UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2018~~2020

☐o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-38317

Luther Burbank Corporation

(Exact name of registrant as specified in its charter)



California (State or other jurisdiction of incorporation or organization)		68-0270948 (I.R.S. employer identification number)

520 Third St, Fourth Floor, Santa Rosa, California (Address of principal executive offices)		95401 (Zip Code)

Registrant's telephone number, including area code: (844) 446-8201



Securities Registered Pursuant to Section 12(b) of the Act
Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common stock, no par value	LBC	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒x NO ☐o

Indicate by checkmark whether the registrant has submitted electronically ~~and posted on its corporate Website, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). YES ☒x NO ☐o

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth ~~company (as defined~~company. See definitions of "large accelerated filer", "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange ~~Act).~~Act.



Large accelerated filer	o	Accelerated filer	x
Non-accelerated filer	o	Smaller Reporting Company	x
		Emerging Growth Company	x

~~Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller Reporting Company ☐ Emerging Growth Company ☒~~

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act): Yes ☐o No ☒x

As of May ~~3, 2018,~~1, 2020, there were ~~56,560,775~~52,951,276 shares of the registrant’s common stock, no par value, outstanding.

Table of Contents



		Page
	PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	~~Index~~Consolidated Statements of Financial Condition	3
	Unaudited Consolidated Statements of Income	4
	Unaudited Consolidated Statements of Comprehensive Income	5
	Unaudited Consolidated Statements of Changes in Stockholders' Equity	6
	Unaudited Consolidated Statements of Cash Flows	7
	Notes to Unaudited Consolidated Financial Statements	38
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3530
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	6053
Item 4.	Controls and Procedures	6256
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	6457
Item 1A.	Risk Factors	6457
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6460
Item 3.	Defaults Upon Senior Securities	6461
Item 4.	Mine Safety Disclosures	6461
Item 5.	Other Information	6461
Item 6.	Exhibits	6562
	~~SIGNATURES~~Signatures	6663

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You can find many (but not all) of these statements by looking for words such as “approximates,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “would,” “may” and other similar expressions in this Quarterly Report on Form 10-Q. With respect to any such forward-looking statements, the Company claims the protection of the safe harbor provided for in the Private Securities Litigation Reform Act of 1995, as amended. The Company cautions investors that any forward-looking statements presented in this Quarterly Report on Form 10-Q, or those that the Company may make orally or in writing from time to time, are based on the beliefs of, assumptions made by, and information available to, management at the time such statements are first made. Actual outcomes will be affected by known and unknown risks, trends, uncertainties and factors that are beyond the Company’s control or ability to predict. Although the Company believes that management’s beliefs and assumptions are reasonable, they are not guarantees of future performance and some will inevitably prove to be incorrect. As a result, the Company’s actual future results can be expected to differ from management’s expectations, and those differences may be material and adverse to the Company’s business, results of operations and financial condition. Accordingly, investors should use caution in placing any reliance on forward-looking statements to anticipate future results or trends.

The coronavirus disease 2019 ("COVID-19") pandemic is adversely affecting us, our customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on our business, financial position, results of operations, liquidity, and prospects is uncertain. Continued deterioration in general business and economic conditions, including further increases in unemployment rates, or turbulence in domestic or global financial markets could adversely affect our revenues and the values of our assets and liabilities, reduce the availability of funding, lead to a tightening of credit, and further increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to COVID-19, could affect us in substantial and unpredictable ways. Some of the other risks and uncertainties that may cause the Company’s actual results, performance or achievements to differ materially from those expressed include, but are not limited to, the following: the ~~risk that the~~ impact of changes in interest rates; political instability; changes in the monetary policies of the U.S. Government; a decline in economic conditions; deterioration in the value of ~~California~~West Coast real estate, both residential and commercial; an increase in the level of non-performing assets and charge-offs; further increased competition among financial institutions; the Company’s ability to continue to attract deposits and quality loan customers; further government regulation, including regulations regarding capital requirements, and the implementation and costs associated with the same; internal and external fraud and cyber-security threats including the loss of bank or customer funds, loss of system functionality or the theft or loss of data; management’s ability to successfully manage the Company’s operations; and the other risks set forth in the Company’s reports filed with the U.S. Securities and Exchange Commission. For further discussion of these and other factors, see “Item 1A. Risk Factors” in Part II of this Quarterly Report on Form 10-Q and the Company’s ~~2017~~2019 Annual Report on Form 10-K.

Any forward-looking statements in this Quarterly Report on Form 10-Q and all subsequent written and oral forward-looking statements attributable to the Company or any person acting on behalf of the Company are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. The Company does not undertake any obligation to release publicly any revisions to forward-looking statements to reflect events or circumstances after the date such ~~forward looking~~forward-looking statements are made, and hereby specifically disclaims any intention to do so, unless required by law.

PART I.

Item 1. Financial Statements

~~Table of Contents~~



	~~Page~~
~~Consolidated Financial Statements:~~
~~Consolidated statements of financial condition~~	4
~~Consolidated statements of income~~	5
~~Consolidated statements of comprehensive income~~	6
~~Consolidated statements of changes in stockholders' equity~~	7
~~Consolidated statements of cash flows~~	8
~~Notes to consolidated financial statements~~	9

LUTHER BURBANK CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollar amounts in thousands)


	March 31, 2018 (unaudited)			December 31, 2017			March 31, 2020 (unaudited)		December 31, 2019
ASSETS

Cash and cash equivalents	$	74,421		$	75,578
Available for sale investment securities, at fair value	538,440			503,288
Held to maturity investment securities, at amortized cost (fair value of $12,013 and $6,925 at March 31, 2018 and December 31, 2017, respectively)	12,237			6,921
Loans receivable, net of allowance for loan losses of $31,980 and $30,312 as of March 31, 2018 and December 31,2017, respectively	5,294,429			5,011,235
Cash, cash equivalents and restricted cash							$	123,248	$	91,325
Available for sale debt securities, at fair value							641,474		625,074
Held to maturity debt securities, at amortized cost (fair value of $10,132 and $10,349 at March 31, 2020 and December 31, 2019, respectively)							9,732		10,170
Equity securities, at fair value							11,970		11,782
Loans receivable, net of allowance for loan losses of $40,657 and $36,001 at March 31, 2020 and December 31, 2019, respectively							6,177,657		6,194,976
Accrued interest receivable	16,137			14,901			20,823		20,814
Federal Home Loan Bank ("FHLB") stock, at cost	33,023			27,733			29,612		30,342
Premises and equipment, net	21,862			22,452			19,792		19,504
Goodwill	3,297			3,297			3,297		3,297
Prepaid expenses and other assets	40,042			38,975			36,445		38,544

Total assets	$	6,033,888		$	5,704,380		$	7,074,050	$	7,045,828

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits	$	4,114,026		$	3,951,238		$	5,285,376	$	5,234,717
Federal Home Loan Bank advances	1,158,153			989,260
FHLB advances							953,694		978,702
Junior subordinated deferrable interest debentures	61,857			61,857			61,857		61,857
Senior debt
$95,000 face amount, 6.5% interest rate, due September 30, 2024 (less debt issuance costs of $805 and $839 at March 31, 2018 and December 31, 2017, respectively)	94,195			94,161
$95,000 face amount, 6.5% interest rate, due September 30, 2024 (less debt issuance costs of $553 and $584 at March 31, 2020 and December 31, 2019, respectively)							94,447		94,416
Accrued interest payable	2,329			1,781			2,635		2,901
Other liabilities and accrued expenses	49,577			56,338			72,701		58,771

Total liabilities	5,480,137			5,154,635			6,470,710		6,431,364

Commitments and contingencies (Note 17)
Commitments and contingencies (Note 16)

Stockholders' equity:
Common stock, no par value; 100,000,000 shares authorized; 56,561,055 and 56,422,662 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively	455,251			454,287
Preferred stock, no par value; 5,000,000 shares authorized; none issued and outstanding at March 31, 2020 and December 31, 2019							—		—
Common stock, no par value; 100,000,000 shares authorized; 54,286,465 and 55,999,754 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively							431,578		447,784
Retained earnings	105,750			102,459			169,572		165,236
Accumulated other comprehensive loss, net of taxes	(7,250		)	(7,001		)

Accumulated other comprehensive income, net of taxes							2,190		1,444
Total stockholders' equity	553,751			549,745			603,340		614,464

Total liabilities and stockholders' equity	$	6,033,888		$	5,704,380		$	7,074,050	$	7,045,828

LUTHER BURBANK CORPORATION

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(Dollar amounts in thousands, except per share data)


	Three Months Ended March 31,					Three Months Ended March 31,
	2018		2017			2020		2019
Interest income:
Interest and fees on loans	$	46,563	$	38,743
Interest and dividends on investment securities	2,718		1,653
Total interest income	49,281		40,396
Interest and fee income:
Loans						$	60,705	$	61,053
Investment securities						3,303		3,925
Cash, cash equivalents and restricted cash						317		400
Total interest and fee income						64,325		65,378
Interest expense:
Interest on deposits	11,932		8,314
Interest on FHLB advances	4,820		3,275
Interest on junior subordinated deferrable interest debentures	487		380
Interest on senior debt	1,577		1,577
Deposits						24,581		24,288
FHLB advances						5,558		6,772
Junior subordinated deferrable interest debentures						493		651
Senior debt						1,578		1,575
Total interest expense	18,816		13,546			32,210		33,286
Net interest income before provision for loan losses	30,465		26,850			32,115		32,092
Provision for loan losses (Note 3)	1,500		309
Provision for loan losses						5,300		300
Net interest income after provision for loan losses	28,965		26,541			26,815		31,792
Noninterest income:
Increase in cash surrender value of life insurance	53		49
Net loss on sale of loans	—		(163		)
Gain on sale of loans						—		333
FHLB dividends	594		633			535		495
Other income	378		363			263		552
Total noninterest income	1,025		882			798		1,380
Noninterest expense:
Compensation and related benefits	9,619		10,197			11,205		10,052
Deposit insurance premium	432		398			476		498
Professional and regulatory fees	398		185			431		441
Occupancy	1,296		1,298			1,140		1,390
Depreciation and amortization	714		735			669		665
Data processing	788		790			967		919
Marketing	213		179			875		1,154
Other expenses	1,253		921			1,096		1,130
Total noninterest expense	14,713		14,703			16,859		16,249
Income before provision for income taxes	15,277		12,720			10,754		16,923
Provision for income taxes	4,175		425			3,178		4,913
Net income	$	11,102	$	12,295		$	7,576	$	12,010

Basic earnings per common share	$	0.20	$	0.29		$	0.14	$	0.21
Diluted earnings per common share	$	0.20	$	0.29		$	0.14	$	0.21
Weighted average common shares outstanding - basic	56,190,970		42,000,000
Weighted average common shares outstanding - diluted	56,755,154		42,000,000
Dividends per common share						$	0.06	$	0.06

LUTHER BURBANK CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(Dollar amounts in thousands)


	Three Months Ended March 31,						Three Months Ended March 31,
	2018			2017			2020			2019
Net income	$	11,102		$	12,295		$	7,576		$	12,010
Other comprehensive (loss) income:
Unrealized (loss) gain on available for sale investment securities:
Unrealized holding (loss) gain arising during the period	(2,971		)	609
Other comprehensive income:
Unrealized gain on available for sale debt securities:
Unrealized holding gain arising during the period							1,051			2,504
Tax effect	843			(21		)	(305		)	(724		)
Net of tax	(2,128		)	588			746			1,780
Unrealized gain on cash flow hedge:
Unrealized holding gain arising during the period	181			50			—			147
Tax effect	(52		)	(2		)	—			(43		)
Net of tax	129			48			—			104
Total other comprehensive (loss) income	(1,999		)	636
Total other comprehensive income							746			1,884
Comprehensive income	$	9,103		$	12,931		$	8,322		$	13,894

LUTHER BURBANK CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)

(Dollar amounts in thousands, except per share data)

Accumulated Other Comprehensive (Loss) Income (Net of Taxes) Total Stockholders' Equity
Common Stock Retained Earnings Available for Sale Securities Cash Flow Hedge
Shares Amount
Balance, December 31, 2016 42,000,000
$ 2,262
$ 407,648
$ (4,374 ) $ (1,161 ) $ 404,375
Comprehensive income:
Net income —
—
12,295
—
—
12,295
Other comprehensive income —
—
—
588
48
636
Cash dividends ($0.23 per share) —
—
(9,800 ) —
—
(9,800 )
Balance, March 31, 2017 42,000,000
$ 2,262
$ 410,143
$ (3,786 ) $ (1,113 ) $ 407,506

Balance, December 31, 2017 56,422,662
$ 454,287
$ 102,459
$ (6,214 ) $ (787 ) $ 549,745
Comprehensive income:
Net income —
—
11,102
—
—
11,102
Other comprehensive (loss) income —
—
—
(2,128 ) 129
(1,999 )
Reclassification of prior year tax benefit related to re-measuring deferred taxes on items recorded to other comprehensive income —
—
(1,750 ) 1,529
221
—
Issuance of restricted stock awards 131,140
—
—
—
—
—
Vested restricted stock units 12,710
—
—
—
—
—
Shares withheld to pay taxes on stock based compensation (4,057 ) (49 ) —
—
—
(49 )
Restricted stock forfeitures (1,400 ) (1 ) —
—
—
(1 )
Stock-based compensation expense —
1,014
—
—
—
1,014
Cash dividends ($0.11 per share) —
—
(6,061 ) —
—
(6,061 )
Balance, March 31, 2018 56,561,055
$ 455,251
$ 105,750
$ (6,813 ) $ (437 ) $ 553,751



									Accumulated Other Comprehensive (Loss) Income (Net of Taxes)						Total Stockholders' Equity
	Common Stock					Retained Earnings			Available for Sale Securities			Cash Flow Hedge
	Shares		Amount			Retained Earnings			Available for Sale Securities			Cash Flow Hedge
Balance, December 31, 2018	56,379,066		$	456,378		$	129,806		$	(4,935	)	$	(104	)	$	581,145
Cumulative effect of change in accounting principal (1)	—		—			(399		)	399			—			—
Comprehensive income:
Net income	—		—			12,010			—			—			12,010
Other comprehensive income	—		—			—			1,780			104			1,884
Issuance of restricted stock awards	297,663		—			—			—			—			—
Settled restricted stock units	112,302		—			—			—			—			—
Shares withheld to pay taxes on stock based compensation	(41,522	)	(404		)	—			—			—			(404		)
Restricted stock forfeitures	(2,728	)	(2		)	1			—			—			(1		)
Stock based compensation expense	—		840			—			—			—			840
Shares repurchased	(393,000	)	(3,881		)	—			—			—			(3,881		)
Cash dividends ($0.06 per share)	—		—			(3,295		)	—			—			(3,295		)
Balance, March 31, 2019	56,351,781		$	452,931		$	138,123		$	(2,756	)	$	—		$	588,298

Balance, December 31, 2019	55,999,754		$	447,784		$	165,236		$	1,444		$	—		$	614,464
Comprehensive income:
Net income	—		—			7,576			—			—			7,576
Other comprehensive income	—		—			—			746			—			746
Issuance of restricted stock awards	250,118		—			—			—			—			—
Settled restricted stock units	70,220		—			—			—			—			—
Shares withheld to pay taxes on stock based compensation	(53,824	)	(563		)	—			—			—			(563		)
Restricted stock forfeitures	(17,408	)	(8		)	6			—			—			(2		)
Stock based compensation expense	—		911			—			—			—			911
Shares repurchased	(1,962,395	)	(16,546		)	—			—			—			(16,546		)
Cash dividends ($0.06 per share)	—		—			(3,246		)	—			—			(3,246		)
Balance, March 31, 2020	54,286,465		$	431,578		$	169,572		$	2,190		$	—		$	603,340

(1) Represents the impact of adopting Accounting Standards Update ("ASU") 2016-01. See Note 3 to the unaudited consolidated financial statements for further information.

LUTHER BURBANK CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollar amounts in thousands)


	Three Months Ended March 31,						Three Months Ended March 31,
	2018			2017			2020			2019
Cash flows from operating activities:
Net income	$	11,102		$	12,295		$	7,576		$	12,010
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	714			735			669			665
Provision for loan losses	1,500			309			5,300			300
Increase in deferred loan costs, net	(2,708		)	(1,049		)
Amortization of deferred loan costs, net							3,725			2,646
Amortization of premiums on investment securities, net	563			231			487			362
Net loss on sale of loans	—			163
Originations of loans held for sale	—			(17,986		)
Proceeds from sale of loans held for sale	—			24,691
Gain on sale of loans							—			(333		)
Stock based compensation expense, net of forfeitures	1,013			—			903			838
Net increase in cash surrender value of life insurance	(53		)	(49		)
Change in fair value of mortgage servicing rights							395			146
Change in fair value of equity securities							(188		)	(144		)
Other items, net							(40		)	—
Effect of changes in:
Accrued interest receivable	(1,236		)	(1,033		)	(9		)	(1,072		)
Accrued interest payable	548			96			(266		)	1,169
Other assets	(43		)	527
Other liabilities	(6,727		)	(7,522		)
Prepaid expenses and other assets							(1,332		)	1,543
Other liabilities and accrued expenses							(1,423		)	(868		)
Net cash provided by operating activities	4,673			11,408			15,797			17,262
Cash flows from investing activities:
Proceeds from maturities or calls of available for sale investment securities	20,965			20,449
Proceeds from maturities or calls of held to maturity investment securities	55			289
Purchases of available for sale investment securities	(59,647		)	(27,468		)
Purchases of held to maturity investment securities	(5,375		)	—
Net increase in loans receivable	(281,986		)	(307,966		)
Purchase of FHLB stock, net	(5,290		)	(2,500		)
Proceeds from maturities, paydowns and calls of available for sale debt securities							92,128			16,263
Proceeds from maturities and paydowns of held to maturity debt securities							416			399
Purchases of available for sale debt securities							(107,942		)	(44,377		)
Net decrease (increase) in loans receivable							46,956			(69,765		)
Proceeds from loans held for sale previously classified as portfolio loans							—			53,772
Purchase of loans							(20,507		)	—
Redemption (purchase) of FHLB stock, net							730			(224		)
Purchase of premises and equipment	(123		)	(168		)	(957		)	(157		)
Net cash used in investing activities	(331,401		)	(317,364		)
Net cash provided by (used in) investing activities							10,824			(44,089		)
Cash flows from financing activities:
Net increase in customer deposits	162,788			286,673			50,659			80,791
Proceeds from long term FHLB advances	100,000			100,000
Net change in short term FHLB advances	68,893			(54,406		)
Proceeds from long-term FHLB advances							126,500			75,000
Repayment of long-term FHLB advances							(150,008		)	(7		)
Net change in short-term FHLB advances							(1,500		)	(108,500		)
Shares withheld for taxes on vested restricted stock	(49		)	—			(563		)	(404		)
Shares repurchased							(16,546		)	(3,881		)
Cash paid for dividends	(6,061		)	(9,800		)	(3,240		)	(3,294		)
Net cash provided by financing activities	325,571			322,467			5,302			39,705
(Decrease) increase in cash and cash equivalents	(1,157		)	16,511
Cash and cash equivalents, beginning of period	75,578			59,208
Cash and cash equivalents, end of period	$	74,421		$	75,719
Increase in cash, cash equivalents and restricted cash							31,923			12,878
Cash, cash equivalents and restricted cash, beginning of period							91,325			91,697
Cash, cash equivalents and restricted cash, end of period							$	123,248		$	104,575
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	18,268		$	13,451		$	32,476		$	32,117
Income taxes	$	158		$	—		$	410		$	10
Non-cash investing activity:
Loans transferred to held for sale							$	—		$	53,559

LUTHER BURBANK CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS ~~(UNAUDITED)~~


1.	NATURE OF OPERATIONS

Organization

Luther Burbank Corporation (the ‘‘Company’’), a California corporation headquartered in Santa Rosa, is the bank holding company for its wholly-owned subsidiary, Luther Burbank Savings (the "Bank"), and its wholly-owned subsidiary, Burbank Investor Services.

The Bank conducts its business from its headquarters in Manhattan Beach, California. It has nine full service branches located in Sonoma, Marin, Santa Clara, and Los Angeles Counties. Other California loan offices are located in Contra Costa, Los Angeles and Orange Counties. There are also loan offices in King County, Washington and Clackamas County, Oregon. The Company also owns Burbank Financial Inc., a real estate investment company, and all the common interests in Luther Burbank Statutory Trusts I and II, entities created to issue trust preferred securities.

~~On April 27, 2017, the Company declared a 200-for-1 stock split, increasing the number of issued~~The Bank conducts its business from its headquarters in Gardena, California. It has ten full service branches in California located in Sonoma, Marin, Santa Clara, and ~~authorized shares from 210,000 to 42,000,000~~Los Angeles Counties and 500,000 to 100,000,000, respectively. The Company also declared that the stock has zero par value, whereas the stock had previously held a stated value of $8 per share (stated value not adjusted for split). Additional shares issuedone full service branch in Washington located in King County. Additionally, there are seven loan production offices located throughout California, as well as a ~~result of the stock split were distributed immediately upon issuance to the stockholders. Share and per share amounts included~~loan production office in ~~the consolidated financial statements and accompanying notes reflect the effect of the split for all periods presented.~~

We terminated our status as a “Subchapter S” corporation as of December 1, 2017, in connection with our Initial Public Offering ("IPO") and became a taxable C Corporation. Prior to that date, as an S-Corporation, we had no U.S. federal income tax expense.

On December 12, 2017, the Company completed the IPO of its common stock. In connection with the Company’s IPO, the Company sold and issued 13,972,500 shares of common stock at $10.75 per share. After deducting underwriting discounts and offering expenses, the Company received total net proceeds of $138.3 million from the IPO.Clackamas County, Oregon.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all footnotes as would be necessary for a fair presentation of financial position, results of operations and comprehensive income, changes in stockholders’ equity and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). However, these interim unaudited consolidated financial statements reflect all adjustments (consisting solely of normal recurring adjustments and accruals) which, in the opinion of management, are necessary for a fair presentation of financial position, results of operations and comprehensive income, changes in stockholders’ equity and cash flows for the interim periods presented. These unaudited consolidated financial statements have been prepared on a basis consistent with, and should be read in conjunction with, the audited consolidated financial statements as of and for the year ended December 31, ~~2017,~~2019, and the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017~~2019 filed with the ~~SEC,~~Securities and Exchange Commission (the “SEC”), under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). The unaudited consolidated financial statements include the accounts of the Company and ~~the Bank.~~its subsidiaries. All intercompany accounts and transactions have been eliminated.

The results of operations for the three months ended March 31, ~~2018~~2020 are not necessarily indicative of the results of operations that may be expected for any other interim period or for the year ending December 31, ~~2018.~~2020.

The Company’s accounting and reporting policies conform to GAAP and to general practices within the banking industry.

Use of Estimates

Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions affect the amounts reported in the unaudited consolidated financial statements and the disclosures provided, and actual results could differ. The estimates utilized to determine the appropriate allowance for loan losses at March 31, 2020 may be materially different from actual results due to the COVID-19 pandemic. See Note 2 to the unaudited consolidated financial statements for additional information regarding the COVID-19 pandemic.

Reclassifications

Certain prior balances in the unaudited consolidated financial statements have been reclassified to conform

to current year presentation. These reclassifications had no effect on prior year net income or stockholders’ equity.

Earnings Per Share ("EPS")

Basic earnings per common share represents the amount of earnings for the period available to each share of common stock outstanding during the reporting period. Basic EPS is computed based upon net income divided by the weighted average number of common shares outstanding during the ~~year.~~period. In determining the weighted average number of shares outstanding, vested restricted stock units are included. Diluted EPS represents the amount of earnings for the period available to each share of common stock outstanding including common stock that would have been outstanding assuming the issuance of common shares for all dilutive potential common shares outstanding during each reporting period. Diluted EPS is computed based upon net income divided by the weighted average number of ~~commons~~common shares outstanding during each period, adjusted for the effect of dilutive potential common shares, such as restricted stock awards and units, calculated using the treasury stock method. ~~The factors used in the earnings per share computation follow:~~


	Three Months Ended March 31,
(Dollars in thousands, except per share amounts)	2018		2017
(Dollars in thousands, except share amounts)					Three Months Ended March 31,
(Dollars in thousands, except share amounts)					2020		2019
Net income	$	11,102	$	12,295	$	7,576	$	12,010

Weighted average basic common shares outstanding	56,190,970		42,000,000		55,611,827		56,519,809
Add: Dilutive effects of assumed vesting of restricted stock	564,184		—		113,271		202,887
Weighted average diluted common shares outstanding	56,755,154		42,000,000		55,725,098		56,722,696

Income per common share:
Basic	$	0.20	$	0.29
Diluted	$	0.20	$	0.29
Basic EPS					$	0.14	$	0.21
Diluted EPS					$	0.14	$	0.21
Anti-dilutive shares not included in calculation of diluted earnings per share	—		—		17,313		13,981

New Financial Accounting ~~Standard Adopted in 2018~~Standards

FASB ASU ~~2018-02~~2019-12

In ~~February 2018,~~December 2019, the FASB provided guidance for the reclassification of the effect of remeasuring deferred tax balances related to items within accumulated other comprehensive income to retained earnings resulting from the Tax Cuts and Jobs Act of 2017. ASU 2018-02 is effective for all entities for fiscal years beginning after December 31, 2018, including interim periods therein, with early adoption permitted. As permitted, the Company early adopted ASU 2018-02 during the quarter ended March 31, 2018 and reclassified $1.8 million of stranded tax amounts within accumulated other comprehensive income to retained earnings.

Financial Accounting Standards ~~Pending Adoption~~

~~FASB~~ Board (“FASB”) issued "Simplifying the Accounting for Income Taxes (Topic 740)" (“ASU ~~2016-01~~

In January 2016, the FASB issued guidance to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. This Update contains several provisions, including but not limited to 1) requiring equity investments, with2019-12”) removing certain exceptions to ~~be measured at fair value with changes~~the general principles in ~~fair value recognized in net income; 2) simplifying the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment~~Accounting Standards Codification (“ASC”) 740 and clarifying and amending existing guidance to identify impairment; 3) eliminating the requirement to disclose the method(s) and significant assumptions used to estimate fair value; and 4) requiring separate presentation of financial assets and liabilities by measurement category and form of financial asset on the statement of financial condition or the accompanying notes to the financial statements. The Update also changes certain financial statement disclosure requirements, including requiring disclosures of the fair value of financial instruments be made on the basis of exit price. The Update isprovide for more consistent application. ASU 2019-12 will become effective ~~for public business entities ("PBEs")~~ for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. As an emerging growth company, the Company expects to adopt this guidance on January 1, 2019, assuming the Company remains an emerging growth company through such date.2021 and early adoption is permitted. The adoption of this standard is not expected to have a material effect on the Company’s operating results or financial condition.

~~FASB ASU 2017-04~~


2.	COVID-19

In late March 2020, the Company implemented a loan modification program that permits borrowers who have been financially impacted by the COVID-19 pandemic, and are unable to service their loans, to defer loan payments for a specified period of time. Because the loan modification program was established in late March 2020, borrower participation in the program and the receipt of modification applications were not generally experienced until April 2020. As of April 30, 2020, the Company had received completed applications from borrowers requesting modifications in connection with this program representing loan balances of $88.5 million, $111.9 million, $51.2 million and $1.1 million, or 2.2%, 5.9%, 24.4% and 5.4%, of our multifamily residential, single family residential, commercial real estate and construction and land loan portfolios, respectively. As of April 30, 2020, the Company has approved COVID-19 loan modifications with an aggregate principal loan balance of $84.7 million, representing 1.4% of the Company's loan portfolio. In conjunction with the passage of the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), banks have been provided the option to temporarily suspend certain requirements under GAAP related to TDRs for a limited time to account for the effects of COVID-19. As a result, the Company will not be recognizing eligible COVID-19 loan modifications as TDRs. Additionally, loans qualifying for these modifications will not be required to be reported as delinquent, nonaccrual, impaired or criticized solely as a result of a COVID-19 loan modification.

~~In January 2017,~~Through the ~~FASB issued guidance~~date of this filing, the Company has not experienced any loan charge-offs caused by the economic impact from COVID-19. Management has evaluated events related to ~~the goodwill impairment test, which eliminates step 2~~COVID-19 that have occurred subsequent to March 31, 2020 and has concluded there are no matters that would require recognition in the process. Under the amendments, an entity should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The loss recognized, however, should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The Update is effective for PBEs that are SEC filers for annual periods or any interim goodwill impairment tests beginning after December 15, 2019 using a prospective transition method and early adoption is permitted. As early adoption is permitted, the Company expects to adopt the guidance on December 31, 2018. The adoption of this standard is not expected to have a material effect on the Company’s operating results oraccompanying unaudited consolidated financial ~~condition.~~statements.


2.3.	INVESTMENT SECURITIES

Available for Sale

The following ~~tables summarize~~table summarizes the amortized cost and the estimated fair value of available for sale ~~investment~~debt securities as of the dates ~~indicated (dollars in thousands):~~indicated:

March 31, 2018
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value
Debt Securities:
Government Sponsored Entities:
Mortgage-backed securities $ 356,772
$ 152
$ (5,432 ) $ 351,492
Agency bonds 120,405
29
(3,919 ) 116,515
Collateralized mortgage obligations 44,707
263
—
44,970
SBA securities 13,125
—
(137 ) 12,988
U.S. Treasury 10 year note 1,010
—
(39 ) 971
CRA Qualified Investment Fund (CRAIX) 12,000
—
(496 ) 11,504
Total available for sale investment securities $ 548,019
$ 444
$ (10,023 ) $ 538,440

December 31, 2017
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value
Debt Securities:
Government Sponsored Entities:
Mortgage-backed securities $ 316,134
$ 112
$ (3,327 ) $ 312,919
Agency bonds 120,405
30
(3,213 ) 117,222
Collateralized mortgage obligations 46,920
249
(1 ) 47,168
SBA securities 13,427
—
(125 ) 13,302
U.S. Treasury 10 year note 1,010
—
(26 ) 984
CRA Qualified Investment Fund (CRAIX) 12,000
—
(307 ) 11,693
Total available for sale investment securities $ 509,896
$ 391
$ (6,999 ) $ 503,288



(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
At March 31, 2020:
Government and Government Sponsored Entities:
Residential mortgage backed securities ('MBS") and collateralized mortgage obligations ("CMOs")	$	227,132	$	1,111	$	(1,829	)	$	226,414
Commercial MBS and CMOs	355,196		5,993		(2,246		)	358,943
Agency bonds	56,058		97		(38		)	56,117
Total available for sale debt securities	$	638,386	$	7,201	$	(4,113	)	$	641,474
At December 31, 2019:
Government and Government Sponsored Entities:
Residential MBS and CMOs	$	145,333	$	340	$	(481	)	$	145,192
Commercial MBS and CMOs	353,727		3,267		(825		)	356,169
Agency bonds	123,977		59		(323		)	123,713
Total available for sale debt securities	$	623,037	$	3,666	$	(1,629	)	$	625,074

Net unrealized ~~losses~~gains on available for sale investment securities are recorded as accumulated other comprehensive income within stockholders’ equity ~~totaling $6.8~~and totaled $2.2 million and ~~$6.2~~$1.4 million, net of ~~$2.8 million~~$898 thousand and ~~$394~~$593 thousand in tax ~~assets~~liabilities, at March 31, ~~2018~~2020 and December 31, ~~2017,~~2019, respectively. At December 31, 2017, $394 thousand of a total $1.9 million tax asset resides in accumulated other comprehensive income, while the remaining $1.5 million was included in the provision for income taxes on the consolidated statements of income related to the tax rate changes associated with the termination of S Corporation status and the change in tax law during the year ended December 31, 2017. The Company adopted ASU 2018-02 effective January 1, 2018 and reclassified the $1.5 million in stranded tax effects from the change in federal corporate tax rates on our available for sale investment securities from accumulated other comprehensive loss, net to retained earnings. There were no sales or transfers of available for sale investment securities and no realized gains or losses on these securities ~~for~~during the three months ended March 31, ~~2018~~2020 and ~~2017.~~2019.

