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): July 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 ClassTrading SymbolName of Each Exchange on Which Registered
Common stock, no par valueLBCThe 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:

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

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

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




Item 2.02. Results of Operations and Financial Condition

On July 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 July 29, 2020 to discuss its financial results for the quarter ended June 30, 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 July 28, 2020, the Company's Board of Directors declared a cash dividend of $0.0575 per common share, payable on August 17, 2020 to shareholders of record on August 7, 2020.

Item 9.01. Financial Statements and Exhibits
Exhibit NumberDescription




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



Document

EXHIBIT 99.1
        https://cdn.kscope.io/9a8129c1269e21186f76694ff9e91705-lbclogoa0311.jpg   https://cdn.kscope.io/9a8129c1269e21186f76694ff9e91705-newsreleasea0311.gif


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

LUTHER BURBANK CORPORATION REPORTS EARNINGS FOR THE QUARTER AND SIX MONTHS ENDED JUNE 30, 2020

Quarterly Cash Dividend of $0.0575 Per Common Share Declared

Second Quarter 2020 Summary
Net income of $9.3 million, or $0.18 per diluted share
Loan production of $487.9 million; $62.7 million net loan growth
COVID-19 loan modifications total 6.4% of the total aggregate loan portfolio balance
Cost of interest bearing deposits of 1.49%, compared to 1.89% for Q1 2020
Net interest margin of 1.88% compared to 1.84% for Q1 2020
Provision for loan losses recorded of $5.3 million
Stock repurchases of 1.9 million common shares at an average share price of $9.62
Book value per share of $11.39
SANTA ROSA, Calif. (July 28, 2020) Luther Burbank Corporation (NASDAQ: LBC) (the “Company”), the holding company for Luther Burbank Savings (the “Bank”), today reported net income of $9.3 million and $16.9 million, or $0.18 and $0.31, diluted earnings per common share (“EPS”), for the three and six months ended June 30, 2020, respectively.
Simone Lagomarsino, President and Chief Executive Officer, stated, “As the COVID-19 pandemic continues to impact almost every aspect of our lives, the focus of our team has remained steadfast on supporting our customers and communities by ensuring that we are able to safely and securely serve their banking needs. In March 2020, we implemented safety protocols at our offices and reduced branch hours, while simultaneously expanding phone and online customer support services. During this period, we have seen the best in our team, as they continue to selflessly remain committed to providing the highest level of service to our customers despite these difficult conditions."
Ms. Lagomarsino continued, "Consistent with the prior quarter, our financial results for June 30, 2020 have been impacted by the pandemic; however, I'm encouraged that we've been able to maintain our profitability throughout this period, reporting quarterly net income of $9.3 million, or $0.18 per diluted share. Furthermore, we are beginning to experience an improvement in our net interest margin resulting from the repricing of our deposits. During the quarter,
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deposits grew by $98.1 million while, at the same time, repricing down by 40 basis points. Net interest margin was 1.88% during the current quarter compared to 1.84% during the linked quarter. As a result of the uncertain economic environment, we recorded an additional $5.3 million provision for loan losses during the quarter, increasing our allowance for loan losses coverage ratio by 12.3%, or eight basis points, to 0.73%. In addition, through the end of the second quarter, we have successfully modified 271 loans for customers affected by the pandemic with an aggregate outstanding loan balance of $398.4 million. We have sustained our strong liquidity and capital positions during this period. As of June 30, 2020, we had access to over $2.1 billion in liquidity resources and our Common Equity Tier 1 Capital ratio measured 14.7%.”
Board Declares Quarterly Cash Dividend of $0.0575 Per Share
On July 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 August 17, 2020 to shareholders of record as of August 7, 2020.
Net Income
The Company reported net income of $9.3 million and $16.9 million, or $0.18 and $0.31 EPS, for the three and six months ended June 30, 2020, respectively, compared to net income of $7.6 million, or $0.14 EPS, for the linked quarter and $23.7 million, or $0.42 EPS, for the six months ended June 30, 2019. Pre-tax, pre-provision net earnings totaled $18.5 million and $34.5 million for the three and six months ended June 30, 2020, respectively, compared to $16.1 million for the linked quarter and $34.6 million for the six months ended June 30, 2019.
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
Q2 2020 vs Q1 2020
Net interest income in the second quarter was $33.1 million, an increase of $1.0 million from the first quarter, primarily due to lower interest expense on our deposit portfolio, which benefited from the decline in market interest rates that began in August 2019, but significantly accelerated in March 2020. During the quarter, the cost of interest bearing deposits declined by 40 basis points as compared to the linked quarter. The improvement in net interest income was partially offset by a decline in interest income earned on our loan and investment portfolios caused by a decrease in the average yield of 19 and 64 basis points, respectively. The decline in our loan yield was primarily caused by an increase in the cost of our interest rate swaps and the prepayment of higher yielding loans, which are being replaced by loans at lower current interest rates, partially offset by an increase in loan prepayment fees collected during the quarter. The decline in our investment yield was generally caused by variable rate securities repricing to lower current interest rates, as well as the accelerated prepayment of securities backed by mortgages.
Net interest margin for the second quarter was 1.88%, compared to 1.84% for the previous quarter. Consistent with the discussion above, our net interest margin benefited from the decline in the cost of interest bearing deposits, partially offset by a reduction in loan and investment yields. During the second quarter, the yield on our interest earning assets decreased by 25 basis points, while the cost of our interest bearing liabilities decreased by 32 basis points. Our net interest spread in the second quarter improved to 1.73%, increasing by 7 basis points as compared to the linked quarter.
YTD 2020 vs YTD 2019
Net interest income totaled $65.3 million for the six months ended June 30, 2020, an increase of $2.6 million, compared to the same period last year. The increase in net interest income was primarily impacted by a 31 basis point decline in the cost of interest bearing deposits, partially offset by a $153.0 million increase in the average balance of interest bearing deposits. Net interest income was further enhanced by a decrease in the average balance and cost of Federal Home Loan Bank of San Francisco ("FHLB") advances of $131.0 million and 9 basis points, respectively. These items were partially offset by a $4.0 million increase in the cost of our interest rate swaps as compared to the same period last year, as well as the prepayment of higher yielding loans, which are being replaced by loans at lower current interest rates, partially offset by a $48.5 million increase in the average balance of loans. Net interest income was further impacted by a 71 basis points decline in the yield on our investment securities. As discussed above, the decline in our investment yield was generally caused by variable rate securities repricing to lower current interest rates, as well as the accelerated prepayment of securities backed by mortgages.
Net interest margin for the six months ended June 30, 2020 was 1.86%, compared to 1.81% for the same period last
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year. The increase in our margin was primarily related to the decline in the cost of our interest bearing deposits, partially offset by the decline in the yields of our loan and investment portfolios, as discussed above. The yield on our interest earning assets decreased by 21 basis points, while the cost of our interest bearing liabilities decreased by 29 basis points. Our net interest spread for the six months ended June 30, 2020 was 1.70%, increasing by 8 basis points as compared to the same period last year.
Noninterest Income
Q2 2020 vs Q1 2020
Noninterest income for the second quarter was $671 thousand, a decrease of $127 thousand compared to the first quarter. The decrease is primarily attributable to a decrease of $161 thousand in FHLB dividends and $89 thousand in fair value adjustments recorded on equity securities, partially offset by an increase of $135 thousand in servicing fee income. During the second quarter, the FHLB decreased its annualized dividend rate from 7% to 5%. The increase in servicing fee income was primarily due to a reduction in the amortization of mortgage servicing rights caused by a slowing in the estimated prepayments of serviced loans as compared to the linked quarter.
YTD 2020 vs YTD 2019
Noninterest income for the six months ended June 30, 2020 totaled $1.5 million, a decrease of $1.4 million compared to the same period last year. The decrease was primarily due to a $530 thousand gain on sale of loans and a non-recurring equipment recovery of $384 thousand, both recognized during the prior year to date period, as well as a $344 thousand decrease in servicing fee income related to elevated actual and estimated prepayments on serviced loans that decreased the fair value of our mortgage servicing rights during the current year to date period.

