In the wake of recent legal turbulence, Sterling Bancorp said Monday that veteran financial services executive Thomas M. O’Brien will be taking over as its chairman, president and CEO.
O’Brien had been acting as a consultant to the bank’s board of directors prior to the hiring decision. He will replace Steve Huber, Sterling’s chief financial officer, who has been filling in as interim president and CEO since Thomas Lopp abruptly left the post on May 7.
This hiring announcement comes as the bank has faced legal woes over its once-popular Advantage Loan Program. The program was designed to serve home buyers with good credit but a short credit history, and according to Sterling’s SEC filings at one point constituted 80% of the bank’s residential loan portfolio.
Sterling put the Advantage Loan Program on hold in December 2019 as it conducted an internal review of the program’s documentation process. Following that review, Sterling announced that it found its employees engaged in misconduct in connection with the bank’s loan origination process. Accordingly, the company said it would be shuttering the Advantage Loan Program completely.
In February, the bank was hit with a class-action suit in Michigan federal court on behalf of investors over the handling of the program. The suit alleges that the bank had potential breaches of fiduciary duty on the part of its directors and management, specifically regarding false or otherwise misleading statements about the program.
Sterling’s legal troubles further expanded in March, when the bank disclosed that it had received multiple grand jury subpoenas from the U.S. Department of Justice seeking documentation regarding its residential lending practices and the issues related to them. Sterling also divulged in March that it is cooperating with the Office of the Comptroller of the Currency, which began an investigation into the bank’s credit administration and its compliance with the Bank Secrecy Act and other anti-money-laundering laws.
While O’Brien said in a statement announcing his hiring that his new position at Sterling was not one he actively sought out, his advisory work had provided him with the opportunity to work with the bank’s directors, and that he has “witnessed their firm commitment to undertaking the remedial work necessary to successfully resolve the regulatory enforcement action against the Bank and ongoing government investigations, repair the Bank’s and the Company’s reputation and address forthrightly the multiple issues from the past.”
O’Brien brings with him 44 years of experience in the financial sector, having most recently served as vice chairman of Emigrant Bancorp, with a four-year stint as president and CEO of Sun Bancorp before that. He has held numerous other executive roles at BankUnited, the State Bank of Long Island and the Atlantic Bank of New York, among others.
“Each time Tom has been in the CEO chair, he has successfully led the turnaround of difficult situations, while enhancing operational integrity, driving shareholder value and creating a strong regulatory compliance culture. He is a proven leader and a strong strategic thinker,” Benjamin Wineman, chairman of the special committee of independent directors of the bank, said in a statement. “We believe Tom is well-positioned to lead Sterling through its current regulatory and operational challenges while providing clear strategic direction during these difficult economic times for the Bank and our customers.”
Sterling also released the financial highlights for the first quarter of 2020 on Monday. Sterling reported a net loss of $27.8 million and a net loss per share of $0.56 for the quarter, according to the bank’s SEC filing. The earnings reflect an increase to the allowance for loan losses due to the economic conditions brought on by the ongoing COVID-19 pandemic, the bank said.