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 23, 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
Securities Registered Under Section 12(b) of the Act
Title of Each Class
 
Trading Symbol
 
Name of Each Exchange on Which Registered
Common stock, no par value
 
LBC
 
The Nasdaq Stock Market LLC

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:

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

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. o






Item 2.02. Results of Operations and Financial Condition

On October 23, 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 October 24, 2019 to discuss its financial results for the quarter ended September 30, 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.

On October 23, 2019, the Board of Directors of the Company approved an extension of the termination date of the previously announced share repurchase plan from December 31, 2019 to December 31, 2020. As of September 30, 2019, approximately $4.7 million remained available under the share repurchase plan.

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 23, 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=13159567&doc=38            http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13159567&doc=39


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, 2019

Quarterly Cash Dividend of $0.0575 Per Common Share Declared

SANTA ROSA, Calif. (October 23, 2019) Luther Burbank Corporation (NASDAQ: LBC) (the “Company”), the holding company for Luther Burbank Savings (the “Bank”), today reported net income of $12.7 million and $36.4 million, or $0.23 and $0.65 diluted earnings per common share (“EPS”), for the quarter and nine months ended September 30, 2019, respectively, compared to net income of $11.7 million, or $0.21 EPS, for the linked quarter and $12.1 million and $34.5 million, or $0.21 and $0.61 EPS, for the same periods last year, respectively. Pre-tax, pre-provision earnings for the quarter and nine months ended September 30, 2019 was $17.5 million and $52.1 million, respectively, compared to $17.3 million for the linked quarter and $17.7 million and $51.5 million for the same periods last year, respectively.
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 and nine months ended September 30, 2019. Total assets increased to $7.2 billion during the quarter. Asset growth during the quarter was primarily attributable to liquidity generated from new deposit relationships. Deposits increased by $127.5 million, to $5.4 billion, during the quarter, driven by strong retail deposit growth. Our net interest margin improved to 1.84% during the quarter ended September 30, 2019 compared to 1.75% during the linked quarter. The 9 basis point expansion was primarily due to a 15 basis point improvement in loan yields during the quarter caused by a combination of swap income earned and an increase in loan prepayment fees collected. Loan originations were $382.4 million during the current quarter compared to $457.5 million for the linked quarter and $463.4 million for the same period last year, while prepayment speeds increased as customers moved to long-term fixed rate loans to benefit from the current rate environment. As a result, loans held-for-investment modestly declined by $7.2 million during the quarter as compared to the linked quarter. In addition, we continue to maintain a disciplined approach to expense management and, as a result, we are one of the most efficient companies within our peer group, with an efficiency ratio of 48% and a noninterest expense to average total assets ratio of 90 basis points for the quarter.”
Ms. Lagomarsino continued, “During the quarter, we repurchased 111,000 shares of our common stock at an average price of $10.46 per share, and since the inception of our stock repurchase program, we've repurchased 1,044,001 shares at an average price of $9.85 per share, or a 9% discount to our book value. There is approximately $4.7 million for additional share repurchases remaining in the program.”

1


Board Declares Quarterly Cash Dividend of $0.0575 Per Share
On October 23, 2019, the Board of Directors of the Company declared a quarterly cash dividend of $0.0575 per common share. The dividend is payable on November 14, 2019 to shareholders of record as of November 4, 2019.
Net Interest Income
Net interest income for the quarter ended September 30, 2019 totaled $32.6 million compared to $30.6 million for the previous quarter and $31.7 million for the same period last year. As compared to the linked quarter, net interest income was positively impacted by a $3.0 million increase in interest income predominantly caused by an increase in the yield of our loan portfolio of 15 basis points and, to a lesser extent, an increase of $61.9 million in the average balance of our loan portfolio, partially offset by an increase in interest expense of $1.0 million primarily related to an increase in the average balance and cost of interest bearing deposits of $171.9 million and 2 basis points, respectively. The $873 thousand, or 2.8%, increase in net interest income over the same period last year was largely related to an increase in the average balance and yield of our loan portfolio of $433.9 million and 27 basis points, respectively, and an increase in the average balance and yield of investments of $65.8 million and 16 basis points, respectively, compared to the same period last year. These increases were partially offset by an increase in the average balance and cost of interest bearing deposits of $494.1 million and 43 basis points, respectively, compared to the same period last year. Net interest margin for the quarter ended September 30, 2019 was 1.84%, compared to 1.75% for the previous quarter and 1.94% for the same period last year. The increase over the linked quarter primarily relates to increases in loan yields attributable to $1.4 million of swap income earned during the quarter and $569 thousand of additional loan prepayment fees collected during the quarter. The Company entered into two swap agreements with an aggregate notional amount of $1.0 billion to hedge the interest rate risk related to certain hybrid multifamily loans which are currently in their fixed rate period. The swaps involve the payment of a fixed rate amount to a counterparty in exchange for the Company receiving a variable rate payment over the life of the swaps. The gain or loss on these derivatives, as well as the offsetting loss or gain on the hedged items attributable to the hedged risk are recognized in interest income for loans. The decline in net interest margin from the same period last year primarily relates to our rising cost of funds, which has generally outpaced the increases in yield on our interest earning assets caused by short-term rate increases, as well as the inversion in the yield curve during the current year. Our net interest spread in the third quarter of 2019 was 1.68%, increasing by 10 basis points and declining by 10 basis points, respectively, compared to the previous quarter and the same period last year.
Net interest income for the nine months ended September 30, 2019 totaled $95.2 million compared to $93.3 million for the same period last year. The $1.9 million, or 2.0%, 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. In addition to the swap income earned during the current period and discussed in detail above, the increase in net interest income was further impacted by an increase in the average balance and yield of loans of $695.1 million and 28 basis points, respectively, 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 $91.2 million and 38 basis points, respectively. This increase was partially offset by growth in the average balance and cost of our interest bearing deposits of $790.4 million and 62 basis points, respectively. Additionally, while the average balance of FHLB advances decreased by $27.8 million, the cost of FHLB advances increased 26 basis points, compared to the same period last year. Net interest margin for the nine months ended September 30, 2019 was 1.82%, compared to 2.01% for the same period last year. As discussed above, the decline in net interest margin primarily relates to our rising cost of funds, which has generally outpaced the increases in yield on our interest earning assets due to short-term rate increases and the inversion of the yield curve. Our net interest spread during the nine months ended September 30, 2019 was 1.64%, declining by 23 basis points compared to the same period last year.
Noninterest Income
Noninterest income for the quarter ended September 30, 2019 totaled $993 thousand, compared to $1.5 million for the previous quarter and $1.0 million for the same period last year. The decrease of $495 thousand in noninterest income, or 33.3%, for the quarter ended September 30, 2019 compared to the linked quarter, was primarily attributable to a non-recurring recovery of $384 thousand recognized during the prior quarter in connection with an equipment writedown during the prior year and a $119 thousand decrease in gains on sale of loans compared to the prior quarter. The decrease of $50 thousand in noninterest income, or 4.8%, for the quarter ended September 30, 2019 compared to the quarter ended September 30, 2018, was primarily due to a decrease in FHLB dividends of $65 thousand and a decrease in gains on sale of loans of $63 thousand, partially offset by an increase in the fair value of equity securities of $89 thousand.
Noninterest income for the nine months ended September 30, 2019 totaled $3.9 million, compared to $2.9 million for

