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): April 29, 2019
 
 
 
 
 
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 April 29, 2019, 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 8:00 a.m. (Pacific Time) on April 30, 2019 to discuss its financial results for the quarter ended March 31, 2019. 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: April 29, 2019
 
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=12861572&doc=4            http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12861572&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 ENDED MARCH 31, 2019

Quarterly Cash Dividend of $0.0575 Per Common Share Declared

SANTA ROSA, Calif. (April 29, 2019) Luther Burbank Corporation (NASDAQ: LBC) (the “Company”), the holding company for Luther Burbank Savings (the “Bank”), today reported net income of $12.0 million, or $0.21 diluted earnings per common share (“EPS”), for the quarter ended March 31, 2019, compared to net income of $10.6 million, or $0.19 EPS, for the linked quarter and $11.1 million, or $0.20 EPS, for the same period last year. Pre-tax, pre-provision earnings for the quarter ended March 31, 2019 was $17.2 million, compared to $15.0 million for the linked quarter and $16.8 million for the same period last year.
Pre-tax, pre-provision earnings, a non-GAAP financial measure, is presented because management believes this financial metric provides stockholders with useful information for evaluating the profitability of the Company. A schedule reconciling our GAAP net income to pre-tax, pre-provision earnings is provided in the tables below.
Simone Lagomarsino, President and Chief Executive Officer, stated, “I'm pleased to announce our financial results for the quarter ended March 31, 2019. During the quarter, we grew our assets to approximately $7.0 billion, with total loans and deposits increasing to $6.1 billion and $5.1 billion, respectively. In addition, net income increased to $12.0 million or $1.4 million above the linked quarter. This increase in earnings was primarily attributable to a $341 thousand increase in net interest income, as well as the absence of non-recurring expenses incurred during the previous period in connection with our CEO succession plan. Net interest margins were 1.86% and 1.88% during the quarters ended March 31, 2019 and December 31, 2018, respectively, as the decline in our margins moderated due to a slowing in the growth of our cost of funds, which increased by 11 basis points during the current quarter as compared to 15 basis points during the linked quarter. Our team continues to focus on improving our deposit structure as we concentrate our efforts and resources on developing deposit relationships with a lower funding cost. In addition, we remain one of the most efficient companies within our peer group, with an efficiency ratio of 49% for the quarter.”
Ms. Lagomarsino continued, “During the quarter, we repurchased 393,000 shares at an average price of $9.88 per share, and since the inception of our stock repurchase program, we've repurchased 566,300 of our shares at an average price of $9.49 per share, or a 9% discount to our book value. There is approximately $9.6 million remaining in the program.”

1


Board Declares Quarterly Cash Dividend of $0.0575 Per Share
On April 29, 2019, the Board of Directors of the Company declared a quarterly cash dividend of $0.0575 per common share. The dividend is payable on May 20, 2019 to shareholders of record as of May 9, 2019.
Net Interest Income
Net interest income for the quarter ended March 31, 2019 totaled $32.1 million compared to $31.8 million for the previous quarter and $30.5 million for the same period last year. As compared to the linked quarter, net interest income was positively impacted by growth in the average balance and yield of our loan portfolio, which increased by $158.9 million and 8 basis points, respectively. These items were partially offset by an increase in the cost of deposits of 11 basis points and an increase in the average balance of FHLB advances of $167.2 million. The $1.6 million, or 5.3%, 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 March 31, 2019, the average balance of loans increased by $1.0 billion and the yield increased by 35 basis points, compared to the same period last year. The improvement in net interest income was further enhanced by growth in the average balance and yield of our investment portfolio, which increased by $113.1 million and 57 basis points, respectively. This increase in net interest income during the current quarter compared to the same period last year was partially offset by growth in the average balance and costs of our deposits and FHLB advances. The average balance and cost of deposits increased $1.0 billion and 74 basis points, respectively, and the average balance and cost of FHLB advances increased $54.2 million and 64 basis points, respectively, compared to the same period last year. Net interest margin for the quarter ended March 31, 2019 was 1.86%, compared to 1.88% for the previous quarter and 2.11% for the same period last year. The decline in net interest margin from these previous periods primarily relates to our rising cost of funds which has generally outpaced the increases in yield on our interest earning assets. Our net interest spread in the first quarter of 2019 was 1.67%, declining by 2 basis points and 30 basis points, respectively, compared to the previous quarter and the same period last year.
Noninterest Income
Noninterest income for the quarter ended March 31, 2019 totaled $1.4 million, compared to $1.2 million for the previous quarter and $1.0 million for the same period last year. The increase of $134 thousand in noninterest income, or 10.8%, for the quarter ended March 31, 2019 compared to the linked quarter ended December 31, 2018, was primarily attributable to a $333 thousand gain on sale of loans during the current quarter, a $144 thousand increase in the fair value of equity securities and a $123 thousand increase in servicing fee income, net of mortgage servicing right amortization, partially offset by a special FHLB dividend of $484 thousand received during the prior quarter. The increase of $355 thousand in noninterest income, or 34.6%, for the quarter ended March 31, 2019 compared to the quarter ended March 31, 2018, was primarily attributable to the $333 thousand gain on sale of loans during the current quarter.
Noninterest income primarily consists of FHLB stock dividends, mark to market adjustments on equity securities, fee income and the financial impact related to loans sold.
Noninterest Expense
Noninterest expense for the quarter ended March 31, 2019 totaled $16.2 million compared to $18.0 million for the previous quarter and $14.7 million for the same period last year. Compared to the linked quarter, noninterest expense decreased $1.7 million, or 9.5%, primarily due to expenses incurred in connection with the Company's CEO succession plan during the linked quarter, resulting in a decrease of $972 thousand and $339 thousand in compensation costs and consulting fees, respectively. Compared to the same period last year, noninterest expense increased $1.5 million, or 10.4%, during the quarter ended March 31, 2019 primarily attributable to an increase of $941 thousand in marketing expenses related to deposit gathering efforts, as well as an increase of $433 thousand in compensation costs due to a decline in the deferral of loan origination costs caused by slower loan originations during the current quarter as compared to the same period last year. As discussed below, loan growth moderated during the current quarter due to a modest slowing in demand for hybrid real estate loans, as well as an elevated level of single family residential loan prepayments.
Noninterest expense primarily consists of compensation costs, as well as expenses incurred related to occupancy, depreciation and amortization, data processing, marketing and professional services.

