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): January 28, 2020
 
 
 
 
 
Luther Burbank Corporation
(Exact name of registrant as specified in its charter)
 
 
 
 
 
California
(State or other jurisdiction of incorporation or organization)
001-38317 (Commission file number)
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 Pursuant to 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

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 January 28, 2020, Luther Burbank Corporation (the "Company") issued a press release, a copy of which is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

The information furnished under Item 2.02, Item 7.01 and Item 9.01 of this Current Report on Form 8-K, including Exhibit 99.1 and Exhibit 99.2 to this Current Report on Form 8-K, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liabilities under that Section, nor shall it be deemed incorporated by reference in any registration statement or other filings of the Company under the Securities Act of 1933, as amended, except as shall be set forth by specific reference in such filing.

Item 7.01. Regulation FD

The Company will conduct a conference call at 8:00 a.m. (Pacific Time) on January 29, 2020 to discuss its financial results for the quarter and year ended December 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 Current Report on Form 8-K and replaces and supersedes investor presentations materials previously furnished as exhibits to the Company's Current Reports on Form 8-K.

Item 8.01. Other Events

On January 28, 2020, the Company's Board of Directors declared a cash dividend of $0.0575 per common share, payable on February 18, 2020 to shareholders of record on February 7, 2020.

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: January 28, 2020
 
By: /s/ Laura Tarantino
 
 
Laura Tarantino
 
 
Executive Vice President and Chief Financial Officer




Exhibit
EXHIBIT 99.1
    https://cdn.kscope.io/f689732e14fcf67978b287e572d902e9-lbc_logoa03.jpg            https://cdn.kscope.io/f689732e14fcf67978b287e572d902e9-newsreleasea03.gif


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 YEAR ENDED DECEMBER 31, 2019

Quarterly Cash Dividend of $0.0575 Per Common Share Declared

SANTA ROSA, Calif. (January 28, 2020) Luther Burbank Corporation (NASDAQ: LBC) (the “Company”), the holding company for Luther Burbank Savings (the “Bank”), today reported net income of $12.5 million and $48.9 million, or $0.22 and $0.87 diluted earnings per common share (“EPS”), for the quarter and year ended December 31, 2019, respectively, compared to net income of $12.7 million, or $0.23 EPS, for the linked quarter and $10.6 million and $45.1 million, or $0.19 and $0.79 EPS, for the same periods last year, respectively. Pre-tax, pre-provision net earnings for the quarter and year ended December 31, 2019 were $18.6 million and $70.7 million, respectively, compared to $17.5 million for the linked quarter and $15.0 million and $66.5 million for the same periods last year, respectively.
Pre-tax, pre-provision net 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 net 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 year ended December 31, 2019. During the quarter, our net interest margin continued to show improvement, increasing to 1.89% compared to 1.84% during the linked quarter. The growth in our margin was primarily attributable to a nine basis point decline in our cost of deposits, as declines in short-term market rates during the second half of the year are benefiting our funding costs. Deposits declined by $127.3 million during the quarter caused primarily by a reduction in our wholesale deposits, which we intentionally allowed to runoff to remove excess liquidity from our balance sheet. Loan yields were 4.07% during the quarter and were relatively flat compared to the linked quarter yield of 4.08%. Loan prepayment speeds remained elevated during the quarter as customers continued to move to long-term fixed rate loans to benefit from the current rate environment. As a result, total loans declined by $28.5 million during the quarter despite loan originations of $412.7 million compared to $382.4 million for the linked quarter and $470.2 million for the same period last year. 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 45% and a noninterest expense to average total assets ratio of 87 basis points for the quarter.”
Ms. Lagomarsino continued, “During the quarter, we successfully completed the planned relocation of our San Rafael branch to a new location in San Rafael, as well as the planned relocation of our Manhattan Beach administrative offices to Gardena, California. As discussed during the previous quarter, we expect to save $1.1 million annually in connection with these moves. Both moves went smoothly and we did not experience any negative deposit impact at our new San

1


Rafael branch as a result of the relocation. In addition, I'm proud to announce that we will be opening a new branch during the first quarter of 2020 in El Segundo, California. This will be the Bank's eleventh overall branch and our tenth in California.”
Board Declares Quarterly Cash Dividend of $0.0575 Per Share
On January 28, 2020, the Board of Directors of the Company declared a quarterly cash dividend of $0.0575 per common share. The dividend is payable on February 18, 2020 to shareholders of record as of February 7, 2020.
Net Interest Income
Net interest income for the quarter ended December 31, 2019 totaled $33.2 million compared to $32.6 million for the previous quarter and $31.8 million for the same period last year. As compared to the linked quarter, net interest income was positively impacted by a $1.8 million decline in interest expense primarily caused by a decrease in the average balance and cost of interest bearing deposits of $46.6 million and 9 basis points, respectively, partially offset by a decline in interest income of $1.2 million, which was predominantly caused by a $874 thousand decline in swap income earned during the quarter. During the quarter ended December 31, 2019, swap income earned was $532 thousand compared to $1.4 million during the linked quarter. To a lesser extent, interest income was further impacted by a decline in the average balance of our loan portfolio of $32.7 million, as well as a 23 basis point decline in the yield on investments and a $32.4 million and 46 basis point decline in the average balance and yield of cash and cash equivalents, respectively. The $1.4 million, or 4.4%, 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 $229.9 million and 19 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 $218.0 million and 19 basis points, respectively, compared to the same period last year. Net interest margin for the quarter ended December 31, 2019 was 1.89%, compared to 1.84% for the previous quarter and 1.88% for the same period last year. The margin increase over the linked quarter primarily relates to the 9 basis points decline in our cost of interest bearing deposits, partially offset by a 23 and 46 basis point decline in the yield on investment securities and cash and cash equivalents, respectively. These declines were related to the repricing of deposits and short-term and variable rate interest earning assets to lower interest yields as a result of the Federal Open Market Committee's ("FOMC") interest rate cuts during the second half of the year. The higher net interest margin as compared to the same period last year primarily relates to our interest bearing deposits repricing during the current period to lower rates more quickly than our loan portfolio. During the quarter ended December 31, 2019, the yield on our interest earning assets increased by 13 basis points, while the cost of our interest bearing liabilities increased by 13 basis points. Despite these equal changes, our net interest margin improved during the current quarter compared to the same period last year due to the higher proportion of average interest earning assets compared to average interest bearing liabilities. Our net interest spread in the fourth quarter of 2019 was 1.73%, increasing by 5 basis points compared to the previous quarter and unchanged compared to the same period last year.
Net interest income for the year ended December 31, 2019 totaled $128.4 million compared to $125.1 million for the prior year. The $3.3 million, or 2.7%, increase in net interest income over the prior year was primarily related to growth in the average balance and yield of our loan portfolio, which increased by $577.9 million and 26 basis points, respectively. The improvement in net interest income was further enhanced by growth in the average balance and yield of our investment portfolio, which increased by $76.7 million and 21 basis points, respectively. These increases were partially offset by growth in the average balance and cost of our interest bearing deposits of $646.0 million and 50 basis points, respectively, and to a lesser extent, an increase in the cost of FHLB advances of 18 basis points, compared to the previous year. Net interest margin for the year ended December 31, 2019 was 1.84%, compared to 1.98% for the prior year. The decline in net interest margin primarily relates to our rising cost of funds, which had generally outpaced the increases in yield on our interest earning assets during the majority of this year, due to short-term rate increases at the end of 2018 and the flattening of the yield curve, which inverted for a period during 2019. Our net interest spread during the year ended December 31, 2019 was 1.66%, declining by 17 basis points compared to the previous year.
Noninterest Income
Noninterest income for the quarter ended December 31, 2019 totaled $814 thousand, compared to $993 thousand for the previous quarter and $1.2 million for the same period last year. The decrease of $179 thousand in noninterest income, or 18.0%, for the quarter ended December 31, 2019 compared to the linked quarter, was primarily attributable to a $144 thousand decline in fair value adjustments recorded on our equity securities, as well as a $77 thousand decrease in gains on sale of loans compared to the prior quarter. The decrease of $432 thousand in noninterest income, or 34.7%, for the quarter ended December 31, 2019 compared to the quarter ended December 31, 2018, was primarily due to a $484 thousand special FHLB dividend received during the quarter ended December 31, 2018.

