Press Releases

Luther Burbank Corporation Reports 2017 Fourth Quarter Earnings Per Diluted Common Share of $0.45

January 25, 2018 at 4:00 PM EST
Quarterly Cash Dividend of $0.015 Per Common Share Declared

SANTA ROSA, Calif., Jan. 25, 2018 (GLOBE NEWSWIRE) -- Luther Burbank Corporation (NASDAQ:LBC) (the “Company”), the holding company for Luther Burbank Savings (the “Bank”), today reported net income available to common shareholders of $20.4 million, or $0.45 diluted earnings per common share (“EPS”), for the quarter ended December 31, 2017, compared to net income available to common shareholders of $13.3 million, or $0.32 EPS, for the quarter ended December 31, 2016. For the twelve months ended December 31, 2017, net income available to common shareholders totaled $69.4 million, or $1.62 EPS compared to $52.1 million, or $1.24 EPS, for the comparable 2016 period.  Net income for the fourth quarter of 2017 reflects a net tax benefit of $5.8 million which amount includes a $5.3 million tax benefit from the restatement of the Company's net deferred tax assets related to the revocation of its S Corporation status and the recently enacted Tax Cuts and Jobs Act and a $2.9 million tax benefit from the partial deductibility of contingent IPO costs not recognized as GAAP expenses, partially offset by a $2.4 million tax provision on fourth quarter earnings.  Excluding these one-time benefits of $8.2 million, EPS for the quarter ended December 31, 2017 and the twelve months ended December 31, 2017 were $0.27 per share and $1.42 per share, respectively. 

John G. Biggs, President and Chief Executive Officer, stated, “Our 34 year history of profitability continues with earnings of over $20 million for the fourth quarter of 2017.  What makes this possible is a loan portfolio that now exceeds $5 billion, which was achieved by deeper loan and deposit penetration into our attractive west coast markets.”

Mr. Biggs continued, “Asset growth continues to excel, exceeding 13% for the year.  The Company completed a successful common equity IPO, raising net proceeds of over $138 million.  This additional capital will allow us to continue building a strong and growing company.”

“At the same time, we remain vigilant to achieving exceptional efficiency of our operations, with one of the best efficiency ratios of our real estate and commercial bank peers.  Coupled with our excellent efficiency is our extremely low level of non-performing assets, which at year end was only 0.12% of total assets, again, one of the best ratios of our peers.”

Board Declares Quarterly Cash Dividend of $0.015 Per Share
On January 25, 2018, the Board of Directors of the Company declared a quarterly cash dividend of $0.015 per common share.  The fourth quarter dividend declared is prorated based on a regular quarterly cash dividend on our common stock of $0.0575 per share and the portion of the fourth quarter of 2017 during which the Company was a public company, which was 24 days.  The dividend is payable on February 15, 2018 to shareholders of record as of February 5, 2018.

Fourth Quarter and Twelve Months Earnings Summary
Net interest income for the quarter ended December 31, 2017 totaled $27.6 million compared to $28.8 million for the previous quarter and $24.2 million for the 2016 fourth quarter.  The net interest margin for the quarter ended December 31, 2017 was 2.05%, compared to 2.02% for the previous quarter and 1.98% for the 2016 fourth quarter.  For the twelve months ended December 31, 2017, net interest income totaled $111.0 million, compared to $94.6 million for the comparable 2016 period, and the net interest margin was 2.05% for the twelve months ended December 31, 2017, up slightly from 2.04% for the twelve months ended December 31, 2016.

For the quarter ended December 31, 2017, a $1.3 million loan loss provision was recorded compared to a $1.6 million provision in the prior quarter and a $3.6 million reversal recorded in the 2016 fourth quarter.  For the twelve months ended December 31, 2017, we recorded a loan loss reversal of $3.4 million compared to a $12.7 million loan loss reversal for the comparable 2016 period.

Noninterest income for the quarter ended December 31, 2017 totaled $1.4 million, compared to $4.9 million for the previous quarter and $3.1 million for the 2016 fourth quarter.  Noninterest income for the twelve months ended December 31, 2017 totaled $7.4 million compared to $7.8 million for the comparable 2016 period.  The reduction of $3.4 million in noninterest income, or 70.6%, for the quarter ended December 31, 2017 compared to the linked quarter ended September 30, 2017, was attributable to the gain on the $626.1 million multifamily securitization transaction in the third quarter 2017.   The reduction of $1.6 million in noninterest income, or 53.1%, for the quarter ended December 31, 2017 compared to the prior quarter ended December 31, 2016, was primarily attributable to a decrease in FHLB dividends of $825,000 as the FHLB provided an special dividend in the fourth quarter of 2016 of $917 thousand and a decrease of $1.2 million in the gain on sale of loans due to no loan sale activity in the quarter ended December 31, 2017.  The quarter ending December 31, 2016 included gains from retail single family mortgage banking operations which operations were ended in the first quarter of 2017 and gains from multifamily residential portfolio loans sales completed for purposes of asset liability management.

General and administrative ("G&A") expense for the quarter ended December 31, 2017 totaled $13.2 million compared to $13.8 million for the previous quarter and $17.1 million for the 2016 fourth quarter.  The reduction of $3.9 million in G&A expenses, or 22.7%, from the quarter ended December 31, 2017 compared to the quarter ended December 31, 2016, was primarily attributable to compensation and related benefits, resulting from a decrease of $1.1 million in salaries and a $2.3 million reduction in incentive compensation related to the retail mortgage banking operations ending in the first quarter of 2017.   

For the twelve months ended December 31, 2017, G&A expense totaled $56.5 million, down from $61.2 million for the 2016 comparable period.  The reduction of $4.7 million in G&A expenses, or 7.7% was the result of a net decrease of $2.0 million in compensation and employee benefits, a decrease of $542,000 in professional and regulatory fees and a decrease of $1.8 million in other expenses.  The decrease in compensation and employee benefits was primarily related to the retail mortgage banking operations ending in the first quarter of 2017.  The decrease in other noninterest expense was primarily attributable to a net reduction in the provision for off-balance sheet items.  This was associated with a reduction in unfunded construction loan commitments in 2017 versus an increase in unfunded construction loan commitments in 2016.

