WAcHTELL, LIPTON, RosEN & KATz

MARTIN LIPTON DAVID A. KATZ T. EIKO STANGE RONALD C CHEN

HERBERT M. WA ILENE KNABLE GOTTS
51 WEST 52ND STREET JOHN F. LYNCH GORDON S. MOODIE
JEFFREY M. WINTNER NEW YORK, N.Y. I 0019-6150 WILLIAM SAVITT DONGJU SONG
TREVOR S. NORWITZ ERIC M. ROSOF BRADLEY R. WILSON
BEN M. GERMANA TELEPHONE: (212) 403- 1000 GREGORY E. OSTLING GRAHAM W. MELI
ANDREW J. NUSSBAUM DAVID B. ANDERS GREGORY E. PESSIN
RACHELLE SILVERBERG
FACSIMILE: <212> 403-2000 ANDREA K. WAHLQUIST CARRIE M REILLY
STEVEN A. COHEN ADAM J. SHAPIRO MARK F. VEBLEN
ANDREW R. BROWNSTEIN DEBORAH L. PAUL GEORGE A. KATZ tl965-19891 NELSON 0. FITTS VICTOR GOLDFELD
MARC WOLINSKY DAVID C. KARP JAMES H. FOGELSON tl967-1991l JOSHUA M. HOLMES EDWARD J LEE
STEVEN A. ROSENBLUM RICHARD K. Kl M LEONARD M. ROSEN t 1965-ZO 141 DAVID E. SHAPIRO BRANDON C. PRICE
JOHN F. SAVARESE JOSHUA R. CAMMAKER DAMIAN G. DIDDEN KEVIN S. SCHWARTZ
SCOTT K. CHARLES MARK GORDON OF COUNSEL IAN BOCZKO MICHAELS. BENN
JODI J SCHWARTZ JOSEPH D. LARSON MATTHEW M. GUEST SABASTIAN V. NILES
WILLIAM T. ALLEN DAVIDS. NEILL
ADAM 0. EMMERICH LAWRENCE S. MAKOW DAVID E. KAHAN ALISON ZIESKE PREISS
MARTIN J.E. ARMS BERNARD W. NUSSBAUM
GEORGE T. CONWAY Ill JEANNEMARIE O'BRIEN DAVID K. LAM TIJANA J. DVORNIC
MICHAEL H. BYOWITZ LAWRENCE B. PEDOWITZ
RALPH M. LEVENE WAYNE M. CARLIN BENJAMIN M. ROTH JENNA E. LEVINE
PETER C. CANELLOS ERIC S ROBINSON
RICHARD G. MASON STEPHEN R. D1PRIMA JOSHUA A. FELTMAN RYAN A. McLEOD
DAVID M. EINHORN PATRICIA A. ROBINSON
MICHAEL J. SEGAL NICHOLAS G. DEMMO ELAINE P. GOLIN
KENNETH B. FORREST ERIC M ROTH
DAVID M. SILK IGOR KIRMAN EMIL A. KLEINHAUS
THEODORE GEWERTZ PAULK ROWE
ROBIN PANOVKA JONATHAN M. MOSES KARESSA L. CAIN
RICHARD D. KATCHER DAVID A. SCHWARTZ
MEYER G. KOPLOW MICHAEL W. SCHWARTZ
DOUGLAS K. MAYER STEPHANIE J. SELIGMAN
ROBERT B. MAZUR ELLIOTT V. STEIN
MARSHALL L. MILLER WARREN R STERN
PHILIP MINDLIN PATRICIA A. VLAHAKIS
ROBERT M. MORGENTHAU AMY R. WOLF
ADMITTED IN THE DISTRICT OF COLUMBIA

COUNSEL

DAVID M ADLERSTEIN PAULA N. GORDON

AMANDA K. AlLEXON NANCY B. GREENBAUM
LOUIS J. BARASH MARK A. KOENIG
FRANCO CASTELLI LAUREN M. KOFKE
DIANNA CHEN J. AUSTIN LYONS
ANDREW J.H. CHEUNG ALICIA C. McCARTHY
PAMELA EHREN KRANZ S. CHRISTOPHER SZCZERBAN
KATHRYN GETTLES-ATWA JEFFREY A. WATIKER
ADAM M. GOGOLAK

