Quarterly Cash Dividend of $0.015 Per Common Share Declared

SANTA ROSA, Calif., Jan. 25, 2018 (GLOBE NEWSWIRE) -- Luther Burbank Corporation (NASDAQ:LBC) (the “Company”), the holding company for Luther Burbank Savings (the “Bank”), today reported net income available to common shareholders of $20.4 million, or $0.45 diluted earnings per common share (“EPS”), for the quarter ended December 31, 2017, compared to net income available to common shareholders of $13.3 million, or $0.32 EPS, for the quarter ended December 31, 2016. For the twelve months ended December 31, 2017, net income available to common shareholders totaled $69.4 million, or $1.62 EPS compared to $52.1 million, or $1.24 EPS, for the comparable 2016 period.  Net income for the fourth quarter of 2017 reflects a net tax benefit of $5.8 million which amount includes a $5.3 million tax benefit from the restatement of the Company's net deferred tax assets related to the revocation of its S Corporation status and the recently enacted Tax Cuts and Jobs Act and a $2.9 million tax benefit from the partial deductibility of contingent IPO costs not recognized as GAAP expenses, partially offset by a $2.4 million tax provision on fourth quarter earnings.  Excluding these one-time benefits of $8.2 million, EPS for the quarter ended December 31, 2017 and the twelve months ended December 31, 2017 were $0.27 per share and $1.42 per share, respectively. 

John G. Biggs, President and Chief Executive Officer, stated, “Our 34 year history of profitability continues with earnings of over $20 million for the fourth quarter of 2017.  What makes this possible is a loan portfolio that now exceeds $5 billion, which was achieved by deeper loan and deposit penetration into our attractive west coast markets.”

Mr. Biggs continued, “Asset growth continues to excel, exceeding 13% for the year.  The Company completed a successful common equity IPO, raising net proceeds of over $138 million.  This additional capital will allow us to continue building a strong and growing company.”

“At the same time, we remain vigilant to achieving exceptional efficiency of our operations, with one of the best efficiency ratios of our real estate and commercial bank peers.  Coupled with our excellent efficiency is our extremely low level of non-performing assets, which at year end was only 0.12% of total assets, again, one of the best ratios of our peers.”

Board Declares Quarterly Cash Dividend of $0.015 Per Share
On January 25, 2018, the Board of Directors of the Company declared a quarterly cash dividend of $0.015 per common share.  The fourth quarter dividend declared is prorated based on a regular quarterly cash dividend on our common stock of $0.0575 per share and the portion of the fourth quarter of 2017 during which the Company was a public company, which was 24 days.  The dividend is payable on February 15, 2018 to shareholders of record as of February 5, 2018.

Fourth Quarter and Twelve Months Earnings Summary
Net interest income for the quarter ended December 31, 2017 totaled $27.6 million compared to $28.8 million for the previous quarter and $24.2 million for the 2016 fourth quarter.  The net interest margin for the quarter ended December 31, 2017 was 2.05%, compared to 2.02% for the previous quarter and 1.98% for the 2016 fourth quarter.  For the twelve months ended December 31, 2017, net interest income totaled $111.0 million, compared to $94.6 million for the comparable 2016 period, and the net interest margin was 2.05% for the twelve months ended December 31, 2017, up slightly from 2.04% for the twelve months ended December 31, 2016.

For the quarter ended December 31, 2017, a $1.3 million loan loss provision was recorded compared to a $1.6 million provision in the prior quarter and a $3.6 million reversal recorded in the 2016 fourth quarter.  For the twelve months ended December 31, 2017, we recorded a loan loss reversal of $3.4 million compared to a $12.7 million loan loss reversal for the comparable 2016 period.

Noninterest income for the quarter ended December 31, 2017 totaled $1.4 million, compared to $4.9 million for the previous quarter and $3.1 million for the 2016 fourth quarter.  Noninterest income for the twelve months ended December 31, 2017 totaled $7.4 million compared to $7.8 million for the comparable 2016 period.  The reduction of $3.4 million in noninterest income, or 70.6%, for the quarter ended December 31, 2017 compared to the linked quarter ended September 30, 2017, was attributable to the gain on the $626.1 million multifamily securitization transaction in the third quarter 2017.   The reduction of $1.6 million in noninterest income, or 53.1%, for the quarter ended December 31, 2017 compared to the prior quarter ended December 31, 2016, was primarily attributable to a decrease in FHLB dividends of $825,000 as the FHLB provided an special dividend in the fourth quarter of 2016 of $917 thousand and a decrease of $1.2 million in the gain on sale of loans due to no loan sale activity in the quarter ended December 31, 2017.  The quarter ending December 31, 2016 included gains from retail single family mortgage banking operations which operations were ended in the first quarter of 2017 and gains from multifamily residential portfolio loans sales completed for purposes of asset liability management.

General and administrative ("G&A") expense for the quarter ended December 31, 2017 totaled $13.2 million compared to $13.8 million for the previous quarter and $17.1 million for the 2016 fourth quarter.  The reduction of $3.9 million in G&A expenses, or 22.7%, from the quarter ended December 31, 2017 compared to the quarter ended December 31, 2016, was primarily attributable to compensation and related benefits, resulting from a decrease of $1.1 million in salaries and a $2.3 million reduction in incentive compensation related to the retail mortgage banking operations ending in the first quarter of 2017.   

