a regular tax payer in 2009.

BALANCE SHEET ANALYSIS

Securities

At March 31, 2010, the Company’s portfolio of securities totaled $762.7 million, of which obligations of U.S. government corporations and government sponsored enterprises amounted to $536.5 million which is approximately 70.3% of the total. The Company has the intent and ability to hold to maturity securities classified as held to maturity, at which time it will receive full value for these securities. These securities are carried at cost, adjusted for amortization of premiums and accretion of discounts. The gross unrealized gains and losses on held to maturity securities were $9.1 million and $0.8 million, respectively. Securities classified as available for sale may be sold in the future, prior to maturity. These securities are carried at fair value. Net aggregate unrealized gains or losses on these securities are included, net of taxes, as a component of shareholders’ equity. Given the generally high credit quality of the portfolio, management expects to realize all of its investments upon market recovery or, the maturity of such instruments and thus believes that any impairment in value is interest rate related and therefore temporary. Available for sale securities included gross unrealized gains of $2.9 million and gross unrealized losses of $1.6 million. As of March 31, 2010, management does not have the intent to sell any of the securities classified as available for sale in the table on page 17 and management believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of cost.

In connection with an asset liability management program designed to reduce the average life of the investment securities portfolio, the Company sold approximately $56.8 million of securities with a weighted average life of approximately 2.2 years during the first three months of 2010 and approximately $94.2 million of securities with a weighted average life of approximately 4 years in the same period of 2009. The Company reinvested a significant portion of the proceeds in securities with an average life of less than two years.

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


	Weighted Average Life				Weighted Average Yield

March 31, 2010	AFS		HTM		AFS			HTM

Mortgage-backed securities		4.2 Years		3.1 Years		3.89	%		4.55	%
Agency notes (with original call dates ranging between 3 and 36 months)		3.8 Years		7.7 Years		2.53	%		4.80	%

Corporate debt securities		0.7 Years		—		3.55	%		—
Obligations of state and political subdivisions-New York Bank Qualified		5.4 Years		11.0 Years		5.34	%^[1]		5.91	%^[1]


^[1]	tax equivalent

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


	March 31, 2010					December 31, 2009

	Balances		% of Total			Balances		% of Total


Obligations of U.S. government corporations and government sponsored enterprises
Mortgage-backed securities CMO’s (Federal National Mortgage Association)	$	13,264		1.74	%	$	13,740		1.86	%
CMO’s (Federal Home Loan Mortgage Corporation)		21,336		2.80			22,698		3.08
CMO’s (Government National Mortgage Association)		28,393		3.72			9,048		1.23
Federal National Mortgage Association		112,544		14.76			125,673		17.05
Federal Home Loan Mortgage Corporation		57,316		7.51			71,715		9.73
Government National Mortgage Association		9,627		1.26			13,146		1.78

Total mortgage-backed securities		242,480		31.79			256,020		34.73
Agency Notes

Federal National Mortgage Association		117,585		15.42			116,603		15.82
Federal Home Loan Bank		96,624		12.67			102,799		13.95
Federal Farm Credit Bank		15,041		1.97			29,418		3.99
Federal Home Loan Mortgage Corporation		64,813		8.50			14,899		2.02

Total obligations of U.S. government corporations and government sponsored enterprises		536,543		70.35			519,739		70.51

Obligations of state and political institutions-New York Bank Qualified		98,810		12.95			83,337		11.31
Single-issuer, trust preferred securities		3,653		0.48			4,483		0.61
Corporate debt securities		113,393		14.87			129,200		17.53
Other securities		10,045		1.32			56		0.01

Total marketable securities		762,444		99.97			736,815		99.97
Debt securities issued by foreign governments		250		0.03			250		0.03

Total	$	762,694		100.00	%	$	737,065		100.00	%

Loan Portfolio

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

The Company’s commercial and industrial loan and factored receivables portfolios represent approximately 62% of all loans. Loans in this category are typically made to small- and medium-sized businesses and range between $250,000 and $15 million. The Company’s real estate mortgage portfolio, which represents approximately 22% of all loans, is comprised of mortgages secured by real property located principally in the states of New York, New Jersey, Virginia and North Carolina. The Company’s leasing portfolio, which consists of finance leases for various types of business equipment, represents approximately 15% of all loans. Sources of repayment are the borrower’s operating profits, cash flows and liquidation of pledged collateral. Based on underwriting standards, loans may be secured in whole or in part by collateral such as liquid assets, accounts receivable, equipment, inventory and real property. The collateral securing any loan or lease may depend on the type of loan or lease and may vary in value based on market conditions.