The following tables summarize the gross unrealized losses and fair value of available for sale ~~investment~~debt securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss ~~position (dollars in thousands):~~position:

March 31, 2018
Less than 12 Months 12 Months or More Total
Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
Debt Securities:
Government Sponsored Entities:
Mortgage-backed securities $ 145,877
$ (1,555 ) $ 177,062
$ (3,878 ) $ 322,939
$ (5,433 )
Agency bonds 9,755
(246 ) 103,732
(3,673 ) 113,487
(3,919 )
SBA securities —
—
12,988
(137 ) 12,988
(137 )
U.S. Treasury 10 year note —
—
971
(39 ) 971
(39 )
CRA Qualified Investment Fund (CRAIX) 4,869
(131 ) 6,635
(364 ) 11,504
(495 )
Total available for sale investment securities $ 160,501
$ (1,932 ) $ 301,388
$ (8,091 ) $ 461,889
$ (10,023 )



	March 31, 2020
	Less than 12 Months					12 Months or More					Total
(Dollars in thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Government and Government Sponsored Entities:
Residential MBS and CMOs	$	83,448	$	(1,038	)	$	40,964	$	(791	)	$	124,412	$	(1,829	)
Commercial MBS and CMOs	91,732		(1,199		)	59,746		(1,047		)	151,478		(2,246		)
Agency bonds	19,243		(38		)	—		—			19,243		(38		)
Total available for sale debt securities	$	194,423	$	(2,275	)	$	100,710	$	(1,838	)	$	295,133	$	(4,113	)

At March 31, ~~2018,~~2020, the Company held ~~92 mortgage-backed securities~~83 residential MBS and CMOs of which 7265 were in a loss position and 4627 had been in a loss position for twelve months or more. The Company held ~~13 agency bonds~~43 commercial MBS and CMOs of which 1219 were in a loss position and 11 had been for twelve months or more. The Company also held 15 collateralized mortgage obligations, none of which were in an unrealized loss position. Of the total 4 SBA securities held at March 31, 2018, 4 were in a loss position and had been in a loss position for greater than twelve months. Of the 3 total investments in CRA Qualified Investment Fund (CRAIX), all 3 were in a loss position and 2 had been for greater than 12 months. The Company held 1 U.S. Treasury note at March 31, 2018. This note was in a loss position and had been for greater than 12 months.

December 31, 2017
Less than 12 Months 12 Months or More Total
Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
Debt Securities:
Government Sponsored Entities:
Mortgage-backed securities $ 93,403
$ (805 ) $ 182,343
$ (2,522 ) $ 275,746
$ (3,327 )
Agency bonds 9,851
(148 ) 104,340
(3,065 ) 114,191
(3,213 )
Collateralized mortgage obligations 1,959
(1 ) —
—
1,959
(1 )
SBA securities —
—
13,302
(125 ) 13,302
(125 )
U.S. Treasury 10 year note —
—
984
(26 ) 984
(26 )
CRA Qualified Investment Fund (CRAIX) 4,948
(52 ) 6,745
(255 ) 11,693
(307 )
Total available for sale investment securities $ 110,161
$ (1,006 ) $ 307,714
$ (5,993 ) $ 417,875
$ (6,999 )

~~At December 31, 2017, the Company held 87 mortgage-backed securities of which 68 were in a loss position and 30~~9 had been in a loss position for twelve months or more. The Company held 1314 agency bonds of which 2 were in a loss position and none had been in a loss position for twelve months or more.



	December 31, 2019
	Less than 12 Months					12 Months or More					Total
(Dollars in thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Government and Government Sponsored Entities:
Residential MBS and CMOs	$	43,623	$	(181	)	$	54,870	$	(300	)	$	98,493	$	(481	)
Commercial MBS and CMOs	95,950		(339		)	57,219		(486		)	153,169		(825		)
Agency bonds	29,471		(86		)	87,405		(237		)	116,876		(323		)
Total available for sale debt securities	$	169,044	$	(606	)	$	199,494	$	(1,023	)	$	368,538	$	(1,629	)

At December 31, 2019, the Company held 76 residential MBS and CMOs of which 45 were in a loss position and 25 had been in a loss position for twelve months or more. The Company held 42 commercial MBS and CMOs of which 19 were in a loss position and 8 had been in a loss position for twelve months or more. The Company held 15 agency bonds of which 12 were in a loss position and 11 had been for twelve months or more. The Company also held 15 collateralized mortgage obligations, 1 of which was in an unrealized loss position. Of the total 4 SBA securities held at year end, 4 were in a loss position and9 had been in a loss position for ~~greater than~~ twelve months. Of the 3 total investments in CRA Qualified Investment Fund (CRAIX), 3 were in a loss position and 2 had been for greater than 12 months. The Company held 1 U.S. Treasury note at year end. This note was in a loss position and had been for greater than 12 months.months or more.

The unrealized losses on the Company’s investments were caused by interest rate changes. In addition, the contractual cash flows of these investments are guaranteed by the U.S. government or agencies sponsored by the U.S. government. Accordingly, it is expected that the securities will not be settled at a price less than amortized cost. Because the decline in market value is attributable to changes in interest rates but not credit quality, and because the Company has the ability and intent to hold those investments until a recovery of fair value, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at March 31, 2020 and December 31, 2019.

As of March 31, 2020 and December 31, 2019, there were no holdings of securities of any one issuer in an amount greater than 10% of stockholders' equity, other than the U.S. government and its agencies.

Held to Maturity

The following table summarizes the amortized cost and estimated fair value of held to maturity investment securities as of the dates indicated:



(Dollars in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses			Estimated Fair Value
As of March 31, 2020:
Government Sponsored Entities:
Residential MBS	$	9,651	$	400	$	—		$	10,051
Other investments	81		—		—			81
Total held to maturity investment securities	$	9,732	$	400	$	—		$	10,132
As of December 31, 2019:
Government Sponsored Entities:
Residential MBS	$	10,087	$	205	$	(26	)	$	10,266
Other investments	83		—		—			83
Total held to maturity investment securities	$	10,170	$	205	$	(26	)	$	10,349

The following table summarizes the gross unrecognized losses and fair value of held to maturity investment securities, aggregated by investment category and length of time that individual securities have been in a continuous unrecognized loss position:



	Less than 12 Months				12 Months or More					Total
(Dollars in thousands)	Fair Value		Unrecognized Losses		Fair Value		Unrecognized Losses			Fair Value		Unrecognized Losses
As of December 31, 2019:
Government Sponsored Entities:
Residential MBS	$	—	$	—	$	2,253	$	(26	)	$	2,253	$	(26	)

At March 31, 2020, the Company had 7 held to maturity residential MBS and none were in a loss position. At December 31, 2019, the Company held 7 held to maturity residential MBS of which 2 had been in a loss position for twelve months or more.

The unrecognized losses on the Company’s held to maturity investments at December 31, 2019 were caused by interest rate changes. In addition, the contractual cash flows of these investments are guaranteed by agencies sponsored by the U.S. government. Accordingly, it is expected that the securities will not be settled at a price less than amortized cost. Because the decline in market value is attributable to changes in interest rates but not credit quality, and because the Company has the ability and intent to hold those investments until ~~a recovery of fair value, which may be~~ maturity, the Company does not consider those investments to be other-than-temporarily impaired at ~~March 31, 2018 and~~ December 31, ~~2017.~~

As of March 31, 2018 and December 31, 2017, there were no holdings of securities of any one issuer in an amount greater than 10% of stockholders' equity, other than the U.S. government and its agencies.

~~Held to Maturity~~

~~The following tables summarize the amortized cost and estimated fair value of held to maturity investment securities as of the dates indicated (dollars in thousands):~~

March 31, 2018
Amortized Cost Gross Unrecognized Gains Gross Unrecognized Losses Estimated Fair Value
Debt securities:
Government Sponsored Entities:
Mortgage-backed securities $ 11,956
$ 33
$ (257 ) $ 11,732
Other investments 281
—
—
281
Total held to maturity investment securities $ 12,237
$ 33
$ (257 ) $ 12,013

December 31, 2017
Amortized Cost Gross Unrecognized Gains Gross Unrecognized Losses Estimated Fair Value
Debt securities:
Government Sponsored Entities:
Mortgage-backed securities $ 6,636
$ 73
$ (69 ) $ 6,640
Other investments 285
—
—
285
Total held to maturity investment securities $ 6,921
$ 73
$ (69 ) $ 6,925

The following tables summarize the gross unrecognized losses and fair value of held to maturity investment securities, aggregated by investment category and length of time that individual securities have been in a continuous unrecognized loss position (dollars in thousands):

March 31, 2018
Less than 12 Months 12 Months or More Total
Fair Value Unrecognized Losses Fair Value Unrecognized Losses Fair Value Unrecognized Losses
Debt securities:
Government Sponsored Entities:
Mortgage-backed securities $ 7,625
$ (123 ) $ 2,943
$ (134 ) $ 10,568
$ (257 )

December 31, 2017
Less than 12 Months 12 Months or More Total
Fair Value Unrecognized Losses Fair Value Unrecognized Losses Fair Value Unrecognized Losses
Debt securities:
Government Sponsored Entities:
Mortgage-backed securities $ 1,047
$ (4 ) $ 3,029
$ (65 ) $ 4,076
$ (69 )

The unrecognized losses on the Company’s investments were caused by interest rate changes. It is likely that management will not be required to sell the securities prior to their anticipated recovery, and the decline in fair value is largely due to changes in interest rate and other market conditions. The issuers continue to make timely principal and interest payments on the investments. The fair value is expected to recover as the investments approach maturity.2019.

The following table summarizes the scheduled maturities of ~~available-for-sale~~available for sale and ~~held-to-maturity~~held to maturity investment securities as of March 31, ~~2018 (dollars in thousands):~~2020:

March 31, 2018
Amortized Cost Fair Value
Available-for-sale investments securities
One to five years $ 120,296
$ 116,341
Five to ten years 1,329
1,334
Beyond ten years 414,394
409,261
No maturity 12,000
11,504
Total available-for-sale investment securities $ 548,019
$ 538,440
Held-to-maturity investment securities beyond ten years $ 12,237
$ 12,013
Total held-to-maturity investment securities $ 12,237
$ 12,013



	March 31, 2020
(Dollars in thousands)	Amortized Cost		Fair Value
Available for sale debt securities
Less than one year	$	10,000	$	10,018
One to five years	30,000		29,987
Five to ten years	3,777		3,781
Beyond ten years	12,281		12,331
MBS and CMOs	582,328		585,357
Total available for sale debt securities	$	638,386	$	641,474
Held to maturity investments securities
Beyond ten years	$	81	$	81
MBS	9,651		10,051
Total held to maturity debt securities	$	9,732	$	10,132

The amortized cost and fair value of debt securities are shown by contractual maturity. Expected maturities

may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. ~~Equity~~As such, mortgage backed securities ~~with no~~and collateralized mortgage obligations are not included in the maturity ~~date~~categories above and instead are shown separately. No securities were pledged as of March 31, ~~2018~~2020 and December 31, ~~2017.~~2019.

Equity Securities

Equity securities consist of investments in the CRA Qualified Investment Fund. At March 31, 2020 and December 31, 2019, the fair value of equity securities totaled $12.0 million and $11.8 million, respectively. Prior to January 1, 2019, equity securities were included with available for sale investment securities and stated at fair value with unrealized gains and losses reported in other comprehensive income. In conjunction with the adoption of ASU 2016-01, as of January 1, 2019, $399 thousand of unrealized losses on equity securities were reclassified from other comprehensive income to retained earnings. Subsequent changes in fair value are recognized in other noninterest income and totaled $188 thousand and $144 thousand during the three months ended March 31, 2020 and 2019. There were no sales of equity securities during the three

months ended March 31, 2020 and 2019.


3.4.	LOANS ~~RECEIVABLE~~

Loans ~~receivable~~ consist of the ~~following (dollars in thousands):~~

following:


	March 31, 2018			December 31, 2017
(Dollars in thousands)							March 31, 2020			December 31, 2019
Permanent mortgages on:
Multifamily residential	$	3,076,356		$	2,887,438		$	4,058,869		$	3,985,981
Single family residential	2,042,624			1,957,546			1,930,831			2,021,320
Commercial real estate	125,445			112,492			205,657			203,134
Construction and land loans on:
Single family residential	36,320			41,165
Non-Mortgage (‘‘NM’’) loans:	100			50
Construction and land loans							22,857			20,442
Non-Mortgage (‘‘NM’’) loans							100			100
Total	5,280,845			4,998,691			6,218,314			6,230,977
Deferred loan costs, net	45,564			42,856
Allowance for loan losses	(31,980		)	(30,312		)	(40,657		)	(36,001		)
Loans receivable held for investment, net	$	5,294,429		$	5,011,235
Loans held for investment, net							$	6,177,657		$	6,194,976

Certain loans have been pledged to secure borrowing arrangements (see Note 7)8).

The following table summarizes activity in and the allocation of the allowance for loan losses by portfolio ~~segment (dollars in thousands):~~segment:


	Multifamily Residential		Single Family Residential			Commercial Real Estate		Land, NM, and Construction		Total
Three months ended March 31, 2018
(Dollars in thousands)												Multifamily Residential		Single Family Residential			Commercial Real Estate			Land, Construction and NM			Total
Three months ended March 31, 2020												Three months ended March 31, 2020
Allowance for loan losses:
Beginning balance allocated to portfolio segments	$	18,588	$	9,044		$	1,734	$	946	$	30,312	$	23,372	$	10,076		$	2,341		$	212		$	36,001
Provision for loan losses	1,245		167			63		25		1,500
Provision for (reversal of) loan losses												3,936		1,069			336			(41		)	5,300
Charge-offs	—		—			—		—		—		—		(722		)	—			—			(722		)
Recoveries	—		3			90		75		168		—		3			—			75			78
Ending balance allocated to portfolio segments	$	19,833	$	9,214		$	1,887	$	1,046	$	31,980	$	27,308	$	10,426		$	2,677		$	246		$	40,657
Three months ended March 31, 2017
Three months ended March 31, 2019												Three months ended March 31, 2019
Allowance for loan losses:
Beginning balance allocated to portfolio segments	$	18,478	$	11,559		$	1,823	$	1,438	$	33,298	$	21,326	$	10,125		$	2,441		$	422		$	34,314
Provision for loan losses	1,395		(1,465		)	127		252		309
Provision for (reversal of) loan losses												720		(239		)	(163		)	(18		)	300
Charge-offs	—		—			—		—		—		—		—			—			—			—
Recoveries	—		3			—		89		92		—		3			—			75			78
Ending balance allocated to portfolio segments	$	19,873	$	10,097		$	1,950	$	1,779	$	33,699	$	22,046	$	9,889		$	2,278		$	479		$	34,692

The following ~~tables summarize~~table summarizes the allocation of the allowance for loan losses by impairment ~~methodology (dollars in thousands):~~methodology:

March 31, 2018
Multifamily Residential Single Family Residential Commercial Real Estate Land, NM, and Construction Total
Ending allowance balance allocated to:
Loans individually evaluated for impairment $ —
$ 25
$ —
$ —
$ 25
Loans collectively evaluated for impairment 19,833
9,189
1,887
1,046
31,955
Ending balance $ 19,833
$ 9,214
$ 1,887
$ 1,046
$ 31,980
Loans:
Ending balance: individually evaluated for impairment $ 1,564
$ 10,211
$ —
$ —
$ 11,775
Ending balance: collectively evaluated for impairment 3,074,792
2,032,413
125,445
36,420
5,269,070
Ending balance $ 3,076,356
$ 2,042,624
$ 125,445
$ 36,420
$ 5,280,845


	December 31, 2017
	Multifamily Residential		Single Family Residential		Commercial Real Estate		Land, NM, and Construction		Total
(Dollars in thousands)											Multifamily Residential		Single Family Residential		Commercial Real Estate		Land, Construction and NM		Total
As of March 31, 2020:
Ending allowance balance allocated to:											Ending allowance balance allocated to:
Loans individually evaluated for impairment	$	—	$	25	$	—	$	—	$	25	$	—	$	25	$	—	$	—	$	25
Loans collectively evaluated for impairment	18,588		9,019		1,734		946		30,287		27,308		10,401		2,677		246		40,632
Ending balance	$	18,588	$	9,044	$	1,734	$	946	$	30,312	$	27,308	$	10,426	$	2,677	$	246	$	40,657
Loans:
Ending balance: individually evaluated for impairment	$	2,246	$	8,991	$	656	$	—	$	11,893	$	537	$	6,331	$	—	$	—	$	6,868
Ending balance: collectively evaluated for impairment	2,885,192		1,948,555		111,836		41,215		4,986,798		4,058,332		1,924,500		205,657		22,957		6,211,446
Ending balance	$	2,887,438	$	1,957,546	$	112,492	$	41,215	$	4,998,691	$	4,058,869	$	1,930,831	$	205,657	$	22,957	$	6,218,314
As of December 31, 2019:
Ending allowance balance allocated to:											Ending allowance balance allocated to:
Loans individually evaluated for impairment											$	—	$	815	$	—	$	—	$	815
Loans collectively evaluated for impairment											23,372		9,261		2,341		212		35,186
Ending balance											$	23,372	$	10,076	$	2,341	$	212	$	36,001
Loans:
Ending balance: individually evaluated for impairment											$	541	$	7,097	$	—	$	—	$	7,638
Ending balance: collectively evaluated for impairment											3,985,440		2,014,223		203,134		20,542		6,223,339
Ending balance											$	3,985,981	$	2,021,320	$	203,134	$	20,542	$	6,230,977

The Company assigns a risk rating to all loans and periodically performs detailed reviews of all such loans to identify credit risks and to assess the overall collectability of the portfolio. During these internal reviews, management monitors and analyzes the financial condition of borrowers and guarantors, as well as the financial performance and ~~trends in the operation~~other characteristics of ~~the~~loan collateral. These credit quality indicators are used to assign a risk rating to each individual loan. The risk ratings can be grouped into six major categories, defined as follows:

Pass assets are those which are performing according to contract and have no existing or known weaknesses deserving of management’s close attention. The basic underwriting criteria used to approve the loans are still valid, and all payments have essentially been made as planned.

Watch assets are expected to have an event occurring in the next 90 to 120 days that will lead to a change in risk rating with the change being either favorable or unfavorable. These assets require heightened monitoring of the event by management.

Special mention assets have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date. Special mention assets are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.

Substandard assets are inadequately protected by the current net worth ~~and~~and/or paying capacity of the obligor or by the collateral pledged. These assets have well-defined weaknesses: the primary source of repayment is gone or severely impaired (i.e., bankruptcy or loss of employment) and/or there has been

a deterioration in collateral value. In addition, there is the distinct possibility that the Company will sustain some loss, either directly or indirectly (i.e., the cost of monitoring), if the deficiencies are not corrected. A deterioration in collateral value alone does not mandate that an asset be adversely classified if such factor does not indicate that the primary source of repayment is in jeopardy.

Doubtful assets have the weaknesses of those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable based on current facts, conditions and values.

Loss assets are considered uncollectible and of such little value that their continuance as assets, without establishment of a specific valuation allowance or charge-off, is not warranted. This classification does not necessarily mean that an asset has absolutely no recovery or salvage value; but rather, it is not practical or desirable to defer writing off a basically worthless asset (or portion thereof) even though partial recovery may be affected in the future.

The following ~~tables summarize~~table summarizes the loan portfolio allocated by management’s internal risk ratings at March 31, ~~2018~~2020 and December 31, ~~2017 (dollars in thousands):~~2019:

March 31, 2018
Multifamily Residential Single Family Residential Commercial Real Estate Land, NM and Construction Total
Grade:
Pass $ 3,030,678
$ 2,015,783
$ 121,203
$ 34,635
$ 5,202,299
Watch 32,854
15,357
3,267
—
51,478
Special mention 5,755
6,001
—
1,785
13,541
Substandard 7,069
5,483
975
—
13,527
Total $ 3,076,356
$ 2,042,624
$ 125,445
$ 36,420
$ 5,280,845


	December 31, 2017
	Multifamily Residential		Single Family Residential		Commercial Real Estate		Land, NM and Construction		Total
(Dollars in thousands)											Multifamily Residential		Single Family Residential		Commercial Real Estate		Land, Construction and NM		Total
As of March 31, 2020:
Grade:
Pass	$	2,847,720	$	1,923,960	$	106,539	$	41,215	$	4,919,434	$	3,989,553	$	1,898,641	$	203,857	$	22,957	$	6,115,008
Watch	25,354		20,178		4,315		—		49,847		51,699		14,844		1,800		—		68,343
Special mention	6,569		9,025		—		—		15,594		16,692		10,108		—		—		26,800
Substandard	7,795		4,383		1,638		—		13,816		925		7,238		—		—		8,163
Doubtful											—		—		—		—		—
Total	$	2,887,438	$	1,957,546	$	112,492	$	41,215	$	4,998,691	$	4,058,869	$	1,930,831	$	205,657	$	22,957	$	6,218,314
As of December 31, 2019:
Grade:
Pass											$	3,917,264	$	1,980,845	$	200,371	$	20,542	$	6,119,022
Watch											47,309		16,432		2,763		—		66,504
Special mention											19,708		13,635		—		—		33,343
Substandard											1,700		8,808		—		—		10,508
Doubtful											—		1,600		—		—		1,600
Total											$	3,985,981	$	2,021,320	$	203,134	$	20,542	$	6,230,977

The following ~~tables summarize~~table summarizes an aging analysis of the loan portfolio by the time past due at March 31, ~~2018~~2020 and December 31, ~~2017 (dollars in thousands):~~2019:


	March 31, 2018
	30 Days		60 Days		90+ Days		Non-accrual		Current		Total
(Dollars in thousands)													30 Days		60 Days		90+ Days		Non-accrual		Current		Total
As of March 31, 2020:
Loans:
Multifamily residential	$	—	$	—	$	—	$	1,564	$	3,074,792	$	3,076,356	$	—	$	897	$	—	$	537	$	4,057,435	$	4,058,869
Single family residential	2,841		—		—		5,397		2,034,386		2,042,624		1,066		1,720		—		5,036		1,923,009		1,930,831
Commercial real estate	—		2,104		—		—		123,341		125,445		—		—		—		—		205,657		205,657
Land, NM, and construction	—		—		—		—		36,420		36,420
Land, construction and NM													—		—		—		—		22,957		22,957
Total	$	2,841	$	2,104	$	—	$	6,961	$	5,268,939	$	5,280,845	$	1,066	$	2,617	$	—	$	5,573	$	6,209,058	$	6,218,314
As of December 31, 2019:
Loans:
Multifamily residential													$	1,411	$	—	$	—	$	541	$	3,984,029	$	3,985,981
Single family residential													4,037		690		—		5,792		2,010,801		2,021,320
Commercial real estate													—		—		—		—		203,134		203,134
Land, construction and NM													—		—		—		—		20,542		20,542
Total													$	5,448	$	690	$	—	$	6,333	$	6,218,506	$	6,230,977

December 31, 2017
30 Days 60 Days 90+ Days Non-accrual Current Total
Loans:
Multifamily residential $ 2,751
$ —
$ —
$ 2,246
$ 2,882,441
$ 2,887,438
Single family residential 4,870
3,364
—
4,135
1,945,177
1,957,546
Commercial real estate —
—
—
656
111,836
112,492
Land, NM, and construction —
—
—
—
41,215
41,215
Total $ 7,621
$ 3,364
$ —
$ 7,037
$ 4,980,669
$ 4,998,691
At March 31, 2020, there were 5 single family residential loans totaling $6.0 million and 1 multifamily residential loan totaling $595 thousand that would have been reported as 30 days delinquent loans if not for COVID-19 related requests. See Note 2 to the unaudited consolidated financial statements for additional information.

The following table summarizes information related to impaired loans at March 31, ~~2018~~2020 and December 31, ~~2017 (dollars in thousands):~~2019:


	As of March 31, 2018						As of December 31, 2017						As of March 31, 2020						As of December 31, 2019
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
(Dollars in thousands)													Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:													With no related allowance recorded:
Multifamily residential	$	1,564	$	1,686	$	—	$	2,246	$	2,545	$	—	$	537	$	614	$	—	$	541	$	618	$	—
Single family residential	9,257		9,488		—		8,029		8,237		—		5,430		6,472		—		4,588		4,915		—
Commercial real estate	—		—		—		656		798		—
	10,821		11,174		—		10,931		11,580		—		5,967		7,086		—		5,129		5,533		—
With an allowance recorded:
Single family residential	954		954		25		962		962		25		901		898		25		2,509		2,484		815
	954		954		25		962		962		25		901		898		25		2,509		2,484		815
Total:
Multifamily residential	1,564		1,686		—		2,246		2,545		—		537		614		—		541		618		—
Single family residential	10,211		10,442		25		8,991		9,199		25		6,331		7,370		25		7,097		7,399		815
Commercial real estate	—		—		—		656		798		—
	$	11,775	$	12,128	$	25	$	11,893	$	12,542	$	25	$	6,868	$	7,984	$	25	$	7,638	$	8,017	$	815

The following ~~table summarizes~~tables summarize information related to impaired loans for the three months ended March 31, ~~2018~~2020 and ~~2017 (dollars in thousands):~~2019:


	Three Months Ended March 31,												Three Months Ended March 31,
	2018						2017						2020						2019
	Average Recorded Investment		Interest Income		Cash Basis Interest		Average Recorded Investment		Interest Income		Cash Basis Interest
(Dollars in thousands)													Average Recorded Investment		Interest Income		Cash Basis Interest		Average Recorded Investment		Interest Income		Cash Basis Interest
With no related allowance recorded:
Multifamily residential	$	2,070	$	—	$	—	$	1,524	$	—	$	—	$	539	$	8	$	8	$	560	$	3	$	3
Single family residential	8,165		37		—		6,353		48		—		4,790		19		14		4,148		36		—
Commercial real estate	487		—		—		832		—		—		—		—		—		—		—		—
	10,722		37		—		8,709		48		—		5,329		27		22		4,708		39		3
With an allowance recorded:
Single family residential	1,718		17		—		989		8		—		2,105		11		—		929		12		—
	1,718		17		—		989		8		—		2,105		11		—		929		12		—
Total:
Multifamily residential	2,070		—		—		1,524		—		—		539		8		8		560		3		3
Single family residential	9,883		54		—		7,342		56		—		6,895		30		14		5,077		48		—
Commercial real estate	487		—		—		832		—		—		—		—		—		—		—		—
	$	12,440	$	54	$	—	$	9,698	$	56	$	—	$	7,434	$	38	$	22	$	5,637	$	51	$	3

The following table summarizes the recorded investment related to troubled debt restructurings ("TDRs") at March 31, ~~2018~~2020 and December 31, ~~2017 (dollars in thousands):~~2019:

March 31,
2018 December 31,
2017
Troubled Debt Restructurings:
Multifamily residential $ —
$ 667
Single family residential 5,594
5,653
Total recorded investment in troubled debt restructurings $ 5,594
$ 6,320



(Dollars in thousands)	March 31, 2020		December 31, 2019
Troubled debt restructurings:
Single family residential	$	1,296	$	1,305

The Company has allocated $25 thousand of ~~allowances~~its allowance for loan losses for loans modified in ~~troubled debt restructurings~~TDRs at both March 31, ~~2018~~2020 and December 31, ~~2017.~~2019. The Company does not have commitments to lend additional funds

to borrowers with loans whose terms have been modified in ~~troubled debt restructurings.~~TDRs. There were no new troubled debt restructurings induring the three months ended March 31, ~~2018~~2020 and ~~2017.~~2019. See Note 2 to the unaudited consolidated financial statements for additional information.

The Company had no ~~troubled debt restructurings~~TDRs with a subsequent payment default within twelve months following the modification during the three months ended March 31, ~~2018~~2020 and ~~2017.~~2019. A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

The terms of certain other loans were modified during the three months ended March 31, 2018 and 2017 that did not meet the definition of a troubled debt restructuring. These loans have a total recorded investment of $3.1 million and $2.8 million as of March 31, 2018 and March 31, 2017, respectively. The modification of these loans involved either a modification of the terms of a loan to borrowers who were not experiencing financial difficulties or a delay in a payment that was considered to be insignificant such as delays in payment of up to 4 months.


4.5.	NONPERFORMING ASSETS

Nonperforming assets include nonperforming loans plus real estate ~~owned (foreclosed property).~~owned. The Company’s nonperforming assets ~~and trends related to those assets~~ at March 31, ~~2018~~2020 and December 31, ~~2017~~2019 are indicated ~~below (dollars in thousands):~~below:


	March 31, 2018		December 31, 2017
(Dollars in thousands)					March 31, 2020		December 31, 2019
Non-accrual loans:
Multifamily residential	$	1,564	$	2,246	$	537	$	541
Single family residential	5,397		4,135		5,036		5,792
Commercial real estate	—		656
Total non-accrual loans	6,961		7,037		5,573		6,333
Real estate owned	—		—		—		—
Total nonperforming assets	$	6,961	$	7,037	$	5,573	$	6,333
Contractual interest not accrued during the quarter	$	12	$	10

~~There~~Interest income is subsequently recognized on a cash basis as long as the remaining unpaid principal amount of a non-accrual loan is deemed to be fully collectible. If there is doubt regarding the collectability of the loan, then any interest payments received are applied to principal. Interest income was ~~not any real estate owned as of~~recognized on a cash basis on non-accrual loans during the three months ended March 31, ~~2018~~2020 and ~~December~~2019 totaling $22 thousand and $3 thousand, respectively. Contractual interest not accrued on nonperforming loans during the three months ended March 31, ~~2017.~~2020 totaled $71 thousand compared with $22 thousand for the three months ended March 31, 2019.

Generally, nonperforming loans are considered impaired because the repayment of the loan will not be made in accordance with the original contractual agreement.


5.6.	MORTGAGE SERVICING RIGHTS

Servicing loans for others generally consists of collecting mortgage payments, maintaining escrow accounts, disbursing payments to investors, and conducting foreclosure proceedings. Loan servicing income is recorded on the accrual basis and includes servicing fees from investors and certain charges collected from borrowers. Mortgage loans serviced for others are not reported as assets. The principal balances of these loans are as ~~follows (dollars in thousands):~~follows:

March 31,
2018 December 31,
2017
Mortgage loans serviced for:
FHLMC $ 609,254
$ 625,545
Colorado Federal Savings 40,049
40,236
First National Bank of Alaska 34,589
36,050
Provident Bank 20,390
20,855
Pacific Coast Bankers Bank 19,996
20,112
American River Bank 19,539
20,718
Exchange Bank 17,861
20,165
Total mortgage loans serviced for others $ 761,678
$ 783,681



(Dollars in thousands)	March 31, 2020		December 31, 2019
Mortgage loans serviced for:
Federal Home Loan Mortgage Corporation ("Freddie Mac")	$	352,107	$	379,339
Other financial institutions	126,203		134,140
Total mortgage loans serviced for others	$	478,310	$	513,479

Custodial account balances maintained in connection with serviced loans totaled $4.8 million and ~~$5.2~~$8.0 million at March 31, ~~2018~~2020 and December 31, ~~2017,~~2019, respectively.

~~Activity~~The Company measures servicing rights at fair value at each reporting date and reports changes in the fair value of servicing assets in earnings in the period in which the changes occur. Fair value is based on a valuation model that calculates the present value of estimated future net servicing income. Activities for mortgage servicing rights are as ~~follows (dollars in thousands):~~follows:


	Three Months Ended March 31,						Three Months Ended March 31,
	2018			2017
Beginning Balance	$	4,255		$	1,099
(Dollars in thousands)							2020			2019
Beginning balance							$	2,657		$	3,463
Additions	—			83			—			155
Disposals	—			—			—			—
Change in fair value due to changes in assumptions	—			—			—			—
Other changes in fair value	(131		)	(29		)	(395		)	(146		)
Ending balance	$	4,124		$	1,153		$	2,262		$	3,472

Fair value as of March 31, ~~2018~~2020 was determined using a discount rate of 10%, prepayment speeds ranging from ~~6.0%~~6.8% to ~~70.4%~~71.2%, depending on the stratification of the specific right, and a weighted average default rate of 5%. The weighted average prepayment speed at March 31, 2020 was 27.8%. Fair value as of December 31, ~~2017~~2019 was determined using a discount rate of 10%, prepayment speeds ranging from ~~5.8%~~6.0% to ~~70.4%~~58.7%, depending on the stratification of the specific right, and a weighted average default rate of 5%. The weighted average prepayment speed at December 31, 2019 was 22.8%.


6.7.	DEPOSITS

A summary of deposits at March 31, ~~2018~~2020 and December 31, ~~2017~~2019 is as ~~follows (dollars in thousands):~~follows:

March 31,
2018 December 31,
2017
Certificate accounts $ 2,398,698
$ 2,242,682
Money market savings 1,407,825
1,389,425
NOW accounts 196,767
203,159
Money market checking 81,893
85,073
Commercial checking 28,843
30,899
$ 4,114,026
$ 3,951,238



(Dollars in thousands)	March 31, 2020		December 31, 2019
Time deposits	$	3,693,790	$	3,526,688
Money market savings	1,212,209		1,330,585
Interest-bearing demand	226,207		222,509
Money market checking	104,388		111,338
Noninterest-bearing demand	48,782		43,597
Total	$	5,285,376	$	5,234,717

The Company had ~~certificates of deposit~~time deposits with a denomination of $100 thousand or more totaling ~~$2.1~~$2.8 billion and ~~$1.9~~$2.6 billion at March 31, ~~2018~~2020 and December 31, ~~2017,~~2019, respectively.

The Company utilizes brokered deposits as an additional source of funding. The Company had brokered deposits of ~~$295.9~~$420.0 million and ~~$278.4~~$416.0 million at March 31, ~~2018~~2020 and December 31, ~~2017,~~2019, respectively.