For the twelve months ended December 31, 2017, G&A expense totaled $56.5 million, down from $61.2 million for the 2016 comparable period.  The reduction of $4.7 million in G&A expenses, or 7.7% was the result of a net decrease of $2.0 million in compensation and employee benefits, a decrease of $542,000 in professional and regulatory fees and a decrease of $1.8 million in other expenses.  The decrease in compensation and employee benefits was primarily related to the retail mortgage banking operations ending in the first quarter of 2017.  The decrease in other noninterest expense was primarily attributable to a net reduction in the provision for off-balance sheet items.  This was associated with a reduction in unfunded construction loan commitments in 2017 versus an increase in unfunded construction loan commitments in 2016.

Balance Sheet Summary
Total assets at December 31, 2017 were $5.7 billion, an increase of over $640.8 million from December 31, 2016. The increase was primarily due to a $601 million increase in loans and a $48 million increase in investments available for sale. 

The multifamily residential (“MFR”) mortgage loan portfolio totaled $2.9 billion at December 31, 2017 compared to $2.6 billion at December 31, 2016 and represents 57.3% of the total loan portfolio. For the quarter and twelve months ended December 31, 2017, MFR loan originations totaled $344.2 million and $1.30 billion, respectively, compared to $338.9 million and $1.06 billion, for the 2016 comparable periods. At December 31, 2017, the MFR pipeline totaled $188.4 million.

The single family residential mortgage loan portfolio totaled $2.0 billion at December 31, 2017, compared to $1.7 billion at December 31, 2016 and represents 38.8% of the total loan portfolio.  For the quarter and twelve months ended December 31, 2017, residential loan originations for portfolio totaled $221.1 million and $726.5 million, respectively, compared to $203.7 million and $782.6 million for the comparable 2016 periods.  At December 31, 2017, the residential mortgage pipeline totaled approximately $114.0 million.

Deposits totaled $4.0 billion at December 31, 2017, an increase of $617.3 million from December 31, 2016. 

Stockholders’ equity totaled $549.7 billion, or 9.6% of total assets at December 31, 2017, an increase of $145.4 million from December 31, 2016, or an increase of 35.9%.  Luther Burbank Savings’ capital levels continue to be significantly above the minimum levels required to be designated as “well-capitalized” for bank regulatory purposes. At December 31, 2017, Tier 1 leverage, Common Equity Tier 1 risk based, Tier 1 risk-based and Total risk-based capital ratios were 12.54%, 19.90%, 19.90% and 20.84%, respectively for the Bank, and 11.26%, 16.05%, 17.84% and 18.78%, respectively for the Company. At December 31, 2017, the Company’s tangible common equity ratio was 9.58%.

Asset Quality
Non-performing loans (“NPLs”), totaled $7.0 million, or 0.14% of total loans, at December 31, 2017, compared to $2.6 million, or 0.06% of total loans, at December 31, 2016.  There was not any real estate owned at December 31, 2017 or December 31, 2016.

About Luther Burbank Corporation

Luther Burbank Corporation, with assets of $5.7 billion, is the holding company for Luther Burbank Savings. Established in 1983, Luther Burbank Savings, with deposits in California totaling $4.0 billion, is the 19^th largest commercial bank in California and provides its business and retail customers and local communities it serves with quality financial products and services through nine convenient banking branch locations in Northern and Southern California and eight lending offices in California, Seattle, Washington and Portland, Oregon.  The Company also has multiple delivery channels, including its flexible mobile banking app.

Cautionary Statements Regarding Forward-Looking Information

Certain statements in this earnings release are forward-looking statements that reflect the Company’s current view with respect to, among other things, future events and our Company’s financial and operational performance.  These statements are often, but not always, made through the use of such words as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “outlook,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would,” and similar terms and phrases, including references to assumptions.

Forward-looking statements are based on various assumptions and analyses made by us in light of our management’s experience and perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate under the circumstances. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors (many of which are beyond our control) that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. These factors include, without limitation, the following: the timing and occurrence or non-occurrence of events that may be subject to circumstances beyond our control; increases in competitive pressure among financial institutions or from non-financial institutions; changes in the interest rate environment; changes in deposit flows, loan demand or collateral values; changes in accounting principles, policies or guidelines; changes in general economic conditions, either nationally or locally in some or all areas in which we do business, or conditions in the real estate or securities markets or the banking industry; legislative or regulatory changes, including those that may be implemented by the new administration in Washington, D.C.; supervision and examination by federal and state banking regulators; our ability to successfully implement technological changes; our ability to successfully consummate new business initiatives; or our ability to implement enhanced risk management policies, procedures and controls commensurate with shifts in our business strategies and regulatory expectations. The forward-looking statements are made as of the date of this communication, and we do not intend, and assume no obligation, to update any forward-looking statements to reflect events or circumstances after the date of this press release, except as required by applicable law.

About Non-GAAP Financial Measures
Certain of the financial measures and ratios we present, including “pre-tax, pre-provision net earnings,” “tangible book value,” “efficiency ratio,” “tangible assets,” “tangible stockholders’ equity,” “tangible stockholders’ equity to tangible assets,” “return on average tangible equity,” “proforma net income” and “proforma ratios” are supplemental measures that are not required by, or are not presented in accordance with, U.S. generally accepted accounting principles (GAAP). We refer to these financial measures and ratios as “non-GAAP financial measures.” We consider the use of select non-GAAP financial measures and ratios to be useful for financial and operational decision making and useful in evaluating period-to-period comparisons.  We believe that management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, analyzing and comparing past, present and future periods.