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
Q2 2020 vs Q1 2020
Noninterest expense for the second quarter was $15.3 million, a decrease of $1.5 million compared to the first quarter. The decrease was primarily due to a decrease in compensation costs of $904 thousand caused by an increase in capitalized loan origination costs related to higher loan origination volume in the current quarter compared to the prior quarter and a decline in payroll taxes caused by the seasonal nature of these taxes. Compensation cost declines were partially offset by an increase in commissions due to the increase in loan originations, discussed above. Noninterest expense further benefited from a decrease of $546 thousand in marketing expenses associated with deposit gathering efforts.
YTD 2020 vs YTD 2019
Noninterest expense for the six months ended June 30, 2020 totaled $32.2 million, an increase of $1.2 million compared to the same period last year. The increase was primarily attributable to a $2.8 million increase in compensation costs mainly due to an increase in the required accrual for post-employment related benefits caused by an increase in estimated future costs resulting from a decline in interest rates, as well as an increase in our headcount. This increase was partially offset by a $1.0 million decrease in marketing costs, discussed above, and a $548 thousand decline in occupancy costs related to the relocation of two facilities in late 2019.
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 June 30, 2020 were $7.2 billion, an increase of $122.5 million, or 3.5% annualized, from December 31, 2019. The increase was primarily due to a $78.9 million increase in cash, cash equivalents and restricted cash, a $50.1 million increase in loans and a $10.3 million increase in available for sale debt securities. Total liabilities were $6.6 billion at June 30, 2020, an increase of $140.3 million, or 4.4% annualized, from December 31, 2019. The increase in total liabilities was primarily attributable to growth in our deposits of $148.8 million, partially offset by a decrease in FHLB advances of $17.0 million compared to December 31, 2019.
Loans
Total loans at June 30, 2020 were $6.3 billion, an increase of $50.1 million from December 31, 2019. Our loan
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portfolio generally consists of income property loans ("IPL") and single family residential ("SFR") mortgage loans, which represent 68.4% and 31.4%, respectively, of our total loan portfolio. Our IPL portfolio primarily consists of hybrid multifamily residential and commercial real estate loans and totaled $4.3 billion at June 30, 2020 compared to $4.2 billion at December 31, 2019. Our SFR loan portfolio also generally consists of hybrid loans and totaled $2.0 billion at both June 30, 2020 and December 31, 2019.
Selected Loan Data (1)
Three Months EndedSix Months Ended
(Dollars in thousands)June 30,
2020
March 31,
2020
June 30,
2019
June 30,
2020
June 30,
2019
Loan Yield
IPL Portfolio3.82 %4.08 %4.12 %3.95 %4.11 %
SFR Loan Portfolio3.45 %3.51 %3.56 %3.48 %3.63 %
Loan Originations
IPL Portfolio$266,661  $189,996  $280,148  $456,657  $487,463  
SFR Loan Portfolio$218,801  $115,591  $154,105  $334,392  $258,326  
Weighted Average Coupon on Loan Originations
IPL Portfolio3.76 %3.93 %4.37 %3.81 %4.47 %
SFR Loan Portfolio3.78 %4.02 %4.34 %3.86 %4.46 %
Prepayment Speeds
IPL Portfolio19.56 %12.60 %10.34 %16.14 %8.70 %
SFR Loan Portfolio34.34 %36.06 %31.87 %35.20 %29.13 %
(1) The table above excludes loan data related to construction, land and non-mortgage loans.

During the quarter ended June 30, 2020, compared to the linked quarter, IPL portfolio yields decreased by 26 basis points. The decline was primarily due to a $3.1 million increase in the cost of our swaps, which reduced the IPL portfolio yield by 29 basis points, as well as the prepayment of higher yielding loans being replaced by loans at lower current interest rates, partially offset by a $1.1 million increase in loan prepayment fees collected during the current quarter. The IPL yield during the six months ended June 30, 2020 declined 16 basis points compared to the same period last year. This decline was primarily due to a $4.0 million increase in the cost of our interest rate swaps, which reduced the IPL portfolio yield by 19 basis points, as well as the prepayment of higher yielding loans being replaced by loans at lower current interest rates. These items were partially offset by a $1.3 million increase in loan prepayment fees collected during the current year to date period. The decline in the IPL portfolio average coupon on originations in the quarter ended June 30, 2020 compared to the linked quarter and same period last year was due to a decline in market interest rates. The elevated IPL portfolio 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.
The 6 basis point decrease in yield on the SFR portfolio during the quarter ended June 30, 2020 compared to the linked quarter, as well as the 15 basis point decline in the yield on the SFR portfolio during the six months ended June 30, 2020 compared to the same period last year, were both the result of the prepayment of higher yielding loans being replaced with loans at lower current interest rates. The decline in the average coupon on originations in the SFR loan portfolio in the quarter ended June 30, 2020 compared to the linked quarter and same period last year was primarily due to a decline in market interest rates. The elevated SFR loan portfolio 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 $4.9 million, or 0.07% of total assets, at June 30, 2020, compared to $6.3 million, or 0.09% of total assets, at December 31, 2019. Total criticized loans decreased by $1.3 million, or 2.8%, during the six months ended June 30, 2020. There was no real estate owned at June 30, 2020 or December 31, 2019 and we have not foreclosed on any collateral since 2015. For the quarter ended June 30, 2020, as well as the quarter ended March 31, 2020, we recorded loan loss provisions of $5.3 million. Of the loan loss provision recognized during the current quarter, $3.9 million was set aside to reserve for the uncertain impact associated with the COVID-19 pandemic, while $1.2 million was provided due to a $9.1 million increase in criticized loans during the current quarter as compared to the linked quarter. The increase in criticized loans was unrelated to the pandemic and was primarily related to a $6.6 million increase in Special Mention loans. To support our customers during this period, the
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Company implemented a loan modification program in late March 2020 that permits borrowers who are unable to service their loans due to a COVID-19 related hardship to defer loan payments for a specified period of time. As of June 30, 2020, we have modified 271 currently outstanding loans in connection with this program, representing aggregate outstanding loan balances of $226.5 million and $171.9 million, or 5.3% and 8.8%, of our IPL and SFR loan portfolios, respectively. Since implementing the modification program, approximately 13.8% of these loans, with an aggregate balance of $55.0 million, have been removed from their forbearance period and returned to monthly payment status. Additionally, two SFR loans totaling $2.2 million have paid off subsequent to their modifications. For the six months ended June 30, 2020, we have added $10.1 million to our allowance for loan losses in response to the COVID-19 environment. Our allowance for loan losses to total loans was 0.73% at June 30, 2020, compared to 0.58% at December 31, 2019.
Prepaid Expenses and Other Assets
Prepaid expenses and other assets totaled $57.4 million at June 30, 2020 compared to $62.7 million at December 31, 2019, a decrease of $5.2 million, or 8.3%. The decline in prepaid expenses and other assets from December 31, 2019 was primarily due to a reduction in deferred income tax balances and a decrease in the fair value of our swap derivatives. Prepaid expenses and other assets primarily consist of bank owned life insurance, prepaid expenses, accrued interest receivable, premises and equipment and tax related items.
Deposits
Deposits totaled $5.4 billion at June 30, 2020, an increase of $148.8 million, or 2.8%, from December 31, 2019. Retail deposits increased $184.8 million, while wholesale deposits decreased $36.0 million. Our cost of interest bearing deposits was 1.49% during the quarter ended June 30, 2020 compared to 1.89% during the linked quarter and 2.05% 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 to the Federal Open Market Committee's interest rate cuts.
Other Liabilities
Other liabilities totaled $70.1 million at June 30, 2020, compared to $61.7 million at December 31, 2019, an increase of $8.4 million, or 13.6%. This increase primarily relates to the fair value of our swap derivatives, which totaled $14.7 million at June 30, 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 $596.7 million, a decrease of $17.8 million, or 2.9%, compared to December 31, 2019. The net decline in capital was attributed to the Company’s stock repurchase activity. We repurchased 3.9 million shares at an average share price of $9.01 during the six months ended June 30, 2020, or a 20.5% discount to tangible book value. During the current quarter, the Company completed its $45.0 million stock repurchase program. The Company repurchased a total of 4.9 million shares at an average share price of $9.19, or a 18.9% discount to our current tangible book value, in connection with the program. Stockholders' equity represented 8.3% and 8.7% of total assets at June 30, 2020 and December 31, 2019, respectively. Both the Bank’s and the Company’s capital levels continue to be above the minimum levels required for bank regulatory capital purposes. At June 30, 2020, our Tier 1 Leverage, Common Equity Tier 1 Risk-Based, Tier 1 Risk-Based and Total Risk-Based Capital ratios were 10.3%, 18.3%, 18.3% and 19.5%, respectively, for the Bank, and 9.1%, 14.7%, 16.3% and 17.4%, respectively, for the Company. At June 30, 2020, the Company’s tangible stockholders' equity ratio was 8.3%. 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 $7.2 billion, total loans of $6.3 billion and total deposits of $5.4 billion as of June 30, 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,
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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 may adversely affect the Company, 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, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, 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.

