Investor Presentation June 30, 2020 Simone Lagomarsino President & Chief Executive Officer Laura Tarantino Executive Vice President & Chief Financial Officer
Forward‐Looking Statement This communication contains a number of forward‐looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward‐looking statements reflect our current views with respect to, among other things, future events and our results of operations, financial condition and financial performance. All statements contained in this communication that are not clearly historical in nature are forward‐looking, and the words such as "anticipate," "believe," “continue,” "could," "estimate," "expect," “impact,” "intend," "seek," "may," "outlook," "plan," "potential," "predict," "project," "should," "will," "would" and similar terms and phrases are generally intended to identify forward‐looking statements. These forward‐looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward‐ looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward‐looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward‐looking statements. The COVID‐19 pandemic is adversely affecting us, our customers, counterparties, employees, and third‐party service providers, and the ultimate extent of the impacts on our business, financial position, results of operations, liquidity, and prospects is uncertain. Continued deterioration in general business and economic conditions, including further increases in unemployment rates, or turbulence in domestic or global financial markets could adversely affect our revenues and the values of our assets and liabilities, reduce the availability of funding, lead to a tightening of credit, and further increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to COVID‐19, could affect us in substantial and unpredictable ways. Other factors include, without limitation, the “Risk Factors” referenced in our Annual Report on Form 10‐K for the year ended December 31, 2019 and other reports we file with the Securities and Exchange Commission (“SEC”). The risks and uncertainties listed from time to time in our reports and documents filed with the SEC include the following factors: challenges and uncertainties regarding the COVID‐19 pandemic, business and economic conditions generally and in the financial services industry, nationally and within our current and future geographic market areas; economic, market, operational, liquidity, credit and interest rate risks associated with our business; the occurrence of significant natural or man‐made disasters, including fires, earthquakes, and terrorist acts; public health crisis and pandemics, including the COVID‐19 pandemic, and their effects on the economic and business environments in which we operate, including on our credit quality and business operations, as well as the impact on general economic and financial market conditions; our management of risks inherent in our real estate loan portfolio, and the risk of a prolonged downturn in the real estate market; our ability to achieve organic loan and deposit growth and the composition of such growth; the fiscal position of the U.S federal government and the soundness of other financial institutions; changes in consumer spending and savings habits; technological and social media changes; the laws and regulations applicable to our business; increased competition in the financial services industry; changes in the level of our nonperforming assets and charge‐offs; uncertainty regarding the future of LIBOR; our involvement from time to time in legal proceedings and examination and remedial actions by regulators; the composition of our management team and our ability to attract and retain key personnel; material weaknesses in our internal control over financial reporting; systems failures or interruptions involving our information technology and telecommunications systems; and potential exposure to fraud, negligence, computer theft and cyber‐crime. Luther Burbank Corporation ("LBC", the "Company", "we", "us", or "our") can give no assurance that any goal or expectation set forth in forward‐looking statements can be achieved and readers are cautioned not to place undue reliance on such statements. These forward‐looking statements are made as of the date of this communication, and the Company does not intend, and assumes no obligation, to update any forward‐looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated eventsor circumstances, except as required by law. 2
Use of Non‐GAAP Financial Measures This investor presentation contains certain financial measures that are not measures recognized under U.S. generally accepted accounting principles (“GAAP”) and therefore, are considered non‐GAAP financial measures. The Company’s management uses these non‐GAAP financial measures in their analysis of the Company’s performance, financial condition and the efficiency of its operations. Management believes that these non‐GAAP financial measures provide a greater understanding of ongoing operations and enhance comparability of results with prior periods as well as demonstrate the effects of significant changes in the current period. The Company’s management also believes that investors find these non‐GAAP financial measures useful as they assist investors in understanding our underlying operating performance and the analysis of ongoing operatingtrends. However, the non‐GAAP financial measures discussed herein should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non‐GAAP financial measures discussed herein may differ from that of other companies reporting measures with similar names. You should understand how such other banking organizations calculate their similar financial measures or with names similar to the non‐ GAAP financial measures we have discussed herein when comparing such non‐GAAP financial measures. Below is a listing of the non‐GAAP financial measures used in this investor presentation. • Pro forma items include provision for income taxes, net income, return on average assets, return on average equity and earnings per share. Prior to January 1, 2018, these pro forma amounts are calculated by adding back our franchise S‐Corporation tax to net income, and using a combined C‐Corporation effective tax rate for Federal and California income taxes of 42.0%. This calculation reflects only the changes in our status as a S‐Corporation and does not give effect to any other transaction. • Efficiency ratio is defined as noninterest expenses divided by operating revenue, which is equal to net interest income plus noninterest income. • Tangible book value and tangible stockholders’ equity to tangible assets are non‐GAAP measures that exclude the impact of goodwill and are used by the Company’s management to evaluate capital adequacy. Because intangible assets such as goodwill vary extensively from company to company, we believe that the presentation of these non‐GAAP financial measures allows investors to more easily compare the Company’s capital position to other companies. A reconciliation to these non‐GAAP financial measures to the most directly comparable GAAP measures are provided in the appendix to this investor presentation. 3