These non-GAAP financial measures should not be considered a substitute for financial information presented in accordance with GAAP and you should not rely on non-GAAP financial measures alone as measures of our performance. The non-GAAP financial measures we present may differ from non-GAAP financial measures used by our peers or other companies. We compensate for these limitations by providing the equivalent GAAP measures whenever we present the non-GAAP financial measures and by including a reconciliation of the impact of the components adjusted for in the non-GAAP financial measure so that both measures and the individual components may be considered when analyzing our performance. A reconciliation of non-GAAP financial measures to the comparable GAAP financial measures is included at the end of the financial statement tables.

 

CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands except for per share data and ratios)
	31-Dec-17				30-Sep-17				30-Jun-17				31-Mar-17				31-Dec-16
ASSETS
Cash and cash equivalents	$	75,578			$	87,051			$	86,819			$	75,719			$	59,208
Available for sale investment securities, at fair value		503,288				471,438				483,846				466,564				459,162
Held to maturity investment securities, at amortized cost		6,921				6,965				7,222				7,267				7,561
Loans held-for-sale		-				39,011				701,947				47,844				34,974
Loans held-for-investment (2)		5,041,547				4,630,926				4,306,893				4,729,359				4,439,766
Allowance for loan losses		(30,312	)			(28,984	)			(27,356	)			(33,699	)			(33,298	)
Accrued interest receivable		14,901				13,902				14,561				13,174				12,141
Federal Home Loan Bank stock		27,733				40,159				38,582				32,910				30,410
Premises and equipment, net		22,452				22,697				23,262				23,785				24,356
Goodwill		3,297				3,297				3,297				3,297				3,297
Prepaid expenses and other assets		38,975				33,095				30,344				25,320				26,008
Total assets	$	5,704,380			$	5,319,557			$	5,669,417			$	5,391,540			$	5,063,585
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits	$	3,951,238			$	3,863,411			$	3,681,175			$	3,620,642			$	3,333,969
Federal Home Loan Bank advances		989,260				807,667				1,359,573				1,157,480				1,111,886
Junior subordinated deferrable interest debentures		61,857				61,857				61,857				61,857				61,857
Senior debt		94,161				94,128				94,095				94,061				94,028
Accrued interest payable		1,781				2,112				3,192				1,398				1,302
Other liabilities and accrued expenses		56,338				56,922				53,239				48,596				56,168
Total liabilities		5,154,635				4,886,097				5,253,131				4,984,034				4,659,210
Stockholders' equity:
Common stock, no par value; 100,000,000 shares authorized; 56,107,577 and 42,000,000 shares issued and outstanding at December 31, 2017 and 2016, respectively		458,570				2,262				2,262				2,262				2,262
Unearned Restricted Stock Award common stock		(4,283	)			-				-				-				-
Retained earnings		102,459				435,912				418,664				410,143				407,648
Accumulated other comprehensive loss, net of taxes		(7,001	)			(4,714	)			(4,640	)			(4,899	)			(5,535	)
Total stockholders' equity		549,745				433,460				416,286				407,506				404,375
Total liabilities and stockholders' equity	$	5,704,380			$	5,319,557			$	5,669,417			$	5,391,540			$	5,063,585
Net tangible book value (1)	$	546,448			$	430,163			$	412,989			$	404,209			$	401,078
Period end shares outstanding (3)		56,107,577				42,000,000				42,000,000				42,000,000				42,000,000
(1) = Considered a non-GAAP financial measure. See ‘‘Non-GAAP Financial Measures’’ for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure. Pre-tax, pre-provision net earnings is defined as net income plus income tax expense and provision for (reversal of) loan losses. Net tangible book value is defined as total assets less goodwill and total liabilities. Efficiency ratio is defined as the ratio of noninterest expense to net interest income plus noninterest income. Tangible assets is defined as total assets less goodwill.  Tangible equity is defined as total equity less goodwill.  We calculate our pro forma net income, 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 42.0%. This calculation reflects only the change in our status as an S Corporation and does not give effect to any other transaction.
(2) = Loans held-for-investment include unamortized deferred fees/costs. All portfolio loans are collateralized by real estate with the exception of one $50 thousand non-mortgage loan.
(3) = Earnings per common share, basic and diluted, book value per common share and number of common shares outstanding have been adjusted retroactively to reflect a 200-for-1 stock split effective April 27, 2017.

CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
(In thousands except for per share data and ratios)	For the Three Months Ended																			For the Years Ended
	31-Dec-17				30-Sep-17			30-Jun-17				31-Mar-17				31-Dec-16				31-Dec-17				31-Dec-16
Interest income:
Interest and fees on loans	$	42,477			$	44,180		$	41,173			$	38,743			$	36,054			$	166,573			$	139,385
Interest and dividends on investment securities		2,159				2,016			1,875				1,664				1,251				7,714				4,774
Total interest income		44,636				46,196			43,048				40,407				37,305				174,287				144,159
Interest expense:
Interest on deposits		11,285				10,156			9,058				8,314				8,329				38,813				31,648
Interest on FHLB advances		3,759				5,260			4,260				3,276				2,873				16,555				10,219
Interest on junior subordinated deferrable interest debentures		447				430			408				380				368				1,665				1,348
Interest on other borrowings		1,578				1,577			1,577				1,577				1,578				6,309				6,309
Total interest expense		17,069				17,423			15,303				13,547				13,148				63,342				49,524
Net interest income before provision for loan losses		27,567				28,773			27,745				26,860				24,157				110,945				94,635
Provision (reversal) of provision for loan losses		1,250				1,550			(6,481	)			309				(3,624	)			(3,372	)			(12,703	)
Net interest income after provision (reversal) for loan losses		26,317				27,223			34,226				26,551				27,781				114,317				107,338
Noninterest income:
Increase in cash surrender value of life insurance		48				48			47				49				55				192				233
Net gain on sale of loans		-				4,133			(693	)			(163	)			1,140				3,277				3,884
FHLB dividends		696				581			562				634				1,521				2,473				2,848
Other income		737				156			272				351				344				1,516				879
Total noninterest income		1,481				4,918			188				871				3,060				7,458				7,844
Noninterest expense:
Compensation and related benefits		8,140				8,664			9,523				10,197				11,887				36,524				38,551
Deposit insurance premium		404				580			431				397				375				1,812				1,725
Professional and regulatory fees		582				428			840				184				650				2,034				2,577
Occupancy		1,295				1,339			1,223				1,298				1,280				5,155				5,477
Depreciation and amortization		724				717			728				734				743				2,903				2,873
Data processing		789				791			797				790				933				3,167				3,322
Marketing		298				253			205				179				294				935				875
Other expenses		989				1,010			1,093				922				938				4,014				5,842
Total noninterest expense		13,221				13,782			14,840				14,701				17,100				56,544				61,242
Income before provision for income taxes		14,577				18,359			19,574				12,721				13,741				65,231				53,940
Provision for income taxes		(5,844	)			612			653				426				464				(4,153	)			1,819
Net income	$	20,421			$	17,747		$	18,921			$	12,295			$	13,277			$	69,384			$	52,121
Basic earnings per common share (3)	$	0.45			$	0.42		$	0.45			$	0.29			$	0.32			$	1.62			$	1.24
Diluted earnings per common share (3)	$	0.45			$	0.42		$	0.45			$	0.29			$	0.32			$	1.62			$	1.24
Weighted average common shares outstanding - basic (3)		45,667,516				42,000,000			42,000,000				42,000,000				42,000,000				42,916,879				42,000,000
Weighted average common shares outstanding - diluted (3)		45,831,743				42,000,000			42,000,000				42,000,000				42,000,000				42,957,936				42,000,000
(1) = Considered a non-GAAP financial measure. See ‘‘Non-GAAP Financial Measures’’ for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure. Pre-tax, pre-provision net earnings is defined as net income plus income tax expense and provision for (reversal of) loan losses. Net tangible book value is defined as total assets less goodwill and total liabilities. Efficiency ratio is defined as the ratio of noninterest expense to net interest income plus noninterest income. Tangible assets is defined as total assets less goodwill.  Tangible equity is defined as total equity less goodwill.  We calculate our pro forma net income, 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 42.0%. This calculation reflects only the change in our status as an S Corporation and does not give effect to any other transaction.
(2) = Loans held-for-investment include unamortized deferred fees/costs. All portfolio loans are collateralized by real estate with the exception of one $50 thousand non-mortgage loan.
(3) = Earnings per common share, basic and diluted, book value per common share and number of common shares outstanding have been adjusted retroactively to reflect a 200-for-1 stock split effective April 27, 2017.

 