2


Noninterest income for the year ended December 31, 2019 totaled $4.7 million, compared to $4.1 million for the prior year. The increase of $544 thousand in noninterest income, or 13.2%, was primarily attributable to an increase in gains on sale of loans of $467 thousand, a non-recurring equipment recovery of $384 thousand and an increase in the fair value of equity securities of $344 thousand, partially offset by the FHLB special dividend, discussed above.
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 December 31, 2019 totaled $15.3 million compared to $16.1 million for the previous quarter and $18.0 million for the same period last year. Compared to the linked quarter, noninterest expense decreased $728 thousand, or 4.5%, 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 during the linked quarter and a $440 thousand decline in federal deposit insurance assessments due to the full utilization of our remaining Small Bank Assessment Credit during the current quarter. As previously discussed, the facilities moves are expected to yield future annual cost savings of $1.1 million. The decreases in noninterest expense were partially offset by an increase of $394 thousand in advertising costs in connection with our deposit gathering efforts. Compared to the same period last year, noninterest expense decreased $2.6 million, or 14.6%, during the quarter ended December 31, 2019 primarily attributable to $2.3 million in compensation and consulting costs incurred during the quarter ended December 31, 2018 related to the CEO succession plan and a $949 thousand decline in federal deposit insurance, discussed above, partially offset by a $634 thousand decline in capitalized loan origination costs.
Noninterest expense for the year ended December 31, 2019 totaled $62.4 million compared to $62.7 million for the same period last year. The decrease of $319 thousand, or 0.5%, is primarily attributable to a decline in compensation and consulting costs incurred last year related to the CEO succession plan, discussed above, partially offset by a $1.6 million increase in deposit related advertising costs 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 December 31, 2019 were $7.0 billion, an increase of $108.6 million, or 1.6%, from December 31, 2018. The increase was primarily due to a $100.3 million, or 1.6%, increase in loans held-for-investment. Absent loan sales of $68.3 million during the current year, loan growth would have been $168.6 million, or 2.8%. Total liabilities increased $75.3 million, or 1.2%, and were $6.4 billion at both December 31, 2019 and December 31, 2018. The increase in total liabilities was primarily attributable to growth in our deposits of $233.7 million, or 4.7%, partially offset by a decrease in FHLB advances of $164.4 million, or 14.4%, compared to December 31, 2018.
Loans
Total loans at December 31, 2019 were $6.2 billion, an increase of $100.3 million from December 31, 2018. Our loan portfolio generally consists of income property loans ("IPL") and single family residential ("SFR") mortgage loans, which represent 67.2% and 32.4%, 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 December 31, 2019 compared to $3.9 billion at December 31, 2018. The yield on the IPL portfolio was 4.33% during the quarter ended December 31, 2019, compared to 4.33% and 4.01% during the linked quarter and the same period last year, respectively. The increase in yield compared to the same period last year was the result of the rate on new loan originations generally exceeding the rate on loan payoffs between early 2017 and mid 2019, as well as $532 thousand of swap related income earned during the current quarter. For the quarter ended December 31, 2019, IPL loan originations and the corresponding weighted average coupon totaled $234.6 million and 4.08%, respectively, compared to $207.1 million and 4.26%, respectively, for the linked quarter and $268.2 million and 4.73%, 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 primarily due to the current year decline in market interest rates. Prepayment speeds within the IPL loan portfolio were 17.2% for the quarter ended December 31, 2019, compared to 13.9% and 9.1% during the linked quarter and the same period last year, respectively. The elevated prepayment speeds during 2019 were primarily related to customers refinancing their hybrid-ARM loans to take advantage of lower long-term interest rates.