2


Balance Sheet Summary
Total assets at March 31, 2019 were $7.0 billion, an increase of $54.8 million, or 0.8%, from December 31, 2018. The increase was primarily due to a $30.3 million, or 5.0%, increase in available for sale debt securities, a $13.6 million, or 0.2%, increase in loans held-for-investment and a $12.9 million, or 14.0%, increase in cash and cash equivalents. Absent loan sales of $52.9 million during the three months ended March 31, 2019, loan growth would have been $66.5 million. Total liabilities increased $47.7 million, or 0.7%, to $6.4 billion at March 31, 2019 from December 31, 2018. The increase in total liabilities was primarily attributable to growth in our deposits of $80.8 million, or 1.6%, partially offset by a decrease in FHLB advances of $33.5 million, or 2.9%, compared to December 31, 2018.
Loans
Total loans at March 31, 2019 were $6.1 billion, an increase of $13.6 million from December 31, 2018. 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 represent 64.4% and 35.3%, respectively, of our total loan portfolio.
Our IPL portfolio primarily consists of hybrid multifamily residential and commercial real estate loans. IPL loans totaled $4.0 billion at March 31, 2019 compared to $3.9 billion at December 31, 2018. The yield on the IPL portfolio was 4.10% during the quarter ended March 31, 2019, compared to 4.01% and 3.77% during the linked quarter and the same period last year, respectively. For the quarter ended March 31, 2019, IPL loan originations and the corresponding weighted average coupon totaled $207.3 million and 4.61%, respectively, compared to $268.2 million and 4.73%, respectively, for the linked quarter and $262.6 million and 4.33%, respectively, for the same period last year. The decreased level of originations during the current quarter was primarily due to a slowing in demand for IPL products. The decrease in yield compared to the linked quarter was due to a decline in longer term interest rates. The increase in yield compared to the same period last year was caused by a general rise in interest rates during the past 12 months. Prepayment speeds within the IPL loan portfolio were 7.0% for the quarter ended March 31, 2019, compared to 9.1% and 4.6% during the linked quarter and the same period last year, respectively.
Our SFR loan portfolio generally consists of hybrid loans. SFR loans totaled $2.2 billion and $2.3 billion at March 31, 2019 and December 31, 2018, respectively. The yield on the SFR portfolio was 3.70% during the quarter ended March 31, 2019, compared to 3.66% and 3.35% during the linked quarter and the same period last year, respectively. For the quarter ended March 31, 2019, SFR loan originations and the corresponding weighted average coupon totaled $104.2 million and 4.63%, respectively, compared to $198.4 million and 4.69%, respectively, for the linked quarter and $215.2 million and 4.29%, respectively, for the same period last year. The decreased originations during the current quarter was primarily due to a slowing in demand for hybrid SFR loans, as a result of an inversion in the yield curve. As discussed above, the decrease in yield compared to the linked quarter was due to a decline in longer term interest rates, while the increase in yield compared to the same period last year was caused by a general rise in interest rates during the past 12 months. Prepayment speeds within the SFR loan portfolio were 26.3% during the quarter ended March 31, 2019, compared to 26.4% and 21.3% during the linked quarter and the same period last year, respectively.
Asset Quality
Nonperforming loans totaled $1.5 million, or 0.02% of total loans, at March 31, 2019, compared to $2.2 million, or 0.04% of total loans, at December 31, 2018. There was no real estate owned at March 31, 2019 and December 31, 2018 and we have not foreclosed on any collateral since 2015. For the quarter ended March 31, 2019, loan loss provisions of $300 thousand were recorded compared to $150 thousand in the prior quarter and $1.5 million for the same period last year. The higher loan loss provisions during the current quarter compared to the linked quarter were primarily recorded to support the continued growth in our loan portfolio. The lower loan loss provisions recorded during the current quarter compared to the same period last year were primarily due to the sustained performance of our loan portfolio, improving credit quality and slower loan growth and corresponding loan originations as compared to the same period last year. Our allowance for loan losses to total loans was 0.56% at March 31, 2019, compared to 0.56% at December 31, 2018 and 0.60% at March 31, 2018.
Prepaid Expenses and Other Assets
Prepaid expenses and other assets totaled $63.5 million at March 31, 2019 compared to $64.6 million at December 31, 2018, a decrease of $1.1 million or 1.6%. Prepaid expenses and other assets primarily consist of bank owned life insurance, prepaid expenses, accrued interest receivable, premises and equipment and tax related items.

3


Deposits
Deposits totaled $5.1 billion at March 31, 2019, an increase of $80.8 million from December 31, 2018. Wholesale deposits increased $143.6 million while retail deposits decreased $62.9 million. During the quarter ended March 31, 2019, our noninterest bearing transaction accounts declined to $39.9 million from $66.0 million at December 31, 2018.  The decline in these deposits was primarily attributable to reduced cash balances held by 1031 exchange facilitators resulting from a general slowing in the real estate market during the period.  Our cost of deposits was 1.94% during the quarter ended March 31, 2019 compared to 1.83% during the linked quarter and 1.20% during the same period last year. The change in our cost of deposits was primarily related to cost increases in our time deposit portfolio, which have been impacted by rising interest rates and competitive pricing pressures. The cost of time deposits increased to 2.28% during the quarter ended March 31, 2019, compared to 1.44% for the same period last year.
Capital
Stockholders’ equity totaled $588.3 million, an increase of $7.2 million, or 1.2%, compared to December 31, 2018. Stockholders' equity represented 8.4% of total assets at both March 31, 2019 and December 31, 2018. Both the Bank’s and the Company’s capital levels continue to be significantly above the minimum levels required for bank regulatory capital purposes. At March 31, 2019, our Tier 1 Leverage, Common Equity Tier 1 Risk-Based, Tier 1 Risk-Based and Total Risk-Based Capital ratios were 10.38%, 18.20%, 18.20% and 19.11%, respectively, for the Bank, and 9.32%, 14.79%, 16.34% and 17.26%, respectively, for the Company. At March 31, 2019, the Company’s tangible stockholders' equity ratio was 8.37%.
During the quarter ended March 31, 2019, the Company repurchased 393,000 shares in connection with its stock repurchase program at an average price of $9.88 per share and a total cost of $3.9 million.
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 $7.0 billion, total loans of $6.1 billion and total deposits of $5.1 billion as of March 31, 2019. 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 real estate lending. Currently operating in California, Oregon and Washington, from nine branches in California, one branch in Washington and eight 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” and other cautionary statements in our Annual Report on Form 10-K for the year ended December 31, 2018. 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.