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CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)June 30,
2020 (unaudited)
December 31,
2019
ASSETS
Cash, cash equivalents and restricted cash$170,197  $91,325  
Available for sale debt securities, at fair value635,324  625,074  
Held to maturity debt securities, at amortized cost9,400  10,170  
Equity securities, at fair value12,070  11,782  
Loans held-for-investment6,281,039  6,230,977  
Allowance for loan losses(45,985) (36,001) 
Total loans held-for-investment, net6,235,054  6,194,976  
FHLB stock29,612  30,342  
Premises and equipment, net19,262  19,504  
Prepaid expenses and other assets57,427  62,655  
Total assets$7,168,346  $7,045,828  
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits$5,383,519  $5,234,717  
FHLB advances961,747  978,702  
Junior subordinated deferrable interest debentures61,857  61,857  
Senior debt94,478  94,416  
Other liabilities70,063  61,672  
Total liabilities6,571,664  6,431,364  
Total stockholders' equity596,682  614,464  
Total liabilities and stockholders' equity$7,168,346  $7,045,828  
CONDENSED CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
Three Months EndedSix Months Ended
(Dollars in thousands except per share data)June 30,
2020
March 31,
2020
June 30,
2019
June 30,
2020
June 30,
2019
Interest and fee income:
Loans$58,190  $60,705  $61,015  $118,895  $122,068  
Investment securities2,316  3,303  4,118  5,619  8,043  
Cash, cash equivalents and restricted cash55  317  522  372  922  
Total interest income60,561  64,325  65,655  124,886  131,033  
Interest expense:
Deposits19,821  24,581  26,471  44,402  50,759  
FHLB advances5,685  5,558  6,410  11,243  13,182  
Junior subordinated deferrable interest debentures332  493  632  825  1,283  
Senior debt1,575  1,578  1,574  3,153  3,149  
Total interest expense27,413  32,210  35,087  59,623  68,373  
Net interest income before provision for loan losses33,148  32,115  30,568  65,263  62,660  
Provision for loan losses5,250  5,300  450  10,550  750  
Net interest income after provision for loan losses27,898  26,815  30,118  54,713  61,910  
Noninterest income671  798  1,488  1,469  2,868  
Noninterest expense15,348  16,859  14,709  32,207  30,958  
Income before provision for income taxes13,221  10,754  16,897  23,975  33,820  
Provision for income taxes3,903  3,178  5,239  7,081  10,152  
Net income$9,318  $7,576  $11,658  $16,894  $23,668  
Basic earnings per common share$0.18  $0.14  $0.21  $0.31  $0.42  
Diluted earnings per common share$0.18  $0.14  $0.21  $0.31  $0.42  
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CONSOLIDATED FINANCIAL HIGHLIGHTS (UNAUDITED)
As of or For the Three Months EndedSix Months Ended
(Dollars in thousands except per share data)June 30,
2020
March 31,
2020
June 30,
2019
June 30,
2020
June 30,
2019
PERFORMANCE RATIOS
Return on average:
Assets0.52 %0.43 %0.66 %0.48 %0.68 %
Stockholders' equity6.21 %4.92 %7.83 %5.55 %8.00 %
Efficiency ratio (1)45.38 %51.22 %45.89 %48.26 %47.24 %
Noninterest expense to average assets0.86 %0.96 %0.84 %0.91 %0.88 %
Loan to deposit ratio116.67 %117.65 %119.72 %116.67 %119.72 %
Average stockholders' equity to average assets8.45 %8.76 %8.46 %8.60 %8.44 %
Dividend payout ratio32.60 %42.77 %28.02 %37.16 %27.72 %
YIELDS/RATES
Yield on loans3.72 %3.91 %3.93 %3.81 %3.94 %
Yield on investments1.42 %2.06 %2.48 %1.74 %2.45 %
Yield on interest earning assets3.44 %3.69 %3.77 %3.57 %3.78 %
Cost of interest bearing deposits1.49 %1.89 %2.05 %1.69 %2.00 %
Cost of borrowings2.72 %2.65 %2.76 %2.68 %2.79 %
Cost of interest bearing liabilities1.71 %2.03 %2.19 %1.87 %2.16 %
Net interest spread1.73 %1.66 %1.58 %1.70 %1.62 %
Net interest margin1.88 %1.84 %1.75 %1.86 %1.81 %
CAPITAL
Total equity to total assets8.32 %8.53 %8.40 %
Tangible stockholders' equity to tangible assets (1)8.28 %8.49 %8.36 %
Book value per share$11.39  $11.11  $10.67  
Tangible book value per share (1)$11.33  $11.05  $10.61  
ASSET QUALITY
Net (recoveries) charge-offs$(78) $644  $(79) 
Annualized net (recoveries) charge-offs to average loans(0.00)%0.04 %(0.01)%
Nonperforming loans to total loans0.08 %0.09 %0.19 %
Nonperforming assets to total assets0.07 %0.08 %0.16 %
Allowance for loan losses to loans held-for-investment0.73 %0.65 %0.56 %
Allowance for loan losses to nonperforming loans940.20 %729.54 %301.58 %
LOAN COMPOSITION
Multifamily residential$4,082,224  $4,058,869  $3,919,621  
Single family residential$1,969,563  $1,930,831  $2,127,733  
Commercial real estate$211,135  $205,657  $199,125  
Construction and land$18,017  $22,857  $20,179  
Non-mortgage$100  $100  $100  
DEPOSIT COMPOSITION
Noninterest bearing transaction accounts$76,286  $48,782  $47,472  
Interest bearing transaction accounts$366,714  $226,207  $195,176  
Money market deposit accounts$1,499,490  $1,316,597  $1,397,387  
Time deposits$3,441,029  $3,693,790  $3,594,455  
(1) See "Non-GAAP Reconciliation" table for reconciliations of non-GAAP measurements.
8


NON-GAAP RECONCILIATION (UNAUDITED)
Three Months EndedSix Months Ended
(Dollars in thousands)June 30,
2020
March 31,
2020
June 30,
2019
June 30,
2020
June 30,
2019
Pre-tax, Pre-provision Net Earnings
Income before provision for income taxes$13,221  $10,754  $16,897  $23,975  $33,820  
Plus: Provision for loan losses5,250  5,300  450  10,550  750  
Pre-tax, pre-provision net earnings$18,471  $16,054  $17,347  $34,525  $34,570  
Efficiency Ratio
Noninterest expense (numerator)$15,348  $16,859  $14,709  $32,207  $30,958  
Net interest income33,148  32,115  30,568  65,263  62,660  
Noninterest income671  798  1,488  1,469  2,868  
Operating revenue (denominator) $33,819  $32,913  $32,056  $66,732  $65,528  
Efficiency ratio45.38 %51.22 %45.89 %48.26 %47.24 %
(Dollars in thousands except per share data)June 30, 2020March 31, 2020June 30, 2019
Tangible Book Value Per Share
Total assets$7,168,346  $7,074,050  $7,114,337  
Less: Goodwill(3,297) (3,297) (3,297) 
Tangible assets7,165,049  7,070,753  7,111,040  
Less: Total liabilities(6,571,664) (6,470,710) (6,516,870) 
Tangible stockholders' equity (numerator)$593,385  $600,043  $594,170  
Period end shares outstanding (denominator)52,382,895  54,286,465  55,982,491  
Tangible book value per share$11.33  $11.05  $10.61  
Tangible Stockholders' Equity to Tangible Assets
Tangible stockholders' equity (numerator)$593,385  $600,043  $594,170  
Tangible assets (denominator)$7,165,049  $7,070,753  $7,111,040  
Tangible stockholders' equity to tangible assets8.28 %8.49 %8.36 %



9
lbcinvestorpresentation-
Investor Presentation June 30, 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 of such growth; the fiscal position of the U.S federal government and the soundness of other financial institutions; changes in consumer spending and savings habits; technological and social media changes; the laws and regulations applicable to our business; increased competition in the financial services industry; changes in the level of our nonperforming assets and charge‐offs; 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 eventsor circumstances, except as required by law. 2