Balance Sheet Summary
Total assets at December 31, 2017 were $5.7 billion, an increase of over $640.8 million from December 31, 2016. The increase was primarily due to a $601 million increase in loans and a $48 million increase in investments available for sale. 

The multifamily residential (“MFR”) mortgage loan portfolio totaled $2.9 billion at December 31, 2017 compared to $2.6 billion at December 31, 2016 and represents 57.3% of the total loan portfolio. For the quarter and twelve months ended December 31, 2017, MFR loan originations totaled $344.2 million and $1.30 billion, respectively, compared to $338.9 million and $1.06 billion, for the 2016 comparable periods. At December 31, 2017, the MFR pipeline totaled $188.4 million.

The single family residential mortgage loan portfolio totaled $2.0 billion at December 31, 2017, compared to $1.7 billion at December 31, 2016 and represents 38.8% of the total loan portfolio.  For the quarter and twelve months ended December 31, 2017, residential loan originations for portfolio totaled $221.1 million and $726.5 million, respectively, compared to $203.7 million and $782.6 million for the comparable 2016 periods.  At December 31, 2017, the residential mortgage pipeline totaled approximately $114.0 million.

Deposits totaled $4.0 billion at December 31, 2017, an increase of $617.3 million from December 31, 2016. 

Stockholders’ equity totaled $549.7 billion, or 9.6% of total assets at December 31, 2017, an increase of $145.4 million from December 31, 2016, or an increase of 35.9%.  Luther Burbank Savings’ capital levels continue to be significantly above the minimum levels required to be designated as “well-capitalized” for bank regulatory purposes. At December 31, 2017, Tier 1 leverage, Common Equity Tier 1 risk based, Tier 1 risk-based and Total risk-based capital ratios were 12.54%, 19.90%, 19.90% and 20.84%, respectively for the Bank, and 11.26%, 16.05%, 17.84% and 18.78%, respectively for the Company. At December 31, 2017, the Company’s tangible common equity ratio was 9.58%.

Asset Quality
Non-performing loans (“NPLs”), totaled $7.0 million, or 0.14% of total loans, at December 31, 2017, compared to $2.6 million, or 0.06% of total loans, at December 31, 2016.  There was not any real estate owned at December 31, 2017 or December 31, 2016.

About Luther Burbank Corporation

Luther Burbank Corporation, with assets of $5.7 billion, is the holding company for Luther Burbank Savings. Established in 1983, Luther Burbank Savings, with deposits in California totaling $4.0 billion, is the 19th largest commercial bank in California and provides its business and retail customers and local communities it serves with quality financial products and services through nine convenient banking branch locations in Northern and Southern California and eight lending offices in California, Seattle, Washington and Portland, Oregon.  The Company also has multiple delivery channels, including its flexible mobile banking app.

Cautionary Statements Regarding Forward-Looking Information

Certain statements in this earnings release are forward-looking statements that reflect the Company’s current view with respect to, among other things, future events and our Company’s financial and operational performance.  These statements are often, but not always, made through the use of such words as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “outlook,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would,” and similar terms and phrases, including references to assumptions.

Forward-looking statements are based on various assumptions and analyses made by us in light of our management’s experience and perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate under the circumstances. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors (many of which are beyond our control) that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. These factors include, without limitation, the following: the timing and occurrence or non-occurrence of events that may be subject to circumstances beyond our control; increases in competitive pressure among financial institutions or from non-financial institutions; changes in the interest rate environment; changes in deposit flows, loan demand or collateral values; changes in accounting principles, policies or guidelines; changes in general economic conditions, either nationally or locally in some or all areas in which we do business, or conditions in the real estate or securities markets or the banking industry; legislative or regulatory changes, including those that may be implemented by the new administration in Washington, D.C.; supervision and examination by federal and state banking regulators; our ability to successfully implement technological changes; our ability to successfully consummate new business initiatives; or our ability to implement enhanced risk management policies, procedures and controls commensurate with shifts in our business strategies and regulatory expectations. The forward-looking statements are made as of the date of this communication, and we do not intend, and assume no obligation, to update any forward-looking statements to reflect events or circumstances after the date of this press release, except as required by applicable law.

About Non-GAAP Financial Measures
Certain of the financial measures and ratios we present, including “pre-tax, pre-provision net earnings,” “tangible book value,” “efficiency ratio,” “tangible assets,” “tangible stockholders’ equity,” “tangible stockholders’ equity to tangible assets,” “return on average tangible equity,” “proforma net income” and “proforma ratios” are supplemental measures that are not required by, or are not presented in accordance with, U.S. generally accepted accounting principles (GAAP). We refer to these financial measures and ratios as “non-GAAP financial measures.” We consider the use of select non-GAAP financial measures and ratios to be useful for financial and operational decision making and useful in evaluating period-to-period comparisons.  We believe that management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, analyzing and comparing past, present and future periods.

These non-GAAP financial measures should not be considered a substitute for financial information presented in accordance with GAAP and you should not rely on non-GAAP financial measures alone as measures of our performance. The non-GAAP financial measures we present may differ from non-GAAP financial measures used by our peers or other companies. We compensate for these limitations by providing the equivalent GAAP measures whenever we present the non-GAAP financial measures and by including a reconciliation of the impact of the components adjusted for in the non-GAAP financial measure so that both measures and the individual components may be considered when analyzing our performance. A reconciliation of non-GAAP financial measures to the comparable GAAP financial measures is included at the end of the financial statement tables.