LBC Responding to COVID‐19 Our Depositors Our Borrowers Our Employees Our Communities • Branch offices remain open • Increased staffing dedicated • Remote work capabilities • Increased contributions • Ability to transact business to handling borrower and flexible working hours to to nonprofit programs via mobile, online or by inquiries maintain our productivity that provide access to telephone • Modifications with no and efficiency while food and shelter for • Increased ATM withdrawal payments for 6 months for minimizing COVID‐19 those most in need limits and no ATM fees; SFR first‐time home buyer exposure risk • Donated N95 masks to waivers of certain early borrowers • Reduced branch hours from local hospital withdrawal penalties and • Modifications with no 10 a.m. to 3 p.m. to limit • Sponsored four non‐ overdraft fees payments for 3 to 6 months public exposure profit partners utilizing • Customer mailings and for portfolio Single Family • Special wellness payments FHLB AHEAD Program to website postings: LBC Residential (“SFR”) and for eligible branch provide funding for contact information; how to Commercial Real Estate employees targeted economic transact business; greater (“CRE”) borrowers • Implemented federal, state, development projects awareness around scams • Accepting applications and and local guidance on and non‐AHP‐eligible and cybercriminals; and links continuing to originate new protective measures, housing initiatives that to the CDC/WHO real estate loans with including social distancing create benefits for low‐ tightened credit protocols and providing and moderate‐income underwriting guidelines disinfectants/hand sanitizer communities • Frequent communication about access to employee benefits 4
Liquidity Management Liquidity Position (Dollars in thousands) As of 6/30/2020 % of Assets Unrestricted Cash & Cash Equivalents $ 154,477 2.2% Unencumbered Liquid Securities 647,394 9.0% Unutilized Brokered Deposit Capacity (1) 552,528 7.7% FHLB Borrowing Capacity (2) 613,087 8.6% FRB Borrowing Capacity (2) 167,215 2.3% Commercial Lines of Credit 50,000 0.7% Total Liquidity $ 2,184,701 30.5% Total Assets $ 7,168,346 Securities Portfolio (3) Other Borrowings 2% 0% 2% Amount Agency Residential MBS and Outstanding Cost of CMOs Type 6/30/2020 Borrowings (4) Agency Commercial MBS & 41% CMOs FHLB Advances $962 million 2.31% Agency bonds 55% Senior Notes $94 million 6.68% CRA Qualified Investment Fund (CRAIX) Other Investments Trust Preferred $62 million 2.68% (1) Capacity based on internal guidelines. (2) Capacity based on pledged loan collateral specific to lending bank. (3) At 6/30/2020, the securities portfolio had a net unrealized gain position of $9.3 million. (4) For the six months ended 6/30/2020. 5
Limited Exposure to Nonresidential CRE 6/30/2020 Loan Portfolio Composition Weighted % of Tot a l ($ in 000's) Count Balance Avg. LTV (1) Loans Multifamily Real Estate 2,539 $ 4,082,224 56.9% 65.0% Commercial Real Construction & Other Loans Land Single Family Real Estate 2,103 1,969,563 64.5% 31.3% Estate 0% 4% Development Commercial Real Estate Type: 0% Strip Retail 23 49,167 51.4% 0.8% Mid Rise Office 7 39,343 65.2% 0.6% Single Family Low Rise Office 15 26,778 55.5% 0.4% Residential 31% Medical Office 7 20,645 62.9% 0.3% Shopping Center 5 14,638 53.8% 0.2% Multi-Tenant Industrial 8 12,874 49.3% 0.2% Anchored Retail 3 12,544 54.2% 0.2% Multifamily Residential Mixed Use > 50% Commercial 11 10,945 47.5% 0.2% 65% Unanchored Retail 7 8,578 44.8% 0.1% Shadow Retail 4 7,008 59.8% 0.1% Warehouse 4 3,102 41.4% 0.0% Flex Industrial 3 2,519 64.8% 0.0% Restaurant 2 1,542 34.3% 0.0% Light Manufacturing 1 1,361 50.2% 0.0% Other 1 91 17.4% 0.0% Commercial Real Estate 101 211,135 55.5% 3.4% Construction & Land Development 13 18,017 51.9% 0.3% Non-mortgage Loans 1 100 N/A 0.0% Total 4,757 $ 6,281,039 59.3% 100.0% (1) Construction and land development LTV is calculated based on an “as completed” property value. Other Loan Notes: • At June 30, 2020, the Bank had four secured lines of credit with a total commitment of $5.6 million. There are no unsecured lines of credit in the portfolio. • LBC did not participate in the Paycheck Protection Program given the small amount of business clients in our customer base. 6
COVID‐19 Hardship Modifications Completed Applications Received by Month Applications by Status Application Under Review Approved Docs Out 600 1% 1% 492 Approved Not 500 Accepted 7% 400 Denied 13% 300 273 Modification Completed 200 Withdrawn 58% 20% 100 147 10 0 62 Mar‐20 Apr‐20 May‐20 Jun‐20 Total Applications Received Approved Withdrawn/Denied Payment Deferral Loan Modifications as of June 30, 2020 Total Loans Modified (1) Total Loans Returned to Payment Status (1) % of Loan Weighted Monthly % of Total Monthly # of Current Portfolio Weighted Avg. Weighted Cashflow # of Current Modified Cashflow (2) (2) ($ in 000's) Loans Balance Segment Avg. LTV DSC Avg. DTI Impact Loans Balance Loans Impact Multifamily residential 99 $ 173,009 4.3% 60.2% 1.37 N/A $ 790 20 $ 23,615 13.6% $ 117 Single family residential 152 171,891 8.8% 69.1% N/A 39.4% 697 14 15,296 8.9% 52 Commercial real estate 20 53,485 25.4% 57.3% 1.43 N/A 285 4 16,075 30.1% 83 Total 271 $ 398,385 6.4% 63.6% 1.39�� 39.4% $ 1,772 38 $ 54,986 13.8% $ 252 (1) As of June 30, 2020, 2 single family loans totaling $2.2 million have paid off subsequent to their modification and are excluded from the table above. (2) Weighted average DSC and DTI are pre‐COVID‐19 measures. 7
Allowance for Loan Losses Q2 2020 Allowance for Loan Losses Components Rollforward ($ in 000's) Balance 3/31/2020 Allowance for Loan Losses$ 40,657 COVID‐19 impact 3,941 Increase due to criticized loans 1,229 Net recoveries 78 Other changes 80 6/30/2020 Allowance for Loan Losses$ 45,985 YTD 6/30/2020 Allowance for Loan Losses Components Rollforward ($ in 000's) Balance 12/31/2019 Allowance for Loan Losses$ 36,001 COVID‐19 impact 10,084 Increase due to criticized loans 236 Net charge‐offs (566) Other changes 230 6/30/2020 Allowance for Loan Losses$ 45,985 8
Capital Management Tier 1 Leverage Ratio Common Equity Tier 1 Risk‐Based Ratio 14.7% 9.1% $365mm, or $307mm, or 128%, above 110%, above regulatory regulatory minimum minimum 7.0% 4.0% Regulatory Minimum 6/30/2020 Regulatory Minimum 6/30/2020 Tier 1 Risk‐Based Capital Ratio Total Risk‐Based Capital Ratio 16.3% 17.4% $309mm, or $277mm, or 91%, above 66%, above regulatory regulatory 10.5% minimum 8.5% minimum Regulatory Minimum 6/30/2020 Regulatory Minimum 6/30/2020 • After returning excess capital to shareholders over the past few years, our capital ratios continue to be well above regulatory minimums. • Common shares outstanding at June 30, 2020 were reduced by 3.6 million shares, or 6%, compared to December 31, 2019. • Returned $41.0 million to shareholders during the first six months of 2020 • Net share repurchases of $34.7 million • Quarterly common stock dividend of $0.0575 per share, or $6.3 million 9