 
Use of Non‐GAAP Financial Measures This investor presentation contains certain financial measures that are not measures recognized under U.S. generally accepted accounting principles (“GAAP”) and therefore, are considered non‐GAAP financial measures. The Company’s management uses these non‐GAAP financial measures in their analysis of the Company’s performance, financial condition and the efficiency of its operations. Management believes that these non‐GAAP financial measures provide a greater understanding of ongoing operations and enhance comparability of results with prior periods as well as demonstrate the effects of significant changes in the current period. The Company’s management also believes that investors find these non‐GAAP financial measures useful as they assist investors in understanding our underlying operating performance and the analysis of ongoing operatingtrends. However, the non‐GAAP financial measures discussed herein should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non‐GAAP financial measures discussed herein may differ from that of other companies reporting measures with similar names. You should understand how such other banking organizations calculate their similar financial measures or with names similar to the non‐ GAAP financial measures we have discussed herein when comparing such non‐GAAP financial measures. Below is a listing of the non‐GAAP financial measures used in this investor presentation. • Pro forma items include provision for income taxes, net income, return on average assets, return on average equity and earnings per share. Prior to January 1, 2018, these pro forma amounts are calculated by adding back our franchise S‐Corporation tax to net income, and using a combined C‐Corporation effective tax rate for Federal and California income taxes of 42.0%. This calculation reflects only the changes in our status as a S‐Corporation and does not give effect to any other transaction. • Efficiency ratio is defined as noninterest expenses divided by operating revenue, which is equal to net interest income plus noninterest income. • Tangible book value and tangible stockholders’ equity to tangible assets are non‐GAAP measures that exclude the impact of goodwill and are used by the Company’s management to evaluate capital adequacy. Because intangible assets such as goodwill vary extensively from company to company, we believe that the presentation of these non‐GAAP financial measures allows investors to more easily compare the Company’s capital position to other companies. A reconciliation to these non‐GAAP financial measures to the most directly comparable GAAP measures are provided in the appendix to this investor presentation. 3


 
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 • Donated N95 masks to  waivers of certain early  borrowers • Reduced branch hours from  local hospital withdrawal penalties and  • Modifications with no  10 a.m. to 3 p.m. to limit  • Sponsored four non‐ overdraft fees payments for 3 to 6 months  public exposure profit partners utilizing  • Customer mailings and  for portfolio Single Family  • Special wellness payments  FHLB AHEAD Program to  website postings: LBC  Residential (“SFR”) and  for eligible branch  provide funding for  contact information; how to  Commercial Real Estate  employees targeted economic  transact business; greater  (“CRE”) borrowers • Implemented federal, state,  development projects  awareness around scams  • Accepting applications and  and local guidance on  and non‐AHP‐eligible  and cybercriminals; and links  continuing to originate new  protective measures,  housing initiatives that  to the CDC/WHO real estate loans with  including social distancing  create benefits for low‐ tightened credit  protocols and providing  and moderate‐income  underwriting guidelines disinfectants/hand sanitizer communities • Frequent communication  about access to employee  benefits 4


 
Liquidity Management Liquidity Position (Dollars in thousands) As of 6/30/2020 % of Assets Unrestricted Cash & Cash Equivalents  $             154,477  2.2% Unencumbered Liquid Securities                 647,394  9.0% Unutilized Brokered Deposit Capacity (1)                 552,528  7.7% FHLB Borrowing Capacity (2)                 613,087  8.6% FRB Borrowing Capacity (2)                 167,215  2.3% Commercial Lines of Credit                   50,000  0.7%      Total Liquidity  $         2,184,701  30.5% Total Assets  $         7,168,346  Securities Portfolio (3) Other Borrowings 2% 0% 2% Amount Agency Residential MBS and Outstanding  Cost of  CMOs Type 6/30/2020 Borrowings (4) Agency Commercial MBS & 41% CMOs FHLB Advances $962 million 2.31% Agency bonds 55% Senior Notes $94 million 6.68% CRA Qualified Investment Fund (CRAIX) Other Investments Trust Preferred  $62 million 2.68% (1) Capacity based on internal guidelines.   (2) Capacity based on pledged loan collateral specific to lending bank.  (3) At 6/30/2020, the securities portfolio had a net unrealized gain position of $9.3 million.  (4) For the six months ended 6/30/2020.  5


 
Limited Exposure to Nonresidential CRE 6/30/2020 Loan Portfolio Composition Weighted % of Tot a l ($ in 000's) Count Balance Avg. LTV (1) Loans Multifamily Real Estate 2,539 $ 4,082,224 56.9% 65.0% Commercial Real  Construction &  Other Loans Land  Single Family Real Estate 2,103 1,969,563 64.5% 31.3% Estate 0% 4% Development Commercial Real Estate Type: 0% Strip Retail 23 49,167 51.4% 0.8% Mid Rise Office 7 39,343 65.2% 0.6% Single Family  Low Rise Office 15 26,778 55.5% 0.4% Residential 31% Medical Office 7 20,645 62.9% 0.3% Shopping Center 5 14,638 53.8% 0.2% Multi-Tenant Industrial 8 12,874 49.3% 0.2% Anchored Retail 3 12,544 54.2% 0.2% Multifamily  Residential Mixed Use > 50% Commercial 11 10,945 47.5% 0.2% 65% Unanchored Retail 7 8,578 44.8% 0.1% Shadow Retail 4 7,008 59.8% 0.1% Warehouse 4 3,102 41.4% 0.0% Flex Industrial 3 2,519 64.8% 0.0% Restaurant 2 1,542 34.3% 0.0% Light Manufacturing 1 1,361 50.2% 0.0% Other 1 91 17.4% 0.0% Commercial Real Estate 101 211,135 55.5% 3.4% Construction & Land Development 13 18,017 51.9% 0.3% Non-mortgage Loans 1 100 N/A 0.0% Total 4,757 $ 6,281,039 59.3% 100.0% (1) Construction and land development LTV is calculated based on an “as completed” property value. Other Loan Notes: • At June 30, 2020, the Bank had four secured lines of credit with a total commitment of $5.6 million.  There are no unsecured lines of credit in the  portfolio.  • LBC did not participate in the Paycheck Protection Program given the small amount of business clients in our customer base. 6


 
COVID‐19 Hardship Modifications  Completed Applications Received by Month Applications by Status Application Under Review Approved Docs Out 600 1% 1% 492 Approved Not  500 Accepted 7% 400 Denied 13% 300 273 Modification Completed 200 Withdrawn 58% 20% 100 147 10 0 62 Mar‐20 Apr‐20 May‐20 Jun‐20 Total Applications Received Approved Withdrawn/Denied Payment Deferral Loan Modifications as of June 30, 2020 Total Loans Modified (1) Total Loans Returned to Payment Status (1) % of Loan  Weighted  Monthly  % of Total  Monthly  # of  Current  Portfolio  Weighted  Avg.  Weighted  Cashflow  # of  Current  Modified  Cashflow  (2) (2) ($ in 000's) Loans Balance Segment Avg. LTV DSC Avg. DTI Impact Loans Balance Loans Impact Multifamily residential 99  $        173,009  4.3% 60.2%          1.37  N/A  $         790  20  $          23,615  13.6%  $         117  Single family residential 152            171,891  8.8% 69.1%  N/A  39.4%             697  14              15,296  8.9%                52  Commercial real estate 20              53,485  25.4% 57.3%          1.43  N/A              285  4              16,075  30.1%                83  Total 271  $        398,385  6.4% 63.6%          1.39  39.4%  $      1,772  38  $          54,986  13.8%  $         252  (1) As of June 30, 2020, 2 single family loans totaling $2.2 million have paid off subsequent to their modification and are excluded from the table above. (2) Weighted average DSC and DTI are pre‐COVID‐19 measures. 7


 
Allowance for Loan Losses  Q2 2020 Allowance for Loan Losses Components Rollforward ($ in 000's)  Balance 3/31/2020 Allowance for Loan Losses$                    40,657      COVID‐19 impact                          3,941      Increase due to criticized loans                         1,229      Net recoveries                               78      Other changes                               80 6/30/2020 Allowance for Loan Losses$                    45,985 YTD 6/30/2020 Allowance for Loan Losses Components Rollforward ($ in 000's)  Balance 12/31/2019 Allowance for Loan Losses$                    36,001      COVID‐19 impact                        10,084      Increase due to criticized loans                            236      Net charge‐offs                           (566)      Other changes                            230 6/30/2020 Allowance for Loan Losses$                    45,985 8


 
Capital Management   Tier 1 Leverage Ratio Common Equity Tier 1 Risk‐Based Ratio 14.7% 9.1% $365mm, or  $307mm, or  128%, above  110%, above  regulatory  regulatory  minimum minimum 7.0% 4.0% Regulatory Minimum 6/30/2020 Regulatory Minimum 6/30/2020 Tier 1 Risk‐Based Capital Ratio Total Risk‐Based Capital Ratio 16.3% 17.4% $309mm, or  $277mm, or  91%, above  66%, above  regulatory  regulatory  10.5% minimum 8.5% minimum Regulatory Minimum 6/30/2020 Regulatory Minimum 6/30/2020 • 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 June 30, 2020 were reduced by 3.6 million shares, or 6%, compared to December 31, 2019. • Returned $41.0 million to shareholders during the first six months of 2020 • Net share repurchases of $34.7 million  • Quarterly common stock dividend of $0.0575 per share, or $6.3 million 9