DIRECT DIAL: (212) 403-1134

DIRECT FAX: (212) 403-2134
E-MAIL: AKALLEXON@WLRK.COM

May 9, 2017

Mr. Ivan J. Hurwitz

Vice President
Bank Applications Function
Federal Reserve Bank of New York
33 Liberty Street
New York, New York 10045

Ms. Marva V. Cummings

Director for District Licensing
Office of the Comptroller of the Currency
Northern District Office
340 Madison A venue, 51h Floor
New_ York, New York 10173

Re: Applications by Sterling Bancorp for Prior Approval to Acquire Astoria Financial
Corporation and by Sterling National Bank for Prior Approval to Acquire Astoria
Bank, N.A. by Merger

W/2905503v3
WACHTELL, LIPTON, RosEN & KATZ

Mr. Ivan J. Hurwitz

Ms. Marva V. Cummings
May 9, 2017
Page 2

Dear Mr. Hurwitz and Ms. Cummings:

We are submitting this response on behalf of our client, Sterling Bancorp

("Sterling"), in response to the comments submitted by Mr. Matthew Lee on April26 and 29,
2017 ("Comment Letters"), regarding Sterling Bancorp's proposed acquisition of Astoria
Financial Corporation ("Astoria") and Sterling National Bank's ("Sterling Bank") acquisition of
Astoria Bank, by merger (the "Proposed Transaction").

The Comment Letters allege that Sterling Bank's Home Mortgage Disclosure Act
("HMDA") data is irregular and that Sterling Bank is not in compliance with its Community
Reinvestment Act ("CRA") Plan without providing any analysis to support this allegation.
Sterling Bank and Astoria Bank recognize the importance of helping to meet the credit needs of
the communities in which they operate. Sterling Bank believes that it has a strong CRA program
and thorough policies and procedures regarding fair lending compliance, which supports
approval of its applications to the Board of Governors of the Federal Reserve System ("Federal
Reserve") and the Office of the Comptroller of the Currency ("OCC").

Sterling Bank's Fair Lending Program

Sterling Bank's commitment to the fair treatment of all of its customers and potential
customers is an integral part ofthe bank's overall compliance risk management program. The
bank's commitment to an effective fair lending program extends to every aspect of the credit
transaction, including advertising, pre-application inquiries, loan disbursement and ongoing
servtcmg.

Sterling Bank has an established Fair Lending Program that is approved annually by the
Management Enterprise Risk Management Committee. This committee is comprised of the most
senior executives of the Bank, including the Chief Executive Officer, Chief Operating Officer,
Chief Banking Officer, Chief Credit Officer, Chief Risk Officer and Chief Human Capital
Officer. As discussed below, the procedures that are part of the Fair Lending Program require
regular reporting to the business units, the Chief Compliance Officer, Chief Banking Officer,
Chief Operating Officer and the Management Enterprise Risk Committee. Potential issues
surrounding fair lending compliance would be reported to the Audit and Enterprise Risk
Committees of the board of directors. Additionally, the Fair Lending Program is subject to
annual review by Internal Audit with the results reported to the Audit Committee.

Fair Lending Monitoring and Testing

As discussed in more detail below, the Compliance Risk Management Department

assesses fair lending compliance at regular intervals through an established monitoring and
testing regime. All findings stemming from monitoring and testing activity are reported to the
WACHTELL, LIPTON, ROSEN & KATZ

Mr. Ivan J. Hurwitz

Ms. Marva V. Cummings
May 9, 2017
Page 3

appropriate business unit. The Compliance Risk Management Department is responsible for
overseeing any resulting remediation activity to ensure any findings are effectively mitigated.

The Compliance Risk Management Department conducts an annual fair lending risk
assessment as part of its annual compliance risk assessments to identify and measure the risk
inherent in lending processes and to determine what control and monitoring mechanisms are in
place to protect against illegal discrimination and what adjustments may be necessary to address
risk areas.

