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CORRESP
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CORRESP

Via U.S. Mail and fax to 202-772-9208

October 18, 2005

Mr. Kevin W. Vaughn

Accounting Branch Chief

Mail Stop 4561

Division of Corporation Finance

Securities and Exchange Commission

Washington, D.C. 20549

Re: Sterling Bancorp – File No. 1-05273

Dear Mr. Vaughn:

     This is in response to your letter, dated September 13, 2005, to Louis J. Cappelli, regarding
staff comments on the Company’s Form 10-K for the year ended December 31, 2004. For your
convenience, we have reproduced in boldface type the specific comments included in your letter.

Financial Statements

Note 1 – Summary of Significant Accounting Policies, page 34

    1.

    Please revise to more clearly disclose your policy for recognizing factoring revenue. Please
refer to paragraph 8(m) of SOP 01-6 and revise to:

    •

    Disclose whether transfers of receivables under your factoring
arrangements meet the sale criteria of paragraph 9 of SFAS 140;

    •

    Disclose your policy for accounting for purchase discounts such as
“factoring commissions”;

    •

    Disclose how you account for transfers not meeting the sale criteria in
SFAS 140 and the related factoring commissions under these
arrangements; and

    •

    If you are not able to support that your policies comply with SOP 01-6,
please revise your financial statements accordingly.

Mr. Kevin W. Vaughn

Division of Corporation Finance

Securities and Exchange Commission

October 18, 2005

Page 2

     Response:

     Paragraph 8(m) of AICPA Statement of Position 01-6 provides that transfers of receivables
under factoring arrangements meeting the sale criteria of paragraph 9 of Statement of Financial
Accounting Standards No. 140 should be accounted for as purchases of receivables, and the
acquisition of receivables and accounting for purchase discounts such as factoring commissions
should be recognized in accordance with Statement of Financial Accounting Standards No. 91 or AICPA
Practice Bulletin No. 6, as applicable. Transfers of receivables under our factoring agreements
are accounted for as purchases of receivables, and, as discussed below, we believe that such
transfers meet the sale criteria of paragraph 9 of SFAS No. 140. As discussed below, we have
analyzed our factoring income and the effect of amortizing factoring fees as specified in SFAS No.
91, and, on the basis of that analysis, we believe that there is no material difference between the
results of our method of accounting for factoring revenue and the amortization method specified in
SFAS No. 91.

     Business Background. Under our factoring arrangements with clients, orders obtained by the
client from its customers for goods and services are submitted to our Credit Department for
approval, and, if approved, the Company purchases the accounts receivable resulting from the
shipments of goods or provision of services and assumes the credit risk of the client’s customer,
after receiving and accepting delivery without dispute, failing to pay the full amount due on the
receivable because of the customer’s financial inability to pay. The Company charges the client a
nonrefundable factoring fee for the bookkeeping and collection services that the Company provides
and for the credit review of the customer performed by our Credit Department and our assumption of
the above-described credit risk.

     In order to maintain a uniform pattern of collection, the Company also purchases accounts
receivable resulting from shipments of goods or provision of services that have not been approved
by our Credit Department, and the above-described credit risk on such accounts receivable is
retained by the client and is not assumed by the Company.

     In both types of transactions, when the Company “factors” (i.e., purchases) a client’s
accounts receivable, the client’s customers are instructed to make payment directly to the Company,
and there is no transfer of funds between the Company and the client with respect to a receivable
until payment is received from the customer. When the Company receives payment of an account
receivable, the Company pays to the client the amount received from the customer less the
nonrefundable factoring fee charged by the Company for its collection and bookkeeping services and,
if applicable, for its credit review of the customer and assumption of the above-described credit
risk. Accounts

Mr. Kevin W. Vaughn

Division of Corporation Finance

Securities and Exchange Commission

October 18, 2005

Page 3

receivable purchased by the Company are collected from the client’s customers within 60 days on
average.

     The Company also may advance funds to its client prior to the collection of factored
receivables, in which case the Company charges interest on such advances (such interest being
separate from and in addition to the Company’s factoring fees). Such advances are routinely
satisfied by the collection of receivables (and, if not so satisfied, must, of course, be repaid by
the client).