2


the same period last year. The increase of $976 thousand in noninterest income, or 33.8%, was primarily attributable to an increase in gains on sale of loans of $467 thousand, an increase in the fair value of equity securities of $399 thousand, and the equipment recovery of $384 thousand, discussed above, in the current year, partially offset by a $182 thousand decrease in servicing fee income related to elevated actual and estimated prepayments on serviced loans that decreased the fair value of our mortgage servicing rights.
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 September 30, 2019 totaled $16.1 million compared to $14.7 million for the previous quarter and $15.1 million for the same period last year. Compared to the linked quarter, noninterest expense increased $1.4 million, or 9.2%, primarily due to the write-off of unamortized leasehold improvements totaling $1.1 million related to the planned relocation of our San Rafael branch and Manhattan Beach administrative office, as well as an increase of $577 thousand in compensation and related benefits compared to the prior quarter, caused by a decrease in capitalized loan origination costs. The move to a new branch in San Rafael, as well as our move to a new office location in Gardena, California from Manhattan Beach are expected to yield future annual cost savings of more than $1.1 million. The increases in noninterest expense were partially offset by a decrease of $480 thousand in federal deposit insurance assessments due to the partial utilization of our Small Bank Assessment Credit in the current quarter. The remaining unused portion of the credit balance is $921 thousand, which will be applied against future insurance assessments. Compared to the same period last year, noninterest expense increased $979 thousand, or 6.5%, during the quarter ended September 30, 2019 primarily attributable to the $1.1 million relocation write-offs discussed above, partially offset by a $483 thousand decrease in federal deposit insurance, also discussed above.
Noninterest expense for the nine months ended September 30, 2019 totaled $47.0 million compared to $44.7 million for the same period last year. The increase of $2.3 million, or 5.1%, is primarily attributable to a $1.4 million increase in marketing expenses related to deposit gathering efforts and the $1.1 million relocation write-offs discussed above.
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, 2019 were $7.2 billion, an increase of $224.2 million, or 4.3% annualized, from December 31, 2018. The increase was primarily due to a $128.9 million, or 2.8% annualized, increase in loans held-for-investment, a $76.6 million, or 111.4% annualized, increase in cash and cash equivalents, and a $23.3 million, or 5.1% annualized, increase in our available-for-sale debt securities. Absent loan sales of $61.7 million during the first nine months of this year, loan growth would have been $190.6 million, or 4.1% annualized. The increase in cash and cash equivalents was primarily due to deposit growth outpacing net loan growth during the nine months ended September 30, 2019. Total liabilities increased $200.0 million, or 4.2% annualized, to $6.6 billion at September 30, 2019 from $6.4 billion at December 31, 2018. The increase in total liabilities was primarily attributable to growth in our deposits of $361.0 million, or 9.6% annualized, partially offset by a decrease in FHLB advances of $165.9 million, or 19.4% annualized, compared to December 31, 2018.
Loans
Total loans at September 30, 2019 were $6.3 billion, an increase of $128.9 million from December 31, 2018. Our loan portfolio generally consists of income property loans (IPL) and single family residential (SFR) mortgage loans, which represent 66.5% and 33.2%, respectively, of our total loan portfolio.
Our IPL portfolio primarily consists of hybrid multifamily residential and commercial real estate loans. IPL loans totaled $4.2 billion at September 30, 2019 compared to $3.9 billion at December 31, 2018. The yield on the IPL portfolio was 4.33% during the quarter ended September 30, 2019, compared to 4.12% and 3.94% during the linked quarter and the same period last year, respectively. The increase in yield was the result of the rate on new loan originations generally exceeding the rate on loan payoffs since early 2017, as well as the $1.4 million of swap related income, discussed above. For the quarter ended September 30, 2019, IPL loan originations and the corresponding weighted average coupon totaled $207.1 million and 4.26%, respectively, compared to $280.1 million and 4.37%, respectively, for the linked quarter and $291.4 million and 4.72%, respectively, for the same period last year. The decline in the average coupon for the current period originations compared to the linked quarter and the same period last year was due to the current year decline in interest rates, as well as competitive pricing pressures. Prepayment speeds within the IPL loan

3


portfolio were 13.9% for the quarter ended September 30, 2019, compared to 10.3% and 11.2% during the linked quarter and the same period last year, respectively.
Our SFR loan portfolio generally consists of hybrid loans. SFR loans totaled $2.1 billion and $2.3 billion at September 30, 2019 and December 31, 2018, respectively. The yield on the SFR portfolio was 3.57% during the quarter ended September 30, 2019, compared to 3.56% and 3.61% during the linked quarter and the same period last year, respectively. The decrease in yield compared to the same period last year was the result of an increase in the accelerated recognition of deferred loan origination costs due to elevated prepayment levels. For the quarter ended September 30, 2019, SFR loan originations and the corresponding weighted average coupon totaled $167.1 million and 4.16%, respectively, compared to $154.1 million and 4.34%, respectively, for the linked quarter and $162.7 million and 4.99%, respectively, for the same period last year. The decline in the average coupon for the current period originations compared to the linked quarter and the same period last year was due to the current year decline in interest rates, as well as competitive pricing pressures. Prepayment speeds within the SFR loan portfolio were 35.6% during the quarter ended September 30, 2019, compared to 31.9% and 24.5% during the linked quarter and the same period last year, respectively.
Asset Quality
Nonperforming assets totaled $12.9 million, or 0.18% of total assets, at September 30, 2019, compared to $2.0 million, or 0.03% of total assets, at December 31, 2018. The increase was due to $5.0 million and $6.6 million of SFR and IPL loans, respectively, being placed on nonaccrual status during the nine months ended September 30, 2019. These loans are all considered to be well collateralized and no losses are anticipated. There was no real estate owned at September 30, 2019 and December 31, 2018 and we have not foreclosed on any collateral since 2015. For the quarter ended September 30, 2019, we reversed loan loss provisions of $500 thousand compared to recording loan loss provisions of $450 thousand in the prior quarter and $650 thousand for the same period last year. The reversal of loan loss provisions during the current quarter compared to the linked quarter and same period last year was primarily due to $202 thousand in loan recoveries received in the current quarter and the sustained performance of our loan portfolio. Our allowance for loan losses to total loans was 0.56% at both September 30, 2019 and December 31, 2018, compared to 0.58% at September 30, 2018.
For the nine months ended September 30, 2019, loan loss provisions of $250 thousand were recorded compared to $3.5 million for the same period last year. As discussed above, the lower loan loss provisions were primarily due to loan recoveries, as well as the sustained performance of our loan portfolio and slower loan growth as compared to the same period last year.
Prepaid Expenses and Other Assets
Prepaid expenses and other assets totaled $65.4 million at September 30, 2019 compared to $64.6 million at December 31, 2018, an increase of $809 thousand, or 1.3%. Prepaid expenses and other assets primarily consist of bank owned life insurance, prepaid expenses, accrued interest receivable, premises and equipment and tax related items.
Deposits
Deposits totaled $5.4 billion at September 30, 2019, an increase of $361.0 million from December 31, 2018. Retail and wholesale deposits increased $291.2 million and $69.7 million, respectively. Our cost of interest bearing deposits was 2.07% during the quarter ended September 30, 2019 compared to 2.05% during the linked quarter and 1.64% during the same period last year. The increase in our cost of interest bearing deposits was primarily related to repricing in our time deposit portfolio, which has been impacted by rising short-term interest rates in the prior year and competitive pricing pressures. The cost of time deposits increased to 2.40% during the quarter ended September 30, 2019, compared to 2.36% and 1.94% for the linked quarter and same period last year, respectively.
Other Liabilities
Other liabilities totaled $60.6 million at September 30, 2019 compared to $55.7 million at December 31, 2018, an increase of $4.8 million or 8.7%. Other liabilities primarily consist of accrued employee benefits, loan escrow balances, checks outstanding and accrued interest payable.