The Compliance Risk Management Department also conducts a robust statistical analysis
to detect practices that could potentially .result in disparate treatment or pricing discrimination
involving loan applicants. Reviews conducted by Sterling Bank include comparative file
reviews, denial rate monitoring and pricing exception analysis. The comparative file review
includes an evaluation of the processing and underwriting of HMDA-reportable loans (i.e.,
residential mortgages and home owner loans for home improvement purposes). The review
determines whether loan applicants with the same qualifications were given the same
consideration during the loan application process regardless of race/national origin, ethnicity or
other protected bases with respect to both outcome of the application and pricing. With regard to
monitoring denial rates, the Compliance Risk Management Department compares the bank's
denial rates involving protected class applicants (e.g., minority applicants) to denial rates
involving other applicants, and compares such rates to industry metrics.

The Compliance Risk Management Department also oversees the semi-annual analysis of
pricing exceptions, as conducted by the Residential Loan Operations Division. Additionally, on
a semi-annual basis, the Compliance Risk Management Department conducts a Fair Lending
Risk Review, which includes analysis and observations with respect to residential mortgage
applications received, approved and denied. The review analyzes risks in HMDA data quality,
marketing initiatives, underwriting, pricing, redlining, policies and procedures.

Any findings from these reviews are reported semi-annually to the business unit and the
Management Enterprise Risk Committee, as well as to the Enterprise Risk and Audit Committees
of the board of directors, to ensure that any issues identified are appropriately addressed. Under
Sterling's policies, possible remedies for any adverse findings include, but are not limited to,
employee counseling or additional training by management, warnings and restrictions imposed
by management.

Second Review

Sterling Bank also has implemented a second review process for denied applications or
counter-offers in order to minimize any fair lending risk associated with the application and other
credit administration activities and to ensure that the applications of all qualified borrowers are
WACHTELL, LIPTON, ROSEN & KATZ

Mr. Ivan J. Hurwitz

Ms. Marva V. Cummings
May 9, 2017
Page4

approved. This review is conducted in the Residential Loan Operations Division. All mortgage
applications are reviewed by a senior underwriter to determine if the borrowers are qualified for
the loan requested. In the event of a recommendation for declination or counter-offer, two senior
managers (i.e., a senior credit officer and a senior underwriter) must review the application
independently. During this process, every option must be explored, including a program change
or a counter-offer, to bring the loan back into acceptable ranges.

Further, before an extension of credit is made, high-cost testing (testing of APR and
points and fees) is done systemically throughout the loan process. In the event of non-
compliance, an appropriate adjustment to pricing will be made to the locked loan rate or fees.

Consumer Complaint Management Response

The Compliance Risk Management Department is responsible for the complaint

management process as it relates to regulatory matters, such as fair lending allegations. The
Compliance Risk Management Department maintains the central log of consumer complaints
received by the Sterling Bank. This centralized system also includes complaints received
through regulatory agencies, such as the Consumer Financial Protection Bureau, the OCC and
the New York Department of Financial Services, as well as other bank channels, such as a
financial center and/or call center. As complaints may be indicative of a compliance weakness,
the Compliance Risk Management Department tracks and regularly reviews all complaints
received to determine if certain trends or patterns are identified. All complaints are vetted with
the appropriate responsible parties (e.g., business unit and Legal Department). The Compliance
Risk Management Department reports the results of these reviews to the Management Enterprise
Risk Committee. Potential issues surrounding fair lending compliance would be reported to the
Enterprise Risk and Audit Committees of the board of directors. Any potential issues are
addressed accordingly, with oversight from the Compliance Risk Management Department and
escalation to senior management and the board of directors. as appropriate.

