Document


 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
 
 
FORM 8-K
 
 
 
 
 

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 25, 2018
 
 
 
 
 
Luther Burbank Corporation
(Exact name of registrant as specified in its charter)
 
 
 
 
 
California
(State or other jurisdiction of incorporation or organization)
 
68-0270948
(I.R.S. employer identification number)
 
 
 
520 Third St, Fourth Floor, Santa Rosa, California
 (Address of principal executive offices)
 
95401
 (Zip code)
 
 Registrant's telephone number, including area code: (844) 446-8201
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.






Item 2.02. Results of Operations and Financial Condition

On October 25, 2018, the Registrant issued a press release, a copy of which is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

Item 7.01. Regulation FD

Luther Burbank Corporation (the “Company”) will conduct a conference call at 10:00 a.m. (Pacific Time) on October 26, 2018 to discuss its financial results for the quarter ended September 30, 2018. A copy of the presentation to be used for the conference call and future investor presentations is furnished as Exhibit 99.2 to this Report and is incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits

Exhibit Number
Description






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


 
 
LUTHER BURBANK CORPORATION
 
 
 
DATED: October 25, 2018
 
By: /s/ Laura Tarantino
 
 
Laura Tarantino
 
 
Executive Vice President and Chief Financial Officer




Exhibit
EXHIBIT 99.1
    http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12512280&doc=39            http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12512280&doc=38


520 Third Street, Fourth Floor, Santa Rosa, CA 95401 (844) 446-8201
FOR IMMEDIATE RELEASE   
 
Contact:
Bradley Satenberg
 
 
 
 
Investor Relations
 
 
 
 
(310) 606-8922
 
 
 
 

LUTHER BURBANK CORPORATION REPORTS EARNINGS FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2018

Quarterly Cash Dividend of $0.0575 Per Common Share Declared

SANTA ROSA, Calif. (October 25, 2018) Luther Burbank Corporation (NASDAQ: LBC) (the “Company”), the holding company for Luther Burbank Savings (the “Bank”), today reported net income of $12.1 million and $34.5 million, or $0.21 and $0.61 diluted earnings per common share (“EPS”), for the three and nine months ended September 30, 2018, respectively, compared to net income of $17.7 million and $49.0 million, or $0.42 and $1.17 EPS, for the same periods last year. Pre-tax, pre-provision earnings and pro-forma EPS for the three and nine months ended September 30, 2018 were $17.7 million and $51.5 million, respectively, and $0.21 and $0.61, respectively, compared to $19.9 million and $46.0 million, respectively, and $0.25 and $0.70, respectively, for the same periods last year.
Pre-tax, pre-provision earnings and pro-forma EPS, both non-GAAP financial measures, are presented because management believes these financial metrics provide stockholders with useful information for evaluating the profitability of the Company. In addition, management believes it enhances the comparability of the Company’s financial results by eliminating the tax differences associated with the Company’s change in tax status from S-corporation to a C-corporation. The Company revoked its S-corporation status in December 2017. A schedule reconciling our GAAP net income to pre-tax, pre-provision earnings and pro-forma EPS are provided in the tables below.
John G. Biggs, President and Chief Executive Officer, stated, “I'm pleased to announce our financial results for the third quarter. We completed the quarter at a record high total assets of $6.7 billion, representing growth of almost $1 billion since the beginning of the year. The majority of this growth has been in our loan portfolio, which increased by $884 million, and was funded by a $993 million increase in our deposits. The strength of this growth has contributed to net interest income increasing by 12% during the nine months ended September 30, 2018 as compared to the same period last year. In addition, our credit quality has continued to improve with total non-performing assets declining by over 68% from December 31, 2017. I'm also proud that we remain one of the most efficient banks compared to our industry peers with an efficiency ratio of 46%.”
Mr. Biggs continued, “Since opening in June 2018, our Bellevue, Washington branch has grown its deposit portfolio to $55 million at September 30, 2018. The successful performance of this newly opened branch and our strong quarterly financial results are encouraging trends as we head into the final quarter of the year and further support the progress made in connection with our longer-term initiatives to expand the footprint of the Bank's franchise. Furthermore, we recently announced the approval of a $15 million stock repurchase program, which provides us the flexibility to

1


opportunistically acquire our common shares in open market or privately negotiated transactions. To date, we have not acquired any shares under the repurchase program.”
Board Declares Quarterly Cash Dividend of $0.0575 Per Share
On October 25, 2018, the Board of Directors of the Company declared a quarterly cash dividend of $0.0575 per common share. The dividend is payable on November 15, 2018 to shareholders of record as of November 5, 2018.
Net Interest Income
Net interest income for the quarter ended September 30, 2018 totaled $31.7 million compared to $31.2 million for the previous quarter and $28.8 million for the same period last year. The $553 thousand, or 1.8%, increase in net interest income from the prior quarter was primarily related to growth in the average balance and yield of our loan portfolio, which increased by $282.3 million and 11 basis points and, to a lesser extent, a decrease of $276.6 million in the average balance of FHLB advances. This was partially offset by a $573.4 million increase in the average balance of our deposits, as well as increases in costs of deposits and FHLB advances, which increased by 26 and 21 basis points, respectively. The $3.0 million, or 10.3%, increase in net interest income over the same period last year was primarily related to growth in the average balance and yield of our loan portfolio. During the quarter ended September 30, 2018, the average balance of loans increased by $729.0 million and the yield increased by 35 basis points, compared to the same period last year. This increase was partially offset by growth in the average balance of our deposits of $1.1 billion and increases in the cost of funds in connection with deposits and FHLB advances of 53 and 88 basis points, respectively. Net interest margin for the quarter ended September 30, 2018 was 1.94%, compared to 2.00% for the previous quarter and 2.02% for the same period last year. The decline in net interest margin from these previous periods primarily relates to increases in our cost of funds as a result of rising interest rates. Cost of funds increased by 20 basis points and 54 basis points, respectively, compared to the previous quarter and the same period last year.
Net interest income for the nine months ended September 30, 2018 totaled $93.3 million compared to $83.3 million for the same period last year. The $10.0 million, or 12.0%, increase in net interest income over the same period last year was primarily related to growth in the average balance and yield of our loan portfolio. During the nine months ended September 30, 2018, the average balance in loans increased by $662.1 million and the yield increased by 31 basis points, compared to the same period last year. This increase was partially offset by growth in the average balance of our deposits of $769.9 million and an increase in the cost of funds in connection with our deposits and FHLB advances of 38 and 75 basis points, respectively. Net interest margin for the nine months ended September 30, 2018 was 2.01% as compared to 2.05% for the nine months ended September 30, 2017. The 4 basis point decline primarily relates to a 42 basis point increase in our cost of funds as a result of rising interest rates.
Noninterest Income
Noninterest income for the quarter ended September 30, 2018 totaled $1.0 million, compared to $817 thousand for the previous quarter and $4.9 million for the same period last year. The increase of $226 thousand in noninterest income, or 27.7%, for the quarter ended September 30, 2018 compared to the linked quarter ended June 30, 2018, was primarily attributable to a gain on sale of loans of $140 thousand in the quarter ended September 30, 2018, as well as an increase of $113 thousand in FHLB dividends as compared to the prior quarter. The decrease of $3.9 million in noninterest income, or 78.8%, for the quarter ended September 30, 2018 compared to the quarter ended September 30, 2017, was primarily attributable to a gain on sale of loans related to the Company's securitization completed in September 2017. During the quarter ended September 30, 2017, the Company recognized gains in connection with the sale of loans of $3.7 million.
Noninterest income for the nine months ended September 30, 2018 totaled $2.9 million, compared to $6.0 million for the nine months ended September 30, 2017. As discussed above, the decrease, as compared to the same period last year, of $3.1 million, or 52.0%, was primarily attributable to the gain on sale of loans related to the Company's securitization.
Noninterest income primarily consists of FHLB stock dividends, fee income and the financial impact related to loans sold and loans held for sale.
Noninterest Expense
Noninterest expense for the quarter ended September 30, 2018 totaled $15.1 million compared to $14.9 million for the previous quarter and $13.8 million for the same period last year. Compared to the linked quarter, noninterest expense increased $168 thousand, or 1.1%, during the quarter ended September 30, 2018. Compared to the same period last

