Luther Burbank Corporation Reports 2017 Fourth Quarter Earnings Per Diluted Common Share of $0.45

2018-01-25 / @nasdaq

 

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 19th 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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