 
Franchise Overview and Financial Highlights Our Small Network of Large Branches Financial Highlights 6/30/2020(1)  10 Total Assets ($mm) $7,168  WA June 30, 2020  Deposits  #Branch Location  Date Established ($mm) Total Loans HFI($mm) $6,281  1Santa Rosa Oct. 1983  $          1,113.8  Total Deposits ($mm) $5,384  2San Rafael Sep. 1996*  575.0 Loans / Deposits 117% 3 Encino Aug. 2007 479.5 Tangible Common Equity / Tang. Assets 8.3% OR 4 Beverly Hills Jul. 2010 390.0 5Los Altos Aug. 2000 300.3 Leverage Ca pi ta l  Ratio 9.1% 6 Pasadena May 2009 329.0 Total Risk‐Based Ca pi ta l  Ratio 17.4% 7Toluca Lake Jan. 2008 303.8 Total CRE Loans (2) / Total Risk‐Based Ca pi ta l 617% 8Long Beach Jun. 2015 282.9 ROAA  0.48% 9San Jose Jun. 2012 229.9 ROAE  5.55% 10 Bellevue Jun. 2018 92.5 11 El Segundo Jan. 2020 16.4 Net Interest Margin 1.86% 11       Wholesale Deposits 380.0 EPS ‐ Fully Diluted  $0.31  22 890.4 San Francisco       Business Banking Efficiency Ratio 48.3% 55 99 ACorporate Office 1,270.4 CA Noninterest Expense / Avg. Assets 0.91% Total Deposits  $          5,383.5  NPAs / Assets 0.07% * Acquisition date ALLL / Loans HFI 0.73% Branch  (11) 33  476   67 Loan Production Office (8) Full‐Time Employees (FTE) 285 4 11 Los Angeles 8 A ** Highlighted counties indicate primary lending markets (1) Financial data as of or for the six months ended 6/30/2020.  See non‐GAAP reconciliation in Appendix hereto. (2) Includes multifamily residential, commercial real estate, and construction  loans. 10


 
Key Highlights 1. History of Profitability 1  Recorded consecutive quarterly profits since our second  History of quarter of operations Profitability  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  with strong job growth and limited affordable housing 6 2  Achieve deeper penetration of our lending and deposit  Efficient Well‐Positioned in  gathering operations in our attractive West Coast markets Operations Strategic 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  Led by President & CEO Simone Lagomarsino (31+ years of  5 3 banking experience) Demonstrated Strong  Invested heavily in people and infrastructure over the last  Organic Growth Asset Quality Engine several years 5. Strong Asset Quality  Our most important focus  Strict, quality oriented underwriting and credit monitoring  processes 4  0.07% NPAs / Total Assets Strong Management Team and  6. Efficient Operations Robust Infrastructure  Maintain a small network of large branches ($374 million  avg. branch size)  48.3% efficiency ratio, 0.91% noninterest expense / average  assets and 285 FTEs Note: Financial data as of or for the six months ended 6/30/2020.  See non‐GAAP reconciliation in Appendix hereto. 11


 
Top Multifamily Lenders in the United States Top 25 Banks and Thrifts by Multifamily Loans (Dollars in billions) As of March 31, 2020 Change Since (%) Delinquency Total Multifamily December 31,  March 31,  % of Change Since (bps) Rank Institution Name Headquarters Assets Loans 2019 2019 Multifamily(1) March 31, 2019 1. JPMorgan Cha s e & Co.  New York, NY 3,139.4 74.77 1.1 4.8 0.18 5 2. New York Community Bancorp Inc.  Westbury, NY 54.3 31.30 0.4 4.5 0.02 0 3. Wells Fargo & Co.  San Francisco, CA 1,981.3 14.96 6.0 11.2 0.15 (6) 4. Signature Bank  New York, NY 53.1 14.86 (1.5) (5.9) 0.21 20 5. Capital One Financial Corp.  McLean, VA 396.9 12.93 5.6 14.3 0.16 12 6. First Republic Bank  San Francisco, CA 123.9 12.82 3.6 19.2 0.00 (2) 7. Santander Holdings USA Inc.  Boston, MA 152.1 8.53 (0.8) 0.4 0.73 8 8. Investors Bancorp Inc.  Short Hills, NJ 26.7 7.65 (2.4) (6.6) 1.04 25 9. Citigroup Inc. New York, NY 2,219.8 7.56 (4.6) (0.3) 1.76 168 10. MUFG Americas Holding Corp.  New York, NY 165.7 7.49 2.5 29.5 0.21 7 11. PNC Financial Services Group Inc.  Pittsburgh, PA 445.6 6.58 1.9 23.4 0.17 (3) 12. Bank of America Corp. Charlotte, NC 2,620.0 5.38 6.6 10.4 0.09 5 13. Valley National Bancorp Wayne, NJ 39.1 5.26 0.6 36.7 0.03 (10) 14. Truist Financial Corp.  Charlotte, NC 506.2 5.09 1.1 90.5 0.10 (39) 15. Sterling Bancorp Montebello, NY 30.3 4.74 (2.9) 0.9 0.16 1 16. M&T Bank Corp.  Buffalo, NY 124.6 4.62 9.7 17.6 0.59 (22) 17. TD Group US Holdings LLC Wilmington, DE 447.3 4.56 1.7 14.1 0.15 (7) 18. Key Corp.  Cleveland, OH 157.0 4.39 4.3 (8.5) 0.12 (12) 19. Luther Burbank Corp.  Santa Rosa, CA 7.1 4.06 1.8 7.7 0.04 (2) 20. U.S. Bancorp Minneapolis, MN 542.9 3.95 2.2 7.4 0.38 8 21. CIBC Bancorp USA Inc.  Chi ca go, IL 49.0 3.87 1.8 21.9 0.00 (4) 22. People's United Financial Inc.  Bridgeport, CT 60.4 3.75 (1.3) 19.1 0.62 56 23. PacWest Bancorp Beverly Hills, CA 26.1 3.60 0.7 11.4 0.01 1 24. Umpqua Holdings Corp.  Portland, OR 27.5 3.52 (1.3) 6.1 0.02 (7) 25. HSBC North America Holdings Inc. New York, NY 297.5 3.50 3.8 38.7 0.00 0 Banking Industry Aggregate(2) 468.69 2.2 7.5 0.32 9 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 > $1 billion  Gross loans / assets > 65%  Multifamily loans / total loans > 30%  MFR + SFR + CRE / total loans > 75% General Information Profitability Capital & Balance Sheet Ratios Asset Quality(1) Bal. Sheet Growth(2) Total NPA /NCO /GrossTotal Total Multifamily Yield on Cost of NIE / Avg. Eff. TCE / Leverage Capital Loans /LLR / Loans Avg. Loans Deposits Assets Loans ROAA ROAE NIM Loans Deposits Assets Ratio TA Ratio Ratio Deposits Loans + OREO Loans CAGR CAGR Institution Name Ticker State ($bn) ($bn) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) Luther Burbank Corporation LBC CA 7.1 4.1 0.43 4.92 1.88 3.91 1.90 0.96 51.5 8.5 9.4 17.5 116 0.65 0.11 0.04 10.7 15.2 Peer Group: 1. Dime Community Bancshares, Inc. DCOM NY 6.3 3.2 0.54 5.35 2.76 4.10 1.26 1.67 57.5 8.2 9.8 15.2 119 0.70 0.35 0.00 ‐2.4 ‐1.0 2. Empire National Bank NY 1.0 0.3 0.26 2.84 2.60 4.41 1.39 2.13 79.4 9.9 9.2 16.5 75 1.04 0.74 0.00 9.8 8.7 3. First Foundation Inc. FFWM CA 6.5 2.9 0.83 8.41 3.05 4.48 1.58 2.08 58.2 8.2 8.4 11.0 105 0.43 0.23 0.01 21.8 25.1 4. Flushing Financial Corporation FFIC NY 7.2 2.3 (0.08) (0.96) 2.50 4.23 1.62 1.80 85.0 7.4 8.6 13.2 120 0.47 0.39 0.08 6.5 4.8 5. Investors Bancorp, Inc. ISBC NJ 26.7 7.7 0.60 6.00 2.69 NA 1.39 1.60 53.8 9.4 9.7 14.3 115 1.14 0.55 0.15 3.9 5.5 6. Kearny Financial Corp. KRNY NJ 6.8 2.1 0.55 3.39 2.55 4.22 1.49 1.68 66.5 13.0 13.3 22.8 106 0.81 0.96 0.00 14.1 14.5 7. Malaga Bank F.S.B. CA 1.3 1.0 1.38 10.96 2.92 4.04 0.98 0.96 32.7 12.7 12.7 21.9 145 0.31 0.00 0.00 7.9 1.0 8. Marquette Bank IL 1.6 0.5 0.26 2.37 3.48 4.24 0.51 3.24 78.3 8.9 8.6 13.9 86 1.33 2.32 (0.01) 1.8 1.4 9. New York Community Bancorp, Inc. NYCB NY 54.3 31.3 0.75 6.00 2.01 3.76 1.50 0.94 48.1 7.2 8.5 13.2 132 0.38 0.14 0.10 2.1 3.2 10. Northfield Bancorp, Inc. NFBK NJ 5.0 2.4 0.37 2.59 2.58 4.07 1.19 1.26 NA 13.4 13.2 NA 99 1.05 0.47 0.01 5.3 8.1 11. Opus Bank CA 8.4 3.9 (4.24) (32.24) 2.82 4.07 1.02 6.95 63.7 8.7 9.6 15.1 88 0.86 0.10 (0.04) 1.7 0.1 12. Provident Savings Bank, F.S.B. CA 1.1 0.5 0.48 4.70 3.37 4.21 0.40 2.66 72.7 10.4 10.4 18.5 108 0.85 1.78 (0.01) ‐3.4 ‐3.5 13. Waterstone Financial, Inc. WSBF WI 2.1 0.6 1.21 6.21 2.80 4.60 1.77 6.94 NA 18.1 18.4 23.9 150 0.79 0.63 (0.01) 5.5 3.9 Average: 0.22 1.97 2.78 4.20 1.24 2.61 63.3 10.4 10.8 16.6 111 0.78 0.67 0.02 5.7 5.5 Median: 0.54 4.70 2.76 4.22 1.39 1.80 63.7 9.4 9.7 15.2 108 0.81 0.47 0.00 5.3 3.9 Source: SNL Financial. GAAP data when available, otherwise FR Y‐9C’s and bank call reports as of or for the three months ended 3/31/2020.  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 3/31/2020. 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  $937 thousand average loan balance  15.0 units average  65% average loan‐to‐value ratio  57% average loan‐to‐value ratio  751 average credit score  1.52x average debt service coverage ratio 0.07% NPAs / Assets 0.08% NPLs / Loans Note: Data as of 6/30/2020. 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 • Real estate secured only/ 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 3.81% yield on loans(1); 4.10%  weighted average coupon Multifamily Loans by Lending Area Single Family Loans by Lending Area Oregon Oregon 3% 0% Washington 7% Washington 12% NorCal SoCal (LA / OC) 32% 47% NorCal 23% SoCal (LA / OC) 52% SoCal  (Other) SoCal (Other) 10% 14% (1) As of or for the six months ended 6/30/2020. 16


