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): May 4, 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 May 4, 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 May 5, 2020 to discuss its financial results for the quarter ended March 31, 2020. 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 presentation materials previously furnished as exhibits to the Company's Current Reports on Form 8-K.

Item 8.01. Other Events

On May 4, 2020, the Company's Board of Directors declared a cash dividend of $0.0575 per common share, payable on May 26, 2020 to shareholders of record on May 14, 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: May 4, 2020
 
By: /s/ Laura Tarantino
 
 
Laura Tarantino
 
 
Executive Vice President and Chief Financial Officer




Exhibit
EXHIBIT 99.1
    https://cdn.kscope.io/ba4f58da3cf975d1870d3c81d075fca7-lbc_logoa03.jpg            https://cdn.kscope.io/ba4f58da3cf975d1870d3c81d075fca7-newsreleasea03.gif


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

LUTHER BURBANK CORPORATION REPORTS EARNINGS FOR THE QUARTER ENDED MARCH 31, 2020

Quarterly Cash Dividend of $0.0575 Per Common Share Declared

SANTA ROSA, Calif. (May 4, 2020) Luther Burbank Corporation (NASDAQ: LBC) (the “Company”), the holding company for Luther Burbank Savings (the “Bank”), today reported net income of $7.6 million, or $0.14 diluted earnings per common share (“EPS”), for the three months ended March 31, 2020.
Simone Lagomarsino, President and Chief Executive Officer, stated, “During this unprecedented time, as we rise to the challenges presented by the novel COVID-19 pandemic, our primary focus is on supporting the needs of our customers, as well as the health and safety of our employees and the communities that we serve. Like most companies, our financial results for the quarter ended March 31, 2020 have been impacted by the uncertainty caused by current economic and market conditions. However, I take comfort knowing that our Company entered this environment with a fundamentally sound loan portfolio and with strong liquidity and capital positions. At March 31, 2020, 100% of our loan portfolio was secured by real estate collateral and 96.3% of our loan balances financed single family or multifamily residential housing having a weighted average loan-to-value ratio of 59.4%. As of the same date, our Common Equity Tier 1 Capital ratio measured 14.9% and we had access to over $1.9 billion in liquidity resources. We are diligently working to understand the full extent of the economic consequences that will be caused by this pandemic.  Currently, the jobless rate is elevated in our region and nationally.  We expect employment will eventually begin to improve. However, we believe it will occur gradually, and as a result, we anticipate that residential real estate values may soften.  It is, nonetheless, important to note that our west coast markets continue to lack an adequate supply of affordable housing and, importantly, everyone needs a place to live.”
“I’m proud to report that we continue to support our customers’ needs during this difficult period. While we have temporarily tightened some of our credit standards, we are still actively lending on residential properties. We thoughtfully reallocated our staffing resources to be responsive to an elevated level of customer inquiries and have programs in place to assist borrowers that require payment deferrals. To ensure depositors have ample access to their funds, all of our branches remain open. I am also pleased that we have been able to adhere to strict social distancing protocols for the protection of our staff and have allowed approximately two-thirds of our employees to work remotely at any one time,” Lagomarsino added.
Ms. Lagomarsino continued, “Our net income of $7.6 million in the first quarter, or $0.14 EPS, was negatively impacted by the onset of the COVID-19 pandemic. During the quarter, we added over $6.1 million to our allowance for loan losses specific to the uncertainty surrounding the economic environment caused by the pandemic. A 23.1% reduction

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in our criticized loan balances during the quarter partially offset the increase in our reserves due to the economic uncertainty, and we recorded a first quarter provision for loan losses of $5.3 million. Our net interest margin was 1.84% during the current quarter and declined by 5 basis points from the linked quarter primarily as a result of reduced earnings on our interest rate swaps. Excluding the impact of the swaps, our net interest margin would have increased slightly from the previous quarter.”
"During the quarter, our Board of Directors approved increasing the Company's stock repurchase program by $30.0 million to take advantage of the current dislocation in financial markets. As a result, from January 1 through April 30, 2020, we repurchased 3,271,681 shares at an average share price of $8.88. As of April 30, 2020, we had $5.7 million available for additional share repurchases under the program", Lagomarsino concluded.
Board Declares Quarterly Cash Dividend of $0.0575 Per Share
On May 4, 2020, the Board of Directors of the Company declared a quarterly cash dividend of $0.0575 per common share. The dividend is payable on May 26, 2020 to shareholders of record as of May 14, 2020.
Net Income
The Company reported net income of $7.6 million, or $0.14 EPS, for the three months ended March 31, 2020, compared to net income of $12.5 million, or $0.22 EPS, for the linked quarter and $12.0 million, or $0.21 EPS, for the same period last year. Pre-tax, pre-provision net earnings for the three months ended March 31, 2020 was $16.1 million compared to $18.6 million for the linked quarter and $17.2 million for the same period last year.
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.
Net Interest Income
Net interest income for the quarter ended March 31, 2020 totaled $32.1 million compared to $33.2 million for the previous quarter and $32.1 million for the same period last year. As compared to the linked quarter, net interest income was primarily impacted by a decline in interest income earned on our loan portfolio caused by a decrease in the average yield of our loan portfolio of 16 basis points. The decline in our loan yield was primarily caused by the prepayment of higher yielding loans, which are being replaced by loans at lower current interest rates, as well as the decline in swap interest income earned, which generated a net cost of $390 thousand during the current quarter as compared to $532 thousand in income during the linked quarter, as well as the net costs associated with loan prepayments, which increased by $622 thousand compared to the linked quarter. The $922 thousand decline in swap income during the quarter compared to the linked quarter was due to precipitous cuts, totaling 150 basis points, in the federal funds rate during March 2020 in response to the effects of the “stay at home” measures for a substantial portion of the U.S. population. The decline in net interest income was partially offset by lower interest expense on our deposit portfolio, which benefited from the decline in interest rates beginning in 2019. During the quarter, the cost of interest bearing deposits declined by 9 basis points compared to the linked quarter. As compared to the same period last year, net interest income was impacted by a decline in the yield of our investment portfolio of 36 basis points, as well as a decline in earnings on our loan portfolio. The decrease in loan interest income as compared to the same period last year was caused by a decrease in the average loan yield of 5 basis points, partially offset by a $45.2 million increase in the average balance of loans. Consistent with the discussion above, the decline in loan yield was impacted by the cost of our swaps during the current quarter, as well as the increase in net costs associated with loan prepayments. Net interest income was further impacted by a $293 thousand increase in interest expense on deposits caused by an increase in the average balance of interest bearing deposits of $156.3 million compared to the same period last year, partially offset by a 5 basis point decline in the cost of interest bearing deposits. These items were offset by a decrease in the average balance and cost of Federal Home Loan Bank ("FHLB") advances of $130.4 million and 19 basis points, respectively, resulting in a minimal change in net interest income during the current quarter as compared to the same period last year.
Net interest margin for the quarter ended March 31, 2020 was 1.84%, compared to 1.89% for the previous quarter and 1.86% for the same period last year. The decline in our margin over the linked quarter and the same period last year was primarily related to the declines in swap income earned resulting from declines in variable interest rate payments received in connection with our swap agreements caused by multiple decreases in the federal funds rate approved by the Federal Reserve Board of Governor's Federal Open Market Committee ("FOMC") beginning in August of 2019. During the quarter ended March 31, 2020, as compared to the linked quarter, the yield on our interest earning assets decreased by 15 basis points, while the cost of our interest bearing liabilities decreased by 8 basis points. During the quarter ended March 31, 2020 as compared to the same period last year, the yield on our interest earning assets

