Luther Burbank

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
 
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Year Ended December 31, 2022
OR
☐  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
Securities Registered Pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No x
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 every Interactive Data File required to be submitted 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 such files). Yes x
No o
Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of "large accelerated filer", "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
Accelerated filer
☒
Non-accelerated filer
o
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. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit
report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by
any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act): Yes ☐ No x
As of June 30, 2022, the last business day of the Registrant’s most recently completed second fiscal quarter, the aggregate market value of its common stock
held by non-affiliates was approximately $132.2 million based on the closing price per share of common stock of $13.05 on June 30, 2022.
As of February 17, 2023, there were 51,022,485 shares of the registrant’s common stock, no par value, outstanding.

Table of Contents
Table of Contents
Page
Part I
Item 1.
Business
4
Item 1A.
Risk Factors
11
Item 1B.
Unresolved Staff Comments
23
Item 2.
Properties
23
Item 3.
Legal Proceedings
24
Item 4.
Mine Safety Disclosures
24
Part II
Item 5.
Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
25
Item 6.
Selected Financial Data
27
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
28
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
53
Item 8.
Financial Statements and Supplementary Data
57
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
100
Item 9A.
Controls and Procedures
100
Item 9B.
Other Information
100
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
100
Part III
Item 10.
Directors, Executive Officers and Corporate Governance
101
Item 11.
Executive Compensation
105
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
113
Item 13.
Certain Relationships and Related Transactions, and Director Independence
115
Item 14.
Principal Accounting Fees and Services
116
Part IV
Item 15.
Exhibits and Financial Statements Schedules
117
Item 16.
Form 10-K Summary
119
Signatures
120
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
All references to ‘‘we,’’ ‘‘our,’’ ‘‘us,’’ ‘‘Luther Burbank Corporation’’ or ‘‘the Company’’ refers to Luther Burbank Corporation, a California
corporation, and our consolidated subsidiaries, including Luther Burbank Savings, a California banking corporation, unless the context indicates
that we refer only to the parent company, Luther Burbank Corporation. ‘‘Bank’’ or ‘‘LBS’’ refers to Luther Burbank Savings, our banking subsidiary.
This document contains 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, including our current views with respect to, among other things, future events and our
results of operations, financial condition, financial performance, plans and/or strategies. These forward-looking statements can be identified by
the fact that they do not relate strictly to historical or current facts and may be identified by use of 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, including references to assumptions. These forward-looking statements 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 and involve a number of risks and uncertainties. Accordingly, we caution you that any
such forward-looking statement is not a guarantee of future performance and that actual results may prove to be materially different from the
results expressed or implied by the forward-looking statements due to a number of factors, including without limitation:
•
interest rate, liquidity, economic, market, credit, operational and inflation risks associated with our business, including the speed and
predictability of changes in these risks;
•
our ability to retain deposits and attract new deposits and loans and the composition and terms of such deposits and loans;
•
business and economic conditions generally and in the financial services industry, nationally and within our current and future geographic
markets, including the tight labor market, ineffective management of the U.S. Federal budget or debt or turbulence or uncertainty in
domestic or foreign financial markets;
•
any failure to adequately manage the transition from LIBOR as a reference rate;
•
changes in the level of our nonperforming assets and charge-offs;
•
the adequacy of our allowance for loan losses;
•
our management of risks inherent in our real estate loan portfolio, including the seasoning of the portfolio, the level of non-conforming
loans, the number of large borrowers, and the risk of a prolonged downturn in the real estate market;
•
significant market concentrations in California and Washington;
•
the occurrence of significant natural or man-made disasters (including fires, earthquakes and terrorist acts), severe weather events,
health crises and other catastrophic events;
•
climate change, including any enhanced regulatory, compliance, credit and reputational risks and costs;
•
political instability or the effects of war or other conflicts, including, but not limited to, the current conflict between Russia and Ukraine;
•
the announced merger with Washington Federal, Inc., including delays in the consummation of the merger or litigation or other conditions
that may cause the parties to abandon the merger or make the merger more expensive or less beneficial;
•
the impact that the announced merger may have on our ability to attract and retain customers and key personnel, the value of our shares,
our expenses, and/or our ability to conduct our business in the ordinary course and execute on our strategies;
•
the performance of our third-party vendors;
•
fraud, financial crimes and fund transfer errors;
•
failures, interruptions, cybersecurity incidents and data breaches involving our data, technology and systems and those of our customers
and third-party providers;
•
rapid technological changes in the financial services industry;
•
any inadequacy in our risk management framework or use of data and/or models;
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•
the laws and regulations applicable to our business, and the impact of recent and future legislative and regulatory changes;
•
changing bank regulatory conditions, policies or programs, whether arising as new legislation or regulatory initiatives, that could lead to
restrictions on activities of banks generally, or our subsidiary bank in particular, more restrictive regulatory capital requirements, increased
costs, including deposit insurance premiums, regulation or prohibition of certain income producing activities or changes in the secondary
market for loans and other products;
•
our involvement from time to time in legal proceedings and examinations and remedial actions by regulators;
•
increased competition in the financial services industry; and
•
changes in our reputation.
The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included this
Annual Report on Form 10-K ("Annual Report"), including under the caption “Risk Factors” in Item 1A of Part I and other reports we file with the
Securities and Exchange Commission ("SEC"). You should not place undue reliance on any of these forward-looking statements. Any forward-
looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking
statement, whether as a result of new information, future developments or otherwise, except as required by law.
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PART I.
Item 1. Business
General
Luther Burbank Corporation is a bank holding company incorporated on May 14, 1991 under the laws of the state of California and is
headquartered in Santa Rosa, California. The Company operates primarily through its wholly-owned subsidiary, Luther Burbank Savings, a
California banking corporation originally chartered in 1983 in Santa Rosa, California. The Bank conducts its business from its executive offices in
Santa Rosa and Gardena, CA.
The Company also owns Burbank Financial Inc., a real estate investment company, and Luther Burbank Statutory Trusts I and II, entities created
to issue trust preferred securities.
The Company's principal business is attracting deposits from the general public and investing those funds in a variety of loans, including
permanent mortgage loans and construction loans secured by residential, multifamily, and commercial real estate. The Company specializes in
real estate secured lending in metropolitan areas in the western U.S. and has developed expertise in multifamily residential, jumbo
nonconforming single family residential and commercial real estate lending.
Recent Developments
On November 13, 2022, the Company entered into an Agreement and Plan of Reorganization (the “Merger Agreement”) with Washington
Federal, Inc. (“WAFD”), pursuant to which the Company will merge with and into WAFD (the “Corporate Merger”), with WAFD surviving the
Corporate Merger. Promptly following the Corporate Merger, the Company’s wholly-owned bank subsidiary, Luther Burbank Savings, will be
merged with and into Washington Federal Bank, dba WaFd Bank, the wholly-owned bank subsidiary of WAFD (“WAFD Bank”), with WAFD Bank
as the surviving institution. In accordance with the terms of the Merger Agreement, the Company’s shareholders will receive 0.3353 shares of
WAFD common stock for each share of the Company's issued and outstanding common stock. Closing of the transaction, which is expected to
occur in 2023, is contingent upon shareholder approval and receipt of all necessary regulatory approvals, along with the satisfaction of other
customary closing conditions.
Business Strategies
We intend to continue executing our strategic plan by focusing on the following key objectives:
•
Continued organic lending growth in our strategic markets. Our primary focus is to grow our customer base within our strategic markets
and to expand the penetration of our existing multifamily, single family and commercial real estate lending activities within these markets
in the western United States, which have historically had strong job growth, strong economic growth and limited affordable housing.
These markets include major metropolitan markets in the western U.S., including our recent expansion to Arizona, Colorado and Utah.
The high cost of living and high barriers to entry make these markets attractive for investments in affordable rental housing for low- and
middle-income tenants. Robust job markets, strong single family residential demand, high average housing costs, and concentrations of
professional, highly skilled and high income workers, entrepreneurs and other high net worth individuals make our markets ideal for our
single family residential lending activities.
We believe we have a competitive advantage over larger national financial institutions, which lack our level of personalized service, and
over smaller community banks, which lack our product and market expertise. We intend to capture additional market share by deepening
our relationships with current customers and supporting our bankers in their pursuit of new customers in our target markets. We believe
that our stable, income producing property focus and our existing customer profile lends itself to expanded lending in our existing
markets, as well as new markets.
•
Deepen customer relationships and grow our deposit base. We provide a high level of customer service to our depositors. Our historical
focus for our deposit production activities was on individual savings deposits from high net worth, primarily self-employed individuals,
entrepreneurs and professionals, and we did not emphasize transactional accounts. We have expanded our focus in recent years, and
invested in personnel, business and compliance processes and technology that enable us to acquire, and efficiently and effectively serve,
a wider array of consumer transactional accounts and business deposit accounts while continuing to
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provide the level of customer service for which we are known to our consumer depositors. We also provide comprehensive online and
mobile banking products to our business and consumer depositors to complement our branch network.
We believe that our current customer base contains additional untapped cross-selling opportunities. We plan to continue to grow our non-
brokered, consumer and business deposits by:
•
cross-selling business deposit relationships to our existing consumer customers who are business operators;
•
cross-selling business and consumer accounts to our multifamily and single family loan borrowers;
•
obtaining new individual and business customers, including specialty deposit customers, such as fiduciary service providers,
1031 exchange companies, unions, homeowners associations and nonprofits; and
•
increasing our digital market presence including the use of social media.
We will also continue to cross-sell existing customers, and solicit new ones, for additional lending opportunities in our markets, and to
develop niche verticals, where our credit underwriting expertise and efficient operations can yield an attractive risk-adjusted return. Our
cross-selling efforts to existing customers will be strategically targeted, based on our in depth analyses of our customers’ overall financial
profile, cash flows, financial resources and banking requirements.
•
Disciplined credit quality and robust risk management. We are committed to being a high performing organization, and we intend to
operate in a disciplined manner. Risk management is a core competency of our business, demonstrated by the strong credit performance
of our portfolio. We have comprehensive policies and procedures for credit underwriting, monitoring our loan portfolio and internal risk
management. The sound credit practices followed by our bankers allow credit decisions to be made efficiently and consistently. We
attribute our success to a strong credit culture, the continuous evaluation of risk and return and the strict separation between business
development and credit decision making, coupled with a robust risk management framework. Our focus on credit and risk management
has enabled us to originate large volumes of loans successfully while maintaining strong asset quality.