CONSOLIDATED FINANCIAL HIGHLIGHTS
(In thousands except for per share data and ratios)	As of or for the Three Months Ended																				As of or for the Years Ended
	31-Dec-17				30-Sep-17				30-Jun-17				31-Mar-17				31-Dec-16				31-Dec-17				31-Dec-16
RESULTS OF OPERATIONS
Interest income	$	44,636			$	46,196			$	43,048			$	40,407			$	37,305			$	174,287			$	144,159
Interest expense		17,069				17,423				15,303				13,547				13,148				63,342				49,524
Net interest income		27,567				28,773				27,745				26,860				24,157				110,945				94,635
Provision for (reversal of) loan losses		1,250				1,550				(6,481	)			309				(3,624	)			(3,372	)			(12,703	)
Net interest income after provision for loan losses		26,317				27,223				34,226				26,551				27,781				114,317				107,338
Noninterest income		1,481				4,918				188				871				3,060				7,458				7,844
Noninterest expense		13,221				13,782				14,840				14,701				17,100				56,544				61,242
Income before provision for income taxes		14,577				18,359				19,574				12,721				13,741				65,231				53,940
Provision for income taxes		(5,844	)			612				653				426				464				(4,153	)			1,819
Net income	$	20,421			$	17,747			$	18,921			$	12,295			$	13,277			$	69,384			$	52,121
Pre-tax, pre-provision net earnings (1)		15,827				19,909				13,093				13,030				10,117				61,859				41,237
Basic earnings per share (3)	$	0.45			$	0.42			$	0.45			$	0.29			$	0.32			$	1.62			$	1.24
Diluted earnings per share (3)	$	0.45			$	0.42			$	0.45			$	0.29			$	0.32			$	1.62			$	1.24
Average basic shares outstanding (3)		45,667,516				42,000,000				42,000,000				42,000,000				42,000,000				42,916,879				42,000,000
Average diluted shares outstanding (3)		45,831,743				42,000,000				42,000,000				42,000,000				42,000,000				42,957,936				42,000,000
PERFORMANCE RATIOS
Return on average:
Assets		1.50	%			1.23	%			1.37	%			0.95	%			1.08	%			1.26	%			1.11	%
Stockholders' equity		17.97	%			16.62	%			18.41	%			12.01	%			13.15	%			16.30	%			13.35	%
Tangible stockholders' equity (1)		14.95	%			16.50	%			18.33	%			12.17	%			13.24	%			12.70	%			13.00	%
Efficiency ratio (1)		45.51	%			40.91	%			53.13	%			53.01	%			62.83	%			47.76	%			59.76	%
Noninterest expense to average assets		0.97	%			0.95	%			1.08	%			1.14	%			1.39	%			1.03	%			1.31	%
Loans to deposit ratio		127.59	%			120.88	%			136.07	%			131.94	%			134.22	%			127.59	%			134.22	%
Average stockholders' equity to average assets		8.32	%			7.38	%			7.45	%			7.92	%			8.21	%			7.76	%			8.35	%
Dividend payout ratio		230.64	%			2.82	%			54.97	%			79.71	%			33.89	%			97.72	%			32.23	%
PRO FORMA
Pro forma net income (1)		8,455				10,648				11,353				7,378				7,970				37,834				31,285
Pro forma return on average:
Assets (1)		0.62	%			0.74	%			0.82	%			0.57	%			0.65	%			0.69	%			0.67	%
Stockholders' equity (1)		7.44	%			9.97	%			11.04	%			7.21	%			7.89	%			8.89	%			8.02	%
Tangible stockholders' equity (1)		7.49	%			10.05	%			11.13	%			7.27	%			7.96	%			8.96	%			8.08	%
YIELDS/ RATES
Yield on loans		3.53	%			3.46	%			3.37	%			3.38	%			3.31	%			3.43	%			3.36	%
Yield on investments		1.57	%			1.39	%			1.38	%			1.32	%			1.07	%			1.42	%			1.07	%
Yield on interest earning assets		3.31	%			3.24	%			3.16	%			3.16	%			3.06	%			3.22	%			3.11	%
Cost of deposits		1.15	%			1.09	%			1.00	%			0.96	%			1.01	%			1.05	%			0.99	%
Cost of borrowings		2.25	%			1.85	%			1.75	%			1.69	%			1.68	%			1.86	%			1.73	%
Cost of interest bearing liabilities		1.38	%			1.31	%			1.21	%			1.15	%			1.18	%			1.27	%			1.17	%
Net interest spread		1.93	%			1.93	%			1.95	%			2.01	%			1.88	%			1.95	%			1.94	%
Net interest margin		2.05	%			2.02	%			2.03	%			2.10	%			1.98	%			2.05	%			2.04	%
(1) = Considered a non-GAAP financial measure. See ‘‘Non-GAAP Financial Measures’’ for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure. Pre-tax, pre-provision net earnings is defined as net income plus income tax expense and provision for (reversal of) loan losses. Net tangible book value is defined as total assets less goodwill and total liabilities. Efficiency ratio is defined as the ratio of noninterest expense to net interest income plus noninterest income. Tangible assets is defined as total assets less goodwill.  Tangible equity is defined as total equity less goodwill.  We calculate our pro forma net income, 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 42.0%. This calculation reflects only the change in our status as an S Corporation and does not give effect to any other transaction.
(2) = Loans held-for-investment include unamortized deferred fees/costs. All portfolio loans are collateralized by real estate with the exception of one $50 thousand non-mortgage loan.
(3) = Earnings per common share, basic and diluted, book value per common share and number of common shares outstanding have been adjusted retroactively to reflect a 200-for-1 stock split effective April 27, 2017.

 

CONSOLIDATED FINANCIAL HIGHLIGHTS
(In thousands except for per share data and ratios)	As of or for the Three Months Ended																				As of or for the Years Ended
	31-Dec-17				30-Sep-17				30-Jun-17				31-Mar-17				31-Dec-16				31-Dec-17				31-Dec-16
CAPITAL
Total equity to total assets		9.64	%			8.15	%			7.34	%			7.56	%			7.99	%			9.64	%			7.99	%
Tangible stockholders' equity to tangible assets (1)		9.58	%			8.09	%			7.29	%			7.50	%			7.93	%			9.58	%			7.93	%
Book value per share	$	9.80			$	10.32			$	9.91			$	9.70			$	9.63			$	9.80			$	9.63
Tangible book value per share (1)	$	9.74			$	10.24			$	9.83			$	9.62			$	9.55			$	9.74			$	9.55
Market value per share (period end)	$	12.04			N/A				N/A				N/A				N/A				$	12.04			N/A
AVERAGE BALANCES
Loans and loans held for sale	$	4,818,654			$	5,109,599			$	4,887,459			$	4,578,372			$	4,360,442			$	4,849,894			$	4,146,713
Earning assets		5,388,238				5,705,891				5,455,216				5,113,760				4,869,178				5,417,323				4,633,321
Total assets		5,461,226				5,786,035				5,517,404				5,172,186				4,921,585				5,485,832				4,676,676
Deposits		3,914,149				3,734,643				3,627,225				3,467,450				3,313,524				3,687,224				3,200,180
Total equity		454,635				427,018				411,176				409,451				404,014				425,698				390,318
Tangible equity (1)		451,338				423,721				407,879				406,154				400,717				422,401				387,021
ASSET QUALITY
Net (charge-offs) recoveries	$	78			$	78			$	138			$	92			$	(2	)		$	386			$	492
Nonperforming loans		7,037				5,829				6,123				4,314				2,641				7,037				2,641
Nonperforming assets		7,037				5,829				6,123				4,314				2,641				7,037				2,641
Allowance for loan losses		30,312				28,984				27,356				33,699				33,298				30,312				33,298
Annualized net (charge offs) recoveries to average loans		0.01	%			0.01	%			0.01	%			0.01	%			0.00	%			0.01	%			0.01	%
Nonperforming loans to total loans		0.14	%			0.13	%			0.12	%			0.09	%			0.06	%			0.14	%			0.06	%
Nonperforming assets to total assets		0.12	%			0.11	%			0.11	%			0.08	%			0.05	%			0.12	%			0.05	%
Allowance for loan losses to loans held-for-investment (2)		0.60	%			0.63	%			0.64	%			0.71	%			0.75	%			0.60	%			0.75	%
Allowance for loan losses to nonperforming loans		430.75	%			497.24	%			446.77	%			781.15	%			1260.81	%			430.75	%			1260.81	%
LOAN COMPOSITION
Multifamily residential	$	2,887,438			$	2,628,691			$	3,055,559			$	2,889,947			$	2,600,262			$	2,887,438			$	2,600,262
Single family residential		1,957,546				1,857,042				1,787,194				1,734,911				1,746,148				1,957,546				1,746,148
Commercial real estate		112,492				95,668				73,459				69,754				59,611				112,492				59,611
Construction and land		41,165				48,004				51,433				42,142				29,465				41,165				29,465
Non-mortgage		50				50				50				50				50				50				50
DEPOSIT COMPOSITION
Non-interest bearing transaction accounts	$	30,899			$	27,166			$	23,907			$	14,490			$	11,826			$	30,899			$	11,826
Interest bearing transaction accounts		203,159				196,062				192,033				197,729				191,892				203,159				191,892
Money market deposit accounts		1,474,498				1,430,201				1,532,234				1,571,721				1,500,976				1,474,498				1,500,976
Time deposits		2,242,682				2,209,982				1,933,001				1,836,702				1,629,275				2,242,682				1,629,275
(1) = Considered a non-GAAP financial measure. See ‘‘Non-GAAP Financial Measures’’ for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure. Pre-tax, pre-provision net earnings is defined as net income plus income tax expense and provision for (reversal of) loan losses. Net tangible book value is defined as total assets less goodwill and total liabilities. Efficiency ratio is defined as the ratio of noninterest expense to net interest income plus noninterest income. Tangible assets is defined as total assets less goodwill.  Tangible equity is defined as total equity less goodwill.  We calculate our pro forma net income, 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 42.0%. This calculation reflects only the change in our status as an S Corporation and does not give effect to any other transaction.
(2) = Loans held-for-investment include unamortized deferred fees/costs. All portfolio loans are collateralized by real estate with the exception of one $50 thousand non-mortgage loan.
(3) = Earnings per common share, basic and diluted, book value per common share and number of common shares outstanding have been adjusted retroactively to reflect a 200-for-1 stock split effective April 27, 2017.