Maturities of the Company’s ~~certificate accounts~~time deposits at March 31, ~~2018~~2020 are summarized as follows (dollars

in thousands):

April 1 - December 31, 2018 $ 1,467,831
Year ending December 31, 2019 560,064
Year ending December 31, 2020 278,666
Year ending December 31, 2021 51,750
Year ending December 31, 2022 35,530
Thereafter 4,857
$ 2,398,698



April 1 - December 31, 2020	$	2,971,692
2021	624,783
2022	84,714
2023	4,858
2024	5,206
Thereafter	2,537
Total	$	3,693,790


7.8.	FEDERAL HOME LOAN BANK AND FEDERAL RESERVE BANK ADVANCES

The Bank may borrow from the ~~Federal Home Loan Bank ("FHLB"),~~FHLB, on either a short-term or long-term basis, up to 40% of its assets provided that adequate collateral has been pledged. As of March 31, ~~2018~~2020 and December 31, ~~2017,~~2019, the Bank had pledged various mortgage loans totaling approximately $2.3 billion and ~~$2.4~~$2.2 billion, respectively, as well as the FHLB stock held by the Bank to secure these borrowing arrangements.

The Bank has access to the Loan and Discount Window of the Federal Reserve Bank of San Francisco ("FRB"). Advances under this window are subject to the Bank providing qualifying collateral. Various mortgage loans totaling approximately ~~$394.9~~$422.7 million and ~~$379.0~~$447.4 million as of March 31, ~~2018~~2020 and December 31, ~~2017,~~2019, respectively, secure this borrowing arrangement. There were no borrowings outstanding with the FRB as of March 31, ~~2018~~2020 and December 31, ~~2017.~~

2019.

The following table discloses the Bank’s outstanding advances from the ~~Federal Home Loan Bank~~FHLB of San ~~Francisco (dollars in thousands):~~Francisco:

March 31,
2018 December 31,
2017
FHLB fixed rate short-term borrowings, interest rates from 1.78% to 1.94%, weighted average rate of 1.90%, and maturity dates of April and June 2018 as of March 31, 2018 $ 480,500
$ 411,600
FHLB fixed rate long-term borrowings, interest rates from 1.55% to 7.69%, weighted average rate of 2.09%, maturity dates between July 2018 and August 2032 as of March 31, 2018 527,653
427,660
FHLB variable rate long-term borrowings, interest rates from 1.68% to 1.89%, weighted average rate of 1.82%, and maturity dates between July 2018 and January 2020 as of March 31, 2018 150,000
150,000
$ 1,158,153
$ 989,260



	Outstanding Balances				As of March 31, 2020
(Dollars in thousands)	March 31, 2020		December 31, 2019		Minimum Interest Rate		Maximum Interest Rate		Weighted Average Rate		Maturity Dates
Fixed rate short-term	$	—	$	1,500	—	%	—	%	—	%	N/A
Fixed rate long-term	953,694		977,202		1.25	%	7.69	%	2.23	%	February 2021 to August 2032
	$	953,694	$	978,702

The Bank's available borrowing capacity based on pledged loans to the FRB and the FHLB totaled ~~$869.5~~$810.0 million and $1.1 billion at March 31, ~~2018~~2020 and December 31, ~~2017,~~2019, respectively. The decline in borrowing capacity during the quarter ended March 31, 2020 was primarily due to the additional FHLB letter of credit, as discussed below, and a revision in the borrowing capacity calculation at the FHLB. As of March 31, 2020 and December 31, 2019, the Bank pledged as collateral a $62.6 million FHLB letter of credit to Freddie Mac related to our multifamily securitization reimbursement obligation. In addition, the Bank pledged as collateral a $125.0 million FHLB letter of credit to the State of California Treasurer's Office in connection with a time deposit at March 31, 2020.

Short-term borrowings are borrowings with original maturities of ~~1 year~~90 days or less. During the three months ended March 31, ~~2018~~2020, there was a maximum amount of ~~short term~~short-term borrowings outstanding of ~~$495.7~~$77.8 million and an average amount outstanding of ~~$457.4~~$23.8 million, ~~and~~with a weighted average interest rate of ~~1.61%~~1.66%.

The following table summarizes principal payments on FHLB advances over the next five years as of March 31, ~~2018~~2020 (dollars in

thousands):

April 1 - December 31, 2018 $ 531,000
Year ending December 31, 2019 275,000
Year ending December 31, 2020 150,000
Year ending December 31, 2021 150,600
Year ending December 31, 2022 —
Thereafter 51,553
$ 1,158,153



April 1 - December 31, 2020	$	—
2021	350,700
2022	100,000
2023	400,750
2024	—
Thereafter	102,244
	$	953,694


8.9.	JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES

The Company formed ~~wholly owned~~two wholly-owned trust companies (the ‘‘Trusts’’) which issued guaranteed preferred beneficial interests (the "Trust Securities") in the Company’s junior subordinated deferrable interest debentures ~~(‘‘the Trust Securities’’~~(the "Notes"). The Company is not considered the primary beneficiary of the Trusts and therefore, the Trusts are not consolidated in the Company’s financial statements, but rather the junior subordinated debentures are shown as a liability. The Company’s investment in the common securities of the Trusts, totaling $1.9 million, ~~are~~is included in other assets on the unaudited consolidated ~~statement~~statements of financial condition. The sole asset of the Trusts are ~~junior subordinated deferrable interest debentures (the ‘‘Notes’’).~~the Notes that they hold.

~~At March 31, 2018 and December 31, 2017, the Company had two Trusts which have issued Trust Securities to the public.~~ The Trusts have invested the proceeds of such Trust Securities in the Notes. Each of the Notes has an interest rate equal to the corresponding Trust Securities distribution rate. The Company has the right to defer payment of interest on the Notes at any time or from time to time for a period not exceeding five years provided that no extension period may extend beyond the stated maturity of the relevant Notes. During any such extension period, distributions on the Trust Securities will also be deferred, and the Company’s ability to pay dividends on its common stock will be restricted.

The Company has entered into contractual arrangements which, taken collectively, fully and unconditionally

guarantee payment of: (i) accrued and unpaid distributions required to be paid on the Trust Securities; (ii) the redemption price with respect to any Trust Securities called for redemption by the Trusts; and (iii) payments due upon a voluntary or involuntary dissolution, winding up or liquidation of the Trusts. The Trust Securities are mandatorily redeemable upon maturity of the Notes, or upon earlier redemption as provided in the

indenture. The Company has the right to redeem the Notes purchased by the Trusts, in whole or in part, on or after the redemption date. As specified in the indenture, if the Notes are redeemed prior to maturity, the redemption price will be the principal amount and any accrued but unpaid interest.

The following table is a summary of the outstanding Trust Securities and Notes at March 31, ~~2018~~2020 and December 31, ~~2017~~2019 (dollars in thousands):

Issuer Issuance Date Amount of Trust Securities Amount of Notes Redemption Date Maturity Date
Luther Burbank Statutory Trust I March 2006 $ 40,000
$ 41,238
June 15, 2011 June 15, 2036
Quarterly adjustments - three month Libor plus 1.38%
(3.505% and 2.968% at 3/31/2018 and 12/31/2017, respectively)
Luther Burbank Statutory Trust II March 2007 $ 20,000
$ 20,619
June 15, 2012 June 15, 2037
Quarterly adjustments - three month Libor plus 1.62%
(3.745% and 3.208% at 3/31/2018 and 12/31/2017, respectively)



	March 31, 2020				December 31, 2019				Date	Maturity	Rate Index
Issuer	Amount		Rate		Amount		Rate		Issued	Date	(Quarterly Reset)
Luther Burbank Statutory Trust I	$	41,238	2.12	%	$	41,238	3.27	%	3/1/2006	6/15/2036	3 month LIBOR + 1.38%
Luther Burbank Statutory Trust II	$	20,619	2.36	%	$	20,619	3.51	%	3/1/2007	6/15/2037	3 month LIBOR + 1.62%


9.10.	SENIOR DEBT

In September 2014, the Company issued $95 million in senior unsecured term notes to qualified institutional investors. The proceeds of this debt were used to retire senior unsecured term notes issued between 2009 and 2011 totaling $62.7 million, including a prepayment penalty of $243 thousand, and make an additional contribution to the Bank of $28 million in the form of paid-in capital. The balance of the proceeds, or approximately $2.7 million, was retained at the holding company to be used as cash reserves and for general corporate purposes. The following table summarizes information on these notes as of March 31, ~~2018~~2020 and December 31, ~~2017 (dollars in thousands):~~2019:

March 31, 2018 December 31, 2017
Principal Unamortized debt issuance costs Principal Unamortized debt issuance costs
Senior unsecured term notes, fixed interest rate 6.50%, does not amortize and matures on September 30, 2024 (discount is based on imputed interest rate of 6.70%) $ 95,000
$ 805
$ 95,000
$ 839



	March 31, 2020				December 31, 2019
(Dollars in thousands)	Principal		Unamortized Debt Issuance Costs		Principal		Unamortized Debt Issuance Costs		Maturity Date	Fixed Interest Rate
Senior Unsecured Term Notes	$	95,000	$	553	$	95,000	$	584	9/30/2024	6.50	%


~~10.~~11.	~~INCOME TAXES~~DERIVATIVES AND HEDGING ACTIVITIES

~~In connection with~~From time to time, the initial public offering, the Company terminated its S Corporation status and became a taxable entity (“C Corporation”) on December 1, 2017. As such, any periods prior to December 1, 2017 will only reflect an effective state income tax rate.

~~The provision for income tax for the three months ended March 31, 2018 and 2017 differs from the statutory federal rate of 21% and 35%, respectively, due to the following:~~

Three months ended March 31,
2018 2017
Statutory U.S. Federal Income Tax $ 3,208
$ 4,452
Increase (decrease) resulting from:
Benefit of S Corporation status —
(4,452 )
State Taxes 1,316
425
Other (349 ) —
Provision for income taxes $ 4,175
$ 425

The Company’s effective tax rate differs from the statutory California tax rate of 3.5% prior to December 1, 2017 and the statutory federal and state tax rate of 29.56% for the three months ended March 31, 2018, primarily due to nontaxable earnings on life insurance and nondeductible meal and entertainment expense.


~~11.~~	~~REGULATORY CAPITAL MATTERS~~

The final rules implementing the Basel Committee on Banking Supervision's capital guidelines for U.S. banks (the “Basel III Capital Rules”) became effective for the Holding Company and Bank on January 1, 2015, with full compliance with all of the requirements being phased in over a multi-year schedule, and fully phased in by January 1, 2019. The Basel III Capital Rules provide for the following minimum capital to risk-weighted assets ratios as of January 1, 2015: a) 4.5% based upon common equity tier 1 capital ("CET1"); b) 6.0% based upon tier 1 capital; and c) 8.0% based upon total regulatory capital. A minimum leverage ratio (tier 1 capital as a percentage of average consolidated assets) of 4.0% is also required under the Basel III Capital Rules.

As of March 31, 2018 and December 31, 2017, the Company and the Bank met all capital adequacy requirements to which it is subject. Also, as of March 31, 2018 and December 31, 2017, the Bank satisfied all criteria necessary to be categorized as “well capitalized” under the regulatory framework for prompt corrective action. There have been no conditions or events since March 31, 2018 that management believes have changed the "well capitalized" categorization.

~~The Company’s and Bank’s actual capital amounts and regulatory capital ratios are presented as follows (dollars in thousands):~~

Actual
Minimum Regulatory
Requirement
Minimum Capital Adequacy with Capital Buffer
Minimum Regulatory Requirement for "Well- Capitalized" Institution under prompt corrective action
provisions
Amount Ratio Amount Ratio Amount Ratio Amount Ratio
Luther Burbank Corporation
As of March 31, 2018
Tier 1 Leverage Ratio $ 619,209
10.57 % $ 241,612
4.00 % N/A
N/A
N/A N/A
Common Equity Tier 1 Risk-Based Ratio 557,352
15.55 % 161,342
4.50 % $ 228,568
6.38 % N/A N/A
Tier 1 Risk-Based Capital Ratio 619,209
17.27 % 215,123
6.00 % 282,348
7.88 % N/A N/A
Total Risk-Based Capital Ratio 653,367
18.22 % 286,830
8.00 % 354,056
9.88 % N/A N/A
As of December 31, 2017
Tier 1 Leverage Ratio $ 615,010
11.26 % $ 218,499
4.00 % N/A
N/A
N/A N/A
Common Equity Tier 1 Risk-Based Ratio 553,153
16.05 % 155,107
4.50 % $ 198,192
5.75 % N/A N/A
Tier 1 Risk-Based Capital Ratio 615,010
17.84 % 206,809
6.00 % 249,894
7.25 % N/A N/A
Total Risk-Based Capital Ratio 647,421
18.78 % 275,746
8.00 % 318,831
9.25 % N/A N/A

Actual Minimum Regulatory
Requirement Minimum Capital Adequacy with Capital Buffer Minimum Regulatory Requirement for "Well- Capitalized" Institution under prompt corrective action
provisions
Amount Ratio Amount Ratio Amount Ratio Amount Ratio
Luther Burbank Savings
As of March 31, 2018
Tier 1 Leverage Ratio $ 696,502
11.90 % $ 241,507
4.00 % N/A
N/A
$ 301,884
5.00 %
Common Equity Tier 1 Risk-Based Ratio 696,502
19.44 % 161,225
4.50 % $ 228,402
6.38 % 232,880
6.50 %
Tier 1 Risk-Based Capital Ratio 696,502
19.44 % 214,966
6.00 % 282,143
7.88 % 286,622
8.00 %
Total Risk-Based Capital Ratio 730,660
20.39 % 286,622
8.00 % 353,799
9.88 % 358,277
10.00 %
As of December 31, 2017
Tier 1 Leverage Ratio $ 685,434
12.54 % $ 218,585
4.00 % N/A
N/A
$ 273,232
5.00 %
Common Equity Tier 1 Risk-Based Ratio 685,434
19.90 % 154,980
4.50 % $ 198,030
5.75 % 223,859
6.50 %
Tier 1 Risk-Based Capital Ratio 685,434
19.90 % 206,640
6.00 % 249,689
7.25 % 275,519
8.00 %
Total Risk-Based Capital Ratio 717,845
20.84 % 275,519
8.00 % 318,569
9.25 % 344,399
10.00 %


~~12.~~	~~DERIVATIVES~~

~~The~~ Company utilizes interest rate ~~cap~~swaps and ~~swap agreements~~other derivative financial instruments as part of its asset liability management strategy to ~~help~~ manage ~~its~~ interest rate risk ~~position.~~positions.

Fair Value Hedges of Interest Rate Risk

During the year ended December 31, 2019, the Company entered into two, two-year interest rate swaps with a total notional amount of $1.0 billion to hedge the interest rate risk related to certain hybrid multifamily loans which are currently in their fixed rate period. The swaps are designated as fair value hedges and involve the payment of a fixed rate amount to a counterparty in exchange for the Company receiving a variable rate payment over the life of the swaps without the exchange of the underlying notional ~~amount~~amount. The gain or loss on the derivatives, as well as the offsetting loss or gain on the hedged items attributable to the hedged risk are recognized in interest income for loans.

For the three months ended March 31, 2020, the floating rate amounts recognized related to the net settlement of the interest rate ~~caps and~~ swaps ~~do not represent~~was less than the fixed rate amounts ~~exchanged~~recognized. As such, interest income on loans was decreased by $390 thousand for the ~~parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate cap or swap agreements.~~

~~Interest Rate Caps Designated as Cash Flow Hedges: Interest rate caps with a notional amount totaling $100 million as of both~~three months ended March 31, ~~2018 and December 31, 2017,~~2020. The Company did not have any derivative financial instruments that were designated as cash flow hedges of certain Federal Home Loan Bank advances and were determined to be fully effective during all periods presented. As such, no amount of ineffectiveness has been included in net income. Therefore, the aggregate fair value of the caps is recorded in other assets (liabilities) with changes in fair value recorded in other comprehensive income (loss). The amount included in accumulated other comprehensive income (loss) would be reclassified to current earnings should the hedges no longer be considered effective. The Company expects the hedges to remain fully effective during the remaining terms of the cap.

~~Summary information about the interest-rate caps designated as cash flow~~ hedges as of ~~year-end is as follows (dollars in thousands):~~or for the three months ended March 31, 2019.

March 31,
2018 December 31,
2017
Notional amounts $ 100,000
$ 100,000
Weighted average rate on FHLB advances 1.78 % 1.42 %
Weighted average cap rate 2.55 % 2.55 %
Weighted average original maturity 4.0 years
4.0 years
Weighted average remaining maturity 0.6 years
0.9 years
Unrealized losses $ (614 ) $ (796 )

The ~~Company recognized $173 thousand and $77 thousand~~following table presents the effect of ~~cap premium amortization~~the Company’s interest rate swaps on ~~cash flow hedges in~~ the unaudited ~~statements~~consolidated statement of income for the three months ended March 31, ~~2018 and 2017, respectively.~~2020:



(Dollars in thousands)
Derivative - interest rate swaps:
Interest income	$	(461	)
Hedged items - loans:
Interest income	71
Net effect on interest income	$	(390	)

The following table presents the fair value of the Company’s interest rate swaps, as well as its classification on the unaudited consolidated statements of financial condition as of March 31, 2020 and December 31, 2019:



			Fair Values of Derivative Instruments
			Asset Derivatives			Liability Derivatives
(Dollars in thousands)	Notional Amount		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
As of March 31, 2020:
Interest Rate Swaps	$	1,000,000	Prepaid Expenses and Other Assets	$	—	Other Liabilities and Accrued Expenses	$	17,674
As of December 31, 2019:
Interest Rate Swaps	$	1,000,000	Prepaid Expenses and Other Assets	$	1,156	Other Liabilities and Accrued Expenses	$	746

As of March 31, 2020 and December 31, 2019, the following amounts were recorded in the unaudited consolidated statements of financial condition related to cumulative basis adjustments for its fair value hedges.



Line Item in the Consolidated Statements of Financial Condition in Which the Hedged Items are Included	Carrying Amount of the Hedged Assets		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets
(Dollars in thousands)
As of March 31, 2020:
Loans receivable, net (1)	$	1,017,750	$	17,750
As of December 31, 2019:
Loans receivable, net (1)	$	999,595	$	(405	)

(1) These amounts include the amortized cost basis of closed portfolio loans used to designate hedging relationships in which the hedged items are the last layer expected to be remaining at the end of the hedging relationship. At March 31, 2020 and December 31, 2019, the amortized cost basis of the closed portfolio loans used in these hedging relationships were $2.4 billion and $2.5 billion, respectively; the cumulative basis adjustments associated with these hedging relationships were $17.8 million and $(405) thousand, respectively, and the amount of the designated hedged items were $1.0 billion and $1.0 billion, respectively.

As of March 31, 2020 and December 31, 2019, the Company had posted $18.2 million and $2.8 million, respectively, in cash collateral in connection with its interest rate swaps. Cash collateral is included in restricted cash within the unaudited consolidated statements of financial condition.


~~13.~~12.	STOCK BASED COMPENSATION

The Company’s stock based compensation consists of restricted stock awards ~~(RSAs)~~("RSAs") and restricted stock units ~~(RSUs)~~("RSUs") granted under ~~its 2017~~the Luther Burbank Corporation Omnibus Equity and Incentive Compensation Plan ("Omnibus Plan"). In connection with its ~~IPO~~initial public offering ("IPO") in December 2017, the Company granted RSAs and RSUs to employees and nonemployee directors which all vest ratably over three years. At the same time, the Company granted RSUs in exchange for unvested phantom stock awards held by employees and all vested and unvested phantom stock awards held by nonemployee directors on a per share basis. The RSUs were subjected to the same vesting schedule and deferral elections that existed for the original phantom stock awards.

~~In recognition of prior and current service, additional RSAs were~~ Awards granted ~~during~~subsequent to the ~~first quarter of 2018. These awards to nonemployee directors~~IPO vest ratably over one year ~~while awards to employees vest~~for nonemployee directors and ratably over three ~~years.~~to four years for employees.

All RSAs and RSUs were granted at the fair value of the common stock at the time of the award. The RSAs and RSUs are considered fixed awards as the number of shares and fair value are known at the date of grant and the fair value at the grant date is amortized over the vesting and/or service period.

Non-cash stock compensation expense recognized for RSAs and RSUs for the ~~quarter~~three months ended on March 31, ~~2018~~2020 totaled ~~$1.0 million. No~~$903 thousand compared with $838 thousand for the three months ended March 31, 2019. The fair value of RSAs orand RSUs ~~had been granted prior to December 2017.~~that vested during the three months ended March 31, 2020 and 2019 totaled $2.5 million and $5.7 million, respectively.

As of March 31, ~~2018,~~2020 and December 31, 2019, there was ~~$7.9~~$5.3 million and $3.5 million, respectively, of unrecognized compensation expense related to ~~1,226,891~~580,887 and 582,940 unvested RSAs and ~~RSUs. This expense is~~RSUs, respectively, which amounts are expected to be ~~recognized~~expensed over a weighted average period of ~~2.26 years.~~2.00 years and 1.61 years, respectively. As of March 31, ~~2018, 169,490~~2020 and December 31, 2019, 165,185 and 135,059 shares, respectively, of RSUs were vested and remain unsettled per the original deferral elections.

The following table summarizes share information about ~~restricted stock awards~~RSAs and ~~restricted stock units for the quarter ended March 31, 2018:~~RSUs:


					Three Months Ended March 31,
					2020				2019
	Restricted Stock and Restricted Stock Units Outstanding		Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Grant Date Fair Value
Beginning of the period balance	1,319,700		$	10.75	717,999		$	10.53	1,155,359		$	10.97
Shares granted	131,140		12.77		250,118		11.72		297,663		9.79
Shares settled	(53,059	)	10.75		(203,169	)	10.53		(169,648	)	11.43
Shares forfeited	(1,400	)	10.75		(18,876	)	10.73		(2,728	)	10.75
End of the period balance	1,396,381		$	10.94	746,072		$	10.92	1,280,646		$	10.63

Under its Omnibus Plan, the Company reserved 3,360,000 shares of common stock for new awards. At March 31, ~~2018~~2020 and December 31, ~~2017,~~2019, there were ~~2,559,959~~2,100,065 and ~~2,689,699~~2,332,775 shares, respectively, of common stock reserved and available for grant through restricted stock or other awards under the Omnibus Plan. During the three months ended March 31, 2020 and 2019, there were 1,468 and no shares, respectively, of forfeited RSU awards that were initially issued to replace unvested phantom stock awards under the Luther Burbank Corporation Phantom Stock Plan. These awards were excluded from the shares reserved and available for grant under the Omnibus Plan.


~~14.~~13.	FAIR VALUE MEASUREMENTS

Fair Value Measurements

Fair Value Hierarchy

The Company groups its assets and liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. Valuations within these levels are based upon:

Level 1 - Quoted market prices for identical instruments traded in active exchange markets.

Level 2 - Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable or can be corroborated by observable market data.

Level 3 - Model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect the Company’s estimates of assumptions that market participants would use on pricing the asset or liability. Valuation techniques include management judgment and estimation which may be significant.

Because broadly traded markets do not exist for most of the Company’s financial instruments, the fair value

calculations attempt to incorporate the effect of current market conditions at a specific time. These determinations are subjective in nature, involve uncertainties and matters of significant judgment and do not include tax ramifications; therefore, the results cannot be determined with precision, substantiated by comparison to independent markets and may not be realized in an actual sale or immediate settlement of the instruments. There may be inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the results. For all of these reasons, the aggregation of the fair value calculations presented herein do not represent, and should not be construed to represent, the underlying value of the Company.

Management monitors the availability of observable market data to assess the appropriate classification of assets and liabilities within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. In such instances, the transfer is reported at the beginning of the reporting period. Management evaluates the significance of transfers between levels based upon the nature of the financial instrument and size of the transfer relative to total assets, total liabilities, or total earnings.

The following methods and assumptions were used to estimate the fair value of financial instruments:

For cash and cash equivalents, ~~variable rate loans,~~ accrued interest receivable and payable, demand deposits and short-term borrowings, the carrying amount is estimated to be fair value. The fair value of accrued interest receivable/payable balances are determined using inputs and fair value measurements commensurate with the asset or liability from which the accrued interest is generated.

Fair values for available for sale ~~investment~~and held to maturity debt securities, which include primarily debt securities issued by U.S. government sponsored agencies, are based on quoted market prices for similar securities.

~~The fair value~~Fair values for equity securities, which consist of ~~mortgage banking loans held for sale recorded at level two is determined~~investments in the CRA Qualified Investment Fund, are based on quoted market prices.

Loans are valued using ~~quoted prices for similar assets, adjusted for specific attributes of that loan.~~

The fair value of other loans held for sale recorded at level three are determined by two methodologies. The first methodology is used for single family portfolio loans that have been designated as held for sale after having been retained on the balance sheet for at least twelve months of seasoning. To be announced ("TBA") prices for Fannie Mae mortgage backed securities are provided by a third party with prices varying depending upon the underlying loan’s weighted average coupon rate. These prices are then used to determine the fair value of the loan pool using each loan’s coupon rate. As compensating evidence, the loans are also run through a valuation model taking into consideration loan level adjustments such as loan to value ratios, property type, and an estimated servicing release premium.exit price notion. The second methodology is used for multifamily portfolio loans that have been designated as held for sale in relation to a planned securitization transaction. This analysis begins with a third party quoted price for a risk free government guaranteed security comprised of these same multifamily loans. This information is then input into an interest rate risk model to generate an option adjusted spread ("OAS"). This OAS is added to a credit risk spread, based primarily on the cost of the Freddie Mac guarantee fee, to generate a fair market value for the loan pool. Both of these methodologies are performed monthly and compared to the prior month analysis for reasonableness.

~~For loans, the~~ fair value is estimated using market quotes for similar assets or the present value of future cash flows, discounted using ~~the current~~a market rate ~~at which~~for similar ~~loans would be made to borrowers with similar credit ratings and for the same maturities~~products and giving consideration to estimated prepayment risk and credit risk. The fair value of loans is determined utilizing estimates resulting in a Level 3 classification.

Impaired loans are measured for impairment based on the present value of expected future cash flows discounted at the ~~loan’s~~loans' effective interest rate, except that as a practical expedient, the Company may measure impairment based on a loan’s observable market price, or the fair value of the collateral (net of estimated costs to sell) if the loan is collateral dependent. The fair value of impaired loans is determined utilizing estimates resulting in a Level 3 classification.

It was not practicable to determine the fair value of FHLB stock due to restrictions placed on its transferability.

~~Typical unobservable inputs used for computing the~~The fair value of ~~impaired loans include adjustments made by appraisers~~servicing rights is determined using a valuation model that utilizes interest rate, prepayment speed, and ~~brokers for differences between comparable property sales,~~default rate assumptions that market participants would use in estimating future net ~~operating~~servicing income ~~assumptions~~ and capitalization rates. Other factors considered include geographic sales trends and the values of comparable surrounding properties as well as the condition of the subject property. In measuring the fair value of impaired collateral dependent loans, the Company assumes a 100% default rate. The valuation techniques used by third party appraisers is consistent among all loan classes held by the Company due to the similarities in the type of loan collateral. For loans measured at fair value on a non-recurring basis in the Company’s loan portfolio at March 31, 2018 and December 31, 2017, adjustments made by appraisers and brokers to comparable property sales generally ranged from (10)% to 20%. Additionally, all appraisals are reviewed in accordance with Uniform Standards of Professional Appraisal Practice, or USPAP, by in house licensed appraisers who review not only the appraisal but independently search for comparable properties to ensure selected comparable properties and corresponding adjustments are appropriate. When necessary appraisal staff will adjust or reject an appraised value. The Company estimates that ~~selling costs approximate 6% of the collateral fair value.~~

~~Real estate owned fair values are categorized as Level 3 due to ongoing assumptions in fair value measurements related to real estate~~can be validated against available market ~~conditions which may require adjustments made by appraisers and brokers for differences between comparable property sales, net operating income assumptions, and capitalization rates.~~data.

The fair values of derivatives are based on valuation models using observable market data as of the measurement date.

Fair values for fixed-rate ~~certificates of deposit~~time deposits are estimated using discounted cash flow analyses using interest rates offered at each reporting date by the Company for ~~certificates~~time deposits with similar remaining maturities. For deposits with no contractual maturity, the fair value is assumed to equal the carrying value.

The fair value of FHLB advances is estimated based on discounting the future cash flows using the market rate currently ~~offered.~~offered for similar terms.

The fair value of subordinated debentures is based on an indication of value provided by a third-party broker.

For senior debt, the fair value is based on an indication of value provided by a third-party broker.

~~The fair values of commitments are estimated using the fees currently charged to enter into similar agreements and are not significant.~~

Fair Value of Financial Instruments

The carrying and estimated fair values of the Company’s financial instruments are as ~~follows (dollars in thousands):~~follows:

March 31, 2018
Fair Level Measurements Using
Carrying Amount Fair Value Level 1 Level 2 Level 3
Financial assets:
Cash and cash equivalents $ 74,421
$ 74,421
$ 74,421
$ —
$ —
Investment securities:
Available for sale 538,440
538,440
—
538,440
—
Held to maturity 12,237
12,013
—
12,013
—
Loans receivable, net 5,294,429
5,292,414
—
—
5,292,414
Accrued interest receivable 16,137
16,137
10
1,309
14,818
Federal Home Loan Bank stock 33,023
N/A
N/A
N/A
N/A
Interest Rate Cap Premium 10
10
—
10
—
Financial liabilities:
Customer deposits $ 4,114,026
$ 4,073,150
$ 1,715,328
$ 2,357,822
$ —
FHLB advances 1,158,153
1,158,556
—
1,158,556
—
Junior subordinated deferrable interest debentures 61,857
58,085
—
58,085
—
Senior debt 94,195
100,819
—
100,819
—
Accrued interest payable 2,329
2,329
—
2,329
—


	December 31, 2017														Fair Level Measurements Using
					Fair Level Measurements Using
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
(Dollars in thousands)											Carrying Amount		Fair Value		Level 1		Level 2		Level 3
As of March 31, 2020:
Financial assets:
Cash and cash equivalents	$	75,578	$	75,578	$	75,578	$	—	$	—
Investment securities:
Cash, cash equivalents and restricted cash											$	123,248	$	123,248	$	123,248	$	—	$	—
Debt securities:
Available for sale	503,288		503,288		—		503,288		—		641,474		641,474		—		641,474		—
Held to maturity	6,921		6,925		—		6,925		—		9,732		10,132		—		10,132		—
Equity securities											11,970		11,970		—		11,970		—
Loans receivable, net	5,011,235		5,022,250		—		—		5,022,250		6,177,657		6,234,531		—		—		6,234,531
Accrued interest receivable	14,901		14,901		27		1,320		13,554		20,823		20,823		2		1,467		19,354
Federal Home Loan Bank stock	27,733		N/A		N/A		N/A		N/A
Interest rate cap premium	1		1		—		1		—
FHLB stock											29,612		N/A		N/A		N/A		N/A
Financial liabilities:
Customer deposits	$	3,951,238	$	3,917,999	$	1,708,556	$	2,209,443	$	—
Deposits											$	5,285,376	$	5,317,833	$	1,441,586	$	3,876,247	$	—
FHLB advances	989,260		989,833		—		989,833		—		953,694		998,314		—		998,314		—
Junior subordinated deferrable interest debentures	61,857		58,624		—		58,624		—		61,857		46,918		—		46,918		—
Senior debt	94,161		104,500		—		104,500		—		94,447		103,170		—		103,170		—
Accrued interest payable	1,781		1,781		—		1,781		—		2,635		2,635		—		2,635		—
Interest rate swaps											17,674		17,674		—		17,674		—
As of December 31, 2019:
Financial assets:
Cash, cash equivalents and restricted cash											$	91,325	$	91,325	$	91,325	$	—	$	—
Debt securities:
Available for sale											625,074		625,074		—		625,074		—
Held to maturity											10,170		10,349		—		10,349		—
Equity securities											11,782		11,782		—		11,782		—
Loans receivable, net											6,194,976		6,346,496		—		—		6,346,496
Accrued interest receivable											20,814		20,814		26		1,685		19,103
FHLB stock											30,342		N/A		N/A		N/A		N/A
Interest rate swap											1,156		1,156		—		1,156		—
Financial liabilities:
Deposits											$	5,234,717	$	5,253,511	$	1,558,029	$	3,695,482	$	—
FHLB advances											978,702		996,860		—		996,860		—
Junior subordinated deferrable interest debentures											61,857		59,272		—		59,272		—
Senior debt											94,416		99,806		—		99,806		—
Accrued interest payable											2,901		2,901		—		2,901		—
Interest rate swap											746		746		—		746		—

These estimates do not reflect any premium or discount that could result from offering the Company’s entire holdings of a particular financial instrument for sale at one time, nor do they attempt to estimate the value of anticipated future business related to the instruments. In addition, the tax ramifications related to the realization of unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of these ~~estimates~~estimates.

Assets and Liabilities Recorded at Fair Value

The following ~~tables present~~table presents information about the Company’s assets and liabilities measured at fair value on a recurring and nonrecurring basis as of March 31, ~~2018~~2020 and December 31, ~~2017.~~2019.