###


4


CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
 
 
 
 
 
(Dollars in thousands)
March 31,
2019 (unaudited)
 
December 31,
2018
ASSETS
 
 
 
Cash and cash equivalents
$
104,575

 
$
91,697

Available for sale debt securities, at fair value
638,795

 
608,528

Held to maturity debt securities, at amortized cost
11,450

 
11,860

Equity securities, at fair value
11,582

 
11,438

Loans held-for-investment
6,144,268

 
6,130,630

Allowance for loan losses
(34,692
)
 
(34,314
)
Total loans held-for-investment, net
6,109,576

 
6,096,316

Federal Home Loan Bank stock
32,047

 
31,823

Premises and equipment, net
20,473

 
20,981

Prepaid expenses and other assets
63,518

 
64,569

Total assets
$
6,992,016

 
$
6,937,212

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Liabilities:
 
 
 
Deposits
$
5,081,831

 
$
5,001,040

Federal Home Loan Bank advances
1,109,625

 
1,143,132

Junior subordinated deferrable interest debentures
61,857

 
61,857

Senior debt
94,324

 
94,293

Other liabilities
56,081

 
55,745

Total liabilities
6,403,718

 
6,356,067

Total stockholders' equity
588,298

 
581,145

Total liabilities and stockholders' equity
$
6,992,016

 
$
6,937,212

CONDENSED CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
 
 
 
 
 
 
 
Three Months Ended
(Dollars in thousands except per share data)
March 31,
2019
 
December 31,
2018
 
March 31,
2018
Interest and fee income:
 
 
 
 
 
Loans
$
61,053

 
$
58,285

 
$
46,563

Investment securities
3,925

 
3,792

 
2,472

Cash and cash equivalents
400

 
614

 
246

Total interest income
65,378

 
62,691

 
49,281

Interest expense:
 
 
 
 
 
Deposits
24,288

 
22,970

 
11,932

FHLB advances
6,772

 
5,782

 
4,820

Junior subordinated deferrable interest debentures
651

 
611

 
487

Senior debt
1,575

 
1,577

 
1,577

Total interest expense
33,286

 
30,940

 
18,816

Net interest income before provision for loan losses
32,092

 
31,751

 
30,465

Provision for loan losses
300

 
150

 
1,500

Net interest income after provision for loan losses
31,792

 
31,601

 
28,965

Noninterest income
1,380

 
1,246

 
1,025

Noninterest expense
16,249

 
17,962

 
14,713

Income before provision for income taxes
16,923

 
14,885

 
15,277

Provision for income taxes
4,913

 
4,282

 
4,175

Net income
$
12,010

 
$
10,603

 
$
11,102

Basic earnings per common share
$
0.21

 
$
0.19

 
$
0.20

Diluted earnings per common share
$
0.21

 
$
0.19

 
$
0.20


5


CONSOLIDATED FINANCIAL HIGHLIGHTS (UNAUDITED)
 
 
 
As of or For the Three Months Ended
(Dollars in thousands except per share data)
March 31,
2019
 
December 31,
2018
 
March 31,
2018
PERFORMANCE RATIOS
 
 
 
 
 
Return on average:
 
 
 
 
 
Assets
0.69
%
 
0.62
%
 
0.76
%
Stockholders' equity
8.19
%
 
7.34
%
 
7.98
%
Efficiency ratio (1)
48.55
%
 
54.44
%
 
46.72
%
Noninterest expense to average assets
0.93
%
 
1.05
%
 
1.01
%
Loan to deposit ratio
120.91
%
 
122.59
%
 
129.47
%
Average stockholders' equity to average assets
8.42
%
 
8.46
%
 
9.52
%
Dividend payout ratio
27.43
%
 
31.13
%
 
54.59
%
YIELDS/RATES
 
 
 
 
 
Yield on loans
3.96
%
 
3.88
%
 
3.61
%
Yield on investments
2.42
%
 
2.39
%
 
1.85
%
Yield on interest earning assets
3.80
%
 
3.71
%
 
3.42
%
Cost of interest bearing deposits
1.94
%
 
1.83
%
 
1.20
%
Cost of borrowings
2.81
%
 
2.86
%
 
2.25
%
Cost of interest bearing liabilities
2.13
%
 
2.02
%
 
1.45
%
Net interest spread
1.67
%
 
1.69
%
 
1.97
%
Net interest margin
1.86
%
 
1.88
%
 
2.11
%
CAPITAL
 
 
 
 
 
Total equity to total assets
8.41
%
 
8.38
%
 
9.18
%
Tangible stockholders' equity to tangible assets (1)
8.37
%
 
8.33
%
 
9.13
%
Book value per share
$
10.44

 
$
10.31

 
$
9.79

Tangible book value per share (1)
$
10.38

 
$
10.25

 
$
9.73

ASSET QUALITY
 
 
 
 
 
Net recoveries
$
78

 
$
78

 
$
168

Annualized net recoveries to average loans
0.01
%
 
0.01
%
 
0.01
%
Nonperforming loans to total loans
0.02
%
 
0.04
%
 
0.13
%
Nonperforming assets to total assets
0.02
%
 
0.03
%
 
0.12
%
Allowance for loan losses to loans held-for-investment
0.56
%
 
0.56
%
 
0.60
%
Allowance for loan losses to nonperforming loans
2303.59
%
 
1585.67
%
 
459.42
%
LOAN COMPOSITION
 
 
 
 
 
Multifamily residential
$
3,768,775

 
$
3,671,069

 
$
3,094,033

Single family residential
$
2,171,670

 
$
2,262,811

 
$
2,069,950

Commercial real estate
$
190,606

 
$
184,039

 
$
125,756

Construction and land
$
13,117

 
$
12,611

 
$
36,570

Non-mortgage
$
100

 
$
100

 
$
100

DEPOSIT COMPOSITION
 
 
 
 
 
Noninterest bearing transaction accounts
$
39,927

 
$
65,970

 
$
28,843

Interest bearing transaction accounts
$
216,580

 
$
179,272

 
$
196,767

Money market deposit accounts
$
1,302,137

 
$
1,458,365

 
$
1,489,718

Time deposits
$
3,523,187

 
$
3,297,433

 
$
2,398,698

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

6


NON-GAAP RECONCILIATION (UNAUDITED)
 
 
 
 
 
 
 
 
Three Months Ended
(Dollars in thousands except per share data)
March 31,
2019
 
December 31,
2018
 
March 31,
2018
Pre-tax, Pre-provision Net Earnings
 
 
 
 
 
Income before provision for income taxes
$
16,923

 
$
14,885

 
$
15,277

Plus: Provision for loan losses
300

 
150

 
1,500

Pre-tax, pre-provision net earnings
$
17,223

 
$
15,035

 
$
16,777

Efficiency Ratio
 
 
 
 
 