     Company’s Accounting Policies. When the Company purchases an account receivable from a
client, it records the receivable as an asset (included in “Loans held in portfolio, net of
unearned discounts”), records a liability for the funds due to the client (included in “Accrued
expenses and other liabilities”) and credits to income the nonrefundable factoring fee (included in
“Factoring income”). The asset balance equals the face amount due on the receivable, and the
liability balance equals such face amount less the amount of the factoring fee credited to income.

     The Company also may advance funds to its client prior to the collection of receivables,
charging interest on such advances and normally satisfying such advances by the collection of
receivables. These advances are recorded as loans, and interest earned on the advances is credited
to interest income based on principal amounts outstanding at appropriate interest rates.

     Discussion. Paragraph 9 of SFAS No. 140 provides that a transfer of financial assets in which
the transferor surrenders control over those financial assets shall be accounted for as a sale to
the extent that consideration other than beneficial interests in the transferred assets is received
in exchange, and provides that the transferor has surrendered control over transferred assets if
and only if (a) the transferred assets have been isolated from the transferor – put presumptively
beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership, (b)
each transferee has the right to pledge or exchange the assets it received, and no condition both
constrains the transferee from taking advantage of its right to pledge or exchange and provides
more than a trivial benefit to the transferor, and (c) the transferor does not maintain effective
control over the transferred assets through either (1) an agreement that both entitles and
obligates the transferor to repurchase or redeem them before their maturity or (2) the ability to
unilaterally cause the holder to return specific assets, other than through a cleanup call.

     When we factor accounts receivable from a client, the client surrenders control over those
receivables as described in paragraph 9 of SFAS No. 140. Our factoring agreements, which provide
for the sale and assignment of receivables to the Company “as

Mr. Kevin W. Vaughn

Division of Corporation Finance

Securities and Exchange Commission

October 18, 2005

Page 4

absolute owner thereof”, do not restrict the Company’s right to pledge or exchange the purchased
receivables, and thus condition (b) above is satisfied. Under our factoring contracts, the client
does not maintain effective control over the receivables through either of the means described in
condition (c) above, and thus that condition is satisfied as well. We believe that accounts
receivable purchased by us pursuant to our factoring arrangements have been effectively isolated
from the client so as to satisfy condition (a) above. We believe this position is valid not only
with respect to receivables as to which the Company has assumed the credit risk of the client’s
customer, after receiving and accepting delivery without dispute, failing to pay the full amount
due on the receivables because of the customer’s financial inability to pay, but also with respect
to purchased receivables as to which the Company has not assumed such credit risk.

     We recognize that bankruptcy and receivership involve complex legal issues and that, in some
circumstances, the question whether certain factored receivables are beyond the reach of the
client’s creditors in a bankruptcy or other receivership of the client may be subject to
uncertainty in some cases. Any such uncertainty is of little practical consequence, however,
because normally a trustee in bankruptcy or a receiver would have little or no financial incentive
to attack the validity of the Company’s purchase of the factored receivables. In our experience,
where a factoring client of the Company enters bankruptcy, the trustee in bankruptcy has never
challenged the Company’s ownership of the factored receivables. We believe that the experience of
others in the factoring industry in this regard is similar to ours.

     The Company’s policy of crediting our factoring fees to income at the time we purchase the
receivables was adopted as a practical expedience. With respect to the amortization requirements
of SFAS No. 91, we have analyzed our reported factoring income and what the effect on such income
might be if we were to amortize our factoring fees over the respective periods during which the
factored receivables remain outstanding. This analysis indicates that the combination of the
relatively short life of the Company’s factored receivables (which are collected from the client’s
customers within 60 days on average) and the continual flow of purchases and collections of
accounts receivable during the course of each month tends to minimize the effects of timing
differences between recognizing income at the time of purchase, on the one hand, and amortizing
factoring fees over the respective lives of the factored receivables, on the other. As a result,
amortizing factoring fees over the respective lives of the factored receivables would have very
little effect on our factoring income for any quarterly or annual reporting period. (For example,
for the fiscal years 2002, 2003 and 2004, the effect of the differences between the two methods was
less than $20,000, $50,000 and $20,000, respectively. During 2004 and 2005, the largest effect for
any fiscal quarter was less than $60,000.) Accordingly, we believe that there is no material
difference between

Mr. Kevin W. Vaughn

Division of Corporation Finance

Securities and Exchange Commission

October 18, 2005

Page 5

the results of our method of accounting for factoring revenue and the amortization method specified
in SFAS No. 91.