2


decreased by 11 basis points, while the cost of our interest bearing liabilities decreased by 9 basis points. Our net interest spread in the first quarter of 2020 was 1.66%, decreasing by 7 basis points compared to the previous quarter and 2 basis points compared to the same period last year.
Noninterest Income
Noninterest income for the quarter ended March 31, 2020 totaled $798 thousand, compared to $814 thousand for the previous quarter and $1.4 million for the same period last year. The decrease of $16 thousand in noninterest income, or 2.0%, for the quarter ended March 31, 2020 compared to the linked quarter, was primarily attributable to a decrease of $107 thousand in servicing fee income related to elevated actual and estimated prepayments on serviced loans that decreased the fair value of our mortgage servicing rights and a decrease of $113 thousand in commitment fees earned, partially offset by an increase in fair value adjustments recorded on equity securities. The decrease of $582 thousand in noninterest income, or 42.2%, for the quarter ended March 31, 2020 compared to the quarter ended March 31, 2019, was primarily due to a $323 thousand decrease in servicing fee income and a $333 thousand gain on sale of loans recognized during the first quarter of 2019. As discussed above, the decline in servicing fee income primarily related to elevated actual and estimated prepayments on serviced loans that decreased the fair value of our mortgage servicing rights during the current quarter.
Noninterest income primarily consists of FHLB stock dividends, fair value adjustments on equity securities, fee income and the financial impact related to loans sold.
Noninterest Expense
Noninterest expense for the quarter ended March 31, 2020 totaled $16.9 million compared to $15.3 million for the previous quarter and $16.2 million for the same period last year. Compared to the linked quarter, noninterest expense increased $1.5 million, or 9.9%, primarily due to an increase in compensation costs of $1.8 million and an increase of $916 thousand in federal deposit insurance assessments due to the full utilization of our remaining Small Bank Assessment Credit during the prior quarter. The increase in compensation costs was primarily due to higher payroll taxes incurred, due to the seasonal nature of these taxes, and an increase in the required accrual for post-employment related benefits caused by an increase in those estimated future costs resulting from the recent decline in interest rates. Increases in noninterest expense were partially offset by a decrease of $736 thousand in marketing expenses associated with deposit gathering efforts and a decrease of $306 thousand in rent expense related to the relocation of two facilities in the fourth quarter of 2019. Compared to the same period last year, noninterest expense increased $610 thousand, or 3.8%, during the quarter ended March 31, 2020 primarily attributable to a $1.2 million increase in compensation costs mainly due to higher salary expenses and the additional costs incurred related to the post-retirement liability, discussed above. This increase was partially offset by a $279 thousand decrease in advertising costs and a $238 thousand decline in rent costs, 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 March 31, 2020 were $7.1 billion, an increase of $28.2 million, or 1.6% annualized, from December 31, 2019. The increase was primarily due to a $31.9 million increase in cash, cash equivalents and restricted cash and a $16.4 million increase in available for sale debt securities, partially offset by a $12.7 million, or 0.8% annualized, decrease in loans. Total liabilities were $6.5 billion at March 31, 2020, an increase of $39.3 million, or 2.4% annualized, from December 31, 2019. The increase in total liabilities was primarily attributable to growth in our deposits of $50.7 million, or 3.9% annualized, partially offset by a decrease in FHLB advances of $25.0 million, or 10.2% annualized, compared to December 31, 2019.
Loans
Total loans at March 31, 2020 were $6.2 billion, a decrease of $12.7 million from December 31, 2019. Our loan portfolio generally consists of income property loans ("IPL") and single family residential ("SFR") mortgage loans, which represent 68.6% and 31.1%, respectively, of our total loan portfolio.
Our IPL portfolio primarily consists of hybrid multifamily residential and commercial real estate loans. IPL loans totaled $4.3 billion at March 31, 2020 compared to $4.2 billion at December 31, 2019. The yield on the IPL portfolio was 4.08% during the quarter ended March 31, 2020, compared to 4.33% and 4.10% during the linked quarter and the same period last year, respectively. The decrease in yield compared to the linked quarter was primarily due to a decline in the average

3


yield of our loan portfolio of 16 basis points resulting from the prepayment of higher yielding loans being replaced by loans at lower current interest rates, as well as a decline in swap interest income earned and an increase in net costs incurred associated with loan prepayments. The decrease in yield compared to the same period last year was primarily due to declining interest rates on new loan originations, the cost of our swaps during current quarter and higher net costs incurred associated with loan prepayments. For the quarter ended March 31, 2020, IPL loan originations and the corresponding weighted average coupon totaled $190.0 million and 3.93%, respectively, compared to $234.6 million and 4.08%, respectively, for the linked quarter and $207.3 million and 4.61%, respectively, for the same period last year. The general 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 a decline in market interest rates. During the current quarter, we purchased IPL loans with a current loan balance of $20.4 million and a weighted average estimated yield of 3.51%. Prepayment speeds within the IPL loan portfolio were 12.6% for the quarter ended March 31, 2020, compared to 17.2% and 7.0% during the linked quarter and the same period last year, respectively. The elevated prepayment speeds during the current quarter and linked quarter were primarily related to customers refinancing their hybrid-ARM loans to take advantage of lower long-term interest rates.
Our SFR loan portfolio generally consists of hybrid loans. SFR loans totaled $1.9 billion and $2.0 billion at March 31, 2020 and December 31, 2019, respectively. The yield on the SFR portfolio was 3.51% during the quarter ended March 31, 2020, compared to 3.51% and 3.70% 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 the prepayment of higher yielding loans being replaced with loans at lower current interest rates, as well as an increase in the accelerated recognition of deferred loan origination costs due to these higher prepayment levels. For the quarter ended March 31, 2020, SFR loan originations and the corresponding weighted average coupon totaled $115.6 million and 4.02%, respectively, compared to $165.8 million and 4.14%, respectively, for the linked quarter and $104.2 million and 4.63%, respectively, for the same period last year. The decline in the average coupon for the current period originations compared to the linked quarter and same period last year was primarily due to a decline in interest rates. Prepayment speeds within the SFR loan portfolio were 36.1% during the quarter ended March 31, 2020, compared to 36.7% and 26.3% during the linked quarter and the same period last year, respectively. As discussed above, the elevated prepayment speeds during the current quarter and linked quarter were primarily related to customers refinancing their hybrid-ARM loans to take advantage of lower long-term interest rates.
Asset Quality
Nonperforming assets totaled $5.6 million, or 0.08% of total assets, at March 31, 2020, compared to $6.3 million, or 0.09% of total assets, at December 31, 2019. Total criticized loans declined by $10.5 million, or 23.1%, during the quarter. There was no real estate owned at March 31, 2020 or December 31, 2019 and we have not foreclosed on any collateral since 2015. During the current quarter, we recorded a $722 thousand charge-off related to a SFR loan which charge-off amount was fully reserved for at December 31, 2019. For the quarter ended March 31, 2020, we recorded loan loss provisions of $5.3 million compared to $1.0 million in the prior quarter and $300 thousand for the same period last year. The loan loss provision recognized during the current quarter was primarily recorded to set aside reserves for the uncertain economic impact associated with the COVID-19 pandemic. To support our customers during this period, the Company has implemented a loan modification program that permits borrowers who are unable to service their loans to defer loan payments for a specified period of time. As of April 30, 2020, we have received completed applications from borrowers requesting COVID-19 modifications representing loan balances of $139.7 million and $111.9 million, or 3.3% and 5.9%, of our IPL and SFR loan portfolios, respectively. Our allowance for loan losses to total loans was 0.65% at March 31, 2020, compared to 0.58% at December 31, 2019.
Prepaid Expenses and Other Assets
Prepaid expenses and other assets totaled $60.6 million at March 31, 2020 compared to $62.7 million at December 31, 2019, a decrease of $2.1 million, or 3.3%. 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 $5.3 billion at March 31, 2020, an increase of $50.7 million, or 1.0%, from December 31, 2019. Wholesale deposits increased $129.0 million, while retail deposits decreased $78.3 million. Our cost of interest bearing deposits was 1.89% during the quarter ended March 31, 2020 compared to 1.98% during the linked quarter and 1.94% during the same period last year. The decrease in our cost of interest bearing deposits compared to the linked quarter and same period last year is predominantly due to a decline in short-term interest rates due primarily to the FOMC's interest rate cuts.