Compliance Training

All Sterling Bank employees that are involved in the origination, processing,
underwriting and the credit decision of mortgage loans, are required to undergo compliance
train1ng. Training includes sessions on the bank's lending compliance programs including how to
prevent abusive or predatory lending. Sterling Bank requires employees to complete appropriate
training within 120 days of starting a position and then annually thereafter. The Chief
Compliance Officer or Senior Compliance Officer provides an overview of compliance
expectations at orientation sessions for all staff that are hired by Sterling Bank. Any indication
that an employee does not understand Sterling Bank's fair lending policies will result in
counseling and additional training with the employee's supervisor.
WACHTELL, LIPTON, RosEN & KATZ

Mr. Ivan J. Hurwitz

Ms. Marva V. Cummings
May 9, 2017
Page 5

Guidelines and Procedures

Sterling Bank will adhere to, and will not purchase loans from, brokers, correspondents
or others who do not follow these Principles for Fair and Responsible Lending:

Sterling Bank will not target minorities or the elderly and other protected classes for loan
products that are higher priced than the products aimed at the general population;
Loan fees charged will be reasonable with up front charges limited to the percentage
permitted by the applicable federal and state statutes;
Sterling Bank will not originate ~r purchase loans defined under HOEPA as high cost
mortgages;
Interest rates are set by a nondiscriminatory, consistent and rational method in which
price relates to actual and perceived risk;
Race, national origin, age, gender, marital status, the source of applicant's income
(assuming continuance) and any other protected class status will not be considered in the
assessment of risk;
Sterling Bank will demonstrate a commitment to equal opportunity and fair housing laws
without discrimination in the terms and conditions charged on loans to minority, elderly
or other protected class borrowers;
Sterling Bank will not provide employees or third party originators incentives to steer
minority, elder, low-income or protected class borrowers to loans that have higher fees or
interest rates; and
Sterling Bank will not allow its employees or wholesale customers to "churn" loans,
where the repeated refinancing of loans does not result in a tangible net benefit to the
borrower.

The combination of Sterling Bank's policies, monitoring and reporting has resulted in a
comprehensive fair lending program. Additionally, in its most recent CRA evaluation of Sterling
Bank, the OCC found no evidence of discriminatory or other illegal credit practices inconsistent
with helping to meet community credit needs.

Sterling Bank's Performance

Sterling Bank's does not have a large mortgage loan operation. The bank is primarily a
commercial business lender. As discussed in the applications, Sterling Bank sold its residential
mortgage lending operation in August 2016 and, currently, directly originates residential
mortgage loans to only LMI individuals through its Community Banking team. Sterling will
continue to leverage its successful referral program with Freedom Mortgage with respect to non-
LMI residential mortgages. As an illustration, residential mortgage lending represented a
decreasing percentage of the bank's overall loan portfolio from 2014-2016, ranging from 11.0%
WACHTELL, LIPTON, ROSEN & KATZ

Mr. Ivan J. Hurwitz

Ms. Marva V. Cummings
May 9, 2017
Page 6

in 2014,9.1% in 2015 and 7.3% in 2016. Sterling Bank receives a limited number of home
mortgage applications and, as a result, has a limited number of originations. Below is a
summary of the bank's mortgage loan applications and originations within its assessment area
from 2014 to 2016.

Number of Applications Number of Originations

2014 1,011 762
2015 1,419 1,031
2016 1,314 852
--------------

Generally speaking, loan penetration in Sterling Bank's New York City and Long Island
markets is challenging due to the presence of several longstanding large bank competitors with
aggressive advertising. As of June 30, 2016, Sterling Bank was ranked 21st in market share for
deposits in the New York City Metropolitan Statistical Area ("NYC MSA"), with only 0.59% of
deposits. 1 The top five participants control a collective 62% of the market share.

Unlike what is suggested in the Comment Letters, there is no indication that Sterling
Bank is denying African American or Hispanic applicants inappropriately in the NYC MSA.
Given the low number of overall applications and originations and limited nature of Sterling
Bank's mortgage lending program, it can be challenging to glean statistically significant
conclusions regarding origination or denial rates for any demographic category, especially when
the analysis does not consider credit related loan underwriting factors. However, as noted,
Sterling Bank's commitment to the fair treatment of all of its customers and potential customers
is an integral part of the bank's overall compliance risk management program.