3


Our SFR loan portfolio generally consists of hybrid loans. SFR loans totaled $2.0 billion and $2.3 billion at December 31, 2019 and December 31, 2018, respectively. The yield on the SFR portfolio was 3.51% during the quarter ended December 31, 2019, compared to 3.57% and 3.66% during the linked quarter and the same period last year, respectively. The decreases in yield compared to the linked quarter and the same period last year were the result of an increase in the accelerated recognition of deferred loan origination costs due to higher prepayment levels. For the quarter ended December 31, 2019, SFR loan originations and the corresponding weighted average coupon totaled $165.8 million and 4.14%, respectively, compared to $167.1 million and 4.16%, respectively, for the linked quarter and $198.4 million and 4.69%, respectively, for the same period last year. The decline in the average coupon for the current period originations compared to the same period last year was primarily due to the current year decline in interest rates, as well as competitive pricing pressures. Prepayment speeds within the SFR loan portfolio were 36.7% during the quarter ended December 31, 2019, compared to 35.6% and 26.4% during the linked quarter and the same period last year, respectively. As discussed above, the elevated prepayment speeds during 2019 were primarily related to customers refinancing their hybrid-ARM loans to take advantage of lower long-term interest rates.
.
Asset Quality
Nonperforming assets totaled $6.3 million, or 0.09% of total assets, at December 31, 2019, compared to $2.0 million, or 0.03% of total assets, at December 31, 2018. The increase in nonperforming assets was primarily due to several SFR loans being placed on nonaccrual status during the year ended December 31, 2019. There was no real estate owned at December 31, 2019 and December 31, 2018 and we have not foreclosed on any collateral since 2015. For the quarter ended December 31, 2019, we recorded loan loss provisions of $1.0 million compared to recapturing loan loss provisions of $500 thousand in the prior quarter and recording loan loss provisions of $150 thousand for the same period last year. The loan loss provision recognized during the quarter was primarily recorded to adequately provide for an increase in criticized loans during the period, as well as a singular SFR loan that we downgraded due to concern about collateral devaluation during what may be a protracted workout period as a result of an impending divorce and possible bankruptcy. Our allowance for loan losses to total loans was 0.58% at December 31, 2019, compared to 0.56% at December 31, 2018.
For the year ended December 31, 2019, loan loss provisions of $1.3 million were recorded compared to $3.6 million for the same period last year. The lower loan loss provisions during the current year were primarily due to slower loan growth as compared to the prior year.
Prepaid Expenses and Other Assets
Prepaid expenses and other assets totaled $65.4 million at December 31, 2019 compared to $64.6 million at December 31, 2018, an increase of $846 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 $5.2 billion at December 31, 2019, an increase of $233.7 million, or 4.7%, from December 31, 2018. Retail deposits increased $285.2 million, while wholesale deposits decreased $51.5 million. Our cost of interest bearing deposits was 1.98% during the quarter ended December 31, 2019 compared to 2.07% during the linked quarter and 1.79% during the same period last year. The decline in our cost of interest bearing deposits compared to the linked quarter is predominantly due to a decline in short-term interest rates due primarily to the FOMC's interest rates cuts during the second half of the year. The increase in our cost of interest bearing deposits compared to the same period last year was primarily related to repricing in our time deposit portfolio, which had been impacted by rising short-term interest rates in the prior year and competitive pricing pressures. The cost of time deposits were 2.34% during the quarter ended December 31, 2019, compared to 2.40% and 2.12% for the linked quarter and same period last year, respectively.
Other Liabilities
Other liabilities totaled $61.7 million at December 31, 2019, compared to $55.7 million at December 31, 2018, an increase of $5.9 million or 10.6%. Other liabilities primarily consist of accrued employee benefits, loan escrow balances, checks outstanding and accrued interest payable.

4


Capital
Stockholders’ equity totaled $614.5 million, an increase of $33.3 million, or 5.7%, compared to December 31, 2018. Stockholders' equity represented 8.7% and 8.4% of total assets at December 31, 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 December 31, 2019, our Tier 1 Leverage, Common Equity Tier 1 Risk-Based, Tier 1 Risk-Based and Total Risk-Based Capital ratios were 10.57%, 18.99%, 18.99% and 19.94%, respectively, for the Bank, and 9.47%, 15.46%, 17.02% and 17.97%, respectively, for the Company. At December 31, 2019, the Company’s tangible stockholders' equity ratio was 8.68%. A schedule reconciling our GAAP financial amounts to the calculation of tangible stockholders' equity is provided in the tables below.
During the quarter ended December 31, 2019, the Company did not repurchase any shares in connection with its stock repurchase program. During the year ended December 31, 2019, the Company repurchased 870,001 shares at an average price of $10.10 per share and a total cost of $8.8 million. At December 31, 2019, the remaining authorized balance available to repurchase shares in connection with the program was $4.7 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 $6.2 billion and total deposits of $5.2 billion as of December 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 and other reports we file with the U.S. Securities and Exchange Commission. 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)
December 31,
2019 (unaudited)
 
December 31,
2018
ASSETS
 
 
 
Cash and cash equivalents
$
88,565

 
$
91,697

Available for sale debt securities, at fair value
625,074

 
608,528

Held to maturity debt securities, at amortized cost
10,170

 
11,860

Equity securities, at fair value
11,782

 
11,438

Loans held-for-investment
6,230,977

 
6,130,630

Allowance for loan losses
(36,001
)
 
(34,314
)
Total loans held-for-investment, net
6,194,976

 
6,096,316

FHLB stock
30,342

 
31,823

Premises and equipment, net
19,504

 
20,981

Prepaid expenses and other assets
65,415

 
64,569

Total assets
$
7,045,828

 
$
6,937,212

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Liabilities:
 
 
 
Deposits
$
5,234,717

 
$
5,001,040

FHLB advances
978,702

 
1,143,132

Junior subordinated deferrable interest debentures
61,857

 
61,857

Senior debt
94,416

 
94,293

Other liabilities
61,672

 
55,745

Total liabilities
6,431,364

 
6,356,067

Total stockholders' equity
614,464

 
581,145

Total liabilities and stockholders' equity
$
7,045,828

 
$
6,937,212

CONDENSED CONSOLIDATED INCOME STATEMENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Years Ended
(Dollars in thousands except per share data)
December 31,
2019
 
September 30,
2019
 
December 31,
2018
 
December 31,
2019
 
December 31,
2018
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
Interest and fee income:
 
 
 
 
 
 
 
 
 
Loans
$
63,452

 
$
64,010

 
$
58,285

 
$
249,530

 
$
211,835

Investment securities
3,517

 
3,900

 
3,792

 
15,461

 
12,430

Cash and cash equivalents
464

 
766

 
614

 
2,151

 
1,792

Total interest income
67,433

 
68,676

 
62,691

 
267,142

 
226,057

Interest expense:
 
 
 
 
 
 
 
 
 
Deposits
26,406

 
27,927

 
22,970

 
105,092

 
69,112

FHLB advances
5,731

 
5,983

 
5,782

 
24,896

 
23,285

Junior subordinated deferrable interest debentures
560

 
604

 
611

 
2,447

 
2,266

Senior debt
1,574

 
1,577

 
1,577

 
6,300

 
6,307

Total interest expense
34,271

 
36,091

 
30,940

 
138,735

 
100,970

Net interest income before provision for (reversal of) loan losses
33,162

 
32,585

 
31,751

 
128,407

 
125,087

Provision for (reversal of) loan losses
1,000

 
(500
)
 
150

 
1,250

 
3,600

Net interest income after provision for (reversal of) for loan losses
32,162

 
33,085

 
31,601

 
127,157

 
121,487

Noninterest income
814

 
993

 
1,246

 
4,675

 
4,131

Noninterest expense
15,341

 
16,069

 
17,962

 
62,368

 
62,687

Income before provision for income taxes
17,635

 
18,009

 
14,885

 
69,464

 
62,931

Provision for income taxes
5,178

 
5,273

 
4,282

 
20,603

 
17,871

Net income
$
12,457

 
$
12,736

 
$
10,603

 
$
48,861

 
$
45,060

Basic earnings per common share
$
0.22

 
$
0.23

 
$
0.19

 
$
0.87

 
$
0.80

Diluted earnings per common share
$
0.22

 
$
0.23

 
$
0.19

 
$
0.87

 
$
0.79


6


CONSOLIDATED FINANCIAL HIGHLIGHTS (UNAUDITED)
 