•
Disciplined cost management. We intend to continue to foster a culture of efficiency through hands-on management, prudent expense
management, and a small number of large deposit balance branches. With a continuing emphasis on process improvements, we believe
that we can support growth in assets, customers and our geographic footprint without significant additional investment in our
infrastructure or significant expansion of our personnel. We believe that our existing network of branches and loan production offices, as
well as non-branch and online customer and deposit development activities, have significant potential to continue to grow loan and
deposit balances. We will continue to be highly selective as we explore opportunities for establishing additional strategically located
branches in markets that present significant opportunity for multifamily and commercial real estate lending, single family residential
lending, and high net worth consumer and business banking relationships.
Market Area
Our operations are primarily concentrated in demographically desirable major metropolitan areas on the West Coast located in the states of
California, Washington and Oregon. We have ten full service branches in California located in Sonoma, Marin, Santa Clara, and Los Angeles
Counties and one full service branch in Washington located in King County. We also operate several loan production offices located throughout
California. We are most active in the following metropolitan areas: Santa Rosa (Sonoma County), Los Angeles, San Francisco, San Jose, San
Diego, and Seattle. We are seeking to more deeply penetrate these markets, and other major metropolitan markets that share key demographic
characteristics with our markets, including our recent expansion into Arizona, Colorado and Utah.
Competition
We operate in a highly competitive industry and in highly competitive markets throughout the western United States. While our commercial real
estate and jumbo single family residential focuses require significant expertise to perform efficiently, competition in commercial real estate lending
is keen from large banking institutions with national
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operations and mid-sized regional banking institutions, while in the single family lending market, we face competition from a wide array of
institutions. For both lending and deposit customers, we compete with other community banks, credit unions, mortgage companies, insurance
companies, finance companies, as well as other kinds of financial institutions and enterprises, such as securities firms, insurance companies,
private lenders and nontraditional competitors such as the U.S. Department of Treasury, fintech companies and internet-based lenders,
depositories and payment systems. The primary factors driving competition for deposits are customer service, interest rates, fees charged,
branch locations and hours, online and mobile banking functionality, the range of products offered and the reputation/public perception of an
institution. The primary factors driving competition for our lending products are customer service, range of products offered, price, reputation, and
quality of execution. We believe the Bank is a strong competitor in our markets; however, other competitors have advantages over us. Among the
advantages that many of these large institutions have over the Bank are their abilities to finance extensive advertising campaigns, maintain
extensive branch networks, generate fee and other noninterest income, make larger technology investments and offer services that we do not
offer. The higher capitalization of the larger institutions permits them to provide higher lending limits than we can, although our current lending
limit is able to accommodate the credit needs of most of our borrowers. Some of these competitors have other advantages, such as tax
exemption in the case of the U.S. Department of Treasury and credit unions, and to some extent, lesser regulation in the case of mortgage
companies and finance companies.
Our primary multifamily competitor is JPMorgan Chase & Co. Additional competitors include, but are not limited to, Pacific Premier Bancorp, Inc.,
First Foundation, Inc., Homestreet Bank and Umpqua Bank. Our primary single family lending competitors in our markets are Fremont Bank,
WaFd Bank, Florida Capital Bank, various non-bank mortgage lenders, and large national banks. Our primary deposit competitors are local
regional banks, community banks, numerous credit unions and large national banks.
Lending Activities
The primary components of our loan portfolio are multifamily and commercial real estate loans and single family residential loans, primarily jumbo
loans which do not meet the requirements for conforming loans.
•
Multifamily and Commercial Real Estate Lending.
Our commercial real estate loans consist primarily of first mortgage loans made for the purpose of purchase, refinance or build-out of
tenant improvements on investor owned multifamily residential (five or more units) properties. We also provide loans for the purchase,
refinance or improvement of office, retail and light industrial properties.
Our underwriting guidelines for multifamily and other commercial real estate loans require a thorough analysis of the financial
performance, cash flows, loan to value and debt service coverage ratios, as well as the physical characteristics of the property being
financed and which will stand as collateral for the loan, as well as the financial condition and global cash flows of the borrower and any
guarantor or other secondary source of repayment. We also closely review the experience of the borrower and its principals in the
ownership, successful management and financing of multifamily residential rental properties or other rental commercial real estate, as
well as their reputation for quality business practices and financial responsibility.
The location of the property is a primary factor in the Bank’s multifamily lending. 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. Our core lending areas are currently defined as:
•
Alameda, Contra Costa, Los Angeles, Marin, Napa, Orange, San Diego, San Francisco, San Mateo, Santa Barbara, Santa Clara,
Sonoma and Ventura counties in California;
•
Clark, King, Kitsap, Pierce and Snohomish counties in Washington;
•
Clackamas, Multnomah and Washington counties in Oregon:
•
Maricopa county in Arizona;
•
Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas, El Paso and Jefferson counties in Colorado; and
•
Davis, Provo, Salt Lake, Utah and Weber counties in Utah.
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Our extended core lending areas are currently defined as:
•
El Dorado, Monterey, Placer, Riverside, Sacramento, San Bernardino, San Luis Obispo, Santa Cruz, Solano and Yolo counties in
California;
•
Spokane and Thurston counties in Washington; and
•
Lane and Marion counties in Oregon.
We may re-evaluate and revise the definitions of our core and extended core areas from time to time. Non-core markets include all
markets in California, Washington and Oregon not categorized as core or extended core.
We make multifamily loans on a recourse or nonrecourse basis. We may require borrowers to provide personal guarantees in a variety of
circumstances, including where a borrower lacks sufficient property ownership and management experience, or where specific loan
characteristics do not meet our stringent underwriting criteria, including but not limited to loans with higher loan to value ratios or lower
debt service coverage ratios. Loans on other commercial real estate are generally made on a comparable basis.
Our multifamily loans typically have a 30-year term, while our nonresidential commercial property loans have a 30-year amortization
period, and are typically due in ten years. For commercial real estate, we offer adjustable rate loans based on Treasury indices, with an
adjustable rate, 5-year hybrid product being our most common multifamily loan product type. Historically, our nonresidential commercial
property loans were originated primarily using the LIBOR index; however, use of this index was discontinued during 2019. We seek to
have interest rates on all of our commercial loans adjust or reprice no later than ten years after origination, and quarterly or semi-annually
thereafter, but our ability to obtain this term is subject to the effects of market competition, customer preferences and other factors
beyond our control.
Our multifamily loans and other commercial real estate loans are originated on a retail basis, through the marketing efforts of our bankers
and loan production offices, and on a wholesale basis, through a network of brokers. We intend to maintain a balance of both retail and
wholesale loan originations, while tailoring our approach to the characteristics of each particular market. While our multifamily and other
commercial real estate loans are generally held in portfolio, we may at times sell pools of loans as a means of managing our loan product
concentrations, liquidity position, capital levels and/or interest rate risk.
•
Single Family Residential Lending.
Our single family residential lending provides loans for the purchase or refinance of 1-4 family residential properties. The financed
properties may be owner-occupied, or investor owned, and may be a primary residence, a second home or vacation property, or an
investment property.
We currently originate substantially all of our single family residential loans through a network of wholesale brokers. We monitor and
regularly review our broker relationships for regulatory compliance, integrity, competence and level of activity. The primary products
offered are 3, 5, 7, and 10-year variable rate hybrid loans and, to a lesser extent, the Grow and Daisy loan products described below.
The markets in which we make single family residential loans have historically been the same core and extended core markets in which
we make multifamily residential and commercial real estate loans. These areas have been characterized by robust job markets, strong
single family residential demand, high average housing cost, and concentrations of professional, highly skilled and high income workers,
entrepreneurs and other high net worth individuals. These characteristics have provided a strong market for our jumbo mortgage
products. Our loans are underwritten to our financial parameters of loan to value and debt to income ratios. Our underwriting includes a
thorough analysis of the borrower’s ability to repay the loan, based on reviews of information regarding the borrower’s income, cash flow
and wealth. This analysis enables us to provide loans to professionals, business owners and entrepreneurs who may not have a
constant, readily documentable earnings stream, but substantial assets, income and wealth. Our platform and niche lending offerings are
designed to meet the needs of the high demand, low supply residential real estate market in high cost market areas, and are focused on
delivering certainty of execution. Our single family residential loans are generally held in portfolio, although we reserve the right to sell
any loan at any time.
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•
Grow and Daisy.
We also offer a portfolio 30-year fixed rate first mortgage and a forgivable second mortgage designed to make home ownership possible
and affordable even in our high cost markets. Our ‘‘Grow’’ program is designed as a conventional, community lending mortgage, up to the
conforming loan limit amount, that offers underwriting flexibility to low- and moderate-income borrowers and borrowers purchasing
properties located in low- or moderate- income communities. Loans in this program are 30-year fixed rate mortgages made on owner-
occupied single family (one and two unit) properties, including condominiums. Pricing on this product is competitive at market rate.
In conjunction with the Grow program, we also offer a down payment and closing cost assistance product, called ‘‘Daisy.’’ Under the
Daisy program, eligible borrowers may take advantage of our second lien loan that provides up to two percent of the purchase price with
an additional one percent for non-recurring closing costs to assist first time homebuyers when utilizing Grow, our first lien program. The
loan has a term of 36 months with no payment required during the term of the Daisy loan. Daisy loans are not recorded as assets, but are
instead expensed upon origination given their fully forgivable nature.
Loans under the Grow and Daisy programs help meet compelling needs in our communities, but may be associated with higher loan to
value and combined loan to value ratios when compared to our standard portfolio products.
Investment Activities
Our investment securities portfolio is primarily maintained as an on-balance sheet contingent source of liquidity. It provides additional interest
income and has limited interest rate risk and credit risk. Other than certain securities purchased for Community Reinvestment Act ("CRA")
purposes, we generally classify all of our investment securities as available for sale. Our investment policy authorizes investment primarily in U.S.
Treasury securities, U.S. Agency mortgage and loan backed securities and certain CRA qualifying investments. For purposes of our investment
policy, U.S. Agencies are the Small Business Administration ("SBA"), the National Credit Union Administration ("NCUA"), the Government
National Mortgage Association ("GNMA"), the Federal Home Loan Mortgage Corporation ("Freddie Mac"), the Federal National Mortgage
Association ("Fannie Mae"), the Federal Farm Credit Banks Funding Corporation and the U.S. Department of Education (guarantee of Sallie Mae
securities). Securities issued by the SBA, NCUA and GNMA are backed by the full faith and credit of the federal government.