Noninterest expense (numerator)
$
16,249

 
$
17,962

 
$
14,713

Net interest income
32,092

 
31,751

 
30,465

Noninterest income
1,380

 
1,246

 
1,025

Operating revenue (denominator)
$
33,472

 
$
32,997

 
$
31,490

Efficiency ratio
48.55
%
 
54.44
%
 
46.72
%
(Dollars in thousands except per share data)
March 31,
2019
 
December 31,
2018
 
March 31,
2018
Tangible Book Value Per Share
 
 
 
 
 
Total assets
$
6,992,016

 
$
6,937,212

 
$
6,033,888

Less: Goodwill
(3,297
)
 
(3,297
)
 
(3,297
)
Tangible assets
6,988,719

 
6,933,915

 
6,030,591

Less: Total liabilities
(6,403,718
)
 
(6,356,067
)
 
(5,480,137
)
Tangible stockholders' equity (numerator)
$
585,001

 
$
577,848

 
$
550,454

Period end shares outstanding (denominator)
56,351,781

 
56,379,066

 
56,561,055

Tangible book value per share
$
10.38

 
$
10.25

 
$
9.73

Tangible Stockholders' Equity to Tangible Assets
 
 
 
 
 
Tangible stockholders' equity (numerator)
$
585,001

 
$
577,848

 
$
550,454

Tangible assets (denominator)
$
6,988,719

 
$
6,933,915

 
$
6,030,591

Tangible stockholders' equity to tangible assets
8.37
%
 
8.33
%
 
9.13
%




7
lbcinvpres03_2019
Investor Presentation March 31, 2019 Simone Lagomarsino 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 are the following factors: business and 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 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 operating performance and the analysis of ongoing operatingtrends. 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 similar financial measures 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. • Pro forma items include provision for income taxes, net income, return on average assets, return on average equity and earnings per share. Prior to January 1, 2018, these pro forma 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 a 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


 
Franchise Overview and Financial Highlights Our Small Network of Large Branches Financial Highlights 3/31/2019(1)  10 WA #Branch Location Date March 31, 2019 Total Assets ($mm) $6,992 Established Deposits ($mm) Total Loans HFI ($mm) $6,144 1Santa Rosa Oct. 1983 1,138.4 2San Rafael Sep. 1996*  549.3 Total Deposits ($mm) $5,082 3Encino Aug. 2007 437.2 Loans / Deposits 121% 4 Beverly Hills Jul. 2010 383.9 OR Tangible Book Value / Tang. Assets 8.4% 5Los Altos Aug. 2000 309.2 6 Pasadena May 2009 305.4 Leverage Capital Ratio 9.3% 7Toluca Lake Jan. 2008 262.6 Total Risk‐Based Capital Ratio 17.3% 8Long Beach Jun. 2015 232.2 Total CRE Loans(2) / Total Risk‐Based  579% 9San Jose Jun. 2012 212.5 Capital 10 Bellevue Jun. 2018 74.9 ROAA  0.69%       Brokered Deposits 611.2 ROAE  8.19%       Online/ Business Banking 565.0 11 Net Interest Margin 1.86% 22 San Francisco A Manhattan Beach 1,176.2 5 EPS – Fully Diluted $0.21 599 Total Deposits 5,081.8 CA Efficiency Ratio 48.6%  * Acquisition date Noninterest Expense / Avg. Assets 0.93%  NPAs / Assets 0.02% Branch  (10) 33  476   67 4 Los Angeles A 8 Loan Production Office (8) ALLL / Loans HFI 0.56% ** Highlighted counties indicate current lending markets Full‐Time Equivalent Employees 271 (1) Financial data as of or for the three months ended 3/31/2019.  See  non‐GAAP reconciliation in Appendix hereto. (2) Includes multifamily residential, commercial real estate, and construction  loans. 4


 
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 35‐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 Simone Lagomarsino (30+ years of  Demonstrated Strong banking experience) Organic Growth Asset Quality Engine  Invested heavily in people and infrastructure over the last  several years 5. Strong Asset Quality  Our most important focus  4 Strict, quality oriented underwriting and credit monitoring  Strong processes Management Team and   0.02% NPAs / Total Assets Robust Infrastructure 6. Efficient Operations  Maintain a small network of large branches ($390 million  avg. branch size)  48.6% efficiency ratio, 0.93% noninterest expense / average  Note: Financial data as of or for the three months ended 3/31/2019.  See non‐GAAP reconciliation in Appendix hereto. assets and 271 FTEs 5


 
Top Multifamily Lenders in the United States Top 25 Banks and Thrifts by Multifamily Loans (Dollars in billions) As of December 31, 2018 Change Since (%) Delinquency Total Multifamily September 30, December 31, % of Change Since (bps) Rank Institution Name Headquarters Assets Loans 2018 2017 Multifamily(1) December 31, 2017 1. JPMorgan Cha s e & Co.  New York, NY 2,622.5 71.28 (0.1) 1.5 0.12 (4) 2. New York Communi ty Bancorp Inc.  Westbury, NY 51.9 29.90 1.1 6.5 0.01 (3) 3. Signature Bank  New York, NY 47.4 15.69 0.2 8.1 0.11 6 4. Wells Fargo & Co.  San Francisco, CA 1,895.9 13.37 (12.4) (3.2) 0.47 2 5. Capital One Financial Corp.  McLean, VA 372.5 11.89 0.7 8.9 0.64 59 6. First Republic Bank  San Francisco, CA 99.2 10.31 3.2 20.0 0.02 (3) 7. Santander Holdings USA Inc.  Boston, MA 135.6 8.31 0.6 0.5 0.18 0 8. Investors Bancorp Inc.  Short Hills, NJ 26.3 8.19 1.2 3.6 0.70 34 9. Citigroup Inc. New  York, NY 1,917.4 7.08 16.4 50.4 0.06 (62) 10. MUFG Americas Holdings Corp.  New York, NY 168.1 5.88 1.5 10.4 0.11 (1) 11. PNC Financial Services Group Inc.  Pittsburgh, PA 382.3 5.51 0.1 (6.1) 0.22 (28) 12. Bank of America Corp. Charlotte, NC 2,355.0 5.17 (2.5) (6.7) 0.06 (23) 13. KeyCorp  Cl evel a nd, OH 140.0 4.84 1.1 19.4 0.42 21 14. Sterling Bancorp Montebello, NY 31.4 4.76 (1.3) (2.0) 0.11 (1) 15. Dime Communi ty Bancshares Inc.  Brooklyn, NY 6.3 3.87 (3.7) (11.7) 0.01 (3) 16. TD Group US Holdings LLC  Wilmington, DE 389.7 3.80 (1.6) 7.7 0.29 (117) 17. Valley National Bancorp  Wayne, NJ 31.9 3.80 (0.5) 9.9 0.03 (5) 18. M&T Bank Corp. Buffalo, NY 120.1 3.75 2.2 4.1 0.74 (28) 19. Luther Burbank Corp.  Santa Rosa, CA 6.9 3.67 4.2 26.4 0.02 (16) 20. U.S.  Bancorp Minneapolis, MN 467.4 3.59 0.1 (4.9) 0.42 18 21. Umpqua Holdings Corp.  Portland, OR 26.9 3.35 3.0 8.0 0.13 9 22. Customers Bancorp Inc. Wyomissing, PA 9.8 3.28 (6.3) (9.9) 0.04 (10) 23. People's United Financial Inc.  Bridgeport, CT 47.8 3.22 6.5 (3.0) 0.07 (12) 24. CIBC Bancorp USA Inc. Chicago, IL 41.2 3.03 (6.6) 12.3 0.06 (1) 25. BB&T Corp. Wi ns ton‐Salem, NC 225.7 2.97 (2.0) (2.1) 0.54 21 Banking Industry Aggregate(2) 430.44 1.1 6.6 0.26 (1) 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. 6