Recurring Basis

The Company is required or permitted to record the following assets and liabilities at fair value on a recurring basis ~~under other accounting pronouncements~~ (dollars in thousands):

March 31, 2018
Description Fair Value Level 1 Level 2 Level 3
Financial Assets:
Available for sale investment securities:
Government Sponsored Entities:
Mortgage-backed securities $ 351,492
$ —
$ 351,492
$ —
Agency bonds 116,515
—
116,515
—
Collateralized mortgage obligations 44,970
—
44,970
—
SBA securities 12,988
—
12,988
—
U.S. Treasury 10 year note 971
—
971
—
CRA Qualified Investment Fund (CRAIX) 11,504
—
11,504
—
Total investment securities available for sale $ 538,440
—
$ 538,440
—
Interest rate cap premium $ 10
$ —
$ 10
$ —

December 31, 2017
Description Fair Value Level 1 Level 2 Level 3
Financial Assets:
Available for sale investment securities:
Government Sponsored Entities:
Mortgage-backed securities $ 312,919
$ —
$ 312,919
$ —
Agency bonds 117,222
—
117,222
—
Collateralized mortgage obligations 47,168
—
47,168
—
SBA securities 13,302
—
13,302
—
U.S. Treasury 10 year note 984
—
984
—
CRA Qualified Investment Fund (CRAIX) 11,693
—
11,693
—
Total investment securities available for sale $ 503,288
$ —
$ 503,288
$ —
Interest rate cap premium $ 1
$ —
$ 1
$ —



Description	Fair Value		Level 1		Level 2		Level 3
As of March 31, 2020:
Financial Assets:
Available for sale debt securities:
Government and Government Sponsored Entities:
Residential MBS and CMOs	$	226,414	$	—	$	226,414	$	—
Commercial MBS and CMOs	358,943		—		358,943		—
Agency bonds	56,117		—		56,117		—
Total available for sale debt securities	$	641,474	$	—	$	641,474	$	—
Equity securities	$	11,970	$	—	$	11,970	$	—
Mortgage servicing rights	$	2,262	$	—	$	—	$	2,262
Financial Liabilities:
Interest rate swaps	$	17,674	$	—	$	17,674	$	—
As of December 31, 2019:
Financial Assets:
Available for sale debt securities:
Government and Government Sponsored Entities:
Residential MBS and CMOs	$	145,192	$	—	$	145,192	$	—
Commercial MBS and CMOs	356,169		—		356,169		—
Agency bonds	123,713		—		123,713		—
Total available for sale debt securities	$	625,074	$	—	$	625,074	$	—
Equity securities	$	11,782	$	—	$	11,782	$	—
Mortgage servicing rights	$	2,657	$	—	$	—	$	2,657
Interest rate swap	$	1,156	$	—	$	1,156	$	—
Financial Liabilities:
Interest rate swap	$	746	$	—	$	746	$	—

There were no transfers between Level 1 and Level 2 during the three months ended March 31, ~~2018 and 2017.~~2020 or 2019.

Non-recurring Basis

The Company may be required, from time to time, to measure certain assets and liabilities at fair value on a non-recurring basis. These include assets that are measured at the lower of cost or market value that were recognized at fair value which was below cost at the reporting date (dollars in thousands):


	December 31, 2017
Description	Fair Value		Level 1		Level 2		Level 3		Total Gain (Loss) or (Valuation Allowance)			Fair Value		Level 1		Level 2		Level 3
March 31, 2020
Impaired loans:
Single family residential	$	191	$	—	$	—	$	191	$	(5	)	$	878	$	—	$	—	$	878
Total assets measured at fair value on a non-recurring basis	$	191	$	—	$	—	$	191	$	(5	)
December 31, 2019
Impaired loans:
Single family residential												$	790	$	—	$	—	$	790

~~Single family residential loans measured at fair value include loans held for sale and certain impaired loans. For the three months ended~~As of March 31, ~~2018, there were no charge offs on impaired loans. At December 31, 2017,~~2020, an impaired loan of ~~$196 thousand~~$1.6 million was adjusted to a fair value of ~~$191~~$878 thousand by recording ~~charge-offs~~a charge off of $5$722 thousand. At December 31, 2019, this same loan totaled $1.6 million and was adjusted to a fair value of $790 thousand by recording an allowance for loan losses of $790 thousand. The fair value of impaired, collateral dependent loans is estimated at the fair value of the underlying collateral, less estimated selling costs. These loans are categorized as Level 3 due to ongoing real estate market conditions which may require the use of unobservable inputs and assumptions in fair value measurements.

The ~~company~~Company held no real estate owned at March 31, ~~2018 and~~2020 or December 31, ~~2017. Management periodically obtains updated valuations of properties after foreclosure.~~

~~Financial Instruments Recorded Using Fair Value Option~~

The Company has elected the fair value option for certain of its loans held for sale. These loans are intended for sale and the Company believes that the fair value is the best indicator of the resolution of these loans. Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on loans held for investment. No loans are held for sale as of March 31, 2018 and December 31, 2017.

~~There was no interest income on loans held for sale for the three months ended March 31, 2018. For the three months ended March 31, 2017 interest income on loans held for sale totaled $32 thousand.~~

2019.


~~15.~~14.	VARIABLE INTEREST ENTITIES ("VIE")

The Company is involved with VIEs through its loan securitization activities. WeThe Company evaluated ~~our~~its association with VIEs for consolidation purposes. Specifically, a VIE is to be consolidated by its primary beneficiary, the entity that has both the power to direct the activities that most significantly impact the VIE and a variable interest that could potentially be significant to the VIE. A variable interest is a contractual, ownership or other interest whose value fluctuates with the changes in the value of the VIE's assets and liabilities. ~~Our~~The assessment includes an evaluation of ~~our~~the Company's continuing involvement with the VIE and the nature and significance of ~~our~~its variable interests.

Multifamily loan securitization

With respect to the securitization transaction with Freddie Mac which settled September 27, 2017, ~~our~~the Company's variable interests reside with a reimbursement agreement entered into with Freddie Mac that obligates the Bank to reimburse Freddie Mac for any defaulted contractual principal and interest payments identified after the ultimate resolution of the defaulted loans. Such reimbursement obligations are not to exceed 10% of the original principal amount of the loans comprising the securitization pool. As part of the securitization transaction, the Bank released all servicing obligations and rights to Freddie Mac who was designated as the Master Servicer. As Master Servicer, Freddie Mac appointed the Bank with sub-servicing obligations, which include obligations to collect and remit payments of principal and interest, manage payments of taxes and insurance, and otherwise administer the underlying loans. The servicing of defaulted loans and foreclosed loans was assigned to a separate third party entity, independent of the Bank and Freddie Mac. Freddie Mac, in its capacity as Master Servicer, can terminate the Bank in its role as sub-servicer and direct such responsibilities accordingly. In evaluating ~~our~~the variable interests and continuing involvement in the VIE, wethe Company determined that ~~we do~~it does not have the power to make significant decisions or direct the activities that most significantly impact the economic performance of the VIE's assets and liabilities. As sub-servicer of the loans, the Bank does not have the authority to make significant decisions that influence the value of the VIE's net assets and therefore, is not the primary beneficiary of the VIE. Therefore, wethe Company determined that the VIE associated with the multifamily securitization should not be included in the consolidated financial statements of the Bank.

~~We believe that our~~

The Company believes its maximum exposure to loss as a result of ~~our~~ involvement with the VIE associated with the securitization under the reimbursement agreement executed with Freddie Mac is 10% of the original principal amount of the loans comprising the securitization pool, or $62.6 million. ~~Our~~The reserve for estimated losses with respect to the reimbursement obligation totaled ~~$1.7~~$959 thousand and $1.0 million as of March 31, ~~2018~~2020 and December 31, ~~2017,~~2019, respectively, based upon ~~our~~an analysis of quantitative and qualitative data over the underlying loans included in the securitization pool. No disbursements have been made in connection with the reimbursement obligation.


~~16.~~15.	LOAN SALE AND SECURITIZATION ACTIVITIES

The Company sells originated and acquired loans as part of its business operations and overall management of liquidity, assets and liabilities, and financial performance. The transfer of loans is executed in securitization or sale transactions. With respect to sale transactions, the Company's continuing involvement may or may not include ongoing servicing responsibilities and general representations and warranties. With respect to securitization sales, the Company executed its first and only transaction on September 27, 2017 with Freddie Mac. The transaction involved the sale of ~~$626~~$626.0 million in originated multifamily loans through a Freddie Mac sponsored transaction. The Company's continuing involvement includes sub-servicing responsibilities, general representations and warranties, and a limited reimbursement ~~obligations.~~obligation.

As sub-servicer for Freddie Mac, the Bank is required to maintain a minimum net worth in accordance with ~~generally accepted accounting principles~~GAAP of not less than $2.0 million. If Luther Burbank Savings’ capital were to fall below this threshold, Freddie Mac would have the authority to terminate and assume the Bank’s sub-servicing duties. At March 31, ~~2018,~~2020, the Bank’s ~~actual~~ net worth was ~~$693~~$729.5 million which equates to its Tier 1 capital of $724.0 million plus goodwill of $3.3 million and accumulated other comprehensive income related to net unrealized gains on available for sale securities of $2.2 million.

Servicing responsibilities on loan sales generally include obligations to collect and remit payments of principal and interest, provide foreclosure services, manage payments of tax and insurance, and otherwise administer the underlying loans. In connection with the securitization transaction, Freddie Mac was designated as the Master Servicer and appointed Luther Burbank Savings to perform sub-servicing responsibilities, which generally include the servicing responsibilities described above with exception to the servicing of foreclosed or defaulted loans. The overall management, servicing, and resolution of defaulted loans and foreclosed loans are separately designated to the special servicer, a third party institution that is independent of the Master Servicer and the Bank. The Master Servicer has the right to terminate the Bank in its role as sub-servicer and direct such responsibilities accordingly.

General representations and warranties associated with loan sales and securitization sales require the Bank to uphold various assertions that pertain to the underlying loans at the time of the transaction, including, but not limited to, compliance with relevant laws and regulations, absence of fraud, enforcement of liens, no environmental damages, and maintenance of relevant environmental insurance. Such representations and warranties are limited to those that do not meet the quality represented at the transaction date and do not pertain to a decline in value or future payment defaults. In circumstances where the Bank breaches its

representations and warranties, the Bank would generally be required to cure such instances through a repurchase or substitution of the subject loan(s).

With respect to the securitization transaction, the Bank also has continuing involvement through a reimbursement agreement executed with Freddie Mac. To the extent the ultimate resolution of defaulted loans results in contractual principal and interest payments that are deficient, the Bank is obligated to reimburse Freddie Mac for such amounts, not to exceed 10% of the original principal amount of the loans comprising the securitization pool at the closing date of September 27, 2017. ~~We recognized a liability of $1.7 million as of March 31, 2018 for our exposure to the reimbursement agreement with Freddie Mac.~~

The following table provides cash flows associated with the Company's loan sale activities:


	Three Months Ended March 31,				Three Months Ended March 31,
(In thousands)	2018		2017
(Dollars in thousands)					2020		2019
Proceeds from loan sales	$	—	$	24,691	$	—	$	53,772
Servicing fees	407		108		270		332

During the three months ended March 31, 2018 there were no sales of originated loans. During the three months ended March 31, 2017 there were $24.7 million of sales of originated loans resulting in a net loss of of $163 thousand.

The following table provides information about the loans transferred through sales or securitization and not recorded on ~~our Consolidated Statement~~the unaudited consolidated statements of ~~Financial Condition,~~financial condition, for which the Company's continuing involvement includes sub-servicing or servicing responsibilities and/or reimbursement ~~obligations (dollars in thousands):~~obligations:


	Single Family Residential		Multifamily Residential
March 31, 2018
(Dollars in thousands)					Single Family Residential		Multifamily Residential
As of March 31, 2020:
Principal balance of loans	$	28,830	$	732,848	$	22,290	$	456,020
Loans 90+ days past due	—		—		—		—
Charge-offs, net	—		—		—		—
December 31, 2017
As of December 31, 2019:
Principal balance of loans	29,772		753,909		24,146		489,333
Loans 90+ days past due	—		—		—		—
Charge-offs, net	—		—		—		—


~~17.~~16.	COMMITMENTS AND CONTINGENCIES

Financial Instruments With ~~Off-Balance-Sheet~~Off-Balance Sheet Risk

The Company is a party to financial instruments with ~~off-balance-sheet~~off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments represent commitments to originate fixed and variable rate loans and ~~lines of credit and~~ loans in process, and involve, to varying degrees, ~~elements of~~credit risk and interest rate ~~risk and credit~~ risk in excess of the amount recognized in the Company’s consolidated ~~statement~~statements of financial condition. The Company’s exposure to credit loss in the event of nonperformance by the other party for commitments to extend credit and lines of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments to originate loans ~~and lines of credit~~ as it does for ~~on-balance-sheet~~on-balance sheet instruments. As it relates to interest rate risk, the Company's exposure is generally limited to increases in interest rates that may result during the short period of time between the commitment and funding of fixed rate credit facilities and adjustable rate credit facilities with initial fixed rate periods. The limited timing risk associated with these credit facilities are considered within the Company's asset liability management process.

Commitments to fund loans ~~and home equity lines of credit~~ are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have expiration dates or other termination clauses. In addition, external market forces may impact the probability of commitments being exercised; therefore, total commitments outstanding do not necessarily represent future cash requirements.

At March 31, ~~2018~~2020 and December 31, ~~2017,~~2019, the Company had outstanding commitments of approximately ~~$114.8~~$123.5 million and ~~$65.8~~$103.2 million, respectively, for ~~real estate~~ loans. Unfunded loan commitment reserves totaled ~~$330~~$95 thousand and ~~$197~~$89 thousand at March 31, ~~2018~~2020 and December 31, ~~2017,~~2019, respectively.

Operating Leases

The Company leases various office premises under long-term operating lease agreements. These leases expire between ~~2018~~2020 and ~~2028,~~2030, with certain leases containing either three, five or ten year renewal options. At March 31, ~~2018,~~2020, minimum commitments under these non-cancellable leases ~~with initial or remaining terms of one year or more~~before considering renewal options are ~~as follows~~ (dollars in thousands):

April 1 - December 31, 2018 $ 4,021
Year ending December 31, 2019 5,117
Year ending December 31, 2020 3,723
Year ending December 31, 2021 3,267
Year ending December 31, 2022 2,419
Thereafter 1,864
$ 20,411



April 1 - December 31, 2020	$	3,316
2021	4,419
2022	3,492
2023	2,253
2024	1,278
Thereafter	2,601
Total	$	17,359

Rent expense under operating leases was ~~$1.1 million and~~ $1.1 million for the three months ended March 31, ~~2018 and 2017, respectively.~~2020, compared with $1.3 million for the three months ended March 31, 2019. Sublease income earned was $191 thousand

for the three months ended March 31, 2020, compared with $177 thousand for the three months ended March 31, 2019.

Contingencies

~~The~~At present, there are no pending or threatened proceedings against the Company ~~is involved in legal proceedings arising in the normal course of business. In the opinion of management, the outcomes of such proceedings will not~~which, if determined adversely, would have a material ~~adverse~~ effect on the Company’s business, financial position, or results of ~~operations.~~operations, cash flows or stock price. In the ordinary course of operations, the Company may be party to various legal proceedings.

Correspondent Banking Agreements

The Company maintains funds on deposit with other federally insured financial institutions under correspondent banking agreements. ~~These balances are insured by the FDIC up to $250 thousand.~~ At March 31, ~~2018~~2020 and December 31, ~~2017,~~2019, the Company had ~~$856 thousand~~$25.9 million and ~~$845 thousand,~~$25.7 million, respectively, in uninsured available cash ~~balances exceeding~~balances. Additionally, the ~~insured amounts.~~

Company had $18.2 million and $2.8 million in restricted cash as collateral for its interest rate swap agreements at a correspondent bank as of March 31, 2020 and December 31, 2019, respectively. The Company periodically monitors the financial condition of these correspondent banks.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion of our financial condition at March 31, ~~2018~~2020 and December 31, ~~2017~~2019 and our results of operations for the three months ended March 31, ~~2018~~2020 and ~~March 31, 2017,~~2019, and should be read in conjunction with our audited consolidated financial statements set forth in our Annual Report on Form 10-K for the year ended December 31, ~~2017~~2019 that was filed with the Securities and Exchange Commission (the “SEC”) on March ~~16, 2018~~11, 2020 (our “Annual Report”) and with the accompanying unaudited notes to consolidated financial statements set forth in this Quarterly Report on Form 10-Q for the quarterly period ended March 31, ~~2018~~2020 (this “Report”). Because we conduct all of our material business operations through our bank subsidiary, Luther Burbank Savings, the discussion and analysis relates to activities primarily conducted by the Bank.

Overview

We are a bank holding company headquartered in Santa Rosa, California, and the parent company of Luther Burbank Savings, a California-chartered commercial bank headquartered in ~~Manhattan Beach,~~Gardena, California with ~~$6.0~~$7.1 billion in assets at March 31, ~~2018.~~2020. Our principal business is providing high-value, relationship-based banking products and services to our customers, which include real estate investors, professionals, entrepreneurs, ~~high net worth individuals~~depositors and commercial businesses. We generate most of our revenue from interest on loans and investments. Our primary source of funding for our loans is retail deposits and we place secondary reliance on wholesale funding, primarily borrowings from the FHLB and brokered deposits. Our largest expenses are interest on deposits and borrowings along with salaries and related employee benefits. Our principal lending products are real estate secured loans, consisting primarily of multifamily residential properties and ~~purchase money mortgages on~~ jumbo single family residential properties on the West Coast.

Selected Financial Data

The following table sets forth the Company’s selected historical consolidated financial data for the periods and as of the dates indicated. You should read this information together with the Company’s audited consolidated financial statements included in our Annual Report and the unaudited consolidated financial statements and related notes included elsewhere in this ~~Quarterly Report on Form 10-Q.~~Report. The selected historical consolidated financial data as of and for the three months ended March 31, ~~2018~~2020 and ~~2017~~2019 are derived from our unaudited consolidated financial statements, which are included elsewhere in this Quarterly Report on Form 10-Q. The selected historical consolidated financial data ~~as of and~~ for the three months ended December 31, ~~2017~~2019 are derived from our unaudited consolidated financial statements. The selected historical consolidated financial data as of December 31, 2019 (except as otherwise noted below) are derived from our audited consolidated financial statements included in our previously-filed Annual ~~Report on Form 10-K.~~Report. The Company’s historical results for any prior period are not necessarily indicative of future performance.

(Dollars in thousands, except share/per share data and percentages) As of or For the Three Months Ended
March 31, 2018 March 31, 2017 December 31, 2017
Per Common Share (1)
Basic earnings per share $ 0.20
$ 0.29
$ 0.45
Diluted earnings per share $ 0.20
$ 0.29
$ 0.45
Book value per share $ 9.79
$ 9.70
$ 9.74
Tangible book value per share (2) $ 9.73
$ 9.62
$ 9.68
Common shares outstanding at end of period 56,561,055
42,000,000
56,422,662
Weighted average shares outstanding - basic 56,190,970
42,000,000
45,667,516
Weighted average shares outstanding - diluted 56,755,154
42,000,000
45,831,743
Pro Forma Statements of Income and Per Common Share Data (2)
Pro forma provision for income tax $ 4,175
$ 5,342
$ 6,122
Pro forma net income 11,102
7,378
8,455
Pro forma net income per common share—basic 0.20
0.18
0.19
Pro forma net income per common share—diluted 0.20
0.18
0.18
Selected Ratios
Return on average:
Assets 0.76 % 0.95 % 1.50 %
Stockholders' equity 7.98 % 12.01 % 17.97 %
Average stockholders' equity to average assets 9.52 % 7.92 % 8.32 %
Dividend payout ratio 54.59 % 79.71 % 230.64 %
Net interest margin 2.11 % 2.10 % 2.05 %
Efficiency ratio (2) 46.72 % 53.02 % 45.51 %
Loan to deposit ratio 129.47 % 131.94 % 127.59 %
Pro Forma Selected Ratios (2)
Pro forma return on average assets 0.76 % 0.57 % 0.62 %
Pro forma return on average equity 7.98 % 7.21 % 7.44 %
Credit Quality Ratios
Allowance for loan losses to loans 0.60 % 0.71 % 0.60 %
Allowance for loan losses to nonperforming loans 459.42 % 780.97 % 430.75 %
Nonperforming assets to total assets 0.12 % 0.08 % 0.12 %
Net recoveries to average loans 0.01 % 0.01 % 0.01 %

(1) 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.
(2) Considered a non-GAAP financial measure. See Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations - ‘‘Non-GAAP Financial Measures’’ for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure. 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. For periods prior to January 1, 2018, we calculate our pro forma net income, return on average assets and return on average 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. Beginning January 1, 2018, our pro forma provision for tax expense is our actual C Corporation provision.



(Dollars in thousands, except per share data)	As of or For the Three Months Ended
(Dollars in thousands, except per share data)	March 31, 2020			December 31, 2019			March 31, 2019
Statements of Income and Financial Condition Data
Net Income	$	7,576		$	12,457		$	12,010
Pre-tax, pre-provision net earnings (1)	$	16,054		$	18,635		$	17,223
Total assets	$	7,074,050		$	7,045,828		$	6,992,016
Per Common Share
Diluted earnings per share	$	0.14		$	0.22		$	0.21
Book value per share	$	11.11		$	10.97		$	10.44
Tangible book value per share (1)	$	11.05		$	10.91		$	10.38
Selected Ratios
Return on average:
Assets	0.43		%	0.70		%	0.69		%
Stockholders' equity	4.92		%	8.14		%	8.19		%
Dividend payout ratio	42.77		%	25.99		%	27.43		%
Net interest margin	1.84		%	1.89		%	1.86		%
Efficiency ratio (1)	51.22		%	45.15		%	48.55		%
Noninterest expense to average assets	0.96		%	0.87		%	0.93		%
Loan to deposit ratio	117.65		%	119.03		%	120.91		%
Credit Quality Ratios
Allowance for loan losses to loans	0.65		%	0.58		%	0.56		%
Allowance for loan losses to nonperforming loans	729.54		%	568.47		%	2,303.59		%
Nonperforming assets to total assets	0.08		%	0.09		%	0.02		%
Net charge-offs (recoveries) to average loans	0.04		%	(0.01		)%	(0.01		)%
Capital Ratios
Tier 1 leverage ratio	9.39		%	9.47		%	9.32		%
Total risk-based capital ratio	17.47		%	17.97		%	17.26		%

(1) Considered a non-GAAP financial measure. See Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - ‘‘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 before taxes and provision for loan losses. 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.

Critical Accounting Policies and Estimates

Our unaudited consolidated financial statements are prepared in accordance with ~~accounting principles generally accepted in the United States~~GAAP and with general practices within the financial services industry. Application of these principles requires management to make complex and subjective estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under current circumstances. These assumptions form the basis for our judgments about the carrying values of assets and liabilities that are not readily available from independent, objective sources. We evaluate our estimates on an ongoing basis. Use of alternative assumptions may have resulted in significantly different estimates. Actual results may differ from these estimates.

Our most significant accounting policies are described in Note 1 to our audited ~~Financial Statements~~financial statements for the year ended December 31, ~~2017,~~2019, included ~~on Form 10-K.~~in our Annual Report. We have identified the following accounting policies and estimates that, due to the difficult, subjective or complex judgments and assumptions inherent in those policies and estimates and the potential sensitivity of our financial statements to those judgments and assumptions, are critical to an understanding of our financial condition and results of operations. We believe that the judgments, estimates and assumptions used in the preparation of our financial statements are reasonable and appropriate.

Pursuant to the ~~JOBS~~Jumpstart Our Business Startups Act, as an emerging growth company, we can elect to opt out of the extended transition period for adopting any new or revised accounting standards. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we may adopt the standard for the private company.

We have elected to take advantage of the scaled disclosures and other relief under the JOBS Act, and we may take advantage of some or all of the reduced regulatory and reporting requirements that will be available to us under the JOBS Act, so long as we qualify as an emerging growth company.

Allowance for Loan Losses

The allowance for loan losses is provided for probable incurred credit losses inherent in the loan portfolio at the statement of financial condition date. The allowance is increased by a provision charged to expense and reduced by loan principal charge-offs, net of recoveries. Where management determines that the allowance for loan losses is more than adequate to absorb the probable incurred credit losses in the portfolio, the allowance is reduced by recapturing provisions and a credit is made to the expense account. The allowance is based on management’s assessment of various factors including, but not limited to, the nature of the loan portfolio, previous loss experience, known and inherent risks in the portfolio, the estimated value of underlying collateral, information that may affect a borrower’s ability to repay, current economic conditions and the results of our ongoing reviews of the portfolio. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance. Such agencies may require the Bank to recognize additions to the allowance based on judgments different from those of management.

While we use available information, including independent appraisals for collateral, to estimate the extent of probable incurred loan losses within the loan portfolio, inherent uncertainties in the estimation process make it reasonably possible that ultimate losses may vary significantly from our original estimates. Generally, loans are partially or fully charged off when it is determined that the unpaid principal balance exceeds the current fair value of the collateral with no other likely source of repayment.

~~Loans Held for Sale~~

Loans originated and intended for sale in the secondary market are carried at fair value. Loans originated and intended for sale only after a minimum 12 month period of seasoning, a practice generally utilized to allow for appropriate community reinvestment lending recognition, are classified as held for sale and are carried at the lower of aggregate cost or fair value. Loans transferred to the held-for-sale portfolio that were not originated with the intent to sell are carried at the lower of aggregate cost or fair value. Changes in the fair value of loans that are carried at fair value are recorded in noninterest income in the period incurred.

When determining whether to recognize sale accounting, we give consideration to the legal isolation of transferred assets including the right to pledge or exchange such assets and the surrender of control over transferred assets. Loan sale transactions that involve securitizations with variable interest entities are evaluated for consolidation with consideration given to the nature and extent of continuing involvement with the transferred assets. When the conditions for sale accounting and legal isolation are met, loans are derecognized from the balance sheet and any gains or losses are recorded to earnings through noninterest income.

Fair Value Measurement

We use estimates of fair value in applying various accounting standards for our unaudited consolidated financial statements. Fair value is defined as the exit price at which an asset may be sold or a liability may be transferred in an orderly transaction between willing and able market participants. When available, fair value is measured by looking at observable market prices for identical assets and liabilities in an active market. When these are not available, other inputs are used to model fair value such as prices of similar instruments, yield curves, prepayment speeds and credit spreads. ~~Methods used to estimate fair value do not necessarily represent an exit price.~~ Depending on the availability of observable inputs and prices, different valuation models could produce materially different fair value estimates. The values presented may not represent future fair values and may not be realizable.

Changes in the fair value of ~~investments available-for-sale~~debt securities available for sale and derivatives designated as effective cash flow hedges are recorded in our unaudited consolidated ~~statement~~statements of financial condition and ~~other~~ comprehensive income (loss) while changes in the fair value of equity securities, loans held for sale orand other derivatives are recorded in the unaudited consolidated ~~statement~~statements of financial condition and in the ~~statement~~unaudited consolidated statements of ~~operations.~~income.

Investment Securities Impairment

We assess on a quarterly basis whether there have been any events or economic circumstances to indicate that a security in which we have an unrealized loss is impaired on an other-than-temporary basis. In any instance, we would consider many factors, including the severity and duration of the impairment, the portion of any unrealized loss attributable to a decline in the credit quality of the issuer, our intent and ability to hold the security for a period of time sufficient for a recovery in value, recent events specific to the issuer or industry, and, for debt securities, external credit ratings and recent downgrades. Securities with respect to which there is an unrealized loss that is deemed to be other-than-temporary are written down to fair value.

Non-GAAP Financial Measures

Some of the financial measures discussed in this ~~Quarterly~~ Report ~~on Form 10-Q~~ are ‘‘non-GAAP financial measures.’’ In accordance with SEC rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with ~~generally accepted accounting principles as in effect from time to time in the United States~~GAAP in our ~~statements of income,~~unaudited consolidated statements of financial condition, income or ~~statements of~~ cash flows.

Pre-tax, pre-provision net earnings is defined as net income before taxes and provision for loan losses. We believe the most directly comparable GAAP financial measure is income before taxes. Disclosure of this measure enables you to compare our operations to those of other banking companies before consideration of taxes and provision expense, which some investors may consider to be a more appropriate comparison given our S Corporation status and recaptures from the allowance for loan losses. Prior to January 1, 2018, we calculate our pro forma net income, return on average assets, return on average equity and per share amounts 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. Beginning Janauary 1, 2018, our pro forma income tax expense is our actual C Corporation tax provision. Net tangible book value is defined as total assets less goodwill and total liabilities.expense. Efficiency ratio is defined as noninterest expenses divided by operating revenue, which is equal to net interest income plus noninterest income. Tangible book value per share is defined as tangible stockholders' equity divided by period end shares outstanding. We believe that these non-GAAP financial measures provide useful information to management and investors that is supplementary to our consolidated statements of financial condition, results of ~~operations~~income and cash flows computed in accordance with GAAP. However, we acknowledge that our non-GAAP financial measures have a number of limitations. As such, you should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other banking companies use. Other banking companies may use names similar to those we use for the non-GAAP financial measures we disclose, but may calculate them differently. You should understand how we and other companies each calculate their non-GAAP financial measures when making comparisons.

The following reconciliation table provides a more detailed analysis of these non-GAAP financial measures:

As of or For the Three Months Ended
(Dollars in thousands) March 31, 2018 March 31, 2017 December 31, 2017
Tangible book value
Total assets $ 6,033,888
$ 5,391,540
$ 5,704,380
Less: Goodwill (3,297 ) (3,297 ) (3,297 )
Less: Total liabilities (5,480,137 ) (4,984,033 ) (5,154,635 )
Tangible book value $ 550,454
$ 404,210
$ 546,448

Pro forma provision for income tax
Net income before income taxes $ 15,277
$ 12,720
$ 14,577
Total effective actual/ pro forma tax rate 27 % 42 % 42 %
Actual/ pro forma provision for income taxes $ 4,175
$ 5,342
$ 6,122

Pro forma net income
Net income before income taxes $ 15,277
$ 12,720
$ 14,577
Actual/ pro forma provision for income taxes 4,175
5,342
6,122
Actual/ pro forma net income $ 11,102
$ 7,378
$ 8,455

Pro forma ratios and per share data
Annualized actual/ pro forma net income (numerator) $ 44,408
$ 29,510
$ 33,819

Average assets (denominator) 5,848,751
5,172,186
5,461,226
Actual/ pro forma return on average assets 0.76 % 0.57 % 0.62 %

Average stockholders' equity (denominator) 556,661
409,451
454,635
Actual/ pro forma return on average stockholders' equity 7.98 % 7.21 % 7.44 %

Actual/ pro forma net income (numerator) $ 11,102
$ 7,378
$ 8,455

Weighted average shares outstanding - basic (denominator) 56,190,970
42,000,000
45,667,516
Actual/ pro forma net income per common share—basic $ 0.20
$ 0.18
$ 0.19

Weighted average shares outstanding - diluted (denominator) 56,755,154
42,000,000
45,831,743
Actual/ pro forma net income per common share—diluted $ 0.20

$ 0.18
$ 0.18

Efficiency ratio
Noninterest expense (numerator) $ 14,713
$ 14,703
$ 13,221
Net interest income $ 30,465
$ 26,850
$ 27,554
Noninterest income 1,025
882
1,494
Operating revenue (denominator) $ 31,490
$ 27,732
$ 29,048
Efficiency ratio 46.72 % 53.02 % 45.51 %



	As of or For the Three Months Ended
(Dollars in thousands)	March 31, 2020			December 31, 2019			March 31, 2019
Pre-tax, Pre-provision Net Earnings
Income before taxes	$	10,754		$	17,635		$	16,923
Plus: Provision for loan losses	5,300			1,000			300
Pre-tax, pre-provision net earnings	$	16,054		$	18,635		$	17,223
Efficiency Ratio
Noninterest expense (numerator)	$	16,859		$	15,341		$	16,249
Net interest income	32,115			33,162			32,092
Noninterest income	798			814			1,380
Operating revenue (denominator)	$	32,913		$	33,976		$	33,472
Efficiency ratio	51.22		%	45.15		%	48.55		%



(Dollars in thousands except per share data)	March 31, 2020			December 31, 2019			March 31, 2019
Tangible Book Value Per Share
Total assets	$	7,074,050		$	7,045,828		$	6,992,016
Less: Goodwill	(3,297		)	(3,297		)	(3,297		)
Tangible assets	7,070,753			7,042,531			6,988,719
Less: Total liabilities	(6,470,710		)	(6,431,364		)	(6,403,718		)
Tangible stockholders' equity (numerator)	$	600,043		$	611,167		$	585,001
Period end shares outstanding (denominator)	54,286,465			55,999,754			56,351,781
Tangible book value per share	$	11.05		$	10.91		$	10.38

~~Factors Affecting Comparability of Financial Results~~COVID-19

~~S Corporation Status~~The COVID-19 pandemic has caused a substantial disruption to the economy, as well as a heightened level of uncertainty about the scope and longevity of its impact. In response to the pandemic, we have implemented a multi-pronged approach to address the challenges caused by the effects of this pandemic. Our approach includes ensuring the safety of our employees and the communities that we serve and developing new and temporarily revised programs that are responsive to the needs of our loan and deposit customers. Although we entered this environment with a fundamentally sound loan portfolio and strong liquidity and capital positions, as our results for the first quarter of 2020 demonstrate, we deemed it prudent to provide additional loss absorbing loan reserves. As we continue to closely monitor COVID-19 developments, we remain focused on our ability to navigate these challenging conditions and the underlying strength and stability of our Company.