 

Average Balance Sheet and Net Interest Analysis
(Dollars in thousands)
				For the Three Months Ended
				12/31/2017									9/30/2017									6/30/2017									3/31/2017									12/31/2016
				Average			Interest			Average			Average			Interest			Average			Average			Interest			Average			Average			Interest			Average			Average			Interest			Average
				Balance			Inc / Exp			Yield/Rate (6)			Balance			Inc / Exp			Yield/Rate (6)			Balance			Inc / Exp			Yield/Rate (6)			Balance			Inc / Exp			Yield/Rate (6)			Balance			Inc / Exp			Yield/Rate (6)
	Interest-Earning Assets
	Multifamily residential			$	2,748,817		$	25,093		3.65	%		$	3,127,491		$	27,445		3.51	%		$	2,987,171		$	25,681		3.44	%		$	2,724,909		$	23,490		3.45	%		$	2,524,648		$	21,690		3.44	%
	Single family residential				1,924,628			15,830		3.29	%			1,852,487			15,371		3.32	%			1,780,312			14,178		3.19	%			1,755,119			14,118		3.22	%			1,744,356			13,444		3.08	%
	Commercial				97,252			1,120		4.61	%			81,577			933		4.57	%			71,907			841		4.68	%			60,953			784		5.14	%			56,555			668		4.72	%
	Construction, land and NM				47,957			434		3.62	%			48,044			431		3.59	%			48,069			473		3.94	%			37,391			351		3.75	%			34,883			252		2.89	%
	Total loans (1)				4,818,654			42,477		3.53	%			5,109,599			44,180		3.46	%			4,887,459			41,173		3.37	%			4,578,372			38,743		3.38	%			4,360,442			36,054		3.31	%
	Securities available-for-sale				473,085			1,826		1.54	%			484,469			1,646		1.36	%			475,090			1,603		1.35	%			456,953			1,477		1.29	%			421,956			1,088		1.03	%
	Securities held-to-maturity (2)				6,948			59		3.40	%			7,047			57		3.24	%			7,249			61		3.37	%			7,452			59		3.17	%			7,751			62		3.20	%
	Cash and cash equivalents				89,551			274		1.22	%			104,776			313		1.19	%			85,418			211		0.99	%			70,983			128		0.72	%			79,029			101		0.51	%
	Total interest-earning assets			$	5,388,238		$	44,636		3.31	%		$	5,705,891		$	46,196		3.24	%		$	5,455,216		$	43,048		3.16	%		$	5,113,760		$	40,407		3.16	%		$	4,869,178		$	37,305		3.06	%
	Noninterest-earning assets				72,988									80,144									62,188									58,426									52,407
	Total Assets			$	5,461,226								$	5,786,035								$	5,517,404								$	5,172,186								$	4,921,585
	Interest-Bearing Liabilities
	Transaction accounts (3)			$	236,169		$	427		0.72	%		$	220,206		$	416		0.76	%		$	212,295		$	359		0.68	%		$	205,712		$	351		0.68	%		$	197,987		$	333		0.67	%
	Money market demand accounts				1,423,937			3,079		0.86	%			1,462,382			3,016		0.82	%			1,553,124			3,085		0.79	%			1,545,433			2,919		0.76	%			1,493,331			2,822		0.76	%
	Time deposits				2,254,043			7,779		1.38	%			2,052,055			6,724		1.31	%			1,861,806			5,614		1.21	%			1,716,305			5,044		1.18	%			1,622,206			5,174		1.28	%
	Total deposits				3,914,149			11,285		1.15	%			3,734,643			10,156		1.09	%			3,627,225			9,058		1.00	%			3,467,450			8,314		0.96	%			3,313,524			8,329		1.01	%
	FHLB advances				873,206			3,759		1.72	%			1,412,319			5,260		1.49	%			1,271,353			4,260		1.34	%			1,084,901			3,276		1.21	%			993,505			2,873		1.16	%
	Senior debt				94,139			1,578		6.70	%			94,106			1,577		6.70	%			94,073			1,577		6.71	%			94,037			1,577		6.71	%			94,006			1,578		6.71	%
	Junior subordinated debentures				61,857			447		2.89	%			61,857			430		2.78	%			61,857			408		2.64	%			61,857			380		2.46	%			61,857			368		2.38	%
	Total interest-bearing liabilities			$	4,943,351		$	17,069		1.38	%		$	5,302,925		$	17,423		1.31	%		$	5,054,508		$	15,303		1.21	%		$	4,708,245		$	13,547		1.15	%		$	4,462,892		$	13,148		1.18	%
	Noninterest-bearing liabilities				63,240									56,092									51,720									54,490									54,679
	Total stockholders' equity				454,635									427,018									411,176									409,451									404,014
	Total liabilities and stockholders' equity			$	5,461,226								$	5,786,035								$	5,517,404								$	5,172,186								$	4,921,585
	Net interest spread (4)									1.93	%								1.93	%								1.95	%								2.01	%								1.88	%
	Net interest income/margin (5)						$	27,567		2.05	%					$	28,773		2.02	%					$	27,745		2.03	%					$	26,860		2.10	%					$	24,157		1.98	%
	(1) Loan balance includes portfolio real estate loans, real estate loans held for sale and one $50 thousand non-mortgage loan.  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 fees, net of deferred loan costs.
	(2) Securities held to maturity include municipal securities.  Yields are not calculated on a tax equivalent basis.
	(3) Transaction accounts include both interest and non-interest bearing deposits.
	(4) Net interest spread is the average yield on total interest-earning assets minus the average rate on total interest-bearing liabilities.
	(5) Net interest margin is net interest income divided by total interest-earning assets.
	(6) Yields shown are annualized.