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


	March 31,

	2010					2009

	Balances		% of Total			Balances		% of Total

Domestic
Commercial and industrial	$	605,029		49.76	%	$	512,118		42.57	%
Lease financing receivables		179,407		14.76			246,052		20.45
Factored receivables		151,054		12.42			89,255		7.42
Real estate - residential mortgage		148,338		12.20			190,267		15.81
Real estate - commercial mortgage		96,670		7.95			95,726		7.96
Real estate - construction and land development		22,386		1.84			25,670		2.13
Loans to individuals		13,043		1.07			19,043		1.58
Loans to depository institutions		—		—			25,000		2.08


Loans, net of unearned discounts	$	1,215,927		100.00	%	$	1,203,131		100.00	%

Asset Quality

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

During the first three months of 2010, conditions across many segments of the economy began to stabilize. As a result nonaccrual loans decreased $0.7 million during the first three months of 2010 compared to December 31, 2009 (primarily reflecting a $0.7 million decrease in nonaccrual lease financing receivables), and charge-offs for the first three months of 2010 were $1.2 million lower than those for the fourth quarter of 2009 (primarily reflecting a $1.2 million decrease in charge-offs for commercial and industrial loans). Nevertheless, worsening of existing economic conditions will likely result in levels of charge-offs and nonaccrual loans that will be higher than those in prior periods.

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


	March 31,

	2010		2009


Gross loans	$	1,239,037	$	1,238,131

Nonaccrual loans
Commercial and industrial	$	4,052	$	1,390

Lease financing receivables		11,298		11,480
Factored receivables		—		—

Real estate-residential mortgage		1,889		3,297
Real estate-commercial mortgage		—		—

Real estate-construction and land development		—		—
Loans to individuals		—		21


Total nonaccrual loans		17,239		16,188
Other real estate owned		874		1,423

Total non-performing assets	$	18,113	$	17,611


Loans past due 90 days or more and still accruing	$	3,668	$	768

At March 31, 2010, commercial and industrial nonaccruals represented 0.67% of commercial and industrial loans. There were 34 loans made to small business borrowers located in 3 states with balances ranging between approximately $6.8 thousand and $1.3 million.

At March 31, 2010, lease financing nonaccruals represented 6.30% of lease financing receivables. The lessees of the equipment are located in 38 states. There were 245 leases ranging between approximately $0.1 thousand and $360.2 thousand, 219 of which were under $100 thousand. The value of the underlying collateral related to lease financing nonaccruals varies depending on the type and condition of equipment. While most leases are written on a recourse basis, with personal guarantees of the principals, the current value of the collateral is often less than the lease financing balance. Collection efforts include repossession and/or sale of leased equipment, payment discussions with the lessee, the principal and/or guarantors, and obtaining judgments against the lessee, the principal and/or guarantors. The balance is charged off when it is determined that collection efforts are no longer productive. Factors considered in determining whether collection efforts are no longer productive include any amounts currently being collected, the status of discussions or negotiations with the lessee, the principal and/or guarantors, the cost of continuing efforts to collect, the status of any foreclosure or other legal actions, the value of the collateral, and any other pertinent factors.

At March 31, 2010, residential real estate nonaccruals represented 1.48% of residential real estate loans held in portfolio. There were 13 loans ranging between approximately $7.5 thousand and $361.1 thousand secured by properties located in 8 states.

At March 31, 2010, other real estate owned consisted of 5 properties with values between approximately $28.1 thousand and $469.1 thousand located in 4 states.