 
Asset Quality Nonperforming Assets(1) / Total Assets Asset Quality ‐ Nonperforming Assets ($ in millions) $30.0 1.50% $20.0 1.00% $10.0 0.50% $6.9  $6.3  $5.6  $4.9  $2.7  $2.0  0.12%  $0.0 0.09%  0.08%  0.00% 0.05%  0.03%  0.07%   December 31,  December 31,  December 31, December 31, March 31, June 30, 2016 2017 2018 2019 2020 2020 Nonperforming Assets (excluding performing troubled debt restructuings) Nonperforming Assets / Total Assets Culture Approach Results  Risk management is a core competency of   Continuous evaluation of risk and return  6/30/2020 NPAs / Total Assets of 0.07%;  our business NPLs / Total Loans of 0.08%  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 Total Loans Originated YTD ($ in millions) & Weighted Average Loan Coupon $3,000 5.00% 4.63% 4.35% 4.50% 4.00% $2,500 3.86% 4.00% 3.51% 3.50% $2,000 $2,073.6  $2,140.3  $2,047.8  3.00% $1,564.1 $1,500 2.50% Q4 $412.7  4.15% 2.00% $1,000 $382.4  Q3 4.26% $821.0 1.50% $487.9  1.00% $500 Q2 $457.5  Q2 4.44% 3.78% 0.50% Q1 $311.5  Q1 $333.1  4.62% 3.98% $0 0.00% December 31, December 31, December 31, December 31, June 30, 2016 2017 2018 2019 2020 Pipeline: • Total loan pipeline at June 30, 2020 is $132.6 million ($87.6 million CRE at 3.852% WAC, $39.5 million SFR at 3.979% WAC & $5.5 million  LOC at 5.000% 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 CRE Loans Originated YTD ($ in millions) & Weighted Average Loan Coupon $1,500 5.00% 4.60% 4.40% 4.50% 4.02% $1,250 3.86% 4.00% 3.43% 3.50% $1,000 $972.9 $1,366.8  $1,218.3  3.00% Q4 $246.9  4.16% $750 $1,091.4  2.50% Q3 $215.3  2.00% 4.34% $486.6 $500 1.50% Q2 $303.4  Q2 $269.1  4.49% 3.78% 1.00% $250 0.50% Q1 $207.3  Q1 $217.5  4.61% 3.95% $0 0.00% December 31, December 31, December 31, December 31, June 30, 2016 2017 2018 2019 2020 • 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 SFR Loans Originated YTD ($ in millions) & Weighted Average Loan Coupon $1,000 5.00% 4.67% 4.29% 4.50% 3.94% 3.86% $800 5.15% 4.00% 3.56% 3.50% $591.2 $600 $828.8  3.00% $815.5  Q4 $165.8  2.50% $756.1  4.14% $400 2.00% $167.1  $334.4 Q3 4.16% 1.50% $218.8  $200 1.00% Q2 $154.1  Q2 3.78% 4.34% 0.50% Q1 $104.2  Q1 $115.6  4.02% $0 4.63% 0.00% December 31, December 31, December 31, December 31, June 30, 2016 2017 2018 2019 2020 20


 
Loan Portfolio Rates 5.000% 4.800% 4.600% 4.400% 4.200% 4.000% 3.800% 3.600% 3.400% 3.200% Rate on Originations Rate on Principal Reductions/Sales Rate on Loan Portfolio 3.000% Jul Jul Jul Jul Jan Jan Jan Jan Jan Jun Jun Jun Jun Jun Oct Oct Oct Oct Apr Apr Apr Apr Apr Feb Sep Feb Sep Feb Sep Feb Sep Feb Dec Dec Dec Dec Aug Aug Aug Aug Nov Nov Nov Nov Mar Mar Mar Mar Mar May May May May May 2016 2017 2018 2019 2020 • At June 30, 2020, loans representing 66% of the loan portfolio, or $4.1 billion in aggregate outstanding principal balance, are at their floors, and 47% of those loans  have fully indexed rates above their floors by approximately 0.31%.  21


 
CPR Loan 13.00% 18.00% 23.00% 28.00% 33.00% 38.00% 43.00% 3.00% 8.00% CPR Jan   Prepayment   Feb based Mar   on Apr   12   May month 0621 0821 2020 2019 2018 2017 2016 Jun   Jul rolling Aug   Sep average Oct   Nov of   Dec monthly Jan     Feb prepayment Speeds Mar Apr May   rates Jun   Jul (SMM) Aug Sep Oct Total Nov   Dec Loans Jan Feb Mar Apr May SFR   Jun Loans Jul Aug Sep Oct Nov CRE Dec   Jan Loans Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May 22 Jun


 
Deposit Composition Historical Deposit Growth & Portfolio Composition Deposit Breakdown by Branch ($ in millions) (1) Total Deposits ($ in millions) Total  $6,000   Branch Location Consumer Business Wholesale Deposits  $5,383.5  $5,234.7  $5,285.4  Santa Rosa  $   1,088.9  $              24.9  $              0.00     $      1,113.8  $5,001.0  $5,000 San Rafael 523.8 51.2 0.0 575.0 $3,951.3  Encino 475.2 4.3 0.0 479.5 $4,000 $3,334.0  Beverly Hills 386.3 3.7 0.0 390.0 $3,000 Los Altos 294.1 6.2 0.0 300.3 Pasadena 326.8 2.2 0.0 329.0 $2,000 Toluca Lake 276.1 27.7 0.0 303.8 $1,000 December 31, December 31, December 31, December 31, March 31, June 30, Long Beach 275.8 7.1 0.0 282.9 2016 2017 2018 2019 2020 2020 San Jose 153.8 76.1 0.0 229.9 Noninterest‐bearing Deposits 1% Bellevue 87.6 4.9 0.0 92.5 El Segundo  15.0 1.4 0.0 16.4 MMDAs &  Other Savings  Corporate Office 0.0 890.4 380.0 1,270.4 Deposits Time Deposits 28%   Total Deposits  $   3,903.4  $      1,100.1  $             380.0  $      5,383.5  64% Interest  Checking  Deposits 7% 1.69% cost of interest‐bearing deposits(1) (1) As of or for the six months ended 6/30/2020. 23


