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Sterling Bancorp in New York reported strong loan and deposit growth in the second quarter, but profits were dampened somewhat by the cost of exiting the government's Troubled Asset Relief Program.

Sterling said Tuesday that it earned $2.5 million in the quarter, up 8% from the same period a year earlier, after it redeemed all of its $42 million in preferred shares owned by the Treasury Department.

Excluding the cost related to redeeming those shares, net income was up 32%, to $3.9 million, Sterling said.

The earnings growth was driven by a 10% increase in total loans, to a record $1.4 billion, and a 22% gain in deposits, to a record $2 billion. Profits were also bolstered by a 45% cut in provision for loan losses, to $3 million, which helped offset a decline in noninterest income and an increase in noninterest expenses during the quarter.

Sterling's assets increased 13% year over year, to $2.6 billion.