4


Other Liabilities
Other liabilities totaled $75.3 million at March 31, 2020, compared to $61.7 million at December 31, 2019, an increase of $13.7 million or 22.2%. This increase primarily relates to the fair value of our swap derivatives, which totaled $17.7 million at March 31, 2020, compared to $746 thousand at December 31, 2019. Other liabilities primarily consist of accrued employee benefits, loan escrow balances, checks outstanding, accrued interest payable and swap liabilities.
Capital
Stockholders’ equity totaled $603.3 million, a decrease of $11.1 million, or 1.8%, compared to December 31, 2019. The net decline in capital was chiefly attributed to the Company’s stock repurchase activity. We repurchased 1,962,395 shares at an average share price of $8.43 during the quarter, or a 23.7% discount to tangible book value. Stockholders' equity represented 8.5% and 8.7% of total assets at March 31, 2020 and December 31, 2019, 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 March 31, 2020, our Tier 1 Leverage, Common Equity Tier 1 Risk-Based, Tier 1 Risk-Based and Total Risk-Based Capital ratios were 10.3%, 18.1%, 18.1% and 19.1%, respectively, for the Bank, and 9.4%, 14.9%, 16.4% and 17.5%, respectively, for the Company. At March 31, 2020, the Company’s tangible stockholders' equity ratio was 8.5%. A schedule reconciling our GAAP financial amounts to the calculation of tangible stockholders' equity is provided in the tables below.
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 $7.1 billion, total loans of $6.2 billion and total deposits of $5.3 billion as of March 31, 2020. 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 ten 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. The COVID-19 pandemic is adversely affecting us, our customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on our business, financial position, results of operations, liquidity, and prospects is uncertain. Continued deterioration in general business and economic conditions, including further increases in unemployment rates, or turbulence in domestic or global financial markets could adversely affect our revenues and the values of our assets and liabilities, reduce the availability of funding, lead to a tightening of credit, and further increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to COVID-19, could affect us in substantial and unpredictable ways. Other 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, 2019 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)
March 31,
2020 (unaudited)
 
December 31,
2019
ASSETS
 
 
 
Cash, cash equivalents and restricted cash
$
123,248

 
$
91,325

Available for sale debt securities, at fair value
641,474

 
625,074

Held to maturity debt securities, at amortized cost
9,732

 
10,170

Equity securities, at fair value
11,970

 
11,782

Loans held-for-investment
6,218,314

 
6,230,977

Allowance for loan losses
(40,657
)
 
(36,001
)
Total loans held-for-investment, net
6,177,657

 
6,194,976

FHLB stock
29,612

 
30,342

Premises and equipment, net
19,792

 
19,504

Prepaid expenses and other assets
60,565

 
62,655

Total assets
$
7,074,050

 
$
7,045,828

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Liabilities:
 
 
 
Deposits
$
5,285,376

 
$
5,234,717

FHLB advances
953,694

 
978,702

Junior subordinated deferrable interest debentures
61,857

 
61,857

Senior debt
94,447

 
94,416

Other liabilities
75,336

 
61,672

Total liabilities
6,470,710

 
6,431,364

Total stockholders' equity
603,340

 
614,464

Total liabilities and stockholders' equity
$
7,074,050

 
$
7,045,828

CONDENSED CONSOLIDATED INCOME STATEMENTS
 
 
 
 
 
 
 
Three Months Ended
(Dollars in thousands except per share data)
March 31,
2020
 
December 31,
2019
 
March 31,
2019
 
(unaudited)
 
(unaudited)
 
(unaudited)
Interest and fee income:
 
 
 
 
 
Loans
$
60,705

 
$
63,452

 
$
61,053

Investment securities
3,303

 
3,517

 
3,925

Cash, cash equivalents and restricted cash
317

 
464

 
400

Total interest income
64,325

 
67,433

 
65,378

Interest expense:
 
 
 
 
 
Deposits
24,581

 
26,406

 
24,288

FHLB advances
5,558

 
5,731

 
6,772

Junior subordinated deferrable interest debentures
493

 
560

 
651

Senior debt
1,578

 
1,574

 
1,575

Total interest expense
32,210

 
34,271

 
33,286

Net interest income before provision for loan losses
32,115

 
33,162

 
32,092

Provision for loan losses
5,300

 
1,000

 
300

Net interest income after provision for loan losses
26,815

 
32,162

 
31,792

Noninterest income
798

 
814

 
1,380

Noninterest expense
16,859

 
15,341

 
16,249

Income before provision for income taxes
10,754

 
17,635

 
16,923

Provision for income taxes
3,178

 
5,178

 
4,913

Net income
$
7,576

 
$
12,457

 
$
12,010

Basic earnings per common share
$
0.14

 
$
0.22

 
$
0.21

Diluted earnings per common share
$
0.14

 
$
0.22

 
$
0.21


6


CONSOLIDATED FINANCIAL HIGHLIGHTS (UNAUDITED)
 
 
 
As of or For the Three Months Ended
(Dollars in thousands except per share data)
March 31,
2020
 
December 31,
2019
 
March 31,
2019
PERFORMANCE RATIOS
 
 
 
 
 
Return on average:
 
 
 
 
 
Assets
0.43
%
 
0.70
 %
 
0.69
 %
Stockholders' equity
4.92
%
 
8.14
 %
 
8.19
 %
Efficiency ratio (1)
51.22
%
 
45.15
 %
 
48.55
 %
Noninterest expense to average assets
0.96
%
 
0.87
 %
 
0.93
 %
Loan to deposit ratio
117.65
%
 
119.03
 %
 
120.91
 %
Average stockholders' equity to average assets
8.76
%
 
8.63
 %
 
8.42
 %
Dividend payout ratio
42.77
%
 
25.99
 %
 
27.43
 %
YIELDS/RATES
 
 
 
 
 
Yield on loans
3.91
%
 
4.07
 %
 
3.96
 %
Yield on investments
2.06
%
 
2.11
 %
 
2.42
 %
Yield on interest earning assets
3.69
%
 
3.84
 %
 
3.80
 %
Cost of interest bearing deposits
1.89
%
 
1.98
 %
 
1.94
 %
Cost of borrowings
2.65
%
 
2.75
 %
 
2.81
 %
Cost of interest bearing liabilities
2.03
%
 
2.11
 %
 
2.12
 %
Net interest spread
1.66
%
 
1.73
 %
 
1.68
 %
Net interest margin
1.84
%
 
1.89
 %
 
1.86
 %
CAPITAL
 
 
 
 
 
Total equity to total assets
8.53
%
 
8.72
 %
 
8.41
 %
Tangible stockholders' equity to tangible assets (1)
8.49
%
 
8.68
 %
 
8.37
 %
Book value per share
$
11.11

 
$
10.97

 
$
10.44

Tangible book value per share (1)
$
11.05

 
$
10.91

 
$
10.38

ASSET QUALITY
 
 
 
 
 
Net charge-offs (recoveries)
$
644

 
$
(78
)
 
$
(78
)
Annualized net charge-offs (recoveries) to average loans
0.04
%
 
(0.01
)%
 
(0.01
)%
Nonperforming loans to total loans
0.09
%
 
0.10
 %
 
0.02
 %
Nonperforming assets to total assets
0.08
%
 
0.09
 %
 
0.02
 %
Allowance for loan losses to loans held-for-investment
0.65
%
 
0.58
 %
 
0.56
 %
Allowance for loan losses to nonperforming loans
729.54
%
 
568.47
 %
 
2303.59
 %
LOAN COMPOSITION
 
 
 
 
 
Multifamily residential
$
4,058,869

 
$
3,985,981

 
$
3,768,775

Single family residential
$
1,930,831

 
$
2,021,320

 
$
2,171,670

Commercial real estate
$
205,657

 
$
203,134

 
$
190,606

Construction and land
$
22,857

 
$
20,442

 
$
13,117

Non-mortgage
$
100

 
$
100

 
$
100

DEPOSIT COMPOSITION
 
 
 
 
 
Noninterest bearing transaction accounts
$
48,782

 
$
43,597

 
$
39,927

Interest bearing transaction accounts
$
226,207

 
$
222,509

 
$
216,580

Money market deposit accounts
$
1,316,597

 
$
1,441,923

 
$
1,302,137

Time deposits
$
3,693,790

 
$
3,526,688

 
$
3,523,187

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

7


NON-GAAP RECONCILIATION (UNAUDITED)
 