Management views the allowance for loan losses as a critical accounting policy due to its subjectivity. The allowance for loan losses is maintained through the provision for loan losses, which is a charge to operating earnings. The adequacy of the provision and the resulting allowance for loan losses is determined by a management evaluation process of the loan portfolio, including identification and review of individual problem situations that may affect the borrower’s ability to repay, review of overall portfolio quality through an analysis of current charge-offs, delinquency and nonperforming loan data, estimates of the value of any underlying collateral, an assessment of current and expected economic conditions and changes in the size and character of the loan portfolio. Other data utilized by management in determining the adequacy of the allowance for loan losses include, but are not limited to, the results of regulatory reviews; the amount of, trend of and/or borrower characteristics on loans that are identified as requiring special attention as part of the credit review process and peer group comparisons. The impact of this other data might result in an allowance greater than that indicated by the evaluation process previously described. The allowance reflects management’s best estimate of probable losses within the existing loan portfolio and of the risk inherent in various components of the loan portfolio. The allowance, in the judgment of management, is necessary to serve for estimated loan losses and risk inherent in the loan portfolio. The Company’s allowance for loan loss methodology is based on guidance provided by the “ Interagency Policy Statement on the Allowance for Loan and Lease losses” issued by the Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, The Federal Deposit Insurance Corporation, the National Credit Union Administration and the Office of Thrift Supervision in December 2006 and includes an allowance allocation calculated in accordance with the U.S. GAAP guidance on loans with deteriorated credit quality in FASB Codification Topic 310: Receivables. The Company’s process for determining the appropriate level of the allowance for loan losses is designed to account for credit deterioration as it occurs. The provision for loan losses reflects loan quality trends, including the levels of and trends related to nonaccrual loans, past due loans, potential problem loans, criticized loans and net charge-offs or recoveries, among other factors.

The level of the allowance reflects changes in the size of the portfolio or in any of its components as well as management’s continuing evaluation of industry concentrations specific credit risks, loan loss experience, current loan portfolio quality, and present economic, political and regulatory conditions. Portions of the allowance may be allocated for specific credits; however, the entire allowance is available for any credit that in management’s judgment, should be charged off. In addition, an increase in the size of the portfolio or in any of its components could necessitate an increase in the allowance even though there may not be a decline in credit quality or an increase in potential problem loans. A significant change in any of the evaluation factors described in the immediately preceding paragraph could also result in future additions to the allowance. While management utilizes its best judgment and information available, the ultimate adequacy of the allowance is dependent upon a variety of factors beyond the Company’s control, including the performance of the Company’s loan portfolio, the economy, changes in interest rates and the view of the regulatory authorities toward loan classifications.

At March 31, 2010, the ratio of the allowance to loans held in portfolio, net of unearned discounts, was 1.67% and the allowance was $19,963 thousand. At such date, the Company’s nonaccrual loans amounted to $17,239 thousand. Loans 90 days past due and still accruing amounted to $3.7 million. At March 31, 2010, loans judged to be impaired under U.S. GAAP guidance on receivables, amounted to $5.4 million and had a valuation allowance totaling $691 thousand, which is included within the overall allowance for loan losses. Included in the impaired loans are $3.8 million in accruing impaired restructured loans as defined by U.S. GAAP guidance on receivables, with allowances for loan impairment of $562 thousand. Based on the foregoing, as well as management’s judgment as to the current risk in loans held in portfolio, the Company’s allowance for loan losses was deemed adequate to absorb all probable losses on specifically known and other credit risks associated with the portfolio as of March 31, 2010. Net losses within loans held in portfolio are not statistically predictable and changes in conditions in the next twelve months could result in future provisions for loan losses varying from the provision recognized in the first three months of 2010. Potential problem loans, which are loans that are currently performing under present loan repayment terms but where known information about possible credit problems of borrowers causes management to have serious doubts as to the ability of the borrowers to continue to comply with the present repayment terms, aggregated $2.4 million both at March 31, 2010 and March 31, 2009, respectively.