 

                     
CONSOLIDATED BALANCE SHEETS (UNAUDITED)                    
(In thousands except for per share data and ratios)    
  31-Dec-17   30-Sep-17   30-Jun-17   31-Mar-17   31-Dec-16  
                     
ASSETS                    
Cash and cash equivalents $   75,578     $   87,051     $   86,819     $   75,719     $   59,208    
Available for sale investment securities, at fair value     503,288         471,438         483,846         466,564         459,162    
Held to maturity investment securities, at amortized cost     6,921         6,965         7,222         7,267         7,561    
Loans held-for-sale     -          39,011         701,947         47,844         34,974    
Loans held-for-investment (2)     5,041,547         4,630,926         4,306,893         4,729,359         4,439,766    
Allowance for loan losses     (30,312 )       (28,984 )       (27,356 )       (33,699 )       (33,298 )  
Accrued interest receivable     14,901         13,902         14,561         13,174         12,141    
Federal Home Loan Bank stock     27,733         40,159         38,582         32,910         30,410    
Premises and equipment, net     22,452         22,697         23,262         23,785         24,356    
Goodwill     3,297         3,297         3,297         3,297         3,297    
Prepaid expenses and other assets     38,975         33,095         30,344         25,320         26,008    
                     
Total assets $ 5,704,380     $ 5,319,557     $ 5,669,417     $ 5,391,540     $  5,063,585    
                     
LIABILITIES AND STOCKHOLDERS' EQUITY                    
Liabilities:                    
Deposits $   3,951,238     $   3,863,411     $   3,681,175     $   3,620,642     $   3,333,969    
Federal Home Loan Bank advances     989,260         807,667         1,359,573         1,157,480         1,111,886    
Junior subordinated deferrable interest debentures     61,857         61,857         61,857         61,857         61,857    
Senior debt     94,161         94,128         94,095         94,061         94,028    
Accrued interest payable     1,781         2,112         3,192         1,398         1,302    
Other liabilities and accrued expenses     56,338         56,922         53,239         48,596         56,168    
                     
Total liabilities     5,154,635         4,886,097         5,253,131         4,984,034         4,659,210    
                     
Stockholders' equity:                    
Common stock, no par value; 100,000,000 shares authorized; 56,107,577 and
42,000,000 shares issued and outstanding at December 31, 2017 and 2016,
respectively
    458,570         2,262         2,262         2,262         2,262    
Unearned Restricted Stock Award common stock     (4,283 )       -          -          -          -     
Retained earnings     102,459         435,912         418,664         410,143         407,648    
Accumulated other comprehensive loss, net of taxes     (7,001 )       (4,714 )       (4,640 )       (4,899 )       (5,535 )  
                     
Total stockholders' equity     549,745         433,460         416,286         407,506         404,375    
                     
Total liabilities and stockholders' equity $ 5,704,380     $ 5,319,557     $ 5,669,417     $ 5,391,540     $   5,063,585    
                     
Net tangible book value (1) $   546,448     $   430,163     $   412,989     $   404,209     $   401,078    
Period end shares outstanding (3)   56,107,577       42,000,000       42,000,000       42,000,000        42,000,000    
                     
(1) = Considered a non-GAAP financial measure. See ‘‘Non-GAAP Financial Measures’’ for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure. Pre-tax, pre-provision net earnings is defined as net income plus income tax expense and provision for (reversal of) loan losses. Net tangible book value is defined as total assets less goodwill and total liabilities. Efficiency ratio is defined as the ratio of noninterest expense to net interest income plus noninterest income. Tangible assets is defined as total assets less goodwill.  Tangible equity is defined as total equity less goodwill.  We calculate our pro forma net income, return on average assets, return on average equity and return on average tangible equity by adding back our franchise S Corporation tax to net income, and using a combined C Corporation effective tax rate for Federal and California income taxes of 42.0%. This calculation reflects only the change in our status as an S Corporation and does not give effect to any other transaction.    
(2) = Loans held-for-investment include unamortized deferred fees/costs. All portfolio loans are collateralized by real estate with the exception of one $50 thousand non-mortgage loan.    
(3) = Earnings per common share, basic and diluted, book value per common share and number of common shares outstanding have been adjusted retroactively to reflect a 200-for-1 stock split effective April 27, 2017.    
     


                             
CONSOLIDATED INCOME STATEMENTS (UNAUDITED)                            
(In thousands except for per share data and ratios) For the Three Months Ended   For the Years Ended  
  31-Dec-17   30-Sep-17   30-Jun-17   31-Mar-17   31-Dec-16   31-Dec-17   31-Dec-16  
Interest income:                            
Interest and fees on loans $   42,477     $   44,180   $   41,173     $   38,743     $   36,054     $   166,573     $   139,385    
Interest and dividends on investment securities     2,159         2,016       1,875         1,664         1,251         7,714         4,774    
                             
Total interest income     44,636         46,196       43,048         40,407         37,305         174,287         144,159    
                             
Interest expense:                            
Interest on deposits     11,285         10,156       9,058         8,314         8,329         38,813         31,648    
Interest on FHLB advances     3,759         5,260       4,260         3,276         2,873         16,555         10,219    
Interest on junior subordinated deferrable interest debentures     447         430       408         380         368         1,665         1,348    
Interest on other borrowings     1,578         1,577       1,577         1,577         1,578         6,309         6,309    
                             
Total interest expense     17,069         17,423       15,303         13,547         13,148         63,342         49,524    
                             
Net interest income before provision for loan losses     27,567         28,773       27,745         26,860         24,157         110,945         94,635    
Provision (reversal) of provision for loan losses     1,250         1,550       (6,481 )       309         (3,624 )       (3,372 )       (12,703 )  
Net interest income after provision (reversal) for loan losses     26,317         27,223       34,226         26,551         27,781         114,317         107,338    
                             
Noninterest income:                            
Increase in cash surrender value of life insurance     48         48       47         49         55         192         233    
Net gain on sale of loans     -          4,133       (693 )       (163 )       1,140         3,277         3,884    
FHLB dividends     696         581       562         634         1,521         2,473         2,848    
Other income     737         156       272         351         344         1,516         879    
                             