 
Deposit Growth/Balance  Growth Trend Deposit Growth by Segment ($ in millions)  $6,000 $50.7 $233.7 $98.1  $5,000 $881.1  $1,100.1  $1,049.7 $708.3  $973.2  $545.0   $4,000 $279.4  $440.1  $416.0  $380.0  $617.3 $86.0  $253.9   $3,000 $105.0   $2,000 $3,852.6  $3,845.5  $3,859.3  $3,903.4  $3,418.0  $3,143.0   $1,000  $‐ December 31, December 31, December 31, December 31, March 31, June 30, 2016 2017 2018 2019 2020 2020 Retail ‐ Consumer Wholesale Retail ‐ Business 24


 
Business Composition By Vertical  December 31, 2019 June 30, 2020 Other HOA Other HOA 15% 10% 18% 8% Other Zero Interest  1031 Exchange Operating 5% 3% Zero Interest  Other Zero Interest  Checking 1.572% Operating 2% 1.572% 1.082% 1031 Exchange 3% 0.830% 27% Zero Interest  1.220% Union Accounts Checking 7% 2% Union Accounts 7% Fiduciary Fiduciary 57% 36% Total business deposits of $973.2 million Total business deposits of $1.1 billion 25


 
Efficient Operations Result in Consistent Profitability Return on Average Assets(1) Return on Average Equity(1) 0.70% 8.89% 0.67% 0.69% 0.69% 8.02% 7.96% 8.15% 0.48% 5.55% Full year Full year Full Year Full Year YTD Full year Full year Full Year Full Year YTD 12/31/2016 12/31/2017 12/31/2018 12/31/2019 6/30/2020 12/31/2016 12/31/2017 12/31/2018 12/31/2019 6/30/2020 Efficiency Ratio Noninterest Expense to Average Assets 1.3% 59.8% 1.0% 47.8% 48.5% 46.9% 48.3% 1.0% 0.9% 0.9% Full year Full year Full Year Full Year YTD Full year Full year Full Year Full Year YTD 12/31/2016 12/31/2017 12/31/2018 12/31/2019 6/30/2020 12/31/2016 12/31/2017 12/31/2018 12/31/2019 6/30/2020 (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  1.94% 2.04% 2.05% 1.89% 1.88% 1.88% 1.98% 1.86% 1.84% 1.84% 1.84% 1.86% 1.75% Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Full year Full year Full Year Full Year YTD 12/31/2016 12/31/2017 12/31/2018 12/31/2019 6/30/2020 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) 5.0% $5.0 25.0% $50.5  $50.0 $1.4  8.9%  (9.3%) 0.9%  (0.2%) 0.0% $0.0 (1.1%) (15.1%) 0.0% $0.0 (21.7%) ($0.4) (2.6%) ($50.0) ($1.6) (25.0%) ($52.8) (31.2%) (5.3%) ($86.0) ($100.0) ($3.9) (5.0%) ($5.0) ($123.7) (50.0%) ($150.0) ($7.8) ($177.8) ($200.0) (10.0%) ($10.0) (75.0%) ($250.0) (15.0%) ($15.0) (100.0%) ($300.0) ‐ 100 BP + 100 BP + 200 BP + 300 BP + 400 BP ‐ 100 BP + 100 BP + 200 BP + 300 BP + 400 BP $ Change NII % Change NII $ Change EVE % Change EVE Interest Rate Risk to Earnings (NII) Interest Rate Risk to Capital (EVE) June 30, 2020 June 30, 2020 Change in Change in Interest Rates $ Change % Change Interest Rates $ Change % Change (basis points) NII NII (basis points) EVE EVE + 400 BP (7.8) (5.3%) + 400 BP (177.8) (31.2%) + 300 BP (3.9) (2.6%) + 300 BP (123.7) (21.7%) + 200 BP (1.6) (1.1%) + 200 BP (86.0) (15.1%) + 100 BP (0.4) (0.2%) + 100 BP (52.8) (9.3%) ‐ 100 BP 1.4 0.9% ‐ 100 BP 50.5 8.9% 28


 
1 For (1) Economic % Change in EVE   Luther ‐ ‐ ‐ ‐ ‐ 10% 15% 20% 25% 30% ‐ 0% 5%   Burbank May Jun   Jul Savings Aug Sep Oct Nov Dec Jan   Feb Value Mar Apr 0421 0621 0821 2020 2019 2018 2017 2016 2015 2014 May Jun Jul Aug Sep Oct Nov   Dec of Jan Feb Mar Apr   May Equity Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr   May Trend Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb +200bp Mar Apr May +100bp   Jun Shock Jul Aug   Sep Shock Oct (1) Nov Dec (1) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 29


 
1 Beta (1) Deposits Ave. Monthly Rate % 0.000 0.500 1.000 1.500 2.000 2.500 3.000   is   calculated Jan‐16 Feb‐16   using Mar‐16   Apr‐16 an   average May‐16  ‐ Jun‐16 Cost   Jul‐16 Fed   Aug‐16 Funds Sep‐16   Rate. Oct‐16 Nov‐16   Dec‐16 of Jan‐17 Feb‐17   Mar‐17 Funds Apr‐17 May‐17 Jun‐17 Jul‐17 Deposit Aug‐17     Comparison Sep‐17 Portfolio Oct‐17 Nov‐17   Dec‐17 Cost Jan‐18   Feb‐18 of   Mar‐18 Funds Apr‐18 May‐18 Jun‐18 Jul‐18 Aug‐18 Sep‐18 Oct‐18 Nov‐18 Fed Dec‐18   Funds Jan‐19 Feb‐19 Deposit Mar‐19 Deposit Jun. Apr‐19 2018 Jan.   May‐19 2019     Portfolio Jun‐19 Portfolio  ‐ Jul‐19  ‐ u.2020 Jun. Aug‐19 Jun.     Beta Beta   Sep‐19 2020   Oct‐19   21% 26%   (1) Nov‐19 (1) Dec‐19 Jan‐20 Feb‐20 Mar‐20 Apr‐20 May‐20 30 Jun‐20


 
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 and a 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 28 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 holdsan 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 Bill Fanter. Mr. Fanter serves the Company as Head of Retail Banking. In this role he is responsible for expanding the Bank’s deposit offerings and creating greater access to its products and services, including consumer deposit generation across traditional branch and online banking platforms. He is also a member of the Company's Executive Committee. Prior to joining the Company in 2020, Mr. Fanter served as Executive Vice President, Head of Retail Banking at Opus Bankfrom 2019 and previous to that, as Senior Vice President, Consumer and Business Banking Market Executive at U.S. Bank from 2003‐2019. His background also includes positionsasDirectorofAutomationServicesatKirchmanCorporationandseveral roles culminating with Senior Vice President, Chief Operating Officer at GreatBanc, Inc. 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. 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 contributions as a 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 executive roles across that institution, culminating in two vice chairman positions (Chief Risk Officer and Chief Corporate 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 chair of that board's 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. 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 serves on the Governance and Nominating Committee. Mr. Krouskup has 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 a variety of 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 financialexpert"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 tenureonour 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 Industriesasa 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., and for many 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) June 30, 2020 (1) December 31, 2019 ASSETS Cash, cash equivalents and restricted cash   $                   170,197  $                     88,565  Available for sale investment securities, at fair value                       635,324                        625,074  Held to maturity investment securities, at amortized cost (fair value of $9,839 and $10,349 at  June 30, 2020 and December 31, 2019 respectively)                            9,400                          10,170  Equity securities, at fair value                         12,070                          11,782  Loans receivable, net of allowance for loan losses of $45,985 and $36,001 as of June 30, 2020  and December 31, 2019, respectively                    6,235,054                     6,194,976  Accrued interest receivable                         20,388                          20,814  Federal Home Loan Bank ("FHLB") stock, at cost                         29,612                          30,342  Premises and equipment, net                         19,262                          19,504  Goodwill                            3,297                             3,297  Prepaid expenses and other assets                         33,742                          41,304  Total assets  $               7,168,346  $               7,045,828  LIABILITIES AND STOCKHOLDERS' EQUITY          Liabilities: Deposits  $               5,383,519  $               5,234,717  Federal Home Loan Bank advances                       961,747                        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 $522 and $584 at June 30, 2020 and December 31, 2019, respectively)                         94,478                          94,416  Accrued interest payable                            1,253                             2,901  Other liabilities and accrued expenses                         68,810                          58,771  Total liabilities                    6,571,664                     6,431,364          Stockholders' equity: Common stock, no par value; 100,000,000 shares authorized; 52,382,895 and 55,999,754 shares  issued and outstanding at June 30, 2020 and December 31, 2019, respectively                       414,264                        447,784  Retained earnings                       175,852                        165,236  Accumulated other comprehensive income, net of taxes                            6,566                             1,444  Total stockholders' equity                       596,682                        614,464  Total liabilities and stockholders' equity  $               7,168,346  $               7,045,828  (1) Unaudited 36