 

Average Balance Sheet and Net Interest Analysis
(Dollars in thousands)
				For the Years Ended December 31,
					2017									2016
				Average			Interest			Average			Average			Interest			Average
				Balance			Inc / Exp			Yield/Rate			Balance			Inc / Exp			Yield/Rate
	Interest-Earning Assets
	Multifamily residential			$	2,897,794			101,708		3.51	%		$	2,437,487			84,766		3.48	%
	Single family residential				1,828,668			59,498		3.25	%			1,629,370			50,756		3.12	%
	Commercial				78,032			3,678		4.71	%			49,863			2,886		5.79	%
	Construction, land and NM				45,400			1,689		3.72	%			29,993			977		3.26	%
	Total loans (1)				4,849,894			166,573		3.43	%			4,146,713			139,385		3.36	%
	Securities available-for-sale				472,477			6,553		1.39	%			402,035			4,151		1.03	%
	Securities held-to-maturity (2)				7,172			236		3.29	%			8,570			253		2.95	%
	Cash and cash equivalents				87,780			925		1.05	%			76,003			370		0.49	%
	Total interest-earning assets			$	5,417,323		$	174,287		3.22	%		$	4,633,321		$	144,159		3.11	%
	Noninterest-earning assets				68,509									43,355
	Total Assets			$	5,485,832								$	4,676,676
	Interest-Bearing Liabilities
	Transaction accounts (3)			$	218,683		$	1,553		0.71	%		$	130,573		$	502		0.38	%
	Money market demand accounts				1,495,794			12,099		0.81	%			1,440,129			10,506		0.73	%
	Time deposits				1,972,747			25,161		1.28	%			1,629,478			20,640		1.27	%
	Total deposits				3,687,224			38,813		1.05	%			3,200,180			31,648		0.99	%
	FHLB advances				1,160,555			16,555		1.43	%			879,237			10,219		1.16	%
	Senior debt				94,090			6,309		6.71	%			93,956			6,309		6.71	%
	Junior subordinated debentures				61,857			1,665		2.69	%			61,857			1,348		2.18	%
	Total interest-bearing liabilities			$	5,003,726		$	63,342		1.27	%		$	4,235,230		$	49,524		1.17	%
	Noninterest-bearing liabilities				56,408									51,128
	Total stockholders' equity				425,698									390,318
	Total liabilities and stockholders' equity			$	5,485,832								$	4,676,676
	Net interest spread (4)									1.95	%								1.94	%
	Net interest income/margin (5)						$	110,945		2.05	%					$	94,635		2.04	%
	(1) Loan balance includes portfolio real estate loans, real estate loans held for sale and one $50 thousand non-mortgage loan.  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 fees, net of deferred loan costs.
	(2) Securities held to maturity include municipal securities .  Yields are not calculated on a tax equivalent basis.
	(3) Transaction accounts include both interest and non-interest bearing deposits.  See "Selected Historical Financial Data".
	(4) Net interest spread is the average yield on total interest-earning assets minus the average rate on total interest-bearing liabilities.
	(5) Net interest margin is net interest income divided by total interest-earning assets.