Total noninterest income     1,481         4,918       188         871         3,060         7,458         7,844    
                             
Noninterest expense:                            
Compensation and related benefits     8,140         8,664       9,523         10,197         11,887         36,524         38,551    
Deposit insurance premium     404         580       431         397         375         1,812         1,725    
Professional and regulatory fees     582         428       840         184         650         2,034         2,577    
Occupancy     1,295         1,339       1,223         1,298         1,280         5,155         5,477    
Depreciation and amortization     724         717       728         734         743         2,903         2,873    
Data processing     789         791       797         790         933         3,167         3,322    
Marketing     298         253       205         179         294         935         875    
Other expenses     989         1,010       1,093         922         938         4,014         5,842    
                             
Total noninterest expense     13,221         13,782       14,840         14,701         17,100         56,544         61,242    
                             
Income before provision for income taxes     14,577         18,359       19,574         12,721         13,741         65,231         53,940    
Provision for income taxes     (5,844 )       612       653         426         464         (4,153 )       1,819    
                             
Net income $   20,421     $   17,747   $   18,921     $   12,295     $   13,277     $   69,384     $   52,121    
Basic earnings per common share (3) $   0.45     $   0.42   $   0.45     $   0.29     $   0.32     $   1.62     $   1.24    
Diluted earnings per common share (3) $   0.45     $   0.42   $   0.45     $   0.29     $   0.32     $   1.62     $   1.24    
Weighted average common shares outstanding - basic (3)   45,667,516       42,000,000     42,000,000       42,000,000       42,000,000       42,916,879        42,000,000    
Weighted average common shares outstanding - diluted (3)   45,831,743       42,000,000     42,000,000       42,000,000       42,000,000       42,957,936        42,000,000    
                                                       
(1) = Considered a non-GAAP financial measure. See ‘‘Non-GAAP Financial Measures’’ for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure. Pre-tax, pre-provision net earnings is defined as net income plus income tax expense and provision for (reversal of) loan losses. Net tangible book value is defined as total assets less goodwill and total liabilities. Efficiency ratio is defined as the ratio of noninterest expense to net interest income plus noninterest income. Tangible assets is defined as total assets less goodwill.  Tangible equity is defined as total equity less goodwill.  We calculate our pro forma net income, return on average assets, return on average equity and return on average tangible equity by adding back our franchise S Corporation tax to net income, and using a combined C Corporation effective tax rate for Federal and California income taxes of 42.0%. This calculation reflects only the change in our status as an S Corporation and does not give effect to any other transaction.    
(2) = Loans held-for-investment include unamortized deferred fees/costs. All portfolio loans are collateralized by real estate with the exception of one $50 thousand non-mortgage loan.      
(3) = Earnings per common share, basic and diluted, book value per common share and number of common shares outstanding have been adjusted retroactively to reflect a 200-for-1 stock split effective April 27, 2017.    
     

 

                             
CONSOLIDATED FINANCIAL HIGHLIGHTS                            
(In thousands except for per share data and ratios) As of or for the Three Months Ended   As of or for the Years Ended  
  31-Dec-17   30-Sep-17   30-Jun-17   31-Mar-17   31-Dec-16   31-Dec-17   31-Dec-16  
RESULTS OF OPERATIONS                            
Interest income $   44,636     $   46,196     $   43,048     $   40,407     $   37,305     $   174,287     $   144,159    
Interest expense     17,069         17,423         15,303         13,547         13,148         63,342         49,524    
Net interest income     27,567         28,773         27,745         26,860         24,157         110,945         94,635    
Provision for (reversal of) loan losses     1,250         1,550         (6,481 )       309         (3,624 )       (3,372 )       (12,703 )  
Net interest income after provision for loan losses     26,317         27,223         34,226         26,551         27,781         114,317         107,338    
Noninterest income     1,481         4,918         188         871         3,060         7,458         7,844    
Noninterest expense     13,221         13,782         14,840         14,701         17,100         56,544         61,242    
Income before provision for income taxes     14,577         18,359         19,574         12,721         13,741         65,231         53,940    
Provision for income taxes     (5,844 )       612         653         426         464         (4,153 )       1,819    
Net income $   20,421     $   17,747     $   18,921     $   12,295     $   13,277     $   69,384     $   52,121    
Pre-tax, pre-provision net earnings (1)     15,827         19,909         13,093         13,030         10,117         61,859         41,237    
Basic earnings per share (3) $   0.45     $   0.42     $   0.45     $   0.29     $   0.32     $   1.62     $   1.24    
Diluted earnings per share (3) $   0.45     $   0.42     $   0.45     $   0.29     $   0.32     $   1.62     $   1.24    
Average basic shares outstanding (3)   45,667,516       42,000,000       42,000,000       42,000,000       42,000,000       42,916,879        42,000,000    
Average diluted shares outstanding (3)   45,831,743       42,000,000       42,000,000       42,000,000       42,000,000       42,957,936        42,000,000    
PERFORMANCE RATIOS                            
Return on average:                            
Assets   1.50 %     1.23 %     1.37 %     0.95 %     1.08 %     1.26 %     1.11 %  
Stockholders' equity   17.97 %     16.62 %     18.41 %     12.01 %     13.15 %     16.30 %     13.35 %  
Tangible stockholders' equity (1)   14.95 %     16.50 %     18.33 %     12.17 %     13.24 %     12.70 %     13.00 %  
Efficiency ratio (1)   45.51 %     40.91 %     53.13 %     53.01 %     62.83 %     47.76 %     59.76 %  
Noninterest expense to average assets   0.97 %     0.95 %     1.08 %     1.14 %     1.39 %     1.03 %     1.31 %  
Loans to deposit ratio   127.59 %     120.88 %     136.07 %     131.94 %     134.22 %     127.59 %     134.22 %  
Average stockholders' equity to average assets   8.32 %     7.38 %     7.45 %     7.92 %     8.21 %     7.76 %     8.35 %  
Dividend payout ratio   230.64 %     2.82 %     54.97 %     79.71 %     33.89 %     97.72 %     32.23 %  
PRO FORMA                            
Pro forma net income (1)     8,455         10,648         11,353         7,378         7,970         37,834         31,285    
Pro forma return on average:                            
Assets (1)   0.62 %     0.74 %     0.82 %     0.57 %     0.65 %     0.69 %     0.67 %  
Stockholders' equity (1)   7.44 %     9.97 %     11.04 %     7.21 %     7.89 %     8.89 %     8.02 %  
Tangible stockholders' equity (1)   7.49 %     10.05 %     11.13 %     7.27 %     7.96 %     8.96 %     8.08 %  
YIELDS/ RATES                            
Yield on loans   3.53 %     3.46 %     3.37 %     3.38 %     3.31 %     3.43 %     3.36 %  
Yield on investments   1.57 %     1.39 %     1.38 %     1.32 %     1.07 %     1.42 %     1.07 %  
Yield on interest earning assets   3.31 %     3.24 %     3.16 %     3.16 %     3.06 %     3.22 %     3.11 %  
Cost of deposits   1.15 %     1.09 %     1.00 %     0.96 %     1.01 %     1.05 %     0.99 %  
Cost of borrowings   2.25 %     1.85 %     1.75 %     1.69 %     1.68 %     1.86 %     1.73 %  
Cost of interest bearing liabilities   1.38 %     1.31 %     1.21 %     1.15 %     1.18 %     1.27 %     1.17 %  
Net interest spread   1.93 %     1.93 %     1.95 %     2.01 %     1.88 %     1.95 %     1.94 %  
Net interest margin   2.05 %     2.02 %     2.03 %     2.10 %     1.98 %     2.05 %     2.04 %  
                                                         