Funding Activities
Deposits.
We offer a wide array of deposit products for individuals and businesses, including interest and noninterest-bearing transaction accounts,
certificates of deposit ("CD") and money market accounts. We provide a high level of customer service to our depositors. As a means of
supplementing our strategically located branch network, we offer our consumer customers unlimited free ATM access worldwide on the
MoneyPass and Allpoint networks. We have invested in personnel, business and compliance processes and technology that enable us to
acquire, and efficiently and effectively serve, a wide array of business deposit accounts, while continuing to provide the level of customer service
for which we are known to our depositors.
Our deposits are currently acquired primarily through our branch network on a retail basis from high net worth individuals, professionals and their
businesses, who value our financial strength, stability, high level of service and competitive interest rates. We have expanded our focus to
leverage our relationships and serve business and individuals with a broader array of deposit, card and cash management products. We continue
to increase our digital marketing presence to attract deposits within a wider geographic band surrounding our existing branch locations.
We currently offer a comprehensive range of business deposit products and services to assist with the banking needs of our business customers,
from a basic reserve account (savings and CD products) to integrated operating accounts with cash management capacity. Our online banking
platform allows a customer to view balances, initiate payments, pay bills and set up custom alerts/statements. Online wires, ACH and remote
capture are additional account features available to qualified businesses. Our debit cards allow access to cash worldwide as a result of our
membership in major ATM networks. We also provide online and mobile banking products to our depositors, to complement our branch network.
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We grow our deposits by cross-selling business deposit relationships to our existing consumer customers who are business owners, and
consumer and business accounts to our multifamily and single family loan borrowers and by obtaining new individual and business customers,
including specialty deposit customers, such as fiduciary services providers, 1031 exchange companies, unions and nonprofits. Our cross-selling
efforts to existing customers are strategically targeted, based on our in depth analyses of our customers’ overall financial situation, global cash
flows, financial resources and banking requirements. We believe there is additional capacity to expand deposit and lending relationships on this
basis.
We supplement customer deposits with wholesale, or brokered, deposits where necessary to fund loan demand prior to raising additional
customer deposits, or where desirable from a cost or liability maturity standpoint. Our current policy limits the use of wholesale deposits in
accordance with our risk appetite level as determined by our board of directors. Our reliance on brokered deposits increased during 2022 given
the rapid rise in interest rates and the competitive environment for generating retail deposits.
Borrowings.
We supplement the funding provided by our deposit accounts with other borrowings at the Bank level from the Federal Home Loan Bank of San
Francisco ("FHLB") to enable us to fund loans and to meet liquidity needs. We also maintain a line of credit at the Federal Reserve Bank of San
Francisco ("FRB") Discount Window, which is generally not used but provides an additional source of funding, if necessary. The use of FHLB
borrowings can vary significantly from period to period, as the ability to originate loans may outpace the ability to obtain deposits at acceptable
rates and in comparable amounts.
Risk Management
We believe that effective risk management is of primary importance. Risk management refers to the activities by which we identify, measure,
monitor, evaluate and manage the risks we face in the course of our banking activities. These include liquidity, interest rate, credit, operational,
compliance, regulatory, strategic, financial and reputational risk exposures. Our board of directors and management team have created a risk-
conscious culture that is focused on quality growth, which starts with capable and experienced risk management teams and infrastructure
capable of addressing the evolving risks we face, as well as the changing regulatory and compliance landscape. Our risk management approach
employs comprehensive policies and processes to establish robust governance and emphasizes personal ownership and accountability for risk
with all our employees. We believe a disciplined and conservative underwriting approach has been the key to our strong asset quality.
Our board of directors sets the tone at the top of our organization, adopting and overseeing the implementation of our Bank’s risk management
framework, which establishes our overall risk appetite and risk management strategy. The board of directors approves our Risk Appetite
Statement, which includes risk policies, procedures, limits, targets and reporting, structured to guide decisions regarding the appropriate balance
between risk and return considerations in our business. Our board of directors receives periodic reporting on risks and control environment
effectiveness and monitors risk levels in relation to the approved risk appetite. The Audit & Risk Committee of our board of directors provides
oversight of all enterprise risk management. The Executive Committee of management is charged with identifying, managing and controlling key
risks that threaten our ability to achieve our strategic initiatives and goals.
Credit risk is the risk that borrowers or counterparties will be unable or unwilling to repay their obligations in accordance with the underlying
contractual terms and the risk that credit collateral will suffer significant deterioration in market value. We manage and control credit risk in our
loan portfolio by adhering to well-defined underwriting criteria and account administration standards established by management and approved by
the board of directors. Written credit policies document underwriting standards, approval levels, exposure limits and other limits or standards
deemed necessary and prudent. Portfolio diversification at the obligor, product and geographic levels is actively managed to mitigate
concentration risk. In addition, credit risk management includes an independent credit review process that assesses compliance with commercial
real estate and consumer credit policies, risk rating standards and other critical credit information. In addition to implementing risk management
practices that are based upon established and sound lending practices, we adhere to sound credit principles. We understand and evaluate our
customers’ borrowing needs and capacity to repay, in conjunction with their character and history. The Bank’s Credit Council, which includes our
President and Chief Executive Officer, our Chief Credit Officer, Chief Financial Officer and Chief Risk Officer, is responsible for ensuring that the
Bank has an effective credit risk management program and credit risk rating system, adheres to our board’s Risk Appetite Statement, and
maintains an adequate allowance for loan losses. Our management and board of directors place significant focus on
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maintaining a healthy risk profile and ensuring sustainable growth. Our risk appetite seeks to balance the risks necessary to achieve our strategic
goals while ensuring that our risks are appropriately managed and remain within our defined limits.
Our management of interest rate and liquidity risk is overseen by our Asset and Liability Council, which is chaired by our Chief Financial Officer,
based on a risk management infrastructure approved by our board of directors that outlines reporting and measurement requirements. In
particular, this infrastructure reviews financial performance, trends, and significant variances to budget; reviews and recommends for board
approval risk limits and tolerances; reviews ongoing monitoring and reporting regarding our performance with respect to these areas of risk,
including compliance with board-approved risk limits and stress-testing; reviews and recommends to the Executive Committee for approval any
changes to theories, mathematics, methodologies, assumptions, and data output for models used to measure these risks; ensures annual back-
testing and independent validation of models at a frequency commensurate with risk level; reviews all hedging strategies and recommends
changes as appropriate; reviews and recommends our contingency funding plan; recommends to the Executive Committee proposed wholesale
borrowing limits to be submitted to the board of directors or its designated committee; recommends to the Executive Committee the proposed
terms of any unanticipated long-term borrowing arrangement prior to debt issuance; develops recommended capital requirements; and reviews
information and reports submitted to this council for the purpose of identifying, investigating, and assuring remediation of any potential issues.
Internet Access to Company Documents
The Company provides access to its SEC filings through its web site at www.lutherburbanksavings.com. After accessing the website, the filings
are available upon selecting "About Us/Investor Relations/Financials/SEC Filings." Reports available include the annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after the
reports are electronically filed with or furnished to the SEC. Further, the SEC maintains an internet site that contains reports, proxy and
information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. All website addresses
given in this document are for information only and are not intended to be an active link or to incorporate any website information into this
document.
Luther Burbank Corporation Foundation
In 2017, we established the Luther Burbank Corporation Foundation ("Foundation") which was granted 501(c)(3) status by the Internal Revenue
Service ("IRS"). The Foundation is an all-volunteer organization primarily funded by the Company, as well as from our directors and a corporate
giving program that matches employee donations. The Foundation focuses its activities in our communities on the three priority areas of (1) social
and human services; (2) community development; and (3) education.
Human Capital
As of December 31, 2022 and 2021, we had 256 and 281 employees, respectively, nearly all of whom are full-time. As a financial institution,
approximately 27% of our employees are employed at our branch and loan production offices. The remaining portion of our employees generally
work from our administrative offices in Northern and Southern California. Our business is highly dependent on the success of our employees, who
provide value to our customers and communities through their dedication to our mission, which is "to improve your financial future with a superior
human-centered experience - whether you are a customer, employee, or shareholder." Our core values are based on acting ethically and with
integrity to provide superior service to our customers and each other with the goal of achieving our mantra that “you’re worth more here.” To
further promote our core values, we acknowledge and reward employees throughout the year that exemplify these values.
We seek to hire well-qualified employees who are also a good fit for our value system. In 2022 and 2021, 34% and 44%, respectively, of our new
hires were from an employee referral. During the years ended December 31, 2022 and 2021, our employee voluntary turnover ratios were 23%
and 16%, respectively. As of December 31, 2022 and 2021, 59% and 52%, respectively, of our employees were employed with us for five years
or longer. Our selection and promotion processes are without bias and include the active recruitment of minorities and women. During the years
ended December 31, 2022 and 2021, individuals from underrepresented groups filled 65% and 61%, respectively, of the Company's promotions
and hirings. As of December  31, 2022, women represented 67% of our workforce and 43% of our executive management team. As of
December 31, 2022, the population of our workforce, based on employee self-reported information or Human Resources’ observation, was as
follows:
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(a) Minorities are defined as all U.S. Equal Employment Opportunity Commission categories other than white.
We strive to provide a competitive compensation and benefits program to help meet the needs of our employees. In addition to salaries, these
programs include incentive compensation plans, stock awards, a 401(k) Plan with an employer matching contribution, healthcare and insurance
benefits, health savings and flexible spending accounts, paid time off, family leave and an employee assistance program.
Item 1A. Risk Factors
In the course of our business operations, we are exposed to numerous risks, some of which are inherent in the financial services industry and
others of which are more specific to our own business. The discussion below addresses the material factors, of which we are currently aware,
that could affect our business, results of operations and/or financial condition. The risk factors below should not be considered a complete list of
potential risks that we may face. Any risk factor described in this Form 10-K or in any of our SEC filings could by itself, or together with other
factors, materially adversely affect our liquidity, competitive position, reputation, results of operations, capital position or financial condition,
including by materially increasing our expenses or decreasing our revenues, which could result in material losses.
Some statements in these risk factors constitute forward-looking statements that involve risks and uncertainties. Please refer to the section
entitled "Cautionary Note Regarding Forward-Looking Statements."