 
 
 
 
 
 
 
Three Months Ended
(Dollars in thousands)
March 31,
2020
 
December 31,
2019
 
March 31,
2019
Pre-tax, Pre-provision Net Earnings
 
 
 
 
 
Income before provision for income taxes
$
10,754

 
$
17,635

 
$
16,923

Plus: Provision for loan losses
5,300

 
1,000

 
300

Pre-tax, pre-provision net earnings
$
16,054

 
$
18,635

 
$
17,223

Efficiency Ratio
 
 
 
 
 
Noninterest expense (numerator)
$
16,859

 
$
15,341

 
$
16,249

Net interest income
32,115

 
33,162

 
32,092

Noninterest income
798

 
814

 
1,380

Operating revenue (denominator)
$
32,913

 
$
33,976

 
$
33,472

Efficiency ratio
51.22
%
 
45.15
%
 
48.55
%
(Dollars in thousands except per share data)
March 31, 2020
 
December 31, 2019
 
March 31, 2019
Tangible Book Value Per Share
 
 
 
 
 
Total assets
$
7,074,050

 
$
7,045,828

 
$
6,992,016

Less: Goodwill
(3,297
)
 
(3,297
)
 
(3,297
)
Tangible assets
7,070,753

 
7,042,531

 
6,988,719

Less: Total liabilities
(6,470,710
)
 
(6,431,364
)
 
(6,403,718
)
Tangible stockholders' equity (numerator)
$
600,043

 
$
611,167

 
$
585,001

Period end shares outstanding (denominator)
54,286,465

 
55,999,754

 
56,351,781

Tangible book value per share
$
11.05

 
$
10.91

 
$
10.38

Tangible Stockholders' Equity to Tangible Assets
 
 
 
 
 
Tangible stockholders' equity (numerator)
$
600,043

 
$
611,167

 
$
585,001

Tangible assets (denominator)
$
7,070,753

 
$
7,042,531

 
$
6,988,719

Tangible stockholders' equity to tangible assets
8.49
%
 
8.68
%
 
8.37
%




8
lbcexhibit992_1q2020
Investor Presentation March 31, 2020 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. The COVID‐19 pandemic is adversely affecting us, our customers, counterparties, employees, and third‐party service providers, and the ultimate extent of the impacts on our business, financial position, results of operations, liquidity, and prospects is uncertain. Continued deterioration in general business and economic conditions, including further increases in unemployment rates, or turbulence in domestic or global financial markets could adversely affect our revenues and the values of our assets and liabilities, reduce the availability of funding, lead to a tightening of credit, and further increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to COVID‐19, could affect us in substantial and unpredictable ways. Other factors include, without limitation, the “Risk Factors” referenced in our Annual Report on Form 10‐K for the year ended December 31, 2019 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 include the following factors: challenges and uncertainties regarding the COVID‐19 pandemic, 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; public health crisis and pandemics, including the COVID‐19 pandemic, and their effects on the economic and business environments in which we operate, including on our credit quality and business operations, as well as the impact on general economic and financial market conditions; our management of risks inherent in our real estate loan portfolio, and the risk of a prolonged downturn in the real estate market; our ability to achieve organic loan and deposit growth and the composition ofsuchgrowth;thefiscal 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. Luther Burbank Corporation ("LBC", the "Company", "we", "us", or "our") 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


 
LBC Responding to COVID‐19 Our Depositors Our Borrowers Our Employees Our Communities • Branch offices remain open • Increased staffing dedicated  • Remote work capabilities  • Increased contributions  • Ability to transact business  to handling borrower  and flexible working hours to  to nonprofit programs  via mobile, online or by  inquiries maintain our productivity  that provide access to  telephone  • Modifications with no  and efficiency while  food and shelter for  • Increased ATM withdrawal  payments for 6 months for  minimizing COVID‐19  those most in need limits and no ATM fees;  SFR first‐time home buyer  exposure risk • Sponsored nearly $1.5  waivers of certain early  borrowers • Reduced branch hours from  million in Federal Home  withdrawal penalties and  • Modifications with no  10 a.m. to 3 p.m. to limit  Loan Bank Affordable  overdraft fees payments for 3 to 6 months  public exposure Housing Program (“FHLB  • Customer mailings and  for portfolio Single Family  • Special wellness payment for  AHP”) grant applications  website postings: LBC  Residential (“SFR”) and  eligible branch employees to partners providing  contact information; how to  Commercial Real Estate  • Implemented federal, state,  affordable housing and  transact business; greater  (“CRE”) borrowers and local guidance on  primary health and  awareness around scams  • Accepting applications and  protective measures,  dental care and cybercriminals; and links  continuing to originate new  including social distancing  • Donated N95 masks to  to the CDC/WHO real estate loans with  protocols and providing  local hospital tightened credit  disinfectants/hand sanitizer underwriting guidelines • Frequent communication  about access to employee  benefits 4


 
Liquidity Management Liquidity Position (Dollars in thousands) As of 3/31/2020 % of Assets Unrestricted Cash & Cash Equivalents $             105,078  1.5% Unencumbered Liquid Securities                653,444  9.2% Unutilized Brokered Deposit Capacity (1)                372,807  5.3% FHLB Borrowing Capacity (2)                646,291  9.1% FRB Borrowing Capacity (2)                163,675  2.3% Commercial Lines of Credit                  50,000  0.7%      Total Liquidity  $         1,991,295  28.1% Total Assets $         7,074,050  Securities Portfolio (3) Other Borrowings Amount Outstanding  Cost of  Type 3/31/2020 Borrowings (4) FHLB Advances $954 million 2.25% Senior Notes $94 million 6.68% Trust Preferred  $62 million 3.21% (1) Capacity based on internal guidelines.   (2) Capacity based on pledged loan collateral specific to lending bank.  (3) At 3/31/2020, the securities portfolio had a net unrealized gain position of $3.1 million.  (4) For the three months ended 3/31/2020.  5


 
Limited Exposure to Nonresidential CRE 3/31/2020 Loan Portfolio Composition Weighted % of Tot a l ($ in 000's) Count Balance Avg. LTV (1) Loans Multifamily Real Estate 2,525 $ 4,058,869 56.6% 65.3% Single Family Real Estate 2,114 1,930,831 64.7% 31.1% Commercial Real Estate Type: Strip Retail 23 49,205 51.4% 0.8% Mid Rise Office 7 39,303 65.1% 0.6% Low Rise Office 14 25,448 55.2% 0.4% Medical Office 8 20,822 63.1% 0.3% Shopping Center 5 14,635 53.7% 0.2% Multi-Tenant Industrial 8 12,917 49.4% 0.2% Anchored Retail 3 12,477 53.9% 0.2% Mixed Use > 50% Commercial 10 9,611 49.2% 0.2% Unanchored Retail 6 7,603 44.9% 0.1% Shadow Retail 3 4,980 58.4% 0.1% Warehouse 4 3,110 41.4% 0.1% Flex Industrial 2 2,531 65.1% 0.0% Restaurant 2 1,550 34.4% 0.0% Single-Tenant Industrial 2 1,372 50.5% 0.0% Other 1 93 17.7% 0.0% Commer cial Re al Es t at e 98 205,657 55.6% 3.2% Construction & Land Development 14 22,857 53.0% 0.4% No n - mo r t g a g e Lo a n s 1 100 NA 0.0% (1) Construction and land developmTotalent LTV is calculated based on an “as completed” property value. 4,752 $ 6,218,314 59.1% 100.0% Other Loan Notes: • At March 31, 2020, the Bank had three secured lines of credit with a total commitment of $4.6 million.  There are no  unsecured lines of credit in the portfolio.  • LBC does not intend to participate in the Paycheck Protection Program given the small amount of business clients in our  customer base. 6