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


	Three Months Ended March 31,

	2010			2009


Average loans held in portfolio, net of unearned discounts, during period	$	1,132,255		$	1,127,728

Allowance for loan losses:
Balance at beginning of period	$	19,872		$	16,010


Charge-offs:
Commercial and industrial		871			359
Lease financing receivables		4,983			4,544
Factored receivables		151			167
Real estate - residential mortgage		65			—
Real estate - commercial mortgage		129			—
Real estate - construction and land development		—			—
Loans to individuals		—			—

Total charge-offs		6,199			5,070


Recoveries:
Commercial and industrial		215			11
Lease financing receivables		105			44
Factored receivables		9			18
Real estate - residential mortgage		—			—
Real estate - commercial mortgage		—			—
Real estate - construction and land development		—			—
Loans to individuals		—			—

Total recoveries		329			73


Subtract:
Net charge-offs		5,870			4,997


Provision for loan losses		6,000			6,200


Less losses on transfers to other real estate owned		39			55


Balance at end of period	$	19,963		$	17,158


Ratio of annualized net charge-offs to average loans held in portfolio, net of unearned discounts		2.07	%		1.77	%

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


	March 31, 2010					December 31, 2009

	Amount		% of loans in each category to total loans held in portfolio			Amount		% of loans in each category to total loans held in portfolio


Domestic

Commercial and industrial	$	5,594		50.63	%	$	6,082		49.01	%
Loans to depository institutions		—		—			—		1.67
Lease financing receivables		10,684		15.01			10,249		16.32
Factored receivables		919		12.64			971		11.70
Real estate - residential mortgage		1,766		10.67			1,646		10.43
Real estate - commercial mortgage		625		8.09			560		7.75
Real estate - construction and land development		147		1.87			149		2.03
Loans to individuals		85		1.09			80		1.09
Unallocated		143		—			135		—

Total	$	19,963		100.00	%	$	19,872		100.00	%

During 2010, the allowance for loan losses increased $0.1 million from $19.9 million at December 31, 2009 primarily due to increases in the allowance allocated to lease financing receivables($0.4 million), real estate - residential mortgage($0.1 million) and real estate - commercial mortgage($0.1 million) partially offset by a reduction of $0.5 million in the allowance allocated to commercial and industrial loans. The allowance allocated to lease financing receivables increased primarily as a result of the continued elevated level of lease financing receivables charge-offs. The increase in the allowance allocated to residential mortgage loans was primarily the result of the higher levels of nonaccrual residential real estate loans. The increase in the allowance allocated to commercial mortgage loans was principally the result of increased commercial real estate loan charge-offs. The reduction of the allowance allocated to commercial and industrial loans was primarily the result of the lower level of charge-offs in the first quarter of 2010 compared to the fourth quarter of 2009.

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:


	March 31,

	2010					2009

	Balances		% of Total			Balances		% of Total

Domestic
Demand	$	509,453		31.56		$	457,277		33.99	%
NOW		221,797		13.74			201,509		14.98
Savings		18,832		1.17			18,837		1.40
Money market		322,059		19.95			345,497		25.68
Time deposits		541,321		33.54			321,785		23.91

Total domestic deposits		1,613,462		99.96			1,344,905		99.96
Foreign
Time deposits		580		0.04			578		0.04