(1) = Considered a non-GAAP financial measure. See ‘‘Non-GAAP Financial Measures’’ for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure. Pre-tax, pre-provision net earnings is defined as net income plus income tax expense and provision for (reversal of) loan losses. Net tangible book value is defined as total assets less goodwill and total liabilities. Efficiency ratio is defined as the ratio of noninterest expense to net interest income plus noninterest income. Tangible assets is defined as total assets less goodwill.  Tangible equity is defined as total equity less goodwill.  We calculate our pro forma net income, return on average assets, return on average equity and return on average tangible equity by adding back our franchise S Corporation tax to net income, and using a combined C Corporation effective tax rate for Federal and California income taxes of 42.0%. This calculation reflects only the change in our status as an S Corporation and does not give effect to any other transaction.    
(2) = Loans held-for-investment include unamortized deferred fees/costs. All portfolio loans are collateralized by real estate with the exception of one $50 thousand non-mortgage loan.    
(3) = Earnings per common share, basic and diluted, book value per common share and number of common shares outstanding have been adjusted retroactively to reflect a 200-for-1 stock split effective April 27, 2017.      
                             

 

                             
CONSOLIDATED FINANCIAL HIGHLIGHTS                            
(In thousands except for per share data and ratios) As of or for the Three Months Ended   As of or for the Years Ended  
  31-Dec-17   30-Sep-17   30-Jun-17   31-Mar-17   31-Dec-16   31-Dec-17   31-Dec-16  
CAPITAL                            
Total equity to total assets   9.64 %     8.15 %     7.34 %     7.56 %     7.99 %     9.64 %     7.99 %  
Tangible stockholders' equity to tangible assets (1)   9.58 %     8.09 %     7.29 %     7.50 %     7.93 %     9.58 %     7.93 %  
Book value per share $   9.80     $   10.32     $   9.91     $   9.70     $   9.63     $   9.80     $   9.63    
Tangible book value per share (1) $   9.74     $   10.24     $   9.83     $   9.62     $   9.55     $   9.74     $   9.55    
Market value per share (period end) $   12.04      N/A     N/A     N/A     N/A    $   12.04      N/A   
AVERAGE BALANCES                            
Loans and loans held for sale $ 4,818,654     $ 5,109,599     $ 4,887,459     $ 4,578,372     $ 4,360,442     $ 4,849,894     $  4,146,713    
Earning assets   5,388,238       5,705,891       5,455,216       5,113,760       4,869,178       5,417,323        4,633,321    
Total assets   5,461,226       5,786,035       5,517,404       5,172,186       4,921,585       5,485,832        4,676,676    
Deposits   3,914,149         3,734,643         3,627,225         3,467,450         3,313,524         3,687,224        3,200,180    
Total equity     454,635         427,018         411,176         409,451         404,014         425,698         390,318    
Tangible equity (1)     451,338         423,721         407,879         406,154         400,717         422,401         387,021    
ASSET QUALITY                            
Net (charge-offs) recoveries $   78     $   78     $   138     $   92     $   (2 )   $   386     $   492    
Nonperforming loans     7,037         5,829         6,123         4,314         2,641         7,037         2,641    
Nonperforming assets     7,037         5,829         6,123         4,314         2,641         7,037         2,641    
Allowance for loan losses     30,312         28,984         27,356         33,699         33,298         30,312         33,298    
Annualized net (charge offs) recoveries to average loans   0.01 %     0.01 %     0.01 %     0.01 %     0.00 %     0.01 %     0.01 %  
Nonperforming loans to total loans   0.14 %     0.13 %     0.12 %     0.09 %     0.06 %     0.14 %     0.06 %  
Nonperforming assets to total assets   0.12 %     0.11 %     0.11 %     0.08 %     0.05 %     0.12 %     0.05 %  
Allowance for loan losses to loans held-for-investment (2)   0.60 %     0.63 %     0.64 %     0.71 %     0.75 %     0.60 %     0.75 %  
Allowance for loan losses to nonperforming loans   430.75 %     497.24 %     446.77 %     781.15 %     1260.81 %     430.75 %     1260.81 %  
LOAN COMPOSITION                            
Multifamily residential  $ 2,887,438     $ 2,628,691     $ 3,055,559     $ 2,889,947     $ 2,600,262     $ 2,887,438     $  2,600,262    
Single family residential   1,957,546       1,857,042       1,787,194       1,734,911       1,746,148       1,957,546        1,746,148    
Commercial real estate     112,492         95,668         73,459         69,754         59,611         112,492         59,611    
Construction and land      41,165         48,004         51,433         42,142         29,465         41,165         29,465    
Non-mortgage     50         50         50         50         50         50         50    
DEPOSIT COMPOSITION                            
Non-interest bearing transaction accounts $   30,899     $   27,166     $   23,907     $   14,490     $   11,826     $   30,899     $   11,826    
Interest bearing transaction accounts     203,159         196,062         192,033         197,729         191,892         203,159         191,892    
Money market deposit accounts   1,474,498       1,430,201       1,532,234       1,571,721       1,500,976       1,474,498        1,500,976    
Time deposits   2,242,682       2,209,982       1,933,001       1,836,702       1,629,275       2,242,682        1,629,275    
                                                         