     On the basis of the foregoing, we believe that our policies comply with SOP 01-6 in all
material respects.

     Proposed Disclosures. We propose that the first paragraph under “Loans” in the summary of
significant accounting policies in Note 1 to the consolidated financial statements in our annual
report on Form 10-K for the year ending December 31, 2005 read as follows:

Loans (including factored accounts receivable), other than those held for sale, are
reported at their principal amount outstanding, net of unearned discounts and unamortized
nonrefundable fees and direct costs associated with their origination or acquisition.
Interest earned on loans without discounts is credited to income based on loan principal
amounts outstanding at appropriate interest rates. Material origination and other
nonrefundable fees net of direct costs and discounts on loans (excluding factored accounts
receivable) are credited to income over the terms of the loans using a method that results
in an approximately constant effective yield. Nonrefundable fees on the purchase of
accounts receivable are credited to “Factoring income” at the time of purchase.1

     We also propose to include the following disclosures in “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” in our annual report on Form 10-K for the year
ending December 31, 2005:

    1

    The following is marked to show the changes
from the corresponding paragraph in our Form 10-K for the year 2004:

Loans (including factored accounts receivable),
other than
those held for sale, are reported at their principal amount outstanding,
net of unearned discounts and unamortized nonrefundable fees and direct
costs associated with their origination or acquisition. Interest earned
on loans without discounts is credited to income based on loan principal
amounts outstanding at appropriate interest rates. Material origination
and other nonrefundable fees net of direct costs and discounts on
loans (excluding factored accounts receivable) are credited to
income over the terms of the loans using a method that results in an
approximately constant effective yield
level rate of return.
Nonrefundable fees on the purchase of accounts receivable are
credited to “Factoring income” at the time of purchase.

Mr. Kevin W. Vaughn

Division of Corporation Finance

Securities and Exchange Commission

October 18, 2005

Page 6

The purchase of a client’s accounts receivable is traditionally known as “factoring” and
results in payment by the client of a nonrefundable factoring fee, which is generally a
percentage of the factored receivables or sales volume and is designed to compensate for
the bookkeeping and collection services provided by the Company and, if applicable, its
credit review of the client’s customer and assumption of customer credit risk. When the
Company “factors” (i.e., purchases) an account receivable from a client, it records the
receivable as an asset (included in “Loans held in portfolio, net of unearned discounts”),
records a liability for the funds due to the client (included in “Accrued expenses and
other liabilities”) and credits to noninterest income the nonrefundable factoring fee
(included in “Factoring income”). The Company also may advance funds to its client prior
to the collection of receivables, charging interest on such advances (in addition to any
factoring fees) and normally satisfying such advances by the collection of receivables.

Note 5 – Investment Securities, page 40

    2.

    Please revise Note 5 and similar disclosures elsewhere in your filing to separately disclose
your investments in government sponsored entities (such as Freddie and Fannie) from U.S.
Government agencies. We do not believe that it is appropriate to aggregate given the
difference in risk profiles.

Response:

     The financial statements note regarding Investment Securities and similar disclosures
elsewhere in our future filings, commencing with our quarterly report on Form 10-Q for the quarter
ended September 30, 2005, will disclose separately our investments in government sponsored entities
(such as Freddie and Fannie) from U.S. Government agencies.

* * * *

     In connection with our responses to your comments on the Company’s filing on Form 10-K, the
Company acknowledges that

    •

    the Company is responsible for the adequacy and accuracy of the
disclosure in the filing;

    •

    staff comments or changes to disclosure in response to staff comments
do not foreclose the Commission from taking any action with respect to
the filing; and

Mr. Kevin W. Vaughn

Division of Corporation Finance

Securities and Exchange Commission

October 18, 2005

Page 7

    •

    the Company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the federal
securities laws of the United States.

     If you have any questions regarding our responses to your comments or have any additional
comments, ple