Franchise Overview and Financial Highlights Our Small Network of Large Branches Financial Highlights 6/30/2020(1) 10 Total Assets ($mm) $7,168 WA June 30, 2020 Deposits #Branch Location Date Established ($mm) Total Loans HFI($mm) $6,281 1Santa Rosa Oct. 1983 $ 1,113.8 Total Deposits ($mm) $5,384 2San Rafael Sep. 1996* 575.0 Loans / Deposits 117% 3 Encino Aug. 2007 479.5 Tangible Common Equity / Tang. Assets 8.3% OR 4 Beverly Hills Jul. 2010 390.0 5Los Altos Aug. 2000 300.3 Leverage Ca pi ta l Ratio 9.1% 6 Pasadena May 2009 329.0 Total Risk‐Based Ca pi ta l Ratio 17.4% 7Toluca Lake Jan. 2008 303.8 Total CRE Loans (2) / Total Risk‐Based Ca pi ta l 617% 8Long Beach Jun. 2015 282.9 ROAA 0.48% 9San Jose Jun. 2012 229.9 ROAE 5.55% 10 Bellevue Jun. 2018 92.5 11 El Segundo Jan. 2020 16.4 Net Interest Margin 1.86% 11 Wholesale Deposits 380.0 EPS ‐ Fully Diluted $0.31 22 890.4 San Francisco Business Banking Efficiency Ratio 48.3% 55 99 ACorporate Office 1,270.4 CA Noninterest Expense / Avg. Assets 0.91% Total Deposits $ 5,383.5 NPAs / Assets 0.07% * Acquisition date ALLL / Loans HFI 0.73% Branch (11) 33 476 67 Loan Production Office (8) Full‐Time Employees (FTE) 285 4 11 Los Angeles 8 A ** Highlighted counties indicate primary lending markets (1) Financial data as of or for the six months ended 6/30/2020. See non‐GAAP reconciliation in Appendix hereto. (2) Includes multifamily residential, commercial real estate, and construction loans. 10
Key Highlights 1. History of Profitability 1 Recorded consecutive quarterly profits since our second History of quarter of operations Profitability Survived and prospered through numerous economic cycles during our more than 36‐year history 2. Well‐Positioned in Strategic Markets West Coast gateway cities in supply‐constrained markets with strong job growth and limited affordable housing 6 2 Achieve deeper penetration of our lending and deposit Efficient Well‐Positioned in gathering operations in our attractive West Coast markets Operations Strategic Markets Expand into contiguous markets on the West Coast to complete our Seattle to San Diego footprint 3. Demonstrated Organic Growth Engine Multifamily: professional real estate investors focused on investing in stable, cash‐flowing assets Single Family: primary residence, second home or investment property Retail Deposits: strong base built on a high level of service, competitive rates and our reputation for strength and security 4. Strong Management Team and Robust Infrastructure Led by President & CEO Simone Lagomarsino (31+ years of 5 3 banking experience) Demonstrated Strong Invested heavily in people and infrastructure over the last Organic Growth Asset Quality Engine several years 5. Strong Asset Quality Our most important focus Strict, quality oriented underwriting and credit monitoring processes 4 0.07% NPAs / Total Assets Strong Management Team and 6. Efficient Operations Robust Infrastructure Maintain a small network of large branches ($374 million avg. branch size) 48.3% efficiency ratio, 0.91% noninterest expense / average assets and 285 FTEs Note: Financial data as of or for the six months ended 6/30/2020. See non‐GAAP reconciliation in Appendix hereto. 11
Top Multifamily Lenders in the United States Top 25 Banks and Thrifts by Multifamily Loans (Dollars in billions) As of March 31, 2020 Change Since (%) Delinquency Total Multifamily December 31, March 31, % of Change Since (bps) Rank Institution Name Headquarters Assets Loans 2019 2019 Multifamily(1) March 31, 2019 1. JPMorgan Cha s e & Co. New York, NY 3,139.4 74.77 1.1 4.8 0.18 5 2. New York Community Bancorp Inc. Westbury, NY 54.3 31.30 0.4 4.5 0.02 0 3. Wells Fargo & Co. San Francisco, CA 1,981.3 14.96 6.0 11.2 0.15 (6) 4. Signature Bank New York, NY 53.1 14.86 (1.5) (5.9) 0.21 20 5. Capital One Financial Corp. McLean, VA 396.9 12.93 5.6 14.3 0.16 12 6. First Republic Bank San Francisco, CA 123.9 12.82 3.6 19.2 0.00 (2) 7. Santander Holdings USA Inc. Boston, MA 152.1 8.53 (0.8) 0.4 0.73 8 8. Investors Bancorp Inc. Short Hills, NJ 26.7 7.65 (2.4) (6.6) 1.04 25 9. Citigroup Inc. New York, NY 2,219.8 7.56 (4.6) (0.3) 1.76 168 10. MUFG Americas Holding Corp. New York, NY 165.7 7.49 2.5 29.5 0.21 7 11. PNC Financial Services Group Inc. Pittsburgh, PA 445.6 6.58 1.9 23.4 0.17 (3) 12. Bank of America Corp. Charlotte, NC 2,620.0 5.38 6.6 10.4 0.09 5 13. Valley National Bancorp Wayne, NJ 39.1 5.26 0.6 36.7 0.03 (10) 14. Truist Financial Corp. Charlotte, NC 506.2 5.09 1.1 90.5 0.10 (39) 15. Sterling Bancorp Montebello, NY 30.3 4.74 (2.9) 0.9 0.16 1 16. M&T Bank Corp. Buffalo, NY 124.6 4.62 9.7 17.6 0.59 (22) 17. TD Group US Holdings LLC Wilmington, DE 447.3 4.56 1.7 14.1 0.15 (7) 18. Key Corp. Cleveland, OH 157.0 4.39 4.3 (8.5) 0.12 (12) 19. Luther Burbank Corp. Santa Rosa, CA 7.1 4.06 1.8 7.7 0.04 (2) 20. U.S. Bancorp Minneapolis, MN 542.9 3.95 2.2 7.4 0.38 8 21. CIBC Bancorp USA Inc. Chi ca go, IL 49.0 3.87 1.8 21.9 0.00 (4) 22. People's United Financial Inc. Bridgeport, CT 60.4 3.75 (1.3) 19.1 0.62 56 23. PacWest Bancorp Beverly Hills, CA 26.1 3.60 0.7 11.4 0.01 1 24. Umpqua Holdings Corp. Portland, OR 27.5 3.52 (1.3) 6.1 0.02 (7) 25. HSBC North America Holdings Inc. New York, NY 297.5 3.50 3.8 38.7 0.00 0 Banking Industry Aggregate(2) 468.69 2.2 7.5 0.32 9 Source: SNL Financial. (1) Represents delinquent multifamily loans as a percentage of total multifamily loans. Delinquent loans include 30+ days past due and nonaccrual loans. (2) Includes all U.S. commercial banks, savings banks and savings and loan associations. 12
Luther Burbank Peer Group Includes all major exchange‐traded banks and thrifts nationwide with: Total assets > $1 billion Gross loans / assets > 65% Multifamily loans / total loans > 30% MFR + SFR + CRE / total loans > 75% General Information Profitability Capital & Balance Sheet Ratios Asset Quality(1) Bal. Sheet Growth(2) Total NPA /NCO /GrossTotal Total Multifamily Yield on Cost of NIE / Avg. Eff. TCE / Leverage Capital Loans /LLR / Loans Avg. Loans Deposits Assets Loans ROAA ROAE NIM Loans Deposits Assets Ratio TA Ratio Ratio Deposits Loans + OREO Loans CAGR CAGR Institution Name Ticker State ($bn) ($bn) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) Luther Burbank Corporation LBC CA 7.1 4.1 0.43 4.92 1.88 3.91 1.90 0.96 51.5 8.5 9.4 17.5 116 0.65 0.11 0.04 10.7 15.2 Peer Group: 1. Dime Community Bancshares, Inc. DCOM NY 6.3 3.2 0.54 5.35 2.76 4.10 1.26 1.67 57.5 8.2 9.8 15.2 119 0.70 0.35 0.00 ‐2.4 ‐1.0 2. Empire National Bank NY 1.0 0.3 0.26 2.84 2.60 4.41 1.39 2.13 79.4 9.9 9.2 16.5 75 1.04 0.74 0.00 9.8 8.7 3. First Foundation Inc. FFWM CA 6.5 2.9 0.83 8.41 3.05 4.48 1.58 2.08 58.2 8.2 8.4 11.0 105 0.43 0.23 0.01 21.8 25.1 4. Flushing Financial Corporation FFIC NY 7.2 2.3 (0.08) (0.96) 2.50 4.23 1.62 1.80 85.0 7.4 8.6 13.2 120 0.47 0.39 0.08 6.5 4.8 5. Investors Bancorp, Inc. ISBC NJ 26.7 7.7 0.60 6.00 2.69 NA 1.39 1.60 53.8 9.4 9.7 14.3 115 1.14 0.55 0.15 3.9 5.5 6. Kearny Financial Corp. KRNY NJ 6.8 2.1 0.55 3.39 2.55 4.22 1.49 1.68 66.5 13.0 13.3 22.8 106 0.81 0.96 0.00 14.1 14.5 7. Malaga Bank