2


year, noninterest expense increased $1.3 million, or 9.5%, during the quarter ended September 30, 2018 primarily due to an increase of $982 thousand in marketing expenses related to costs associated with deposit gathering efforts. Noninterest expense for the nine months ended September 30, 2018 totaled $44.7 million compared to $43.3 million for the same period last year, an increase of $1.4 million, or 3.2%. As discussed above, this increase is primarily related to marketing expenses incurred in connection with our deposit gathering efforts.
Noninterest expense primarily consists of compensation costs, as well as expenses incurred related to occupancy, depreciation and amortization, data processing, marketing and professional services.
Balance Sheet Summary
Total assets at September 30, 2018 were $6.7 billion, an increase of $988.0 million from December 31, 2017. The increase was primarily due to a $884.2 million, or 17.5%, increase in loans and a $111.3 million, or 22.1%, increase in available for sale investment securities. Total liabilities at September 30, 2018 and December 31, 2017 were $6.1 billion and $5.2 billion, respectively. The increase of $966.4 million, or 18.7%, was primarily attributable to growth in our deposits of $992.7 million, or 25.1%, compared to December 31, 2017.
Loans
Total loans at September 30, 2018 were $5.9 billion, an increase of $884.2 million from December 31, 2017. The increase was primarily attributable to originations of multifamily and single family residential loans. Our loan portfolio generally consists of income property loans (IPL) and single family residential (SFR) mortgage loans, which represents 62.2% and 37.5%, respectively, of our total loan portfolio.
Our IPL portfolio primarily consists of hybrid multifamily residential and commercial real estate loans. IPL loans totaled $3.7 billion at September 30, 2018 compared to $3.0 billion at December 31, 2017. The yield on the IPL portfolio was 3.94% and 3.84%, respectively, during the three and nine months ended September 30, 2018, compared to 3.54% and 3.50%, respectively, during the same periods last year. For the quarter and nine months ended September 30, 2018, IPL loan originations and the corresponding weighted average coupon totaled $291.4 million and $936.2 million, respectively, and 4.72% and 4.54%, respectively, compared to $298.7 million and $1.0 billion, respectively, and 4.08% and 4.00%, respectively, for the same periods last year. The increasing yield was caused by both a general rise in interest rates and a greater proportion of loans originated in extended and non-core geographies as compared to the prior fiscal year. Prepayment speeds within the IPL loan portfolio were 11.2% and 7.8%, respectively, for the three and nine months ended September 30, 2018, compared to 7.8% and 10.7%, respectively, during the same periods last year.
Our SFR loan portfolio generally consists of hybrid loans. SFR loans totaled $2.2 billion and $2.0 billion at September 30, 2018 and December 31, 2017, respectively. The yield on the SFR portfolio was 3.61% and 3.49%, respectively, during the three and nine months ended September 30, 2018, compared to 3.32% and 3.24%, respectively, during the same periods last year. For the quarter and nine months ended September 30, 2018, residential loan originations and the corresponding weighted average coupon totaled $162.7 million and $630.5 million, respectively, and 4.99% and 4.66%, respectively, compared to $193.1 million and $505.4 million, respectively, and 3.90% and 3.96%, respectively, for the same periods last year. The increase in SFR originations during the nine months ended September 30, 2018 compared to the same period last year was primarily attributable to a general increase in customer demand while the increasing yield was caused by a combination of rising interest rates and a greater percentage of niche product originations. Prepayment speeds within the SFR loan portfolio were 24.5% and 23.5% during the three and nine months ended September 30, 2018, respectively, compared to 23.8% and 25.0%, respectively, during the same periods last year.
Asset Quality
Nonperforming loans totaled $2.2 million, or 0.04% of total loans, at September 30, 2018, compared to $7.0 million, or 0.14% of total loans, at December 31, 2017. There was no real estate owned at September 30, 2018 or December 31, 2017. For the quarter ended September 30, 2018, loan loss provisions of $650 thousand were recorded compared to $1.3 million in the prior quarter and $1.6 million for the same period last year. The lower loan loss provision recorded during the current quarter compared to the linked quarter and the same period last year was primarily attributable to a decline in loan growth compared to these prior periods. During the three months ended September 30, 2018, loans increased by $190.9 million compared to $408.5 million and $324.0 million for the linked quarter and the same period last year, respectively. The change in loans during the three months ended September 30, 2017 excludes the impact of loans sold in connection with the Company's securitization in September 2017.
During the nine months ended September 30, 2018, loan loss provisions of $3.5 million were recorded compared to a

3


reversal of provisions for loan losses of $4.6 million during the same period last year. The provision for loan losses recorded during the nine months ended September 30, 2018 was primarily attributable to loan growth. The reversal of loan loss provisions recorded during the same period last year was due to improvements in the credit metrics of our loan portfolio.
Prepaid Expenses and Other Assets
Prepaid expenses and other assets totaled $64.7 million at September 30, 2018 compared to $57.2 million at December 31, 2017, an increase of $7.5 million or 13.2%. The variance was primarily attributable to a $5.2 million increase in accrued interest receivable resulting from growth in our loan portfolio during the nine months ended September 30, 2018.
Prepaid expenses and other assets primarily consist of prepaid expenses, accrued interest receivable, premises and equipment and tax related items.
Deposits
Deposits totaled $4.9 billion at September 30, 2018, an increase of $992.7 million from December 31, 2017. Retail deposits represented 74.9% of the growth, or $743.4 million, while wholesale deposits represented 25.1%, or $249.3 million. Our cost of deposits was 1.62% and 1.40%, respectively, during the quarter and nine months ended September 30, 2018 compared to 1.36% during the prior quarter and 1.09% and 1.02%, respectively, during the same periods last year. The change in our cost of deposits was primarily related to cost increases in our time deposit portfolio. Time deposit rates increased to 1.94% and 1.70%, respectively, during the three and nine months ended September 30, 2018, compared to 1.31% and 1.23%, respectively, for the same periods last year. The increase in time deposit rates was primarily due to rising interest rates, as well as competitive pricing pressures.
Capital
Stockholders’ equity totaled $571.4 million, an increase of $21.7 million, or 3.9%, compared to December 31, 2017. Stockholders' equity represented 8.5% of total assets at September 30, 2018, compared to 9.6% at December 31, 2017. Both the Bank’s and the Company’s capital levels continue to be significantly above the minimum levels required to be designated as “well-capitalized” for bank regulatory capital purposes. At September 30, 2018, Tier 1 leverage, Common Equity Tier 1 risk based, Tier 1 risk-based and Total risk-based capital ratios were 10.85%, 18.66%, 18.66% and 19.58%, respectively, for the Bank, and 9.63%, 14.94%, 16.55% and 17.47%, respectively, for the Company. At September 30, 2018, the Company’s tangible stockholders' equity ratio was 8.49%.
About Luther Burbank Corporation
Luther Burbank Corporation is a publicly owned company traded on the NASDAQ Capital Market under the symbol “LBC.” The Company is headquartered in Santa Rosa, California with total assets of $6.7 billion, total loans of $5.9 billion and total deposits of $4.9 billion as of September 30, 2018. It operates primarily through its wholly-owned subsidiary, Luther Burbank Savings, an FDIC insured, California-chartered bank. Luther Burbank Savings executes on its mission to improve the financial future of customers, employees and shareholders by providing personal banking and business banking services. It offers consumers a host of highly competitive depository and mortgage products coupled with personalized attention. Business customers benefit from boutique-quality service along with access to products which meet their unique financial needs from the convenience of online and mobile banking, robust cash management solutions, and high-yield liquidity management products to multifamily and commercial lending. Currently operating in California, Oregon and Washington, from nine branches in California, one branch in Washington and nine lending offices located throughout the market area, Luther Burbank Savings is an equal housing lender. For additional information, please visit lutherburbanksavings.com.
Cautionary Statements Regarding Forward-Looking Information
This communication contains a number of forward-looking statements, which involve a number of risks and uncertainties. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not a guarantee of future performance and that actual results may prove to be materially different from the results expressed or implied by the forward-looking statements due to a number of factors. Such factors include, without limitation, those listed from time to time in reports that the Company files with the Securities and Exchange Commission, including, but not limited to, the “Risk Factors” referenced in our Annual Report on Form 10-K for the year

4


ended December 31, 2017. These forward-looking statements are made as of the date of this communication, and the Company does not intend, and assumes no obligation, to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events or circumstances, except as required by law.

### (tables to follow)


5


CONSOLIDATED BALANCE SHEETS
 
 
 
 
 
 
 
 
 
 
 
(Dollars in thousands)
September 30,
2018 (unaudited)
 
December 31,
2017
 
September 30,
2017 (unaudited)
ASSETS
 
 
 
 
 
Cash and cash equivalents
$
60,698

 
$
75,578

 
$
87,051

Available for sale investment securities, at fair value
614,576

 
503,288

 
471,438

Held to maturity investment securities, at amortized cost
11,935

 
6,921

 
6,965

Loans held-for-sale

 

 
39,011

Loans held-for-investment
5,925,788

 
5,041,547

 
4,630,927

Allowance for loan losses
(34,086
)
 
(30,312
)
 
(28,984
)
Total loans held-for-investment, net
5,891,702

 
5,011,235

 
4,601,943

Federal Home Loan Bank stock
27,235

 
27,733

 
40,159

Premises and equipment, net
21,571

 
22,452

 
22,697

Prepaid expenses and other assets
64,698

 
57,173

 
50,293

Total assets
$
6,692,415

 
$
5,704,380

 
$
5,319,557

 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
Liabilities:
 
 
 
 
 
Deposits
$
4,943,944

 
$
3,951,238

 
$
3,863,411

Federal Home Loan Bank advances
962,139

 
989,260

 
807,667

Junior subordinated deferrable interest debentures
61,857

 
61,857

 
61,857

Senior debt
94,262

 
94,161

 
94,128

Other liabilities
58,814

 
58,119

 
59,034

Total liabilities
6,121,016

 
5,154,635

 
4,886,097

Total stockholders' equity
571,399

 
549,745

 
433,460

Total liabilities and stockholders' equity
$
6,692,415

 
$
5,704,380

 
$
5,319,557

CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
(Dollars in thousands except per share data)
September 30,
2018
 
June 30,
2018
 
September 30,
2017
 
September 30,
2018
 
September 30,
2017
Interest and fee income:
 
 
 
 
 
 
 
 
 
Loans
$
55,644

 
$
51,343

 
$
44,180

 
$
153,550

 
$
124,096

Investment securities
3,266

 
3,117

 
1,683

 
8,638

 
4,857

Cash and cash equivalents
489

 
226

 
320

 
1,178

 
662

Total interest income
59,399

 
54,686

 
46,183

 
163,366

 
129,615

Interest expense:
 
 
 
 
 
 
 
 
 
Deposits
19,650

 
14,560

 
10,156

 
46,141

 
27,527

FHLB advances
5,860

 
6,823

 
5,260

 
17,502

 
12,796

Junior subordinated deferrable interest debentures
600

 
567

 
430

 
1,655

 
1,218

Senior debt
1,577

 
1,577

 
1,577

 
4,733

 
4,732

Total interest expense
27,687

 
23,527

 
17,423

 
70,031

 
46,273

Net interest income before provision for loan losses
31,712

 
31,159

 
28,760

 
93,335

 
83,342

Provision for (reversal of) loan losses
650

 
1,300

 
1,550

 
3,450

 
(4,622
)
Net interest income after provision for (reversal of) loan losses
31,062

 
29,859

 
27,210

 
89,885

 
87,964

Noninterest income
1,043

 
817

 
4,931

 
2,885

 
6,014

Noninterest expense
15,090

 
14,922

 
13,782

 
44,725

 
43,323

Income before provision for income taxes
17,015

 
15,754

 
18,359

 
48,045

 
50,655

Provision for income taxes
4,886

 
4,528

 
612

 
13,588

 
1,691

Net income
$
12,129

 
$
11,226

 
$
17,747

 
$
34,457

 
$
48,964

Basic earnings per common share
$
0.22

 
$
0.20

 
$
0.42

 
$
0.61

 
$
1.17

Diluted earnings per common share
$
0.21

 
$
0.20

 
$
0.42

 
$
0.61

 
$
1.17


6


CONSOLIDATED FINANCIAL HIGHLIGHTS (UNAUDITED)
 