Employees

The safety and health of our employees are of paramount importance to us. Financial institutions have been designated as an essential component of our nation’s critical infrastructure, therefore, all of our branches have remained open during this challenging time. To limit our branch employees' exposure to risks related to COVID-19, we have temporarily reduced our branch hours, expanded our phone support systems and enhanced branch safety protocols. Despite the staffing requirements of our branches, a remote working arrangement has been implemented for the vast majority of our non-branch employees and approximately two-thirds of our team are successfully working from home. In recognition of the demands caused by the "stay-at-home" orders on families, our employees are also being permitted to utilize a flexible work schedule to maintain our Company's productivity while fulfilling personal responsibilities. We ~~terminated~~have also provided other benefits such as wellness allowances for customer facing employees, as well as paid time off and counseling services for employees requiring additional assistance. Our employees have successfully risen to the challenge of supporting our ~~status as~~customers during this difficult time by providing quality customer care for both deposit and lending services.

Borrowers

In late March 2020, the Company implemented a ~~“Subchapter S” corporation as~~lending modification initiative to support customers financially impacted by the COVID-19 pandemic and unable to make their scheduled loan payments. The program provides borrowers the opportunity to modify their existing real estate loans by temporarily deferring payments for a specified period of ~~December 1, 2017, in~~time. In connection with ~~our IPO. Prior~~the modifications, loan maturity dates are typically being extended for a commensurate period and deferred payments will be capitalized and reamortized into future monthly loan payments over the revised term of the loan. As a further accommodation to ~~this date, we elected~~borrowers, all late charges are generally being waived for COVID-19 modifications. In conjunction with the passage of Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), banks have been provided the option to ~~be taxed~~temporarily suspend certain requirements under U.S. GAAP related to loan delinquencies and troubled debt restructurings ("TDRs") for ~~U.S. federal income tax purposes as an S Corporation.~~a limited time to account for the effects of COVID-19. As a result, ~~our earnings were~~the Company will not ~~subject to, and we did~~be recognizing eligible COVID-19 loan modifications as TDRs. Additionally, loans qualifying for these modifications will not ~~pay, U.S. federal income tax, and we were not~~be required to ~~make any provision~~be reported as delinquent, nonaccrual, impaired or criticized solely as a result of a COVID-19 loan modification.

~~recognize any liability for U.S. federal income tax in our financial statements. While we~~As there was minimal activity as of March 31, 2020, the following table details completed loan hardship applications submitted to the Company and currently under review and applications approved as of April 30, 2020:



	Total Completed Applications Received⁽¹⁾							Approved for Payment Deferral
(Dollars in thousands)	# of Loans	Current Balance		% of Loan Portfolio Segment		Monthly Cashflow Impact		# of Loans	Current Balance		% of Loan Portfolio Segment		Monthly Cashflow Impact

Multifamily residential	61	$	88,527	2.2	%	$	445	11	$	12,280	0.3	%	$	61
Single family residential	90	111,920		5.9	%	517		49	57,718		3.0	%	259
Commercial real estate	14	51,167		24.4	%	274		3	13,559		6.5	%	73
Construction and land loans	1	1,142		5.4	%	147		1	1,142		5.4	%	147
Total	166	$	252,756	4.1	%	$	1,383	64	$	84,699	1.4	%	$	540

(1) Included in total completed applications above are 13 loans totaling $11.2 million, where an application was received and the deferral request was denied given a lack of current hardship. Not included in the table above are 232 incomplete applications received related to loans totaling $332.1 million and 17 withdrawn applications related to loans totaling $18.2 million.

At March 31, 2020, there were 5 single family residential loans totaling $6.0 million and 1 multifamily residential loan totaling $595 thousand that would have been reported as 30 days delinquent loans had the borrowers not ~~subject to and did not pay U.S. federal income tax, we were subject to, and paid, California S Corporation income tax at a rate of 3.5%.~~requested COVID-19 loan payment deferrals.

~~Upon the termination of our status as an S Corporation on December 1, 2017, we commenced paying U.S. federal income tax~~The Bank continues to originate loans for single family and ~~a higher California income tax on our taxable earnings and our financial statements will reflect a provision for both U.S. federal income tax and California income tax.~~multifamily borrowers desiring to refinance loans or execute real estate purchase transactions. As a result of ~~this change,~~ the ~~net income~~pandemic, however, the Company has temporarily tightened its credit underwriting guidelines and ~~earnings per share data presented in our historical financial statements~~discontinued accepting applications for certain loan programs such as those secured by second homes, nonresidential commercial properties and construction projects. While we continue to monitor the changing environment and the ~~other financial information set forth in~~impacts of COVID-19 on employment and real estate values, at this ~~Quarterly Report, which unless otherwise specified, do~~time we remain committed to providing lending services required by the public. The Company has elected to not include any provision for U.S. federal income tax, will not be comparable with our future net income and earnings per share in periods after we commenced being taxed as a C Corporation. As a C Corporation, our net income is calculated by including a provision for U.S. federal income tax and a higher California income tax rate, currently at 10.84%.

The termination of our status as an S Corporation may also affect our financial condition and cash flows. Historically, we have made quarterly cash distributions to our shareholders in amounts estimated by us to be sufficient for them to pay estimated individual U.S. federal and California income tax liabilities resulting from our taxable income that was ‘‘passed through’’ to them. However, these distributions have not been consistent, as sometimes the distributions have been less than or in excess of the shareholder’s estimated U.S. federal and California income tax liabilities resulting from their ownership of our stock. In addition, these estimates have been based on individual income tax rates, which may differ from the rates imposed on the income of C Corporations. Subsequent to the termination of our S Corporation status on December 1, 2017, other than our obligations under the tax sharing agreement with prior S Corporation shareholders, no income will be ‘‘passed through’’ to any shareholders, but, as noted above, we have commenced paying U.S. federal income tax and a higher California income tax. The amounts that we have historically distributed to our shareholders may not be indicative of the amount of U.S. federal and California income tax that we will be required to pay after December 1, 2017. Depending on our effective tax rate and our future dividend rate, our future cash flows and financial condition could be positively or adversely affected compared to our historical cash flows and financial condition.

Deferred tax assets and liabilities are recognized for the tax consequences attributable to differences between the financial statement carrying amounts of our existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using tax rates expected to apply to taxable incomeparticipate in the ~~years in which those temporary differences are expected to be recovered or settled.~~

~~Retail Mortgage Banking Activity and Other Loan Sales~~

We began retail mortgage banking operations in 2013, with the primary purpose of serving a wider customer base of consumers who desire 30-year fixed rate single family real estate financing. We offered a wide range of mortgage products including variable rate 3, 5, 7 and 10-year hybrid products and long-term fixed rate programs. While much of the variable rate loan production from this activity was held in our loan portfolio, the long-term fixed loan originations were sold to correspondents or to Freddie Mac. Since 2016, we have sold $31.3 million of single family residential loans to Freddie Mac, on a servicing retained basis. We also brokered loans to other financial institutions where those organizations had a desirable product for our customers. As part of our retail mortgage banking activity, we also made single family residential construction loans, $33.1 million of which remained on our books, and $7.3 million of which were subject to commitments for future disbursements, at March 31, 2018.

We decided to wind down this business activity during the first quarter of 2017, as we found that the highly competitive nature and expense of running this business was unprofitable, primarily due to the lack of sufficient loan volume needed to offset fixed costs. Revenue from this activity, including net gains on the sales of loans, broker fee income and servicing fee income can be found in noninterest income on our consolidated statements of operations while the related expenses are captured in noninterest expense on the consolidated statements of operations.

While we are still able to originate single family residential loans on a retail basis with our portfolio of hybrid products, we are not actively pursuing this business. Our single family residential loans are primarily sourced from brokers, with many of which we have long-term relationships. This activity has been a significant part of our lending business since 2006.Small Business Administration's Payment Protection Program.

~~Multifamily Securitization Transaction~~Depositors

~~During 2017,~~To address depositors needs during the pandemic, we ~~entered into~~have kept all of our branches open, and have also increased ATM withdrawal limits with no fees to ensure customer access to liquidity and promote their safety. Furthermore, we have implemented the waiver of certain early withdrawal penalties and overdraft fees related to deposit accounts. In addition, we have enhanced our customer communications via mailings and website postings to inform them of telephonic, online and mobile options for transacting business, as well as the need to have a ~~trust sale memorandum~~greater awareness of ~~understanding with Freddie Mac, pursuant~~perpetrated scams and fraudulent schemes related to ~~which~~COVID-19. As of April 30, 2020, we ~~agreed to sell a~~have not experienced any material changes in deposit levels.

Allowance for Loan Losses

At March 31, 2020, 100% of our loan portfolio ~~of multifamily loans to a~~was secured by real estate ~~mortgage investment conduit,~~collateral and 96.3% of our loan balances financed single family or ~~REMIC, that holds the~~multifamily residential housing having a weighted average loan-to-value of 59.4%. The Company has limited exposure to nonresidential commercial loans ~~in trust~~ and ~~issued securities that are fully guaranteed by Freddie Mac and privately offered and sold~~little to ~~investors. On September 27, 2017, we closed this securitization transaction. We did not purchase any of the securities for our portfolio.~~

The primary purpose of this multifamily securitization transaction was to enable us to redeploy capital and funding to support higher-yielding assets while also reducing our reliance on wholesale funding, improving liquidity measures and reducing our concentration of multifamily loans.

~~The size of the multifamily loan portfolio sold~~no exposure to the ~~REMIC was $626.1 million, consisting of one class of post-reset, variable rate 3, 5,~~industries most impacted by the pandemic such as travel, hospitality and 7-year hybrid loans in an aggregate principal amount of approximately $91.6 million, and two classes of pre-reset, variable rate 3, 5 and 7-year hybrid loans in an aggregate principal amount of approximately $534.5 million. 74.3% ofentertainment. The following table shows the loan portfolio ~~consisted~~composition, with more granular emphasis on nonresidential commercial real estate, as of loans for multifamily properties located in California, while the remaining 25.7% of the loan portfolio consistent of loans for multifamily properties located in Washington. We retain sub-servicing obligations on the loan portfolio. The gross proceeds of this sale to us was approximately $637.6 million. We used the proceeds of this sale to pay down short-term FHLB borrowings. These borrowings had no prepayment penalties associated with them. The following table summarizes the loans that sold in this securitization.March 31, 2020:

Loan Type Number of Mortgage Loans Principal Balance (1)(2) Percentage of Mortgage Pool Balance Weighted Average Mortgage Rate (2) Loan to Value Ratio (2) Debt Service Coverage Ratio (2)
Post-Reset Hybrid Loans 65
$ 91,552
14.6 % 3.66 % 53.2 % 1.88
Pre-Reset Hybrid Loans (3) 237
415,628
66.4
3.39
54.2
1.67
Pre-Reset Hybrid Loans (4) 70
118,880
19.0
3.51
46.5
1.70
Total 372
$ 626,060
100.0 % 3.45 % 52.6 % 1.71


~~(1)~~	~~Dollars in thousands~~


~~(2)~~	~~Represents balance, weighted average rate and ratios at the security cut-off date of September 1, 2017.~~


~~(3)~~	~~Loans have 1 to 40 months until their first rate reset.~~


~~(4)~~	~~Loans have 41 or more months until their first rate reset.~~

In connection with the securitization, we entered into a reimbursement agreement with Freddie Mac, pursuant to which we are obligated to reimburse Freddie Mac for the first losses in the underlying loan portfolio not to exceed 10% of the unpaid principal amount of the loans comprising the securitization pool at settlement, or approximately $62.6 million. Our reimbursement obligation is supported by a FHLB letter of credit. Our reimbursement obligation will terminate on the later of (i) the date on which Freddie Mac has no further liability (accrued or contingent) under its guarantee for these securities or (ii) the date on which the we shall pay to Freddie Mac our full reimbursement obligation.



(Dollars in thousands)	# of Loans	Balance		% of Total Loans		Weighted Average LTV (1)
Multifamily residential	2,525	$	4,058,869	65.3	%	56.6	%
Single family residential	2,114	1,930,831		31.1	%	64.7	%
Commercial real estate type:
Strip Retail	23	49,205		0.8	%	51.4	%
Mid Rise Office	7	39,303		0.6	%	65.1	%
Low Rise Office	14	25,448		0.4	%	55.2	%
Medical Office	8	20,822		0.3	%	63.1	%
Shopping Center	5	14,635		0.2	%	53.7	%
Multi-Tenant Industrial	8	12,917		0.2	%	49.4	%
Anchored Retail	3	12,477		0.2	%	53.9	%
More than 50% commercial	10	9,611		0.2	%	49.2	%
Unanchored Retail	6	7,603		0.1	%	44.9	%
Shadow Retail	3	4,980		0.1	%	58.4	%
Warehouse	4	3,110		0.1	%	41.4	%
Flex Industrial	2	2,531		—	%	65.1	%
Restaurant	2	1,550		—	%	34.4	%
Single-Tenant Industrial	2	1,372		—	%	50.5	%
Other	1	93		—	%	17.7	%
Commercial Real Estate	98	205,657		3.2	%	55.6	%
Construction & Land Development	14	22,857		0.4	%	53.0	%
Non-mortgage Loans	1	100		—	%	N/A
Total	4,752	$	6,218,314	100.0	%	59.1	%

(1) Construction and land development LTV is calculated based on an "as completed" property value.

As a result of the COVID-19 pandemic, we increased the qualitative component of our ~~exit from retail mortgage banking and~~allowance for loan losses specific to the uncertainty surrounding the economic environment. During the current ~~securitization activities, gains on the sale of loans and other fee income shown as noninterest income~~quarter, we added over $6.1 million to our reserves for this purpose. As there was a 23.1% reduction in our ~~consolidated statements~~criticized loan balances during the quarter as compared to December 31, 2019, this improvement partially offset our required charge to increase reserves, and we recorded a first quarter provision for loan losses of ~~operations may not be directly comparable,~~$5.3 million. The following table shows the components attributed to the net increase in our allowance for loan losses during the first quarter of 2020:



(Dollars in thousands)	Balance
12/31/2019 Allowance for Loan Losses	$	36,001
COVID-19 economic impact	6,143
Decline in criticized loans	(993		)
Net charge-offs	(644		)
Decline in loan portfolio	(37		)
Other qualitative changes	187
3/31/2020 Allowance for Loan Losses	$	40,657

Liquidity and ~~will likely vary, from period to period.~~

~~Public Company Costs~~Capital

As ~~a result~~part of our ~~initial public offering completed in December 2017,~~response to COVID-19, we ~~expect~~continue to incur additional costs associated with operating as a public company. We expect that these costs will include additional personnel, legal, consulting, regulatory, insurance, accounting, investor relationsclosely monitor our liquidity and ~~other expenses~~capital levels to ensure that we ~~did not incur as a private company.~~

~~The Sarbanes-Oxley Act, as well as rules adopted~~are properly prepared for the economic uncertainty caused by the SEC and national securities exchanges, requires public companies to implement specified corporate governance practices that were inapplicable to us as a private company. These additional rules and regulations will increase our legal, regulatory and financial compliance costs and will make some activities more time-consuming and costly.pandemic. As of March 31, 2020, we maintained the following liquidity position:



(Dollars in thousands)	As of 3/31/2020		% of Assets
Cash & Cash Equivalents	$	105,078	1.5	%
Unencumbered Liquid Securities	653,444		9.2	%
Unutilized Brokered Deposit Capacity (1)	372,807		5.3	%
Unutilized FHLB Borrowing Capacity (2) (3)	646,291		9.1	%
Unutilized FRB Borrowing Capacity (2)	163,675		2.3	%
Commercial Lines of Credit	50,000		0.7	%
Total Liquidity	$	1,991,295	28.1	%

(1) Capacity based on internal guidelines
(2) Capacity based on pledged loan collateral specific to the FHLB or FRB, as applicable
(3) Availability to borrow from the FHLB is permitted up to 40% of the Bank's assets or $2.8 billion. At March 31, 2020, we had $953.7 million and $187.6 million in outstanding advances and letters of credit with the FHLB, respectively.

The Company’s capital levels continue to be significantly above the minimum levels required for regulatory capital purposes. At March 31, 2020, our Tier 1 Leverage, Common Equity Tier 1 Risk-Based, Tier 1 Risk-Based and Total Risk-Based Capital ratios were 9.4%, 14.9%, 16.4% and 17.5%, respectively. Refer to Part I. Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" - "Capital Adequacy" for further details regarding our capital levels at March 31, 2020. The following graphs depict the Company’s capital position in relation to current regulatory requirements including capital conservation buffers:

Results of ~~operations~~Operations - Three Months Ended March 31, ~~2018~~2020 and ~~2017~~2019

Overview

For the three months ended March 31, ~~2018~~2020, our net income was ~~$11.1~~$7.6 million as compared to ~~$12.3~~$12.0 million for the ~~three months ended March 31, 2017.~~same period last year. The decrease of ~~$1.2~~$4.4 million, or ~~9.7%~~36.9%, was attributed primarily to an increase of ~~$3.6~~$5.0 million in ~~net interest income, a $1.2 million increase in the~~ provision for loan losses, ~~and~~ an increase in noninterest expense of ~~$3.8~~$610 thousand and a decrease in noninterest income of $582 thousand, partially offset by a decrease of $1.7 million in ~~the provision for~~ income taxes, compared to the three months ended March 31, 2017. The increase in net interest income was credited to strong organic loan growth. Loan loss provisions recognized during the quarter ended March 31, 2018 were directly attributable to loan growth. Despite higher loan growth during the quarter ended March 31, 2017, loan loss provisions were lower due to improvements in the credit metrics of our loan portfolio. The increase in provision for income taxes was due to the increase in tax ~~rates associated with the revocation of our S Corporation election in conjunction with our IPO in December 2017.~~expense. Pre-tax, pre-provision net earnings ~~increased~~decreased by ~~$3.7~~$1.2 million, or ~~28.8%~~6.8%, for the three months ended March 31, ~~2018~~2020 as compared to the ~~three months ended March 31, 2017 largely due to the additional $3.6 million in net interest income.~~same period last year.

Net Interest Income

Net interest income increased by ~~$3.6 million,~~$23 thousand, or ~~13.5%~~0.1%, to ~~$30.5~~$32.1 million ~~for three months ended March 31, 2018 from $26.9 million for three months ended March 31, 2017. Our net interest margin of 2.11%~~ for the three months ended March 31, ~~2018 increased slightly~~2020 from $32.1 million for the same period last year. Net interest income was impacted by a decline in the yield of our investment portfolio of 36 basis points, as well as a decline in earnings on our loan portfolio. The decrease in loan interest income as compared to the same period last year was caused by a decrease in the average loan yield of 5 basis points, partially offset by a $45.2 million increase in the average balance of loans. Net interest income was further impacted by a $293 thousand increase in interest expense on deposits caused by an increase in the average balance of interest-bearing deposits of $156.3 million compared to the same period last year, partially offset by a 5 basis point decline in the cost of interest-bearing deposits. These items were offset by a decrease in the average balance and cost of FHLB advances of $130.4 million and 19 basis points, respectively. Our net interest margin of ~~2.10%~~1.84% for the three months ended March 31, ~~2017,~~2020 decreased from our net interest margin of 1.86% for the same

period last year. The decline in net interest margin from the same period last year primarily ~~due~~relates to the ~~increased rates on new loan origination volume exceeding~~carry cost of swaps during the current quarter resulting from declines in variable interest rate ~~on loans paid off and sold and secondarily,~~payments received in connection with our swap agreements caused by multiple decreases in the ~~recovery~~federal funds rate approved by the Federal Reserve Board of ~~$269 thousand of interest on two nonaccrual loans that paid off within the quarter.~~Governor's Federal Open Market Committee beginning in August 2019.

Average balance sheet, interest and yield/rate analysis. The following table presents average balance sheet information, interest income, interest expense and the corresponding average yield earned and rates paid for the three months ended March 31, ~~2018~~2020 and ~~2017.~~2019. The average balances are daily ~~averages and include both performing and nonperforming loans.~~averages.


	For the Three Months Ended March 31,												For the Three Months Ended March 31,
	2018						2017						2020						2019
(Dollars in thousands)	Average Balance		Interest Inc / Exp		Average Yield/Rate		Average Balance		Interest Inc / Exp		Average Yield/Rate		Average Balance		Interest Inc/Exp		Yield/Rate		Average Balance		Interest Inc/Exp		Yield/Rate
Interest-Earning Assets
Multifamily residential	$	3,000,059	$	27,930	3.72	%	$	2,724,910	$	23,490	3.45	%	$	4,009,477	$	40,594	4.05	%	$	3,716,551	$	37,801	4.07	%
Single family residential	2,009,329		16,806		3.35	%	1,755,119		14,118		3.22	%	1,979,005		17,390		3.51	%	2,250,674		20,841		3.70	%
Commercial	117,559		1,463		4.98	%	60,953		784		5.14	%
Commercial real estate													204,118		2,355		4.61	%	189,485		2,256		4.76	%
Construction, land and NM	38,419		364		3.79	%	37,390		351		3.76	%	21,334		366		6.90	%	11,983		155		5.25	%
Total Loans (1)	5,165,366		46,563		3.61	%	4,578,372		38,743		3.38	%	6,213,934		60,705		3.91	%	6,168,693		61,053		3.96	%
Securities available-for-sale	524,119		2,383		1.82	%	455,096		1,465		1.29	%
Securities held-to-maturity (2)	10,544		89		3.38	%	7,452		59		3.17	%
Cash and cash equivalents	70,041		246		1.40	%	70,983		129		0.73	%
Investment securities													641,556		3,303		2.06	%	647,805		3,925		2.42	%
Cash, cash equivalents and restricted cash													113,196		317		1.13	%	73,679		400		2.20	%
Total interest-earning assets	5,770,070		49,281		3.42	%	5,111,903		40,396		3.16	%	6,968,686		64,325		3.69	%	6,890,177		65,378		3.80	%
Noninterest-earning assets (3)	78,681						60,283
Noninterest-earning assets (2)													66,756						77,770
Total assets	$	5,848,751					$	5,172,186					$	7,035,442					$	6,967,947

Interest-Bearing Liabilities
Transaction accounts (4)	$	224,674	$	407	0.72	%	$	205,712	$	350	0.68	%
Transaction accounts													$	226,879	572		1.00	%	$	220,225	720		1.31	%
Money market demand accounts	1,507,614		3,314		0.88	%	1,545,433		2,919		0.76	%	1,358,219		4,139		1.21	%	1,351,938		3,998		1.18	%
Time deposits	2,274,818		8,211		1.44	%	1,716,304		5,045		1.18	%	3,569,897		19,870		2.21	%	3,426,550		19,570		2.28	%
Total deposits	4,007,106		11,932		1.19	%	3,467,449		8,314		0.96	%	5,154,995		24,581		1.89	%	4,998,713		24,288		1.94	%
FHLB advances	1,070,087		4,820		1.80	%	1,084,904		3,275		1.21	%	993,890		5,558		2.25	%	1,124,269		6,772		2.44	%
Junior subordinated debentures													61,857		493		3.21	%	61,857		651		4.27	%
Senior debt	94,173		1,577		6.70	%	94,037		1,577		6.71	%	94,427		1,578		6.68	%	94,304		1,575		6.68	%
Junior subordinated debentures	61,857		487		3.15	%	61,857		380		2.46	%
Total interest-bearing liabilities	5,233,223		18,816		1.44	%	4,708,247		13,546		1.15	%	6,305,169		32,210		2.03	%	6,279,143		33,286		2.12	%
Noninterest-bearing liabilities	58,867						54,488
Noninterest-bearing deposit accounts													46,315						41,407
Other noninterest-bearing liabilities													67,827						60,573
Total liabilities													6,419,311						6,381,123
Total stockholders' equity	556,661						409,451						616,131						586,824
Total liabilities and stockholders' equity	$	5,848,751					$	5,172,186					$	7,035,442					$	6,967,947

Net interest spread ~~(5)~~(3)					1.98	%					2.01	%					1.66	%					1.68	%
Net interest income/margin ~~(6)~~(4)			$	30,465	2.11	%			$	26,850	2.10	%			$	32,115	1.84	%			$	32,092	1.86	%

(1)

~~Loan balance includes portfolio real estate loans, real estate loans held for sale and $100 thousand or less in non-mortgage loans.~~ 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,~~costs, net of deferred loan ~~costs.~~fees. Net deferred loan cost amortization totaled ~~$2.3~~$3.7 million and ~~$2.2~~$2.6 million for the three months ended March 31, ~~2018~~2020 and ~~2017,~~2019, respectively.


(2)	Securities held to maturity include obligations of states and political subdivisions of $281 thousand and $298 thousand as of March 31, 2018 and March 31, 2017, respectively. Yields are not calculated on a tax equivalent basis.


~~(3)~~	~~Noninterest earning~~Noninterest-earning assets includes the allowance for loan losses.


~~(4)~~	~~Transaction accounts include both interest and non-interest bearing deposits.~~


~~(5)~~(3)	Net interest spread is the average yield on total interest-earning assets minus the average rate on total interest-bearing liabilities.


~~(6)~~(4)	Net interest margin is net interest income divided by total interest-earning assets.

Interest rates and operating interest differential. Increases and decreases in interest income and interest expense result from ~~change~~changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following table shows the effect that these factors had on the interest earned from our interest-earning assets and interest incurred on our interest-bearing liabilities during the periods indicated.

The effect of changes in volume is determined by multiplying the change in volume by the ~~current~~prior period’s average rate. The effect of rate changes is calculated by multiplying the change in average rate by the prior period’s volume. The change in interest due to both rate and volume has been allocated to rate and volume changes in proportion to the relationship of the absolute dollar amounts of the changes in each.


	Three Months Ended March 31,
	2018 vs 2017
	Variance Due To								Three Months Ended March 31, 2020 vs 2019
				Yield/					Variance Due To
(Dollars in thousands)	Volume			Rate			Total		Volume			Yield/Rate			Total
Interest-Earning Assets
Multifamily residential	$	2,478		$	1,962		$	4,440	$	2,979		$	(186	)	$	2,793
Single family residential	2,109			579			2,688		(2,421		)	(1,030		)	(3,451		)
Commercial	705			(26		)	679
Commercial real estate									171			(72		)	99
Construction, land and NM	10			3			13		151			60			211
Total Loans	5,302			2,518			7,820		880			(1,228		)	(348		)
Securities available-for-sale	247			671			918
Securities held-to-maturity	26			4			30
Cash and cash equivalents	(2		)	119			117
Investment securities									(38		)	(584		)	(622		)
Cash, cash equivalents and restricted cash									163			(246		)	(83		)
Total interest-earning assets	5,573			3,312			8,885		1,005			(2,058		)	(1,053		)

Interest-Bearing Liabilities
Transaction accounts	33			24			57		22			(170		)	(148		)
Money market demand accounts	(73		)	468			395		22			119			141
Time deposits	1,862			1,304			3,166		865			(565		)	300
Total deposits	1,822			1,796			3,618		909			(616		)	293
FHLB advances	(46		)	1,591			1,545		(726		)	(488		)	(1,214		)
Junior subordinated debentures									—			(158		)	(158		)
Senior debt	2			(2		)	—		3			—			3
Junior subordinated debentures	—			107			107
Total interest-bearing liabilities	1,778			3,492			5,270		186			(1,262		)	(1,076		)

Net Interest Income									$	819		$	(796	)	$	23
Net Interest Income	$	3,795		$	(180	)	$	3,615

Total interest income ~~increased~~decreased by ~~$8.9~~$1.1 million, or ~~22.0%~~1.6%, for the three months ended March 31, ~~2018~~2020 as compared to the same period last year. Interest income on investments accounted for $622 thousand of ~~2017. Interest~~that amount due to a decrease in the average yield on investment securities of 36 basis points. Additionally, interest income from loans ~~accounted for $7.8 million of that amount~~decreased $348 thousand as the yield on loans decreased by 5 basis points, which impact was partially offset by a $45.2 million increase in the average ~~daily~~ balance of loans. The decline in our loan yield was primarily caused by the prepayment of higher yielding loans, ~~increased~~which are being replaced by ~~$587.0 million, or 12.8%. The~~loans at lower current interest ~~income increase from greater average~~rates, a current quarter net cost of $390 thousand on interest rate swaps, as well as the net costs associated with elevated loan ~~balances was further enhanced by a 23 basis point increase in loan yield.~~prepayments. The volume of new loans originated totaled ~~$478~~$312.7 million and ~~$583~~$311.5 million for the three months ended March 31, ~~2018~~2020 and ~~2017,~~2019, respectively. ~~Loan originations were higher~~Additionally, during the ~~first~~current quarter, we purchased multifamily residential loans with a total current loan balance of ~~2017 due to anticipated loan sales during 2017.~~$20.4 million and a weighted average estimated yield of 3.51%. The weighted average rate on new loans for the three months ended March 31, ~~2018~~2020 was ~~4.31%~~3.98% as compared to ~~the weighted average rate on new loans~~4.62% for the ~~three months ended March 31, 2017 of 3.91%.~~same period last year. The ~~weighted~~decline in the average ~~rate~~coupon on ~~loan curtailments/payoffs~~originations was primarily due to the decline in market rates. Loan prepayment speeds were 19.58% and 13.66% during the three months ended March 31, ~~2018 was 3.89% as compared to a~~2020 and 2019, respectively. The weighted average rate on loan ~~curtailment/payoff rate of 3.63% for~~payoffs/curtailments during the three months ended March 31, ~~2017.~~2020 was 4.32% as compared to 4.19% for the same period last year.

Total interest expense ~~increased $5.3~~decreased $1.1 million to ~~$18.8~~$32.2 million for the three months ended March 31, ~~2018~~2020 from ~~$13.5 million for the three months ended March 31, 2017. Interest expense on deposits increased $3.6 million to $11.9 million for the three months ended March 31, 2018 from $8.3~~$33.3 million for the same period ~~of 2017. This increase is~~last year primarily ~~due~~related to average daily deposit balances increasing by $539.7 million, or 15.6%, from period to period, as well as cost of deposits increasing to 1.19% for the three months ended March 31, 2018, from 0.96% for the same period ended 2017. Interest expense on advances from the FHLB accounted for $1.5 million of the increase. Average daily advances decreased by $14.8 million, or 1.4%, from period to period; however, the cost of those advances increased to 1.80% for the three months ended March 31, 2018, as compared to 1.21% for the three months ended March 31, 2017. The increasea decrease in the average balance and cost of FHLB advances of $130.4 million and 19 basis points, respectively. This item was partially offset by an increase of $293 thousand in interest expense on deposits caused by ~~rising borrowing interest rates during~~an increase in the ~~quarter ended March 31, 2018~~average balance of interest-bearing deposits of $156.3 million compared to the same period last ~~year. We use both deposits and FHLB advances to fund net loan growth. We also use FHLB advances, with or without embedded interest rate caps, as~~year, partially offset by a ~~hedge~~5 basis point decline in the cost of ~~interest rate risk, as we can~~interest-bearing deposits.

strategically control the duration of those funds. A discussion of instruments used to mitigate interest rate risk can be found under Part I - Financial Information, Item 3. ‘‘Quantitative and Qualitative Disclosures About Market Risk.’’

Provision for Loan Losses

Provisions for loan losses totaled $1.5 million for the three months ended March 31, 2018 as compared to a provision for loan losses of $309 thousand for the three months ended March 31, 2017. The provision recorded in the first quarter of 2018 was directly attributed to loan growth during the period. Despite higher loan growth duringFor the quarter ended March 31, ~~2017,~~2020, we recorded loan loss provisions ~~were lower due~~of $5.3 million compared to ~~improvements in~~$300 thousand for the ~~credit metrics~~same period last year. The loan loss provision recognized during the current quarter was primarily recorded to set aside reserves for the uncertain economic impacts associated with the COVID-19 pandemic. See Part I. Item 2. "Management's Discussion and Analysis of ~~our loan portfolio. At times, refinements in our model~~Financial Condition and ~~improvements in the credit metrics~~Results of our real estate portfolio, measures such as collateral support, debt service coverage, and payment performance along with continued general economic recovery will cause management to reevaluate quantitative and qualitative adjustments within our methodologyOperations" - "COVID-19" for ~~calculating the allowance for loan losses and will result in an expected reduction to the allowance for loan losses as a percentage~~additonal information. Nonperforming loans totaled $5.6 million, or 0.09% of total loans, ~~as evidenced~~at March 31, 2020, compared to $6.3 million, or 0.10%, and $1.5 million, or 0.02%, of total loans, at December 31, 2019 and March 31, 2019, respectively. Total criticized loans declined by $10.5 million, or 23.1%, during the ~~three months ended March~~current quarter as compared to December 31, ~~2017.~~2019. During the current quarter, we recorded a $722 thousand charge-off related to a single family residential loan, which charge-off amount was fully reserved for at December 31, 2019. Our allowance for loan losses as a percentage of total loans was ~~0.60%~~0.65% at March 31, ~~2018~~2020 as compared to ~~0.71%~~0.56% and ~~0.60%~~0.58% at March 31, ~~2017~~2019 and December 31, ~~2017,~~2019, respectively.