 
Allowance for Loan Losses  Q1 2020 Allowance for Loan Losses Components Rollforward ($ in 000's)  Balance 12/31/2019 Allowance for Loan Losses$                    36,001      COVID‐19 economic impact                          6,143      Decline in criticized loans                           (993)      Net charge‐offs                           (644)      Decline in loan portfolio                             (37)      Other qualitative changes                            187 3/31/2020 Allowance for Loan Losses$                    40,657 Allowance for Loan Losses Today vs. Financial Crisis Loss Rates (2009‐2012) • As a supplemental review of the adequacy of our allowance for loan losses at March 31, 2020,  we calculated an estimated annual charge‐off rate based on an average of the two highest  actual annual losses experienced by the Bank during the last financial crisis (2009‐2012).  We  applied that loss rate to our current loan portfolio, which resulted in an implied charge‐off  amount of $44.5 million, compared to our current allowance for loan losses of $40.7 million. 7


 
COVID‐19 Hardship Applications  As of April 30, 2020 Total Completed Applications Received % of Loan Monthly # of Portfolio Cashflow ($ in 000's) Loans Current Balance Segment Impact Multifamily residential 61 $                   88,527  2.2% $           445  Single family residential 90                    111,920  5.9%              517  Commercial real estate 14                      51,167  24.4%              274  Construction and land loans                1                          1,142  5.4%              147  Total (1)  166  $                 252,756  4.1%  $        1,383  Approved for Payment Deferral % of Loan Monthly # of Portfolio Cashflow ($ in 000's) Loans Current Balance Segment Impact Multifamily residential 11 $                   12,280  0.3% $             61  Single family residential 49                      57,718  3.0%              259  Commercial real estate 3                      13,559  6.5%                 73  Construction and land loans 1                         1,142  5.4%              147  Total 64  $                   84,699  1.4%  $           540  (1) Included in the total completed applications table above are 13 loans totaling $11.2 million, where an application was received and the deferral request was denied given a lack of current hardship. Not included in the  tables above are 232 incomplete applications received related to loans totaling $332.1 million and 17 withdrawn applications totaling $18.2 million. 8


 
Capital Management   Tier 1 Leverage Ratio Common Equity Tier 1 Risk‐Based Ratio $379mm, or  $317mm, or  135%, above  113%, above  regulatory  regulatory  minimum minimum Tier 1 Risk‐Based Capital Ratio Total Risk‐Based Capital Ratio $318mm, or  $280mm, or  93%, above  67%, above  regulatory  regulatory  minimum minimum • After returning excess capital to shareholders over the past few years, our capital ratios continue to be well above regulatory minimums. • Common shares outstanding at March 31, 2020 were reduced by 1.7 million shares, or 3%, compared to December 31, 2019. • Returned $19.7 million to shareholders during Q1 2020 • Net share repurchases of $16.5 million  • Quarterly common stock dividend of $0.0575 per share, or $3.2 million 9


 
Franchise Overview and Financial Highlights Our Small Network of Large Branches Financial Highlights 3/31/2020(1)  10 March 31,  Total Assets ($mm) $7,074 WA # Branch Location Date 2020 Established Deposits  ($mm) Total Loans HFI ($mm) $6,218 1 Santa Rosa Oct. 1983 1,091.5 Total Deposits ($mm) $5,285 2 San Rafael Sep. 1996*  562.6 3 Encino Aug. 2007 473.6 Loans / Deposits 118% 4 Beverly Hills Jul. 2010 387.5 OR Tangible Book Value / Tang. Assets 8.5% 5 Los Altos Aug. 2000 291.8 6 Pasadena May 2009 333.8 Leverage Capital Ratio 9.4% 7Toluca Lake Jan. 2008 290.4 Total Risk‐Based Capital Ratio 17.5% 8 Long Beach Jun. 2015 271.1 Total CRE Loans(2) / Total Risk‐Based  609% 9 San Jose Jun. 2012 234.7 Capital 10 Bellevue Jun. 2018 98.7 ROAA  0.43% 11 El Segundo Jan. 2020 12.0 ROAE  4.92%       Wholesale Deposits 545.0 11       Business Banking 692.7 Net Interest Margin 1.84% 22 San Francisco A Corporate Office 1,237.7 55 9 EPS – Fully Diluted $0.14 9 Total Deposits 5,285.4 CA Efficiency Ratio 51.2%  * Acquisition date Noninterest Expense / Avg. Assets 0.96%  Branch  (11) NPAs / Assets 0.08% 33  6   77 6 Loan Production Office (8) 4411 Los Angeles 8 ALLL / Loans HFI 0.65% A ** Highlighted counties indicate primary lending markets Full‐Time Equivalent Employees 279 (1) Financial data as of or for the three months ended 3/31/2020  See non‐GAAP reconciliation in Appendix hereto. (2) Includes multifamily residential, commercial real estate, and construction  loans. 10


 
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 (31+ 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   0.08% NPAs / Total Assets Robust Infrastructure 6. Efficient Operations  Maintain a small network of large branches ($368 million  avg. branch size)  51.2% efficiency ratio, 0.96% noninterest expense / average  Note: Financial data as of or for the three months ended 3/31/2020.  See non‐GAAP reconciliation in Appendix hereto. assets and 279 FTEs 11


 
Top Multifamily Lenders in the United States Top 25 Banks and Thrifts by Multifamily Loans (Dollars in billions) As of December 31, 2019 Change Since (%) Delinquency Total Multifamily September 30,  December 31,  % of Change Since (bps) Rank Institution Name Headquarters Assets Loans 2019 2018 Multifamily(1) December 31, 2018 1. JPMorgan Chase & Co.  New York, NY 2,687.4 74.08 0.9 3.9 0.12 0 2. New York Community Bancorp Inc.  Westbury, NY 53.6 31.18 2.9 4.3 0.02 1 3. Signature Bank  New York, NY 50.6 15.09 (0.6) (3.8) 0.00 (11) 4. Wells Fargo & Co.  San Francisco, CA 1,927.6 14.11 (4.5) 5.5 0.25 (22) 5. First Republic Bank  San Francisco, CA 116.3 12.37 5.8 20.0 0.00 (2) 6. Capital One Financial Corp.  McLean, VA 390.4 12.25 (1.0) 3.0 0.40 (24) 7. Santander Holdings USA Inc.  Boston, MA 149.5 8.59 1.1 3.4 0.16 (1) 8. Citigroup Inc. New York, NY 1,951.2 7.92 (5.5) 11.8 0.99 93 9. Investors Bancorp Inc.  Short Hills, NJ 26.8 7.84 (2.2) (4.3) 0.88 18 10. MUFG Americas Holding Corp.  New York, NY 170.8 7.31 9.9 24.3 0.10 (1) 11. PNC Financial Services Group Inc.  Pittsburgh, PA 410.4 6.46 (4.6) 17.1 0.31 10 12. Valley National Bancorp Wayne, NJ 37.5 5.23 30.3 37.5 0.02 (1) 13. Bank of America Corp. Charlotte, NC 2,434.1 5.05 (5.9) (2.3) 0.38 32 14. Truist Financial Corp.  Charlotte, NC 473.1 5.03 85.4 69.4 0.06 (48) 15. Sterling Bancorp Montebello, NY 30.6 4.88 2.0 2.4 0.09 (2) 16. TD Group US Holdings LLC Wilmington, DE 408.6 4.49 9.0 17.9 0.26 (3) 17. Key Corp.  Cleveland, OH 145.6 4.21 5.2 (12.9) 0.21 (2) 18. M&T Bank Corp.  Buffalo, NY 119.9 4.21 6.6 12.3 1.29 55 19. Luther Burbank Corp.  Santa Rosa, CA 7.0 3.99 0.7 8.6 0.05 3 20. U.S. Bancorp Minneapolis, MN 495.4 3.87 2.2 7.8 0.23 (19) 21. People's United Financial Inc.  Bridgeport, CT 58.6 3.80 14.7 17.90.2215 22. CIBC Bancorp USA Inc.  Chicago, IL 47.2 3.80 10.8 25.5 0.00 (6) 23. Opus Bank  Irvine, CA 8.0 3.78 2.3 29.1 0.08 6 24. PacWest Bancorp Beverly Hills, CA 26.8 3.58 5.3 27.7 0.01 1 25. Umpqua Holdings Corp.  Portland, OR 28.8 3.56 0.9 6.5 0.00 (13) Banking Industry Aggregate(2) 458.73 1.5 6.6 0.25 (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. 12