Total deposits	$	1,614,042		100.00	%	$	1,345,483		100.00	%

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

CAPITAL

The Company and the bank are subject to risk-based capital regulations which quantitatively measure capital against risk-weighted assets, including certain off-balance sheet items. These regulations define the elements of the Tier 1 and Tier 2 components of total capital and establish minimum ratios of 4% for Tier 1 capital and 8% for total capital for capital adequacy purposes. Supplementing these regulations is a leverage requirement. This requirement establishes a minimum leverage ratio (at least 3% or 4%, depending upon an institution’s regulatory status) which is calculated by dividing Tier 1 capital by adjusted quarterly average assets (after deducting goodwill). Information regarding the Company’s and the bank’s risk-based capital is presented on page 45. In addition, the bank is subject to the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) which imposes a number of mandatory supervisory measures. Among other matters, FDICIA established five capital categories, ranging from “well capitalized” to “critically under capitalized”. Such classifications are used by regulatory agencies to determine a bank’s deposit insurance premium, approval of applications authorizing institutions to increase their asset size or otherwise expand business activities or acquire other institutions. Under FDICIA, a “well capitalized” bank must maintain minimum leverage, Tier 1 and total capital ratios of 5%, 6% and 10%, respectively. The Federal Reserve Board applies comparable tests for holding companies such as the Company. At March 31, 2010, the Company and the bank exceeded the requirements for “well capitalized” institutions under the tests pursuant to FDICIA and of the Federal Reserve Board.

The bank regulatory agencies have encouraged banking organizations, including healthy, well run banking organizations, to operate with capital ratios substantially in excess of the stated ratios required to maintain “well capitalized” status. This has resulted from, among other things, current economic conditions, the global financial crisis and the likelihood, as described in the 2009 Form 10-K, of increased formal capital requirements for banking organizations. In light of the foregoing, the Company and the bank expect that they will maintain capital ratios substantially in excess of these ratios.

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

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT

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

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

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

STERLING BANCORP AND SUBSIDIARIES
Average Balance Sheets [1]
Three Months Ended March 31,
(Unaudited)

2010

2009

Average
Balance

Interest

Average
Rate

Average
Balance

Interest

Average
Rate

ASSETS

Interest-bearing deposits with other banks

43,365

0.17

11,980

0.35

Securities available for sale

292,343

2,734

3.74

418,378

5,255

5.03

Securities held to maturity

312,199

3,716

4.76

297,558

3,523

4.74

Securities tax-exempt [2]

91,655

1,408

6.15

24,162

352

5.83

Total investment securities

696,197

7,858

4.52

740,098

9,130

4.94

FRB and FHLB stock [2]

8,467

122

5.74

9,953

0.82

Loans, net of unearned discounts [3]

1,159,100

16,511

5.98

1,161,171

17,552

6.19

TOTAL INTEREST-EARNING ASSETS

1,907,129

24,510

5.28

1,923,202

26,712

5.63

Cash and due from banks

35,588

32,423

Allowance for loan losses

(22,158

)

(16,890

)

Goodwill

22,901

Other assets

126,988

113,588

TOTAL ASSETS

2,070,448

2,075,224

LIABILITIES AND SHAREHOLDERS’ EQUITY

Interest-bearing deposits

Domestic

Savings

18,454

0.07

18,217

0.14

NOW

249,671

225

0.37

227,027

168

0.30

Money market

324,458

737

0.92

338,134

951

1.14

Time

452,065

1,673

1.50

327,815

2,164

2.68

Foreign

Time

580

1.09

578

1.09

Total interest-bearing deposits

1,045,228

2,640

1.02

911,771

3,291

1.46

Borrowings

Securities sold under agreements to repurchase - customers

50,525

0.49

74,700

115

0.63

Federal funds purchased

11,200

0.14

57,507

0.23

Commercial paper

16,404

0.31

11,877

0.78

Short-term borrowings - FHLB

—

13,833

0.31

Short-term borrowings - FRB

15,000

0.25

141,611

0.28

Short-term borrowings - other

2,233

—

1,454

0.17

Long-term borrowings - FHLB

129,681

871

2.72

150,000

1,122

3.03

Long-term borrowings - sub debt

25,774

523

8.38

25,774

523

8.38

Total borrowings

250,817

1,481

2.39

476,756

1,928

1.64

TOTAL INTEREST-BEARING LIABILITIES

1,296,045

4,121

1.29

1,388,527

5,219

1.52

Noninterest-bearing deposits

468,676

416,180

Other liabilities

134,478

112,984

Total liabilities

1,899,199

1,917,691

Shareholders’ equity

171,249

157,533

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

2,070,448

2,075,224

Net interest income/spread

20,389

3.99

21,493

4.11

Net yield on interest-earning assets (margin)