While loans in our portfolio occasionally become impaired, the loans, as individually analyzed and measured, generally do not require a charge-off or reserve for loss. While our nonperforming loans as a percentage of total loans increased slightly from 0.09% to 0.13% from December 31, 2017 to March 31, 2018, 42% of those loans, by balance, were current and paying as agreed at March 31, 2018. Additionally, our classified loans as a percentage of total loans decreased 2 basis points, from 0.28% to 0.26%, over the same period.

Noninterest Income

Noninterest income ~~increased~~decreased by ~~$143~~$582 thousand to ~~$1.0 million for the three months ended March 31, 2018 from $882~~$798 thousand for the three months ended March 31, ~~2017.~~2020 from $1.4 million for the same period last year.

The following table presents the major components of our noninterest income:



	For the Three Months Ended March 31,
(Dollars in thousands)	2020			2019		$ Increase (Decrease)			% Increase (Decrease)
Noninterest Income
Gain on sale of loans	$	—		$	333	$	(333	)	(100.0	)%
FHLB dividends	535			495		40			8.1	%
Fee income	(38		)	285		(323		)	(113.3	)%
Other	301			267		34			12.7	%
Total noninterest income	$	798		$	1,380	$	(582	)	(42.2	)%

The decrease in noninterest income for the ~~three months~~quarter ended March 31, ~~2018 and 2017:~~

For the Three Months Ended March 31,
(Dollars in thousands) 2018 2017 $ Increase (Decrease) % Increase (Decrease)
Noninterest Income
FHLB stock dividends $ 594
$ 633
$ (39 ) (6.2 )%
Fee income 313
337
(24 ) (7.1 )%
Loss on sale of loans —
(163 ) 163
(100.0 )%
Earnings on CSV life insurance 53
49
4
8.2 %
Other 65
26
39
150.0 %
Total noninterest income $ 1,025
$ 882
$ 143
16.2 %

~~Loss on sale of loans.~~ ~~There were no gains on~~2020 compared to the ~~sale of loans, including the change in fair value of loans held for sale for the three months~~quarter ended March 31, ~~2018 as compared~~2019, was primarily due to a ~~net loss of $163~~$333 thousand ~~for the same period ended March 31, 2017. Losses~~gain on sale of loans ~~for~~recognized during the ~~three months ended March 31, 2017 consisted solely~~first quarter of 2019 and a $323 thousand decrease in servicing fee income earned. The decline in servicing fee income primarily related to elevated actual and estimated prepayments on serviced loans that decreased the fair value of our mortgage ~~banking activity and was primarily caused by increased pipeline fall out as we exited that activity.~~servicing rights during the current quarter.

Noninterest Expense

~~Our noninterest~~Noninterest expense ~~decreased $10~~increased $610 thousand, or ~~0.1%~~3.8%, to ~~$14.7~~$16.9 million for the three months ended March 31, ~~2018~~2020 from ~~$14.7~~$16.2 million for the three months ended March 31, ~~2017.~~2019.

The following table presents the components of our noninterest expense for the three months ended March 31, ~~2018~~2020 and ~~2017:~~

2019:


	For the Three Months Ended March 31,										For the Three Months Ended March 31,
(Dollars in thousands)	2018		2017			$ Increase (Decrease)			% Increase (Decrease)		2020		2019		$ Increase (Decrease)			% Increase (Decrease)
Noninterest Expense
Compensation and related benefits	$	9,619	$	10,197		$	(578	)	(5.7	)%	$	11,205	$	10,052	$	1,153		11.5	%
Deposit insurance premium	432		398			34			8.5	%	476		498		(22		)	(4.4	)%
Professional and regulatory fees											431		441		(10		)	(2.3	)%
Occupancy	1,296		1,298			(2		)	(0.2	)%	1,140		1,390		(250		)	(18.0	)%
Depreciation and amortization	714		735			(21		)	(2.9	)%	669		665		4			0.6	%
Professional and regulatory fees	398		185			213			115.1	%
Data processing											967		919		48			5.2	%
Marketing	213		179			34			19.0	%	875		1,154		(279		)	(24.2	)%
Data processing	788		790			(2		)	(0.3	)%
Operating	1,025		1,039			(14		)	(1.3	)%
Other	228		(118		)	346			(293.2	)%
Other expenses											1,096		1,130		(34		)	(3.0	)%
Total noninterest expense	$	14,713	$	14,703		$	10		0.1	%	$	16,859	$	16,249	$	610		3.8	%

~~Compensation and related benefits.~~ ~~Compensation and related benefits~~The increase in noninterest expense ~~decreased by $578 thousand, or 5.7%, to $9.6 million for~~during the ~~three months~~quarter ended March 31, ~~2018 from $10.2 million for~~2020 compared to the same period last year was primarily attributable to a $1.2 million increase in ~~2017. The decrease in expense was~~compensation costs primarily due to higher salary expenses and an increase in the required accrual for post-employment related benefits caused by an increase in the estimated future costs resulting from the recent decline in interest rates. This increase was partially offset by a ~~net~~$279 thousand decrease ~~of $546~~in marketing expenses related to deposit gathering efforts and a $238 thousand decline in ~~incentive compensation and severance payments~~rent costs related to the ~~discontinued mortgage banking operations~~relocation of two facilities in the ~~first~~fourth quarter of ~~2017. We employed 267 full time equivalent employees at both March 31, 2018 and March 31, 2017.~~

~~Professional and regulatory fees.~~ Professional and regulatory fees increased by $213 thousand, or 115.1%, to $398 thousand for the three months ended March 31, 2018 from $185 thousand for the same period in 2017 primarily due to greater third party audit costs in relation to our recent conversion from a private company to a public company as a result of our IPO in December 2017. In addition, regulatory fees increased due to the timing of a change in the Bank’s charter. On September 9, 2016, we converted the Bank from a federally chartered savings and loan to a California state commercial bank. As a result, the DBO and the FDIC are our primary bank regulators, while the Federal Reserve remains the primary federal regulator for the Company. Given the timing of our charter change, we were not assessed any DBO regulatory fees during the first six months of 2017.

~~Other.~~ Other noninterest expense increased by $346 thousand, or 293.2%, to $228 thousand for the three months ended March 31, 2018 from $(118) thousand for the same period in 2017. Other noninterest expense includes provisions for (expense) or reversals of (income) reserves for off balance sheet liabilities such as undisbursed funds on loans and lines of credit and early payoff/default obligations on sold loans. For the three months ended March 31, 2018 and 2017, a provision for off-balance sheet reserves of $133 thousand and a reversal of off-balance sheet reserves of $309 thousand, respectively, were recorded in other noninterest expense for these purposes. The increase in reserves related to off-balance sheet risk period over period reflects an increase in required reserves for unfunded construction loan balances. Other noninterest expense also includes the cost of issuing forgivable down payment assistance loans to borrowers with low-to-moderate income and/or with collateral property located in low-to-moderate income census tracts. As we do not expect to collect any interest or principal on these loans, they are recorded as an expense at the time of origination. For the three months ended March 31, 2018 and 2017, these loans totaled $27 thousand and $94 thousand, respectively. Other noninterest expense also includes miscellaneous other office costs such as guard services, moving expenses and shredding services.

2019.

Income Tax Expense

For the three months ended March 31, ~~2018,~~2020, we recorded an income tax expense of ~~$4.2~~$3.2 million as compared to ~~income tax expense of $425 thousand~~$4.9 million for the ~~three months ended March 31, 2017~~same period last year with effective tax rates of ~~27.3%~~29.6% and ~~3.3%~~29.0%, respectively. ~~We elected to be taxed as an S Corporation until December 1, 2017, at which time we revoked~~The increase in our election in connection with our initial public offering. Prior to December 1, 2017, we did not pay corporate U.S. federal income tax on our taxable income. Instead, our taxable income was ‘‘passed through’’ to our shareholders. Our tax expense for the three months ended March 31, 2018 reflects our liability for both federal and state taxes as a C Corporation. See ‘‘S Corporation Status’’ above for a discussion of our status as an S Corporation and ‘‘Pro Forma Income Tax Expense and Net Income’’ below for a discussion on what our income tax expense and net income would have been had we been taxed as a C Corporation.

~~Pro Forma Income Tax Expense and Net Income~~

In connection with our IPO, we revoked our “Subchapter S” corporation election on December 1, 2017. Prior to that date, as an S-Corporation, we had no U.S. federal income tax expense. We calculate our pro forma net income by adding back our franchise S Corporation tax to net income, and using a combined C Corporation effective tax rate ~~for federal~~was primarily related to the vesting and ~~California income taxes~~settlement of ~~42.0%. This calculation reflects only the change in our status as an S Corporation~~stock awards and does not give effect to any other transaction. Our net income for the three months ended March 31, 2018 and 2017 was $11.1 million and $12.3 million, respectively. Had we been subject to U.S. federal income tax during the three months ended March 31, 2017, on a pro forma basis, our provision for combined federal and state income tax would have been $5.3 million. As a result of the foregoing factors, our pro forma net income (after U.S. federal and California state income tax) for the three months ended March 31, 2018 and 2017 would have been $11.1 million and $7.4 million, respectively.current year non-deductible executive compensation.

Financial ~~condition~~Condition - As of March 31, ~~2018~~2020 and December 31, ~~2017~~2019

Total assets ~~as of~~at March 31, ~~2018~~2020 were ~~$6.0~~$7.1 billion, ~~compared to $5.7 billion at December 31, 2017,~~ an increase of ~~$329.5~~$28.2 million, or ~~5.8%.~~0.4%, from December 31, 2019. The increase was primarily ~~driven~~due to a $31.9 million increase in cash, cash equivalents and restricted cash and a $16.4 million increase in available for sale debt securities, partially offset by a $12.7 million, or 0.2%, decrease in loans. Total liabilities were $6.5 billion at March 31, 2020, an increase ~~in gross loans~~ of $284.9 million. We funded $477.9 million of loans during the three months ended March 31, 2018, which was reduced primarily by normal loan amortization and loan payoffs. Our loan growth was funded through deposits and FHLB advances. Deposits increased by $162.8$39.3 million, or ~~4.1%~~0.6%, ~~to $4.1 billion as of March 31, 2018~~ from ~~$4.0 billion as of~~ December 31, ~~2017.~~2019. The increase in total liabilities was primarily attributable to growth in our deposits of $50.7 million, or 1.0%, partially offset by a decrease in FHLB advances ~~increased by $168.9~~of $25.0 million, or ~~17.1%~~2.6%, compared to ~~$1.2 billion as of March~~December 31, ~~2018.~~2019.

Loan Portfolio Composition

Our loan portfolio is our largest class of earning assets and typically provides higher yields than other types of earning assets. Associated with the higher yields is an inherent amount of credit risk which we attempt to mitigate with strong underwriting. As of both March 31, ~~2018~~2020 and December 31, ~~2017~~2019, our total loans held for investment amounted to ~~$5.3 billion and $5.0 billion, respectively.~~$6.2 billion. The following table presents the balance and associated percentage of each major product type within our portfolio as of the dates indicated.


	As of March 31, 2018				As of December 31, 2017				As of March 31, 2020				As of December 31, 2019
(Dollars in thousands)	Amount		% of total loans		Amount		% of total loans		Amount		% of total		Amount		% of total
Real estate loans held-for-investment
Real estate loans held for investment
Multifamily residential	$	3,076,356	58.2	%	$	2,887,438	57.7	%	$	4,035,266	65.4	%	$	3,962,929	64.1	%
Single family residential	2,042,624		38.7	%	1,957,546		39.2	%	1,904,038		30.9	%	1,993,484		32.3	%
Other:
Commercial real estate	125,445		2.4	%	112,492		2.3	%	204,970		3.3	%	202,452		3.3	%
Construction and land	36,320		0.7	%	41,165		0.8	%	22,990		0.4	%	20,565		0.3	%
Non-mortgage	100		—	%	50		—	%	100		—	%	100		—	%
Total loans held-for-investment	5,280,845		100.0	%	4,998,691		100.0	%
Unamortized Deferred Loan Costs	45,564				42,856
Total loans	$	5,326,409			$	5,041,547
Total loans before deferred items									6,167,364		100.0	%	6,179,530		100.0	%
Deferred loan costs, net									50,950				51,447
Total loans held for investment									$	6,218,314			$	6,230,977

~~There were no loans held for sale at March 31, 2018 or December 31, 2017.~~

~~Over the past few years, we have experienced significant growth in our loan portfolio, although the~~The relative composition of the loan portfolio has not changed ~~significantly.~~significantly over the past few years. Our primary focus remains multifamily real estate lending, which constitutes ~~58%~~65% and 64% of our portfolio at March 31, ~~2018.~~2020 and December 31, 2019, respectively. Single family residential lending ~~which we entered in 2006,~~ is our secondary lending emphasis and represents ~~39%~~31% and 32% of our portfolio at March 31, ~~2018.~~2020 and December 31, 2019, respectively. Single family residential loans have decreased slightly from the prior year due to elevated prepayments attributable to customers refinancing their hybrid-ARM loans to take advantage of lower long-term interest rates.

We recognize that these two loan products represent concentrations within our balance sheet. Multifamily loan balances as a percentage of risk-based capital were ~~473.6%~~578.6% and ~~448.5%~~562.3% as of March 31, ~~2018~~2020 and December 31, ~~2017,~~2019, respectively. Our ~~non-construction~~ single family loans as a percentage of risk-based capital were ~~316.8%~~275.2% and ~~306.4%~~285.2% as of the same dates. Additionally, our loans are geographically concentrated with borrowers and collateral properties on the West Coast. At March 31, ~~2018, 62%~~2020, 61%, 26% and ~~12%~~11% of our real estate loans were collateralized by properties in southern California counties, northern California counties and in Washington, ~~respectively. At December 31, 2017, our collateral footprint was similar at 62%~~respectively, compared to 61%, 26% and ~~12% for southern California counties, northern California counties and in Washington, respectively.~~11%, respectively, at December 31, 2019.

~~We believe that our past success is attributable~~Our lending strategy has been to ~~focusing~~focus on products and markets where we have significant expertise. Given our concentrations, we have established strong risk management practices including risk-based lending standards, self-established product and geographical limits, annual evaluations of income property loans and semi-annual stress testing. WeAlthough we have temporarily tightened lending standards in response to the COVID-19 pandemic and have temporarily stopped accepting applications for loans secured by second homes, nonresidential commercial properties and construction projects, we expect to continue modestly growing ~~our loan portfolio. We have placed more recent focus on originating non-residential commercial real estate loans in our core markets and we anticipate geographic expansion of~~ our single family residential and multifamily ~~products into strategically selected West Coast markets; however, do not expect our product or geographic concentrations to materially change.~~residential loan portfolios.

We have a small portfolio of construction loans with commitments (funded and unfunded) totaling ~~$44.5~~$44.6 million and ~~$53.1~~$39.4 million at March 31, ~~2018~~2020 and December 31, ~~2017,~~2019, respectively. ~~These loans consist primarily of~~Our construction lending typically focuses on single family ~~owner-occupied construction loans that were accommodated as part~~residential projects with completed values of $5.0 million or less and multifamily projects with loan commitments of $15.0 million or less. In response to the aforementioned pandemic, we expect growth of our ~~retail mortgage banking operations. As a result of the recent northern California fires impacting our local community, we plan~~construction loan portfolio to ~~expand our construction lending to help rebuild homes in the affected areas.~~

be limited.

The following table presents the activity in our loan portfolio for the periods shown:

Three Months Ended March 31,
(Dollars In thousands) 2018 2017
Loan Inflows:
Loans originated:
Multifamily residential $ 241,760
$ 410,172
Single family residential 215,248
123,906
Commercial real estate 20,795
16,698
Construction and land —
14,509
Non-mortgage 50
—
Mortgage banking originations —
18,041
Total loans originated 477,853
583,326

Loan Outflows:
Portfolio loan sales —
—
Mortgage banking loan sales —
(24,692 )
Loan principal reductions and payoffs (200,117 ) (254,155 )
Other (1) 7,126
(3,211 )
Total loan outflows (192,991 ) (282,058 )

Net increase in total loan portfolio $ 284,862
$ 301,268

(1) Other changes in loan balances primarily represent the net change in disbursements on unfunded commitments and may include foreclosures, charge-offs and negative amortization.

Total loan origination volume has increased significantly over the past few years as we have made investments in both experienced lending staff as well as front-end loan origination systems allowing us to be more competitive in our markets. MFR loan originations were higher during the first quarter of 2017 due to anticipated loan sales during 2017. The fluctuation in SFR originations was primarily attributable to an increase in customer demand experienced during the first quarter of 2018 compared to the same period last year. In September 2017, we closed a multifamily securitization transaction. The primary purpose of this transaction was to enable us to redeploy capital and funding to support higher-yielding assets while also reducing our reliance on wholesale funding, improving liquidity measures and reducing our concentration of multifamily loans.



	Three Months Ended March 31,
(Dollars in thousands)	2020			2019
Loan Inflows:
Multifamily residential	$	185,056		$	198,385
Single family residential	115,591			104,221
Commercial real estate	4,940			8,930
Construction and land	7,154			—
Purchases	20,380			—
Total loans originated	333,121			311,536

Loan Outflows:
Loan principal reductions and payoffs	(360,333		)	(247,216		)
Portfolio loan sales	—			(52,850		)
Other (1)	14,549			2,168
Total loan outflows	(345,784		)	(297,898		)
Net (decrease) increase in total loan portfolio	$	(12,663	)	$	13,638

(1) Other changes in loan balances primarily represent the net change in disbursements on unfunded commitments, deferred loan costs, fair value adjustments and, to the extent applicable, may include foreclosures, charge-offs and negative amortization.

Multifamily residential loans. We provide multifamily residential loans for the purchase or refinance of apartment buildings of five units or more, with the financed properties serving as collateral for the loan. Our multifamily lending is built around three core principles: market selection, deal selection and sponsor selection. We focus on markets with a high barrier to entry for new development, where there is a limited supply of new housing and where there is a high variance between the cost to rent and the cost to own. We typically lend on stabilized and seasoned assets and focus on older, smaller properties with rents at or below market levels, catering to low and middle income renters. Our customers are generally experienced real estate professionals who desire regular income/cash flow streams and are focused on building wealth steadily over time. We have instituted strong lending policies to mitigate credit and concentration risk. At March 31, ~~2018,~~2020, our multifamily real estate portfolio had an average loan balance of ~~$1.5~~$1.6 million, an average unit count of ~~15.6~~15.1 units, a weighted average loan to value of ~~56.7%~~56.9% and a weighted average debt service coverage ratio of ~~1.58,~~1.50, as compared to an average loan balance of ~~$1.5~~$1.6 million, an average unit count of ~~15.4~~15.2 units, a weighted average loan to value of ~~56.6%~~56.9% and a weighted average debt service coverage ratio of ~~1.54 and~~1.49 at December 31, ~~2017.~~2019.

Single family residential loans. We provide permanent financing on single family residential properties primarily located in our market areas, which are both owner-occupied and investor owned. We conduct this business primarily through a network of third party mortgage brokers with the intention of retaining these loans in our portfolio. The majority of our originations are for purchase transactions, but we also provide refinancings. Our underwriting criteria focuses on debt

ratios, credit scores, liquidity of the borrower and the borrower’s cash reserves. At March 31, ~~2018,~~2020, our single family residential real estate portfolio had an average loan balance of ~~$880~~$901 thousand, a weighted average loan to value of ~~64.9%~~64.7% and a weighted average credit score at origination/refreshed of ~~749. Our~~750. At December 31, 2019, our single family residential real estate portfolio had an average loan balance of ~~$865~~$905 thousand, a weighted average loan to value of ~~65.1%~~64.6% and a weighted average credit score at origination/refreshed of ~~748 at December 31, 2017.~~750.

Commercial real estate loans. While not a large part of our portfolio during any period presented, we also lend on ~~non-residential~~nonresidential commercial real estate. Our commercial real estate loans are generally used to finance the purchase of established multi-tenant industrial, office and retail sites. At March 31, ~~2018,~~2020, our commercial real estate portfolio had an average loan balance of ~~$1.9~~$2.1 million, a weighted average loan to value of ~~59.3%~~55.6% and a weighted average debt service coverage ratio of ~~1.56,~~1.57, as compared to an average loan balance of ~~$1.8~~$2.1 million, a weighted average loan to value of ~~59.0%~~55.9% and a weighted average debt service coverage ratio of ~~1.52~~1.57 at December 31, ~~2017. Our business plan provides for increased emphasis on this product through marketing and cross-selling efforts.~~2019.

Other. Other categories of loans included in our portfolio include construction loans and non-mortgage loans. Construction loans currently consist primarily of single family ~~owner-occupied~~ construction projects. The non-mortgage loans in our

portfolio were provided in support of community investment efforts.

The following table sets forth the contractual maturity distribution of our loan portfolio:



(Dollars in thousands)	Due in 1 year or less		Due after 1 year through 5 years		Due after 5 years		Total
As of March 31, 2020:
Loans
Real estate mortgage loans:
Multifamily residential	$	—	$	1,709	$	4,033,557	$	4,035,266
Single family residential	3,808		1,344		1,898,886		1,904,038
Commercial real estate	56		1,140		203,774		204,970
Construction and land	18,044		4,946		—		22,990
Non-mortgage	—		—		100		100
Total loans	$	21,908	$	9,139	$	6,136,317	$	6,167,364

Fixed interest rates	$	—	$	323	$	30,585	$	30,908
Floating or hybrid adjustable rates	21,908		8,816		6,105,732		6,136,456
Total loans	$	21,908	$	9,139	$	6,136,317	$	6,167,364
As of December 31, 2019:
Loans
Real estate mortgage loans:
Multifamily residential	$	—	$	1,498	$	3,961,431	$	3,962,929
Single family residential	1,445		1,403		1,990,636		1,993,484
Commercial real estate	58		1,640		200,754		202,452
Construction and land	15,884		4,681		—		20,565
Non-mortgage	—		—		100		100
Total loans	$	17,387	$	9,222	$	6,152,921	$	6,179,530

Fixed interest rates	$	—	$	352	$	29,828	$	30,180
Floating or hybrid adjustable rates	17,387		8,870		6,123,093		6,149,350
Total loans	$	17,387	$	9,222	$	6,152,921	$	6,179,530

Our fixed interest rate loans are primarily secured by single family residential properties in conjunction with our efforts to provide affordable housing to low-to-moderate income individuals. Our floating and adjustable rate loans are largely hybrid interest rate programs that provide an initial fixed term of 3 to 10 years and then convert to quarterly or semi-annual adjustments thereafter. As of March 31, 2020 and December 31, 2019, $4.0 billion and $3.9 billion, respectively, of our floating or hybrid adjustable rate loans were at their floor rates. The weighted average minimum interest rate on these loans was 4.14% at both March 31, 2020 and December 31, 2019. Hybrid adjustable rate loans still within their initial fixed term totaled $5.5 billion at both March 31, 2020 and December 31, 2019. These loans had a weighted average term to first repricing date of 3.32 years and 3.42 years at March 31, 2020 and December 31, 2019, respectively.

Refer to Part I. Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" - "COVID-19" for discussion regarding the lending initiatives implemented by the Company in connection with the COVID-19 pandemic.

Asset Quality

Our primary objective is to maintain a high level of asset quality in our loan portfolio. We believe our underwriting practices and policies, established by experienced professionals, appropriately govern the risk profile for our loan portfolio. These policies are continually evaluated and updated as necessary. All loans are assessed and assigned a risk classification at origination based on underlying characteristics of the transaction such as collateral type, collateral

cash flow, collateral coverage and borrower strength. We believe that we have a comprehensive methodology to proactively monitor our credit quality after ~~the origination process.~~origination. Particular emphasis is placed on our commercial portfolio where risk assessments are ~~reevaluated~~re-evaluated as a result of reviewing commercial property operating statements and borrower financials on at least an annual basis. Single family residential loans are subject to an annual credit score refresh. On an ongoing basis, we also monitor payment performance, delinquencies, and tax and property insurance compliance. We believe our practices facilitate the early detection and remediation of problems within our loan portfolio. Assigned risk ~~classifications~~ratings, as well as the evaluation of other credit metrics, are an integral part of management assessing the adequacy of our allowance for loan losses. We periodically employ the use of an outside independent consulting firm to evaluate our underwriting and risk assessment process. Like other financial institutions, we are subject to the risk that our loan portfolio will be exposed to increasing pressures from deteriorating borrower credit due to general economic conditions. Refer to Part I. Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" - "COVID-19" for discussion regarding loan modifications in connection with the COVID-19 pandemic.

Nonperforming assets. Our nonperforming assets consist of nonperforming loans and foreclosed real estate, if any. It is our policy to place a loan on non-accrual status in the event that the borrower is 90 days or more delinquent, unless the loan is well secured and in the process of collection, or earlier if the timely collection of contractual payments appears doubtful. Cash payments subsequently received on non-accrual loans are recognized as income only where the future collection of the remaining principal is considered by management to be probable. Loans are restored to accrual status only when the loan is less than 90 days delinquent and not in foreclosure, and the borrower has demonstrated the ability to make future payments of principal and interest. Refer to Part I. Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" - "COVID-19" for discussion regarding loan modifications in connection with the COVID-19 pandemic.

Troubled debt ~~restructures.~~restructurings. Loans for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered ~~troubled debt restructurings, or~~ TDRs. Concessions could include reductions of interest rates, extension of the maturity date at a rate lower than the current market rate for a new loan with similar risk, reduction of accrued interest, principal forgiveness, forbearance, or other material modifications. The assessment of whether a borrower is experiencing or will likely experience financial difficulty and whether a concession has been granted is highly subjective in nature, and management’s judgment is required when determining whether a modification is classified as a TDR. Refer to Part I. Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" - "COVID-19" for discussion regarding loan modifications in connection with the COVID-19 pandemic.

The following table provides details of our nonperforming and restructured assets as of the dates presented and certain other related information:


	March 31,			December 31,
(Dollars in thousands)	2018			2017			March 31, 2020			December 31, 2019
Non-accrual loans
Multifamily residential portfolio	$	1,564		$	2,246		$	537		$	541
Single family residential portfolio	5,397			4,135			5,036			5,792
Commercial real estate	—			656
Construction and land	—			—
Non-mortgage	—			—
Total non-accrual loans	$	6,961		$	7,037		5,573			6,333
Real estate owned	—			—			—			—
Total nonperforming assets	$	6,961		$	7,037		$	5,573		$	6,333
Troubled debt restructurings (performing - not included above)	$	4,814		$	4,857
Performing TDRs							$	1,296		$	1,305
Allowance for loan losses to period end nonperforming loans	459.42		%	430.75		%	729.54		%	568.47		%
Nonperforming loans to period end loans	0.13		%	0.14		%	0.09		%	0.10		%
Nonperforming assets to total assets	0.12		%	0.12		%	0.08		%	0.09		%
Nonperforming loans plus performing TDRs to total loans	0.22		%	0.24		%	0.11		%	0.12		%

When assessing whether a loan should be placed on non-accrual status because contractual ~~payment appears~~payments appear doubtful, consideration is given to ~~the~~ information we collect ~~on an annual basis~~ from ~~commercial real estate~~third parties and our borrowers to substantiate their future ability to repay principal and interest due on their loans as contractually agreed.

For the three months ended March 31, ~~2018~~2020 and ~~2017, no~~2019, $22 thousand and $3 thousand, respectively, in interest income was recognized on non-accrual loans subsequent to ~~a loan’s~~their classification as ~~nonaccrual.~~non-accrual. For the three months ended March 31, ~~2018~~2020 and ~~2017,~~2019, the Company recorded ~~$54~~$16 thousand and ~~$56~~$51 thousand, respectively, of interest income related to performing TDR loans. Gross interest income that would have been recorded on non-accrual loans had they

been current in accordance with their original terms was $71 thousand and $22 thousand for the three months ended March 31, 2020 and 2019, respectively.

Allowance for loan losses. Our allowance for loan losses is maintained at a level management believes is adequate to account for probable incurred credit losses in the loan portfolio ~~incurred~~ as of the reporting date. We determine the allowance based on a quarterly evaluation of risk. That evaluation gives consideration to the nature of the loan portfolio, historical loss experience, known and inherent risks in the portfolio, the estimated value of any underlying collateral, adverse situations that may affect a borrower’s ability to repay, current economic and environmental conditions and risk assessments assigned to each loan as a result of our ongoing reviews of the loan portfolio. This process involves a considerable degree of judgment and subjectivity. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance. Such agencies may require the Bank to recognize additions to the allowance based on judgments different from those of management.

Our allowance is established through charges to the provision for loan losses. Loans, or ~~portion~~portions of loans, deemed to be uncollectible are charged against the allowance. Recoveries of previously charged-off amounts are credited to our allowance for loan ~~and lease~~ losses. The allowance is decreased by the reversal of prior provisions when the total allowance balance is deemed excessive for the risks inherent in the portfolio. The allowance for loan losses balance is neither indicative of the specific amounts of future charge-offs that may occur, nor is it an indicator of any future loss trends. Refer to Part I. Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" - "COVID-19" for discussion regarding the impact of the COVID-19 pandemic on our allowance for loan losses.

The following table provides information on the activity within the allowance for loan losses as of and for the periods indicated:


	Three Months Ended March 31,						Three Months Ended March 31,
(Dollars in thousands)	2018			2017			2020			2019
Loans held-for-investment	$	5,280,845		$	4,689,750
Allowance for loan losses at beginning of period	$	30,312		$	33,298		$	36,001		$	34,314
Charge-offs:
Multifamily residential	—			—
Single family residential	—			—			(722		)	—
Commercial real estate	—			—
Construction and land	—			—
Non-mortgage	—			—
Total charge-offs	—			—			(722		)	—
Recoveries:
Multifamily residential	—			—
Single family residential	3			3			3			3
Commercial real estate	90			—
Construction and land	75			89			75			75
Non-mortgage	—			—
Total recoveries	168			92			78			78
Net recoveries	168			92
Net (charge-offs) recoveries							(644		)	78
Provision for loan losses	1,500			309			5,300			300
Allowance for loan losses at period end	$	31,980		$	33,699		$	40,657		$	34,692
Allowance for loan losses to period end loans held-for-investment	0.60		%	0.71		%
Annualized net recoveries to average loans	0.01		%	0.01		%
Allowance for loan losses to period end loans held for investment							0.65		%	0.56		%
Annualized net charge-offs (recoveries) to average loans							0.04		%	(0.01		)%

Investment Portfolio

~~Our total securities held-for-investment and available-for-sale amounted to $550.7 million at March 31, 2018 and $510.2 million at December 31, 2017.~~ Our investment portfolio is generally comprised of government agency securities which are high-quality liquid investments under Basel III. The portfolio is primarily maintained to serve as a contingent, on-balance sheet source of liquidity and as such, is kept unencumbered. We manage our investment portfolio according to written investment policies approved by our board of directors. Our investment strategy aims to maximize earnings while maintaining liquidity in securities with minimal credit risk and interest rate risk which is reflective in the yields obtained on those securities. Most of our securities are classified as ~~available-for-sale,~~available for sale, although we occasionally purchase long-term fixed rate mortgage backed securities or municipal securities for community reinvestment purposes and classify those as ~~held-to-maturity.~~held to maturity. In addition, we have equity securities which consist of investments in the CRA Qualified Investment Fund.

The following table presents the book value of our investment portfolio as of the dates indicated:

(Dollars in thousands) March 31, 2018 December 31, 2017
Book Value % of Total Book Value % of Total
Available-for-sale:
(At fair value)
Government Sponsored Entities:
Mortgage-backed securities $ 351,492
63.82 % $ 312,919
61.33 %
Agency bonds 116,515
21.16 % 117,222
22.98 %
Collateralized mortgage obligations 44,970
8.17 % 47,168
9.24 %
SBA securities 12,988
2.36 % 13,302
2.61 %
CRA Qualified Investment Fund (CRAIX) 11,504
2.09 % 11,693
2.29 %
U.S. Treasury 10 year note 971
0.18 % 984
0.19 %
Total available-for-sale 538,440
97.78 % 503,288
98.64 %

Held-to-maturity:
(At amortized cost)
Government Sponsored Entities:
Mortgage-backed securities 11,956
2.17 % 6,636
1.30 %
Other investments 281
0.05 % 285
0.06 %
Total held-to-maturity 12,237
2.22 % 6,921
1.36 %
Total investment securities $ 550,677
100.00 % $ 510,209
100.00 %



	March 31, 2020				December 31, 2019
(Dollars in thousands)	Book Value		% of Total		Book Value		% of Total
Available for sale debt securities (at fair value):
Government and Government Sponsored Entities:
Residential mortgage backed securities ('MBS") and collateralized mortgage obligations ("CMOs")	$	226,414	34.15	%	$	145,192	22.44	%
Commercial MBS and CMOs	358,943		54.12	%	356,169		55.05	%
Agency bonds	56,117		8.46	%	123,713		19.12	%
U.S. Treasury	—		—	%	—		—	%
Total available for sale debt securities	641,474		96.73	%	625,074		96.61	%
Held to maturity (at amortized cost):
Government Sponsored Entities:
Residential MBS	9,651		1.46	%	10,087		1.56	%
Other investments	81		0.01	%	83		0.01	%
Total held to maturity debt securities	9,732		1.47	%	10,170		1.57	%
Equity securities (at fair value)	11,970		1.80	%	11,782		1.82	%
Total investment securities	$	663,176	100.00	%	$	647,026	100.00	%

At March 31, ~~2018,~~2020, there was no issuer, other than U.S. government agencies, where the aggregate book value or market value of such issuer’s securities held by the Company ~~exceed~~exceeded 10% of our stockholders’ equity.