Interest Rate Risk
We are subject to interest rate risk, which could adversely affect our profitability. Our profitability, like that of most financial institutions,
depends to a large extent on our net interest income, which is the difference between our interest income on interest-earning assets, such as
loans and investment securities, and our interest expense on interest-bearing liabilities, such as deposits and borrowings.
Historically, we have been, and, as of December 31, 2022, we remain, a liability-sensitive institution, which means when short-term interest rates
rise, the rate of interest we pay on our interest-bearing liabilities, such as deposits, may rise more quickly than the rate of interest that we receive
on our interest-earning assets, such as loans, which may cause our net interest income to decrease. This was the case in 2022, when the Board
of Governors of the Federal Reserve System (“Federal Reserve”), significantly increased interest rates and the benchmark rate at an
unprecedented pace, and as a result, our weighted average cost of interest-bearing liabilities increased from 0.73% during the quarter ended
December 31, 2021 to 2.15% during the quarter ended December 31, 2022, while at the same time our weighted average yield on interest-
earning assets only increased from 3.23% during the quarter ended December 31, 2021 to 4.00% during the quarter ended December 31, 2022,
resulting in a decrease in our net interest margin from 2.57% to 2.01% for the quarters ended December 31, 2021 and 2022, respectively.
Additional repricing in our interest-bearing liabilities as a result of past interest rate increases and any further Federal Reserve increases in
interest rates and the benchmark rate may negatively affect our net interest income.
Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various
governmental and regulatory agencies and, in particular and as described above, the Federal Reserve. Changes in monetary policy, including
changes in interest rates, influence not only the interest we receive on loans and securities and the interest we pay on deposits and borrowings,
but such changes also affect our ability to originate loans and obtain deposits, the fair value of our financial assets and liabilities, and the average
duration of our assets. Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly
than the interest rates paid on deposits and other borrowings. Any substantial,
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unexpected, prolonged or rapid change in market interest rates could have a material adverse impact on our business, financial condition and
results of operations. Additionally, a shrinking yield premium between short-term and long-term market interest rates, a pattern typically indicative
of investors' waning expectations of future growth and inflation, commonly referred to as a flattening of the yield curve, as well as an inverted
yield curve, where long-term debt instruments have a lower yield than short-term debt instruments of the same credit quality, typically reduce our
profit margin since we borrow at shorter terms than the terms at which we lend and invest.
An increase in interest rates could also have a negative impact on our results of operations by reducing the ability of borrowers to repay current
loan obligations. These circumstances could not only result in increased loan defaults, foreclosures and charge-offs, but also reduce collateral
values and necessitate further increases to the allowance for loan losses, which could have a material adverse effect on our business, financial
condition and results of operations.
Liquidity Risk
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, satisfy customer deposit withdrawals at maturity and on demand, make payments on our debt
obligations as they come due and satisfy other cash commitments under both normal operating conditions and other challenging or unpredictable
circumstances, including events causing industry or general financial market stress. To fund our operations, we rely on customer deposits,
advances from the FHLB, which is one of eleven banks in the Federal Home Loan Bank system ("FHLB System"), brokered deposits, occasional
loan sales and, to a lesser extent, advances from the FRB.
Liquidity risk, which includes our ability to access liquidity sources such as customer deposits, advances from the FHLB and FRB, and brokered
deposits, can increase due to a number of factors, including: adverse changes in our financial condition or performance or in our CRA rating; a
decrease in the level of our deposit activity, including as a result of customers moving funds into higher yielding assets or changes in the liquidity
needs of our depositors; adverse regulatory actions against us; an over-reliance on a particular source of funding; the financial condition of the
FRB, FHLB and the FHLB System; and market-wide phenomena such as market dislocation and major disasters.
As of December 31, 2022, we estimated that $1.3 billion of our deposits exceeded the insurance limits established by the FDIC. None of our
deposits are governmental deposits secured by collateral. Our inability to retain and raise funds, or inability to retain and raise funds on
competitive terms, through deposits, FHLB and FRB borrowings, the sale of loans, and other sources could have a substantial negative effect on
our 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. Any substantial, unexpected, and/or prolonged change
in the level or cost of liquidity, including as a result of the rapidly rising interest rates in 2022 and any future increase in interest rates, could impair
our ability to fund operations and meet our obligations as they become due (including our senior notes due in September 2024 with a balance of
$95 million at December 31, 2022); could have a material adverse effect on our business, financial condition and results of operations; and could
result in the closure of the Bank.
We may not be able to retain or grow our core deposit base, which could adversely impact our funding costs. We rely on customer
deposits as our primary source of funding for our lending activities, and we continue to seek customer deposits to maintain this funding base. Our
financial condition and financial performance largely depend on our ability to maintain our deposit base in a profitable manner. Customer deposits
are subject to potentially dramatic fluctuations in availability or price due to various factors, most of which are outside of our control, such as
increasing competitive pressures, changes in interest rates and returns on other investment classes, customer perceptions of our financial health
and general reputation, or a loss of confidence by customers in us or the banking sector generally, which could result in significant outflows of
deposits within short periods of time or significant changes in pricing or other terms necessary to maintain current customer deposits or attract
additional deposits.
Our deposit customers tend to be more interest-rate sensitive than customers at some competitor banks, which means our deposit customers
may be more likely to move funds into higher-yielding investment alternatives than deposit customers at some of our competitor banks. The
recent rapidly rising interest rate environment and resulting
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competition for deposits has made it challenging for us to attract and retain certain deposit customers and maintain our profitability, which in turn
has resulted in lower margins. Additional repricing in our interest-bearing liabilities as a result of past interest rate increases as well as future
interest rate increases and/or a prolonged high interest rate environment could result in decreased loan originations and margins, which could
have a material adverse effect on our business, financial condition and results of operations.
Economic and Market Conditions Risk
Our business and operations may be materially adversely affected by weak or uncertain economic conditions. Our business and
operations, which primarily consist of banking activities, including lending money to customers in the form of real estate secured loans and
borrowing money from customers in the form of deposits, are sensitive to general business and economic conditions in the U.S. generally, and on
the West Coast in particular, which may differ from economic conditions in the U.S. as a whole. If economic conditions in the U.S. or any of our
markets weaken, our growth and profitability from our operations could be constrained. In addition, economic and political conditions could affect
the stability of financial markets, which could hinder economic growth. Our business is also significantly affected by monetary and related policies
of the U.S. federal government and its agencies. Changes in any of these policies are influenced by macroeconomic conditions and other factors
that are beyond our control. Adverse and uncertain economic conditions caused by inflation, recession, acts of terrorism, outbreak of hostilities or
other international or domestic occurrences including, but not limited to, the conflict in Ukraine and related developments, the COVID-19
pandemic or other pandemics, unemployment, changes in securities markets, declines in home values, ineffective management of the U.S.
Federal budget or debt, a tightening credit environment or other factors, and U.S. and foreign government policy responses to such conditions
including, but not limited to, sanctions, could have a material adverse effect on our business, financial condition and results of operations. For
example, the rapid and significant increase in interest rates during 2022 combined with historically below average real estate inventory levels
have decreased demand for the Company’s real estate loan products. Real estate refinance activity and loan payoffs are strongly correlated with
changes in mortgage interest rates. Rising mortgage rates during the last year resulted in fewer loan payoffs and had an adverse impact on the
Company’s business, which conditions are expected to continue for so long as mortgage rates continue to rise or if they subsequently remain
high relative to the interest rates of outstanding mortgages.
The replacement of the LIBOR benchmark interest rate may adversely affect our results of operations. We have financial instruments that
are priced based on variable interest rates tied to LIBOR. On July 27, 2017, the United Kingdom’s Financial Conduct Authority (“FCA”)
announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021. On November 30, 2020, to facilitate an
orderly LIBOR transition, the Office of the Comptroller of the Currency ("OCC"), the Federal Deposit Insurance Corporation ("FDIC"), and the
Federal Reserve jointly announced that entering into new contacts using LIBOR as a reference rate after December 31, 2021 would create a
safety and soundness risk. On March 5, 2021, the FCA announced that all LIBOR settings will either cease to be provided by any administrator or
no longer be representative immediately after December 31, 2021, in the case of 1-week and 2-month U.S. dollar LIBOR, and immediately after
June 30, 2023, in the case of the remaining U.S. dollar LIBOR settings. In the United States, efforts to identify a set of alternative U.S. dollar
reference interest rates are ongoing, and the Alternative Reference Rate Committee (“ARRC”) has recommended the use of the Secured
Overnight Financing Rate ("SOFR"). SOFR is different from LIBOR in that it is a secured rate rather than an unsecured rate. This difference could
lead to a greater disconnect between our ability to make loans using SOFR and our costs to raise funds for SOFR as compared to LIBOR. For
cash products and loans, the ARRC has recommended Term SOFR with a credit spread, which is a forward-looking SOFR based on SOFR
futures and may in part reduce differences between SOFR and LIBOR.
As of December 31, 2022, we had $529.2 million of loans, $245.3 million of investments, $61.9 million of junior subordinated deferrable interest
debentures and $15.9 million of other assets that were indexed to LIBOR. There are also operational issues which may create a delay in the
transition to SOFR or other substitute indices, leading to uncertainty across the industry. The implementation of a substitute index or indices, or
the use of a fixed interest rate, for the calculation of interest rates under our financial instruments may cause significant expenses in effecting the
transition, may result in reduced loan balances if our borrowers do not accept the substitute index or indices, may result in increased expenses if
holders of the junior subordinated deferrable interest debentures or other counterparties to our financial instruments do not accept a substitute
index or indices, or attempt to establish a fixed interest rate, and may result in disputes or litigation with customers, trustees or noteholders over
the appropriateness or comparability to LIBOR of the substitute index or indices or other interest rate calculations, which could have an adverse
effect on our results of operations. These consequences cannot be entirely predicted and could have an adverse impact on the market value for
or value of LIBOR-linked securities, loans, and other financial obligations or extensions of credit held by or due to us.
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Credit Risk
We are subject to credit risk, which could adversely impact our profitability. Our business depends on our ability to successfully measure
and manage credit risk. As a 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 period of time over which the loan may be repaid, risks relating to loan underwriting, risks resulting from changes in economic and
industry conditions, and risks inherent in dealing with individual loans and borrowers. The creditworthiness of a borrower is affected by many
factors including local market conditions and general economic conditions. If the overall economic climate experiences material disruption, our
borrowers may experience difficulties in repaying their loans, 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 multifamily residential and other commercial real estate (“CRE”) loans include the quality of management of the
business, tenant vacancy rates, rent control regulations, eviction moratoriums and limitations, and economic conditions that may have a disparate
impact on some tenants of properties within this portfolio, many of which are low or moderate income tenants or small businesses.