4.37

4.50

Less: Tax equivalent adjustment

494

127

Net interest income

19,895

21,366


[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)


	Increase/(Decrease) Three Months Ended March 31, 2010 to March 31, 2009

	Volume			Rate			Net [2]

INTEREST INCOME
Interest-bearing deposits with other banks	$	16		$	(7	)	$	9

Securities available for sale		(1,362	)		(1,159	)		(2,521	)
Securities held to maturity		177			16			193
Securities tax-exempt		1,036			20			1,056

Total investment securities		(149	)		(1,123	)		(1,272	)

FRB and FHLB stock		(3	)		105			102

Loans, net of unearned discounts [3]		(53	)		(988	)		(1,041	)


TOTAL INTEREST INCOME	$	(189	)	$	(2,013	)	$	(2,202	)


INTEREST EXPENSE
Interest-bearing deposits
Domestic
Savings	$	—		$	(3	)	$	(3	)
NOW		17			40			57
Money market		(37	)		(177	)		(214	)
Time		655			(1,146	)		(491	)
Foreign
Time		—			—			—

Total interest-bearing deposits		635			(1,286	)		(651	)


Borrowings
Securities sold under agreements to repurchase - customers		(32	)		(22	)		(54	)
Federal funds purchased		(20	)		(10	)		(30	)
Commercial paper		7			(17	)		(10	)
Short-term borrowings - FHLB		(11	)		—			(11	)
Short-term borrowings - FRB		(81	)		(9	)		(90	)
Short-term borrowings - other		—			(1	)		(1	)
Long-term borrowings - FHLB		(143	)		(108	)		(251	)
Long-term borrowings - sub debt		—			—			—

Total borrowings		(280	)		(167	)		(447	)

TOTAL INTEREST EXPENSE	$	355		$	(1,453	)	$	(1,098	)


NET INTEREST INCOME	$	(544	)	$	(560	)	$	(1,104	)


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

[2]	Changes in interest income and interest expense due to a combination of both volume and rate have been allocated to the change due to volume and the change due to rate in proportion to the relationship of the change due solely to each. The change in interest expense for short-term borrowings-FHLB has been allocated entirely to the volume variance.

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

STERLING BANCORP AND SUBSIDIARIES
Regulatory Capital and Ratios

Ratios and Minimums

Actual

For Capital
Adequacy Minimum

To Be Well
Capitalized

As of March 31, 2010

Amount

Ratio

Amount

Ratio

Amount

Ratio

Total Capital (to Risk-Weighted Assets):

The Company

259,393

16.98

122,223

8.00

152,779

10.00

The bank

197,015

13.02

121,054

8.00

151,318

10.00

Tier 1 Capital (to Risk-Weighted Assets):

The Company

240,283

15.73

61,111

4.00

91,667

6.00

The bank

178,085

11.77

60,527

4.00

90,791

6.00

Tier 1 Leverage Capital(to Average Assets):

The Company

240,283

11.74

81,880

4.00

102,350

5.00

The bank

178,085

8.78

81,134

4.00

101,418

5.00

As of December 31, 2009

Total Capital(to Risk-Weighted Assets):

The Company

193,760

12.75

121,606

8.00

152,007

10.00

The bank

169,353

11.25

120,378

8.00

150,473

10.00

Tier 1 Capital(to Risk-Weighted Assets):

The Company

174,746

11.50

60,803

4.00

91,204

6.00

The bank

150,529

10.00

60,189

4.00

90,284

6.00

Tier 1 Leverage Capital (to Average Assets):

The Company

174,746

8.06

86,757

4.00

108,447

5.00

The bank

150,529

6.97

86,385

4.00

107,981

5.00


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 March 31, 2010, presented on page 50, indicates that net interest income would increase during periods of rising interest rates and decrease during periods of falling interest rates, but, as mentioned above, gap analysis may not be an accurate predictor of net interest income.

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

As of March 31, 2010, the Company was not a party to any financial instrument derivative agreement.