 
 
 
 
As of or For the Three Months Ended
 
Nine Months Ended
(Dollars in thousands except per share data)
September 30,
2018
 
June 30,
2018
 
September 30,
2017
 
September 30,
2018
 
September 30,
2017
PERFORMANCE RATIOS
 
 
 
 
 
 
 
 
 
Return on average:
 
 
 
 
 
 
 
 
 
Assets
0.73
%
 
0.71
%
 
1.23
%
 
0.73
%
 
1.19
%
Stockholders' equity
8.52
%
 
8.00
%
 
16.62
%
 
8.17
%
 
15.70
%
Efficiency ratio (1)
46.07
%
 
46.67
%
 
40.91
%
 
46.48
%
 
48.48
%
Noninterest expense to average assets
0.91
%
 
0.95
%
 
0.95
%
 
0.95
%
 
1.05
%
Loan to deposit ratio
119.86
%
 
124.89
%
 
119.87
%
 
119.86
%
 
119.87
%
Average stockholders' equity to average assets
8.60
%
 
8.89
%
 
7.38
%
 
8.98
%
 
7.57
%
Dividend payout ratio
27.20
%
 
29.41
%
 
2.82
%
 
36.75
%
 
42.28
%
PRO FORMA (1)
 
 
 
 
 
 
 
 
 
Actual/pro forma net income
$
12,129

 
$
11,226

 
$
10,648

 
$
34,457

 
$
29,380

Actual/pro forma diluted earnings per share
$
0.21

 
$
0.20

 
$
0.25

 
$
0.61

 
$
0.70

Actual/pro forma return on average:
 
 
 
 
 
 
 
 
 
Assets
0.73
%
 
0.71
%
 
0.74
%
 
0.73
%
 
0.71
%
Stockholders' equity
8.52
%
 
8.00
%
 
9.97
%
 
8.17
%
 
9.42
%
YIELDS/ RATES
 
 
 
 
 
 
 
 
 
Yield on loans
3.81
%
 
3.70
%
 
3.46
%
 
3.71
%
 
3.40
%
Yield on investments
2.18
%
 
2.04
%
 
1.37
%
 
2.03
%
 
1.36
%
Yield on interest earning assets
3.63
%
 
3.51
%
 
3.24
%
 
3.52
%
 
3.19
%
Cost of deposits
1.62
%
 
1.36
%
 
1.09
%
 
1.40
%
 
1.02
%
Cost of borrowings
2.81
%
 
2.53
%
 
1.85
%
 
2.52
%
 
1.77
%
Cost of interest bearing liabilities
1.85
%
 
1.65
%
 
1.31
%
 
1.65
%
 
1.23
%
Net interest spread
1.78
%
 
1.86
%
 
1.92
%
 
1.87
%
 
1.96
%
Net interest margin
1.94
%
 
2.00
%
 
2.02
%
 
2.01
%
 
2.05
%
CAPITAL
 
 
 
 
 
 
 
 
 
Total equity to total assets
8.54
%
 
8.64
%
 
8.15
%
 
 
 
 
Tangible stockholders' equity to tangible assets (1)
8.49
%
 
8.59
%
 
8.09
%
 
 
 
 
Book value per share
$
10.11

 
$
9.94

 
$
10.32

 
 
 
 
Tangible book value per share (1)
$
10.05

 
$
9.88

 
$
10.24

 
 
 
 
Market value per share (period end)
$
10.88

 
$
11.51

 
N/A

 
 
 
 
ASSET QUALITY
 
 
 
 
 
 
 
 
 
Annualized net recoveries to average loans
0.01
%
 
0.01
%
 
0.01
%
 
 
 
 
Nonperforming loans to total loans
0.04
%
 
0.08
%
 
0.13
%
 
 
 
 
Nonperforming assets to total assets
0.03
%
 
0.07
%
 
0.11
%
 
 
 
 
Allowance for loan losses to loans held-for-investment
0.58
%
 
0.58
%
 
0.63
%
 
 
 
 
Allowance for loan losses to nonperforming loans
1552.89
%
 
696.99
%
 
497.24
%
 
 
 
 
LOAN COMPOSITION
 
 
 
 
 
 
 
 
 
Multifamily residential
$
3,521,456

 
$
3,354,475

 
$
2,644,243

 
 
 
 
Single family residential
$
2,223,510

 
$
2,196,582

 
$
1,842,416

 
 
 
 
Commercial real estate
$
164,185

 
$
151,974

 
$
95,822

 
 
 
 
Construction and land
$
16,537

 
$
31,786

 
$
48,396

 
 
 
 
Non-mortgage
$
100

 
$
100

 
$
50

 
 
 
 
DEPOSIT COMPOSITION
 
 
 
 
 
 
 
 
 
Noninterest bearing transaction accounts
$
70,075

 
$
67,541

 
$
27,166

 
 
 
 
Interest bearing transaction accounts
$
173,788

 
$
173,120

 
$
196,062

 
 
 
 
Money market deposit accounts
$
1,467,105

 
$
1,388,636

 
$
1,430,201

 
 
 
 
Time deposits
$
3,232,976

 
$
2,962,858

 
$
2,209,982

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) See "Non-GAAP Reconciliation" table for reconciliations of non-GAAP measurements.
 
 
 
 

7


NON-GAAP RECONCILIATION (UNAUDITED)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
(Dollars in thousands except per share data)
September 30,
2018
 
June 30,
2018
 
September 30,
2017
 
September 30,
2018
 
September 30,
2017
Pre-tax, pre-provision net earnings
 
 
 
 
 
 
 
 
 
Income before taxes
$
17,015

 
$
15,754

 
$
18,359

 
$
48,045

 
$
50,655

Plus: Provision for (reversal of) loan losses
650

 
1,300

 
1,550

 
3,450

 
(4,622
)
Pre-tax, pre-provision net earnings
$
17,665

 
$
17,054

 
$
19,909

 
$
51,495

 
$
46,033

Efficiency Ratio
 
 
 
 
 
 
 
 
 
Noninterest expense (numerator)
$
15,090

 
$
14,922

 
$
13,782

 
$
44,725

 
$
43,323

Net interest income
31,712

 
31,159

 
28,760

 
93,335

 
83,342

Noninterest income
1,043

 
817

 
4,931

 
2,885

 
6,014

Operating revenue (denominator)
$
32,755

 
$
31,976

 
$
33,691

 
$
96,220

 
$
89,356

Efficiency ratio
46.07
%
 
46.67
%
 
40.91
%
 
46.48
%
 
48.48
%
Pro Forma Net Income
 
 
 
 
 
 
 
 
 
Income before provision for income taxes
$
17,015

 
$
15,754

 
$
18,359

 
$
48,045

 
$
50,655

Actual/pro forma provision for income taxes (1)
4,886

 
4,528

 
7,711

 
13,588

 
21,275

Actual/pro forma net income (numerator)
$
12,129

 
$
11,226

 
$
10,648

 
$
34,457

 
$
29,380

Pro Forma Diluted Earnings Per Share
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - diluted (denominator)
56,864,100

 
56,820,076

 
42,000,000

 
56,813,110

 
42,000,000

Actual/pro forma diluted earnings per share
$
0.21

 
$
0.20

 
$
0.25

 
$
0.61

 
$
0.70

Pro Forma Return on Average Assets
 
 
 
 
 
 
 
 
 
 Actual/pro forma net income (numerator)
$
12,129

 
$
11,226

 
$
10,648

 
$
34,457

 
$
29,380

Average assets (denominator)
$
6,619,629

 
$
6,310,087

 
$
5,786,035

 
$
6,262,313

 
$
5,494,124

Actual/pro forma return on average assets
0.73
%
 
0.71
%
 
0.74
%
 
0.73
%
 
0.71
%
Pro Forma Return on Average Stockholders' Equity
 
 
 
 
 
 
 
 
 
 Actual/pro forma net income (numerator)
$
12,129

 
$
11,226

 
$
10,648

 
$
34,457

 
$
29,380

Average stockholders' equity (denominator)
$
569,176

 
$
560,961

 
$
427,018

 
$
562,312

 
$
415,946

Actual/pro forma return on average stockholders' equity
8.52
%
 
8.00
%
 
9.97
%
 
8.17
%
 
9.42
%
(Dollars in thousands except per share data)
September 30,
2018
 
June 30,
2018
 
September 30,
2017
Tangible Book Value Per Share
 
 
 
 
 
Total Assets
$
6,692,415

 
$
6,510,233

 
$
5,319,557

Less: Goodwill
(3,297
)
 
(3,297
)
 
(3,297
)
Tangible assets
6,689,118

 
6,506,936

 
5,316,260

Less: Total Liabilities
(6,121,016
)
 
(5,948,053
)
 
(4,886,097
)
Tangible Stockholders' Equity (numerator)
$
568,102

 
$
558,883

 
$
430,163

Period end shares outstanding (denominator)
56,543,771

 
56,559,655

 
42,000,000

Tangible Book Value Per Share
$
10.05

 
$
9.88

 
$
10.24

Tangible Stockholders' Equity to Tangible Assets
 
 
 
 
 
Tangible stockholders' equity (numerator)
$
568,102

 
$
558,883

 
$
430,163

Tangible assets (denominator)
6,689,118

 
6,506,936

 
5,316,260

Tangible Stockholders' Equity to Tangible Assets
8.49
%
 
8.59
%
 
8.09
%

(1) Prior to January 1, 2018, we calculate our pro forma net income, earnings per share, 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. For periods in 2018, our actual provision for income taxes is used for comparative purposes.