Our risk management practices, such as monitoring the concentration of our loans within specific markets and product types and our credit
approval, review and administrative practices, may not adequately reduce credit risk, and our credit administration personnel, policies and
procedures may not adequately adapt to changes in economic, employment or any other conditions affecting customers and the quality of the
loan portfolio. Many of our loans are made to individuals or small businesses that are less able to withstand competitive, economic and financial
pressures than larger businesses. Consequently, we may have significant exposure if any of these borrowers become unable to pay their loan
obligations as a result of economic or market conditions, or personal circumstances, such as divorce, unemployment or death. A failure to
effectively measure and limit the credit risk associated with our loan portfolio may result in loan defaults, foreclosures and additional charge-offs,
and may necessitate that we significantly increase our allowance for loan losses, each of which could adversely affect our net income. No matter
how effectively we measure and limit such credit risk, we may still experience certain negative consequences during economic downturns,
especially when such downturns are either severe or prolonged or when unemployment is high. As a result, our inability to successfully manage
credit risk could have a material adverse effect on our business, financial condition and results of operations.
Our multifamily residential and other commercial real estate loan portfolios may carry significant credit risk. Our loan portfolio consists
primarily of multifamily residential and, to a lesser extent, other CRE loans, which are primarily secured by industrial, office and retail properties.
As of December 31, 2022, our multifamily residential loans totaled $4.5 billion, or 64.7%, of our loan portfolio, and our other CRE loans totaled
$172.3 million, or 2.5% of our loan portfolio. Nonperforming multifamily residential loans were $3.5 million at December 31, 2022. There were no
nonperforming other CRE loans at December 31, 2022. Multifamily residential and other CRE loans that involve large loan balances concentrated
with a single borrower or groups of related borrowers may carry significant credit risk. The payment on multifamily residential and other CRE
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. Investment in these properties by our
customers is influenced by prices and return on investment, as well as changes to applicable laws regarding, among other things, rent control,
moratoriums or limitations on evictions for non-payment, personal and corporate tax reform, pass-through rules, immigration and fiscal and
economic policy. The collateral securing these loans, particularly CRE loans, may not be liquidated as easily as single family residential (“SFR”)
real estate during economic downturns or other unfavorable conditions, which may lead to longer holding periods. If these properties become less
attractive investments, demand for our loans would decrease. In addition, unexpected deterioration in the credit quality of our multifamily
residential or other CRE loan portfolios could require us to increase our allowance for loan losses, which would reduce our profitability and could
materially adversely affect our business, financial condition and results of operations.
Our allowance for loan losses may be inadequate to absorb probable incurred losses inherent in the loan portfolio, which could have a
material adverse effect on our business, financial condition and results of operations. 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
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management assumptions, deterioration of economic conditions affecting borrowers, declines in real estate values, 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 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.
Further impacting the sufficiency of our current allowance for loan losses is the implementation of the Current Expected Credit Losses ("CECL")
allowance methodology, which we adopted on January 1, 2023. The CECL methodology depends on future economic forecasts, assumptions and
models that are inherently uncertain and may prove to be inaccurate and could result in increases in, and add volatility to, our allowance for loan
losses and future provisions for loan losses.
Lack of seasoning of our loan portfolio could increase risk of credit defaults in the future. As a result of our organic growth over the past
several years, as of December 31, 2022, approximately $4.5 billion, or 63.9% of the loans in our loan portfolio were originated since January 1,
2019, excluding in-house refinancings. In general, loans do not begin to show signs of credit deterioration or default until they have been
outstanding for some period of time, a process referred to as "seasoning." As a result, a portfolio of older loans will usually behave more
predictably than a newer portfolio. Therefore, since a large portion of our loan portfolio is relatively new, the current level of delinquencies and
defaults may not represent the level that may prevail as the portfolio becomes more seasoned and may not serve as a reliable basis for predicting
the health and nature of our loan portfolio, including net charge-offs and the ratio of nonperforming assets in the future. Our limited experience
with these loans does not provide us with a significant history pattern with which to judge future collectability or performance. Our credit
underwriting process, our ongoing credit review processes, and our management of our loan portfolio may not be adequate to mitigate these
risks. If delinquencies and defaults increase, we may be required to increase our provision for loan losses, which could have a material adverse
effect on our business, financial condition and results of operations.
Our SFR loan portfolio possesses increased risk due to our level of non-conforming loans. Many of the SFR mortgage loans we have
originated consist of loans that do not conform to Fannie Mae or Freddie Mac underwriting guidelines as a result of loan terms, loan size, or other
exceptions from agency underwriting guidelines. Additionally, many of our loans do not meet the qualified mortgage (“QM”) definition established
by the Consumer Financial Protection Bureau (“CFPB”), and, therefore, contain additional regulatory and legal risks. In addition, the secondary
market demand for non-conforming and non-QM mortgage loans is generally limited, and consequently, we may experience difficulties selling
non-conforming loans in our portfolio should we decide to do so.
We are exposed to higher credit risk due to relationship exposure with a number of large borrowers. As of December 31, 2022, we had 28
borrowing relationships in excess of $20 million which accounted for approximately 15.6% of our loan portfolio. These borrower relationships had
an average of 12 loans outstanding per relationship. A deterioration of any of these credit relationships could require us to increase our allowance
for loan losses or result in significant losses to us, which could have a material adverse effect on our business, financial condition and results of
operations.
Risks Related to the Merger
The consummation of the recently-announced merger with WAFD is contingent upon the satisfaction of a number of conditions,
including shareholder and regulatory approvals, that may be outside of our control and that we may be unable to satisfy or obtain or
which may delay the consummation of the merger or result in the imposition of conditions that could cause the parties to abandon the
merger. As noted in Note 1 in Part II - Item 8. "Notes to Consolidated Financial Statements”, on November 13, 2022, the Company and WAFD
entered into the Merger Agreement, pursuant to which, and subject to the terms and conditions of the Merger Agreement, the Company will
merge with and into WAFD, with WAFD as the surviving institution, promptly followed by the merger of Luther Burbank Savings with and into
Washington Federal Bank, dba WaFd Bank, with WAFD Bank as the surviving institution (collectively, the “Merger”).
Before the transactions contemplated in the Merger Agreement can be completed, approvals must be obtained from regulatory authorities,
shareholders and other customary closing conditions must have been satisfied or waived. The required regulatory approvals may require
changes to the terms of the transactions contemplated by the Merger Agreement. There can be no assurance that our or WAFD’s regulators will
not impose any additional conditions, limitations, obligations or restrictions on the parties, or that they will not have the effect of delaying or
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preventing the completion of the Merger, imposing additional material costs on or materially limiting the revenues of the surviving entity following
the Merger or otherwise reducing the anticipated benefits of the Merger.
Uncertainties about the effect of the Merger may impair our ability to attract, retain and motivate key personnel until the Merger is consummated
and for a period of time thereafter, and could cause customers and others that deal with us to seek to change their existing business relationships
with us. It is not unusual for competitors to use mergers as an opportunity to target the merging parties’ customers and to hire certain of their
employees. Employee retention may be particularly challenging during the pendency of the Merger, as employees may experience uncertainty
about their roles with the surviving entity following the Merger.
The Merger Agreement contains provisions that restrict our ability to, among other things, initiate, solicit, knowingly encourage or knowingly
facilitate, inquiries or proposals with respect to, or, subject to certain exceptions generally related to our Board of Directors’ exercise of fiduciary
duties, engage in any negotiations concerning, or provide any confidential information relating to, any alternative acquisition proposals. These
provisions, which include payment of a termination fee of $26.17 million (the “Termination Fee”) payable to WAFD, which, under certain
circumstances, may discourage any potential competing acquirer having an interest in acquiring us from proposing a transaction, or may result in
the offer of a lower per share price to acquire us than might otherwise have been proposed.
The value to be recognized by our shareholders from the Merger is subject to material uncertainties. The Merger Agreement provides that
upon the closing of the Merger our shareholders will receive per share of common stock of Luther Burbank, 0.3353 shares of common stock, par
value $1.00 per share, of WAFD and cash in lieu of fractional shares of WAFD common stock. The exchange ratio for the conversion of our
common stock into common stock of WAFD (“WAFD Common Stock”) was set based upon information available to the boards of directors and
financial advisors of each company at the time the Merger Agreement was entered into. The market price of our common stock and of WAFD
Common Stock fluctuates constantly in response to a variety of factors that are inherently unpredictable and outside of our control, including
changes in our and WAFD’s business, operations and prospects, and regulatory considerations, the historical and anticipated future financial
results of our respective banking operations and general market and economic developments affecting the United States and international
businesses and financial markets. The substantial differences between our business and the business of WAFD will subject our shareholders to
new and different risks than those with which they are familiar with our business. A period of months may transpire between the date that our
shareholders are asked to approve the Merger and the earliest date the Merger can be closed, during which time the price of the Company’s
common stock and WAFD Common Stock will continue to fluctuate and WAFD’s adjusted shareholders’ equity may continue to fluctuate. As a
result, at the time that our shareholders must decide whether to approve the Merger Agreement, they may not necessarily know the precise value
of the merger consideration they will receive, which could be materially different than the value of the merger consideration at the closing of the
Merger.
Failure to complete the proposed Merger could negatively impact our business, financial results and stock price. If the proposed Merger
is not completed for any reason, our ongoing business may be adversely affected and, without realizing any of the benefits of having completed
the Merger, we would be subject to a number of related risks, including the following:
•
We may be required, under certain circumstances, to pay WAFD the termination fee under the Merger Agreement, which may adversely
affect our financial performance and the price of our common stock;
•
We will have incurred substantial expenses and will be required to pay significant costs relating to the Merger, whether or not it is
completed, such as legal, accounting, due diligence, financial advisor and printing fees;
•
The Merger Agreement places certain restrictions on the conduct of our business prior to completion of the Merger, which may adversely
affect our ability to execute certain of our business strategies and cause certain other projects to be delayed or abandoned;
•
Matters relating to the Merger require substantial commitments of time and resources by our management team that could have been
devoted to the pursuit of other opportunities beneficial to us as an independent company; and
•
We may be subject to negative reactions from the financial markets and from our customers and employees that could materially affect
our business, financial results and stock price; and the market price of our common stock could decline to the extent that current market
prices of our common stock reflect a market assumption that the Merger will be completed.