As discussed in detail above, Sterling Bank has comprehensive fair lending policies and
procedures in place, including a second review process, to ensure all applications are reviewed
consistently. Sterling Bank has completed its annual fair lending risk assessments and statistical
analysis for 2014 through the first half of 2016 and found no irregularities. Further, Sterling
Bank is subject to ongoing supervision and examination of its fair lending and CRA compliance
function by the OCC. In its most recent CRA evaluation of Sterling Bank, the OCC reported that
it found no evidence of discriminatory or other illegal credit practices inconsistent with helping
to meet community credit needs. It is important to note that prior to selling its mortgage loan
operations in 2016, the majority of mortgages originated by Sterling Bank were conventional
mortgages that must adhere to rigorous credit and income requirements established by Fannie
Mae and Freddie Mac, which directly affects approval and denial decisions.

1
Summary of Deposits, as of June 30, 2016. The Summary of Deposits uses the consolidated New York-Newark-
Jersey City, NY-NJ-PA MSA for purposes of this calculation.
WAcHTELL, LIPTON, RosEN & KATz

Mr. Ivan J. Hurwitz

Ms. Marva V. Cummings
May 9, 2017
Page 7

Sterling Bank's Compliance with its CRA Plan

The Comment Letters also contend that Sterling Bank is not in compliance with its CRA
Plan but provides no support for this allegation. In 2016, Sterling Bank implemented a three-
year, enhanced CRA Plan to further strengthen its CRA Program. As discussed in the
applications, the CRA Plan, which was reviewed and accepted by the OCC, serves as the
foundation for the Bank's CRA Program. The CRA Plan was specifically designed to expand
CRA-related lending and investments activities and community services, consistent with the
Bank's overall growth and business strategy.

The CRA Plan, which was devel9ped after consultation with a national community
reinvestment organization and some of its members and other organizations based in New York
and New Jersey, includes: (1) measureable goals for CRA lending, investment and service;
(2) CRA compliance governance and reporting on the Bank's progress in achieving its goals;
(3) enhanced CRA training for the Bank's employees, executives and directors; (4) independent
validation by Sterling's Internal Audit Department of the plan's implementation; and
(5) community outreach and input on its CRA performance. The Enterprise Risk Committee of
Sterling Bank's board of directors, which is responsible for oversight of the CRA Program and
CRA Plan, receives periodic reports on the Bank's CRA performance and progress in meeting
the CRA Plan's goals from the management-level Management Enterprise Risk Committee and
the Bank's CRA Officer. Representatives from the Management Enterprise Risk Committee
meet at least annually with community-based organizations to help form product offerings to
reach LMI customers and communities, marketing of products and services and partnership
opportunities. A copy of the CRA Plan, which is also available on Sterling Bank's website, was
provided as an exhibit to the applications submitted to the Federal Reserve and the OCC on April
17,2017.

Under the CRA Plan, the Bank is endeavoring to increase or enhance: (1) the proportion
of its mortgage loans to LMI borrowers and in LMI census tracts: (2) the proportion of its
multifamily loans in LMI census tracts; (3) the number, amount and variety of community
development loans in its CRA assessment areas ("AAs"); (4) the proportion of small loans to
businesses in LMI census tracts and businesses with $1 million or less in revenues; (5) the
amount of qualified investments and grants that support community and economic development;
and (6) the amount and range of community development services provided through branches
and by the Bank's executives, senior officers and staff. A copy of the Sterling 2016 CRA Plan
Progress Report, which is also available on Sterling Bank's website, was provided as an exhibit
to the applications submitted to the Federal Reserve and the OCC on April 17, 2017.