4


Capital
Stockholders’ equity totaled $605.4 million, an increase of $24.2 million, or 4.2%, compared to December 31, 2018. Stockholders' equity represented 8.5% and 8.4% of total assets at September 30, 2019 and December 31, 2018, respectively. 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 September 30, 2019, our Tier 1 Leverage, Common Equity Tier 1 Risk-Based, Tier 1 Risk-Based and Total Risk-Based Capital ratios were 10.35%, 18.62%, 18.62% and 19.54%, respectively, for the Bank, and 9.25%, 15.09%, 16.64% and 17.55%, respectively, for the Company. At September 30, 2019, the Company’s tangible stockholders' equity ratio was 8.41%.
During the quarter ended September 30, 2019, the Company repurchased 111,000 shares in connection with its stock repurchase program at an average price of $10.46 per share and a total cost of $1.2 million. At September 30, 2019, the remaining balance to repurchase shares in connection with the program was $4.7 million. On October 23, 2019, the Company's Board of Directors approved extending the stock repurchase plan from December 31, 2019 to December 31, 2020.
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 $7.2 billion, total loans of $6.3 billion and total deposits of $5.4 billion as of September 30, 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.

###


5


CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
 
 
 
 
 
(Dollars in thousands)
September 30,
2019 (unaudited)
 
December 31,
2018
ASSETS
 
 
 
Cash and cash equivalents
$
168,282

 
$
91,697

Available for sale debt securities, at fair value
631,857

 
608,528

Held to maturity debt securities, at amortized cost
10,602

 
11,860

Equity securities, at fair value
11,837

 
11,438

Loans held-for-sale

 

Loans held-for-investment
6,259,520

 
6,130,630

Allowance for loan losses
(34,923
)
 
(34,314
)
Total loans held-for-investment, net
6,224,597

 
6,096,316

FHLB stock
30,343

 
31,823

Premises and equipment, net
18,523

 
20,981

Prepaid expenses and other assets
65,378

 
64,569

Total assets
$
7,161,419

 
$
6,937,212

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Liabilities:
 
 
 
Deposits
$
5,362,002

 
$
5,001,040

FHLB advances
977,210

 
1,143,132

Junior subordinated deferrable interest debentures
61,857

 
61,857

Senior debt
94,386

 
94,293

Other liabilities
60,592

 
55,745

Total liabilities
6,556,047

 
6,356,067

Total stockholders' equity
605,372

 
581,145

Total liabilities and stockholders' equity
$
7,161,419

 
$
6,937,212

CONDENSED CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
(Dollars in thousands except per share data)
September 30,
2019
 
June 30,
2019
 
September 30,
2018
 
September 30,
2019
 
September 30,
2018
Interest and fee income:
 
 
 
 
 
 
 
 
 
Loans
$
64,010

 
$
61,015

 
$
55,644

 
$
186,078

 
$
153,550

Investment securities
3,900

 
4,118

 
3,266

 
11,943

 
8,638

Cash and cash equivalents
766

 
522

 
489

 
1,688

 
1,178

Total interest income
68,676

 
65,655

 
59,399

 
199,709

 
163,366

Interest expense:
 
 
 
 
 
 
 
 
 
Deposits
27,927

 
26,471

 
19,650

 
78,686

 
46,141

FHLB advances
5,983

 
6,410

 
5,860

 
19,165

 
17,502

Junior subordinated deferrable interest debentures
604

 
632

 
600

 
1,888

 
1,655

Senior debt
1,577

 
1,574

 
1,577

 
4,725

 
4,733

Total interest expense
36,091

 
35,087

 
27,687

 
104,464

 
70,031

Net interest income before provision for loan losses
32,585

 
30,568

 
31,712

 
95,245

 
93,335

(Reversal of) provision for loan losses
(500
)
 
450

 
650

 
250

 
3,450

Net interest income after (reversal of) provision for loan losses
33,085

 
30,118

 
31,062

 
94,995

 
89,885

Noninterest income
993

 
1,488

 
1,043

 
3,861

 
2,885

Noninterest expense
16,069

 
14,709

 
15,090

 
47,027

 
44,725

Income before provision for income taxes
18,009

 
16,897

 
17,015

 
51,829

 
48,045

Provision for income taxes
5,273

 
5,239

 
4,886

 
15,425

 
13,588

Net income
$
12,736

 
$
11,658

 
$
12,129

 
$
36,404

 
$
34,457

Basic earnings per common share
$
0.23

 
$
0.21

 
$
0.22

 
$
0.65

 
$
0.61

Diluted earnings per common share
$
0.23

 
$
0.21

 
$
0.21

 
$
0.65

 
$
0.61


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,
2019
 
June 30,
2019
 
September 30,
2018
 
September 30,
2019
 
September 30,
2018
PERFORMANCE RATIOS
 
 
 
 
 
 
 
 
 
Return on average:
 
 
 
 
 
 
 
 
 
Assets
0.71
%
 
0.66
%
 
0.73
%
 
0.69
%
 
0.73
%
Stockholders' equity
8.45
%
 
7.83
%
 
8.52
%
 
8.15
%
 
8.17
%
Efficiency ratio (1)
47.86
%
 
45.89
%
 
46.07
%
 
47.45
%
 
46.48
%
Noninterest expense to average assets
0.90
%
 
0.84
%
 
0.91
%
 
0.89
%
 
0.95
%
Loan to deposit ratio
116.74
%
 
119.72
%
 
119.86
%
 
116.74
%
 
119.86
%
Average stockholders' equity to average assets
8.43
%
 
8.46
%
 
8.60
%
 
8.44
%
 
8.98
%
Dividend payout ratio
25.39
%
 
28.02
%
 
27.20
%
 
26.91
%
 
36.75
%
YIELDS/RATES
 
 
 
 
 
 
 
 
 