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Litigation could prevent or delay the closing of the proposed Merger or otherwise negatively impact our business and operations. We
may be subject to legal proceedings related to the agreed terms of the proposed Merger, the manner in which the Merger was considered and
approved by our board of directors or any failure to complete the Merger or perform our obligations under the Merger Agreement. Such litigation,
regardless of the merits, could delay or block the consummation of the Merger, have an adverse effect on our financial condition and impose
material costs on us or the surviving entity. One of the conditions to the closing of the Merger is that no regulation, judgment, decree, injunction or
other order of a governmental authority (including any federal, state or local court or administrative or regulatory agency) which prohibits the
consummation of the Merger be in effect. If any plaintiff were successful in obtaining an injunction prohibiting us or WAFD from completing the
Merger on the agreed upon terms, then such injunction may prevent the Merger from becoming effective or from becoming effective within the
expected timeframe.
Geographic Concentration and Climate Risk
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. As of December 31, 2022, approximately 88% of the loans in our portfolio measured by dollar amount were secured
by collateral located in California and 9% of the loans in our portfolio measured by dollar amount were secured by collateral located in
Washington. In addition, 61% of our real estate loans measured by dollar amount, were secured by collateral located in southern California
counties. Therefore, our success will depend upon the general economic conditions in these areas, including the strength of the rental and
residential purchase markets, which we cannot predict with certainty. As a result, our operations and profitability may be more adversely affected
by a local economic downturn in these areas 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; it
may also reduce the ability of depositors to make or maintain deposits with us. For these reasons, any regional or local economic downturn could
have a material adverse effect on our business, financial condition and results of operations.
Our ability to conduct our business could be disrupted by natural or man-made disasters, severe weather events, health crises or other
catastrophic events. A significant number of our offices, and a significant portion of the real estate securing loans we make, and our borrowers'
business operations in general, are located in California. California has had and will continue to have major earthquakes in areas where a
significant portion of the collateral and assets of our borrowers are concentrated. California is also prone to natural and climate-related disasters,
including fires, mudslides, floods, droughts and other disasters. Our other locations and places where we do business are also subject to natural
disasters and severe weather events. The policies and procedures we have implemented to monitor and mitigate these risks, specifically flood
and wildfire risk, in our loan portfolio may prove inadequate. Additionally, acts of terrorism, war, civil unrest, violence, or other man-made
disasters, as well as energy shortages, water shortages and health crises, such as the COVID-19 pandemic, and governmental responses to
those events have caused and could cause disruptions to our business or to the economies where we do business. The occurrence of these
disasters and other events, and governmental responses thereto, could destroy, or cause a decline in the value of, mortgaged properties that
serve as our collateral; increase the risk of delinquencies, defaults, foreclosures and losses on our loans; damage our banking facilities and
offices; negatively impact economic conditions in our markets; result in a decline in loan demand and loan originations; result in drawdowns of
and/or fewer deposits by customers; and negatively impact the implementation of our strategy.
We have implemented a disaster recovery and business continuity plan that is designed to allow us to move critical functions to a backup data
center in the event of a catastrophe. Although this program is tested periodically, it may not be effective in an actual disaster. Regardless of the
effectiveness of our disaster recovery and business continuity plan, the occurrence of any natural or man-made disaster, severe weather
conditions, health crises or other events could have a material adverse effect on our business, financial condition and results of operations.
Climate change could have a material negative impact on the Company and customers. The Company’s business, as well as the
operations and activities of our customers, could be negatively impacted by climate change. Climate change presents both immediate and long-
term risks to the Company and its customers, and these risks are expected to increase over time. Climate change presents multi-faceted risks,
including: operational risk from the physical effects of climate events on the Company and its customers’ facilities and other assets; credit risk
from borrowers with significant exposure to climate risk; transition risks associated with the transition to a less carbon-dependent economy; and
reputational risk from stakeholder concerns about our practices related to climate change and the Company’s carbon footprint.
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Federal and state banking regulators and supervisory authorities, investors, and other stakeholders have increasingly viewed financial institutions
as important in helping to address the risks related to climate change both directly and with respect to their customers, which may result in
financial institutions coming under increased pressure regarding the disclosure and management of their climate risks and related lending and
investment activities. Given that climate change could impose systemic risks upon the financial sector, either via disruptions in economic activity
resulting from the physical impacts of climate change or changes in policies as the economy transitions to a less carbon-intensive environment,
the Company may face regulatory risk of increasing focus on the Company’s resilience to climate-related risks, including in the context of stress
testing for various climate stress scenarios. Ongoing legislative or regulatory uncertainties and changes regarding climate risk management and
practices may result in higher regulatory, compliance, credit, and reputational risks and costs.
Although we have made efforts to enhance our governance of climate change-related risks and integrate climate considerations into our risk
governance framework, such efforts may prove to be inadequate. Nonetheless, the risks associated with climate change are rapidly changing and
evolving in an escalating fashion, making them difficult to assess due to limited data and other uncertainties. We could experience increased
expenses resulting from strategic planning, litigation, and technology and market changes, and reputational harm as a result of negative public
sentiment, regulatory scrutiny, and reduced investor and stakeholder confidence due to our response to climate change and our climate change
strategy, which, in turn, could have a material negative impact on our business, results of operations, and financial condition.
Operational Risk
Operational risks are inherent in our business. Operational risks and losses can result from internal and external fraud; gaps or weaknesses
in our risk management or internal control procedures; errors by employees or third-parties; failure to document transactions properly or to obtain
proper authorization; failure to comply with applicable regulatory requirements; failures in the models we utilize and rely on; equipment failures,
including those caused by electrical, telecommunications or other essential utility outages; business continuity and data security system failures,
including those caused by computer viruses, cyberattacks, unforeseen problems encountered while implementing major new computer systems,
upgrades to existing systems or inadequate access to data or poor response capabilities in light of such business continuity or data security
system failures; or the inadequacy or failure of systems and controls, including those of our suppliers or counterparties. Our efforts to implement
risk controls and loss mitigation actions, and the resources we devote to developing efficient procedures, identifying and rectifying weaknesses in
existing procedures and training staff, may not be adequate or effective in controlling all of the operational risks faced by us. Failure of our risk
controls and/or loss mitigation actions could have a material adverse effect on our business, financial condition and results of operations.
We rely on third party vendors to provide key components of our business infrastructure. We rely on numerous third parties to provide us
with products and services necessary to maintain our day-to-day operations including, but not limited to, our core processing function and
mortgage broker relationships. Accordingly, our operations are exposed to risk that these vendors will not perform in accordance with the
contracted arrangements. The failure of an external vendor to perform in accordance with the contracted arrangements or service level
agreements because of changes in the vendor’s organizational structure, financial condition, support for existing products and services or
strategic focus or for any other reason, could be disruptive to our operations, which in turn could have a material negative impact on our financial
condition and results of operations. We also could be adversely affected to the extent such an agreement is not renewed by the third party vendor
or is renewed on terms less favorable to us. Additionally, the bank regulatory agencies expect financial institutions to be responsible for all
aspects of our vendors’ performance, including aspects which they delegate to third parties. As a result, failure of third parties to comply with
applicable laws and regulations, or fraud or misconduct on the part of employees of any of these third parties could disrupt our operations or
adversely affect our reputation.
Our business may be adversely affected by an increasing prevalence of fraud and other financial crime. Our Bank is susceptible to
fraudulent activity that may be committed against us or our customers which may result in financial losses or increased costs to us or our
customers, disclosure or misuse of our customers' or our information, misappropriation of assets, privacy breaches against our customers,
litigation or damage to our reputation. Such fraudulent activity may take many forms, including wire fraud, check fraud, electronic fraud, phishing,
social engineering and other dishonest acts. The reported incidents of fraud and other financial crimes have increased overall and we may
experience material losses in the future that could have a material adverse effect on our reputation, business, financial condition and results of
operations.
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Risks Related to Information Technology, Cybersecurity and Data Privacy
If the technology we use in operating our business fails, is unavailable, or does not operate to expectations, our business and results
of operations could be adversely affected. Our business depends on the successful and uninterrupted functioning of our information
technology and telecommunications systems. Our policies and procedures to prevent or limit the impact of systems failures and interruptions may
prove inadequate to prevent such events or to adequately address those events that we do experience. Even if we have well designed policies
and procedures, we will remain vulnerable to such events. In addition, we outsource many aspects of our data processing and other operational
functions to certain third-party providers, of particular significance is our long-term contract for core data processing with Fiserv. The contracts
and relationships we have with our vendors may not place adequate controls around their actions, or they may breach those contracts. If our
vendors encounter difficulties, including those resulting from disruptions in communication services provided by a vendor, failure of a vendor to
handle current or higher transaction volumes, cyber-attacks and security breaches, or if we otherwise have difficulty in communicating with them,
our ability to adequately process and account for transactions could be affected, and our ability to deliver products and services to our customers
and otherwise conduct business operations could be adversely impacted. The failure of the systems on which we rely, or the termination or
breach 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.
The occurrence of any systems failure or interruption could damage our reputation and result in a loss of customers and business, could subject
us to regulatory scrutiny, or could expose us to legal liability. Any of these occurrences could have a material adverse impact on our financial
condition and results of operations.
Failure to keep pace with the rapid technological changes in the financial services industry could have a material adverse effect on our
competitive position and profitability. The financial services industry is undergoing rapid technological changes, with frequent introductions of
new technology-driven products and services. Our future success will depend, in part, upon our ability and willingness to address the needs of
our customers by using technology to provide products and services that will satisfy customer demands for convenience, as well as to create
additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements
than we have. We may not be able to implement new technology-driven products and services effectively or be successful in marketing these
products and services to our customers. Failure to successfully keep pace with technological change affecting the financial services industry
could harm our ability to compete effectively and could have a material adverse effect on our business, financial condition or results of operations.
As these technologies are improved in the future, we may be required to make significant capital expenditures in order to remain competitive,
which may increase our overall expenses and have a material adverse effect on our business, financial condition and results of operations.