 
 
 
 
 
 
 
 
As of or For the Three Months Ended
 
Years Ended
(Dollars in thousands except per share data)
December 31,
2019
 
September 30,
2019
 
December 31,
2018
 
December 31,
2019
 
December 31,
2018
PERFORMANCE RATIOS
 
 
 
 
 
 
 
 
 
Return on average:
 
 
 
 
 
 
 
 
 
Assets
0.70
%
 
0.71
%
 
0.62
%
 
0.69
%
 
0.70
%
Stockholders' equity
8.14
%
 
8.45
%
 
7.34
%
 
8.15
%
 
7.96
%
Efficiency ratio (1)
45.15
%
 
47.86
%
 
54.44
%
 
46.86
%
 
48.51
%
Noninterest expense to average assets
0.87
%
 
0.90
%
 
1.05
%
 
0.88
%
 
0.98
%
Loan to deposit ratio
119.03
%
 
116.74
%
 
122.59
%
 
119.03
%
 
122.59
%
Average stockholders' equity to average assets
8.63
%
 
8.43
%
 
8.46
%
 
8.48
%
 
8.84
%
Dividend payout ratio
25.99
%
 
25.39
%
 
31.13
%
 
26.67
%
 
35.43
%
YIELDS/RATES
 
 
 
 
 
 
 
 
 
Yield on loans
4.07
%
 
4.08
%
 
3.88
%
 
4.01
%
 
3.75
%
Yield on investments
2.11
%
 
2.34
%
 
2.39
%
 
2.34
%
 
2.13
%
Yield on interest earning assets
3.84
%
 
3.88
%
 
3.71
%
 
3.82
%
 
3.57
%
Cost of interest bearing deposits
1.98
%
 
2.07
%
 
1.79
%
 
2.01
%
 
1.51
%
Cost of borrowings
2.75
%
 
2.77
%
 
2.86
%
 
2.77
%
 
2.60
%
Cost of interest bearing liabilities
2.11
%
 
2.20
%
 
1.98
%
 
2.16
%
 
1.74
%
Net interest spread
1.73
%
 
1.68
%
 
1.73
%
 
1.66
%
 
1.83
%
Net interest margin
1.89
%
 
1.84
%
 
1.88
%
 
1.84
%
 
1.98
%
CAPITAL
 
 
 
 
 
 
 
 
 
Total equity to total assets
8.72
%
 
8.45
%
 
8.38
%
 
 
 
 
Tangible stockholders' equity to tangible assets (1)
8.68
%
 
8.41
%
 
8.33
%
 
 
 
 
Book value per share
$
10.97

 
$
10.80

 
$
10.31

 
 
 
 
Tangible book value per share (1)
$
10.91

 
$
10.74

 
$
10.25

 
 
 
 
ASSET QUALITY
 
 
 
 
 
 
 
 
 
Net recoveries
$
78

 
$
202

 
$
78

 
 
 
 
Annualized net recoveries to average loans
0.01
%
 
0.01
%
 
0.01
%
 
 
 
 
Nonperforming loans to total loans
0.10
%
 
0.21
%
 
0.03
%
 
 
 
 
Nonperforming assets to total assets
0.09
%
 
0.18
%
 
0.03
%
 
 
 
 
Allowance for loan losses to loans held-for-investment
0.58
%
 
0.56
%
 
0.56
%
 
 
 
 
Allowance for loan losses to nonperforming loans
568.47
%
 
269.88
%
 
1705.47
%
 
 
 
 
LOAN COMPOSITION
 
 
 
 
 
 
 
 
 
Multifamily residential
$
3,985,981

 
$
3,959,351

 
$
3,671,069

 
 
 
 
Single family residential
$
2,021,320

 
$
2,079,811

 
$
2,262,811

 
 
 
 
Commercial real estate
$
203,134

 
$
201,067

 
$
184,039

 
 
 
 
Construction and land
$
20,442

 
$
19,191

 
$
12,611

 
 
 
 
Non-mortgage
$
100

 
$
100

 
$
100

 
 
 
 
DEPOSIT COMPOSITION
 
 
 
 
 
 
 
 
 
Noninterest bearing transaction accounts
$
43,597

 
$
47,134

 
$
65,970

 
 
 
 
Interest bearing transaction accounts
$
222,509

 
$
209,442

 
$
179,272

 
 
 
 
Money market deposit accounts
$
1,441,923

 
$
1,484,420

 
$
1,458,365

 
 
 
 
Time deposits
$
3,526,688

 
$
3,621,006

 
$
3,297,433

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

7


NON-GAAP RECONCILIATION (UNAUDITED)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Years Ended
(Dollars in thousands)
December 31,
2019
 
September 30,
2019
 
December 31,
2018
 
December 31,
2019
 
December 31,
2018
Pre-tax, Pre-provision Net Earnings
 
 
 
 
 
 
 
 
 
Income before provision for income taxes
$
17,635

 
$
18,009

 
$
14,885

 
$
69,464

 
$
62,931

Plus: Provision for loan losses
1,000

 
(500
)
 
150

 
1,250

 
3,600

Pre-tax, pre-provision net earnings
$
18,635

 
$
17,509

 
$
15,035

 
$
70,714

 
$
66,531

Efficiency Ratio
 
 
 
 
 
 
 
 
 
Noninterest expense (numerator)
$
15,341

 
$
16,069

 
$
17,962

 
$
62,368

 
$
62,687

Net interest income
33,162

 
32,585

 
31,751

 
128,407

 
125,087

Noninterest income
814

 
993

 
1,246

 
4,675

 
4,131

Operating revenue (denominator)
$
33,976

 
$
33,578

 
$
32,997

 
$
133,082

 
$
129,218

Efficiency ratio
45.15
%
 
47.86
%
 
54.44
%
 
46.86
%
 
48.51
%
(Dollars in thousands except per share data)
December 31, 2019
 
September 30, 2019
 
December 31, 2018
Tangible Book Value Per Share
 
 
 
 
 
Total assets
$
7,045,828

 
$
7,161,419

 
$
6,937,212

Less: Goodwill
(3,297
)
 
(3,297
)
 
(3,297
)
Tangible assets
7,042,531

 
7,158,122

 
6,933,915

Less: Total liabilities
(6,431,364
)
 
(6,556,047
)
 