F.S.B. CA 1.3 1.0 1.38 10.96 2.92 4.04 0.98 0.96 32.7 12.7 12.7 21.9 145 0.31 0.00 0.00 7.9 1.0 8. Marquette Bank IL 1.6 0.5 0.26 2.37 3.48 4.24 0.51 3.24 78.3 8.9 8.6 13.9 86 1.33 2.32 (0.01) 1.8 1.4 9. New York Community Bancorp, Inc. NYCB NY 54.3 31.3 0.75 6.00 2.01 3.76 1.50 0.94 48.1 7.2 8.5 13.2 132 0.38 0.14 0.10 2.1 3.2 10. Northfield Bancorp, Inc. NFBK NJ 5.0 2.4 0.37 2.59 2.58 4.07 1.19 1.26 NA 13.4 13.2 NA 99 1.05 0.47 0.01 5.3 8.1 11. Opus Bank CA 8.4 3.9 (4.24) (32.24) 2.82 4.07 1.02 6.95 63.7 8.7 9.6 15.1 88 0.86 0.10 (0.04) 1.7 0.1 12. Provident Savings Bank, F.S.B. CA 1.1 0.5 0.48 4.70 3.37 4.21 0.40 2.66 72.7 10.4 10.4 18.5 108 0.85 1.78 (0.01) ‐3.4 ‐3.5 13. Waterstone Financial, Inc. WSBF WI 2.1 0.6 1.21 6.21 2.80 4.60 1.77 6.94 NA 18.1 18.4 23.9 150 0.79 0.63 (0.01) 5.5 3.9 Average: 0.22 1.97 2.78 4.20 1.24 2.61 63.3 10.4 10.8 16.6 111 0.78 0.67 0.02 5.7 5.5 Median: 0.54 4.70 2.76 4.22 1.39 1.80 63.7 9.4 9.7 15.2 108 0.81 0.47 0.00 5.3 3.9 Source: SNL Financial. GAAP data when available, otherwise FR Y‐9C’s and bank call reports as of or for the three months ended 3/31/2020. Note that SNL earnings ratios may differ from Company as SNL annualizes one quarter rather than using data for 12 months. (1) Nonperforming assets (“NPA”) includes performing troubled debt restructurings. (2) Compound annual growth rate (“CAGR”) from 12/31/2016 to 3/31/2020. 13
Our Lending Business Multifamily Residential Loans Single Family Residential Loans Property Types: Markets: Both owner‐occupied and investor owned High barrier to entry for new development; little land to develop Broker Network: Limited supply of new housing Primarily third party mortgage brokers with the intention of High variance between cost to own and rent retaining these loans in our portfolio Deals: Originations: Stabilized and seasoned assets Majority are for purchase transactions Older, smaller properties with rents at/below market levels, Also provide refinancing catering to lower and middle income renters Underwriting Focus: Sponsors: Debt ratios Experienced real estate professionals who desire regular Loan to Value income/cash flow streams and are focused on building wealth Credit scores steadily over time Borrower’s liquidity and cash reserves Multifamily Portfolio Highlights Single Family Portfolio Highlights $1.6 million average loan balance $937 thousand average loan balance 15.0 units average 65% average loan‐to‐value ratio 57% average loan‐to‐value ratio 751 average credit score 1.52x average debt service coverage ratio 0.07% NPAs / Assets 0.08% NPLs / Loans Note: Data as of 6/30/2020. 14
Our Lending Products Multifamily / Commercial Real Estate Lending Single Family Residential Lending First Mortgages First Mortgages Hybrid Structures Hybrid Structures • 25‐ or 30‐year amortization • 30‐ or 40‐year amortization • 10‐, 25‐ or 30‐year maturities • 30‐ or 40‐year maturities • 3‐, 5‐, 7‐ or 10‐year fixed rate periods • 3‐, 5‐, 7‐ or 10‐year fixed rate periods Interest Only Option Full Documentation • Lower loan‐to‐value ratios Interest Only • Underwrite at amortizing payment Purchase or Refinance Transactions Investor‐Owner Purchase or Refinance Primary Residence, Second Home or Investor programs Lines of Credit Low‐ and Moderate‐income lending program • Real estate secured only/ specific business purpose/ fully adjustable/ short term • 30‐year fixed mortgages and forgivable second mortgages for first time homebuyers 15
Loan Portfolio Historical Loan Growth Loan Portfolio Composition 3.81% yield on loans(1); 4.10% weighted average coupon Multifamily Loans by Lending Area Single Family Loans by Lending Area Oregon Oregon 3% 0% Washington 7% Washington 12% NorCal SoCal (LA / OC) 32% 47% NorCal 23% SoCal (LA / OC) 52% SoCal (Other) SoCal (Other) 10% 14% (1) As of or for the six months ended 6/30/2020. 16
Asset Quality Nonperforming Assets(1) / Total Assets Asset Quality ‐ Nonperforming Assets ($ in millions) $30.0 1.50% $20.0 1.00% $10.0 0.50% $6.9 $6.3 $5.6 $4.9 $2.7 $2.0 0.12% $0.0 0.09% 0.08% 0.00% 0.05% 0.03% 0.07% December 31, December 31, December 31, December 31, March 31, June 30, 2016 2017 2018 2019 2020 2020 Nonperforming Assets (excluding performing troubled debt restructuings) Nonperforming Assets / Total Assets Culture Approach Results Risk management is a core competency of Continuous evaluation of risk and return 6/30/2020 NPAs / Total Assets of 0.07%; our business NPLs / Total Loans of 0.08% Strict separation between business Extensive expertise among our lending development and credit decisions NPAs and loans 90+ days past due to total and credit administration staff and assets have been at low levels since 2016 Vigilant response to adverse economic executive officers conditions and specific problem credits Only one foreclosure in the past five years Credit decisions are made efficiently and Strict, quality oriented underwriting and consistent with our underwriting credit monitoring processes standards (1) Excludes performing troubled debt restructurings. 17
Loan Origination Volume and Rates Total Loans Originated YTD ($ in millions) & Weighted Average Loan Coupon $3,000 5.00% 4.63% 4.35% 4.50% 4.00% $2,500 3.86% 4.00% 3.51% 3.50% $2,000 $2,073.6 $2,140.3 $2,047.8 3.00% $1,564.1 $1,500 2.50% Q4 $412.7 4.15% 2.00% $1,000 $382.4 Q3 4.26% $821.0 1.50% $487.9 1.00% $500 Q2 $457.5 Q2 4.44% 3.78% 0.50% Q1 $311.5 Q1 $333.1 4.62% 3.98% $0 0.00% December 31, December 31, December 31, December 31, June 30, 2016 2017 2018 2019 2020 Pipeline: • Total loan pipeline at June 30, 2020 is $132.6 million ($87.6 million CRE at 3.852% WAC, $39.5 million SFR at 3.979% WAC & $5.5 million LOC at 5.000% WAC). A portion of our pipeline will ultimately fallout/not fund and loans without rate locks are subject to ongoing rate increases/decreases. • Q2 2019 originations include a $10.1 million CRE loan purchase. • Q1 2020 originations include a $20.4 million CRE loan purchase. 18
CRE Loan Origination Volume and Rates CRE Loans Originated YTD ($ in millions) & Weighted Average Loan Coupon $1,500 5.00% 4.60% 4.40% 4.50% 4.02% $1,250 3.86% 4.00% 3.43% 3.50% $1,000 $972.9 $1,366.8 $1,218.3 3.00% Q4 $246.9 4.16% $750 $1,091.4 2.50% Q3 $215.3 2.00% 4.34% $486.6 $500 1.50% Q2 $303.4 Q2 $269.1 4.49% 3.78% 1.00% $250 0.50% Q1 $207.3 Q1 $217.5 4.61% 3.95% $0 0.00% December 31, December 31, December 31, December 31, June 30, 2016 2017 2018 2019 2020 • Q2 2019 originations include a $10.1 million CRE loan purchase. • Q1 2020 originations include a $20.4 million CRE loan purchase. 19
SFR Loan Origination Volume and Rates SFR Loans Originated YTD ($ in millions) & Weighted Average Loan Coupon $1,000 5.00% 4.67% 4.29% 4.50% 3.94% 3.86% $800 5.15% 4.00% 3.56% 3.50% $591.2 $600 $828.8 3.00% $815.5 Q4 $165.8 2.50% $756.1 4.14% $400 2.00% $167.1 $334.4 Q3 4.16% 1.50% $218.8 $200 1.00% Q2 $154.1 Q2 3.78% 4.34% 0.50% Q1 $104.2 Q1 $115.6 4.02% $0 4.63% 0.00% December 31, December 31, December 31, December 31, June 30, 2016 2017 2018 2019 2020 20