 
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% Source: SNL Financial. GAAP data when available, otherwise FR Y‐9C’s and bank call reports as of or for the three months ended 12/31/2019.  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 12/31/2016 to 12/31/2019. 13


 
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  $901 thousand average loan balance  15.1 units average  65% average loan‐to‐value ratio  57% average loan‐to‐value ratio  750 average credit score  1.50x average debt service coverage ratio 0.08% NPAs / Assets 0.09% NPLs / Loans Note: Data as of 3/31/2020. 14


 
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‐, 7‐ or 10‐year fixed rate periods • 3‐, 5‐, 7‐ or 10‐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 15


 
Loan Portfolio Historical Loan Growth Loan Portfolio Composition 3.91% yield on loans; 4.16%  weighted average coupon(1) Multifamily Loans by Lending Area Single Family Loans by Lending Area (1) As of or for the three months ended 3/31/2020. 16


 
Asset Quality Nonperforming Assets(1) / Total Assets Culture Approach Results  Risk management is a core competency of   Continuous evaluation of risk and return  3/31/2020 NPAs / Total Assets of 0.08%;  our business NPLs / Total Loans of 0.09%  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 2016  Vigilant response to adverse economic  executive officers conditions and specific problem credits  Only one foreclosure in the past five 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. 17


 
Loan Origination Volume and Rates $1,564.1 Q4 4.15% Q3 4.26% Q2 4.44% Q1 Q1 4.62% 3.98% Pipeline: • Total loan pipeline at March 31, 2020 is $526.4 million ($271.7 million CRE at 3.815% WAC, $239.9 million SFR at 3.701% WAC & $14.8  million Construction at 5.335% 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 CRE loan purchase.  • Q1 2020 originations include a $20.4 million CRE loan purchase.  18


 
CRE Loan Origination Volume and Rates $972.9 Q4 4.16% Q3 4.34% Q2 4.49% Q1 Q1 4.61% 3.95% • Q2 2019 originations include a $10.1 million CRE loan purchase.  • Q1 2020 originations include a $20.4 million CRE loan purchase.  19


 
SFR Loan Origination Volume and Rates 5.15% $591.2 Q4 4.14% Q3 4.16% Q2 4.34% Q1 Q1 4.63% 4.02% 20


 
Loan Portfolio Rates • At March 31, 2020, loans representing 66% of the loan portfolio, or $4.0 billion in aggregate outstanding principal balance, are at their floors, and 61% of those  loans have fully indexed rates above their floors by approximately 0.49%.  21


 
Loan Prepayment Speeds 22


 
Deposit Composition Historical Deposit Growth & Portfolio Composition Deposit Breakdown by Branch ($ in millions) Total  Branch Location Consumer Business Wholesale Deposits  Santa Rosa 1,066.4 25.1 0.0 1,091.5 San Rafael 511.4 51.2 0.0 562.6 Encino 470.3 3.3 0.0 473.6 Beverly Hills 382.3 5.2 0.0 387.5 Los Altos 290.3 1.5 0.0 291.8 Pasadena 331.5 2.3 0.0 333.8 Toluca Lake 278.4 12.0 0.0 290.4 Long Beach 264.2 6.9 0.0 271.1 San Jose 159.4 75.3 0.0 234.7 Bellevue 94.3 4.4 0.0 98.7 El Segundo  10.8 1.2 0.0 12.0 Corporate Office 0.0 692.7 545.0 1,237.7 Total Deposits 3,859.3 881.1 545.0 5,285.4 1.89% cost of interest‐bearing deposits(1) (1) For the three months ended 3/31/2020. 23


 
Deposit Growth/Balance  Growth Trend $233.7 $50.7 $1,049.7 $617.3 24


 
Business Composition By Vertical  December 31, 2019 March 31, 2020 1.572% 1.572% 1.082% 0.830% 1.220% Total business deposits of $973.2 million Total business deposits of $881.1 million 25


 
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. 26


 
Net Interest Margin Quarterly Net Interest Margin Net Interest Margin  27


 
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) 28


 
Economic Value of Equity Trend 29


 
Deposits ‐ Cost of Funds Comparison (1) Beta is calculated using an average Fed Funds Rate. 30


 
Executive Management  Simone Lagomarsino. Ms. Lagomarsino, serves as President and Chief Executive Officer (“CEO”) of the Company and the Bank. Ms. Lagomarsino has served on our Board of Directors since November 30, 2018. Prior to joining the Company, Ms. Lagomarsino was President and CEO of the Western Bankers Association anda director of Pacific Premier Bancorp. (NASDAQ: PPBI). From 2011 to 2016, she served as CEO of Heritage Oaks Bank, and President and CEO and a director of Heritage Oaks Bancorp. Ms. Lagomarsino also previously held executive positions with Hawthorne Financial Corporation, Ventura County National Bank, and Kinecta Federal Credit Union. In addition to her role at the Company, Ms. Lagomarsino serves on the board of directors of the Federal Home Loan Bank of San Francisco and Hannon Armstrong Sustainable Infrastructure Capital, Inc. (NYSE: HASI). We believe Ms. Lagomarsino's extensive experience in leadership roles in numerous financial institutions, including public companies, gives her valuable insight and enables her to make significant contributions as a member of our Board. Laura Tarantino. Ms. Tarantino serves as Chief Financial Officer of the Company and Bank, a position she has held since 2006. In this role, she oversees all aspects of financial reporting including strategic planning, asset/liability management, taxation and regulatory filings. She also serves on the Company's Executive Committee. Ms. Tarantino has over 26 years of experience with the 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, Ms. Tarantino has served as an audit committee member for the Santa Rosa Council on Aging since 2012. Ms. Tarantino is a CPA (inactive) and holds a B.S. in Business Administration ‐ Finance & Accounting with summa cum laude honors from San Francisco State University. John A. Cardamone. Mr. Cardamone joined the Bank as Chief Credit Officer in 2014. He oversees the Bank's credit administration, appraisal and special assets activities and serves on the Executive Committee. Prior to joining the Bank, Mr. Cardamone served as a Senior Vice President & Divisional Credit Manager ‐ Commercial Real Estate at Bank of the West from 2008 until 2014, Chief Credit Officer at GreenPoint Mortgage, Senior Vice President ‐ Global Risk Management at GE Capital's Mortgage Insurance Unit and Managing Director and Chief Credit Officer at the Federal Home Loan Bank of San Francisco. Mr. Cardamone holds an M.B.A. in Finance from the Wharton School at the University of Pennsylvania, an M.B.A. in Management from St. Mary's College and a B.B.A. in Business Statistics from Temple University. 31


 
Executive Management ‐ Continued Tammy Mahoney. Ms. Mahoney joined the Company in 2016 and serves as the Chief Risk Officer. In her role, Ms. Mahoney oversees the Company's compliance, internal audit and risk management functions; 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 2011 through 2015; as Director, Risk Advisory Services at KPMG LLP from 1995 to 2004; and as Associate National Bank Examiner with the Office of the Comptroller of the Currency. A Certified Enterprise Risk Professional, Certified Regulatory Compliance Manager and Certified Internal Auditor, Ms. Mahoney holds a B.S. in Business Administration ‐ Finance from San Diego State University. Liana Prieto. Ms. Prieto serves as General Counsel and Corporate Secretary of the Company and Bank. In this role she is responsible for leading a team of legal, human resources, Bank Secrecy Act, fair and responsible banking and third party risk management professionals. She is also a member of the Company's Executive Committee. Prior to joining the Bank in 2014, Ms. Prieto served as Associate and then Counsel at Buckley 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, Ms. Prieto has served in leadership and advisory roles on the Banking Law Committee of the American Bar Association's Business Law Section and the American Association of Bank Directors. She also serves on the Board of Directors of Long Beach Local, a non‐profit that supports sustainable urban agriculture. Ms. Prieto holds a J.D. from Fordham University School of Law and a B.A. from Georgetown University. Brian Skelton. Mr. Skelton serves the Company as Chief Banking Officer. In this role he is responsible for expanding Luther Burbank’s deposit offerings and creating greater access to its products and services, including consumer deposit generation across traditional branch and online banking platforms, as well as business banking activities; he is also a member of the Company's Executive Committee. Prior to joining in 2019, Mr. Skelton served as Senior Vice President, Regional Sales Manager at Farmers and Merchants Bank of Long Beach from 2014 to 2019; previous to that as Senior Vice President, Region Manager at Union Bank of California from 2006‐2014. His background also includes positions as Vice President, Branch Manager at City National Bank; Vice President, Branch Manager at Union Bank; Customer Service and Sales Manager at Pacific Mercantile Bank; Account Executive at US Capital Funding; and Loan Specialist at Bank of America. In addition to his role at Luther Burbank, Mr. Skelton sits on the Executive Advisory Board of Mihaylo College of Business and Economics at California State University, Fullerton and is an active advocate for the American Heart Association of Orange County as well as Junior Achievement Orange County. Mr. Skelton holds a Masters in Banking from Pacific Coast Banking School and a B.A. in Education from California State University, Fullerton. 32