Liabilities

Total liabilities ~~as of~~increased $39.3 million, or 0.6%, to $6.5 billion at March 31, ~~2018 were $5.5 billion compared to $5.2 billion at~~2020 from December 31, ~~2017, an increase of $325.5 million, or 6.3%.~~2019. The ~~increase was chiefly driven by an~~ increase in total liabilities was primarily attributable to growth in our deposits of ~~$162.8~~$50.7 million, ~~and an increase of $168.9 million~~or 1.0%, partially offset by a decrease in FHLB ~~advances. The growth in deposits and FHLB~~ advances ~~period over period was instrumental in supporting our continued growth in real estate loans.~~of $25.0 million, or 2.6%, compared to December 31, 2019.

Deposits

Representing ~~75.1%~~81.7% of our total liabilities as of March 31, ~~2018,~~2020, deposits are our primary source of funding for our business operations. We ~~believe we will maintain~~have historically maintained and ~~grow~~grown our deposit customer base in ~~a rising~~various rate environment without the need to match increases in the federal funds target rate point for point, or to compete solely on the basis of rate, and without materially increasing our cost of funds in the near term. This belief isenvironments based on ~~our steady funding costs over the past three years coupled with~~ our strong customer relationships, evidenced in part by increased deposits over ~~the same period of time,~~recent years, as well as our reputation as a safe, sound, secure, ~~well-capitalized~~"well-capitalized" institution and our commitment to excellent customer service. We are focused on growing our deposits by deepening our relationships with our existing loan and deposit customers and looking to expand our traditional product footprint with ~~new~~newer emphasis placed on ~~specialty,~~ specialty/business ~~and online~~ affiliations and ~~transactional deposits.~~transaction accounts. When competitively priced and/or for asset liability management purposes, we will supplement our deposits with wholesale deposits from deposit ~~brokers.~~brokers and/or the State of California.

Total deposits increased by ~~$162.8~~$50.7 million, or ~~4.1%~~1.0%, to ~~$4.1~~$5.3 billion at March 31, ~~2018~~2020 from ~~$4.0~~$5.2 billion as of December 31, ~~2017. Deposit increases were attributed to both organic~~2019. Wholesale deposits increased $129.0 million, while retail ~~deposit growth from our existing nine branches coupled with growth in wholesale deposits. Given our consistently high retention rate~~deposits decreased $78.3 million. Time deposits represent 69.9% and 67.4% of total deposits at ~~renewal, we~~March 31, 2020 and December 31, 2019, respectively. We consider ~~all~~approximately 78.5% of our retail deposits ~~including time deposits,~~at March 31, 2020 to be core ~~deposits. We expect~~deposits based on our internal methodology, which gives consideration to ~~continue to maintain approximately half~~the tenure of ~~our deposits balance in time deposits.~~

customer relationships, product penetration and the relative cost of the deposit accounts.

Our loan to deposit ratio was ~~129.47%~~117.65% and ~~127.59%~~119.03% at March 31, ~~2018~~2020 and December 31, ~~2017,~~2019, respectively. It is common for us to operate with a loan to deposit ratio exceeding those commonly seen at other banks. Our higher than average ratio is attributed to our use of FHLB borrowings to ~~fund~~supplement loan growth and to strategically manage our interest rate risk, as well as our preference to maintain a large proportion of our assets ~~being comprised of~~in real estate loans which generally provide a better yield than ~~the~~ high-quality liquid ~~investments that we typically hold for contingent liquidity purposes. We intend to continue to operate our business with a loan to deposit ratio similar to these levels.~~investments.

The following ~~table summarizes~~tables summarize our deposit composition by average deposits and average rates paid for the periods indicated:


	Three Months Ended												Three Months Ended March 31,
	March 31, 2018						March 31, 2017						2020						2019
(Dollars in thousands)	Average Amount		Weighted average rate paid		Percent of total deposits		Average Amount		Weighted average rate paid		Percent of total deposits		Average Amount		Weighted average rate paid		Percent of total deposits		Average Amount		Weighted average rate paid		Percent of total deposits
Transaction accounts (1)	$	224,674	0.72	%	5.6	%	$	205,712	0.68	%	5.9	%
Noninterest-bearing deposit accounts													$	46,315	—	%	0.9	%	$	41,407	—	%	0.8	%
Interest-bearing transaction accounts													226,879		1.00	%	4.4	%	220,225		1.31	%	4.4	%
Money market demand accounts	1,507,614		0.88	%	37.6	%	1,545,433		0.76	%	44.6	%	1,358,219		1.21	%	26.1	%	1,351,938		1.18	%	26.8	%
Time deposits	2,274,818		1.44	%	56.8	%	1,716,304		1.18	%	49.5	%	3,569,897		2.21	%	68.6	%	3,426,550		2.28	%	68.0	%
	$	4,007,106	1.19	%	100.0	%	$	3,467,449	0.96	%	100.0	%
(1) Transaction accounts include both interest bearing and non-interest bearing deposits.
Total													$	5,201,310	1.89	%	100.0	%	$	5,040,120	1.94	%	100.0	%

The following table sets forth the maturity of time deposits as of March 31, ~~2018:~~2020:


(in thousands except for column headings and percentages)	Under $100,000			$100,000 and greater
(Dollars in thousands except for column headings)							Under $100,000			$100,000 and greater
Remaining maturity:
Three months or less	$	59,250		$	691,822		$	548,545		$	1,145,954
Over three through six months	54,643			322,565			166,743			886,986
Over six through twelve months	109,132			558,155			121,912			403,022
Over twelve months	106,456			496,675			66,928			353,700
Total	$	329,481		$	2,069,217		$	904,128		$	2,789,662
Percent of total deposits	8.01		%	50.30		%	17.11		%	52.78		%

The Company had ~~certificates of deposit~~time deposits that ~~meet~~met or ~~exceed~~exceeded the FDIC ~~Insurance~~insurance limit of $250 thousand of ~~$1.2~~$1.6 billion and $1.4 billion at March 31, ~~2018.~~2020 and December 31, 2019, respectively. At the same ~~date,~~dates, the Company had ~~$295.9~~$545.0 million and $416.0 million, respectively, of ~~brokered~~wholesale deposits.

FHLB Advances and Other Borrowings

In addition to deposits, we utilize ~~short and long-term~~ collateralized FHLB borrowings to fund our loan growth. FHLB advances can, at times, have attractive rates and we have commonly used them to strategically extend the duration of our liabilities as part of our interest rate risk management. Total FHLB advances decreased $25.0 million, or 2.6%, to $953.7 million at March 31, ~~2018 were $1.2 billion~~2020 compared to ~~$989.3~~$978.7 million at December 31, ~~2017, an increase~~2019. As of ~~$168.9~~March 31, 2020 and December 31, 2019, the Bank had FHLB letters of credit outstanding totaling $187.6 million ~~or 17.1%. The increase in FHLB advances was a result of borrowing to support our strong loan growth.~~and $62.6 million, respectively.

Historically, we have utilized other instruments such as trust preferred securities and senior debt at the bank holding company level as a source of capital for our Bank to support asset growth. We have established two trusts ~~or Trusts,~~(the "Trusts") of which we own all the common securities, that have issued trust preferred securities, or ("Trust ~~Securities,~~Securities"), to investors in private placement transactions. The proceeds of the securities qualify as Tier 1 capital under the ~~final Dodd Frank~~applicable regulations for community banks with total assets less than $15 billion. In accordance with GAAP, the Trusts are not consolidated in our ~~balance sheet~~unaudited consolidated statements of financial condition but rather the common securities are included in our other assets and the junior subordinated debentures ~~or Notes,~~("Notes") issued to the Trusts are shown as a liability. The following table is a summary of our outstanding Trust Securities and related Notes as of ~~March 31, 2018~~the dates indicated (dollars in thousands):

Issuer Issuance Date Amount of Trust Securities Amount of Notes Redemption Date Maturity Date
Luther Burbank Statutory Trust I March 2006 $ 40,000
$ 41,238
June 15, 2011 June 15, 2036
Quarterly adjustments - three month Libor plus 1.38%
(3.505% at March 31, 2018)
Luther Burbank Statutory Trust II March 2007 $ 20,000
$ 20,619
June 15, 2012 June 15, 2037
Quarterly adjustments - three month Libor plus 1.62%
(3.745% at March 31, 2018)



	March 31, 2020				December 31, 2019				Date	Maturity	Rate Index
Issuer	Amount		Rate		Amount		Rate		Issued	Date	(Quarterly Reset)
Luther Burbank Statutory Trust I	$	41,238	2.12	%	$	41,238	3.27	%	3/1/2006	6/15/2036	3 month LIBOR + 1.38%
Luther Burbank Statutory Trust II	$	20,619	2.36	%	$	20,619	3.51	%	3/1/2007	6/15/2037	3 month LIBOR + 1.62%

We have the right to defer payment of interest on the Notes at any time or from time to time for a period not exceeding

five years provided that no extension period may extend beyond the stated maturity of the relevant Note. During any such extension period, distributions on the Trust Securities will also be deferred, and our ability to pay dividends on our common stock will be restricted.

We have entered into contractual arrangements which, taken collectively, fully and unconditionally guarantee payment of: (i) accrued and unpaid distributions required to be paid on the Trust Securities; (ii) the redemption price with respect to any Trust Securities called for redemption by the Trusts; and (iii) payments due upon a voluntary or involuntary dissolution, winding up or liquidation of the Trusts. The Trust Securities are mandatorily redeemable upon maturity of the Notes, or upon earlier redemption as provided in the indenture. We have the right to redeem the Notes purchased by the Trusts, in whole or in part, on or after the redemption date. As specified in the indenture, if the Notes are redeemed prior to maturity, the redemption price will be the principal amount and any accrued but unpaid interest.

In 2014, we issued senior debt totaling $95.0 million to qualified institutional investors. These senior notes are unsecured, carry a fixed interest coupon of 6.5%, pay interest only on a quarterly basis and mature on September 30, 2024. The senior debt is redeemable at any time prior to August 31, 2024, at a redemption price equal to the greater of (i) 100% of the principal amount, or (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date on a semi-annual basis at the calculated rate for a U. S. Treasury security having a comparable remaining maturity plus 30 basis points, plus in each case accrued and unpaid interest. On or after September 1, 2024, the senior debt may be redeemed at 100% of the principal amount plus accrued and unpaid interest.

The following table presents information regarding our FHLB advances and other borrowings as of and for the periods indicated:


	Three Months Ended March 31,						Three Months Ended March 31,
(Dollars in thousands)	2018			2017			2020			2019

FHLB advances
Average amount outstanding during the period	$	1,070,087		$	1,084,904		$	993,890		$	1,124,269
Maximum amount outstanding at any month-end during the period	1,158,153			1,157,480			1,040,199			1,186,827
Balance outstanding at end of period	1,158,153			1,157,480			953,694			1,109,625
Weighted average maturity (in years)	1.2			1.4			2.6			2.3
Weighted average interest rate at end of period	1.98		%	1.22		%	2.23		%	2.35		%
Weighted average interest rate during the period	1.80		%	1.21		%	2.25		%	2.44		%

Junior subordinated deferrable interest debentures
Balance outstanding at end of period	$	61,857		$	61,857		$	61,857		$	61,857
Weighted average maturity (in years)	18.8			19.8			16.8			17.8
Weighted average interest rate at end of period	3.58		%	2.52		%	2.20		%	4.07		%
Weighted average interest rate during the period	3.15		%	2.46		%	3.21		%	4.27		%

Senior unsecured term notes
Balance outstanding at end of period	$	94,195		$	94,061		$	94,447		$	94,324
Weighted average maturity (in years)	6.6			7.6			4.6			5.6
Weighted average interest rate at end of period	6.70		%	6.71		%	6.68		%	6.68		%
Weighted average interest rate during the period	6.70		%	6.71		%	6.68		%	6.68		%

Our level of FHLB advances can fluctuate on a daily basis depending on our funding needs and the availability of other sources of funds to satisfy those needs. Short-term advances allow us flexibility in funding particularly when planned transactions will yield an immediate large inflow of cash such as the closing of the securitization transaction in the third quarter of 2017, and the closing of the initial public offering. We intend to use the net cash proceeds from these transactions to reduce our ~~level of short-term FHLB advances until we can redeploy such funds into higher yielding assets such as loans and investments.~~daily liquidity needs.

The following table sets forth the amount of short-term borrowings outstanding, comprised entirely of FHLB advances, as well as the weighted average interest rate thereon, as of the dates ~~indicated.~~indicated:


	Three Months Ended March 31,						Three Months Ended March 31,
(Dollars in thousands)	2018			2017			2020			2019
Outstanding at period end	$	480,500		$	579,800		$	—		$	57,500
Average amount outstanding	457,425			564,900			23,753			142,974
Maximum amount outstanding at any month end	495,700			579,800			63,000			209,700
Weighted average interest rate:
During period	1.61		%	0.66		%	1.66		%	2.57		%
End of period	1.90		%	0.72		%	—		%	2.60		%

Stockholders’ Equity

Stockholders’ equity totaled ~~$553.8~~$603.3 million and ~~$549.7~~$614.5 million at March 31, ~~2018~~2020 and December 31, ~~2017,~~2019, respectively. The decrease in stockholders' equity is primarily related to stock repurchases of $16.5 million and dividends paid of $3.2 million, partially offset by net income of $7.6 million during the three months ended March 31, 2020.

During the three months ended March 31, 2020, the Company repurchased 1,962,395 shares in connection with its stock repurchase program at an average price of $8.43 per share, or a 23.7% discount to tangible book value at March 31, 2020, and a total cost of $16.5 million. During the month ended April 30, 2020, we repurchased an additional 1,309,286 shares at an average price per share of $9.56 and, as of April 30, 2020, we had $5.7 million remaining available for future share repurchases.

Off-Balance Sheet Arrangements

In the normal course of business, we enter into various transactions that are not included in our unaudited consolidated statements of financial condition in accordance with GAAP. These transactions include commitments to extend credit in the ordinary course of business including commitments to fund new loans and undisbursed ~~construction funds. While these~~funds, as well as certain guarantees and derivative transactions.

Loan commitments represent contractual cash requirements to a borrower although, a portion of these commitments to extend credit may expire without being drawn upon. Therefore, the total commitment amounts, shown below, do not necessarily represent future cash requirements. In conjunction with mortgage banking activities, we enter into forward sales contracts to hedge interest rate risk involved with interest rate lock commitments on loans. Given our exit from mortgage banking activities, the volume of both forward sales and written option contracts have decreased from prior periods.obligations. The following is a summary of our off-balance ~~commitments~~sheet arrangements outstanding as of the dates presented.


(Dollars in thousands)	March 31, 2018		December 31, 2017		March 31, 2020		December 31, 2019
Commitments to fund loans held-for-investment	$	114,832	$	65,767
Commitments to fund loans held for investment					$	123,549	$	103,227

In connection with our Freddie Mac multifamily loan securitization, ~~in 2017,~~ we entered into a reimbursement agreement pursuant to which we may be required to reimburse Freddie Mac for the first losses in the underlying loan portfolio, not to exceed 10% of the unpaid principal amount at settlement, or approximately $62.6 million. A $62.6 million letter of credit with the FHLB is pledged as collateral in connection with this reimbursement agreement. We have recorded a reserve for estimated losses with respect to the reimbursement obligation of ~~$1.7~~$959 thousand and $1.0 million as of March 31, ~~2018,~~2020 and December 31, 2019, respectively, which is included in other liabilities and accrued expenses on the unaudited consolidated statements of financial condition. ~~Please refer~~

During the year ended December 31, 2019, we entered into two, two-year swap agreements with an aggregate notional amount of $1.0 billion to ~~"Factors Affecting Comparability~~hedge the interest rate risk related to certain hybrid multifamily loans which are currently in their fixed rate period. The swaps involve the payment of ~~Financial Results - Multifamily Securitization Transaction"~~a fixed rate amount to a counterparty in ~~Part I, Item 2. "Management's Discussion and Analysis"~~exchange for ~~additional information regarding~~ the ~~securitization.~~Company receiving a variable rate payment over the life of the swaps without the exchange of the underlying notional amounts.

We guarantee the distributions and payments for redemption or liquidation of the Trust Securities issued by the Trusts to the extent of funds held by the Trusts. Although this guarantee is not separately recorded, the obligation underlying the guarantee is fully reflected on our unaudited consolidated statements of financial condition as junior subordinated

debentures held by the Trusts. The junior subordinated debentures currently qualify as Tier 1 capital under the Federal Reserve capital adequacy guidelines. With the exception of our obligations in connection with its Trust Securities and the items detailed above, we have no other off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources, that is material to investors.

In addition, the Company maintains a $125.0 million letter of credit with the FHLB that is pledged as collateral to the State of California Treasurer's Office in connection with the Company's participation in a time deposit program with the State.

Contractual Obligations

The following table presents, as of March 31, ~~2018,~~2020, our significant contractual obligations to third parties on debt and lease agreements and service obligations. For more information about our contractual obligations, see Part I, Item 1, "Financial Statements and Supplementary Data", Note 16. ‘‘Commitments and Contingencies,’’ in the notes to our unaudited consolidated financial ~~statements.~~statements in this Report.


			Payments Due by Period																	Payments Due by Period
As of March 31, 2018			Less than 1 Year			1 to 3 Years			3 to 5 Years				More than 5 Years
												Less than 1 Year					1 to 3 Years				3 to 5 Years				More than 5 Years
(Dollars in thousands)	Total				Less than 1 Year			1 to 3 Years							3 to 5 Years									More than 5 Years		Total
Contractual Cash Obligations
Time deposits (1)	$	2,398,698	$	1,776,864		$	598,297				$	23,537			$	—		$	3,693,790			$	3,273,162			$	412,177	$	8,451	$	—
FHLB advances (1)	1,158,153		531,000			575,000			50,600				1,553			953,694				100,000				400,700		452,250		744
Senior debt (1)	95,000		—			—			—				95,000			95,000				—				—		95,000		—
Junior subordinated debentures (1)	61,857		—			—			—				61,857			61,857				—				—		—		61,857
Operating leases (net of sublease income)	18,242		4,665			7,178			5,013				1,386
Operating leases																17,359				4,487				7,491		3,064		2,317
Significant contract (2)	4,207		1,354			2,707			146				—			1,930				1,730				200		—		—
Total	$	3,736,157	$	2,313,883		$	1,183,182		$	79,296			$	159,796		$	4,823,630			$	3,379,379			$	820,568	$	558,765	$	64,918

(1) Amounts exclude interest
(2) We have one significant, long-term contract for core processing services which expires May 9, 2021. Actual obligation is unknown and dependent on certain factors including volume and activities. For purposes of this disclosure, future obligations are estimated using our March 31, 2018 year to date average monthly expense extrapolated over the remaining life of the contract.
(2) We have one significant, long-term contract for core processing services which expires May 9, 2021. The actual obligation is unknown and dependent on certain factors including volume and activities. For purposes of this disclosure, future obligations are estimated using our current year-to-date average monthly expense extrapolated over the remaining life of the contract.																(2) We have one significant, long-term contract for core processing services which expires May 9, 2021. The actual obligation is unknown and dependent on certain factors including volume and activities. For purposes of this disclosure, future obligations are estimated using our current year-to-date average monthly expense extrapolated over the remaining life of the contract.

We believe that we will we be able to meet our contractual obligations as they come due. Adequate cash levels are expected through profitability, repayments from loans and securities, deposit gathering activity, access to borrowing sources and periodic loan sales.

Liquidity Management and Capital Adequacy Liquidity Management

Liquidity refers to our capacity to meet our cash obligations at a reasonable cost. Our cash obligations require us to have cash flow that is adequate to fund loan growth and maintain on-balance sheet liquidity while meeting present and future obligations of deposit withdrawals, borrowing maturities and other contractual cash obligations. In managing our cash flows, management regularly confronts situations that can give rise to increased liquidity risk. These include funding mismatches, market constraints in accessing sources of funds and the ability to convert assets into cash. Changes in economic conditions or exposure to credit, market, operational, legal and reputational risks also could affect the ~~bank’s~~Bank’s liquidity risk profile and are considered in the assessment of liquidity management.

We continually monitor our liquidity position to ensure that our assets and liabilities are managed in a manner to meet all reasonably foreseeable short-term, long-term and strategic liquidity demands. Management has established a comprehensive management process for identifying, measuring, monitoring and controlling liquidity risk. Because of its critical importance to the viability of the Bank, liquidity risk management is fully integrated into our risk management processes. Critical elements of our liquidity risk management include: effective corporate governance consisting of oversight by the board of directors and active involvement by management; appropriate strategies, policies, procedures, and limits used to manage and mitigate liquidity risk; comprehensive liquidity risk measurement and monitoring systems including stress tests that are commensurate with the complexity of our business activities; active management of intraday liquidity and collateral; an appropriately diverse mix of existing and potential future funding sources; adequate

levels of highly liquid marketable securities free of legal, regulatory, or operational impediments, that can be used to meet liquidity needs in stressful situations; comprehensive contingency funding plans that sufficiently address potential adverse liquidity events and emergency cash flow requirements; and internal controls and internal audit processes sufficient to determine the adequacy of the Bank’s liquidity risk management process.

Our liquidity position is supported by management of our liquid assets and liabilities and access to alternative sources of funds. Our liquidity requirements are met primarily through our deposits, FHLB advances and the principal and interest payments we receive on loans and investment securities. Cash on hand, unrestricted cash at third party banks, investments ~~available-for-sale~~available for sale and maturing or prepaying balances in our investment and loan portfolios are our most liquid assets. Other sources of liquidity that are routinely available to us include funds from retail and wholesale deposits, advances from the FHLB and proceeds from the sale of loans. Less commonly used sources of funding include borrowings from the FRB discount window, draws on established federal funds lines from unaffiliated commercial banks and the issuance of debt or equity securities. We believe we have ample liquidity resources to fund future growth and meet other cash needs as necessary. Refer to Part I. Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" - "COVID-19" for additional discussion regarding liquidity.

Our total deposits at March 31, ~~2018~~2020 and December 31, ~~2017~~2019 were ~~$4.1~~$5.3 billion and ~~$4.0~~$5.2 billion, respectively. Based on the values of loans pledged as collateral, our $953.7 million of FHLB advances outstanding and our $125.0 million of FHLB letters of credit, we had ~~$689.4~~$646.3 million of additional borrowing capacity with the FHLB at March 31, ~~2018.~~2020. Based on the values of loans pledged as collateral, we had ~~$180.0~~$163.7 million of borrowing capacity with the FRB at March 31, ~~2018.~~2020. There were no outstanding advances with the FRB at March 31, ~~2018.~~2020. In addition to the liquidity provided by the FHLB and FRB described above, we have established federal funds lines of credit with unaffiliated banks totaling $50.0 million at March 31, ~~2018,~~2020, none of which was advanced at that date. In the ordinary course of business, we maintain correspondent bank accounts with unaffiliated banks which are used for normal business activity including ordering cash for our branch network, the purchase of investment securities and the receipt of principal and interest on those investments. ~~Cash~~Available cash balances at correspondent banks, including amounts at the FRB, totaled ~~$67.8~~$105.1 million at March 31, ~~2018.~~2020.

The Company is a corporation separate and apart from our Bank and, therefore, must provide for its own liquidity, including liquidity required to meet its debt service requirements on its senior notes and junior subordinated debentures. The Company’s main source of cash flow is dividends declared and paid to it by the Bank. There are statutory and regulatory limitations that affect the ability of our Bank to pay dividends to the Company. We believe that these limitations will not impact our ability to meet our ongoing short-term cash obligations. For contingency purposes, the Company typically maintains a minimum level of cash to fund one year’s projected operating cash flow needs.

Capital Adequacy

We are subject to various regulatory capital requirements administered by ~~the~~ federal and state banking regulators. Our capital management consists of providing equity to support our current operations and future growth. Failure to meet minimum regulatory capital requirements may result in mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and off-balance sheet items as calculated under regulatory accounting policies. As of March 31, ~~2018~~2020 and December 31, ~~2017,~~2019, we were in compliance with all applicable regulatory capital requirements, including the capital conservation buffer, and the Bank qualified as ‘‘well-capitalized’’ for purposes of the FDIC’s prompt corrective action regulations. At March 31, ~~2018,~~2020, the capital conservation buffer was ~~1.875%~~2.50%.

The vast majority of our multifamily residential loans and single family residential loans are currently eligible for 50% risk-weighting for purposes of calculating our regulatory capital levels. ToRisk-weighting requirements of multifamily residential loans and single family residential loans are contingent upon meeting specific criteria, which, if not adequately met, would increase the ~~extent that we increase our levels of commercial~~required risk-weighting percentage for these loans. Commercial real estate lending collateralized by real estate other than multifamily residential properties ~~which loans would~~are generally ~~be 100%~~ risk weighted ~~we would expect that our risk-based capital ratios would decline.~~at 100%. Our leverage ratio is not impacted by the composition of our assets. ~~See ‘‘Supervision and Regulation’’ for additional information regarding the regulatory capital requirements applicable to us.~~

The following table presents our regulatory capital ratios as of the dates presented, as well as the regulatory capital ratios that are required by FDIC regulations to maintain ‘‘well-capitalized’’ status:

Actual
Minimum Regulatory
Requirement
Minimum Capital Adequacy with Capital Buffer
Minimum Regulatory Requirement for "Well- Capitalized" Institution under prompt corrective action
provisions
(Dollars in thousands) Amount Ratio Amount Ratio Amount Ratio Amount Ratio
Luther Burbank Corporation
As of March 31, 2018
Tier 1 Leverage Ratio $ 619,209
10.57 % $ 241,612
4.00 % N/A
N/A
N/A N/A
Common Equity Tier 1 Risk-Based Ratio 557,352
15.55 % 161,342
4.50 % $ 228,568
6.38 % N/A N/A
Tier 1 Risk-Based Capital Ratio 619,209
17.27 % 215,123
6.00 % 282,348
7.88 % N/A N/A
Total Risk-Based Capital Ratio 653,367
18.22 % 286,830
8.00 % 354,056
9.88 % N/A N/A
As of December 31, 2017
Tier 1 Leverage Ratio $ 615,010
11.26 % $ 218,499
4.00 % N/A
N/A
N/A N/A
Common Equity Tier 1 Risk-Based Ratio 553,153
16.05 % 155,107
4.50 % $ 198,192
5.75 % N/A N/A
Tier 1 Risk-Based Capital Ratio 615,010
17.84 % 206,809
6.00 % 249,894
7.25 % N/A N/A
Total Risk-Based Capital Ratio 647,421
18.78 % 275,746
8.00 % 318,831
9.25 % N/A N/A


Luther Burbank Savings
As of March 31, 2018
																					Minimum Required
																	Actual				For Capital Adequacy Purposes				Plus Capital Conservation Buffer				For Well- Capitalized Institution
(Dollars in thousands)																	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
Luther Burbank Corporation
As of March 31, 2020
Tier 1 Leverage Ratio	$	696,502	11.90	%	$	241,507	4.00	%	N/A		N/A		$	301,884	5.00	%	$	659,710	9.39	%	$	281,125	4.00	%	N/A		N/A		N/A		N/A
Common Equity Tier 1 Risk-Based Ratio	696,502		19.44	%	161,225		4.50	%	$	228,402	6.38	%	232,880		6.50	%	597,853		14.89	%	180,667		4.50	%	$	281,037	7.00	%	N/A		N/A
Tier 1 Risk-Based Capital Ratio	696,502		19.44	%	214,966		6.00	%	282,143		7.88	%	286,622		8.00	%	659,710		16.43	%	240,889		6.00	%	341,259		8.50	%	N/A		N/A
Total Risk-Based Capital Ratio	730,660		20.39	%	286,622		8.00	%	353,799		9.88	%	358,277		10.00	%	701,553		17.47	%	321,185		8.00	%	421,556		10.50	%	N/A		N/A
As of December 31, 2017
As of December 31, 2019
Tier 1 Leverage Ratio	$	685,434	12.54	%	$	218,585	4.00	%	N/A		N/A		$	273,232	5.00	%	$	671,580	9.47	%	$	283,631	4.00	%	N/A		N/A		N/A		N/A
Common Equity Tier 1 Risk-Based Ratio	685,434		19.90	%	154,980		4.50	%	$	198,030	5.75	%	223,859		6.50	%	609,723		15.46	%	177,523		4.50	%	$	276,147	7.00	%	N/A		N/A
Tier 1 Risk-Based Capital Ratio	685,434		19.90	%	206,640		6.00	%	249,689		7.25	%	275,519		8.00	%	671,580		17.02	%	236,697		6.00	%	335,321		8.50	%	N/A		N/A
Total Risk-Based Capital Ratio	717,845		20.84	%	275,519		8.00	%	318,569		9.25	%	344,399		10.00	%	708,847		17.97	%	315,596		8.00	%	414,220		10.50	%	N/A		N/A
Luther Burbank Savings
As of March 31, 2020
Tier 1 Leverage Ratio																	$	724,032	10.30	%	$	281,227	4.00	%	N/A		N/A		$	351,533	5.00	%
Common Equity Tier 1 Risk-Based Ratio																	724,032		18.05	%	180,536		4.50	%	$	280,833	7.00	%	260,774		6.50	%
Tier 1 Risk-Based Capital Ratio																	724,032		18.05	%	240,714		6.00	%	341,012		8.50	%	320,952		8.00	%
Total Risk-Based Capital Ratio																	765,875		19.09	%	320,952		8.00	%	421,250		10.50	%	401,190		10.00	%
As of December 31, 2019
Tier 1 Leverage Ratio																	$	748,916	10.57	%	$	283,542	4.00	%	N/A		N/A		$	354,428	5.00	%
Common Equity Tier 1 Risk-Based Ratio																	748,916		18.99	%	177,437		4.50	%	$	276,012	7.00	%	256,297		6.50	%
Tier 1 Risk-Based Capital Ratio																	748,916		18.99	%	236,582		6.00	%	335,158		8.50	%	315,443		8.00	%
Total Risk-Based Capital Ratio																	786,183		19.94	%	315,443		8.00	%	414,019		10.50	%	394,303		10.00	%

Impact of Inflation and Changing Prices

Our unaudited consolidated financial statements and related notes have been prepared in accordance with GAAP, which require the measurement of financial position and operating results in terms of historical dollars, without considering the changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of operations. Unlike most industrial companies, nearly all of our assets and liabilities are monetary in nature. As a result, interest rates have a greater impact on our performance than do the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the price of goods or services.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk represents the exposure to unanticipated changes in net interest earnings or loss due to changes in the market value of assets and liabilities as a result of fluctuations in interest rates. As a financial institution, our primary market risk is interest rate risk. Interest rate risk is the risk to earnings and value arising from volatility in market interest rates. Interest rate risk arises from timing differences in the repricings and maturities of interest-earning assets and interest-bearing liabilities ~~(reprice~~(repricing risk), changes in the expected maturities of assets and liabilities arising from embedded options, such as borrowers’ ability to prepay ~~residential mortgage~~ loans at any time and depositors’ ability to redeem certificates of deposit before maturity (option risk), changes in the shape of the yield curve where interest rates increase or decrease in a nonparallel fashion (yield curve risk), and changes in spread relationships between different yield curves, such as U.S. Treasuries and LIBOR (basis risk).

We manage market risk though our Asset Liability Council ~~or ALCO,~~("ALCO") which is comprised of senior management who are responsible for ensuring that board approved strategies, policy limits, and procedures for managing interest rate risk are appropriately executed within the designated lines of authority and responsibility. The ALCO meets monthly

to review, among other things, the composition of our assets and liabilities, the sensitivity of our assets and liabilities to interest rate changes, our actual and forecasted liquidity position, investment activity and our interest rate hedging transactions. The ALCO reports regularly to our board of directors. Our board reviews all policies impacting asset and liability management and establishes risk tolerance limits for business operations on at least an annual basis.

Interest rate risk management is an active process that encompasses monitoring loan and deposit flows complemented by investment and funding activities. Effective management of interest rate risk begins with understanding the dynamic characteristics of assets and liabilities and determining the appropriate interest rate risk posture given business forecasts, management objectives, market expectations, and policy constraints. In recognition of this, we actively manage our assets and liabilities to maximize our net interest income and return on equity, while ~~limiting~~managing our ~~exposure to board-established~~ risk ~~tolerances~~exposure and maintaining adequate liquidity and capital positions.