Yield on loans
4.08
%
 
3.93
%
 
3.81
%
 
3.99
%
 
3.71
%
Yield on investments
2.34
%
 
2.48
%
 
2.18
%
 
2.41
%
 
2.03
%
Yield on interest earning assets
3.88
%
 
3.77
%
 
3.63
%
 
3.81
%
 
3.52
%
Cost of interest bearing deposits
2.07
%
 
2.05
%
 
1.64
%
 
2.02
%
 
1.40
%
Cost of borrowings
2.77
%
 
2.76
%
 
2.81
%
 
2.78
%
 
2.52
%
Cost of interest bearing liabilities
2.20
%
 
2.19
%
 
1.85
%
 
2.17
%
 
1.65
%
Net interest spread
1.68
%
 
1.58
%
 
1.78
%
 
1.64
%
 
1.87
%
Net interest margin
1.84
%
 
1.75
%
 
1.94
%
 
1.82
%
 
2.01
%
CAPITAL
 
 
 
 
 
 
 
 
 
Total equity to total assets
8.45
%
 
8.40
%
 
8.54
%
 
 
 
 
Tangible stockholders' equity to tangible assets (1)
8.41
%
 
8.36
%
 
8.49
%
 
 
 
 
Book value per share
$
10.80

 
$
10.67

 
$
10.11

 
 
 
 
Tangible book value per share (1)
$
10.74

 
$
10.61

 
$
10.05

 
 
 
 
ASSET QUALITY
 
 
 
 
 
 
 
 
 
Net recoveries
$
202

 
$
79

 
$
78

 
 
 
 
Annualized net recoveries to average loans
0.01
%
 
0.01
%
 
0.01
%
 
 
 
 
Nonperforming loans to total loans
0.21
%
 
0.19
%
 
0.03
%
 
 
 
 
Nonperforming assets to total assets
0.18
%
 
0.16
%
 
0.03
%
 
 
 
 
Allowance for loan losses to loans held-for-investment
0.56
%
 
0.56
%
 
0.58
%
 
 
 
 
Allowance for loan losses to nonperforming loans
269.88
%
 
301.58
%
 
1669.25
%
 
 
 
 
LOAN COMPOSITION
 
 
 
 
 
 
 
 
 
Multifamily residential
$
3,959,351

 
$
3,919,621

 
$
3,521,456

 
 
 
 
Single family residential
$
2,079,811

 
$
2,127,733

 
$
2,223,510

 
 
 
 
Commercial real estate
$
201,067

 
$
199,125

 
$
164,185

 
 
 
 
Construction and land
$
19,191

 
$
20,179

 
$
16,537

 
 
 
 
Non-mortgage
$
100

 
$
100

 
$
100

 
 
 
 
DEPOSIT COMPOSITION
 
 
 
 
 
 
 
 
 
Noninterest bearing transaction accounts
$
47,134

 
$
47,472

 
$
70,075

 
 
 
 
Interest bearing transaction accounts
$
209,442

 
$
195,176

 
$
173,788

 
 
 
 
Money market deposit accounts
$
1,484,420

 
$
1,397,387

 
$
1,467,105

 
 
 
 
Time deposits
$
3,621,006

 
$
3,594,455

 
$
3,232,976

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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)
September 30,
2019
 
June 30,
2019
 
September 30,
2018
 
September 30,
2019
 
September 30,
2018
Pre-tax, Pre-provision Net Earnings
 
 
 
 
 
 
 
 
 
Income before provision for income taxes
$
18,009

 
$
16,897

 
$
17,015

 
$
51,829

 
$
48,045

Plus: Provision for loan losses
(500
)
 
450

 
650

 
250

 
3,450

Pre-tax, pre-provision net earnings
$
17,509

 
$
17,347

 
$
17,665

 
$
52,079

 
$
51,495

Efficiency Ratio
 
 
 
 
 
 
 
 
 
Noninterest expense (numerator)
$
16,069

 
$
14,709

 
$
15,090

 
$
47,027

 
$
44,725

Net interest income
32,585

 
30,568

 
31,712

 
95,245

 
93,335

Noninterest income
993

 
1,488

 
1,043

 
3,861

 
2,885

Operating revenue (denominator)
$
33,578

 
$
32,056

 
$
32,755

 
$
99,106

 
$
96,220

Efficiency ratio
47.86
%
 
45.89
%
 
46.07
%
 
47.45
%
 
46.48
%
(Dollars in thousands except per share data)
September 30, 2019
 
June 30, 2019
 
September 30, 2018
Tangible Book Value Per Share
 
 
 
 
 
Total assets
$
7,161,419

 
$
7,114,337

 
$
6,692,415

Less: Goodwill
(3,297
)
 
(3,297
)
 
(3,297
)
Tangible assets
7,158,122

 
7,111,040

 
6,689,118

Less: Total liabilities
(6,556,047
)
 
(6,516,870
)
 
(6,121,016
)
Tangible stockholders' equity (numerator)
$
602,075

 
$
594,170

 
$
568,102

Period end shares outstanding (denominator)
56,034,771

 
55,982,491

 
56,543,771

Tangible book value per share
$
10.74

 
$
10.61

 
$
10.05

Tangible Stockholders' Equity to Tangible Assets
 
 
 
 
 
Tangible stockholders' equity (numerator)
$
602,075

 
$
594,170

 
$
568,102

Tangible assets (denominator)
$
7,158,122

 
$
7,111,040

 
$
6,689,118

Tangible stockholders' equity to tangible assets
8.41
%
 
8.36
%
 
8.49
%




8
lbc2019q3_ex992
Exhibit 99.2 Investor Presentation September 30, 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 StatementonFormS‐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 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 andthecompositionofsuchgrowth;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 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 thatofothercompanies 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 9/30/2019(1)  10 September  30, 2019 Total Assets ($mm) $7,161 WA # Branch Location Date Established Deposits ($mm) Total Loans HFI ($mm) $6,260 1 Santa Rosa Oct. 1983 1,096.4 2 San Rafael Sep. 1996*  559.3 Total Deposits ($mm) $5,362 3 Encino Aug. 2007 455.4 Loans / Deposits 117% 4 Beverly Hills Jul. 2010 382.7 OR 5 Los Altos Aug. 2000 290.9 Tangible Book Value / Tang. Assets 8.4% 6 Pasadena May 2009 316.8 Leverage Capital Ratio 9.3% 7 Toluca Lake Jan. 2008 278.6 8 Long Beach Jun. 2015 258.2 Total Risk‐Based Capital Ratio 17.6% Total CRE Loans(2) / Total Risk‐Based  9 San Jose Jun. 2012 224.3 598% Capital 10 Bellevue Jun. 2018 88.9 ROAA  0.69%       Wholesale Deposits 537.3       Business Banking 873.2 ROAE  8.15% 11 Net Interest Margin 1.82% 22 San Francisco A Manhattan Beach 1,410.5 5 EPS – Fully Diluted $0.65 599 Total Deposits 5,362.0 CA Efficiency Ratio 47.5%  * Acquisition date Noninterest Expense / Avg. Assets 0.89%  Branch  (10) NPAs / Assets 0.18% 33  6   77 6 Loan Production Office (8) 44 Los Angeles 8 ALLL / Loans HFI 0.56% A ** Highlighted counties indicate primary lending markets Full‐Time Equivalent Employees 274 (1) Financial data as of or for the nine months ended 9/30/2019.  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 36‐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   0.18% NPAs / Total Assets Robust Infrastructure 6. Efficient Operations  Maintain a small network of large branches ($395 million  avg. branch size)  47.5% efficiency ratio, 0.89% noninterest expense / average  Note: Financial data as of or for the nine months ended 9/30/2019.  See non‐GAAP reconciliation in Appendix hereto. assets and 274 FTEs 5