 
Luther Burbank Peer Group  Includes all major exchange‐traded banks and thrifts nationwide with:  Total assets > $1 billion  Gross loans / assets > 65%  Multifamily loans / total loans > 30%  MFR + SFR + CRE / total loans > 75% (1) (2) General Information Profitability Capital & Balance SheetBal. Ratios Sheet GrowthAsset Quality Total/ NPANCO /  Gross Total Total Multifamily Yield on Cost of NIE / Avg. Eff. TCE / Leverage Capital Loans  / LLR/  Loans Avg. Loans Deposits Assets Loans ROAA ROAE NIM Loans Deposits Assets Ratio TA Ratio Ratio Deposits Loans + OREO LoansR CAGCAGR Institution Name Ticker State ($bn) ($bn) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) Luther Burbank Corporation LBC CA 6.9 3.7 0.62 7.34 1.88 3.88 1.81 1.04 54.4 8.3 9.4 17.2 123 0.56 0.11 (0.01) 16.5 17.0 Peer Group: 1. ConnectOne Bancorp, Inc.   CNOB NJ 5.5 1.6 1.42 12.32 3.29 4.79 1.23 1.39 41.3 8.8 9.3 13.2 111 0.77 1.32 0.08 13.6 13.6 2. Dime Community Bancshares, Inc. DCOM NY 6.3 3.9 0.80 8.25 2.46 3.94 1.31 1.45 56.0 8.7 8.9 14.4 124 0.40 0.12 0.01 4.7 11.0 3. First Foundations, Inc. FFWM CA 5.8 2.5 1.00 10.37 3.05 4.41 1.17 2.16 58.5 8.0 8.4 11.2 95 0.40 0.28 0.01 39.6 43.9 4. Flushing Financial Corporation FFIC NY 6.8 2.3 0.74 9.18 2.55 4.47 1.64 1.52 64.0 7.8 8.7 13.7 112 0.38 0.44 (0.02) 8.2 8.4 5. Investors BanCorp, Inc. ISBC NJ 26.2 8.2 0.52 4.40 2.66 4.18 1.33 1.57 54.7 11.2 11.3 15.9 123 1.09 0.68 (0.03) 8.6 7.7 6. Kearny Financial Corp. KRNY NJ 6.7 2.1 0.64 3.55 2.56 4.12 1.25 1.62 61.8 14.9 14.7 23.2 114 0.71 0.55 0.01 22.3 17.3 7. Marquette Bank MNAT IL 1.5 0.5 0.74 6.72 3.80 4.36 0.30 3.15 71.6 9.1 9.1 14.1 91 1.12 2.43 0.04 4.0 ‐0.4 8. New York Community Bancorp, Inc. NYCB NY 51.9 29.9 0.79 6.03 2.07 3.76 1.53 1.04 49.8 7.5 8.7 14.2 131 0.40 0.16 0.03 1.7 2.7 9. Northfield Bancorp, Inc. NFBK NJ 4.4 2.1 0.92 6.05 2.74 4.08 1.11 1.46 54.0 14.4 14.8 17.9 99 0.85 0.74 0.10 11.0 17.0 10. Opus Bank OPB CA 7.2 2.9 (0.38) (2.63) 3.10 4.31 0.80 2.95 65.1 9.4 9.7 15.3 87 1.06 0.54 0.93 ‐2.0 3.9 11. Oritani Financial Corp. ORIT NJ 4.1 1.8 1.31 9.85 2.68 4.21 1.36 1.01 34.7 12.9 12.8 15.1 121 0.82 0.33 (0.01) 6.1 11.0 12. Provident Financial Holdings, Inc. PROV CA 1.1 0.5 0.69 6.42 3.52 4.36 0.40 3.77 81.0 10.9 9.96 18.26 101 0.75 NA (0.05) ‐2.0 ‐1.7 13. Signature Bank SBNY NY 47.4 15.7 1.38 14.88 2.93 4.24 0.99 1.03 34.9 9.2 9.7 13.4 100 0.62 0.44 (0.03) 15.0 10.8 14. Waterstone Financial, Inc. WSBF WI 1.9 0.6 1.19 5.62 3.03 4.63 1.36 6.65 81.4 20.8 21.1 28.2 133 0.87 0.93 (0.01) 5.9 5.1 Average: 0.84 7.21 2.89 4.28 1.13 2.20 57.8 11.0 11.2 16.3 110 0.73 0.69 0.08 9.8 10.7 Median: 0.79 6.57 2.83 4.27 1.24 1.55 57.3 9.3 9.7 14.7 111 0.76 0.54 0.01 7.1 9.6 Source: SNL Financial. GAAP data when available, otherwise FR Y‐9C’s and bank call reports as of or for the three months ended 12/31/2018.  Note that SNL earnings ratios may differ from Company as SNL annualizes one  quarter rather than using data for 12 months.  (1) Nonperforming assets (“NPA”) includes performing troubled debt restructurings. (2) Compound annual growth rate (“CAGR”) from 12/31/2015 to 12/31/2018. 7


 
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  $1.5 million average loan balance  $908 thousand average loan balance  15.6 units average  64% average loan‐to‐value ratio  57% average loan‐to‐value ratio  751 average credit score  1.49x average debt service coverage ratio 0.02% NPAs / Assets 0.02% NPLs / Loans Note: Data as of 3/31/2019. 8


 
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  Mortgage‐Lending Program  Lines of Credit • Low‐ and moderate‐income borrowers and  • Specific business purpose/ fully adjustable/  communities short term 9


 
Loan Portfolio Historical Loan Growth Loan Portfolio Composition 3.96% yield on loans; 4.16%  weighted average coupon(1) Multifamily Loans by Lending Area Single‐Family Loans by Lending Area (1) As of or for the three  months ended 3/31/2019. 10