8
exhibit992_2018q3
Investor Presentation September 30, 2018 John Biggs President & Chief Executive Officer Laura Tarantino Executive Vice President & Chief Financial Officer


 
Forward‐Looking Statement This communication contains a number of forward‐looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward‐looking statements reflect our current views with respect to, among other things, future events and our results of operations, financial condition and financial performance. All statements contained in this communication that are not clearly historical in nature are forward‐looking, and the words such as "anticipate," "believe," “continue,” "could," "estimate," "expect," “impact,” "intend," "seek," "may," "outlook," "plan," "potential," "predict," "project," "should," "will," "would" and similar terms and phrases are generally intended to identify forward‐looking statements. These forward‐looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward‐ looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward‐looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward‐looking statements. Such factors include, without limitation, the “Risk Factors” referenced in our Registration Statement on Form S‐1filedwiththeSecurities and Exchange Commission (“SEC”). The risks and uncertainties listed from time to time in our reports and documents filed with the SEC, and the followingfactors:businessand economic conditions generally and in the financial services industry, nationally and within our current and future geographic market areas; economic, market, operational, liquidity, credit and interest rate risks associated with our business; the occurrence of significant natural or man‐made disasters, including fires, earthquakes, and terrorist acts; our management of risks inherent in our real estate loan portfolio, and the risk of a prolonged downturn in the real estate market; our ability to achieve organic loan and deposit growth and the composition of such growth; the fiscal position of the U.S federal government and the soundness of other financial institutions; changes in consumer spending and savings habits; technological and social media changes; the laws and regulations applicable to our business; increased competition in the financial services industry; changes in the level of our nonperforming assets and charge‐offs; our involvement from time to time in legal proceedings and examination and remedial actions by regulators; the composition of our management team and our ability to attract and retain key personnel; material weaknesses in our internal control over financial reporting; systems failures or interruptions involving our information technology and telecommunications systems; and potential exposure to fraud, negligence, computer theft and cyber‐crime. The Company can give no assurance that any goal or expectation set forth in forward‐looking statements can be achieved and readers are cautioned not to place undue reliance on such statements. These forward‐ looking statements are made as of the date of this communication, and the Company does not intend, and assumes no obligation, to update any forward‐looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events or circumstances, except as required by law. 2


 
Use of Non‐GAAP Financial Measures This investor presentation contains certain financial measures that are not measures recognized under U.S. generally accepted accounting principles (GAAP) and therefore are considered non‐GAAP financial measures. The Company’s management uses these non‐GAAP financial measures in their analysis of the Company’s performance, financial condition and the efficiency of its operations. Management believes that these non‐GAAP financial measures provide a greater understanding of ongoing operations and enhance comparability of results with prior periods as well as demonstrate the effects of significant gains and changes in the current period. The Company’s management also believes that investors find these non‐GAAP financial measures useful as they assist investors in understanding our underlying operations performance and the analysis of ongoing operating trends. However, the non‐GAAP financial measures discussed herein should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non‐GAAP financial measures discussed herein may differ from that of other companies reporting measures with similar names. You should understand how such other banking organizations calculate their financial measures similar or with names similar to the non‐GAAP financial measures we have discussed herein when comparing such non‐GAAP financial measures. Below is a listing of the non‐GAAP financial measures used in this investor presentation. • Prior to January 1, 2018, pro forma net income, return on average assets, return on average equity and per share amounts are calculated 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 changes in our status as an S Corporation and does not give effect to any other transaction. Efficiency ratio is defined as noninterest expenses divided by operating revenue, which is equal to net interest income plus noninterest income. • Tangible book value and tangible stockholders’ equity to tangible assets are non‐GAAP measures that exclude the impact of goodwill and are used by the Company’s management to evaluate capital adequacy. Because intangible assets such as goodwill vary extensively from company to company, we believe that the presentation of these non‐GAAP financial measures allows investors to more easily compare the Company’s capital position to other companies. A reconciliation to these non‐GAAP financial measures to the most directly comparable GAAP measures are provided in the appendix to this investor presentation. 3


 
2014: Luther Burbank’s More Than 34‐Year History Issued $95 million in senior  notes with a 6.50% fixed  1983: 1996: 2000: coupon to refinance the  Luther Burbank S&LA was  Completed acquisition of  Converted to a federal  notes issued between 2009  chartered in Santa Rosa, CA;  New Horizon S&LA, our only  savings association and  and 2011 an initial $2 million is the  acquisition changed our name to Luther  only equity raise, prior to our  Burbank Savings 2016: recent IPO, in our 34‐year  1996‐2006: Converted to a state‐ history Migration to apartment  2006: chartered commercial bank  lending; expanded products  Issued $61.9 million in notes  (OCC to FDIC) to include jumbo single‐ related to Trust Preferred  1983‐1989: 2017: family lending Securities Specialty CRE lender  Q3 ‐ Completed $626 million  including land, C&D, joint  2009 ‐ 2011: MFR securitization;  ventures and commercial Issued $62.7 million in senior  Q4 – Closed IPO at $10.75  notes with a 9.875% fixed  per share & raised $138  coupon to friends and family million net proceeds or $98  million after special dividend 1980’s 1990’s 2000’s 2010’s 1983: 1996: 2000: 2010: Opened Santa Rosa Opened San Rafael Opened Los Altos Opened Beverly Hills Total Deposits: $1.2bn Total Deposits: $560mm Total Deposits: $313mm Total Deposits: $375mm 2007: 2012: Opened Encino Opened San Jose Total Deposits: $439mm Total Deposits: $174mm 2008: 2015: Opened Toluca Lake Opened Long Beach Total Deposits: $260mm Total Deposits: $208mm 2009: 2018: Opened Pasadena Opened Bellevue  Total Deposits: $299mm Total Deposits: $55mm Note: Branch deposits as of 09/30/2018 4


 
Franchise Overview and Financial Highlights Our Small Network of Large Branches Financial Highlights 09/30/2018(1)  September 30,  10 #Branch Location Date WA 2018 Total Assets ($mm) $6,692 Established Deposits ($mm) Total Loans HFI ($mm) $5,926 1Santa Rosa Oct. 1983 1,155.7 2San Rafael Sep. 1996 559.5 Total Deposits ($mm) $4,944 3 Encino Aug. 2007 439.4 Loans / Deposits 120% 4Beverly Hills Jul. 2010 375.1 OR Tangible Book Value / Tang. Assets 8.5% 5Los Altos Aug. 2000 312.5 6 Pasadena May 2009 299.1 Leverage Capital Ratio 9.6% 7Toluca Lake Jan. 2008 260.2 Total Risk‐Based Capital Ratio 17.5% 8Long Beach Jun. 2015 208.4 Total CRE Loans(2) / Total Risk‐Based  550% 9San Jose Jun. 2012 173.5 Capital 10 Bellevue Jun. 2018 54.8 ROAA  0.73%       Brokered Deposits 527.7 ROAE  8.17%       Online/ Business Banking 578.0 11 A Manhattan Beach 1,105.7 Net Interest Margin 2.01% 22 San Francisco Total Deposits 4,943.9 5 EPS – Fully Diluted $0.61 5 99 Branch  (10) CA Loan Production Office (9) Efficiency Ratio 46.5%  * Highlighted counties indicate current lending markets Noninterest Expense / Avg. Assets 0.95%  NPAs / Assets 0.03% 33  476   67 4 Los Angeles A 8 ALLL / Loans HFI 0.58% Full‐Time Equivalent Employees 273 (1) Financial data as of or for the nine months ended 09/30/2018.  See  non‐GAAP reconciliation in Appendix hereto. (2) Includes  multifamily residential, commercial real estate, and construction  loans. 5


 
Key Highlights 1 1. History of Profitability History of  Recorded consecutive quarterly profits since our second  Profitability quarter of operations  Survived and prospered through numerous economic cycles  during our more than 34‐year history 2. Well‐Positioned in Strategic Markets  West Coast gateway cities in supply‐constrained markets  6 2 with strong job growth and limited affordable housing Efficient Well‐Positioned in   Achieve deeper penetration of our lending and deposit  Operations Strategic Markets gathering operations in our attractive West Coast markets  Expand into contiguous markets on the West Coast to  complete our Seattle to San Diego footprint 3. Demonstrated Organic Growth Engine  Multifamily: professional real estate investors focused on  investing in stable, cash‐flowing assets  Single Family: primary residence, second home or  investment property  Retail Deposits: strong base built on a high level of service,  competitive rates and our reputation for strength and  security 4. Strong Management Team and Robust Infrastructure 5 3  Led by President & CEO John Biggs (30+ years of banking  Demonstrated Strong experience) Organic Growth Asset Quality  Invested heavily in people and infrastructure over the last  Engine four years 5. Strong Asset Quality  Our most important focus  4 Strict, quality oriented underwriting and credit monitoring  Strong processes Management Team and   0.03% NPAs / Total Assets Robust Infrastructure 6. Efficient Operations  Maintain a small network of large branches ($384 million  avg. branch size)  46.5% efficiency ratio, 0.95% noninterest expense / average  Note: Financial data as of or for the nine months ended 09/30/2018.  See non‐GAAP reconciliation in Appendix hereto. assets and 273 FTEs 6