(6,356,067
)
Tangible stockholders' equity (numerator)
$
611,167

 
$
602,075

 
$
577,848

Period end shares outstanding (denominator)
55,999,754

 
56,034,771

 
56,379,066

Tangible book value per share
$
10.91

 
$
10.74

 
$
10.25

Tangible Stockholders' Equity to Tangible Assets
 
 
 
 
 
Tangible stockholders' equity (numerator)
$
611,167

 
$
602,075

 
$
577,848

Tangible assets (denominator)
$
7,042,531

 
$
7,158,122

 
$
6,933,915

Tangible stockholders' equity to tangible assets
8.68
%
 
8.41
%
 
8.33
%




8
lbcinvestorpresentation4
Investor Presentation December 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 Annual Report on Form 10‐K for the year ended December 31, 2018 and other reports we file with the Securities 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 growthandthecompositionofsuchgrowth; 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; uncertainty regarding the future of LIBOR; 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 12/31/2019(1)  10 December  WA # Branch Location Date , 201931 Total Assets ($mm) $7,046 Established Deposits  ($mm) Total Loans HFI ($mm) $6,231 1 Santa Rosa Oct. 1983 1,096.5 Total Deposits ($mm) $5,235 2 San Rafael Sep. 1996*  560.4 3 Encino Aug. 2007 463.7 Loans / Deposits 119% 4 Beverly Hills Jul. 2010 394.1 OR Tangible Book Value / Tang. Assets 8.7% 5 Los Altos Aug. 2000 292.2 6 Pasadena May 2009 326.6 Leverage Capital Ratio 9.5% 7 Toluca Lake Jan. 2008 283.7 Total Risk‐Based Capital Ratio 18.0% 8 Long Beach Jun. 2015 267.4 Total CRE Loans(2) / Total Risk‐Based  594% 9 San Jose Jun. 2012 227.0 Capital 10 Bellevue Jun. 2018 95.8 ROAA  0.69%       Wholesale Deposits 416.0 ROAE  8.15%       Business Banking 811.4 11 Net Interest Margin 1.84% 22 San Francisco 5 A Corporate Office 1,227.4 EPS – Fully Diluted $0.87 599 Total Deposits 5,234.7 CA Efficiency Ratio 46.9%  * Acquisition date Noninterest Expense / Avg. Assets 0.88%  Branch  (10) NPAs / Assets 0.09% 33  6   77 6 Loan Production Office (8) 44 Los Angeles 8 ALLL / Loans HFI 0.58% A ** Highlighted counties indicate primary lending markets Full‐Time Equivalent Employees 277 (1) Financial data as of or for the year ended 12/31/2019.  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 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   0.09% NPAs / Total Assets Robust Infrastructure 6. Efficient Operations  Maintain a small network of large branches ($401 million  avg. branch size)  46.9% efficiency ratio, 0.88% noninterest expense / average  Note: Financial data as of or for the year ended 12/31/2019.  See non‐GAAP reconciliation in Appendix hereto. assets and 277 FTEs 5