Any significant disruption in or unauthorized access to our computer systems or those of third parties that we utilize in our operations,
including those relating to cybersecurity or arising from cyber-attacks, could result in a loss or degradation of service or unauthorized
disclosure of data, including customer and Company information, which could adversely affect our business. Our business involves the
storage and transmission of customers' proprietary information, and security breaches could expose us to a risk of loss or misuse of this
information, litigation and potential liability. Our computer systems and those of third parties we use in our operations are subject to cybersecurity
threats, including, but not limited to: destructive malware, ransomware, attempts to gain unauthorized access to systems or data, unauthorized
release of confidential information, corruption of data, networks or systems, zero-day attacks and malicious software. The measures in place to
address and mitigate cyber-related risks may be inadequate and our investments in the cybersecurity and resiliency of our networks and to
enhance our internal controls and processes may not be adequate to protect the security of our computer systems, software, networks and other
technology assets and the confidentiality, integrity and availability of information belonging to us or our customers. Cybersecurity risk
management programs are expensive to maintain, and even well-designed and well-funded systems may not be effective against all potential
cyber-attacks or security breaches. Moreover, as technology and cyberattacks change over time, we must continually monitor and change
systems to guard against new threats. We may not know of or be able to guard against a new threat until after an attack has occurred.
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
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our customers, loss of confidence in our security measures, customer dissatisfaction, significant litigation and regulatory exposure, and severe
harm to our reputation, all of which could have a material adverse effect on our business, financial condition and results of operations.
We are subject to laws regarding the privacy, information security and protection of personal information and any violation of these
laws could damage our reputation or otherwise adversely affect our business. Our business requires the collection and retention of
volumes of customer data, including personally identifiable information (“PII”) in various information systems that we maintain and in those
maintained by third party service providers. We also maintain important internal company data such as PII about our employees and information
relating to our operations. We are subject to complex and evolving laws and regulations regarding the privacy and protection of PII of individuals
(including customers, employees, and other third parties) including the Gramm-Leach-Bliley Act and the California Consumer Privacy Act. Various
federal and state banking regulators and states have also enacted data breach notification requirements with varying levels of individual,
consumer, regulatory or law enforcement notification in the event of a security breach. Ensuring that our collection, use, transfer and storage of
PII complies with all applicable laws and regulations has increased, and is likely to continue increasing, our costs. Furthermore, we may not be
able to ensure that customers and other third parties have appropriate controls in place to protect the confidentiality of the information that they
exchange with us, particularly where such information is transmitted by electronic means. If personal, confidential or proprietary information of
customers or others were to be mishandled or misused (in situations where, for example, such information was erroneously provided to parties
who are not permitted to have the information or where such information was intercepted or otherwise compromised by third parties), we could be
exposed to litigation or regulatory sanctions under privacy and data protection laws and regulations. Concerns regarding the effectiveness of our
measures to safeguard PII, or even the perception that such measures are inadequate, could cause us to lose customers or potential customers
and thereby reduce our revenue. Accordingly, any failure, or perceived failure, to comply with applicable privacy or data protection laws and
regulations may subject us to inquiries, examinations and investigations that could result in requirements to modify or cease certain operations or
practices or result in significant liabilities, fines or penalties, and could damage our reputation and otherwise adversely affect our operations,
financial condition and results of operations.
Risks Related to Risk Management
Our risk management framework may not be effective in mitigating risks and/or losses to us. Our risk management framework is
comprised of various processes, systems and strategies designed to manage the types of risk to which we are subject, including, among others,
credit, market, liquidity, operational, interest rate and compliance. Our framework also includes financial or other modeling methodologies that
involve management assumptions and judgment. Our risk management framework may not be effective and may not adequately mitigate any risk
or loss to us. If our risk management framework is not effective, we could suffer unexpected losses and our business, financial condition, results
of operations or growth prospects could be materially and adversely affected. We may also be subject to potentially adverse regulatory
consequences.
We are no longer an “emerging growth company,” and as such, the cost of compliance with Section 404 of the Sarbanes-Oxley Act of
2002 may adversely affect our results of operations. Under Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”), management is
required to annually assess and report on the effectiveness of our internal control over financial reporting and include an attestation report by the
Company’s independent auditors addressing the effectiveness of our internal control over financial reporting. As an emerging growth company,
we availed ourselves of the exemption from the requirement that our independent registered public accounting firm attest to the effectiveness of
our internal control over financial reporting under Section 404. However, we may no longer avail ourselves of this exemption since we ceased to
be an “emerging growth company” on December 31, 2022. As a result, our independent registered public accounting firm is required to undertake
an assessment of our internal control over financial reporting and the cost of our compliance with Section 404 will correspondingly increase and
require significant management time, which could adversely affect our results of operations.
We are dependent on the use of data and modeling in both our management's decision making generally, and in meeting regulatory
expectations in particular. The use of statistical and quantitative models and other quantitatively-based analyses is endemic to bank decision
making and regulatory compliance processes, and the employment of such analyses is becoming increasingly widespread in our operations.
Liquidity stress testing, interest rate sensitivity analysis, allowance for loan loss measurement, loan portfolio stress testing and the identification of
suspicious activity are examples of areas in which we are dependent on models and the data that underlies them. These quantitative techniques
and approaches create the possibility that faulty data or flawed quantitative approaches could yield regulatory scrutiny or adverse outcomes,
including increased exposure due to errors. Secondarily, because of the complexity inherent in these approaches, misunderstanding or misuse of
their
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outputs could similarly result in suboptimal decision making, which could have a material adverse effect on our business, financial condition and
results of operations.
Legal and Regulatory Risk
Our industry is highly regulated, and the regulatory framework, together with any future legislative or regulatory changes, may have a
materially adverse effect on our operations. The banking industry is highly regulated and supervised under both federal and state laws and
regulations that are intended primarily for the protection of depositors, customers, the public, the banking system as a whole or the FDIC Deposit
Insurance Fund, not for the protection of our shareholders and creditors. Compliance with these laws and regulations can be difficult and costly,
and changes to them can impose additional compliance costs. Applicable laws and regulations govern a variety of matters, including permissible
types; amounts and terms of loans and investments we may make; the maximum interest rate that may be charged; the types of deposits we may
accept and the rates we may pay on such deposits; maintenance of adequate capital and liquidity; changes in control of the Bank and/or Luther
Burbank Corporation, as the Bank's holding company; inter-company transactions; handling of nonpublic information; restrictions on dividends
and establishment of new offices. We must obtain approval from our regulators before engaging in certain activities, and there is risk that such
approvals may not be granted, in a timely manner or at all. These requirements may constrain our operations, and the adoption of new laws and
changes to or repeal of existing laws may have a further impact on our business, financial condition and results of operations. Also, the burden
imposed by those federal and state regulations may place banks in general, including our Bank in particular, at a competitive disadvantage
compared to non-bank competitors. Our failure to comply with any applicable laws or regulations, or regulatory policies and interpretations of
such laws and regulations, could result in sanctions by regulatory agencies or damage to our reputation, all of which could have a material
adverse effect on our business, financial condition and results of operations.
Bank holding companies and financial institutions are extensively regulated and currently face an uncertain regulatory environment. Applicable
laws, regulations, interpretations, enforcement policies and accounting principles have been subject to significant changes in recent years, and
may be subject to significant future changes. Future changes may have a material adverse effect on our business, financial condition and results
of operations.
Regulatory agencies may adopt changes to their regulations or change the manner in which existing regulations are applied. We cannot predict
the substance or effect of pending or future legislation or regulation or the application of laws and regulations to us. Compliance with current and
potential regulation, as well as regulatory scrutiny, may significantly increase our costs, impede the efficiency of our internal business processes,
require us to increase our regulatory capital, and limit our ability to pursue business opportunities in an efficient manner by requiring us to expend
significant time, effort and resources to ensure compliance and respond to any regulatory inquiries or investigations.
In addition, regulators may elect to alter standards or the interpretation of the standards used to measure regulatory compliance or to determine
the adequacy of liquidity, risk management or other operational practices for financial institutions in a manner that impacts our ability to implement
our strategy and could affect us in substantial and unpredictable ways, and could have a material adverse effect on our business, financial
condition and results of operations. Furthermore, the regulatory agencies have extremely broad discretion in their interpretation of laws and
regulations and their assessment of the quality of our loan portfolio, securities portfolio and other assets. If any regulatory agency's assessment
of the quality of our assets, operations, lending practices, investment practices, funding sources, capital structure or other aspects of our business
differs from our assessment, we may be required to take additional charges or undertake, or refrain from taking, actions that could have a
material adverse effect on our business, financial condition and results of operations.
Regulatory requirements affecting our loans secured by commercial real estate could limit our ability to leverage our capital and
adversely affect our growth and profitability. The federal banking agencies have issued guidance for institutions that are deemed to have
concentrations in CRE lending. Institutions which are deemed to have concentrations in CRE lending pursuant to the supervisory criteria in the
relevant guidance are expected to employ heightened levels of risk management with respect to their CRE portfolios, and may be required to hold
higher levels of capital. We have a concentration in CRE loans, and multifamily residential real estate loans in particular, and we have
experienced significant growth in our CRE portfolio in recent years. As of December 31, 2022, CRE loans represent 584% of the Company's total
risk-based capital. Multifamily residential real estate loans, the vast majority of which are 50% risk weighted for regulatory capital purposes, were
560% of the Company's total risk-based capital. Management has extensive experience in CRE lending, and has implemented and continues to
maintain heightened portfolio monitoring and reporting, and strong underwriting criteria with respect to its CRE portfolio. Nevertheless, we could
be required to maintain higher levels of capital as a result of our CRE
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concentration, which could limit our growth, require us to obtain additional capital, and have a material adverse effect on our business, financial
condition and results of operations.
Litigation and regulatory actions, including possible enforcement actions, could subject us to significant fines, penalties, judgments or
other requirements resulting in increased expenses or restrictions on our business activities. In the normal course of business, from time
to time, we have in the past and may in the future be named as a defendant in various legal actions, arising in connection with our current and/or
prior business activities. Legal actions could include claims for substantial compensatory or punitive damages or claims for indeterminate
amounts of damages. We may also, from time to time, be the subject of subpoenas, requests for information, reviews, investigations and
proceedings (both formal and informal) by governmental agencies regarding our current and/or prior business activities. Any such legal or
regulatory actions may subject us to substantial compensatory or punitive damages, significant fines, penalties, obligations to change our
business practices or other requirements resulting in increased expenses, diminished income and damage to our reputation. Our involvement in
any such matters, whether tangential or otherwise and even if the matters are ultimately determined in our favor, could also cause significant
harm to our reputation and divert management attention from the operation of our business. Further, any settlement, consent order or adverse
judgment in connection with any formal or informal proceeding or investigation by government agencies may result in litigation, investigations or
proceedings as other litigants and government agencies begin independent reviews of the same activities. As a result, legal and regulatory
actions could have a material adverse effect on our business, financial condition and results of operations.