 
Top Multifamily Lenders in the United States Top 25 Banks and Thrifts by Multifamily Loans (Dollars in billions) As of June 30, 2018 Change Since (%) Delinquency Total Multifamily March 31, June 30, % of Change Since (bps) Rank Institution Name Headquarters Assets Loans 2018 2017 Multifamily(1) June 30, 2017 1. JPMorgan Cha s e & Co.  New York, NY 2,590.1 70.87 0.5 2.9 0.08 1 2. New York Community Bancorp Inc.  Westbury, NY 50.5 29.23 1.9 8.8 0.02 (3) 3. Signature Bank  New York, NY 45.2 15.32 2.0 5.4 0.00 0 4. Wells Fargo & Co.  San Francisco, CA 1,879.7 14.42 6.4 (8.8) 0.31 8 5. Capital One Financial Corp.  McLean, VA 364.0 11.46 (2.7) (2.2) 0.02 0 6. First Republic Bank  San Francisco, CA 93.9 9.66 6.2 30.3 0.05 (3) 7. Santander Holdings USA Inc.  Boston, MA 130.1 8.32 3.0 1.3 0.41 33 8. Investors Bancorp Inc.  Short Hills, NJ 25.4 8.06 1.2 0.1 0.58 21 9. PNC Financial Services Group Inc. Pittsburgh, PA 380.8 5.68 6.7 (4.6) 0.21 (42) 10. Citigroup Inc. New York, NY 1,912.3 5.61 7.7 28.3 0.20 (42) 11. MUFG Americas Holdings Corp.  New York, NY 160.4 5.48 0.7 16.4 0.19 (46) 12. Bank of America Corp. Charlotte, NC 2,291.9 5.35 (3.7) (9.5) 0.02 (3) 13. Sterling Bancorp Montebello, NY 31.5 4.94 0.6 364.2 0.23 1 14. M&T Bank Corp.  Buffalo, NY 118.4 4.31 20.7 3.7 1.65 (26) 15. KeyCorp  Cl evel a nd, OH 138.2 4.16 5.9 8.8 0.39 1 16. Dime Community Bancshares Inc.  Brooklyn, NY 6.3 4.11 (4.1) (13.7) 0.04 (2) 17. Valley National Bancorp  Wayne, NJ 30.2 3.79 1.5 12.5 0.01 (13) 18. TD Group US Holdings LLC  Wilmington, DE 378.8 3.64 (0.6) 8.8 0.68 6 19. Customers Bancorp Inc.  Wyomissing, PA 11.1 3.53 (2.8) (1.0) 0.04 4 20. U.S. Bancorp Minneapolis, MN 461.3 3.46 (3.5) (17.1) 0.43 27 21. Luther Burbank Corp.  Santa Rosa, CA 6.5 3.38 9.1 9.9 0.07 (7) 22. Umpqua Holdings Corp.  Portland, OR 26.5 3.21 2.1 8.1 0.14 10 23. CIBC Bancorp USA Inc. Chicago, IL 38.4 3.11 8.4 209.1 0.06 1 24. BB&T Corp. Wi ns ton‐Salem, NC 222.7 3.11 1.9 (19.5) 0.77 62 25. People's United Financial Inc.  Bridgeport, CT 44.6 3.09 (1.1) (11.3) 0.35 6 Banking Industry Aggregate(2) 418.96 1.9 5.1 0.23 (3) Source: SNL Financial. (1) Represents delinquent multifamily loans as a percentage of total multifamily loans.  Delinquent loans include 30+ days past due and nonaccrual loans. (2) Includes all U.S. commercial banks, savings banks and savings and loan associations. 7


 
Luther Burbank Peer Group  Includes all major exchange‐traded banks and thrifts nationwide with:  Total assets $1 billion ‐ $100 billion  Multifamily loans > $1 billion  Multifamily loans / total loans > 20% (1) (2) General Information Profitability Capital & Balance Sheet Ratios Bal. SheetAsset  GrowthQuality Total NPA/ NCO  /  Gross Total Total Multifamily Yield on Cost of NIE / Avg. Eff. TCE  / Leverage Capital Loans/   LLR/  Loans Avg. Loans Deposits Assets Loans ROAA ROAE NIM Loans Deposits Assets Ratio TA Ratio Ratio Deposits Loans + OREO Loans CAGR CAGR Institution Name Ticker State ($bn) ($bn) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) Luther Burbank Corporation LBC CA 6.5 3.4 0.71 7.93 2.00 3.70 1.36 0.94 46.7 8.6 9.9 17.3 125 0.58 0.16 (0.01) 15.5 11.4 Peer Group: 1. Dime Community Bancshares, Inc. DCOM NY 6.3 4.1 0.79 8.06 2.39 3.67 1.09 1.33 54.3 9.0 9.1 14.8 124 0.39 0.12 0.10 8.1 15.2 2. First Foundations, Inc. FFWM CA 6.0 2.7 0.37 4.72 2.83 3.98 0.82 2.44 66.5 7.1 7.9 11.4 93 0.39 0.26 0.32 51.0 56.6 3. Flushing Financial Corporation FFIC NY 6.5 2.3 0.86 10.47 2.76 4.31 1.24 1.67 59.8 8.1 8.8 13.8 116 0.38 0.46 0.02 10.1 8.1 4. Grandpoint Capital, Inc. GPNC CA 3.1 0.7 0.19 1.80 3.88 4.79 NA 4.39 113.2 8.6 8.6 10.9 96 0.78 0.44 0.01 5.6 1.2 5. Investors BanCorp, Inc. ISBC NJ 25.4 8.1 0.90 7.35 2.77 4.12 1.01 1.62 56.3 11.9 12.1 16.0 123 1.11 0.74 0.08 9.6 9.9 6. Kearny Financial Corp. KRNY NJ 6.6 1.8 0.47 2.38 2.72 4.14 0.97 1.90 58.9 16.5 16.2 25.8 111 0.69 0.47 0.01 29.7 15.4 7. Marquette National Corporation MNAT IL 1.6 0.4 1.00 10.81 3.52 NA 0.21 3.27 77.3 7.3 9.3 16.3 85 1.10 1.83 0.06 5.1 0.9 8. New York Community Bancorp, Inc. NYCB NY 50.5 29.2 0.87 6.33 2.32 3.77 1.18 1.12 48.2 8.0 9.4 14.0 133 0.41 0.21 0.05 2.8 1.2 9. Northfield Bancorp, Inc. NFBK NJ 4.2 2.0 1.02 6.56 2.84 3.98 0.81 1.65 56.3 14.7 15.2 18.4 109 0.83 0.71 (0.01) 15.5 18.9 10. Opus Bank OPB CA 7.2 2.7 0.85 6.02 3.07 4.21 0.57 2.38 66.1 9.2 9.9 15.9 85 1.17 0.79 0.65 6.4 13.6 11. Oritani Financial Corp. ORIT NJ 4.2 1.8 1.31 9.88 2.81 4.15 1.17 0.97 31.6 13.4 13.3 15.6 123 0.86 0.27 (0.01) 8.9 14.9 12. Peapack‐Gladstone Financial Corporation PGC NJ 4.3 1.3 1.11 11.11 2.82 4.01 0.90 2.31 59.4 9.7 9.7 15.7 106 1.02 0.87 (0.01) 15.5 13.0 13. Provident Financial Holdings, Inc. PROV CA 1.2 0.5 0.48 4.65 3.26 4.10 0.38 4.11 85.0 10.2 10.3 18.5 100 0.73 2.70 (0.02) ‐0.8 0.1 14. Signature Bank SBNY NY 45.2 15.3 1.38 15.18 2.93 4.01 0.76 1.02 34.4 9.1 9.6 13.4 98 0.61 0.54 0.04 20.0 13.3 15. Waterstone Financial, Inc. WSBF WI 1.9 0.6 2.01 9.37 3.15 4.61 1.08 7.41 74.0 21.5 21.7 29.5 135 0.88 0.77 (0.04) 5.8 4.1 Average: 0.91 7.65 2.94 4.13 0.87 2.51 62.7 11.0 11.4 16.7 109 0.76 0.75 0.08 12.9 12.4 Median: 0.87 7.35 2.83 4.11 0.94 1.90 59.4 9.2 9.7 15.7 109 0.78 0.54 0.02 8.9 13.0 Source: SNL Financial. GAAP data when available, otherwise FR Y‐9C’s and bank call reports as of or for the three months ended 06/30/2018.  Note that SNL earnings ratios may differ from Company as SNL annualizes one  quarter rather than using data for 12 months and SNL does not pro forma C Corporation earnings for S Corporations.  (1) Non‐performing assets (“NPA”) includes performing troubled debt restructurings. (2) Compound annual growth rate (“CAGR”) from 12/31/2014 to 6/30/2018. 8


 
Our Lending Business Multifamily Residential Loans Single‐Family Residential Loans Property Types: Markets:  Both owner‐occupied and investor owned  High barrier to entry for new development; little land to develop Broker Network:  Limited supply of new housing  Primarily third party mortgage brokers with the intention of   High variance between cost to own and rent retaining these loans in our portfolio Deals: Originations:  Stabilized and seasoned assets  Majority are for purchase transactions  Older, smaller properties with rents at/below market levels,   Also provide refinancing catering to lower and middle income renters Underwriting Focus: Sponsors:  Debt ratios  Experienced real estate professionals who desire regular   Loan to Value income/cash flow streams and are focused on building wealth   Credit scores steadily over time  Borrower’s liquidity and cash reserves Multifamily Portfolio Highlights Single‐Family Portfolio Highlights  $1.6 million average loan balance  $896 thousand average loan balance  16 units average  64.5% average loan‐to‐value ratio  57.1% average loan‐to‐value ratio  750 average credit score  1.55x average debt service coverage ratio 0.03% NPAs / Assets 0.04% NPLs / Loans Note: Data as of 09/30/2018. 9


 
Our Lending Products Multifamily / Commercial Real Estate Lending Single‐Family Residential Lending  First Mortgages  First Mortgages  Hybrid Structures  Hybrid Structures • 25‐ or 30‐year amortization • 30‐ or 40‐year amortization • 10‐, 25‐ or 30‐year maturities • 30‐ or 40‐year maturities • 3‐, 5‐ or 7‐year fixed rate periods • 3‐, 5‐ or 7‐year fixed rate periods  Interest Only Option  Full Documentation • Lower loan‐to‐value ratios  Purchase or Refinance Transactions • Underwrite at amortizing payment  Primary Residence, Second Home or Investor  programs  Investor‐Owner Purchase or Refinance  Grow Program • First‐time homebuyer 10


 
Loan Portfolio Historical Loan Growth Loan Portfolio Composition 3.71% yield on loans; 4.04% weighted average coupon(1) Multifamily Loans by Lending Area Single‐Family Loans by Lending Area (1) As of or for the nine months ended 09/30/2018. 11