 
Top Multifamily Lenders in the United States Top 25 Banks and Thrifts by Multifamily Loans (Dollars in billions) As of September 30, 2019 Change Since (%) Delinquency Total Multifamily June 30,  September 30,  % of Change Since (bps) (1) Rank Institution Name Headquarters Assets Loans 2019 2018 Multifamily September 30, 2018 1. JPMorgan Chase & Co.  New York, NY 2,764.7 73.44 1.9 2.9 0.05 (3) 2. New York Community Bancorp Inc.  Westbury, NY 52.5 30.29 (0.6) 2.4 0.02 0 3. Signature Bank  New York, NY 49.4 15.18 (3.9) (3.0) 0.14 10 4. Wells Fargo & Co.  San Francisco, CA 1,944.0 14.78 7.1 (3.2) 0.24 2 5. Capital One Financial Corp.  McLean, VA 378.8 12.36 1.2 4.7 0.22 2 6. First Republic Bank  San Francisco, CA 111.0 11.70 4.8 17.1 0.00 (4) 7. Santander Holdings USA Inc.  Boston, MA 147.2 8.50 (0.1) 2.9 0.14 (33) 8. Citigroup Inc. New York, NY 2,014.8 8.38 3.5 37.7 0.12 4 9. Investors Bancorp Inc.  Short Hills, NJ 26.8 8.02 (1.9) (0.9) 0.49 (7) 10. PNC Financial Services Group Inc.  Pittsburgh, PA 409.0 6.77 16.9 22.9 0.07 (13) 11. MUFG Americas Holding Corp.  New York, NY 173.2 6.65 8.8 14.7 0.45 29 12. Bank of America Corp. Charlotte, NC 2,426.3 5.37 10.2 1.3 0.04 (34) 13. Sterling Bancorp Montebello, NY 30.1 4.78 2.2 (1.0) 0.13 4 14. TD Group US Holdings LLC Wilmington, DE 393.6 4.11 4.8 6.4 0.14 (14) 15. Valley National Bancorp Wayne, NJ 33.8 4.01 4.2 5.0 0.03 3 16. Key Corp.  Cleveland, OH 147.3 4.01 (13.8) (16.2) 0.27 (5) 17. Luther Burbank Corp.  Santa Rosa, CA 7.2 3.96 1.0 12.4 0.20 18 18. M&T Bank Corp.  Buffalo, NY 125.5 3.95 (9.0) 7.7 0.88 42 19. U.S. Bancorp Minneapolis, MN 487.7 3.78 4.2 5.6 0.40 (13) 20. Opus Bank  Irvine, CA 7.8 3.70 0.3 29.5 0.00 (3) 21. Dime Community Bancshares Inc.  Brooklyn, NY 6.4 3.61 (3.5) (10.1)0.01(5) 22. Umpqua Holdings Corp.  Portland, OR 28.9 3.53 4.2 8.8 0.00 (13) 23. CIBC Bancorp USA Inc.  Chicago, IL 45.1 3.43 (2.4) 5.8 0.00 (5) 24. PacWest Bancorp Beverly Hills, CA 26.7 3.40 (0.6) 39.2 0.00 0 25. People's United Financial Inc.  Bridgeport, CT 52.1 3.31 (0.9) 9.5 0.12 (18) (2) Banking Industry Aggregate 451.96 1.6 6.1 0.21 (2) 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 > $1 billion  Gross loans / assets > 65%  Multifamily loans / total loans > 30%  MFR + SFR + CRE / total loans > 75% (1) (2) General Information Profitability Capital & Balance Sheet RatiosBal. Sheet GrowthAsset Quality Total NPA / NCO / Gross Total Total Multifamily Yield on Cost of NIE / Avg. Eff. TCE / Leverage Capital Loans / LLR / Loans Avg. Loans Deposits Assets Loans ROAA ROAE NIM Loans Deposits Assets Ratio TA Ratio Ratio Deposits Loans + OREO Loans CAGR CAGR Institution Name Ticker State ($bn) ($bn) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) Luther Burbank Corporation LBC CA 7.2 4.0 0.71 8.45 1.88 4.08 2.11 0.83 46.2 8.4 9.3 17.6 115 0.56 0.25 (0.01) 13.7 15.6 Peer Group: 1. Dime Community Bancshares, Inc. DCOM NY 6.4 3.6 0.29 3.08 2.36 4.01 1.63 1.41 57.6 8.7 8.8 13.3 121 0.50 0.30 0.37 4.2 9.0 2. Empire National Bank NY 1.0 0.3 0.52 5.70 2.61 4.52 1.72 2.08 77.2 9.3 9.2 15.4740.950.770.1110.415.6 3. First Foundation Inc. FFWM CA 6.4 2.5 1.12 11.60 2.95 4.35 1.88 2.11 56.0 8.1 8.2 10.9 94 0.42 0.46 (0.01) 31.1 38.5 4. Flushing Financial Corporation FFIC NY 7.1 2.2 0.61 7.60 2.44 4.47 1.99 1.50 64.8 7.8 8.7 13.4 115 0.38 0.37 0.01 7.6 6.8 5. Investors Bancorp, Inc. ISBC NJ 26.8 8.0 0.77 7.07 2.51 4.24 1.77 1.61 60.4 10.7 10.7 15.5 121 1.05 0.51 0.03 7.0 6.3 6. Kearny Financial Corp. KRNY NJ 6.6 2.1 0.68 4.08 2.52 4.26 1.66 1.58 63.6 13.9 13.8 23.3 109 0.70 0.60 0.01 16.5 13.8 7. Malaga Bank F.S.B. CA 1.2 1.0 1.36 10.55 2.92 4.10 1.13 0.91 31.1 12.5 13.0 22.9 144 0.31 0.05 0.00 6.5 0.7 8. Marquette Bank IL 1.6 0.5 0.82 7.31 3.52 4.31 0.60 3.15 71.5 9.1 9.1 14.0 88 1.172.200.053.90.8 9. New York Community Bancorp, Inc. NYCB NY 52.5 30.3 0.76 5.91 1.98 3.83 1.79 0.94 47.4 7.5 8.7 13.6 129 0.37 0.17 0.06 1.8 2.8 10. Northfield Bancorp, Inc. NFBK NJ 4.8 2.2 1.10 8.40 2.55 4.22 1.43 1.42 50.3 13.6 13.7 17.4 98 0.84 0.71 (0.18) 9.7 13.8 11. Opus Bank OPB CA 7.8 3.7 1.14 8.21 2.82 4.23 1.25 2.06 61.5 9.3 9.7 15.3 92 0.78 0.13 0.33 1.5 4.6 12. Oritani Financial Corp. NJ 4.0 1.9 1.22 9.29 2.61 4.28 1.76 0.94 36.2 13.3 13.1 15.6 115 0.83 0.18 0.00 4.3 9.0 13. Provident Savings Bank, F.S.B. CA 1.1 0.5 1.03 9.91 3.70 4.52 0.41 2.60 65.3 10.0 10.2 17.4 109 0.74 2.18 (0.01) ‐1.8 ‐2.8 14. Signature Bank SBNY NY 49.4 15.2 1.20 12.65 2.74 4.27 1.83 1.09 40.5 9.6 9.7 13.2 97 0.64 0.26 0.03 12.9 10.6 15. Waterstone Financial, Inc. WSBF WI 2.0 0.6 2.18 11.24 2.96 4.78 1.86 7.20 71.2 19.3 19.4 25.7 150 0.77 0.69 0.00 6.5 4.3 Average: 0.99 8.17 2.75 4.29 1.51 2.04 57.0 10.8 11.0 16.4 110 0.70 0.64 0.05 8.1 8.9 Median: 1.03 8.21 2.61 4.27 1.72 1.58 60.4 9.6 9.7 15.4 109 0.74 0.46 0.01 6.5 6.8 Source: SNL Financial. GAAP data when available, otherwise FR Y‐9C’s and bank call reports as of or for the three months ended 9/30/2019.  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 9/30/2019.. 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  $905 thousand average loan balance  15.2 units average  65% average loan‐to‐value ratio  57% average loan‐to‐value ratio  750 average credit score  1.49x average debt service coverage ratio 0.09% NPAs / Assets 0.10% NPLs / Loans Note: Data as of 12/31/2019. 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  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 4.01% yield on loans; 4.18%  weighted average coupon(1) Multifamily Loans by Lending Area Single‐Family Loans by Lending Area (1) As of or for the year ended 12/31/2019. 10


 
Asset Quality Nonperforming Assets(1) / Total Assets Culture Approach Results  Risk management is a core competency of   Continuous evaluation of risk and return  12/31/2019 NPAs / Total Assets of 0.09%;  our business NPLs / Total Loans of 0.10%  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% $1,564.1 Q3 4.84% Q4 4.15% Q3 Q2 4.26% 4.65% Q2 4.44% Q1 4.31% Q1 4.62% Pipeline: • Total loan pipeline at December 31, 2019 is $279.3 million ($174.5 million CRE at 4.031% WAC, $90.7 million SFR at 4.201% WAC & $14.1  million Construction at 5.594% 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 Volume and Rates $1,218.3 Q4 $972.9 4.75% Q3 Q4 4.16% 4.76% Q3 4.34% Q2 4.56% Q2 4.49% Q1 Q1 4.33% 4.61% 13


 
SFR Loan Origination Volume and Rates $828.8 5.15% Q4 4.69% $591.2 Q3 4.99% Q4 4.14% Q2 Q3 4.78% 4.16% Q2 4.34% Q1 4.29% Q1 4.63% 14


 
Loan Portfolio Rates • At December 31, 2019, loans representing 64% of the loan portfolio, or $3.9 billion in aggregate outstanding principal balance, are at their floors, and 84% of those  loans have fully indexed rates above their floors by approximately 0.69%.  15


 
Loan Prepayment Speeds 16


 
Deposit Composition Historical Deposit Growth & Portfolio Composition Deposit Breakdown by Branch Total  Branch Location Consumer Business Wholesale Deposits ($mm) Santa Rosa 1,076.3 20.1 0.0 1,096.5 San Rafael 511.5 48.9 0.0 560.4 Encino 460.1 3.6 0.0 463.7 Beverly Hills 389.2 5.0 0.0 394.1 Los Altos 290.8 1.3 0.0 292.2 Pasadena 324.5 2.2 0.0 326.6 Toluca Lake 276.0 7.7 0.0 283.7 Long Beach 260.4 6.9 0.0 267.4 San Jose 165.1 61.9 0.0 227.0 Bellevue 91.5 4.3 0.0 95.8 Corporate Office 0.0 811.4 416.0 1,227.4 Total Deposits 3,845.5 973.2 416.0 5,234.7 2.01% cost of interest‐bearing deposits(1) (1) For the year ended 12/31/2019. 17


