The turnaround story at Sterling Bancorp in Southfield, Mich., continues.
The $3.1 billion-asset company said in a press release Thursday that it has agreed to sell a pool of commercial real estate loans to an unnamed buyer. The pool includes 21 loans with an aggregate outstanding balance of $56.8 million.
The loans, which are primarily secured by single-room occupancy hotel properties, were reclassified as held for sale and written down to fair value at the end of 2021.
Sterling said it will receive $4.4 million in excess of the loans’ carrying amount.
“We remain committed to fully remediating the multiple challenges facing the company over recent years,” Thomas O’Brien, Sterling’s chairman, president and CEO, said in the release.
“Among the challenges has been confronting a large volume of classified loans,” O’Brien added. “This cash sale permanently removes a substantial volume of such loans from our loan book and represents another step in our efforts to restore Sterling’s financial and regulatory standing.”
The company fired several employees and abruptly discontinued a low-documentation mortgage program in December 2019 after discovering alleged fraud. Suspension of the program created a significant revenue hole for Sterling.
Thomas Lopp, who was named CEO shortly before the mortgage program was discontinued, resigned in May 2020, citing health reasons. A month later, Sterling hired Thomas O’Brien, a veteran turnaround expert, as CEO.
O’Brien has since closed some branches, returned Sterling to profitability and settled a shareholder lawsuit alleging that disclosures about the company’s residential lending practices violated federal securities laws.
Sterling implemented numerous corporate governance measures in January to resolve a shareholder demand for change.