 
Board of Directors Victor S. Trione. Mr. Trione, serves as Chair of the Board of Directors of the Company and the Bank, a position he has held since founding the Bank in 1983. In addition to serving as our Chair, Mr. Trione is President of Vimark, Inc., a real estate development and vineyard management company, and co‐proprietor of Trione Winery. Mr. Trione also serves in the following roles: Director and Chair of the Executive Committee of Empire College; Advisory Board member of the Stanford Institute for Economic Policy Research; Board of Overseers of Stanford University's Hoover Institution; and, trustee of the U.S. Navy Memorial Foundation. As one of our founders, Mr. Trione brings continuity and deep historic knowledge of the Company to the Board, which enables him to make significant contributionsasa member of our Board. John C. Erickson. Mr. Erickson, serves on the Audit and Risk Committee and on the Compensation Committee. Mr. Erickson has served on our Board of Directors since 2017. Mr. Erickson has more than 35 years of financial services experience, including over 30 years at Union Bank N.A. He served in many executiveroles across that institution, culminating in two vice chairman positions (Chief Risk Officer and Chief Corporate Banking Officer) between 2007 and 2014.AsChief Corporate Banking Officer, he oversaw commercial banking, real estate, global treasury management, wealth management and global capital markets.Hewasa director of Zions Bancorporation (NASDAQ: ZION) from 2014 to 2016, and chair of that board's Risk Committee, as well as a member of the Audit Committee.Healso served as President, Consumer Banking and President, California, for CIT Group, Inc. (NYSE: CIT) in 2016. He joined the board of directors of Bank of Hawaii Corporation (NYSE: BOH) in January 2019, and serves as a member of its Audit and Risk Committee and Nominating and Governance Committee. Mr. Erickson qualifies as an "audit committee financial expert" as defined in SEC rules. We believe Mr. Erickson's extensive knowledge of banking and his service on public company boards give him valuable insight and enable him to make significant contributions as a member of our Board. Jack Krouskup. Mr. Krouskup, serves as Chair of the Audit and Risk Committee and also servesontheGovernanceandNominatingCommittee.Mr.Krouskuphas served on our Board of Directors since 2012. He is a certified public accountant (inactive) with more than 35 years of experience serving customers in avarietyof industries. At 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. Mr. Krouskup qualifies as an "audit committee financial expert" as defined in SEC rules. We believe Mr. Krouskup's significant experience as an auditor and certified public accountant give him valuable insight and enable him to make significant contributions as a member of our Board. 33


 
Board of Directors ‐ Continued Anita Gentle Newcomb. Mrs. Newcomb, serves on the Audit and Risk Committee. Ms. Newcomb has served on our Board of Directors since 2014. Her experience spans over three decades in the financial services industry as a commercial banker, investment banker, and strategic consultant. She has advised numerous 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. Most recently, Ms. Newcomb was president of A.G. Newcomb & Co., a financial services consultancy, she founded and managed from 1999 to 2019. She also served on the board of the Federal Reserve Bank of Richmond‐ Baltimore Branch from 2010 through 2015. She is also a certified public accountant (inactive). Ms. Newcomb qualifies as an "audit committee financial expert" as defined in SEC rules. We believe Ms. Newcomb's extensive knowledge of banking, as well as her expertise in strategic planning for community and regional banks, give her valuable insight and enable her to make significant contributions as a member of our Board. Bradley M. Shuster. Mr. Shuster, serves as Chair of the Compensation Committee and also serves on the Governance and Nominating Committee. Mr. Shuster has served on our Board of Directors since 1999. 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, he 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, where he served as partner‐in‐charge of Deloitte's Northern California Insurance and Mortgage Banking practices. Mr. Shuster has received both CPA and CFA certifications. He is a member of the board of directors of McGrath Rentcorp (NASDAQ: MGRC), and serves as a member of its Audit and Governance Committees. We believe Mr. Shuster's experience leading a public company, as well as his service on public company boards and his tenure on our Board, give him valuable insight and enable him to make significant contributions as a member of our Board. Thomas C. Wajnert. Mr. Wajnert, serves as our Lead Independent Director, Chair of the Governance and Nominating Committee, and a member of the Compensation Committee. Mr. Wajnert has served on our Board of Directors since 2013. He 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 Chief Executive Officer and Chair of AT&T Capital Corporation, an international, full‐service equipment leasing and commercial finance company, from 1984 to 1996. Mr. Wajnert also has extensive public company board experience at Reynolds American as Chair, and at Solera, UDR, Inc., NYFIX, and 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.,andformany years served as a Trustee of Wharton's Center for Financial Institutions. We believe Mr. Wajnert's substantial experience in leadership of public companies, both as an executive and a director, give him valuable insight and enable him to make significant contributions as a member of our Board. 34


 
Appendix


 
Balance Sheet ($ in 000’s) As of March 31, December 31, 2020 (1) 2019 ASSETS Cash, cash equivalents and restricted cash $ 123,248 $ 88,565 Available for sale investment securities, at fair value 641,474 625,074 Held to maturity investment securities, at amortized cost (fair value of $10,132 and $10,349 at March 31, 2020 and December 31, 2019 respectively) 9,732 10,170 Equity securities, at fair value 11,970 11,782 Loans receivable, net of allowance for loan losses of $40,657 and $36,001 as of March 31, 2020 and December 31, 2019, respectively 6,177,657 6,194,976 Accrued interest receivable 20,823 20,814 Federal Home Loan Bank ("FHLB") stock, at cost 29,612 30,342 Premises and equipment, net 19,792 19,504 Goodwill 3,297 3,297 Prepaid expenses and other assets 36,445 41,304 Total assets $ 7,074,050 $ 7,045,828 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits $ 5,285,376 $ 5,234,717 Federal Home Loan Bank advances 953,694 978,702 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 $553 and $584 at March 31, 2020 and December 31, 2019, respectively) 94,447 94,416 Accrued interest payable 2,635 2,901 Other liabilities and accrued expenses 72,701 58,771 Total liabilities 6,470,710 6,431,364 Stockholders' equity: Common stock, no par value; 100,000,000 shares authorized; 54,286,465 and 55,999,754 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively 431,578 447,784 Retained earnings 169,572 165,236 Accumulated other comprehensive gain/(loss), net of taxes 2,190 1,444 Total stockholders' equity 603,340 614,464 Total liabilities and stockholders' equity $ 7,074,050 $ 7,045,828 (1) Unaudited 36