 
Deposit Growth/Balance  Growth Trend ($127.3) $152.7 $127.5 $80.8 $1,049.7 $617.3 $212.8 18


 
Business Composition By Vertical  December 31, 2018 December 31, 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 Noninterest Expense to Average Assets (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) December 31, 2019 December 31, 2019 Change in Change in Interest Rates $ Change % Change Interest Rates $ Change % Change (basis points) NII NII (basis points) EVE EVE + 400 BP (19.1) (13.3%) + 400 BP (182.1) (25.9%) + 300 BP (11.9) (8.3%) + 300 BP (108.8) (15.5%) + 200 BP (6.2) (4.3%) + 200 BP (55.4) (7.9%) + 100 BP (2.5) (1.7%) + 100 BP (21.0) (3.0%) ‐ 100 BP 1.6 1.1% ‐ 100 BP 28.0 4.0% ‐ 200 BP 1.5 1.0% ‐ 200 BP 55.9 8.0% 22


 
Economic Value of Equity Trend 23


 
Deposits ‐ Cost of Funds Comparison (1) Beta is calculated using an average Fed Funds Rate. 24


 
Liquidity Management Securities Portfolio As of December 31, 2019 Book Value % of ($000) Total Available for Sale: Residential mortgage‐backed securities & collateralized  145,193 22.4% mortgage obligations ("MBS & CMOs")  Commercial MBS & CMOs 356,169 55.0% Agency bonds 123,712 19.1% Total Available for Sale 625,074 96.6% Equity Investment: CRA Qualified Investment Fund (CRAIX)  11,782 1.8% Total Equity Investment 11,782 1.8% Held to Maturity: Residential mortgage‐backed securities 10,087 1.6% Other Investments 83 0.0% Total Held to Maturity 10,170 1.6% Total Investment Securities 647,026 100.0% Other Borrowings Other Borrowings Amount Outstanding  Cost of  Type 12/31/2019 Borrowings  (1) FHLB Advances $979 million 2.36% Senior Notes $94 million 6.68% Trust Preferred  $62 million 3.96% (1) For the year ended 12/31/2019.  25


 
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 and Hannon Armstrong. 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. 26


 
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. 27


 
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. 28


 
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. 29


 
Appendix


 
As of Balance Sheet ($ in 000’s) December 31, December 31, 2019 (1) 2018 ASSETS Cash and cash equivalents $ 88,565 $ 91,697 Available for sale investment securities, at fair value 625,074 608,528 Held to maturity investment securities, at amortized cost (fair value of $10,349 and $11,625 at December 31, 2019 and December 31, 2018 respectively) 10,170 11,860 Equity securities, at fair value 11,782 11,438 Loans receivable, net of allowance for loan losses of $36,001 and $34,314 as of December 31, 2019 and December 31, 2018, respectively 6,194,976 6,096,316 Accrued interest receivable 20,814 20,220 Federal Home Loan Bank ("FHLB") stock, at cost 30,342 31,823 Premises and equipment, net 19,504 20,981 Goodwill 3,297 3,297 Prepaid expenses and others assets$ 7, 045,828 41,304 $ 6,937,212 41,052 LIABILITIES TotalAND STOCKHOLDERS' asset EQUITY Liabilities: Deposits $ 5,234,717 $ 5,001,040 Federal Home Loan Bank advances 978,702 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 $584 and $707 at December 31, 2019 and December 31, 2018, respectively) 94,416 94,293 Accrued interest payable 2,901 4,307 Other liabilities and accrued expenses 58,771 51,438 Total liabilities 6,431,364 6,356,067 6,431,364 Stockholders' equity: Common stock, no par value; 100,000,000 shares authorized; 55,999,754 and 56,379,066 shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively 447,784 456,378 Retained earnings 165,236 129,806 Accumulated other comprehensive gain/(loss), net of taxes 1,444 (5,039) y $ 7,045,828 $ 6,937,212 (1) Unaudited Total stockholders' equity 614,464 581,145 Total liabilities and stockholders' equit 31


 
Income Statement ($ in 000’s, except per share data) For the Three Months Ended December 31, (1) For the Year Ended December 31, 2019 2018 2019 (1) 2018 Interest and fee income: Loans $ 63,452 $ 58,285 $ 249,530 $ 211,835 Investment securities 3,517 3,792 15,461 12,430 Cash and cash equivalents 464 614 2,151 1,792 Total interest and fee income 67,433 62,691 267,142 226,057 Interest expense: Interest on deposits 26,406 22,970 105,092 69,112 Interest on FHLB advances 5,731 5,782 24,896 23,285 Interest on junior subordinated deferrable interest debentures 560 611 2,447 2,266 Interest on other borrowings 1,574 1,577 6,300 6,307 Total interest expense 34,271 30,940 138,735 100,970 Net interest income before provision for loan losses 33,162 31,751 128,407 125,087 Provision for loan losses 1,000 150 1,250 3,600 Net interest income after provision for loan losses 32,162 31,601 127,157 121,487 Noninterest income: Net gain on sale of loans - - 607 140 FHLB dividends 559 1,010 2,163 2,735 Other income 255 236 1,905 1,256 Total noninterest income 814 1,246 4,675 4,131 Noninterest expense: Compensation and related benefits 9,371 11,024 37,228 38,860 Deposit insurance premium (440) 509 545 1,892 Professional and regulatory fees 565 742 1,984 2,037 Occupancy 1,474 1,330 5,688 5,349 Depreciation and amortization 617 705 2,618 2,813 Data processing 929 825 3,738 3,315 Marketing 1,611 1,488 5,053 3,497 Other expenses 1,214 1,339 5,514 4,924 Total noninterest expense 15,341 17,962 62,368 62,687 Income before provision for income taxes 17,635 14,885 69,464 62,931 Provision for income taxes 5,178 4,282 20,603 17,871 Net income $ 12,457 $ 10,603 $ 48,861 $ 45,060 Basic earnings per common share $ 0.22 $ 0.19 $ 0.87 $ 0.80 Diluted earnings per common share $ 0.22 $ 0.19 $ 0.87 $ 0.79 Dividends per common share $ 0.06 $ 0.06 $ 0.23 $ 0.28 Weighted average common shares outstanding - basic 55,614,066 56,213,660 55,974,230 56,196,648 Weighted average common shares outstanding - diluted 55,937,952 56,862,277 56,219,892 56,825,402 (1) Unaudited 32