 
Top Multifamily Lenders in the United States Top 25 Banks and Thrifts by Multifamily Loans (Dollars in billions) As of June 30, 2019 Change Since (%) Delinquency Total Multifamily March 31, June 30,  % of Change Since (bps) Rank Institution Name Headquarters Assets Loans 2019 2018 Multifamily(1) June 30, 2018 1. JPMorgan Chase & Co.  New York, NY 2,727.4 72.07 1.0 1.7 0.11 3 2. New York Community Bancorp Inc.  Westbury, NY 52.8 30.49 1.8 4.3 0.02 0 3. Signature Bank  New York, NY 48.9 15.80 0.0 3.2 0.17 17 4. Wells Fargo & Co.  San Francisco, CA 1,923.4 13.79 2.6 (4.3) 0.15 (16) 5. Capital One Financial Corp.  McLean, VA 373.6 12.21 7.9 6.6 0.30 28 6. First Republic Bank  San Francisco, CA 105.7 11.16 3.8 15.5 0.00 (5) 7. Santander Holdings USA Inc.  Boston, MA 143.9 8.51 0.2 2.3 0.04 (37) 8. Investors Bancorp Inc.  Short Hills, NJ 27.1 8.18 (0.3) 1.4 0.77 19 9. Citigroup Inc. New York, NY 1,988.2 8.09 6.7 44.2 0.07 (12) 10. MUFG Americas Holdings Corp.  New York, NY 172.0 6.11 5.7 11.5 0.07(12) 11. PNC Financial Services Group Inc.  Pittsburgh, PA 405.9 5.79 8.6 1.9 0.09 (11) 12. Bank of America Corp. Charlotte, NC 2,396.5 4.87 (0.1) (9.0) 0.04 2 13. Sterling Bancorp Montebello, NY 30.3 4.68 (0.3) (5.2) 0.13 (9) 14. KeyCorp Cleveland, OH 145.1 4.65 (3.2) 11.9 0.27 (12) 15. M&T Bank Corp. Buffalo, NY 121.6 4.35 10.6 0.7 0.86 (79) 16. TD Group US Holdings LLC Wilmington, DE 387.7 3.93 (1.7) 8.0 0.26 (42) 17. Luther Burbank Corp.  Santa Rosa, CA 7.1 3.92 4.0 16.1 0.29 22 18. Valley National Bancorp Wayne, NJ 33.0 3.85 0.1 1.6 0.03 2 19. Dime Community Bancshares Inc.  Brooklyn, NY 6.5 3.74 (2.4) (9.0) 0.03 0 20. Opus Bank  Irvine, CA 7.9 3.69 13.3 37.0 0.08 8 21. U.S. Bancorp Minneapolis, MN 481.7 3.63 (1.4) 5.0 0.28 (16) 22. CIBC Bancorp USA Inc. Chicago, IL 43.8 3.51 10.8 13.1 0.00 (6) 23. PacWest Bancorp Inc.  Beverly Hills, CA 26.3 3.42 5.7 53.1 0.00 (1) 24. Umpqua Holdings Corp.  Portland, OR 28.0 3.39 2.3 5.8 0.00 (14) 25. People's United Financial Inc.  Bridgeport, CT 51.6 3.34 6.2 8.4 0.03 (32) Banking Industry Aggregate(2) 444.89 2.1 6.2 0.22 (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 > $1 billion  Gross loans / assets > 65%  Multifamily loans / total loans > 30%  MFR + SFR + CRE / total loans > 75% General Information Profitability Capital & Balance Sheet Ratios (1) Asset QualityBal. Sheet Growth(2) Total NPA / NCO / Gross Total Total Multifamily Yield on Cost of NIE / Avg. Eff. TCE / Leverage Capital Loans / LLR / Loans Avg. Loans Deposits Assets Loans ROAA ROAE NIM Loans Deposits Assets Ratio TA Ratio Ratio Deposits Loans + OREO Loans CAGR CAGR Institution Name Ticke r State ($bn) ($bn) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) Luther Burbank Corporation LBC CA 7.1 3.9 0.66 7.83 1.79 3.93 2.07 0.83 46.1 8.4 9.3 17.1 119 0.56 0.24 (0.01) 14.8 15.9 Peer Group: 1. ConnectOne Bancorp, Inc. CNOB NJ 6.1 1.6 1.28 11.10 3.25 5.08 1.78 1.44 44.3 8.9 9.1 12.7 109 0.74 1.30 0.02 15.3 15.6 2. Dime Community Bancshares, Inc. DCOM NY 6.5 3.7 0.82 8.59 2.38 4.00 1.59 1.39 56.8 8.6 8.8 13.6 122 0.38 0.12 0.03 4.8 9.8 3. Empire National Bank NY 1.0 0.3 0.42 4.90 2.63 4.55 1.69 2.15 78.4 8.8 8.9 14.6 73 0.96 0.61 0.04 11.7 17.8 4. First Foundation Inc. FFWM CA 6.3 2.8 0.81 8.57 2.90 4.52 1.86 2.12 62.2 7.9 8.0 11.3 110 0.38 0.32 0.02 36.6 38.3 5. Flushing Financial Corporation FFIC NY 6.9 2.3 0.61 7.53 2.51 4.49 1.95 1.56 63.4 7.9 8.7 13.2 115 0.38 0.39 0.07 7.4 6.7 6. Investors Bancorp, Inc. ISBC NJ 27.1 8.2 0.70 6.33 2.45 4.19 1.78 1.55 59.7 10.5 10.7 15.2 123 1.05 0.60 0.00 7.9 6.7 7. Kearny Financial Corp. KRNY NJ 6.6 2.1 0.53 3.08 2.54 4.19 1.58 1.73 69.7 14.2 14.1 23.2 112 0.71 0.52 0.04 18.3 14.5 8. Malaga Bank F.S.B. CA 1.1 0.9 1.39 10.42 2.98 4.08 1.04 1.05 34.7 13.2 13.4 24.0 135 0.31 0.00 0.00 4.8 0.5 9. Marquette Bank IL 1.6 0.5 0.71 6.47 3.60 4.37 0.54 3.16 74.4 9.0 9.0 14.2 86 1.16 2.17 0.07 3.5 1.0 10. National Consumer Cooperative Bank DC 2.7 0.6 0.58 5.42 2.98 4.95 1.69 3.14 81.2 10.7 12.6 17.0 90 0.82 1.10 (0.01) 3.2 7.9 11. New York Community Bancorp, Inc. NYCB NY 52.8 30.5 0.75 5.85 2.00 3.84 1.76 0.95 48.2 7.4 8.6 13.5 126 0.37 0.17 0.07 2.0 3.7 12. Northfield Bancorp, Inc. NFBK NJ 4.8 2.2 0.72 4.83 2.55 4.07 1.44 1.64 63.0 13.6 14.1 17.1 100 0.83 0.75 0.02 10.2 14.6 13. Opus Bank OPB CA 7.9 3.7 0.45 3.29 2.86 4.26 1.21 2.36 71.3 8.9 9.3 14.8 93 0.98 0.36 0.29 1.9 4.7 14. Oritani Financial Corp. ORIT NJ 4.1 1.9 1.25 9.61 2.61 4.25 1.70 0.96 37.2 13.0 13.0 15.4 118 0.81 0.30 0.00 5.3 9.6 15. Provident Savings Bank, F.S.B. CA 1.1 0.4 0.36 3.48 3.58 4.42 0.40 3.46 87.7 10.6 10.5 19.1 103 0.80 2.60 (0.01) ‐3.3 ‐2.9 16. Signature Bank SBNY NY 48.9 15.8 1.21 12.84 2.77 4.27 1.75 1.09 39.7 9.5 9.7 12.8 101 0.64 0.29 (0.04) 13.9 10.1 17. Waterstone Financial, Inc. WSBF WI 2.0 0.6 1.95 9.93 2.93 4.71 1.81 7.10 73.1 19.2 19.4 26.1 148 0.78 0.64 (0.01) 6.8 4.8 Average: 0.86 7.19 2.80 4.37 1.50 2.17 61.5 10.7 11.1 16.3 110 0.71 0.72 0.04 8.8 9.6 Median: 0.72 6.47 2.77 4.27 1.69 1.64 63.0 9.5 9.7 14.8 110 0.78 0.52 0.02 6.8 7.9 Source: SNL Financial. GAAP data when available, otherwise FR Y‐9C’s and bank call reports as of or for the three months ended 6/30/2019.  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 6/30/2019.. 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  $1.6 million average loan balance  $907 thousand average loan balance  15.3 units average  65% average loan‐to‐value ratio  57% average loan‐to‐value ratio  749 average credit score  1.55x average debt service coverage ratio 0.18% NPAs / Assets 0.21% NPLs / Loans Note: Data as of 9/30/2019. 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  Interest Only  • Underwrite at amortizing payment  Purchase or Refinance Transactions  Investor‐Owner Purchase or Refinance  Primary Residence, Second Home or Investor  programs  Lines of Credit  Low‐ and Moderate‐income lending program • Specific business purpose/ fully adjustable/  short term • 30‐year fixed mortgages and forgivable second  mortgages for first time homebuyers 9