Loan Portfolio Rates 5.000% 4.800% 4.600% 4.400% 4.200% 4.000% 3.800% 3.600% 3.400% 3.200% Rate on Originations Rate on Principal Reductions/Sales Rate on Loan Portfolio 3.000% Jul Jul Jul Jul Jan Jan Jan Jan Jan Jun Jun Jun Jun Jun Oct Oct Oct Oct Apr Apr Apr Apr Apr Feb Sep Feb Sep Feb Sep Feb Sep Feb Dec Dec Dec Dec Aug Aug Aug Aug Nov Nov Nov Nov Mar Mar Mar Mar Mar May May May May May 2016 2017 2018 2019 2020 • At June 30, 2020, loans representing 66% of the loan portfolio, or $4.1 billion in aggregate outstanding principal balance, are at their floors, and 47% of those loans have fully indexed rates above their floors by approximately 0.31%. 21
CPR Loan 13.00% 18.00% 23.00% 28.00% 33.00% 38.00% 43.00% 3.00% 8.00% CPR Jan Prepayment Feb based Mar on Apr 12 May month 0621 0821 2020 2019 2018 2017 2016 Jun Jul rolling Aug Sep average Oct Nov of Dec monthly Jan Feb prepayment Speeds Mar Apr May rates Jun Jul (SMM) Aug Sep Oct Total Nov Dec Loans Jan Feb Mar Apr May SFR Jun Loans Jul Aug Sep Oct Nov CRE Dec Jan Loans Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May 22 Jun
Deposit Composition Historical Deposit Growth & Portfolio Composition Deposit Breakdown by Branch ($ in millions) (1) Total Deposits ($ in millions) Total $6,000 Branch Location Consumer Business Wholesale Deposits $5,383.5 $5,234.7 $5,285.4 Santa Rosa $ 1,088.9 $ 24.9 $ 0.00 $ 1,113.8 $5,001.0 $5,000 San Rafael 523.8 51.2 0.0 575.0 $3,951.3 Encino 475.2 4.3 0.0 479.5 $4,000 $3,334.0 Beverly Hills 386.3 3.7 0.0 390.0 $3,000 Los Altos 294.1 6.2 0.0 300.3 Pasadena 326.8 2.2 0.0 329.0 $2,000 Toluca Lake 276.1 27.7 0.0 303.8 $1,000 December 31, December 31, December 31, December 31, March 31, June 30, Long Beach 275.8 7.1 0.0 282.9 2016 2017 2018 2019 2020 2020 San Jose 153.8 76.1 0.0 229.9 Noninterest‐bearing Deposits 1% Bellevue 87.6 4.9 0.0 92.5 El Segundo 15.0 1.4 0.0 16.4 MMDAs & Other Savings Corporate Office 0.0 890.4 380.0 1,270.4 Deposits Time Deposits 28% Total Deposits $ 3,903.4 $ 1,100.1 $ 380.0 $ 5,383.5 64% Interest Checking Deposits 7% 1.69% cost of interest‐bearing deposits(1) (1) As of or for the six months ended 6/30/2020. 23
Deposit Growth/Balance Growth Trend Deposit Growth by Segment ($ in millions) $6,000 $50.7 $233.7 $98.1 $5,000 $881.1 $1,100.1 $1,049.7 $708.3 $973.2 $545.0 $4,000 $279.4 $440.1 $416.0 $380.0 $617.3 $86.0 $253.9 $3,000 $105.0 $2,000 $3,852.6 $3,845.5 $3,859.3 $3,903.4 $3,418.0 $3,143.0 $1,000 $‐ December 31, December 31, December 31, December 31, March 31, June 30, 2016 2017 2018 2019 2020 2020 Retail ‐ Consumer Wholesale Retail ‐ Business 24
Business Composition By Vertical December 31, 2019 June 30, 2020 Other HOA Other HOA 15% 10% 18% 8% Other Zero Interest 1031 Exchange Operating 5% 3% Zero Interest Other Zero Interest Checking 1.572% Operating 2% 1.572% 1.082% 1031 Exchange 3% 0.830% 27% Zero Interest 1.220% Union Accounts Checking 7% 2% Union Accounts 7% Fiduciary Fiduciary 57% 36% Total business deposits of $973.2 million Total business deposits of $1.1 billion 25
Efficient Operations Result in Consistent Profitability Return on Average Assets(1) Return on Average Equity(1) 0.70% 8.89% 0.67% 0.69% 0.69% 8.02% 7.96% 8.15% 0.48% 5.55% Full year Full year Full Year Full Year YTD Full year Full year Full Year Full Year YTD 12/31/2016 12/31/2017 12/31/2018 12/31/2019 6/30/2020 12/31/2016 12/31/2017 12/31/2018 12/31/2019 6/30/2020 Efficiency Ratio Noninterest Expense to Average Assets 1.3% 59.8% 1.0% 47.8% 48.5% 46.9% 48.3% 1.0% 0.9% 0.9% Full year Full year Full Year Full Year YTD Full year Full year Full Year Full Year YTD 12/31/2016 12/31/2017 12/31/2018 12/31/2019 6/30/2020 12/31/2016 12/31/2017 12/31/2018 12/31/2019 6/30/2020 (1) For periods prior to 2018, net income adjusted for C‐Corp status assumes 42% tax rate. See non‐GAAP reconciliation in Appendix hereto. 26
Net Interest Margin Quarterly Net Interest Margin Net Interest Margin 1.94% 2.04% 2.05% 1.89% 1.88% 1.88% 1.98% 1.86% 1.84% 1.84% 1.84% 1.86% 1.75% Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Full year Full year Full Year Full Year YTD 12/31/2016 12/31/2017 12/31/2018 12/31/2019 6/30/2020 27
Interest Rate Risk Analysis On a quarterly basis, the Company measures and reports NII and EVE at Risk to isolate the change in income and equity related solely to interest‐earning assets and interest‐bearing liabilities. Both models measure instantaneous parallel shifts in market interest rates, implied by the forward yield curve. NII Impact ($ in millions) EVE Impact ($ in millions) 5.0% $5.0 25.0% $50.5 $50.0 $1.4 8.9% (9.3%) 0.9% (0.2%) 0.0% $0.0 (1.1%) (15.1%) 0.0% $0.0 (21.7%) ($0.4) (2.6%) ($50.0) ($1.6) (25.0%) ($52.8) (31.2%) (5.3%) ($86.0) ($100.0) ($3.9) (5.0%) ($5.0) ($123.7) (50.0%) ($150.0) ($7.8) ($177.8) ($200.0) (10.0%) ($10.0) (75.0%) ($250.0) (15.0%) ($15.0) (100.0%) ($300.0) ‐ 100 BP + 100 BP + 200 BP + 300 BP + 400 BP ‐ 100 BP + 100 BP + 200 BP + 300 BP + 400 BP $ Change NII % Change NII $ Change EVE % Change EVE Interest Rate Risk to Earnings (NII) Interest Rate Risk to Capital (EVE) June 30, 2020 June 30, 2020 Change in Change in Interest Rates $ Change % Change Interest Rates $ Change % Change (basis points) NII NII (basis points) EVE EVE + 400 BP (7.8) (5.3%) + 400 BP (177.8) (31.2%) + 300 BP (3.9) (2.6%) + 300 BP (123.7) (21.7%) + 200 BP (1.6) (1.1%) + 200 BP (86.0) (15.1%) + 100 BP (0.4) (0.2%) + 100 BP (52.8) (9.3%) ‐ 100 BP 1.4 0.9% ‐ 100 BP 50.5 8.9% 28
1 For (1) Economic % Change in EVE Luther ‐ ‐ ‐ ‐ ‐ 10% 15% 20% 25% 30% ‐ 0% 5% Burbank May Jun Jul Savings Aug Sep Oct Nov Dec Jan Feb Value Mar Apr 0421 0621 0821 2020 2019 2018 2017 2016 2015 2014 May Jun Jul Aug Sep Oct Nov Dec of Jan Feb Mar Apr May Equity Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Trend Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb +200bp Mar Apr May +100bp Jun Shock Jul Aug Sep Shock Oct (1) Nov Dec (1) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 29
1 Beta (1) Deposits Ave. Monthly Rate % 0.000 0.500 1.000 1.500 2.000 2.500 3.000 is calculated Jan‐16 Feb‐16 using Mar‐16 Apr‐16 an average May‐16 ‐ Jun‐16 Cost Jul‐16 Fed Aug‐16 Funds Sep‐16 Rate. Oct‐16 Nov‐16 Dec‐16 of Jan‐17 Feb‐17 Mar‐17 Funds Apr‐17 May‐17 Jun‐17 Jul‐17 Deposit Aug‐17 Comparison Sep‐17 Portfolio Oct‐17 Nov‐17 Dec‐17 Cost Jan‐18 Feb‐18 of Mar‐18 Funds Apr‐18 May‐18 Jun‐18 Jul‐18 Aug‐18 Sep‐18 Oct‐18 Nov‐18 Fed Dec‐18 Funds Jan‐19 Feb‐19 Deposit Mar‐19 Deposit Jun. Apr‐19 2018 Jan. May‐19 2019 Portfolio Jun‐19 Portfolio ‐ Jul‐19 ‐ u.2020 Jun. Aug‐19 Jun. Beta Beta Sep‐19 2020 Oct‐19 21% 26% (1) Nov‐19 (1) Dec‐19 Jan‐20 Feb‐20 Mar‐20 Apr‐20 May‐20 30 Jun‐20