 
Income Statement ($ in 000’s, except per share data) For the Three Months Ended June 30, (1) For the Six Months Ended June 30, (1) 2020 2019 2020 2019 Interest and fee income: Loans  $                58,190  $                61,015  $              118,895  $              122,068  Investment securities                       2,316                        4,118                        5,619                        8,043  Cash, cash equivalents and restricted cash                            55                           522                           372                           922  Total interest and fee income                    60,561                     65,655                   124,886                   131,033  Interest expense: Interest on deposits                    19,821                     26,471                     44,402                     50,759  Interest on FHLB advances                       5,685                        6,410                     11,243                     13,182  Interest on junior subordinated deferrable interest debentures                          332                           632                           825                        1,283  Interest on other borrowings                       1,575                        1,574                        3,153                        3,149  Total interest expense                    27,413                     35,087                     59,623                     68,373  Net interest income before provision for loan losses                    33,148                     30,568                     65,263                     62,660  Provision for loan losses                        5,250                           450                     10,550                           750  Net interest income after provision for loan losses                    27,898                     30,118                     54,713                     61,910  Noninterest income: Net gain on sale of loans                              ‐                             197                               ‐                             530  FHLB dividends                          374                           552                           909                        1,047  Other income                          297                           739                           560                        1,291  Total noninterest income                          671                        1,488                        1,469                        2,868  Noninterest expense: Compensation and related benefits                    10,300                        8,614                     21,505                     18,666  Deposit insurance premium                          471                           487                           947                           985  Professional and regulatory fees                          454                           457                           885                           898  Occupancy                       1,101                        1,399                        2,241                        2,789  Depreciation and amortization                          687                           664                        1,356                        1,329  Data processing                       1,038                           945                        2,005                        1,864  Marketing                          330                        1,071                        1,205                        2,225  Other expenses                          967                        1,072                        2,063                        2,202  Total noninterest expense                    15,348                     14,709                     32,207                     30,958  Income before provision for income taxes                    13,221                     16,897                     23,975                     33,820  Provision for income taxes                       3,903                        5,239                        7,081                     10,152  Net income  $                  9,318  $                11,658  $                16,894  $                23,668  Basic earnings per common share  $                     0.18  $                     0.21  $                     0.31  $                     0.42  Diluted earnings per common share  $                     0.18  $                     0.21  $                     0.31  $                     0.42  Dividends per common share  $                     0.06  $                     0.06  $                     0.12  $                     0.12  Weighted average common shares outstanding ‐ basic            52,465,458             56,108,618             54,038,642             56,314,213  Weighted average common shares outstanding ‐ diluted            52,551,006             56,291,388             54,138,052             56,507,042  (1) Unaudited 37


 
Net Interest Margin ($ in 000’s) For the Six Months Ended For the Three Months Ended For the Three Months Ended June 30, 2020 June 30, 2020 March 31, 2020 Average Interest  Average  Average Interest  Average  Average Interest  Average  Balance Inc / Exp Yield/Rate (5) Balance Inc / Exp Yield/Rate (5) Balance Inc / Exp Yield/Rate (5) Interest‐Earning Assets Multifamily residential$ 4,042,681  $     79,146 3.92%$ 4,075,885  $     38,551 3.78%$ 4,009,477  $     40,594 4.05% Single family residential    1,967,298        34,257 3.48%    1,955,592        16,867 3.45%    1,979,005        17,390 3.51% Commercial real estate       206,921          4,766 4.61%       209,725          2,411 4.60%       204,118          2,355 4.61% Construction, land and NM         21,363             726 6.83%         21,391             361 6.79%         21,334             366 6.90% Total loans (1)    6,238,263      118,895 3.81%    6,262,593        58,190 3.72%    6,213,934        60,705 3.91% Securities available‐for‐sale/ equity       637,628          5,493 1.72%       643,699          2,255 1.40%       631,556          3,238 2.05% Securities held‐to‐maturity (2)           9,761             126 2.58%           9,522               61 2.56%         10,000               65 2.60% Cash, cash equivalents and restricted cash       120,380             372 0.62%       127,565               55 0.17%       113,196             317 1.13% Total interest‐earning assets    7,006,032      124,886 3.57%    7,043,379        60,561 3.44%    6,968,686        64,325 3.69% Noninterest‐earning assets         65,288         63,821         66,756 Total assets $7,071,320  $7,107,200  $7,035,442  Interest‐Bearing Liabilities Interest‐bearing demand deposits$     249,520 $          903 0.72%$     272,160 $          332 0.48%$     226,879 $          572 0.01% Money market demand accounts    1,390,479          7,453 1.06%    1,422,739          3,314 0.92%    1,358,219          4,139 1.21% Time deposits ‐ Retail     3,104,552        33,204 2.12%    3,084,317        15,193 1.95%    3,124,787        18,009 2.28%      Total interest‐bearing deposits ‐ Retail    4,744,551        41,560 1.73%    4,779,216        18,839 1.56%    4,709,885        22,720 1.91% Time deposits ‐ Wholesale       459,148          2,842 1.24%       473,187             982 0.83%       445,110          1,861 1.68%      Total interest‐bearing deposits     5,203,699        44,402 1.69%    5,252,403        19,821 1.49%    5,154,995        24,581 1.89% FHLB advances       977,650        11,243 2.31%       961,410          5,685 2.38%       993,890          5,558 2.25% Senior debt         94,442          3,153 6.68%         94,458          1,575 6.67%         94,427          1,578 6.68% Junior subordinated debentures         61,857             825 2.68%         61,857             332 2.16%         61,857             493 3.21% Total interest‐bearing liabilities     6,337,648        59,623 1.87%    6,370,128        27,413 1.71%    6,305,169        32,210 2.03% Noninterest‐bearing demand deposits         55,529         64,744         46,315 Noninterest‐bearing liabilities         69,745         71,662         67,827 Total liabilities    6,462,922    6,506,534    6,419,311 Total stockholders' equity       608,398       600,666       616,131 Total liabilities and stockholders' equity $7,071,320  $7,107,200  $7,035,442  Net interest spread (3) 1.70% 1.73% 1.66% Net interest income/margin (4) $     65,263 1.86%$      33,148 1.88%$      32,115 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.   38


 
Non‐GAAP Reconciliation ($ in 000’s) As of or For the  Six Months Ended  As of or For the Years Ended December 31, June 30, 2020 2019 2018 2017 2016 Tangible common equity Total assets  $          7,168,346  $        7,045,828  $        6,937,212  $        5,704,380  $        5,063,585  Less: Goodwill                     (3,297)                   (3,297)                   (3,297)                   (3,297)                   (3,297) Less: Total liabilities             (6,571,664)           (6,431,364)           (6,356,067)           (5,154,635)           (4,659,210) Tangible common equity  $             593,385  $           611,167  $           577,848  $           546,448  $           401,078  Tangible assets Total assets  $          7,168,346  $        7,045,828  $        6,937,212  $        5,704,380  $        5,063,585  Less: Goodwill                     (3,297)                   (3,297)                   (3,297)                   (3,297)                   (3,297) Tangible assets  $          7,165,049  $        7,042,531  $        6,933,915  $        5,701,083  $        5,060,288  Tangible common equity to tangible assets Tangible book value (numerator)  $             593,385  $           611,167  $           577,848  $           546,448  $           401,078  Tangible assets (denominator)              7,165,049             7,042,531             6,933,915             5,701,083             5,060,288  Tangible common equity to tangible assets 8.3% 8.7% 8.3% 9.6% 7.9% Efficiency ratio Noninterest expense (numerator)  $                32,207  $              62,386  $              62,687  $              56,544  $              61,242  Net interest income  $                65,263  $           128,407  $           125,087  $           110,895  $              94,594  Noninterest income                      1,469                     4,675                     4,131                     7,508                     7,885  Operating revenue (denominator)  $                66,732  $           133,082  $           129,218  $           118,403  $           102,479  Efficiency ratio 48.3% 46.9% 48.5% 47.8% 59.8% Pro forma items (1)      Net income before income taxes  $              65,231  $              53,940       Effective tax rate 42% 42%      Pro forma provision for income taxes  $              27,397  $              22,655       Net income before income taxes  $              65,231  $              53,940       Pro forma provision for income taxes                  27,397                   22,655       Pro forma net income  $              37,834  $              31,285       Pro forma net income (numerator)  $              37,834  $              31,285       Average assets (denominator)            5,485,832             4,676,676       Pro forma return on average assets 0.69% 0.67%      Average stockholders' equity (denominator)  $           425,698  $           390,318       Pro forma return on average stockholders' equity 8.89% 8.02% (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