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

The Company’s interest rate sensitivity is determined by identifying the probable impact of changes in market interest rates on the yields on the Company’s assets and the rates that would be paid on its liabilities. This modeling technique involves a degree of estimation based on certain assumptions that management believes to be reasonable. Utilizing this process, management projects the impact of changes in interest rates on net interest margin. The Company has established certain policy limits for the potential volatility of its net interest margin assuming certain levels of changes in market interest rates with the objective of maintaining a stable net interest margin under various probable rate scenarios. Management generally has maintained a risk position well within the policy limits. As of December 31, 2009, the model indicated the impact of a 100 and 200 basis point parallel and pro rata rise in rates over 12 months would approximate a 2.6% ($2.7 million) and a 4.9% ($5.1 million) increase in net interest income, respectively, while the impact of a 25 basis point decline in rates over the same period would approximate a 1.3% ($1.3 million) decline from an unchanged rate environment. The likelihood of a decrease in interest rates beyond 25 basis points as of December 31, 2009 was considered to be remote given then-current interest rate levels. As of March 31, 2010, the model indicated the impact of a 100 and 200 basis point parallel and pro rata rise in rates over 12 months would approximate a 2.7% ($2.9 million ) and a 4.9% ($5.3 million) increase in net interest income, respectively, while the impact of a 25 basis point decline in rates over the same period would approximate a 1.8% ($1.9 million) decline from an unchanged rate environment. The likelihood of a decrease in interest rates beyond 25 basis points as of March 31, 2010 was considered to be remote given then-current interest rate levels.

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

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

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

Liquidity Risk

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

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

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

At March 31, 2010, the parent company’s short-term debt, consisting principally of commercial paper used to finance ongoing current business activities, was approximately $15.8 million. The parent company had cash, interest-bearing deposits with banks and other current assets aggregating $93.4 million. The parent company also has back-up credit lines with banks of $19.0 million. Since 1979, the parent company has had no need to use the available back-up lines of credit.

The following table sets forth information regarding the Company’s obligations and commitments to make future payments under contract as of March 31, 2010:


	Payments Due by Period

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


Long-Term Debt	$	145,774	$	30,000	$	40,000	$	30,000	$	45,774
Operating Leases		49,035		4,511		8,896		8,910		26,718

Total Contractual Cash Obligations	$	194,809	$	34,511	$	48,896	$	38,910	$	72,492


(1)	Based on contractual maturity dates

The following table sets forth information regarding the Company’s obligations under other commercial commitments as of March 31, 2010:


	Amount of Commitment Expiration Per Period

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


Residential Loans	$	31,827	$	31,827	$	—	$	—	$	—
Commercial Loans		16,910		30		9,946		—		6, 934

Total Loans		48,737		31,857		9,946		—		6,934
Standby Letters of Credit		25,363		24,110		1,253		—		—
Other Commercial Commitments		50,069		49,691		—		—		378


Total Commercial Commitments	$	124,169	$	105,658	$	11,199	$	—	$	7,312

INFORMATION AVAILABLE ON OUR WEB SITE

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

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

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

STERLING BANCORP AND SUBSIDIARIES
Interest Rate Sensitivity

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


	Repricing Date

	3 Months or Less		More than 3 Months to 1 Year			More than 1 Year to 5 Years			More than 5 Years to 10 Years		Over 10 Years		Nonrate Sensitive			Total


ASSETS
Interest-bearing deposits with other banks	$	46,657	$	—		$	—		$	—	$	—	$	—		$	46,657
Investment securities		80,016		59,921			199,386			111,932		311,439		—			762,694
Commercial and industrial loans		471,223		25,636			36,945			72,242		—		(1,017	)		605,029
Lease financing receivables		1,623		11,594			185,176			2,855		—		(21,841	)		179,407
Factored receivables		151,306		—			—			—		—		(252	)		151,054
Real estate-residential mortgage		21,686		41,733			8,931			12,575		63,413		—			148,338
Real estate-commercial mortgage		9,873		35,755			14,636			36,406		—		—			96,670
Real estate-construction and land development		—		—			22,386			—		—		—			22,386
Loans to individuals		2,350		2,305			6,669			1,719		—		—			13,043
Loans to depository institutions		—		—			—			—		—		—			—
Noninterest-earning assets & allowance for loan losses		—		—			—			—		—		169,036			169,036

