Sterling Bancorp revised its fourth quarter and 2022 earnings after entering into a plea agreement with the Justice Department tied to the Southfield, Mich., company’s defunct mortgage program.
The $2.5 billion-asset company said in a press release that it agreed to plead guilty to one count of securities fraud tied to disclosures for its Advantage Loan Program made between 2017 and 2019.
Sterling agreed to pay $27.2 million in restitution to non-insider shareholders and further enhance its compliance program and internal controls tied to securities law compliance. The settlement releases Sterling and its bank from further prosecution for securities fraud and underlying mortgage fraud in the loan program.
The plea agreement is subject to court approval.
As a result of the agreement, Sterling reported a $18.4 million loss for the fourth quarter and a $14.2 million full-year loss, reflecting an increase in the provision for contingent losses.
The announcement “ends the long-running uncertainty around the DOJ’s investigation,” Thomas O’Brien, Sterling’s chairman, president and CEO, said in the release.
“We concluded that the long-running fraud in the origination of residential mortgage loans … was undeniable and was known to the founder and certain former members of senior management at the time of going public,” he added. “It was crucial to the long-term benefit of the company and its shareholders to accept the charge … and finally resolve this matter.”
Sterling, which hired O’Brien in 2020 to address issues tied to the mortgage program, had already agreed to a $6 million civil money penalty with the Office of the Comptroller of the Currency and a $12.5 million payment to address a class-action lawsuit.