Executive Management Simone Lagomarsino. Ms. Lagomarsino, serves as President and Chief Executive Officer (“CEO”) of the Company and the Bank. Ms. Lagomarsino has served on our Board of Directors since November 30, 2018. Prior to joining the Company, Ms. Lagomarsino was President and CEO of the Western Bankers Association and a director of Pacific Premier Bancorp. (NASDAQ: PPBI). From 2011 to 2016, she served as CEO of Heritage Oaks Bank, and President and CEO and a director of Heritage Oaks Bancorp. Ms. Lagomarsino also previously held executive positions with Hawthorne Financial Corporation, Ventura County National Bank, and Kinecta Federal Credit Union. In addition to her role at the Company, Ms. Lagomarsino serves on the board of directors of the Federal Home Loan Bank of San Francisco and Hannon Armstrong Sustainable Infrastructure Capital, Inc. (NYSE: HASI). We believe Ms. Lagomarsino's extensive experience in leadership roles in numerous financial institutions, including public companies, gives her valuable insight and enables her to make significant contributions as a member of our Board. Laura Tarantino. Ms. Tarantino serves as Chief Financial Officer of the Company and Bank, a position she has held since 2006. In this role, she oversees all aspects of financial reporting including strategic planning, asset/liability management, taxation and regulatory filings. She also serves on the Company's Executive Committee. Ms. Tarantino has over 28 years of experience with the Bank, having joined as Controller in 1992. She previously served as Audit Manager for KPMG LLP, San Francisco, specializing in the financial services industry. In addition to her role at the Company, Ms. Tarantino has served as an audit committee member for the Santa Rosa Council on Aging since 2012. Ms. Tarantino is a CPA (inactive) and holds a B.S. in Business Administration ‐ Finance & Accounting with summa cum laude honors from San Francisco State University. John A. Cardamone. Mr. Cardamone joined the Bank as Chief Credit Officer in 2014. He oversees the Bank's credit administration, appraisal and special assets activities and serves on the Executive Committee. Prior to joining the Bank, Mr. Cardamone served as a Senior Vice President & Divisional Credit Manager ‐ Commercial Real Estate at Bank of the West from 2008 until 2014, Chief Credit Officer at GreenPoint Mortgage, Senior Vice President ‐ Global Risk Management at GE Capital's Mortgage Insurance Unit and Managing Director and Chief Credit Officer at the Federal Home Loan Bank of San Francisco. Mr. Cardamone holdsan M.B.A. in Finance from the Wharton School at the University of Pennsylvania, an M.B.A. in Management from St. Mary's College and a B.B.A. in Business Statistics from Temple University. 31
Executive Management ‐ Continued Bill Fanter. Mr. Fanter serves the Company as Head of Retail Banking. In this role he is responsible for expanding the Bank’s deposit offerings and creating greater access to its products and services, including consumer deposit generation across traditional branch and online banking platforms. He is also a member of the Company's Executive Committee. Prior to joining the Company in 2020, Mr. Fanter served as Executive Vice President, Head of Retail Banking at Opus Bankfrom 2019 and previous to that, as Senior Vice President, Consumer and Business Banking Market Executive at U.S. Bank from 2003‐2019. His background also includes positionsasDirectorofAutomationServicesatKirchmanCorporationandseveral roles culminating with Senior Vice President, Chief Operating Officer at GreatBanc, Inc. Tammy Mahoney. Ms. Mahoney joined the Company in 2016 and serves as the Chief Risk Officer. In her role, Ms. Mahoney oversees the Company's compliance, internal audit and risk management functions; she is also a member of its Executive Committee. Prior to joining the Bank, Ms. Mahoney served as Senior Vice President of Enterprise Risk and Compliance at Opus Bank from 2011 through 2015; as Director, Risk Advisory Services at KPMG LLP from 1995 to 2004; and as Associate National Bank Examiner with the Office of the Comptroller of the Currency. A Certified Enterprise Risk Professional, Certified Regulatory Compliance Manager and Certified Internal Auditor, Ms. Mahoney holds a B.S. in Business Administration ‐ Finance from San Diego State University. Liana Prieto. Ms. Prieto serves as General Counsel and Corporate Secretary of the Company and Bank. In this role she is responsible for leading a team of legal, human resources, Bank Secrecy Act, fair and responsible banking and third party risk management professionals. She is also a member of the Company's Executive Committee. Prior to joining the Bank in 2014, Ms. Prieto served as Associate and then Counsel at Buckley LLP from 2009 to 2014, and as a trial attorney in the Enforcement & Compliance Division of the Office of the Comptroller of the Currency. In addition to her role at the Company, Ms. Prieto has served in leadership and advisory roles on the Banking Law Committee of the American Bar Association's Business Law Section and the American Association of Bank Directors. She also serves on the Board of Directors of Long Beach Local, a non‐profit that supports sustainable urban agriculture. Ms. Prieto holds a J.D. from Fordham University School of Law and a B.A. from Georgetown University. 32
Board of Directors Victor S. Trione. Mr. Trione, serves as Chair of the Board of Directors of the Company and the Bank, a position he has held since founding the Bank in 1983. In addition to serving as our Chair, Mr. Trione is President of Vimark, Inc., a real estate development and vineyard management company, and co‐proprietor of Trione Winery. Mr. Trione also serves in the following roles: Director and Chair of the Executive Committee of Empire College; Advisory Board member of the Stanford Institute for Economic Policy Research; Board of Overseers of Stanford University's Hoover Institution; and, trustee of the U.S. Navy Memorial Foundation. As one of our founders, Mr. Trione brings continuity and deep historic knowledge of the Company to the Board, which enables him to make significant contributions as a member of our Board. John C. Erickson. Mr. Erickson, serves on the Audit and Risk Committee and on the Compensation Committee. Mr. Erickson has served on our Board of Directors since 2017. Mr. Erickson has more than 35 years of financial services experience, including over 30 years at Union Bank N.A. He served in many executive roles across that institution, culminating in two vice chairman positions (Chief Risk Officer and Chief Corporate Banking Officer) between 2007 and 2014. As Chief Corporate Banking Officer, he oversaw commercial banking, real estate, global treasury management, wealth management and global capital markets. He was a director of Zions Bancorporation (NASDAQ: ZION) from 2014 to 2016, and chair of that board's Risk Committee, as well as a member of the Audit Committee. He also served as President, Consumer Banking and President, California, for CIT Group, Inc. (NYSE: CIT) in 2016. He joined the board of directors of Bank of Hawaii Corporation (NYSE: BOH) in January 2019, and serves as a member of its Audit and Risk Committee and Nominating and Governance Committee. Mr. Erickson qualifies as an "audit committee financial expert" as defined in SEC rules. We believe Mr. Erickson's extensive knowledge of banking and his service on public company boards give him valuable insight and enable him to make significant contributions as a member of our Board. Jack Krouskup. Mr. Krouskup, serves as Chair of the