(1) = Considered a non-GAAP financial measure. See ‘‘Non-GAAP Financial Measures’’ for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure. Pre-tax, pre-provision net earnings is defined as net income plus income tax expense and provision for (reversal of) loan losses. Net tangible book value is defined as total assets less goodwill and total liabilities. Efficiency ratio is defined as the ratio of noninterest expense to net interest income plus noninterest income. Tangible assets is defined as total assets less goodwill.  Tangible equity is defined as total equity less goodwill.  We calculate our pro forma net income, return on average assets, return on average equity and return on average tangible equity by adding back our franchise S Corporation tax to net income, and using a combined C Corporation effective tax rate for Federal and California income taxes of 42.0%. This calculation reflects only the change in our status as an S Corporation and does not give effect to any other transaction.    
(2) = Loans held-for-investment include unamortized deferred fees/costs. All portfolio loans are collateralized by real estate with the exception of one $50 thousand non-mortgage loan.    
(3) = Earnings per common share, basic and diluted, book value per common share and number of common shares outstanding have been adjusted retroactively to reflect a 200-for-1 stock split effective April 27, 2017.    
     

 

                                                           
Average Balance Sheet and Net Interest Analysis                                                          
(Dollars in thousands)                                                               
                                           
        For the Three Months Ended  
        12/31/2017   9/30/2017   6/30/2017   3/31/2017   12/31/2016  
        Average   Interest    Average    Average   Interest    Average    Average   Interest    Average    Average   Interest    Average    Average   Interest    Average   
        Balance   Inc / Exp   Yield/Rate (6)   Balance   Inc / Exp   Yield/Rate (6)   Balance   Inc / Exp   Yield/Rate (6)   Balance   Inc / Exp   Yield/Rate (6)   Balance   Inc / Exp   Yield/Rate (6)  
  Interest-Earning Assets                                                            
  Multifamily residential $   2,748,817   $   25,093   3.65 %   $   3,127,491   $   27,445   3.51 %   $   2,987,171   $   25,681   3.44 %   $   2,724,909   $   23,490   3.45 %   $   2,524,648   $   21,690   3.44 %  
  Single family residential     1,924,628       15,830   3.29 %       1,852,487       15,371   3.32 %       1,780,312       14,178   3.19 %       1,755,119       14,118   3.22 %       1,744,356       13,444   3.08 %  
  Commercial       97,252       1,120   4.61 %       81,577       933   4.57 %       71,907       841   4.68 %       60,953       784   5.14 %       56,555       668   4.72 %  
  Construction, land and NM     47,957       434   3.62 %       48,044       431   3.59 %       48,069       473   3.94 %       37,391       351   3.75 %       34,883       252   2.89 %  
  Total loans (1)       4,818,654       42,477   3.53 %       5,109,599       44,180   3.46 %       4,887,459       41,173   3.37 %       4,578,372       38,743   3.38 %       4,360,442       36,054   3.31 %  
  Securities available-for-sale     473,085       1,826   1.54 %       484,469       1,646   1.36 %       475,090       1,603   1.35 %       456,953       1,477   1.29 %       421,956       1,088   1.03 %  
  Securities held-to-maturity (2)     6,948       59   3.40 %       7,047       57   3.24 %       7,249       61   3.37 %       7,452       59   3.17 %       7,751       62   3.20 %  
  Cash and cash equivalents     89,551       274   1.22 %       104,776       313   1.19 %       85,418       211   0.99 %       70,983       128   0.72 %       79,029       101   0.51 %  
  Total interest-earning assets $ 5,388,238   $ 44,636   3.31 %   $   5,705,891   $   46,196   3.24 %   $   5,455,216   $   43,048   3.16 %   $   5,113,760   $   40,407   3.16 %   $   4,869,178   $   37,305   3.06 %  
  Noninterest-earning assets     72,988               80,144               62,188               58,426               52,407          
  Total Assets   $ 5,461,226           $ 5,786,035           $ 5,517,404           $ 5,172,186           $ 4,921,585          
                                                                   