 
Asset Quality Nonperforming Assets(1) / Total Assets Culture Approach Results  Risk management is a core competency of   Continuous evaluation of risk and return  3/31/2019 NPAs / Total Assets of 0.02%;  our business NPLs / Total Loans of 0.02%  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 2015 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. 11


 
Loan Origination Volume and Rates $2,047.8 Q4 4.73% Q3 4.84% Q2 4.65% Q1 4.31% Q1 4.62% Pipeline: • Total loan pipeline at March 31, 2019 is $280.5 million ($184.9 million CRE at 4.483% WAC, $74.7 million SFR at 4.548% WAC & $20.9  million Construction at 6.427% WAC). A portion of our pipeline will ultimately fallout/not fund and loans without rate locks are subject to  ongoing rate increases/ decreases.   12


 
CRE Loan Origination Composition YTD Loan Volume & WAC 12 Months Ended December 31, 2018 3 Months Ended March 31, 2019 4.593% 4.683% 4.808% 4.578% 5.022 % 4.567% 4.552% 5.045% 13


 
SFR Loan Origination Composition YTD Loan Volume & WAC  12 Months Ended December 31, 2018 3 Months Ended March 31, 2019 5.15% 4.534% 4.484% 4.723% 4.692% 14


 
Loan Portfolio Rates • At March 31, 2019, loans representing 60% of the loan portfolio, or $3.7 billion are at their floors, and 93% of those loans have fully indexed rates above their  floors by approximately 1.14%.  15


 
Deposit Composition Historical Deposit Growth & Portfolio Composition Deposit Breakdown by Branch #Branch Location Date March 31, 2019 Established Deposits ($mm) 1Santa Rosa Oct. 1983 1,138.4 2San Rafael Sep. 1996*  549.3 3Encino Aug. 2007 437.2 4 Beverly Hills Jul. 2010 383.9 5Los Altos Aug. 2000 309.2 6 Pasadena May 2009 305.4 7Toluca Lake Jan. 2008 262.6 8Long Beach Jun. 2015 232.2 9San Jose Jun. 2012 212.5 10 Bellevue Jun. 2018 74.9       Brokered Deposits 611.2 A Manhattan Beach 1,176.2       Online/ Business Banking 565.0 Total Deposits 5,081.8 * Acquisition date 1.93% cost of total deposits(1) (1) For the three months ended 3/31/2019. 16


 
Deposit Growth/Balance  Quarterly Trend $80.8 $1,049.8 $617.3 $212.7 (1) Business/online includes $4.6 million of brokered/wholesale funds, sourced by the unit.  17


 
Business/Online Composition By Vertical  December 31, 2018 March 31, 2019 1.572% 1.572% 1.082% 0.830% 1.220% 18


 
Efficient Operations Result in Consistent Profitability Return on Average Assets(1) Return on Average Equity(1) Efficiency Ratio (1) For periods prior to 2018, net income adjusted for C‐Corp status assumes 42% tax rate.  See non‐GAAP reconciliation in Appendix hereto. 19


 
Net Interest Margin Quarterly Net Interest Margin Net Interest Margin  20


 
Interest Rate Risk Analysis On a quarterly basis, the Company measures and reports NII and EVE at Risk to isolate the change in income and equity related  solely to interest‐earning assets and interest‐bearing liabilities. Both models measure instantaneous parallel shifts in market  interest rates, implied by the forward yield curve.  NII Impact ($ in millions)  EVE Impact ($ in millions) Interest Rate Risk to Earnings (NII) Interest Rate Risk to Capital (EVE) March 31, 2019 March 31, 2019 Change in Change in Interest Rates $ Change % Change Interest Rates $ Change % Change (basis points) NII NII (basis points) EVE EVE + 400 BP (38.5) (30.8%) + 400 BP (343.2) (55.5%) + 300 BP (25.5) (20.4%) + 300 BP (227.5) (36.8%) + 200 BP (14.2) (11.4%) + 200 BP (131.4) (21.3%) + 100 BP (6.0) (4.8%) + 100 BP (56.4) (9.1%) ‐ 100 BP 5.7 4.5% ‐ 100 BP 49.7 8.0% ‐ 200 BP 9.2 7.4% ‐ 200 BP 99.3 16.1% 21


 
Deposits ‐ Cost of Funds Comparison (1) Beta is calculated using an average Fed Funds Rate. 22


 
Liquidity Management Securities Portfolio As of March 31, 2019 Book Value % of ($000) Total Available for Sale: Residential mortgage‐backed securities & collateralized  179,804 27.2% mortgage obligations ("MBS & CMOs")  Commercial MBS and CMOs 324,774 49.1% Agency bonds 133,231 20.1% U.S. Treasury 986 0.1% Total Available for Sale 638,795 96.5% EquityCRA  QualifiedInvestment: Investment Fund (CRAIX)  11,582 1.8% Total Equity Investment 11,582 1.8% Held to Maturity: Mortgage‐backed securities 11,187 1.7% Other Investments 263 0.0% Total Held to Maturity 11,450 1.7% Total Investment Securities 661,827 100.0% Other Borrowings Other Borrowings Amount Outstanding  Cost of  Type 3/31/2019 Borrowings (1) FHLB Advances $1,110 million 2.44% Senior Notes $94 million 6.68% Trust Preferred  $62 million 4.27% (1) For the three months ended 3/31/2019.  23


 
Executive Management  Simone Lagomarsino. Ms. Lagomarsino joined the Bank as Chief Executive Officer (CEO) in January 2019 and currently serves as the President and CEO of both the Company and the Bank. She leads the Executive Committee and is a member of the Company’s and the Bank’s board of directors. Ms. Lagomarsino was most recently President and CEO of Western Bankers Association and a director of Pacific Premier Bancorp. Prior to those roles, Ms. Lagomarsino served as CEO of Heritage Oaks Bank, and President and CEO of Heritage Oaks Bancorp, headquartered in Paso Robles, California. She also previously held executive positions with Hawthorne Financial Corporation, Ventura County National Bank, and Kinecta Federal Credit Union. Additionally, she currently serves on the board ofdirectorsof the Federal Home Loan Bank of San Francisco. In 2013, Ms. Lagomarsino was honored by the American Banker magazine as one of the top three community bankers in the country. Ms. Lagomarsino holds an M.B.A. from Claremont Graduate School and a bachelor’s degree in economics from Claremont McKenna College. 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 in 2014 and currently serves as Executive Vice President and Chief Credit Officer. He oversees the Bank’s credit, appraisal and special assets activities; he is also a member of the Bank’s Executive Committee. Prior to joining the Bank, Mr. Cardamone served as Senior Vice President & Divisional Credit 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. 24


