Sterling Bancorp Reports Second Quarter 2020 Financial Highlights - Seite 2

Our net interest margin reflects an increase in low yielding liquid assets, the reversal of interest income due to the increase in nonperforming loans and loan and deposit repricing driven by the lower interest rate environment. Liquid assets averaged $342 million higher during the second quarter and generated an average yield that was 103 basis points lower than the previous quarter.

Operating expenses remain elevated as the Company continues to utilize the services of professional firms to assist in its efforts to resolve previously disclosed matters related to the Advantage Loan Program as well as with the Bank’s internal review of the program.

As previously disclosed, the Bank is currently under formal investigation by the Office of the Comptroller of the Currency (the “OCC”) and continues to be subject to a publicly-available formal agreement with the OCC, dated June 18, 2019, relating to certain aspects of its Bank Secrecy Act/Anti-Money Laundering compliance program as well as the Bank’s credit administration. The Bank also has received grand jury subpoenas from the United States Department of Justice (the “DOJ”) requesting the production of documents and information in connection with an investigation that appears to be focused on the Bank’s residential lending practices and related issues. The Bank is fully cooperating with these ongoing investigations.

In addition, as previously disclosed, the Company, certain of its current and former officers and directors, and other parties have been named as defendants in a shareholder class action captioned Oklahoma Police Pension and Retirement System v. Sterling Bancorp, Inc., et al., Case No. 2:20-cv-10490-AJT-EAS, filed in the United States District Court for the Eastern District of Michigan. This action alleges violations of the federal securities laws, primarily with respect to disclosures concerning the Bank’s residential lending practices that were made in the Company’s registration statement and prospectus for its initial public offering, in subsequent periodic filings with the SEC, and during earnings calls. The Company intends to vigorously defend this action.

The Bank’s internal review of the circumstances that led to the previously-reported discontinuation of the Advantage Loan Program has progressed significantly and no additional loan repurchase liability or contingency reserves were required to be added in the second quarter.

The outcome of the pending investigations and litigation is uncertain. There can be no assurance (i) that we will not incur material losses due to damages, penalties, costs and/or expenses as a result of such investigations and litigation, (ii) that the reserves we have established will be sufficient to cover such losses, or (iii) that such losses will not materially exceed such reserves and have a material impact on our financial condition or results of operations. In addition, in connection with the audit of the Company’s December 31, 2019 financial statements, the Company is evaluating whether any portion of the reserves should be applied to the fourth quarter of 2019 and/or prior periods. The Company has incurred significant legal expenses in defending the litigation and in cooperating with the investigations and expects to continue to do so during the pendency of these matters.