  Interest-Bearing Liabilities                                                            
  Transaction accounts (3) $   236,169   $   427   0.72 %   $   220,206   $   416   0.76 %   $   212,295   $   359   0.68 %   $   205,712   $   351   0.68 %   $   197,987   $   333   0.67 %  
  Money market demand accounts     1,423,937       3,079   0.86 %       1,462,382       3,016   0.82 %       1,553,124       3,085   0.79 %       1,545,433       2,919   0.76 %       1,493,331       2,822   0.76 %  
  Time deposits       2,254,043       7,779   1.38 %       2,052,055       6,724   1.31 %       1,861,806       5,614   1.21 %       1,716,305       5,044   1.18 %       1,622,206       5,174   1.28 %  
    Total deposits       3,914,149       11,285   1.15 %       3,734,643       10,156   1.09 %       3,627,225       9,058   1.00 %       3,467,450       8,314   0.96 %       3,313,524       8,329   1.01 %  
  FHLB advances       873,206       3,759   1.72 %       1,412,319       5,260   1.49 %       1,271,353       4,260   1.34 %       1,084,901       3,276   1.21 %       993,505       2,873   1.16 %  
  Senior debt       94,139       1,578   6.70 %       94,106       1,577   6.70 %       94,073       1,577   6.71 %       94,037       1,577   6.71 %       94,006       1,578   6.71 %  
  Junior subordinated debentures     61,857       447   2.89 %       61,857       430   2.78 %       61,857       408   2.64 %       61,857       380   2.46 %       61,857       368   2.38 %  
  Total interest-bearing liabilities  $   4,943,351   $   17,069   1.38 %   $   5,302,925   $   17,423   1.31 %   $   5,054,508   $   15,303   1.21 %   $   4,708,245   $   13,547   1.15 %   $   4,462,892   $   13,148   1.18 %  
  Noninterest-bearing liabilities     63,240               56,092               51,720               54,490               54,679          
  Total stockholders' equity     454,635               427,018               411,176               409,451               404,014          
  Total liabilities and stockholders' equity $   5,461,226           $   5,786,035           $   5,517,404           $   5,172,186           $   4,921,585          
                                                                   
                                                                   
                                                                   
  Net interest spread (4)         1.93 %           1.93 %           1.95 %           2.01 %           1.88 %  
  Net interest income/margin (5)     $   27,567   2.05 %       $   28,773   2.02 %       $   27,745   2.03 %       $   26,860   2.10 %       $   24,157   1.98 %  
                                                                   
                                                                   
  (1) Loan balance includes portfolio real estate loans, real estate loans held for sale and one $50 thousand non-mortgage loan.  Non-accrual loans are included in total loan balances.  No adjustment has been made for these loans in the calculation of yields.  Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs.   
  (2) Securities held to maturity include municipal securities.  Yields are not calculated on a tax equivalent basis.   
  (3) Transaction accounts include both interest and non-interest bearing deposits.                                      
  (4) Net interest spread is the average yield on total interest-earning assets minus the average rate on total interest-bearing liabilities.   
  (5) Net interest margin is net interest income divided by total interest-earning assets.                                       
  (6) Yields shown are annualized.                          
                                                                   

 

                       
Average Balance Sheet and Net Interest Analysis                      
(Dollars in thousands)                         
                             
        For the Years Ended December 31,
          2017     2016
        Average   Interest    Average    Average   Interest    Average 
        Balance   Inc / Exp   Yield/Rate   Balance   Inc / Exp   Yield/Rate
  Interest-Earning Assets                      
  Multifamily residential $   2,897,794       101,708   3.51 %   $   2,437,487       84,766   3.48 %
  Single family residential     1,828,668       59,498   3.25 %       1,629,370       50,756   3.12 %
  Commercial       78,032       3,678   4.71 %       49,863       2,886   5.79 %
  Construction, land and NM     45,400       1,689   3.72 %       29,993       977   3.26 %
  Total loans (1)       4,849,894       166,573   3.43 %       4,146,713       139,385   3.36 %
  Securities available-for-sale     472,477       6,553   1.39 %       402,035       4,151   1.03 %
  Securities held-to-maturity (2)     7,172       236   3.29 %       8,570       253   2.95 %
  Cash and cash equivalents     87,780       925   1.05 %       76,003       370   0.49 %
  Total interest-earning assets $   5,417,323   $   174,287   3.22 %   $   4,633,321   $   144,159   3.11 %
  Noninterest-earning assets     68,509               43,355        
  Total Assets   $   5,485,832           $   4,676,676        
                             
  Interest-Bearing Liabilities                      
  Transaction accounts (3) $   218,683   $   1,553   0.71 %   $   130,573   $   502   0.38 %
  Money market demand accounts     1,495,794       12,099   0.81 %       1,440,129       10,506   0.73 %
  Time deposits       1,972,747       25,161   1.28 %       1,629,478       20,640   1.27 %
    Total deposits       3,687,224       38,813   1.05 %       3,200,180       31,648   0.99 %
  FHLB advances       1,160,555       16,555   1.43 %       879,237       10,219   1.16 %
  Senior debt       94,090       6,309   6.71 %       93,956       6,309   6.71 %
  Junior subordinated debentures     61,857       1,665   2.69 %       61,857       1,348   2.18 %
  Total interest-bearing liabilities  $   5,003,726   $   63,342   1.27 %   $   4,235,230   $   49,524   1.17 %
  Noninterest-bearing liabilities     56,408               51,128        
  Total stockholders' equity     425,698               390,318        
  Total liabilities and stockholders' equity $   5,485,832           $   4,676,676        
                             
                             
                             
  Net interest spread (4)         1.95 %           1.94 %
  Net interest income/margin (5)     $   110,945   2.05 %       $   94,635   2.04 %
                             
  (1) Loan balance includes portfolio real estate loans, real estate loans held for sale and one $50 thousand non-mortgage loan.  Non-accrual loans are included in total loan balances.  No adjustment has been made for these loans in the calculation of yields.  Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs. 
  (2) Securities held to maturity include municipal securities .  Yields are not calculated on a tax equivalent basis. 
  (3) Transaction accounts include both interest and non-interest bearing deposits.  See "Selected Historical Financial Data". 
  (4) Net interest spread is the average yield on total interest-earning assets minus the average rate on total interest-bearing liabilities. 
  (5) Net interest margin is net interest income divided by total interest-earning assets. 
                             