 
Asset Quality Nonperforming Assets(1) / Total Assets Culture Approach Results  Risk management is a core competency of   Continuous evaluation of risk & return  09/30/2018 NPAs / Total Assets of 0.03%;  our business NPLs / Total Loans of 0.04%  Strict separation between business   Extensive expertise among our lending  development and credit decisions  NPAs and loans 90+ days past due to total  and credit administration staff and  assets are at depressed levels and   Vigilant response to adverse economic  executive officers significantly decreased since 2014 conditions and specific problem credits  Credit decisions are made efficiently and   Only one foreclosure in the past four years  Strict, quality oriented underwriting and  consistent with our underwriting  credit monitoring processes standards (1) Excludes performing troubled debt restructurings. 12


 
LOAN ORIGINATION VOLUME AND RATES Q3 4.84% Q2 4.65% Q1 4.31% Pipeline: • Total loan pipeline at September 30, 2018 is $251.5 million ($157.9 million CRE at 4.761% WAC, $88.8 million SFR at 4.69% WAC & $4.8  million Construction at 6.00% WAC). A portion of our pipeline will ultimately fallout/not fund and loans without rate locks are subject to  ongoing rate increases/ decreases.   13


 
CRE Loan Origination Composition Quarterly and YTD Loan Volume & WAC ($ in millions) 4.739% 6.5% 4.788% 8.1% 4.974% 1.2% 4.582% 15.4% 7.7% 5.350% 0.4% 5.328% 4.840% 7.9% 4.708% 11.0% 4.340% 13.3% 70.0% 4.512% 4.708% 80.1% 4.270% 78.4% 12 Months Ended December 31, 2017 9 Months Ended September 30, 2018 4.547% 4.200% 4.791% 4.730% 4.970% 4.600% 3.970% 4.509% 14


 
SFR Loan Origination Composition Quarterly and YTD Loan Volume & WAC ($ in millions) 4.652% 24.4% 4.198% 37.8% 5.15% 4.821% 24.4% 75.6% 4.820% 4.341% 62.2% 5.042% 75.6% 12 Months Ended December 31, 2017 9 Months Ended September 30, 2018 4.486% 3.990% 4.738% 3.910% 15


 
Deposit Composition Historical Deposit Growth & Portfolio Composition Deposit Breakdown by Branch September 30,  #Branch Location Date 2018 Established Deposits ($mm) 1Santa Rosa Oct. 1983 1,155.7 2San Rafael Sep. 1996 559.5 3Encino Aug. 2007 439.4 4Beverly Hills Jul. 2010 375.1 5Los Altos Aug. 2000 312.5 6 Pasadena May 2009 299.1 7Toluca Lake Jan. 2008 260.2 8Long Beach Jun. 2015 208.4 9San Jose Jun. 2012 173.5 10 Bellevue Jun. 2018 54.8       Brokered Deposits 527.7       Online/ Business Banking 578.0 A Manhattan Beach 1,105.7 1.40% cost of total deposits(1) Total Deposits 4,943.9 (1) For the nine months ended 09/30/2018. 16


 
Deposit Growth/Balance  Quarterly Trend $351.8 $478.1 $87.8 $162.8 $60.5 $182.2 (1) Business/online includes $47.7 million of brokered/wholesale funds, sourced by the unit.  17


 
Deposit Growth/Balance Continued  Interest vs Noninterest Bearing ($ in millions)  1Q 2018  2Q 2018  3Q 2018  Total Deposit  % of  Growth Growth Growth YTD 2018 Balance Portfolio Business/Online      Interest Bearing$            101,513 $                       47,199 $       181,727 $                 330,439 $       555,646 11.2%      Noninterest Bearing                  (2,240)                          38,699               2,534                       38,993             70,075 1.4% Total Business/Online Accounts                 99,273                          85,898          184,261                    369,432          625,721 12.7% Branches      Interest Bearing                 63,513                        392,232          167,529                    623,274       4,318,223 87.3% Total Branch Accounts                 63,513                        392,232          167,529                    623,274       4,318,223 87.3% Total Interest Bearing                165,026                        439,431          349,256                    953,713       4,873,869 98.6% Total Noninterest Bearing                   (2,240)                          38,699               2,534                       38,993             70,075 1.4% Total Deposit Growth$            162,786 $                     478,130 $       351,790 $                 992,706 $    4,943,944 100.0% 18


 
Business/Online Composition By Vertical  December 31, 2017 September 30, 2018 1.572% 1.572% 1.082% 0.830% 1.220% Balances include $256.3 million sourced by Business/Online unit  Balances include $625.7 million sourced by Business/Online unit  and $23.1 million sourced by Branches.  and $34.2 million sourced by Branches.  (1) Represents brokered funds sourced by Business Banking.  Total Bank brokered deposits at September 30, 2018 are $527.7 million or 10.67% of total deposits. 19


 
Efficient Operations Result in Consistent Profitability Return on Average Assets(1) Return on Average Equity(1) Efficiency Ratio (1) Prior to 2018 net income adjusted for C‐Corp status assumes 42% tax rate.  See non‐GAAP reconciliation in Appendix hereto. 20


 
Efficient Operations Result in Consistent Profitability Cont. Net Interest Margin YTD  Net Interest Margin  21


 
Interest Rate Risk Analysis On a quarterly basis, the Company measures and reports NII and EVE at Risk to isolate the change in income related solely to  interest earning assets and interest‐bearing liabilities. It models instantaneous parallel shifts in market interest rates, implied by  the forward yield curve over the next one year period. NII Impact EVE Impact Interest Rate Risk to Earnings (NII) Interest Rate Risk to Capital (EVE) September 30, 2018 September 30, 2018 Change in ($ in millions) Change in ($ in millions) Interest Rates $ Change % Change Interest Rates $ Change % Change (basis points) NII NII (basis points) EVE EVE + 400 BP (42.7) (33.2%) + 400 BP (392.9) (64.8%) + 300 BP (28.8) (22.4%) + 300 BP (261.0) (43.0%) + 200 BP (16.2) (12.6%) + 200 BP (152.4) (25.1%) + 100 BP (6.6) (5.1%) + 100 BP (65.0) (10.7%) ‐ 100 BP 7.8 6.1% ‐ 100 BP 49.0 8.1% 22


 
Deposits ‐ Cost of Funds Comparison 23


 
Liquidity Management Securities Portfolio As of September 30, 2018 Book Value % of ($000) Total Available‐for‐Sale: Mortgage‐backed securities 445,525 71% Agency bonds 116,221 19% Residential collateralized mortgage obligations 40,542 6% CRA Qualified Investment Fund (CRAIX) 11,327 2% U.S. Treasury 10 year note 961 0% Total Available‐for‐Sale 614,576 98% Held‐to‐Maturity: Mortgage‐backed securities 11,663 2% Other Investments 272 0% Total Held‐to‐Maturity: 11,935 2% Total Investment Securities 626,511 100.0% Other Borrowings Amount Outstanding  Cost of  Type 9/30/2018 Borrowings (1) FHLB Advances $962 million 2.11% Senior Notes $94 million 6.70% Trust Preferred  $62 million 3.57% (1) For the nine months ended 09/30/2018 24


 
Executive Management  John G. Biggs. Mr. Biggs serves as our President and Chief Executive Officer. He leads the Executive Committee and is a member of the Bank’s board of directors. During his 30‐plus year tenure with the Bank, Mr. Biggs has held the positions of Chief Financial Officer and Chief Operating Officer, before assuming his current role in September 2007. Since becoming President and Chief Executive Officer, Mr. Biggs has spearheaded the initiatives that have seen our total assets increase from $2.7 billion at December 31, 2007 to $6.7 billion at September 30, 2018, equity increase from $182.4 million to $571.4 million over that period, expansion of the branch network in Northern and Southern California from three branches to ten, establishment and expansion of our headquarters infrastructure in Santa Rosa and Manhattan Beach, and our entry into the Seattle market, in which we have over $690.8 million in loans as of September 30, 2018. A Certified Public Accountant (inactive), Mr. Biggs previously served as Vice President of Finance and Controller for Columbus Marin Savings & Loan Association and as a public accountant specializing in auditing broker/dealers for the firms of Arthur Andersen, San Francisco, and KPMG LLP, Los Angeles. Mr. Biggs graduated summa cum laude in Accounting from Woodbury University. Robert Armstrong, III. Mr. Armstrong joined the Bank in January 2016, and currently serves as Executive Vice President and Chief Banking Officer. Mr. Armstrong is responsible for expanding the Bank’s deposit offerings and creating greater access to its products and services, including deposit generation across commercial and consumer online banking platforms, as well as business banking activities. Prior to joining us, Mr. Armstrong served as Senior Vice President of Business Banking at BofI Federal Bank from October 2013 to December 2015 and a Senior Partner at Cappetta Capital from 2010 to 2013. Mr. Armstrong’s background also includes positions as CEO/President of San Diego Private Bank, Market President at US Bank and Managing Director at Bank of America. Mr. Armstrong holds a B.S. in Economics from the University of California, Los Angeles. John A. Cardamone. Mr. Cardamone joined the Bank as Chief Credit Officer in 2014. He oversees the Bank’s credit and special assets activities as well as loan operations; he is also a member of the Bank’s Executive Committee. Prior to joining the Bank, Mr. Cardamone served as Senior Vice President & DivisionalCredit Manager – Commercial Real Estate at Bank of the West from 2008 until joining the Bank, Chief Credit Officer at GreenPoint Mortgage, Senior Vice President – Global Risk Management at GE Capital’s Mortgage Insurance Unit and Managing Director and Chief Credit Officer at the Federal Home Loan Bank of San Francisco. Mr. Cardamone holds an M.B.A. in Finance from The Wharton School at the University of Pennsylvania, an M.B.A. in Management from St. Mary’s College and a B.B.A. in Business Statistics from Temple University. 25