 
Executive Management Continued Tammy Mahoney. Ms. Mahoney joined the Bank in January 2016, and currently serves as Executive Vice President and Chief Risk Officer. In her role, Ms. Mahoney oversees the Bank’s compliance, internal audit and risk management functions, including information security and independent loan review. 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 Bank from 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 Enterprise Risk Professional, 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 the Bank in 2014 and currently serves as Executive Vice President and General Counsel. 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. Prieto served as 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. 25


 
Board of Directors Victor S. Trione. Mr. Trione serves as Chairman of the board of directors for Luther Burbank Savings, a position he has held since founding Luther Burbank Savings and Loan Association in 1983. In this role, Mr. Trione brings continuity and deep historical knowledge of the Company to the Board. In addition to serving as Chairman of the Board, Mr. Trione holds 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. John C. Erickson. Mr. Erickson has more than 30 years of financial services experience, including serving for over 30 years at Union Bank, N.A.. He served in many executive roles across that institution, culminating in two vice chairman positions (Chief Risk Officer and Chief Corporate and Banking Officer) between 2007 and 2014. 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 was Chair of the Board Risk Committee as well as a member of the Audit Committee. He also served as President, Consumer Banking and President, California, for CIT Group, Inc. (NYSE: CIT) in 2016. 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. Mr. Krouskup qualifies as an ‘‘audit committee financial expert’’ as defined in SEC rules, and the financial sophistication requirements of NASDAQ’s listing requirements. 26


 
Board of Directors Continued 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 many 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 a certified public accountant (inactive) and is president of A.G. Newcomb & Co., a financial services consultancy. She 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. Bradley M. Shuster. Mr. Shuster has served as Executive Chairman and Chairman of the Board of NMI Holdings, Inc. (NASDAQ: NMIH) since January 2019. Mr. Shuster founded National MI and served as Chairman and Chief Executive Officer of the company from 2012 to 2018. Prior to founding National MI, Mr. Shuster was a senior executive of The PMI Group, Inc. (NYSE: PMI), where he served as Chief Executive Officer of PMI Capital Corporation. Before joining PMI in 1995,Mr. Shuster was a partner at Deloitte LLP, where he served as partner‐in‐charge of Deloitte’s Northern California Insurance and Mortgage Banking practices. He holds a B.S. from the University of California, Berkeley and an M.B.A from the University of California, Los Angeles. Mr. Shuster has received both CPA and CFA certifications. 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 has extensive public company board experience at Reynolds American as Chairman and at 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 companies in the U.S. For many years, he served as a Trustee of Wharton’s Center for Financial Institutions. 27


 
Appendix


 
Balance Sheet ($ in 000’s) As of March 31, December 31, 2019 (1) 2018 ASSETS Cash and cash equivalents $ 104,575 $ 91,697 Available for sale investment securities, at fair value 638,795 608,528 Held to maturity investment securities, at amortized cost (fair value of $11,376 and $11,624 at March 31, 2019 and December 31, 2018 respectively) 11,450 11,860 Equity securities, at fair value 11,582 11,438 Loans receivable, net of allowance for loan losses of $34,692 and $34,314 as of March 31, 2019 and December 31, 2018, respectively 6,109,576 6,096,316 Accrued interest receivable 21,292 20,220 Federal Home Loan Bank ("FHLB") stock, at cost 32,047 31,823 Premises and equipment, net 20,473 20,981 Goodwill 3,297 3,297 Prepaid expenses and other assets 38,929 41,052 Total assets $ 6,992,016 $ 6,937,212 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits $ 5,081,831 $ 5,001,040 Federal Home Loan Bank advances 1,109,625 1,143,132 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 $676 and $707 at March 31, 2019 and December 31, 2018, respectively) 94,324 94,293 Accrued interest payable 5,476 4,307 Other liabilities and accrued expenses 50,605 51,438 Total liabilities 6,403,718 6,356,067 Stockholders' equity: Common stock, no par value; 100,000,000 shares authorized; 56,351,781 and 56,379,066 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively 452,931 456,378 Retained earnings 138,123 129,806 Accumulated other comprehensive loss, net of taxes (2,756) (5,039) Total stockholders' equity 588,298 581,145 Total liabilities and stockholders' equity $ 6,992,016 $ 6,937,212 (1) Unaudited 29


 
Income Statement ($ in 000’s, except per share data) For the Three Months Ended March 31, (1) 2019 2018 Interest and fee income: Loans $ 61,053 $ 46,563 Investment securities 3,925 2,472 Cash and cash equivalents 400 246 Total interest and fee income 65,378 49,281 Interest expense: Interest on deposits 24,288 11,932 Interest on FHLB advances 6,772 4,820 Interest on junior subordinated deferrable interest debentures 651 487 Interest on other borrowings 1,575 1,577 Total interest expense 33,286 18,816 Net interest income before provision for loan losses 32,092 30,465 Provision for loan losses 300 1,500 Net interest income after provision for loan losses 31,792 28,965 Noninterest income: Net gain on sale of loans 333 - FHLB dividends 495 594 Other income 552 431 Total noninterest income 1,380 1,025 Noninterest expense: Compensation and related benefits 10,052 9,619 Deposit insurance premium 498 432 Professional and regulatory fees 441 398 Occupancy 1,390 1,296 Depreciation and amortization 665 714 Data processing 919 788 Marketing 1,154 213 Other expenses 1,130 1,253 Total noninterest expense 16,249 14,713 Income before provision for income taxes 16,923 15,277 Provision for income taxes 4,913 4,175 Net income $ 12,010 $ 11,102 Basic earnings per common share $ 0.21 $ 0.20 Diluted earnings per common share $ 0.21 $ 0.20 Dividends per common share $ 0.06 $ 0.11 Weighted average common shares outstanding - basic 56,519,809 56,190,970 Weighted average common shares outstanding - diluted 56,722,696 56,755,154 (1) Unaudited 30