Audit and Risk Committee and also serves on the Governance and Nominating Committee. Mr. Krouskup has served on our Board of Directors since 2012. He is a certified public accountant (inactive) with more than 35 years of experience serving customers in a variety of industries. At Deloitte, he served as partner‐in‐charge of the company's Northern California Financial Services practice and also served on Deloitte's Financial Services Advisory Committee. Mr. Krouskup has years of boardroom experience representing Deloitte with numerous global and highly complex organizations. Consequently, he has an extensive corporate governance background and deep familiarity with board and audit committee best practices. Mr. Krouskup retired from Deloitte in 2011. He currently serves on the board of directors of Verity Health System and on the Board of Trustees of the University of California, Santa Barbara, Alumni Association. Mr. Krouskup qualifies as an "audit committee financial expert" as defined in SEC rules. We believe Mr. Krouskup's significant experience as an auditor and certified public accountant give him valuable insight and enable him to make significant contributions as a member of our Board. 33
Board of Directors ‐ Continued Anita Gentle Newcomb. Mrs. Newcomb, serves on the Audit and Risk Committee. Ms. Newcomb has served on our Board of Directors since 2014. Her experience spans over three decades in the financial services industry as a commercial banker, investment banker, and strategic consultant. She has advised numerous banks and financial services companies on a wide range of corporate development initiatives, from strategic planning, consumer and business banking strategy, and corporate governance best practices, to mutual conversions and valuing and structuring acquisitions. Most recently, Ms. Newcomb was president of A.G. Newcomb & Co., a financial services consultancy, she founded and managed from 1999 to 2019. She also served on the board of the Federal Reserve Bank of Richmond‐ Baltimore Branch from 2010 through 2015. She is also a certified public accountant (inactive). Ms. Newcomb qualifies as an "audit committee financialexpert"as defined in SEC rules. We believe Ms. Newcomb's extensive knowledge of banking, as well as her expertise in strategic planning for community and regional banks, give her valuable insight and enable her to make significant contributions as a member of our Board. Bradley M. Shuster. Mr. Shuster, serves as Chair of the Compensation Committee and also serves on the Governance and Nominating Committee. Mr. Shuster has served on our Board of Directors since 1999. Mr. Shuster has served as Executive Chairman and Chairman of the Board of NMI Holdings, Inc. (NASDAQ: NMIH) since January 2019. Mr. Shuster founded National MI and served as Chairman and Chief Executive Officer of the company from 2012 to 2018. Prior to founding National MI, he was a senior executive of The PMI Group, Inc. (NYSE: PMI), where he served as Chief Executive Officer of PMI Capital Corporation. Before joining PMI in 1995, Mr. Shuster was a partner at Deloitte, where he served as partner‐in‐charge of Deloitte's Northern California Insurance and Mortgage Banking practices. Mr. Shuster has received both CPA and CFA certifications. He is a member of the board of directors of McGrath Rentcorp (NASDAQ: MGRC), and serves as a member of its Audit and Governance Committees. We believe Mr. Shuster's experience leading a public company, as well as his service on public company boards and his tenureonour Board, give him valuable insight and enable him to make significant contributions as a member of our Board. Thomas C. Wajnert. Mr. Wajnert, serves as our Lead Independent Director, Chair of the Governance and Nominating Committee, and a member of the Compensation Committee. Mr. Wajnert has served on our Board of Directors since 2013. He launched his career in 1968 with US Leasing, a NYSE‐listed company. For over 40 years, Mr. Wajnert has navigated the changing currents of the equipment leasing industry and built an impressive list of accomplishments, including serving as Chief Executive Officer and Chair of AT&T Capital Corporation, an international, full‐service equipment leasing and commercial finance company, from 1984 to 1996. Mr. Wajnert also has extensive public company board experience at Reynolds American as Chair, and at Solera, UDR, Inc., NYFIX, and JLG Industriesasa director. Mr. Wajnert also serves on the board of International Finance Group, one of the largest privately owned P&C insurance companies in the U.S., and for many years served as a Trustee of Wharton's Center for Financial Institutions. We believe Mr. Wajnert's substantial experience in leadership of public companies, both as an executive and a director, give him valuable insight and enable him to make significant contributions as a member of our Board. 34
Appendix
Balance Sheet ($ in 000’s) June 30, 2020 (1) December 31, 2019 ASSETS Cash, cash equivalents and restricted cash $ 170,197 $ 88,565 Available for sale investment securities, at fair value 635,324 625,074 Held to maturity investment securities, at amortized cost (fair value of $9,839 and $10,349 at June 30, 2020 and December 31, 2019 respectively) 9,400 10,170 Equity securities, at fair value 12,070 11,782 Loans receivable, net of allowance for loan losses of $45,985 and $36,001 as of June 30, 2020 and December 31, 2019, respectively 6,235,054 6,194,976 Accrued interest receivable 20,388 20,814 Federal Home Loan Bank ("FHLB") stock, at cost 29,612 30,342 Premises and equipment, net 19,262 19,504 Goodwill 3,297 3,297 Prepaid expenses and other assets 33,742 41,304 Total assets $ 7,168,346 $ 7,045,828 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits $ 5,383,519 $ 5,234,717 Federal Home Loan Bank advances 961,747 978,702 Junior subordinated deferrable interest debentures 61,857 61,857 Senior debt $95,000 face amount, 6.5% interest rate, due September 30, 2024 (less debt issuance costs of $522 and $584 at June 30, 2020 and December 31, 2019, respectively) 94,478 94,416 Accrued interest payable 1,253 2,901 Other liabilities and accrued expenses 68,810 58,771 Total liabilities 6,571,664 6,431,364 Stockholders' equity: Common stock, no par value; 100,000,000 shares authorized; 52,382,895 and 55,999,754 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively 414,264 447,784 Retained earnings 175,852 165,236 Accumulated other comprehensive income, net of taxes 6,566 1,444 Total stockholders' equity 596,682 614,464 Total liabilities and stockholders' equity $ 7,168,346 $ 7,045,828 (1) Unaudited 36