 

                                 
Non-GAAP Reconciliation                                 
(Dollars in thousands) As of and for the Three Months Ended       As of and for the Years Ended  
  31-Dec-17   30-Sep-17   30-Jun-17   31-Mar-17   31-Dec-16       31-Dec-17   31-Dec-16  
Pre-tax, pre-provision net earnings                                
Income before taxes $   14,577     $   18,359     $   19,574     $   12,721     $   13,741         $   65,231     $   53,940    
Plus: Provision (reversal of provision) for loan losses     1,250         1,550         (6,481 )       309         (3,624 )           (3,372 )       (12,703 )  
Pre-tax, pre-provision net earnings $   15,827     $   19,909     $   13,093     $   13,030     $   10,117         $   61,859     $   41,237    
                                 
Net Tangible Book Value                                
Total Assets $   5,704,380     $   5,319,557     $   5,669,417     $   5,391,540     $   5,063,585         $   5,704,380     $   5,063,585    
Less: Goodwill     (3,297 )       (3,297 )       (3,297 )       (3,297 )       (3,297 )           (3,297 )       (3,297 )  
Less: Total liabilities     (5,154,635 )       (4,886,097 )       (5,253,131 )       (4,984,034 )       (4,659,210 )           (5,154,635 )       (4,659,210 )  
Net tangible book value $   546,448     $   430,163     $   412,989     $   404,209     $   401,078         $   546,448     $   401,078    
                                 
Efficiency Ratio                                
Noninterest expense (numerator) $   13,221     $   13,782     $   14,840     $   14,701     $   17,100         $   56,544     $   61,242    
                                 
  Net interest income $   27,567     $   28,773     $   27,745     $   26,860     $   24,157         $   110,945     $   94,635    
  Noninterest income     1,481         4,918         188         871         3,060             7,458         7,844    
Operating revenue (denominator)  $   29,048     $   33,691     $   27,933     $   27,731     $   27,217         $   118,403     $   102,479    
Efficiency ratio   45.51 %     40.91 %     53.13 %     53.01 %     62.83 %         47.76 %     59.76 %  
                                 
Tangible Assets                                
Total Assets $   5,704,380     $   5,319,557     $   5,669,417     $   5,391,540     $   5,063,585         $   5,704,380     $   5,063,585    
Less: Goodwill     (3,297 )       (3,297 )       (3,297 )       (3,297 )       (3,297 )           (3,297 )       (3,297 )  
Tangible Assets $   5,701,083     $   5,316,260     $   5,666,120     $   5,388,243     $   5,060,288         $   5,701,083     $   5,060,288    
                                 
Tangible Stockholders' Equity                                
Total Stockholders' Equity $   549,745     $   433,460     $   416,286     $   407,506     $   404,375         $   549,745     $   404,375    
Less: Goodwill     (3,297 )       (3,297 )       (3,297 )       (3,297 )       (3,297 )           (3,297 )       (3,297 )  
Tangible Stockholders' Equity $   546,448     $   430,163     $   412,989     $   404,209     $   401,078         $   546,448     $   401,078    
                                 
Tangible Stockholders' Equity to Tangible Assets                                
Tangible stockholders' equity (numerator) $   546,448     $   430,163     $   412,989     $   404,209     $   401,078         $   546,448     $   401,078    
Tangible assets (denominator) $   5,701,083     $   5,316,260     $   5,666,120     $   5,388,243     $   5,060,288         $   5,701,083     $   5,060,288    
Tangible Stockholders' Equity to Tangible Assets   9.58 %     8.09 %     7.29 %     7.50 %     7.93 %         9.58 %     7.93 %  
                                 
Return on Average Tangible Equity                                
Annualized net income (numerator) $   81,684     $   70,988     $   75,684     $   49,180     $   53,108         $   69,384     $   52,121    
                                 
Average stockholders' equity $   454,635     $   427,018     $   411,176     $   409,451     $   404,014         $   425,698     $   390,318    
Less: Average goodwill     (3,297 )       (3,297 )       (3,297 )       (3,297 )       (3,297 )           (3,297 )       (3,297 )  
Average tangible stockholders' equity (denominator)  $   451,338     $   423,721     $   407,879     $   406,154     $   400,717         $   422,401     $   387,021    
Return on Average Tangible Equity   18.10 %     16.75 %     18.56 %     12.11 %     13.25 %         16.43 %     13.47 %  
                                 
Pro Forma Net Income                                
Income before provision for income taxes $   14,577     $   18,359     $   19,574     $   12,721     $   13,741         $   65,231     $   53,940    
Pro forma provision for income taxes (4)     6,122         7,711         8,221         5,343         5,771             27,397         22,655    
Pro forma net income $   8,455     $   10,648     $   11,353     $   7,378     $   7,970         $   37,834     $   31,285    
                                 
Pro Forma Ratios                                
Annualized pro forma net income (numerator) $   33,819     $   42,593     $   45,412     $   29,513     $   31,879         $   37,834     $   31,285    
                                 
Average assets (denominator)     5,461,226         5,786,035         5,517,404         5,172,186         4,921,585             5,485,832         4,676,676    
Pro forma return on average assets   0.62 %     0.74 %     0.82 %     0.57 %     0.65 %         0.69 %     0.67 %  
                                 
Average stockholders' equity (denominator)     454,635         427,018         411,176         409,451         404,014             425,698         390,318    
Pro forma return on average stockholders' equity   7.44 %     9.97 %     11.04 %     7.21 %     7.89 %         8.89 %     8.02 %  
                                 
Average tangible stockholders' equity (denominator)     451,338         423,721         407,879         406,154         400,717             422,401         387,021    
Pro forma return on average stockholders' equity   7.49 %     10.05 %     11.13 %     7.27 %     7.96 %         8.96 %     8.08 %  
                                 

Contact:
Mark A. Severson
Investor Relations
707-921-3655
investorrelations@lbsavings.com

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Source: Luther Burbank Corporation

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