 
Executive Management Continued Tammy Mahoney. Ms. Mahoney joined the Bank as Chief Compliance Officer in early 2016 and was appointed Chief Risk Officer later that year. In her role, Ms. Mahoney oversees the Bank’s compliance, internal audit and risk management functions, including information security and project management; she is also a member of its Executive Committee. Prior to joining the Bank, Ms. Mahoney served as Senior Vice President of Enterprise Risk and Compliance at Opus Bankfrom August 2011 to December 2015; as Director, Risk Advisory Services at KPMG from June 1995 to August 2004; and as Associate National Bank Examiner with the Office of the Comptroller of the Currency. A Certified Regulatory Compliance Manager and Certified Internal Auditor, Ms. Mahoney holds a B.S. in Business Administration ‐ Finance from San Diego State University. Liana Prieto. Ms. Prieto joined as General Counsel of the Company and Bank in 2014. In this role she is responsible for leading a team of legal, human resources, Bank Secrecy Act, and third party risk management professionals; she is also a member of the Bank’s Executive Committee. Prior to joining us, Ms. Prietoservedas Associate and then Counsel at Buckley Sandler LLP from 2009 to 2014, and as a trial attorney in the Enforcement & Compliance Division of the Office of the Comptroller of the Currency. In addition to her role at the Company and Bank, Ms. Prieto serves as Vice Chair of the Enforcement, Insider Liability and Troubled Banks Subcommittee of the American Bar Association’s Business Law Section. She also serves on the American Association of Bank Directors’ Board of Advisors and on their General Counsel and Corporate Secretary Committee. Ms. Prieto holds a J.D. from Fordham Law School and a B.A. from Georgetown University. Laura Tarantino. Ms. Tarantino currently serves as Executive Vice President and Chief Financial Officer of the Company and Bank, a position she has held since 2006. In this role, she oversees all aspects of financial reporting including strategic planning, asset/liability management, taxation and regulatory filings; she is also a member of the Bank’s Executive Committee. Ms. Tarantino has over 26 years of experience with the Company and Bank, having joined as Controller in 1992. She previously served as Audit Manager for KPMG LLP, San Francisco specializing in the financial services industry. In addition to her role at the Company and Bank, Ms. Tarantino has served as an Audit Committee member for the Santa Rosa Council on Aging since 2012. Ms. Tarantino is a California Chartered CPA (inactive)and earned a B.S. in Business Administration – Finance & Accounting with summa cum laude honors from San Francisco State University. 26


 
Board of Directors John C. Erickson. Mr. Erickson has more than 30 years of financial services experience. Most recently, he served as President, Consumer Banking and President, California, for CIT Group, Inc. (2016). Until 2014, he served for over 30 years at Union Bank, N.A.. He held a number of senior roles across the firm, culminating in two vice chairman positions (Chief Risk Officer and Chief Corporate and Banking Officer). As Chief Corporate Banking Officer, he oversaw commercial banking, real estate, global treasury management, wealth management and global capital markets. He was a director of Zions Bancorporation (NASDAQ: ZION) from 2014 to 2016, and chair of that board’s risk committee, as well as a member of the audit committee. We believe Mr. Erickson’s extensive banking experience, leadership and board experience qualify him to serve on our board of directors. Jack Krouskup. Mr. Krouskup, a certified public accountant (inactive), has more than 35 years’ experience serving customers in a variety of industries. At Deloitte, LLP, or Deloitte, he served as partner‐in‐charge of the company’s Northern California financial services practice and also served on Deloitte’s financial services advisory committee. Mr. Krouskup has years of boardroom experience representing Deloitte with numerous global and highly complex organizations. Consequently, he has an extensive corporate governance background and deep familiarity with board and audit committee best practices. Mr. Krouskup retired from Deloitte in 2011. He currently serves on the board of directors of Verity Health System and on the Board of Trustees of the University of California, Santa Barbara, Alumni Association board of directors. We believe Mr. Krouskup’s extensive experience as an auditor enhances the skill set of our board. Mr. Krouskup qualifiesasan‘‘audit committee financial expert’’ as defined in SEC rules, and the financial sophistication requirements of NASDAQ’s listing requirements. Anita Gentle Newcomb. Ms. Newcomb’s experience spans over three decades in the financial services industry as a commercial banker, investment banker, and strategic consultant. She has advised a range of banks and financial services companies on a wide range of corporate development initiatives from strategic planning, consumer and business banking strategy, and corporate governance best practices, to mutual conversions and valuing and structuring acquisitions. Ms. Newcomb is president of A.G. Newcomb & Co., a financial services consultancy. She also served on the board of the Federal Reserve Bank of Richmond – Baltimore Branch from 2010 through 2015. Ms. Newcomb is a member of the Advisory Board of the American Association of Bank Directors’ Institute for Bank Director Education. She is also a certified public accountant (inactive). We believe Ms. Newcomb’s broad financial services consulting and strategic planning expertise bring a valuable perspective to our board and qualifies her to serve on our board of directors. 27


 
Board of Directors Continued Bradley M. Shuster. Mr. Shuster currently serves as Chairman of the board of directors and Chief Executive Officer of NMI Holdings, Inc. and its principal subsidiary, National Mortgage Insurance Corporation, positions he has held since 2012. From 2008 to 2011, Mr. Shuster has held various consulting positions assisting private investors with evaluating opportunities in the insurance industry. Mr. Shuster was an executive of The PMI Group, Inc., or PMI, from 1995 to 2008, whereheserved as president of International and Strategic Investments and chief executive officer of PMI Capital Corporation. Prior to that, he served as PMI’s executive vice president of Corporate Development and senior vice president, treasurer and chief investment officer. Before joining PMI in 1995, Mr. Shuster was a partner at Deloitte, where he served as partner‐in‐charge of Deloitte’s Northern California Insurance Practice and Mortgage Banking Practice. He is a member of the board of directors of McGrath Rentcorp (NASDAQ: MRGC), and serves as a member of its audit and governance committees. We believe Mr. Shuster’s substantial experience in leadership and management of a public company in the mortgage sector qualifies him to serve on our board of directors. Victor S. Trione. Mr. Trione serves as Chairman of the board of directors Luther Burbank Savings, a position he has held since founding Luther Burbank Savings and LoanAssociationin1983andoftheCompany.InadditiontoservingasChairman of the Company and Bank, Mr. Trione is President of Vimark, Inc., a real estate development and vineyard management company, and co‐proprietor of Trione Winery. Mr. Trione serves as Director and Chairman of the Executive Committee – Empire College; sits on the Advisory Board – Stanford Institute for Economic Policy Research; Board of Overseers – Stanford University’s Hoover Institution; serves as Trustee – Angela Merici and John Newman Foundation, Inc.; Trustee – U.S. Navy Memorial Foundation, Washington, D.C.; Director – Navy Supply Corps Foundation. As one of our founders, Mr. Trione brings continuity and deep historic knowledge of the Company to the board. Thomas C. Wajnert. Mr. Wajnert launched his career in 1968 with US Leasing, a NYSE‐listed company. For over 40 years, Mr. Wajnert has navigated the changing currents of the equipment leasing industry and built an impressive list of accomplishments, including serving as CEO and Chairman of AT&T Capital Corporation, an international, full‐service equipment leasing and commercial finance company, from 1984 to 1996. Mr. Wajnert also has extensive public company board experience at Reynolds American as Chairman and Solera, UDR, Inc., NYFIX, JLG Industries as a director. Mr. Wajnert also serves on the board of International Finance Group, one of the largest privately owned P&C insurance company in the U.S. For many years he served as a Trustee of Wharton’s Center for Financial Institutions. We believe Mr. Wajnert’s substantial experience in leadership of public companies, both as an executive and as a director, qualifies him to serve on our board of directors. 28


 
Appendix


 
Balance Sheet ($ in 000’s) As of September 30, December 31, 2018 (1) 2017 ASSETS Cash and cash equivalents $ 60,698 $ 75,578 Available for sale investment securities, at fair value 614,576 503,288 Held to maturity investment securities, at amortized cost (fair value of $11,527 and $6,925 at September 30, 2018 and December 31, 2017 respectively) 11,935 6,921 Loans receivable, net of allowance for loan losses of $34,086 and $30,312 as of September 30, 2018 and December 31, 2017, respectively 5,891,702 5,011,235 Accrued interest receivable 20,060 14,901 Federal Home Loan Bank ("FHLB") stock, at cost 27,235 27,733 Premises and equipment, net 21,571 22,452 Goodwill 3,297 3,297 Prepaid expenses and other assets 41,341 38,975 Total assets $ 6,692,415 $ 5,704,380 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits $ 4,943,944 $ 3,951,238 Federal Home Loan Bank advances 962,139 989,260 Junior subordinated deferrable interest debentures 61,857 61,857 Senior debt $95,000 face amount, 6.5% interest rate, due September 30, 2024 (less debt issuance costs of $738 and $839 at September 30, 2018 and December 31, 2017, respectively) 94,262 94,161 Accrued interest payable 4,974 1,781 Other liabilities and accrued expenses 53,840 56,338 Total liabilities 6,121,016 5,154,635,000 Stockholders' equity: Common stock, no par value; 100,000,000 shares authorized; 56,543,771 and 56,422,662 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively 457,428 454,287 Retained earnings 122,503 102,459 Accumulated other comprehensive loss, net of taxes (8,532) (7,001) Total stockholders' equity 571,399 549,745,000 Total liabilities and stockholders' equity $ 6,692,415 $ 5,704,380 (1) Unaudited 30


 
Income Statement ($ in 000’s, except per share data) For the Three Months Ended (1) For the Nine Months Ended (1) September 30, September 30, September 30, September 30, 2018 2017 2018 2017 Interest and fee income: Loans $ 55,644 $ 44,180 $ 153,550 $ 124,096 Investment securities 3,266 1,683 8,638 4,857 Cash and cash equivalents 489 320 1,178 662 Total interest and fee income 59,399 46,183 163,366 129,615 Interest expense: Interest on deposits 19,650 10,156 46,141 27,527 Interest on FHLB advances 5,860 5,260 17,502 12,796 Interest on junior subordinated deferrable interest debentures 600 430 1,655 1,218 Interest on other borrowings 1,577 1,577 4,733 4,732 Total interest expense 27,687 17,423 70,031 46,273 Net interest income before provision for (reversal of) loan losses 31,712 28,760 93,335 83,342 Provision for (reversal of) loan losses 650 1,550 3,450 (4,622) Net interest income after provision for (reversal of) loan losses 31,062 27,210 89,885 87,964 Noninterest income: Net gain on sale of loans 140 4,133 140 3,277 FHLB dividends 622 581 1,725 1,777 Other income 281 217 1,020 960 Total noninterest income 1,043 4,931 2,885 6,014 Noninterest expense: Compensation and related benefits 9,018 8,664 27,836 28,384 Deposit insurance premium 483 580 1,382 1,408 Professional and regulatory fees 394 428 1,295 1,453 Occupancy 1,418 1,339 4,018 3,860 Depreciation and amortization 700 717 2,108 2,179 Data processing 895 791 2,490 2,378 Marketing 1,235 253 2,009 637 Other expenses 947 1,010 3,587 3,024 Total noninterest expense 15,090 13,782 44,725 43,323 Income before provision for income taxes 17,015 18,359 48,045 50,655 Provision for income taxes 4,886 612 13,588 1,691 Net income $ 12,129 $ 17,747 $ 34,457 $ 48,964 Basic earnings per common share $ 0.22 $ 0.42 $ 0.61 $ 1.17 Diluted earnings per common share $ 0.21 $ 0.42 $ 0.61 $ 1.17 Weighted average common shares outstanding - basic 56,190,970 42,000,000 56,190,970 42,000,000 Weighted average common shares outstanding - diluted 56,864,100 42,000,000 56,813,110 42,000,000 (1) Unaudited 31