Income Statement ($ in 000’s, except per share data) For the Three Months Ended June 30, (1) For the Six Months Ended June 30, (1) 2020 2019 2020 2019 Interest and fee income: Loans $ 58,190 $ 61,015 $ 118,895 $ 122,068 Investment securities 2,316 4,118 5,619 8,043 Cash, cash equivalents and restricted cash 55 522 372 922 Total interest and fee income 60,561 65,655 124,886 131,033 Interest expense: Interest on deposits 19,821 26,471 44,402 50,759 Interest on FHLB advances 5,685 6,410 11,243 13,182 Interest on junior subordinated deferrable interest debentures 332 632 825 1,283 Interest on other borrowings 1,575 1,574 3,153 3,149 Total interest expense 27,413 35,087 59,623 68,373 Net interest income before provision for loan losses 33,148 30,568 65,263 62,660 Provision for loan losses 5,250 450 10,550 750 Net interest income after provision for loan losses 27,898 30,118 54,713 61,910 Noninterest income: Net gain on sale of loans ‐ 197 ‐ 530 FHLB dividends 374 552 909 1,047 Other income 297 739 560 1,291 Total noninterest income 671 1,488 1,469 2,868 Noninterest expense: Compensation and related benefits 10,300 8,614 21,505 18,666 Deposit insurance premium 471 487 947 985 Professional and regulatory fees 454 457 885 898 Occupancy 1,101 1,399 2,241 2,789 Depreciation and amortization 687 664 1,356 1,329 Data processing 1,038 945 2,005 1,864 Marketing 330 1,071 1,205 2,225 Other expenses 967 1,072 2,063 2,202 Total noninterest expense 15,348 14,709 32,207 30,958 Income before provision for income taxes 13,221 16,897 23,975 33,820 Provision for income taxes 3,903 5,239 7,081 10,152 Net income $ 9,318 $ 11,658 $ 16,894 $ 23,668 Basic earnings per common share $ 0.18 $ 0.21 $ 0.31 $ 0.42 Diluted earnings per common share $ 0.18 $ 0.21 $ 0.31 $ 0.42 Dividends per common share $ 0.06 $ 0.06 $ 0.12 $ 0.12 Weighted average common shares outstanding ‐ basic 52,465,458 56,108,618 54,038,642 56,314,213 Weighted average common shares outstanding ‐ diluted 52,551,006 56,291,388 54,138,052 56,507,042 (1) Unaudited 37
Net Interest Margin ($ in 000’s) For the Six Months Ended For the Three Months Ended For the Three Months Ended June 30, 2020 June 30, 2020 March 31, 2020 Average Interest Average Average Interest Average Average Interest Average Balance Inc / Exp Yield/Rate (5) Balance Inc / Exp Yield/Rate (5) Balance Inc / Exp Yield/Rate (5) Interest‐Earning Assets Multifamily residential$ 4,042,681 $ 79,146 3.92%$ 4,075,885 $ 38,551 3.78%$ 4,009,477 $ 40,594 4.05% Single family residential 1,967,298 34,257 3.48% 1,955,592 16,867 3.45% 1,979,005 17,390 3.51% Commercial real estate 206,921 4,766 4.61% 209,725 2,411 4.60% 204,118 2,355 4.61% Construction, land and NM 21,363 726 6.83% 21,391 361 6.79% 21,334 366 6.90% Total loans (1) 6,238,263 118,895 3.81% 6,262,593 58,190 3.72% 6,213,934 60,705 3.91% Securities available‐for‐sale/ equity 637,628 5,493 1.72% 643,699 2,255 1.40% 631,556 3,238 2.05% Securities held‐to‐maturity (2) 9,761 126 2.58% 9,522 61 2.56% 10,000 65 2.60% Cash, cash equivalents and restricted cash 120,380 372 0.62% 127,565 55 0.17% 113,196 317 1.13% Total interest‐earning assets 7,006,032 124,886 3.57% 7,043,379 60,561 3.44% 6,968,686 64,325 3.69% Noninterest‐earning assets 65,288 63,821 66,756 Total assets $7,071,320 $7,107,200 $7,035,442 Interest‐Bearing Liabilities Interest‐bearing demand deposits$ 249,520 $ 903 0.72%$ 272,160 $ 332 0.48%$ 226,879 $ 572 0.01% Money market demand accounts 1,390,479 7,453 1.06% 1,422,739 3,314 0.92% 1,358,219 4,139 1.21% Time deposits ‐ Retail 3,104,552 33,204 2.12% 3,084,317 15,193 1.95% 3,124,787 18,009 2.28% Total interest‐bearing deposits ‐ Retail 4,744,551 41,560 1.73% 4,779,216 18,839 1.56% 4,709,885 22,720 1.91% Time deposits ‐ Wholesale 459,148 2,842 1.24% 473,187 982 0.83% 445,110 1,861 1.68% Total interest‐bearing deposits 5,203,699 44,402 1.69% 5,252,403 19,821 1.49% 5,154,995 24,581 1.89% FHLB advances 977,650 11,243 2.31% 961,410 5,685 2.38% 993,890 5,558 2.25% Senior debt 94,442 3,153 6.68% 94,458 1,575 6.67% 94,427 1,578 6.68% Junior subordinated debentures 61,857 825 2.68% 61,857 332 2.16% 61,857 493 3.21% Total interest‐bearing liabilities 6,337,648 59,623 1.87% 6,370,128 27,413 1.71% 6,305,169 32,210 2.03% Noninterest‐bearing demand deposits 55,529 64,744 46,315 Noninterest‐bearing liabilities 69,745 71,662 67,827 Total liabilities 6,462,922 6,506,534 6,419,311 Total stockholders' equity 608,398 600,666 616,131 Total liabilities and stockholders' equity $7,071,320 $7,107,200 $7,035,442 Net interest spread (3) 1.70% 1.73% 1.66% Net interest income/margin (4) $ 65,263 1.86%$ 33,148 1.88%$ 32,115 1.84% (1) Non‐accrual loans are included in total loan balances. No adjustment has been made for these loans in the calculation of yields. Interest income on loans includes amortization of deferred loan costs, net. (2) Securities held to maturity include municipal securities. Yields are not calculated on a tax equivalent basis. (3) Net interest spread is the average yield on total interest‐earning assets minus the average rate on total interest‐bearing liabilities. (4) Net interest margin is net interest income divided by total average interest‐earning assets. (5) Yields shown are annualized. 38
Non‐GAAP Reconciliation ($ in 000’s) As of or For the Six Months Ended As of or For the Years Ended December 31, June 30, 2020 2019 2018 2017 2016 Tangible common equity Total assets $ 7,168,346 $ 7,045,828 $ 6,937,212 $ 5,704,380 $ 5,063,585 Less: Goodwill (3,297) (3,297) (3,297) (3,297) (3,297) Less: Total liabilities (6,571,664) (6,431,364) (6,356,067) (5,154,635) (4,659,210) Tangible common equity $ 593,385 $ 611,167 $ 577,848 $ 546,448 $ 401,078 Tangible assets Total assets $ 7,168,346 $ 7,045,828 $ 6,937,212 $ 5,704,380 $ 5,063,585 Less: Goodwill (3,297) (3,297) (3,297) (3,297) (3,297) Tangible assets $ 7,165,049 $ 7,042,531 $ 6,933,915 $ 5,701,083 $ 5,060,288 Tangible common equity to tangible assets Tangible book value (numerator) $ 593,385 $ 611,167 $ 577,848 $ 546,448 $ 401,078 Tangible assets (denominator) 7,165,049 7,042,531 6,933,915 5,701,083 5,060,288 Tangible common equity to tangible assets 8.3% 8.7% 8.3% 9.6% 7.9% Efficiency ratio Noninterest expense (numerator) $ 32,207 $ 62,386 $ 62,687 $ 56,544 $ 61,242 Net interest income $ 65,263 $ 128,407 $ 125,087 $ 110,895 $ 94,594 Noninterest income 1,469 4,675 4,131 7,508 7,885 Operating revenue (denominator) $ 66,732 $ 133,082 $ 129,218 $ 118,403 $ 102,479 Efficiency ratio 48.3% 46.9% 48.5% 47.8% 59.8% Pro forma items (1) Net income before income taxes $ 65,231 $ 53,940 Effective tax rate 42% 42% Pro forma provision for income taxes $ 27,397 $ 22,655 Net income before income taxes $ 65,231 $ 53,940 Pro forma provision for income taxes 27,397 22,655 Pro forma net income $ 37,834 $ 31,285 Pro forma net income (numerator) $ 37,834 $ 31,285 Average assets (denominator) 5,485,832 4,676,676 Pro forma return on average assets 0.69% 0.67% Average stockholders' equity (denominator) $ 425,698 $ 390,318 Pro forma return on average stockholders' equity 8.89% 8.02% (1) For periods prior to January 1, 2018, we calculate our pro forma net income, earnings per share, return on average assets, return on average equity and return on average tangible equity by adding back our franchise S‐ Corporation tax to net income, and using a combined C‐Corporation effective tax rate for Federal and California income taxes of 42%. This calculation reflects only the change in our status as an S‐Corporation and does not give effect to any other transaction. 39