 

Non-GAAP Reconciliation
(Dollars in thousands)	As of and for the Three Months Ended																						As of and for the Years Ended
	31-Dec-17				30-Sep-17				30-Jun-17				31-Mar-17				31-Dec-16						31-Dec-17				31-Dec-16
Pre-tax, pre-provision net earnings
Income before taxes	$	14,577			$	18,359			$	19,574			$	12,721			$	13,741					$	65,231			$	53,940
Plus: Provision (reversal of provision) for loan losses		1,250				1,550				(6,481	)			309				(3,624	)					(3,372	)			(12,703	)
Pre-tax, pre-provision net earnings	$	15,827			$	19,909			$	13,093			$	13,030			$	10,117					$	61,859			$	41,237
Net Tangible Book Value
Total Assets	$	5,704,380			$	5,319,557			$	5,669,417			$	5,391,540			$	5,063,585					$	5,704,380			$	5,063,585
Less: Goodwill		(3,297	)			(3,297	)			(3,297	)			(3,297	)			(3,297	)					(3,297	)			(3,297	)
Less: Total liabilities		(5,154,635	)			(4,886,097	)			(5,253,131	)			(4,984,034	)			(4,659,210	)					(5,154,635	)			(4,659,210	)
Net tangible book value	$	546,448			$	430,163			$	412,989			$	404,209			$	401,078					$	546,448			$	401,078
Efficiency Ratio
Noninterest expense (numerator)	$	13,221			$	13,782			$	14,840			$	14,701			$	17,100					$	56,544			$	61,242
Net interest income	$	27,567			$	28,773			$	27,745			$	26,860			$	24,157					$	110,945			$	94,635
Noninterest income		1,481				4,918				188				871				3,060						7,458				7,844
Operating revenue (denominator)	$	29,048			$	33,691			$	27,933			$	27,731			$	27,217					$	118,403			$	102,479
Efficiency ratio		45.51	%			40.91	%			53.13	%			53.01	%			62.83	%					47.76	%			59.76	%
Tangible Assets
Total Assets	$	5,704,380			$	5,319,557			$	5,669,417			$	5,391,540			$	5,063,585					$	5,704,380			$	5,063,585
Less: Goodwill		(3,297	)			(3,297	)			(3,297	)			(3,297	)			(3,297	)					(3,297	)			(3,297	)
Tangible Assets	$	5,701,083			$	5,316,260			$	5,666,120			$	5,388,243			$	5,060,288					$	5,701,083			$	5,060,288
Tangible Stockholders' Equity
Total Stockholders' Equity	$	549,745			$	433,460			$	416,286			$	407,506			$	404,375					$	549,745			$	404,375
Less: Goodwill		(3,297	)			(3,297	)			(3,297	)			(3,297	)			(3,297	)					(3,297	)			(3,297	)
Tangible Stockholders' Equity	$	546,448			$	430,163			$	412,989			$	404,209			$	401,078					$	546,448			$	401,078
Tangible Stockholders' Equity to Tangible Assets
Tangible stockholders' equity (numerator)	$	546,448			$	430,163			$	412,989			$	404,209			$	401,078					$	546,448			$	401,078
Tangible assets (denominator)	$	5,701,083			$	5,316,260			$	5,666,120			$	5,388,243			$	5,060,288					$	5,701,083			$	5,060,288
Tangible Stockholders' Equity to Tangible Assets		9.58	%			8.09	%			7.29	%			7.50	%			7.93	%					9.58	%			7.93	%
Return on Average Tangible Equity
Annualized net income (numerator)	$	81,684			$	70,988			$	75,684			$	49,180			$	53,108					$	69,384			$	52,121
Average stockholders' equity	$	454,635			$	427,018			$	411,176			$	409,451			$	404,014					$	425,698			$	390,318
Less: Average goodwill		(3,297	)			(3,297	)			(3,297	)			(3,297	)			(3,297	)					(3,297	)			(3,297	)
Average tangible stockholders' equity (denominator)	$	451,338			$	423,721			$	407,879			$	406,154			$	400,717					$	422,401			$	387,021
Return on Average Tangible Equity		18.10	%			16.75	%			18.56	%			12.11	%			13.25	%					16.43	%			13.47	%
Pro Forma Net Income
Income before provision for income taxes	$	14,577			$	18,359			$	19,574			$	12,721			$	13,741					$	65,231			$	53,940
Pro forma provision for income taxes (4)		6,122				7,711				8,221				5,343				5,771						27,397				22,655
Pro forma net income	$	8,455			$	10,648			$	11,353			$	7,378			$	7,970					$	37,834			$	31,285
Pro Forma Ratios
Annualized pro forma net income (numerator)	$	33,819			$	42,593			$	45,412			$	29,513			$	31,879					$	37,834			$	31,285
Average assets (denominator)		5,461,226				5,786,035				5,517,404				5,172,186				4,921,585						5,485,832				4,676,676
Pro forma return on average assets		0.62	%			0.74	%			0.82	%			0.57	%			0.65	%					0.69	%			0.67	%
Average stockholders' equity (denominator)		454,635				427,018				411,176				409,451				404,014						425,698				390,318
Pro forma return on average stockholders' equity		7.44	%			9.97	%			11.04	%			7.21	%			7.89	%					8.89	%			8.02	%
Average tangible stockholders' equity (denominator)		451,338				423,721				407,879				406,154				400,717						422,401				387,021
Pro forma return on average stockholders' equity		7.49	%			10.05	%			11.13	%			7.27	%			7.96	%					8.96	%			8.08	%

Contact:
Mark A. Severson
Investor Relations
707-921-3655
investorrelations@lbsavings.com

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