 
Loan Portfolio Historical Loan Growth Loan Portfolio Composition 3.99% yield on loans; 4.20%  weighted average coupon(1) Multifamily Loans by Lending Area Single‐Family Loans by Lending Area (1) As of or for the nine months ended 9/30/2019. 10


 
Asset Quality Nonperforming Assets(1) / Total Assets Culture Approach Results  Risk management is a core competency of   Continuous evaluation of risk and return  9/30/2019 NPAs / Total Assets of 0.18%;  our business NPLs / Total Loans of 0.21%  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 have been at low levels since 2015  Vigilant response to adverse economic  executive officers conditions and specific problem credits  Only one foreclosure in the past four years  Credit decisions are made efficiently and   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% $1,151.4 Q3 Q2 4.26% 4.65% Q2 4.44% Q1 4.31% Q1 4.62% Pipeline: • Total loan pipeline at September 30, 2019 is $258.5 million ($147.9 million CRE at 4.109% WAC, $93.8 million SFR at 4.196% WAC & $16.8  million Construction at 6.235% WAC). A portion of our pipeline will ultimately fallout/not fund and loans without rate locks are subject to  ongoing rate increases/decreases. • Q2 2019 Originations include a $10.1 million loan purchase.  12


 
CRE Loan Origination Composition Quarterly  and YTD Loan Volume & WAC 5.153% 1.0% 5.658% 11.0% 4.625% 8.4% 4.567% 1.7% 4.579% 1.0% 6.5% 5.045% 4.3% 5.447% 4.549% 10.3% 4.683% 11.6% 79.6% 82.4% 82.2% 4.578% 4.301% 4.217% 12 Months Ended December 31, 2018 9 Months Ended September 30, 2019 4.593% 4.621% 4.808% 4.767% 5.022 % 5.508% 4.552% 4.356% 13


 
SFR Loan Origination Composition YTD Loan Volume & WAC  4.358% 26.9% 4.170% 40.1% 30.6% 5.15% 4.484% 73.1% 4.339% 4.153% 59.9% 4.692% 69.4% 12 Months Ended December 31, 2018 9 Months Ended September 30, 2019 4.534% 4.297% 4.723% 4.363% 14


 
Loan Portfolio Rates • At September 30, 2019, loans representing 63% of the loan portfolio, or $3.9 billion are at their floors, and 93% of those loans have fully indexed rates above their  floors by approximately 1.03%.  15


 
Loan Prepayment Speeds 16


 
Deposit Composition Historical Deposit Growth & Portfolio Composition Deposit Breakdown by Branch September  30, 2019 # Branch Location Date Established Deposits ($mm) 1 Santa Rosa Oct. 1983 1,096.4 2 San Rafael Sep. 1996*  559.3 3 Encino Aug. 2007 455.4 4 Beverly Hills Jul. 2010 382.7 5 Los Altos Aug. 2000 290.9 6 Pasadena May 2009 316.8 7 Toluca Lake Jan. 2008 278.6 8 Long Beach Jun. 2015 258.2 9 San Jose Jun. 2012 224.3 10 Bellevue Jun. 2018 88.9       Wholesale Deposits 537.3       Business Banking 873.2 A Manhattan Beach 1,410.5 Total Deposits 5,362.0 * Acquisition date 2.01% cost of total deposits(1) (1) For the nine months ended 9/30/2019. 17


 
Deposit Growth/Balance  Growth Trend $127.5 $80.8 $152.7 $1,049.7 $617.3 $212.8 18


 
Business Composition By Vertical  December 31, 2018 September 30, 2019 1.572% 1.572% 1.082% 0.830% 1.220% 19


 
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. 20


 
Net Interest Margin Quarterly Net Interest Margin 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 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) September 30, 2019 September 30, 2019 Change in Change in Interest Rates $ Change % Change Interest Rates $ Change % Change (basis points) NII NII (basis points) EVE EVE + 400 BP (13.0) (8.9%) + 400 BP (164.4) (25.3%) + 300 BP (7.6) (5.2%) + 300 BP (97.4) (15.0%) + 200 BP (3.6) (2.4%) + 200 BP (50.5) (7.8%) + 100 BP (1.2) (0.8%) + 100 BP (21.0) (3.2%) ‐ 100 BP 0.5 0.3% ‐ 100 BP 33.0 5.1% ‐ 200 BP (0.2) (0.1%) ‐ 200 BP (13.9) (2.1%) 22


 
Deposits ‐ Cost of Funds Comparison (1) Beta is calculated using an average Fed Funds Rate. 23