Given the nature of our loan and deposit activities, we are liability sensitive to volatility in interest rates. A liability sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate lower net interest income, as rates paid on our interest-bearing liabilities would reprice upward more quickly than rates earned on our interest-earning assets, thus compressing our net interest margin. Conversely, an asset sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate higher net interest income, as rates earned on our interest-earning assets would reprice upward more quickly than rates paid on our interest-bearing liabilities, thus expanding net interest margin.

We use two primary modeling techniques to assess our exposure to interest rates that simulate the earnings and valuation effects of variations in interest rates: Net Interest Income at Risk or ("NII at ~~Risk,~~Risk") and the Economic Value of Equity ~~or EVE.~~("EVE"). These models require that we use numerous assumptions, including asset and liability pricing and repricing, future growth, prepayment rates, non-maturity deposit sensitivity and decay rates. These assumptions are inherently uncertain and, as a result, the models cannot precisely predict the fluctuations in market interest rates or precisely measure the impact of future changes in interest rates. Actual results will differ from the model’s simulated results due to timing, magnitude and frequency of interest rate changes as well as changes in market conditions and the application and timing of various management strategies.

Stress testing the balance sheet and net interest income using instantaneous parallel shock movements in the yield curve of ~~100~~-100 to 400 basis points is a regulatory and banking industry practice. However, these stress tests may not represent a realistic forecast of future interest rate movements in the yield curve.

Instantaneous parallel interest rate shock modeling is not a predictor of actual future performance of earnings. It is a

financial metric used to manage interest rate risk, implement hedging transactions if the metric rises above policy limits for interest rate risk, and track the movement of the bank’s interest rate risk position over a historical time frame for comparison purposes.

Our earnings are a function of collecting both a credit risk premium on our loans and an interest rate risk premium on our balance sheet position. The purpose of these premiums being to diversify our earnings position with both credit risk and interest rate risk, which tend to be negatively correlated historically for the ~~bank.~~Bank. During weak economic times, ~~such as the financial crisis of 2007-2008,~~ our loan losses ~~were~~have been higher than ~~normal. However, due to~~normal, but the ~~decline in~~Federal Reserve will generally reduce short-term interest rates ~~caused by the Federal Reserve attempting~~in an attempt to stimulate the economy and add ~~liquidity,~~liquidity. As a result, our interest rate spread ~~increased sufficiently to offset the loan losses in our loan portfolio.~~will generally increase during those periods. During strong economic times, when the Federal Reserve raises short-term interest rates to dampen economic activity, the Bank’s interest rate spread decreases. These periods ~~are often~~have historically been indicative of inflation and real property value increases. As such, the decrease in net interest income is typically somewhat offset by ~~little to no~~declining loan losses in our loan portfolio. There is no guarantee, however, that the past countercyclical nature of our loan losses and our net interest spread declines will continue in the future.

On a quarterly basis, we measure and report NII at Risk to isolate the change in income related solely to interest-earning assets and interest-bearing liabilities. The following table illustrates the results of our NII at Risk analysis to determine the extent to which our net interest income over the following 12 months would change if prevailing interest rates increased or decreased by the specified amounts at March 31, ~~2018.~~2020. It models instantaneous parallel shifts in market interest rates, implied by the forward yield curve over the next one year period.

					Interest Rate Risk to Earnings (NII)
March 31, 2018
March 31, 2020			March 31, 2020
(Dollars in millions)
Change in Interest Rates (basis points)	$ Change NII	% Change NII	$ Change NII	% Change NII
+400 BP	(35.0)	(27.5)%	$(13.1)	(9.1)%
+300 BP	(22.8)	(18.0)%	(7.6)	(5.3)%
+200 BP	(12.9)	(10.2)%	(4.0)	(2.8)%
+100 BP	(5.9)	(4.6)%	(1.6)	(1.1)%
-100 BP	7.6	5.9%	1.4	1.0%

The NII at Risk reported at March 31, ~~2018~~2020 reflects that our earnings are in a liability sensitive position in which an increase in ~~short-term~~ interest rates is expected to generate lower net interest income. ~~At March 31, 2018 all~~All NII stress tests measures were within our board established limits. During the three months ended March 31, 2020, our NII at Risk decreased as compared to December 31, 2019 due to the decline in interest rates and our interest rate swaps.

EVE measures the period end market value of assets minus the market value of liabilities and the change in this value as rates change. The EVE results included in the table below reflect the analysis reviewed monthly by management. It models instantaneous parallel shifts in market interest rates, implied by the forward yield curve. The EVE model calculates the market value of capital by taking the present value of all asset cash flows less the present value of all liability cash flows.

					Interest Rate Risk to Capital (EVE)
March 31, 2018
March 31, 2020			March 31, 2020
(Dollars in millions)
Change in Interest Rates (basis points)	$ Change EVE	% Change EVE	$ Change EVE	% Change EVE
+400 BP	(378.0)	(63.1)%	$(186.7)	(34.2)%
+300 BP	(251.4)	(41.9)%	(130.7)	(24.0)%
+200 BP	(146.9)	(24.5)%	(91.3)	(16.7)%
+100 BP	(63.9)	(10.7)%	(56.7)	(10.4)%
-100 BP	54.1	9.0%	57.7	10.6%

The EVE at Risk reported at March 31, ~~2018~~2020 reflects that our market value of capital is in a liability sensitive position in which an increase in ~~short-term~~ interest rates is expected to generate lower market values of capital. ~~At March 31, 2018 all~~All EVE stress tests measures were within our board established limits.

During the three months ended March 31, 2020, our EVE at Risk increased as compared to December 31, 2019 primarily due to the decline in the Company's capital due to stock repurchases and asset growth during the quarter ended March 31, 2020, partially offset by the decline in interest rates.

Certain shortcomings are inherent in the NII and EVE analyses presented above. Both the NII and EVE simulations include assumptions regarding balances, asset prepayment speeds, deposit repricing and runoff and interest rate relationships among balances that we believe to be reasonable for the various interest rate environments. Differences in actual occurrences from these assumptions, as well as nonparallel changes in the yield curve, may change our market risk exposure. Simulated results are not intended to be used as a forecast of the actual effect of changes in market interest rates on our results, but rather as a means to better plan and execute appropriate interest rate risk strategies.

Hedge Positions

In managing our market risk, our board of directors has authorized the ALCO to utilize interest rate caps and swaps to mitigate on-balance sheet interest rate risk in accordance with regulations and our internal policy. We use or expect to use interest rate caps and swaps as macro hedges against inherent rate sensitivity in our loan portfolio, other interest-earning assets and our interest-bearing liabilities. Positions for hedging purposes are undertaken as mitigation to exposure primarily from mismatches between assets and liabilities.

We ~~currently~~typically utilize ~~stand-alone interest rate caps and~~ FHLB advances with embedded interest rate caps to hedge our liability sensitive interest rate risk position. The stand-alone caps are derivative instruments that have been designated as cash flow hedges of variable rate borrowings. These interest rate cap agreements are recorded at fair value with changes in fair value reflected in other comprehensive income and the fair value of these derivatives is recorded on the consolidated balance sheet in other assets and other liabilities. The interest rate caps embedded in FHLB advances do not qualify as derivative contracts. The cost of these contracts is inseparable from the cost of the advances and, as such, is included in interest expense in our unaudited consolidated ~~statement~~statements of ~~operations.~~income. In addition, during 2019, we entered into two, two-year interest rate swaps with a

total notional amount of $1.0 billion to hedge the interest rate risk related to certain hybrid multifamily loans which are currently in their fixed rate period. The swaps are designated as fair value hedges and involve the payment of a fixed rate amount to a counterparty in exchange for the Company receiving a variable rate payment over the life of the swaps without the exchange of the underlying notional amount. The gain or loss on these derivatives, as well as the offsetting loss or gain on the hedged items attributable to the hedged risk are recognized in interest income for loans in our unaudited consolidated statements of income. During the three months ended March 31, 2020, the Company recognized a reduction in interest income of $390 thousand in connection with the swaps.

The following table summarizes ~~our two~~FHLB borrowings with embedded caps and the derivative instruments ~~and FHLB borrowings~~ utilized by us as interest rate risk hedge positions as of March 31, ~~2018:~~2020:


		March 31, 2018
(Dollars in thousands)	(Dollars in thousands)				Fair Value				(Dollars in thousands)				Fair Value
Hedging Instrument	Hedge Accounting Type	Months to Maturity	Notional		Other Assets		Other Liabilities		Hedge Accounting Type	Months to Maturity	Notional		Other Assets		Other Liabilities
Interest rate cap	Cash Flow Hedge	3	$	50,000	$	1	$	—
Interest rate cap	Cash Flow Hedge	12	50,000		9		—
FHLB fixed rate advance	With embedded cap	15	75,000		—		—		With embedded cap	11	100,000		—		—
FHLB fixed rate advance	With embedded cap	18	75,000		—		—
FHLB fixed rate advance	With embedded cap	19	30,000		—		—
FHLB fixed rate advance	With embedded cap	19	45,000		—		—
FHLB variable rate advance	With embedded cap	22	50,000		—		—
FHLB fixed rate advance	With embedded cap	23	50,000		—		—
FHLB fixed rate advance	With embedded cap	25	50,000		—		—
FHLB fixed rate advance	With embedded cap	35	100,000		—		—
FHLB fixed rate advance	With embedded cap	35	50,000		—		—
FHLB fixed rate advance	With embedded cap	60	50,000		—		—
Interest rate swap									Fair value hedge	15	500,000		—		9,238
Interest rate swap									Fair value hedge	17	500,000		—		8,436
			$	675,000	$	10	$	—			$	1,100,000	$	—	$	17,674

Counterparty Credit Risk

Derivative contracts involve the risk of dealing with institutional derivative counterparties and their ability to meet contractual terms. Our policies require that counterparties must be approved by our ~~ALCO and all positions over and above the~~ALCO. Additionally, contracts are in place to ensure that minimum transfer amounts and collateral requirements are ~~secured by marketable securities or cash.~~established.

Item 4. Controls and Procedures

Management of the Company, with the participation of its Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness as of March 31, ~~2018,~~2020, of the Company's disclosure controls and procedures, as defined in Rules 13a-15(e) and 15(d)-15(e) under the Exchange Act. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective

as of March 31, ~~2018~~2020 in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to management of the Company as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

There was no change in the Company's internal control over financial reporting that occurred during the Company's last fiscal quarter that has materially affected, or is reasonably likely to materially affect, such controls.

PART II.

Item 1. Legal Proceedings

From time to time, we are a party to legal actions that are routine and incidental to our business. Given the nature, scope and complexity of the extensive legal and regulatory landscape applicable to our business, ~~including laws and regulations governing consumer protections, fair lending, fair labor, privacy, information security and anti-money laundering and anti-terrorism laws,~~ we, like all banking organizations, are subject to heightened ~~legal and~~ regulatory compliance and ~~litigation~~legal risk. However, based ~~upon~~on available information, ~~and in consultation with legal counsel,~~ management does not expect the ultimate disposition of any or a combination of these actions to have a material adverse effect on our business, ~~prospects,~~ financial condition ~~liquidity,~~and results of ~~operation, cash flows or capital levels.~~operation.

Item 1A. Risk Factors

~~There were~~The section titled Risk Factors in Part I, Item 1A of our Annual Report includes a discussion of the many risks and uncertainties we face, any one or more of which could have a material adverse effect on our business, results of operations, financial condition (including capital and liquidity), or prospects or the value of or return on an investment in the Company. The information presented below provides an update to, and should be read in conjunction with, the risk factors and other information contained in our Annual Report. Except as presented below, there have been no material changes to the risk factors described in our Annual Report.

Our business and operations may be materially adversely affected by the COVID-19 pandemic and governmental authorities’ responses to the COVID-19 pandemic.

In December 2019, the COVID-19 outbreak was reported in China, and, in March 2020, the World Health Organization declared it a pandemic. Since March 13, 2020, the U.S. has been operating under a state of emergency declared in response to the spread of COVID-19. Many local and state governments, including the State of California, have instituted emergency restrictions that have substantially limited the operation of non-essential businesses and the activities of individuals. We are sensitive to general business and economic conditions in the U.S. generally, and on the West Coast in particular. The duration and impacts of the pandemic and governmental authorities’ responses to it are not yet known or knowable. Circumstances related to the COVID-19 pandemic and related events continue to change quickly. The spread of COVID-19, and government responses to it, have resulted in increased volatility in financial markets, very large increases in unemployment and the closure of non-essential businesses in our markets. The extent of COVID-19’s impact on us is unpredictable and depends on a number of factors outside of our control, such as the scope and duration of the pandemic, the nature and scope of any resulting economic downturn, customer response, and actions that governmental authorities may take in response to the pandemic.

Given the ongoing and dynamic nature of the circumstances, it is not possible to predict the ultimate impact of the pandemic on our stock price, business prospects, financial condition or results of operations. COVID-19 could cause a decline in the value of mortgaged properties or other assets that serve as our collateral and increase the risk of delinquencies, defaults, foreclosures and losses on our loans, damage our banking facilities and offices, negatively impact regional economic conditions, result in a decline in loan demand and loan originations, result in drawdowns of deposits by customers impacted by COVID-19, result in branch or office closures and business interruptions, and negatively impact the implementation of our business strategy. COVID-19, and governmental authorities’ responses to it, may also result in prolonged adverse economic conditions which could constrain our growth and profitability from our operations, and could have a material adverse effect on our business, financial condition and results of operations.

We are subject to increasing credit risk as a result of the COVID-19 pandemic, which could adversely impact our profitability.

Our business depends on our ability to successfully measure and manage credit risk. As a mortgage lender, we are exposed to the risk that the principal of, or interest on, a loan will not be paid timely or at all or that the value of any collateral supporting a loan will be insufficient to cover our outstanding exposure. In addition, we are exposed to risks with respect to the risks resulting from changes in economic and industry conditions and risks inherent in dealing with individual loans and borrowers. As the overall economic climate in the U.S., generally, and in our market areas specifically, experiences material disruption due to the COVID-19 pandemic, our borrowers may experience difficulties in repaying their loans and governmental actions may provide mortgage payment relief to borrowers affected by COVID-19 and preclude our ability to initiate foreclosure proceedings in certain circumstances, and as a result, the collateral we hold may decrease in value or become illiquid, and the level of nonperforming loans, charge-offs and delinquencies could rise and require significant additional provisions for loan losses. Additional factors related to the credit quality of investor-owned single family residential, multifamily residential and other commercial real estate loans

include the duration of state and local moratoriums on evictions for non-payment of rent or other fees. The payment on these loans that are secured by income producing properties are typically dependent on the successful operation of the related real estate property and may subject us to risks from adverse conditions in the real estate market or the general economy.

We are actively working to support our mortgage borrowers to mitigate the impact of the COVID-19 pandemic on them and on our portfolio, including through loan modifications that defer payments for a specified period of time for those who experienced a hardship as a result of the COVID-19 pandemic. As of April 30, 2020, we have modified an aggregate of $84.7 million in principal amount of mortgage loans, representing 1.4% of our loan portfolio. However, our inability to successfully manage the increased credit risk caused by the COVID-19 pandemiccould have a material adverse effect on our business, financial condition and results of operations.

Demand for real estate loan products may decline significantly.

There is a risk that COVID-19 could significantly adversely affect the U.S. residential and commercial real estate markets, including decreasing property values, and reduced demand for commercial and multifamily real estate and increased vacancies if businesses fail or close locations. In response to the COVID-19 pandemic, state and local executive orders have been issued in our markets that include moratoriums on evictions for non-payment and limitations on the ability of real estate professionals to conduct their business, among other provisions. As a result, demand for the types of real estate secured loans that we originate may decrease, which would reduce our profitability and could materially adversely affect our business, financial condition and results of operations.

Our business and operations are concentrated in California and Washington, and we are more sensitive than our more geographically diversified competitors to adverse changes in the local economy.

Unlike many of our larger competitors that maintain significant operations located outside our market areas, substantially all of our customers are individuals and businesses located and doing business in the states of California and Washington. Our operations and profitability may be more adversely affected by a local economic downturn than those of large, more geographically diverse competitors. A downturn in the local economy could make it more difficult for our borrowers to repay their loans and may lead to loan losses that are not offset by operations in other markets. A downturn in the local economy may also reduce the ability of depositors to make or maintain deposits with us. Both of these states are currently operating under state-wide “stay-at-home” orders issued in response to the COVID-19 pandemic. For these reasons, any regional or local economic downturn resulting from the COVID-19 pandemic or government responses to the pandemic could have a material adverse effect on our business, financial condition and results of operations.

We are subject to increased cybersecurity risks ~~disclosed~~and security breaches during the COVID-19 pandemic.

Our business faces increased cybersecurity risks due to the number of employees working remotely. Increased levels of remote access create additional opportunities for cybercriminals to exploit vulnerabilities, and employees may be more susceptible to phishing and social engineering attempts due to increased stress caused by the COVID-19 pandemic and from balancing family and work responsibilities at home. Technology resources may also be strained due to the increase in the ~~Risk Factors section~~number of remote users. It is possible that we may not be able to anticipate or to implement effective preventive measures against all security breaches. If an actual or perceived security breach occurs, customer perception of the ~~Company's Annual Report~~effectiveness of our security measures could be harmed and could result in the loss of customers.

A successful penetration or circumvention of the security of our systems, including those of third party providers or other financial institutions, or the failure to meet regulatory requirements for security of our systems, could cause serious negative consequences, including significant disruption of our operations, misappropriation of our confidential information or that of our customers, or damage to our computers or systems or those of our customers or counterparties, significant increases in compliance costs (such as repairing systems or adding new personnel or protection technologies), and could result in violations of applicable privacy and other laws, financial loss to us or to our customers, loss of confidence in our security measures, customer dissatisfaction, significant litigation and regulatory exposure, and harm to our reputation, all of which could have a material adverse effect on ~~Form 10-K~~our business, financial condition and results of operations.

We may be adversely affected by the soundness of other financial institutions during the COVID-19 pandemic.

The COVID-19 pandemic has materially increased the risk associated with the interconnectedness of financial institutions. Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services companies are interrelated as a result of trading, clearing, counterparty, and other relationships. As a result, defaults by, or even rumors or questions about, one or more financial services companies, or the financial services industry generally, could lead to market-wide liquidity problems and losses or defaults by us or other institutions. These losses could have a material adverse effect on our business, financial condition and results of operations.

We are dependent on our management team and key employees, and if they were unable to perform their duties as a result of COVID-19, our business operations could be materially adversely affected.

Our success depends, in large part, on our management team and key employees. Many of our critical functions are conducted by a small number of individuals. We have taken steps to mitigate exposure risk for our staff, including timely implementation of federal, state and local guidance and increasing our remote work capabilities. We have in place contingency succession plans for our management team and key employees. However, if one or more members of one of these groups were incapacitated as a result of the ~~year ended~~COVID-19 pandemic, it could have a material adverse effect on our business, financial condition and results of operations.

The impact of the COVID-19 pandemic is unknown and adds increased risk and uncertainty to our calculation of an adequate allowance for loan losses.

The extent of COVID-19’s impact on our business and our borrowers is unpredictable and depends on a number of factors outside of our control, introducing additional uncertainty into our allowance for loan loss calculations. We periodically review our allowance for loan losses for adequacy considering historical loss experience, volume and types of loans, trends in classification, volume and trends in delinquencies and non-accrual loans, economic conditions and other pertinent information. The determination of the appropriate level of the allowance for loan losses is inherently highly subjective and requires us to make significant estimates of and assumptions regarding current credit risk and future trends, all of which may change materially. These estimates of loan losses are necessarily subjective and their accuracy depends on the outcome of future events. Inaccurate management assumptions, continuing deterioration of economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may require us to increase our allowance for loan losses. In addition, our regulators, as an integral part of their examination process, periodically review our loan portfolio and the adequacy of our allowance for loan losses and may require adjustments based upon judgments that are different than those of management. Differences between our actual experience and assumptions and the effectiveness of our models could adversely affect our business, financial condition and results of operations.

Liquidity risk could impair our ability to fund operations and meet our obligations as they become due and failure to maintain sufficient liquidity could materially adversely affect our growth, business, profitability and financial condition.

Liquidity is essential to our business. Liquidity risk is the potential that we will be unable to meet our obligations as they become due because of an inability to liquidate assets or obtain adequate funding at a reasonable cost, in a timely manner and without adverse conditions or consequences. We require sufficient liquidity to fund asset growth, meet customer loan requests, customer deposit maturities and withdrawals, payments on our debt obligations as they come due and other cash commitments under both normal operating conditions and other unpredictable circumstances, including events causing industry or general financial market stress such as the COVID-19 pandemic. Liquidity risk can increase due to a number of factors, including an over-reliance on a particular source of funding or market-wide phenomena such as market dislocation and major disasters. Factors that could detrimentally impact access to liquidity sources include, but are not limited to, a decrease in the level of our deposit activity as a result of a downturn in the markets in which our loans are concentrated, a decrease in real estate values ultimately impairing the value of our loans used by us as collateral to access wholesale liquidity, adverse regulatory actions against us, or changes in the liquidity needs of our depositors. Market conditions or other events could also negatively affect the level or cost of funding, affecting our ongoing ability to accommodate liability maturities and deposit withdrawals, meet contractual obligations, and fund asset growth and new business transactions at a reasonable cost, in a timely manner, and without adverse consequences. Our inability to raise funds through deposits, borrowings, the sale of loans, and other sources could have a substantial negative effect on our business, and could result in the closure of the Bank. Our access to funding sources in amounts adequate to finance our activities or on acceptable terms could be impaired by factors

that affect our organization specifically or the financial services industry or economy in general. Any substantial, unexpected, and/or prolonged change in the level or cost of liquidity could impair our ability to fund operations and meet our obligations as they become due and could have a material adverse effect on our business, financial condition and results of operations.

We rely on customer deposits, advances from the FHLB and brokered deposits to fund our operations. Although we have historically been able to replace maturing deposits and advances, if desired, including throughout the most recent recession, which lasted from December ~~31, 2017.~~2007 through June 2009, we may not be able to replace such funds in the future if our financial condition, the financial condition of the FHLB or market conditions change. FHLB borrowings and other current sources of liquidity may not be available or, if available, sufficient to provide adequate funding for operations.

We depend on information technology and telecommunications systems of third parties, and any systems failures or interruptions resulting from or related to COVID-19 could adversely affect our operations and financial condition.

Our business depends on the successful and uninterrupted functioning of our information technology and telecommunications systems. We outsource many of our major systems, such as data processing, deposit processing, loan origination, email and anti-money laundering monitoring systems. Of particular significance is our long term contract for core data processing services with Fiserv. The failure of these systems, or the termination (for force majeure reasons related to COVID-19 or otherwise) of a third party software license or service agreement on which any of these systems is based, could interrupt our operations, and we could experience difficulty in implementing replacement solutions. In many cases, our operations rely heavily on secured processing, storage and transmission of information and the monitoring of a large number of transactions on a minute-by-minute basis, and even a short interruption in service could have significant consequences. Remote working and other factors related to the COVID-19 pandemic may significantly increase the demand and stress on information technology and telecommunications systems. Because our information technology and telecommunications systems interface with and depend on third party systems, we could experience service denials if demand for such services exceeds capacity or such third party systems fail or experience interruptions. Moreover, “stay-at-home” orders to non-essential businesses could affect the services we rely on from our third party vendors. If significant, sustained or repeated, a system failure or service denial could compromise our ability to operate effectively, damage our reputation, result in a loss of customer business, and subject us to additional regulatory scrutiny and possible financial liability, any of which could have a material adverse effect on our business, financial condition and results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~There were no~~Unregistered Sales of Equity Securities

None.

Purchases of Equity Securities

The table below summarizes the Company's monthly repurchases ~~or unregistered sales~~of equity securities during the three months ended March 31, 2020 (dollars in thousands, except per share data):



Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Program (1)
January 1-31, 2020	7,000	$	10.64	7,000	$	4,640
February 1-29, 2020	46,821	10.68		46,821	19,139
March 1-31, 2020	1,908,574	8.37		1,908,574	18,168
Total	1,962,395	$	8.43	1,962,395	$	18,168

(1) In August 2018, the Company's Board of Directors authorized the purchase of up to $15.0 million of the ~~Company’s~~Company's common stock ~~during~~from August 17, 2018 through December 31, 2019 (the "Repurchase Program"), which was announced by press release and Current Report on Form 8-K on August 16, 2018 and August 17, 2018, respectively. Under the ~~quarter.~~

Repurchase Program, the Company may acquire its common stock in the open market or in privately negotiated transactions, including 10b5-1 plans. The Repurchase Program may be modified, suspended or terminated by the Board of Directors at any time without notice. In December 2018, the Company adopted a systematic stock repurchase plan in accordance with, and as part of, the Repurchase Program. The plan was effective from December 17, 2018 until two days following the Company's release of its 2018 year-end financial results and was announced by press release and Current Report on Form 8-K on December 14, 2018. In January 2019, the Company adopted a systematic stock repurchase plan in accordance with, and as part of, the Repurchase Program. The plan was effective from January 31, 2019 until December 31, 2019 and was announced by Current Report on Form 8-K on February 1, 2019. These plans were adopted under the guidelines specified by Rule 10b5-1 and under Rule 10b-18 under the Securities Exchange Act of 1934, as amended, and the Company's Insider Trading Policy. On October 23, 2019, the plan was extended from December 31, 2019 to December 31, 2020 and was announced by Current Report on Form 8-K on October 23, 2019. In February 2020, the Company's Board of Directors authorized the repurchase of an additional $15.0 million of the Company's common stock under the Repurchase Program, which was announced on Form 8-K on February 26, 2020. In March 2020, the Company's Board of Directors further authorized the repurchase of an additional $15.0 million of the Company's common stock under the Repurchase Program, which was announced on Form 8-K on March 12, 2020.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6.Exhibits



~~Exhibit Number~~	~~Description~~

~~3.1~~	~~Amended and Restated Bylaws of Luther Burbank Corporation (incorporated by reference to Exhibit 3.1 to the Current Report filed on Form 8-K by Luther Burbank Corporation on April 27, 2018)~~
~~31.1~~	Rule 13a-14(a) Certification of Chief Executive Officer*
~~31.2~~	Rule 13a-14(a) Certification of Chief Financial Officer*
~~32.1~~	Section 1350 Certification of Chief Executive Officer*
~~32.2~~	Section 1350 Certification of Chief Financial Officer*
~~101~~	Pursuant to Rule 405 of Regulation S-T, the following financial information from the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2018 is formatted in XBRL (Extensible Business Reporting Language) interactive data files: (i) the Consolidated Statements of Financial Condition (Unaudited), (ii) the Consolidated Statements of Income (Unaudited), (iii) the Consolidated Statements of Comprehensive Income (Unaudited), (iv) the Consolidated Statements of Changes in Stockholders' Equity (Unaudited), (v) the Consolidated Statements of Cash Flows (Unaudited), and (vi) the Notes to Unaudited Condensed Consolidated Financial Statements.
* Filed herewith

Incorporated by Reference

Exhibit Number

Description

Filed Herewith

Form

File No.

Exhibit

Filing Date

3.1

Amended and Restated Articles of Incorporation of Luther Burbank Corporation

S-1

333-221455

3.1

11/9/2017

3.2

Amended and Restated Bylaws of Luther Burbank Corporation

S-1

333-221455

3.2

11/9/2017

4.1

Specimen Certificate for Common Stock

S-1

333-221455

4.1

11/9/2017

Pursuant to Item 601(b) (4) (iii) (A) of Regulation S-K, copies of instruments defining the rights of holders of long-term debt and preferred securities are not filed. The Company agrees to furnish a copy thereof to the SEC upon request.

31.1

Rule 13a-14(a) Certification of Chief Executive Officer*

31.2

Rule 13a-14(a) Certification of Chief Financial Officer*

32.1

Section 1350 Certification of Chief Executive Officer*

32.2

Section 1350 Certification of Chief Financial Officer*

101

Pursuant to Rule 405 of Regulation S-T, the following financial information from the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2020 is formatted in XBRL (Extensible Business Reporting Language) interactive data files: (i) the Consolidated Statements of Financial Condition (Unaudited), (ii) the Consolidated Statements of Income (Unaudited), (iii) the Consolidated Statements of Comprehensive Income (Unaudited), (iv) the Consolidated Statements of Changes in Stockholders' Equity (Unaudited), (v) the Consolidated Statements of Cash Flows (Unaudited), and (vi) the Notes to Unaudited Condensed Consolidated Financial Statements.

(1) Not filed in accordance with the provision of Item 601(b)(4)(v) of Regulation S-K. The Company agrees to provide a copy of these documents to the Commission upon request.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

~~LUTHER BURBANK CORPORATION~~

~~DATED: MAY 10, 2018 By:~~ ~~/s/ John G. Biggs~~

~~John G. Biggs~~

~~President and Chief Executive Officer~~

~~DATED: MAY 10, 2018 By:~~ ~~/s/ Laura Tarantino~~

~~Laura Tarantino~~

~~Executive Vice President and Chief Financial Officer~~



		LUTHER BURBANK CORPORATION

DATED:	MAY 8, 2020	By: /s/ Simone Lagomarsino
		Simone Lagomarsino
		President and Chief Executive Officer

DATED:	MAY 8, 2020	By: /s/ Laura Tarantino
		Laura Tarantino
		Executive Vice President and Chief Financial Officer

6663



	March 31, 2018		December 31, 2017
Certificate accounts	$	2,398,698	$	2,242,682
Money market savings	1,407,825		1,389,425
NOW accounts	196,767		203,159
Money market checking	81,893		85,073
Commercial checking	28,843		30,899
	$	4,114,026	$	3,951,238



April 1 - December 31, 2018	$	1,467,831
Year ending December 31, 2019	560,064
Year ending December 31, 2020	278,666
Year ending December 31, 2021	51,750
Year ending December 31, 2022	35,530
Thereafter	4,857
	$	2,398,698



	March 31, 2018		December 31, 2017
FHLB fixed rate short-term borrowings, interest rates from 1.78% to 1.94%, weighted average rate of 1.90%, and maturity dates of April and June 2018 as of March 31, 2018	$	480,500	$	411,600
FHLB fixed rate long-term borrowings, interest rates from 1.55% to 7.69%, weighted average rate of 2.09%, maturity dates between July 2018 and August 2032 as of March 31, 2018	527,653		427,660
FHLB variable rate long-term borrowings, interest rates from 1.68% to 1.89%, weighted average rate of 1.82%, and maturity dates between July 2018 and January 2020 as of March 31, 2018	150,000		150,000
	$	1,158,153	$	989,260



	Actual				Minimum Regulatory Requirement				Minimum Capital Adequacy with Capital Buffer				Minimum Regulatory Requirement for "Well- Capitalized" Institution under prompt corrective action provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount	Ratio
Luther Burbank Corporation
As of March 31, 2018
Tier 1 Leverage Ratio	$	619,209	10.57	%	$	241,612	4.00	%	N/A		N/A		N/A	N/A
Common Equity Tier 1 Risk-Based Ratio	557,352		15.55	%	161,342		4.50	%	$	228,568	6.38	%	N/A	N/A
Tier 1 Risk-Based Capital Ratio	619,209		17.27	%	215,123		6.00	%	282,348		7.88	%	N/A	N/A
Total Risk-Based Capital Ratio	653,367		18.22	%	286,830		8.00	%	354,056		9.88	%	N/A	N/A
As of December 31, 2017
Tier 1 Leverage Ratio	$	615,010	11.26	%	$	218,499	4.00	%	N/A		N/A		N/A	N/A
Common Equity Tier 1 Risk-Based Ratio	553,153		16.05	%	155,107		4.50	%	$	198,192	5.75	%	N/A	N/A
Tier 1 Risk-Based Capital Ratio	615,010		17.84	%	206,809		6.00	%	249,894		7.25	%	N/A	N/A
Total Risk-Based Capital Ratio	647,421		18.78	%	275,746		8.00	%	318,831		9.25	%	N/A	N/A



	March 31, 2018			December 31, 2017
Notional amounts	$	100,000		$	100,000
Weighted average rate on FHLB advances	1.78		%	1.42		%
Weighted average cap rate	2.55		%	2.55		%
Weighted average original maturity	4.0 years			4.0 years
Weighted average remaining maturity	0.6 years			0.9 years
Unrealized losses	$	(614	)	$	(796	)



April 1 - December 31, 2018	$	4,021
Year ending December 31, 2019	5,117
Year ending December 31, 2020	3,723
Year ending December 31, 2021	3,267
Year ending December 31, 2022	2,419
Thereafter	1,864
	$	20,411



Loan Type	Number of Mortgage Loans	Principal Balance (1)(2)		Percentage of Mortgage Pool Balance		Weighted Average Mortgage Rate (2)		Loan to Value Ratio (2)		Debt Service Coverage Ratio (2)
Post-Reset Hybrid Loans	65	$	91,552	14.6	%	3.66	%	53.2	%	1.88
Pre-Reset Hybrid Loans (3)	237	415,628		66.4		3.39		54.2		1.67
Pre-Reset Hybrid Loans (4)	70	118,880		19.0		3.51		46.5		1.70
Total	372	$	626,060	100.0	%	3.45	%	52.6	%	1.71