Total Assets		784,734		176,944			474,129			237,729		374,852		145,926			2,194,314


LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits
Savings [1]		—		—			18,832			—		—		—			18,832
NOW [1]		—		—			221,797			—		—		—			221,797
Money market [1]		283,308		—			38,751			—		—		—			322,059
Time - domestic		300,442		189,333			51,546			—		—		—			541,321
- foreign		185		395			—			—		—		—			580
Securities sold under agreement to repurchase - customer		21,060		—			—			—		—		—			21,060
Federal funds purchased		—		—			—			—		—		—			—
Commercial paper		15,797		50			—			—		—		—			15,847
Short-term borrowings - FHLB		—		—			—			—		—		—			—
Short-term borrowings - FRB		—		—			—			—		—		—			—
Short-term borrowings - other		3,290		—			—			—		—		—			3,290
Long-term borrowings - FHLB		—		10,000			90,000			20,000		—		—			120,000
Long-term borrowings - subordinated debentures		—		—			—			—		25,774		—			25,774
Noninterest-bearing liabilities & shareholders’ equity		—		—			—			—		—		903,754			903,754


Total Liabilities and Shareholders’ Equity		624,082		199,778			420,926			20,000		25,774		903,754			2,194,314


Net Interest Rate Sensitivity Gap	$	160,652	$	(22,834	)	$	53,203		$	217,729	$	349,078	$	(757,828	)	$	—


Cumulative Gap March 31, 2010	$	160,652	$	137,818		$	191,021		$	408,750	$	757,828	$	—		$	—


Cumulative Gap March 31, 2009 [2]	$	6,977	$	(119,795	)	$	(38,100	)	$	146,441	$	528,088	$	—		$	—


Cumulative Gap December 31, 2009 [2]	$	215,345	$	223,572		$	238,762		$	348,921	$	707,012	$	—		$	—


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

[2]	Certain reclassifications have been made to conform to the current presentation.


ITEM 4.	CONTROLS AND PROCEDURES

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

No change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) occurred during the fiscal quarter ended March 31, 2010 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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 Company did not repurchase any of its common shares during the first quarter of 2010. At March 31, 2010, the maximum number of shares that may yet be purchased under the share repurchase program was 870,963.

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


Item 6.	Exhibits

The following exhibits are filed as part of this report:


3.	(i)	Restated Certificate of Incorporation filed with the State of New York Department of State, October 28, 2004 (Filed as Exhibit 3(i)to the Registrant’s Form 10-K for the year ended December 31, 2008 and incorporated herein by reference).

	(ii)	Certificate of Amendment of Certificate of Incorporation filed with the State of New York Department of State on December 18, 2008 (Filed as Exhibit 3(ii) to the Registrant’s Form 10-K for the year ended December 31, 2008 and incorporated herein by reference).

	(iii)	By-Laws as in effect on November 15, 2007 (Filed as Exhibit 3(ii)(A) to the Registrant’s Form 8-K dated November 15, 2007 and filed on November 19, 2007 and incorporated herein by reference).

11.		Statement Re: Computation of Per Share Earnings.

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

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

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

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

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:	5/7/10	/s/ Louis J. Cappelli

		Louis J. Cappelli
		Chairman and Chief Executive Officer

Date:	5/7/10	/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.	55

	31.1	Certification of the CEO pursuant to Exchange Act Rule 13a-14(a).	56

	31.2	Certification of the CFO pursuant to Exchange Act Rule 13a-14(a).	57

	32.1	Certification of the CEO required by Section 1350 of Chapter 63 of Title 18 of the U.S. Code.	58

	32.2	Certification of the CFO required by Section 1350 of Chapter 63 of Title 18 of the U.S. Code.	59