 
Liquidity Management Securities Portfolio As of September 30, 2019 Book Value % of ($000) Total Available for Sale: Residential mortgage‐backed securities & collateralized  156,632 23.9% mortgage obligations ("MBS & CMOs")  Commercial MBS & CMOs 341,347 52.2% Agency bonds 133,878 20.5% Total Available for Sale 631,857 96.6% Equity Investment: CRA Qualified Investment Fund (CRAIX)  11,837 1.8% Total Equity Investment 11,837 1.8% Held to Maturity: Mortgage‐backed securities 10,517 1.6% Other Investments 85 0.0% Total Held to Maturity 10,602 1.6% Total Investment Securities 654,296 100.0% Other Borrowings Other Borrowings Amount Outstanding  Cost of  Type 9/30/2019 Borrowings  (1) FHLB Advances $977 million 2.37% Senior Notes $94 million 6.68% Trust Preferred  $62 million 4.08% (1) For the nine months ended 9/30/2019.  24


 
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 of directors of 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. 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 GreenPointMortgage, 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 fromSt. Mary’s College and a B.B.A. in Business Statistics from Temple University. 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. 25


 
Executive Management Continued 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.PrietoholdsaJ.D.fromFordhamLawSchoolandaB.A.fromGeorgetown University. Brian Skelton. Mr. Skelton joined the Bank in August 2019 and currently serves as Executive Vice President and Chief Banking Officer. In this role he is responsible for leading the Retail Banking, Business Banking and Marketing units. Prior to joining the Bank, Mr. Skelton led the Branch Banking and the Business Development Divisions at Farmers and Merchants Bank. He has also previously worked at Union Bank, City National Bank, and Pacific Mercantile Bank. Mr. Skelton earned a Bachelor’s degree from Cal State Fullerton and graduated from the Pacific Coast Banking School. Laura Tarantino. Ms. Tarantino currently serves as Executive Vice President and Chief Financial Officer of the Company, 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 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 andLoanAssociationin1983.Inthisrole,Mr.Trionebringscontinuityand 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 ofTrione 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. 27


 
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.Newcombis 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. 28


 
Appendix


 
Balance Sheet ($ in 000’s) As of September 30, December 31, 2019 (1) 2018 ASSETS Cash and cash equivalents $ 168,282 $ 91,697 Available for sale investment securities, at fair value 631,857 608,528 Held to maturity investment securities, at amortized cost (fair value of $10,731 and $11,624 at September 30, 2019 and December 31, 2018 respectively) 10,602 11,860 Equity securities, at fair value 11,837 11,438 Loans receivable, net of allowance for loan losses of $34,923 and $34,314 as of September 30, 2019 and December 31, 2018, respectively 6,224,597 6,096,316 Accrued interest receivable 21,558 20,220 Federal Home Loan Bank ("FHLB") stock, at cost 30,343 31,823 Premises and equipment, net 18,523 20,981 Goodwill 3,297 3,297 Prepaid expenses and other assets 40,523 41,052 Total assets $ 7,161,419 $ 6,937,212 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits $ 5,362,002 $ 5,001,040 Federal Home Loan Bank advances 977,210 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 $614 and $707 at September 30, 2019 and December 31, 2018, respectively) 94,386 94,293 Accrued interest payable 3,338 4,307 Other liabilities and accrued expenses 57,254 51,438 Total liabilities 6,556,047 6,356,067 Stockholders' equity: Common stock, no par value; 100,000,000 shares authorized; 56,034,771 and 56,379,066 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively 447,389 456,378 Retained earnings 156,016 129,806 Accumulated other comprehensive gain/(loss), net of taxes 1,967 (5,039) Total stockholders' equity 605,372 581,145 Total liabilities and stockholders' equity $ 7,161,419 $ 6,937,212 (1) Unaudited 30


 
Income Statement ($ in 000’s, except per share data) For the Three Months Ended September 30, (1) For the Nine Months Ended September 30, (1) 2019 2018 2019 2018 Interest and fee income: Loans $ 64,010 $ 55,644 $ 186,078 $ 153,550 Investment securities 3,900 3,266 11,943 8,638 Cash and cash equivalents 766 489 1,688 1,178 Total interest and fee income 68,676 59,399 199,709 163,366 Interest expense: Interest on deposits 27,927 19,650 78,686 46,141 Interest on FHLB advances 5,983 5,860 19,165 17,502 Interest on junior subordinated deferrable interest debentures 604 600 1,888 1,655 Interest on other borrowings 1,577 1,577 4,725 4,733 Total interest expense 36,091 27,687 104,464 70,031 Net interest income before provision for loan losses 32,585 31,712 95,245 93,335 (Reversal of) provision for loan losses (500) 650 250 3,450 Net interest income after provision for loan losses 33,085 31,062 94,995 89,885 Noninterest income: Net gain on sale of loans 77 140 607 140 FHLB dividends 557 622 1,604 1,725 Other income 359 281 1,650 1,020 Total noninterest income 993 1,043 3,861 2,885 Noninterest expense: Compensation and related benefits 9,191 9,018 27,857 27,836 Deposit insurance premium - 483 985 1,382 Professional and regulatory fees 521 394 1,419 1,295 Occupancy 1,425 1,418 4,214 4,018 Depreciation and amortization 672 700 2,001 2,108 Data processing 945 895 2,809 2,490 Marketing 1,217 1,235 3,442 2,009 Other expenses 2,098 947 4,300 3,587 Total noninterest expense 16,069 15,090 47,027 44,725 Income before provision for income taxes 18,009 17,015 51,829 48,045 Provision for income taxes 5,273 4,886 15,425 13,588 Net income $ 12,736 $ 12,129 $ 36,404 $ 34,457 Basic earnings per common share $ 0.23 $ 0.22 $ 0.65 $ 0.61 Diluted earnings per common share $ 0.23 $ 0.21 $ 0.65 $ 0.61 Dividends per common share $ 0.06 $ 0.06 $ 0.17 $ 0.23 Weighted average common shares outstanding - basic 55,654,429 56,190,970 56,094,285 56,190,970 Weighted average common shares outstanding - diluted 55,927,533 56,864,100 56,313,872 56,813,110 (1) Unaudited 31