 
For the Three Months Ended For the Three Months Ended March 31, 2019 December 31, 2018 Net Interest Margin ($ in 000’s) Average Interest  Average  Average Interest  Average   (5)  (5) Balance Inc / Exp Yield/Rate Balance Inc / Exp Yield/Rate Interest‐Earning Assets Multifamily residential$     3,716,551 $ 37,801 4.07%$    3,583,413 $ 35,653 3.98% Single family residential       2,250,674    20,841 3.70%      2,241,726    20,502 3.66% Commercial          189,485      2,256 4.76%         171,326      2,001 4.67% Construction, land and NM            11,983         155 5.25%           13,377         129 3.91% (1)      6,168,693   61,053 3.96%    6,009,842   58,285 3.88% Total loans  Securities available‐for‐sale/ equity          636,003      3,834 2.41%         621,725      3,692 2.38% (2) Securities held‐to‐maturity            11,802         91 3.08%         11,905       100 3.36% Cash and cash equivalents            73,679         400 2.20%         114,738         614 2.17% Total interest‐earning assets $    6,890,177 $ 65,378 3.80%$    6,758,210 $ 62,691 3.71% Noninterest‐earning assets            77,770           73,876 Total Assets $    6,967,947 $   6,832,086 Interest‐bearingInterest demand‐Bearing deposits Liabilities $        220,225 $      720 1.31%$       171,248 $      448 1.05% Money market demand accounts       1,351,938      3,998 1.18%      1,464,219      4,273 1.17% Time deposits       3,426,550    19,570 2.28%      3,374,000    18,249 2.16%      Total interest‐bearing deposits       4,998,713    24,288 1.94%      5,009,467    22,970 1.83% FHLB advances       1,124,269      6,772 2.44%         957,057      5,782 2.42% Senior debt            94,304      1,575 6.68%           94,273      1,577 6.69% Junior subordinated debentures liabilities             $     61,8576,279,143         $ 65133,286 4.27%2.13%          $    61,8576,122,654         $ 61130,940 3.95%2.02% TotalNoninterest interest‐‐bearingbearing demand deposits            41,407           69,657 Total Funding       6,320,550 2.11%      6,192,311 2.00% Noninterest‐bearing liabilities            60,573           61,742 Total stockholders' equity          586,824         578,033 Total liabilities and stockholders' equity $    6,967,947 $   6,832,086 (3) 1.67% 1.69% (4) Net interestNet spread interest   income/margin  $ 32,092 1.86%$  31,751 1.88% (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) Net interest spread is the average yield on total interest‐earning assets minus the average rate on total interest‐bearing liabilities.  (4) Net interest margin is net interest income divided by total average interest‐earning assets.  (5) Yields shown are annualized.   31


 
Non‐GAAP Reconciliation ($ in 000’s) December 31,  March 31, 2019 2018 March 31, 2018 2018 2017 2016 2015 Tangible book value As of or For the Three Months Ended As of or For the Years Ended December 31, Total assets  $           6,992,016  $           6,937,212  $           6,033,888  $         6,937,212  $         5,704,380  $         5,063,585  $         4,361,779  Less: Goodwill                      (3,297)                     (3,297)                     (3,297)                   (3,297)                   (3,297)                   (3,297)                   (3,297) Less: Total liabilities              (6,403,718)             (6,356,067)             (5,480,137)           (6,356,067)           (5,154,635)           (4,659,210)           (3,990,480) Tangible book value  $               585,001  $               577,848   $               550,454  $            577,848  $            546,448  $            401,078  $            368,002  Tangible assets Total assets  $           6,992,016  $           6,937,212  $           6,033,888  $         6,937,212  $         5,704,380  $         5,063,585  $         4,361,779  Less: Goodwill                      (3,297)                     (3,297)                     (3,297)                   (3,297)                   (3,297)                   (3,297)                   (3,297) Tangible assets  $           6,988,719  $           6,933,915  $           6,030,591  $         6,933,915  $         5,701,083  $         5,060,288  $          4,358,482  Tangible stockholders' equity to tangible assets Tangible book value (numerator)  $               585,001  $               577,848  $               550,454  $            577,848  $            546,448  $            401,078  $            368,002  Tangible assets (denominator)                6,988,719                6,933,915                6,030,591             6,933,915             5,701,083             5,060,288             4,358,482  Tangible stockholders' equity to tangible assets 8.4% 8.3% 9.1% 8.3% 9.6% 7.9% 8.4% Pro forma Items  (1)      Actual/ Pro forma provision for income tax      Net income before income taxes  $                 16,923  $                 14,885  $                 15,277  $               62,931  $               65,231  $               53,940  $               36,639       Effective tax rate 29% 29% 27% 28% 42% 42% 42%      Actual/ Pro forma provision for income taxes  $                   4,913  $                   4,282  $                   4,175  $               17,872  $               27,397  $               22,655    $               15,388      Actual/ Pro forma net income      Net income before income taxes  $                 16,923  $                 14,885  $                 15,277  $               62,931  $               65,231  $               53,940  $               36,639       Actual/ Pro forma provision for income taxes                        4,913                        4,282                        4,175                   17,872                   27,397                   22,655                   15,388       Actual/ Pro forma net income  $                 12,010  $                 10,603  $                 11,102   $               45,059  $               37,834  $               31,285  $               21,251  (1) For periods 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.   32


 
Non‐GAAP Reconciliation ($ in 000’s, except per share data) As of or ForDecember the Three 31, Months   Ended  As of or For the Years Ended December 31, March 31, 2019 2018 March 31, 2018 2018 2017 2016 2015 Pro forma Items Continued  (1)      Actual/ Pro forma ratios and per share data      Actual/ Pro forma net income (numerator)  $                 12,010  $                 10,603  $                 11,102  $               45,059  $               37,834  $               31,285  $               21,251       Average assets (denominator)                6,967,947                6,832,086                5,848,751             6,405,931             5,485,832             4,676,676             4,040,381       Actual/ Pro forma return on average assets 0.69% 0.62% 0.76% 0.70% 0.69% 0.67% 0.53%      Average stockholders' equity (denominator) $                 586,824  $               578,033  $               556,661  $            566,275  $            425,698  $            390,318  $            359,359       Actual/ Pro forma return on average stockholders' equity 8.19% 7.34% 7.98% 7.96% 8.89% 8.02% 5.91%      Weighted average shares outstanding ‐ diluted (denominator)             56,722,696             56,862,277             56,755,154           56,825,402           42,957,936           42,000,000           42,000,000       Actual/ Pro forma earnings per share—diluted  $                      0.21  $                      0.19  $                      0.20  $                   0.79                     $ 0.88  $                   0.74  $                   0.51  Efficiency ratio Noninterest expense (numerator)  $                 16,249  $                 17,962  $                 14,713  $               62,687  $               56,544  $               61,242  $               62,339  Net interest income  $                 32,092  $                 31,751  $                 30,465  $            125,087  $            110,895  $               94,594  $               84,879  Noninterest income                        1,380                        1,246                        1,025                     4,131                     7,508                     7,885                     6,958  Operating  revenue (denominator)  $                 33,472  $                 32,997  $                 31,490  $            129,218  $            118,403  $            102,479  $               91,837  Efficiency ratio 48.5% 54.4% 46.7% 48.5% 47.8% 59.8% 67.9% (1) For periods 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.   33