 
Net Interest Margin ($ in 000’s) AverageFor the Twelve Months Ended Interest  Average  AverageFor the Three Months Ended Interest  Average  Average For the Three Months Ended Interest Average  BalanceDecember 31, 2019 Inc / Exp Yield/Rate (5) BalanceDecember 31, 2019 Inc / Exp Yield/Rate (5) Balance September 30, 2019 Inc / Exp Yield/Rate (5) Interest‐Earning Assets Multifamily residential$     3,870,897 $  162,328 4.19%$     3,968,059 $    42,775 4.31%$    3,934,650 $  42,368 4.31% Single family residential       2,139,517       76,766               3.59        2,049,471       17,985               3.51       2,118,339     18,901               3.57 Commercial real estate          196,903         9,353               4.75           202,425         2,337               4.62          200,742       2,412               4.81 Construction, land and NM            15,907         1,083               6.81             19,816            355               7.11            18,761          329               6.96 Total loans (1)      6,223,224  4.01 249,530                 6,239,771     63,452             4.07     6,272,492  4.08 64,010              Securities available‐for‐sale/ equity          650,444       15,140               2.33           656,984         3,448               2.10          654,752       3,834               2.34 Securities held‐to‐maturity  (2)           11,130          321             2.88           10,345            69             2.67          10,978          66              2.40 Cash and cash equivalents          105,042         2,151               2.05           110,555            464               1.67          142,960          766               2.13 Total interest‐earning assets $    6,989,840 $  267,142               3.82 $     7,017,655 $    67,433               3.84 $    7,081,182 $  68,676               3.88 Noninterest‐earning assets            76,707             75,527            77,416 Total assets $    7,066,547 $     7,093,182 $    7,158,598 Interest‐Bearing Liabilities Interest‐bearing demand deposits$        210,743 $      2,686 1.26%$        218,034 $         628 1.13%$       201,480 $       637 1.24% Money market demand accounts       1,402,608       18,181               1.28        1,452,980         4,476               1.21       1,418,275       4,871               1.34 Time deposits       3,538,223       84,225               2.35        3,556,487       21,302               2.34       3,654,313     22,419               2.40      Total interest‐bearing deposits       5,151,574     105,092               2.01        5,227,501       26,406               1.98       5,274,068     27,927               2.07 FHLB advances       1,056,557       24,896               2.36           989,273         5,731               2.30       1,021,396       5,983               2.32 Senior debt            94,350         6,300               6.68             94,396         1,574               6.67            94,365       1,577               6.68 Junior subordinated debentures            61,857         2,447               3.96             61,857            560               3.59            61,857          604               3.87 Total interest‐bearing liabilities  $    6,364,338 $  138,735               2.16 $     6,373,027 $    34,271               2.11 $    6,451,686 $  36,091               2.20 Noninterest‐bearing demand deposits            41,821             42,576            43,188 Noninterest‐bearing liabilities            60,814             65,528            60,548 Total liabilities       6,466,973        6,481,131       6,555,422 Total stockholders' equity          599,574           612,051          603,176 Total liabilities and stockholders' equity $    7,066,547 $     7,093,182 $    7,158,598 Net interest spread  (3) 1.66% 1.73% 1.68% (4) Net interest income/margin  $ 128,407 1.84%$    33,162 1.89%$  32,585 1.84% (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.   33


 
Non‐GAAP Reconciliation ($ in 000’s) As of or For the Years Ended December 31, 2019 2018 2017 2016 2015 Tangible book value Total assets $         7,045,828  $         6,937,212  $         5,704,380  $         5,063,585  $         4,361,779  Less: Goodwill                   (3,297)                   (3,297)                   (3,297)                   (3,297)                   (3,297) Less: Total liabilities           (6,431,364)           (6,356,067)           (5,154,635)           (4,659,210)           (3,990,480) Tangible book value  $            611,167   $            577,848   $            546,448   $            401,078   $            368,002  Tangible assets Total assets $         7,045,828  $         6,937,212  $         5,704,380  $         5,063,585  $         4,361,779  Less: Goodwill                   (3,297)                   (3,297)                   (3,297)                   (3,297)                   (3,297) Tangible assets  $         7,042,531   $         6,933,915   $         5,701,083   $         5,060,288   $         4,358,482  Tangible stockholders' equity to tangible assets Tangible book value (numerator) $            611,167  $            577,848  $            546,448  $            401,078  $            368,002  Tangible assets (denominator)            7,042,531             6,933,915             5,701,083             5,060,288             4,358,482  Tangible stockholders' equity to tangible assets 8.7% 8.3% 9.6% 7.9%8.4% Pro forma Items  (1)      Actual/ Pro forma provision for income tax      Net income before income taxes $               69,464  $               62,931  $               65,231  $               53,940  $               36,639       Effective tax rate 30% 28% 42% 42% 42%      Actual/ Pro forma provision for income taxes  $               20,603   $               17,871   $               27,397   $               22,655   $               15,388       Actual/ Pro forma net income      Net income before income taxes $               69,464  $               62,931  $               65,231  $               53,940  $               36,639       Actual/ Pro forma provision for income taxes                  20,603                   17,871                   27,397                   22,655                   15,388       Actual/ Pro forma net income  $               48,861   $               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.   34


 
Non‐GAAP Reconciliation ($ in 000’s, except per share data) As of or For the Years Ended December 31, 2019 2018 2017 2016 2015 Pro forma Items Continued  (1)      Actual/ Pro forma ratios and per share data      Actual/ Pro forma net income (numerator) $               48,861  $               45,060  $               37,834  $               31,285  $               21,251       Average assets (denominator)            7,066,547             6,405,931             5,485,832             4,676,676             4,040,381       Actual/ Pro forma return on average assets 0.69% 0.70% 0.69% 0.67% 0.53%      Average stockholders' equity (denominator) $            599,574  $            566,275  $            425,698  $            390,318  $            359,359       Actual/ Pro forma return on average stockholders' equity 8.15% 7.96% 8.89% 8.02% 5.91%      Weighted average shares outstanding ‐ diluted (denominator)          56,219,892           56,825,402           42,957,936           42,000,000           42,000,000       Actual/ Pro forma earnings per share—diluted  $                   0.87   $                   0.79   $                   0.88   $                   0.74  $                   0.51  Efficiency ratio Noninterest expense (numerator)  $               62,386   $               62,687   $               56,544   $               61,242  $               62,339  Net interest income $            128,407  $            125,087  $            110,895  $               94,594  $               84,879  Noninterest income                    4,675                     4,131                     7,508                     7,885                     6,958  Operating revenue (denominator)  $            133,082   $            129,218   $            118,403   $            102,479  $               91,837  Efficiency ratio 46.9% 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.   35