 
Net Interest Margin ($ in 000’s) For the Nine Months Ended For the Three Months Ended For the Three Months Ended September 30, 2018 September 30, 2018 June 30, 2018 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) Interest‐Earning Assets Multifamily residential$  3,233,492 $   92,296 3.81%$  3,446,093 $ 33,609 3.90%$  3,249,423 $ 30,758 3.79% Single family residential    2,117,957      55,405 3.49%    2,209,538    19,935 3.61%    2,132,806    18,664 3.50% Commercial       139,463        4,934 4.72%       158,567      1,863 4.70%       141,811      1,607 4.53% Construction, land and NM         31,608           915 3.86%         24,354         237 3.89%         32,204         314 3.90% Total loans (1)   5,522,520   153,550 3.71%  5,838,552   55,644 3.81%  5,556,244   51,343 3.70% Securities available‐for‐sale       556,930        8,355 2.00%       587,917      3,166 2.15%       558,051      2,807 2.01% Securities held‐to‐maturity (2)        11,545         283 3.27%       11,980       100 3.35%       12,095         94 3.11% Cash and cash equivalents         93,060        1,178 1.69%       105,854         489 1.85%       102,891         442 1.72% Total interest‐earning assets $ 6,184,055 $ 163,366 3.52%$  6,544,303 $ 59,399 3.63%$  6,229,281 $ 54,686 3.51% Noninterest‐earning assets         78,258         75,326         80,806 Total Assets $ 6,262,313 $ 6,619,629 $ 6,310,087 Interest‐Bearing Liabilities Transaction accounts (3) $   223,487 $    1,093 0.65%$    228,803 $     303 0.53%$    216,938 $     382 0.70% Money market demand accounts    1,465,200      10,681 0.97%    1,483,298      4,150 1.12%    1,404,954      3,217 0.92% Time deposits    2,691,934      34,367 1.70%    3,137,338    15,197 1.94%    2,654,169    10,961 1.65%      Total deposits    4,380,621      46,141 1.40%    4,849,439    19,650 1.62%    4,276,061    14,560 1.36% FHLB advances    1,107,012      17,502 2.11%       987,607      5,860 2.37%    1,264,250      6,823 2.16% Senior debt         94,207        4,733 6.70%         94,240      1,577 6.69%         94,206      1,577 6.70% Junior subordinated debentures         61,857        1,655 3.57%         61,857         600 3.88%         61,857         567 3.67% Total interest‐bearing liabilities  $ 5,643,697 $   70,031 1.65%$  5,993,143 $ 27,687 1.85%$  5,696,374 $ 23,527 1.65% Noninterest‐bearing liabilities         56,304         57,310         52,752 Total stockholders' equity       562,312       569,176       560,961 Total liabilities and stockholders' equity $ 6,262,313 $ 6,619,629 $ 6,310,087 Net interest spread (4) 1.87% 1.78% 1.86% Net interest income/margin (5) $   93,335 2.01%$  31,712 1.94%$  31,159 2.00% (1) 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 costs, net.  (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 average interest‐earning assets.  (6) Yields shown are annualized.   32


 
Non‐GAAP Reconciliation ($ in 000’s, except per share data)  (1)  (1) As of or For the Three Months EndedAs of or for the Nine Months Ended or For the Years Ended December 31, September 30,  June 30,  September 30,  September 30,  September 30,  2018 2018 2017 2018 2017 2017 2016 2015 2014 Tangible book value Total assets  $           6,692,415  $           6,510,233  $           5,319,557  $           6,692,415  $           5,319,557  $         5,704,380  $         5,063,585  $         4,361,779  $         3,969,047  Less: Goodwill                      (3,297)                     (3,297)                     (3,297)                     (3,297)                      (3,297)                   (3,297)                   (3,297)                   (3,297)                   (3,297) Less: Total liabilities              (6,121,016)             (5,948,053)              As of  (4,886,097)             (6,121,016)              (4,886,097)           (5,154,635)           (4,659,210)           (3,990,480)           (3,619,539) Tangible book value  $               568,102  $               558,883  $               430,163  $               568,102  $               430,163  $            546,448  $            401,078  $            368,002  $            346,211  Pro forma Items  (2)      Actual/ Pro forma provision for income tax      Net income before income taxes  $                 17,015  $                 15,754  $                 18,359  $                 48,045  $                 50,655  $               65,231  $               53,940  $               36,639  $               35,721       Effective tax rate 29% 29% 42% 28% 42% 42% 42% 42% 42%      Actual/ Pro forma provision for income taxes  $                   4,886  $                   4,528  $                   7,711  $                 13,588  $                  21,275  $               27,397  $               22,655  $               15,388  $               15,003       Actual/ Pro forma net income      Net income before income taxes  $                 17,015  $                 15,754  $                 18,359  $                 48,045  $                 50,655  $               65,231  $               53,940  $               36,639  $               35,721       Actual/ Pro forma provision for income taxes                        4,886                        4,528                        7,711                     13,588                      21,275                   27,397                    22,655                   15,388                   15,003       Actual/ Pro forma net income  $                 12,129  $                 11,226  $                 10,648  $                 34,457  $                 29,380  $               37,834  $               31,285  $               21,251  $               20,718       Actual/ Pro forma ratios and per share data      Actual/ Pro forma net income (numerator)  $                 12,129  $                 11,226  $                 10,648  $                 34,457  $                  29,380  $               37,834  $               31,285  $               21,251  $               20,718       Average assets (denominator)                6,619,629                6,310,087                5,786,035                6,262,313                 5,494,124             5,485,832             4,676,676             4,040,381             3,796,649       Actual/ Pro forma return on average assets 0.73% 0.71% 0.74% 0.73% 0.71% 0.69% 0.67% 0.53% 0.55%      Average stockholders' equity (denominator)  $               569,176  $               560,961  $               427,018  $               562,312  $               415,946  $            425,698  $            390,318  $            359,359  $            343,412        Actual/ Pro forma return on average stockholders' equity 8.52% 8.00% 9.97% 8.17% 9.42% 8.89% 8.02% 5.91% 6.03%      Weighted average shares outstanding ‐ diluted (denominator)             56,864,100             56,820,076             42,000,000             56,813,110              42,000,000           42,957,936           42,000,000           42,000,000           42,000,000       Actual/ Pro forma earnings per share—diluted  $                      0.21  $                      0.20  $                      0.25  $                      0.61  $                      0.70  $                   0.88  $                   0.74  $                   0.51  $                   0.49  (1) Unaudited (2) Prior to January 1, 2018, we calculate our pro forma net income, earnings per share, 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%.  This calculation reflects only the change in our status as an S Corporation and does not give effect  to any other transaction.  For the three months  and nine months ended September 30, 2018, our actual provision for income taxes is used for comparative purposes.  33


 
Non‐GAAP Reconciliation ($ in 000’s)  Ended (1) As of or for the Nine Months Ended (1) September As30, of   or For the JuneThree 30, Months  September 30,  September 30,  September 30,  As of or For the Years Ended December 31, 2018 2018 2017 2018 2017 2017 2016 2015 2014 Efficiency ratio Noninterest expense (numerator)  $                 15,090  $                 14,922  $                 13,782  $                 44,725  $                 43,323  $               56,544  $               61,242  $               62,339  $               61,886  Net interest income  $                 31,712  $                 31,159  $                 28,760  $                 93,335  $                 83,342  $            110,895                 $ 94,594  $               84,879  $               93,968  Noninterest income                        1,043                           817                        4,931                        2,885                         6,014                     7,508                     7,885                     7,644                     3,676  Operating revenue (denominator)  $                 32,755  $                 31,976  $                 33,691  $                 96,220  $                 89,356  $            118,403  $            102,479  $               92,523  $               97,644  Efficiency ratio 46.1% 46.7% 40.9% 46.5% 48.5% 47.8% 59.8% 67.4% 63.4% Tangible assets Total assets  $           6,692,415  $           6,510,233  $           5,319,557  $           6,692,415   $           5,319,557  $         5,704,380  $         5,063,585  $         4,361,779  $         3,969,047  Less: Goodwill                      (3,297)                     (3,297)                     (3,297)                     (3,297)                      (3,297)                   (3,297)                   (3,297)                   (3,297)                   (3,297) Tangible assets  $           6,689,118  $           6,506,936  $           5,316,260  $           6,689,118  $           5,316,260  $         5,701,083  $         5,060,288  $         4,358,482  $         3,965,750  Tangible stockholders' equity to tangible assets Tangible book value (numerator)   $               568,102  $               558,883  $               430,163  $               568,102  $               430,163  $            546,448  $            401,078  $            368,002  $            346,211  Tangible assets (denominator)                6,689,118                6,506,936                5,316,260                6,689,118                 5,316,260             5,701,083             5,060,288             4,358,482             3,965,750  Tangible stockholders' equity to tangible assets 8.5% 8.6% 8.1% 8.5% 8.1% 9.6% 7.9% 8.4% 8.7% (1) Unaudited 34