 
Net Interest Margin ($ in 000’s) AverageFor the Nine Months Ended Interest  Average  AverageFor the Three Months Ended Interest  Average  Average For the Three Months Ended Interest Average  September 30, 2019  (5) September 30, 2019 (5) June 30, 2019  (5) Balance Inc / Exp Yield/Rate Balance Inc / Exp Yield/Rate Balance Inc / Exp Yield/Rate Interest‐Earning Assets Multifamily residential$     3,838,154 $ 119,553 4.15%$     3,934,650 $    42,368 4.31%$    3,860,863 $  39,384 4.08% Single family residential       2,169,862       58,782 3.61%       2,118,339       18,901 3.57%      2,142,027     19,040 3.56% Commercial real estate          195,042         7,015 4.80%          200,742         2,412 4.81%         194,775       2,347 4.82% Construction, land and NM            14,589            728 6.67%            18,761            329 6.96%           12,948          244 7.56% Total loans (1)      6,217,647   186,078 3.99%     6,272,492     64,010 4.08%    6,210,613  3.93% 61,015 Securities available‐for‐sale/ equity          648,240       11,691 2.40%          654,752         3,834 2.34%         653,761       4,023 2.46% Securities held‐to‐maturity  (2)           11,395          252 2.95%          10,978            66 2.40%         11,413          95 3.33% Cash and cash equivalents          103,185         1,688 2.19%          142,960            766 2.13%           92,154          522 2.27% Total interest‐earning assets $    6,980,467 $ 199,709 3.81%$     7,081,182 $    68,676 3.88%$    6,967,941 $  65,655 3.77% Noninterest‐earning assets            77,106             77,416            76,137 Total assets $    7,057,573 $     7,158,598 $    7,044,078 Interest‐Bearing Liabilities Interest‐bearing demand deposits$        208,287 $      2,058 1.30% $       201,480 $         637 1.24%$       203,362 $       701 1.36% Money market demand accounts       1,385,633       13,705 1.30%       1,418,275         4,871 1.34%      1,385,957       4,835 1.38% Time deposits       3,532,068       62,923 2.35%       3,654,313       22,419 2.40%      3,512,838     20,935 2.36%      Total interest‐bearing deposits       5,125,988       78,686 2.02%       5,274,068       27,927 2.07%      5,102,157     26,471 2.05% FHLB advances       1,079,231       19,165 2.37%       1,021,396         5,983 2.32%      1,093,160       6,410 2.35% Senior debt            94,335         4,725 6.68%            94,365         1,577 6.68%           94,335       1,574 6.67% Junior subordinated debentures            61,857         1,888 4.08%            61,857            604 3.87%           61,857          632 4.10% Total interest‐bearing liabilities  $    6,361,411 $ 104,464 2.17%$     6,451,686 $    36,091 2.20%$    6,351,509 $  35,087 2.19% Noninterest‐bearing demand deposits            41,567             43,188            40,086 Noninterest‐bearing liabilities            59,225             60,548            56,553 Total liabilities       6,462,203        6,555,422       6,448,148 Total stockholders' equity          595,370          603,176          595,930 Total liabilities and stockholders' equity $    7,057,573 $     7,158,598 $    7,044,078 Net interest spread  (3) 1.64% 1.68% 1.58% Net interest income/margin  (4) $   95,245 1.82%$    32,585 1.84%$  30,568 1.75% (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.   32


 
Non‐GAAP Reconciliation ($ in 000’s) September 30,  September 30,  September 30,  September 30,  2019 2018 2019 2018 2018 2017 2016 2015 Tangible book value Total assets  $           7,161,419  $           6,692,415  $           7,161,419  $           6,692,415  $         6,937,212  $         5,704,380  $         5,063,585  $         4,361,779  Less: Goodwill                      (3,297)As of or For the Three Months Ended                     (3,297)                     (3,297) As of or For the Nine Months                     (3,297) Ended                   (3,297)                   (3,297)As of or For the Years Ended December 31,                   (3,297)                   (3,297) Less: Total liabilities              (6,556,047)             (6,121,016)             (6,556,047)             (6,121,016)           (6,356,067)           (5,154,635)           (4,659,210)           (3,990,480) Tangible book value  $               602,075   $               568,102   $               602,075   $               568,102   $            577,848   $            546,448   $            401,078  $            368,002  Tangible assets Total assets  $           7,161,419  $           6,692,415  $           7,161,419  $           6,692,415  $         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)                   (3,297) Tangible assets  $           7,158,122   $           6,689,118   $           7,158,122   $           6,689,118   $         6,933,915   $         5,701,083   $         5,060,288  $         4,358,482  Tangible stockholders' equity to tangible assets Tangible book value (numerator)  $               602,075  $               568,102  $               602,075  $               568,102  $            577,848  $            546,448  $            401,078  $            368,002  Tangible assets (denominator)                7,158,122                6,689,118                7,158,122                6,689,118             6,933,915             5,701,083             5,060,288             4,358,482  Tangible stockholders' equity to tangible assets 8.4% 8.5% 8.4% 8.5% 8.3% 9.6% 7.9% 8.4% Pro forma Items  (1)      Actual/ Pro forma provision for income tax      Net income before income taxes  $                 18,009  $                 17,015  $                 51,829  $                 48,045  $               62,931  $               65,231  $               53,940  $               36,639       Effective tax rate 29% 29% 30% 28% 28% 42% 42% 42%      Actual/ Pro forma provision for income taxes  $                   5,273   $                   4,886   $                 15,425   $                 13,588   $               17,871   $               27,397   $               22,655   $               15,388       Actual/ Pro forma net income      Net income before income taxes  $                 18,009  $                 17,015  $                 51,829  $                 48,045  $               62,931  $               65,231  $               53,940  $               36,639       Actual/ Pro forma provision for income taxes                        5,273                        4,886                     15,425                     13,588                   17,871                   27,397                   22,655                   15,388       Actual/ Pro forma net income  $                 12,736   $                 12,129   $                 36,404   $                 34,457   $               45,060   $               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.   33


 
Non‐GAAP Reconciliation ($ in 000’s, except per share data) September 30,  As of or For the Three Months EndedSeptember 30,  September 30,  As of or For the Nine MonthsSeptember 30,   Ended As of or For the Years Ended December 31, 2019 2018 2019 2018 2018 2017 2016 2015 Pro forma Items Continued  (1)      Actual/ Pro forma ratios and per share data      Actual/ Pro forma net income (numerator)  $                 12,736  $                 12,129  $                 36,404  $                 34,457  $               45,060  $               37,834  $               31,285  $               21,251       Average assets (denominator)                7,158,598                6,619,629                7,057,573                6,262,313             6,405,931             5,485,832             4,676,676             4,040,381       Actual/ Pro forma return on average assets 0.71% 0.73% 0.69% 0.73% 0.70% 0.69% 0.67% 0.53%      Average stockholders' equity (denominator)  $               603,176  $               569,176  $               595,370  $               562,312  $            566,275  $            425,698  $            390,318  $            359,359       Actual/ Pro forma return on average stockholders' equity 8.45% 8.52% 8.15% 8.17% 7.96% 8.89% 8.02% 5.91%      Weighted average shares outstanding ‐ diluted (denominator)             55,927,533             56,864,100             56,313,872             56,813,110           56,825,402           42,957,936           42,000,000           42,000,000       Actual/ Pro forma earnings per share—diluted  $                      0.23   $                      0.21   $                      0.65   $                      0.61   $                   0.79   $                   0.88   $                   0.74   $                   0.51  Efficiency ratio Noninterest expense (numerator)  $                 16,069   $                 15,090   $                 47,027   $                 44,725   $               62,687   $               56,544   $               61,242  $               62,339  Net interest income  $                 32,585  $                 31,712  $                 95,245  $                 93,335  $            125,087  $            110,895  $               94,594  $               84,879  Noninterest income                           993                        1,043                        3,861                        2,885                     4,131                     7,508                     7,885                     6,958  Operating revenue (denominator)  $                 33,578   $                 32,755   $                 99,106   $                 96,220   $            129,218   $            118,403   $            102,479  $               91,837  Efficiency ratio 47.9% 46.1% 47.5% 46.5% 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.   34