As discussed in the applications, Sterling Bank achieved and, in most cases, exceeded its
enhanced CRA goals for the first operational year under the CRA Plan, and the Bank is confident
of achieving the increased goals in 2017-2018 and beyond. Under the CRA Plan as of year-end
2016, Sterling Bank significantly increased its CRA performance related activities including:
WACHTELL, LIPTON, ROSEN & KATZ

Mr. Ivan J. Hurwitz

Ms. Marva V. Cummings
May 9, 2017
Page 8

1-4 Residential Mortgage Lending

o Increased the percentage of its total residential mortgage lending to LMI

borrowers from 9.7% in 2015 to 24.8% in 2016, which represented 76% of the
percentage of LMI families in its combined AAs and thereby satisfied the
2016 goal of 75%.

o Increased the percentage of its total residential mortgage lending in LMI census
tracts from 19.7% in 2015 to 23.6% in 2016, which met the 2016 goal of75% of
the percentage of owner-9ccupied housing units in LMI census tracts in its
combined AAs.

Multifamily Lending

o Increased the number and amount of multifamily loans in LMI census tracts to
represent 144% of the percentage of multifamily properties in LMI census tracts
in its combined AAs, which far exceeded the 2016 goal of 75%.

Small Business Lending

o Increased the number of loans to businesses in LMI census tracts to represent

156% of the number of businesses in such tracts within its combined AAs, which
far exceeded the 2016 goal of75%.

o Increased the number of business loans to businesses with revenues of $1 million

or less to represent 103% of the percentage of businesses with such revenue level
in its combined AAs, which well exceeded the 2016 goal of75%.

o Expansion of small business lending program participation, such as the New York
City School Construction Authority's ("SCA's") small business lending program
for upgrades and modernization of public schools, through which Sterling Bank
originated 118 small business loans totaling $1.95 million to minority- and
women-owned businesses participating in the SCA program.

Community Development Lending

o Increased community development lending from $71.3 million during 2015 to

$174 million during 2016.

o This increased amount in 2016 represented 13.3% of Sterling Bank's tier 1 capital
amount, which far exceeded the goal of 4.7% of the Bank's tier 1 capital amount.
WAcHTELL, LIPTON, RosEN & KATz

Mr. Ivan J. Hurwitz

Ms. Marva V. Cummings
May 9, 2017
Page 9

Qualified Investments and Grants

o Increased qualified investments and grants from $19.9 million during 2014 to
$49.0 million during 2016.

o This increased amount in 2016 represented 6.6% of Sterling Bank's tier 1 capital
amount, which exceeded the 2016 goal of 4.7% of tier 1 capital.

Community Development Service

o Increased the number of volunteer community development service hours from

595 hours in 2015 to 2,185 hours in 2016 and increased the branch employee
participation rate to 37%, which exceeded the 2016 goal of 2,160 volunteer hours
and a branch employee participation rate of 35%.

o Increased the number of nonprofit community organization boards on which

Sterling Bank executives and senior officers served to 13 such boards, which
exceeded the 2016 goal of service on six of such organization boards.

No Extension of the Comment Period or Public Hearing Necessary

The Comment Letters also request that public hearings be held on the Proposed
Transaction and that the comment period on the applications be extended. The required public
notice was published (in print and electronically) in the New York Post, as well as the Federal
Register and Federal Reserve and OCC websites, and gives the public ample opportunity to
submit comments on the proposal. At this point, the comment period has not closed and the
commenter' s request for additional time does not identify circumstances that would warrant an
extension of the public comment period for this particular proposal. Further, the commenter has
in fact submitted comments and has not identified disputed issues of fact material to the
agencies' decision that require a public hearing or meeting.

* * * * * *
WACHTELL, LIPTON, RosEN & KATZ

Mr. Ivan J. Hurwitz

Ms. Marva V. Cummings
May 9, 2017
Page 10

If you have any questions concerning this submission, please contact me at (212) 403-
1134 or Patricia Robinson at (212) 403-1127.

Sincerely,

~~-~ Amanda K. Allexon

cc: U.S. Department of Justice, Antitrust Division

James P. Blose, Executive Vice President and General Counsel, Sterling Bancorp
Richard K. Kim, Wachtell, Lipton, Rosen & Katz
Patricia A. Robinson, Wachtell, Lipton, Rosen & Katz
Matthew R. Lee, Fair Finance Watch
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