 
Income Statement ($ in 000’s, except per share data) For the Three Months Ended March 31, (1) 2020 2019 Interest and fee income: Loans $ 60,705 $ 61,053 Investment securities 3,303 3,925 Cash, cash equivalents and restricted cash 317 400 Total interest and fee income 64,325 65,378 Interest expense: Interest on deposits 24,581 24,288 Interest on FHLB advances 5,558 6,772 Interest on junior subordinated deferrable interest debentures 493 651 Interest on other borrowings 1,578 1,575 Total interest expense 32,210 33,286 Net interest income before provision for loan losses 32,115 32,092 Provision for loan losses 5,300 300 Net interest income after provision for loan losses 26,815 31,792 Noninterest income: Net gain on sale of loans - 333 FHLB dividends 535 495 Other income 263 552 Total noninterest income 798 1,380 Noninterest expense: Compensation and related benefits 11,205 10,052 Deposit insurance premium 476 498 Professional and regulatory fees 431 441 Occupancy 1,140 1,390 Depreciation and amortization 669 665 Data processing 967 919 Marketing 875 1,154 Other expenses 1,096 1,130 Total noninterest expense 16,859 16,249 Income before provision for income taxes 10,754 16,923 Provision for income taxes 3,178 4,913 Net income $ 7,576 $ 12,010 Basic earnings per common share $ 0.14 $ 0.21 Diluted earnings per common share $ 0.14 $ 0.21 Dividends per common share $ 0.06 $ 0.06 Weighted average common shares outstanding - basic 55,611,827 56,519,809 Weighted average common shares outstanding - diluted 55,725,098 56,722,696 (1) Unaudited 37


 
For the Three Months Ended For the Three Months Ended March 31, 2020 December 31, 2019 Net Interest Margin ($ in 000’s) Average Interest  Average  Average Interest  Average   (5)  (5) Balance Inc / Exp Yield/Rate Balance Inc / Exp Yield/Rate Interest‐Earning Assets Multifamily residential$     4,009,477 $    40,594 4.05%$     3,968,059 $   42,775 4.31% Single family residential       1,979,005       17,390               3.51        2,049,471      17,985               3.51 Commercial real estate          204,118         2,355               4.61           202,425        2,337               4.62 Construction, land and NM            21,334            366               6.90             19,816           355               7.11 (1)     6,213,934     60,705             3.91      6,239,771    63,452             4.07 Total loans Securities available‐for‐sale/ equity          631,556         3,238               2.05           656,984        3,448               2.10 (2) Securities held‐to‐maturity           10,000            65             2.60           10,345           69             2.67 Cash, cash equivalents and restricted cash          113,196            317               1.13           110,555           464               1.67 Total interest‐earning assets $    6,968,686 $    64,325               3.69 $     7,017,655 $   67,433               3.84 Noninterest‐earning assets            66,756             75,527 Total assets $    7,035,442 $     7,093,182 Interest‐bearing demand depositsInterest‐Bearing Liabilities $        226,879 $         572 1.00%$        218,034 $        628 1.13% Money market demand accounts       1,358,219         4,139               1.21        1,452,980        4,476               1.21 Time deposits ‐ Retail        3,124,787       18,009               2.28        3,088,172      18,979               2.40      Total interest‐bearing deposits ‐ Retail       4,709,885       22,720               1.91        4,759,186      24,083               1.98 Time deposits ‐ Wholesale          445,110         1,861               1.68           468,315        2,323               1.97      Total interest‐bearing deposits        5,154,995       24,581               1.89        5,227,501      26,406               1.98 FHLB advances          993,890         5,558               2.25           989,273        5,731               2.30 Senior debt            94,427         1,578               6.68             94,396        1,574               6.67 Junior subordinated debentures            61,857            493               3.21             61,857           560               3.59 Total interest‐bearing liabilities  $    6,305,169 $    32,210               2.03 $     6,373,027 $   34,271               2.11 Noninterest‐bearing demand deposits            46,315             42,576 Noninterest‐bearing liabilities            67,827             65,528 Total liabilities       6,419,311        6,481,131 Total stockholders' equity(3)           616,131          1.66% 612,051 1.73% Total liabilities and stockholders' equity(4) $    7,035,442 $     7,093,182 Net interest income/margin  $   32,115 1.84%$   33,162 1.89% Net interest spread  (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.   38


 
Non‐GAAP Reconciliation ($ in 000’s) March 31, 2020As of or For the Three Months Ended December 31, 2019 March 31, 2019 2019 As of or For the Years Ended 2018 2017 December 31, 2016 Tangible book value Total assets  $           7,074,050  $             7,045,828  $           6,992,016   $         7,045,828  $         6,937,212  $         5,704,380  $         5,063,585  Less: Goodwill                      (3,297)                       (3,297)                     (3,297)                    (3,297)                   (3,297)                   (3,297)                   (3,297) Less: Total liabilities              (6,470,710)               (6,431,364)             (6,403,718)            (6,431,364)           (6,356,067)           (5,154,635)           (4,659,210) Tangible book value  $               600,043   $                611,167   $               585,001   $            611,167   $            577,848   $            546,448  $            401,078  Tangible assets Total assets  $           7,074,050  $             7,045,828  $           6,992,016   $         7,045,828  $         6,937,212  $         5,704,380  $         5,063,585  Less: Goodwill                      (3,297)                       (3,297)                     (3,297)                    (3,297)                   (3,297)                   (3,297)                   (3,297) Tangible assets  $           7,070,753   $             7,042,531   $           6,988,719   $         7,042,531   $         6,933,915   $         5,701,083   $         5,060,288  Tangible stockholders' equity to tangible assets Tangible book value (numerator)  $               600,043  $                611,167  $               585,001   $            611,167  $            577,848  $            546,448  $            401,078  Tangible assets (denominator)                7,070,753                 7,042,531                6,988,719              7,042,531             6,933,915             5,701,083             5,060,288  Tangible stockholders' equity to tangible assets 8.5% 8.7% 8.4% 8.7%8.3%9.6%7.9% Pro forma Items  (1)      Actual/ Pro forma provision for income tax      Net income before income taxes  $                 10,754  $                   17,635  $                 16,923   $               69,464  $               62,931  $               65,231  $               53,940       Effective tax rate 30% 29% 29% 30% 28% 42% 42%      Actual/ Pro forma provision for income taxes  $                   3,178   $                     5,178   $                   4,913   $               20,603   $               17,871   $               27,397   $               22,655       Actual/ Pro forma net income      Net income before income taxes  $                 10,754  $                   17,635  $                 16,923   $               69,464  $               62,931  $               65,231  $               53,940       Actual/ Pro forma provision for income taxes                        3,178                         5,178                        4,913                    20,603                   17,871                   27,397                   22,655       Actual/ Pro forma net income  $                   7,576   $                   12,457   $                 12,010   $               48,861   $               45,060   $               37,834   $               31,285  (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.   39


 
Non‐GAAP Reconciliation ($ in 000’s, except per share data) As of or For the Three Months Ended As of or For the Years Ended December 31, March 31, 2020 December 31, 2019 March 31, 2019 2019 2018 2017 2016 Pro forma Items Continued  (1)      Actual/ Pro forma ratios and per share data      Actual/ Pro forma net income (numerator) $                   7,576  $                   12,457  $                 12,010   $               48,861  $               45,060  $               37,834  $               31,285       Average assets (denominator)               7,035,442                 7,093,182                6,967,947              7,066,547             6,405,931             5,485,832             4,676,676       Actual/ Pro forma return on average assets 0.43% 0.70% 0.69% 0.69% 0.70% 0.69% 0.67%      Average stockholders' equity (denominator) $               616,131  $                612,051  $               586,824   $            599,574  $            566,275  $            425,698  $            390,318       Actual/ Pro forma return on average stockholders' equity 4.92% 8.14% 8.19% 8.15% 7.96% 8.89% 8.02%      Weighted average shares outstanding ‐ diluted (denominator)            55,725,098               56,937,952             56,722,696            56,219,892           56,825,402           42,957,936           42,000,000       Actual/ Pro forma earnings per share—diluted  $                      0.14   $                       0.22   $                      0.21   $                   0.87   $                   0.79   $                   0.88   $                   0.74  Efficiency ratio Noninterest expense (numerator)  $                 16,859   $                   15,341   $                 16,249   $               62,386   $               62,687   $               56,544  $               61,242  Net interest income $                 32,115  $                   33,162  $                 32,092   $            128,407  $            125,087  $            110,895  $               94,594  Noninterest income                          798                             814                        1,380                      4,675                     4,131                     7,508                     7,885  Operating revenue (denominator)  $                 32,913   $                   33,976   $                 33,472   $            133,082   $             129,218   $            118,403   $            102,479  Efficiency ratio 51.2% 45.2% 48.5% 46.9% 48.5% 47.8% 59.8% (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.   40