Regulatory initiatives regarding bank capital requirements may require heightened capital. Regulatory capital rules adopted in July 2013,
which implement the Basel III regulatory capital reforms, include a common equity Tier 1 capital requirement and establish criteria that
instruments must meet to be considered common equity Tier 1 capital, additional Tier 1 capital or Tier 2 capital. These enhancements were
intended to both improve the quality and increase the quantity of capital required to be held by banking organizations, and to better equip the U.S.
banking system to deal with adverse economic conditions. The capital rules require bank holding companies and banks to maintain a common
equity Tier 1 capital ratio of 4.5%, a minimum total Tier 1 risk based capital ratio of 6%, a minimum total risk based capital ratio of 8%, and a
minimum leverage ratio of 4%. Bank holding companies and banks are also required to hold a capital conservation buffer of common equity Tier 1
capital of 2.5% to avoid limitations on capital distributions and discretionary executive compensation payments. The revised capital rules also
require banks to maintain a common equity Tier 1 capital ratio of 6.5% or greater, a Tier 1 capital ratio of 8% or greater, a total capital ratio of 10%
or greater and a leverage ratio of 5% or greater to be deemed "well-capitalized" for purposes of certain rules and prompt corrective action
requirements. The Federal Reserve may also set higher capital requirements for holding companies whose circumstances warrant it. Future
regulatory change could impose higher capital standards on us. Failure to maintain capital to meet current or future regulatory requirements could
have a significant material adverse effect on our business, financial condition and results of operations.
We are subject to the anti-money laundering statutes and regulations, and failure to comply with these laws could lead to a wide
variety of sanctions, damage our reputation and otherwise adversely affect our business. The Bank Secrecy Act of 1970, the Uniting and
Strengthening America by Providing Appropriate Tools to Intercept and Obstruct Terrorism Act of 2001 ("Patriot Act"), and other laws and
regulations require financial institutions, among other duties, to institute and maintain an effective anti-money laundering program and to file
reports such as suspicious activity reports and currency transaction reports. We are required to comply with these and other anti-money
laundering requirements. Our federal and state banking regulators, FinCEN, and other government agencies are authorized to impose significant
civil money penalties for violations of anti-money laundering requirements. We are also subject to increased scrutiny of compliance with the
regulations issued and enforced by the Office of Foreign Assets Control ("OFAC"). If our program is deemed deficient, we could be subject to
liability, including fines, civil money penalties and other regulatory actions, which may include restrictions on our business operations and our
ability to pay dividends, restrictions on mergers and acquisitions activity, restrictions on expansion, and restrictions on entering new business
lines. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have significant
reputational consequences for us. Any of these circumstances could have a material adverse effect on our business, financial condition or results
of operations.
We are subject to numerous consumer protection laws, and failure to comply with these laws could lead to a wide variety of sanctions,
damage our reputation and otherwise adversely affect our business. The Community Reinvestment Act, the Equal Credit Opportunity Act,
the Fair Housing Act and other fair lending laws and regulations, including state laws and regulations, prohibit discriminatory lending practices by
financial institutions. The Federal Trade Commission Act and the Dodd-Frank Act prohibit unfair, deceptive, or abusive acts
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or practices by financial institutions. We are also subject to complex and evolving laws and regulations governing the privacy and protection of
personally identifiable information of individuals (including customers, employees, and other third parties), including, but not limited to, the
Gramm-Leach-Bliley Act, and the California Consumer Protection Act. A challenge to an institution's compliance with these and other consumer
protections laws and regulations could result in a wide variety of sanctions, including damages and civil money penalties, injunctive relief,
restrictions on mergers and acquisitions activity, restrictions on expansion, and restrictions on entering new business lines. Such actions could
have a material adverse effect on our reputation, business, financial condition and results of operations.
Other Business Risks
We face significant and increasing competition in the financial services industry. The banking markets in which we operate are highly
competitive and our future growth and success will depend on our ability to compete effectively in these markets. We compete for deposits, loans,
and other financial services in our markets with commercial and community banks, credit unions, financial technology companies, mortgage
banking firms and online mortgage lenders, including large national financial institutions that operate in our market area, and with the United
States Department of the Treasury. Many of these competitors are larger than us, have significantly more resources and greater brand
recognition than we do, and may be able to attract customers more effectively than we can. Increased competition could require us to lower the
rates that we offer on loans and could require, and recently has required, us to increase the rates we pay on deposits, which could and recently
has reduced our profitability. Our failure to compete effectively in our market could restrain our growth or cause us to lose market share, which
could have a material adverse effect on our business, financial condition and results of operations.
Our reputation is critical to our business, and damage to it could have a material adverse effect on us. Our ability to attract and retain
customers is highly dependent upon the perceptions of consumers and commercial borrowers and depositors and other external perceptions of
our products, services, trustworthiness, business practices, workplace culture, compliance practice or our financial health. Negative public opinion
or damage to our brand could result from actual or alleged conduct in any number of circumstances, including lending practices, regulatory
compliance, security breaches, corporate governance, sales and marketing, and employee misconduct, as well as from our financial condition
and performance. The policies and procedures we have in place to protect our reputation and promote ethical conduct may not be fully effective.
Negative publicity regarding our business, employees, or customers, with or without merit, may result in the loss of customers, investors and
employees, litigation, a decline in revenue and increased regulatory scrutiny.
Risks Related to an Investment in Our Common Stock
We are controlled by trusts established for the benefit of members of the Trione family, whose interests in our business may be
different from yours. As of December 31, 2022, the Trione Family Trusts control 78.4% of our common stock and if they vote in the same
manner, are able to determine the outcome of all matters put to a shareholder vote, including the election of directors, the approval of mergers,
material acquisitions and dispositions and other extraordinary transactions, and amendments to our articles of incorporation, bylaws and other
corporate governance documents. So long as the Trione Family Trusts continue to own a majority of our common stock, they will have the ability,
if they vote in the same manner, to approve or prevent any transaction that requires shareholder approval regardless of whether others believe
the transaction is in our best interests. In any of these matters, the interests of the Trione Family Trusts may differ from or conflict with the
interests of other shareholders. Moreover, this concentration of stock ownership may also adversely affect the trading price of our common stock,
if investors perceive disadvantages in owning stock of a company with a controlling group or if trading volumes do not provide sufficient liquidity.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Our corporate headquarters is located at 520 Third Street, Santa Rosa, California. In addition to our corporate headquarters, the Bank operates
ten full service branches in California located in Sonoma, Marin, Santa Clara, and Los Angeles Counties and one full service branch in
Washington located in King County. We also operate several loan production offices located throughout California. Other than our main branch in
Santa Rosa, California, which we own, we lease all of our other offices.
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Item 3. Legal Proceedings
From time to time, we are 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, we, like all banking organizations, are subject to heightened regulatory
compliance and legal risk. However, based on available information, management does not expect the ultimate disposition of any or a
combination of these actions to have a material adverse effect on our business, financial condition or results of operation.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II.
Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information and Holders of Record
Our common stock is listed on the NASDAQ Global Select Stock Market under the trading symbol "LBC". As of February 17, 2023, we had
approximately 3,005 record holders. On February 17, 2023, our stock closed at $12.17.
Stock Performance Graph
The performance graph and table below compare the cumulative total stockholder return on the common stock of the Company with the
cumulative total return on the equity securities included in (i) the Russell 2000 Index, which measures the performance of the smallest 2,000
members by market cap of the Russell Index, (ii) the S&P U.S. BMI Banks - Western Region Index, which reflects the performance of publicly
traded U.S. companies that do business as banks in the Western U.S., and (iii) the S&P U.S. BMI Banks Index, which reflects the performance of
publicly traded U.S. banks that do business in the U.S.
The graph below assumes an initial $100 investment on December 31, 2017 through December 31, 2022. Data for the Company, the Russell
2000, the S&P U.S. BMI Banks - Western Region and the S&P U.S. BMI Banks indices assume reinvestment of dividends. Returns are shown on
a total return basis. The performance graph represents past performance and should not be considered to be an indication of future performance.
This graph is not deemed filed with the SEC.
25

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Period Ended
Index
12/31/2017
12/31/2018
12/31/2019
12/31/2020
12/31/2021
12/31/2022
Luther Burbank Corporation
100.00 
76.21 
99.57 
86.64 
127.66 
104.87 
Russell 2000 Index
100.00 
88.99 
111.7 
134.00 
153.85 
122.41 
S&P U.S. BMI Banks - Western Region
100.00 
79.17 
96.55 
72.25 
111.40 
86.45 
S&P U.S. BMI Banks
100.00 
83.54 
114.74 
100.10 
136.10 
112.89 
Source: S&P Capital IQ Pro
Dividend Policy
Holders of our common stock are only entitled to receive dividends when, and if, declared by our board of directors out of funds legally available
for dividends.
Any future determination relating to our dividend policy will be made by our board of directors and will depend on a number of factors, including
general and economic conditions, industry standards, our financial condition and operating results, our available cash and current and anticipated
cash needs, capital requirements, our ability to service debt obligations senior to our common stock, banking regulations, contractual, legal, tax
and regulatory restrictions, and limitations on the payment of dividends by us to our shareholders or by the Bank to us, and such other factors as
our board of directors may deem relevant.
Because we are a bank holding company and do not engage directly in business activities of a material nature, our ability to pay any dividends on
our common stock depends, in large part, upon our receipt of dividends from our Bank, which is also subject to numerous limitations on the
payment of dividends under federal and state banking laws, regulations and policies.
Dividends are authorized at the sole discretion of our board of directors. In addition, our board of directors can change the amount or frequency of
this dividend or discontinue the payment of dividends entirely at any time. Given the pending merger with WAFD, and the desire to preserve
capital in the current uncertain economic environment, the Company’s board of directors, on January 24, 2023, decided to suspend any further
quarterly cash dividends. The following table shows the dividends that have been declared on our common stock with respect to the periods
indicated below. The per share amounts are presented to the nearest cent.
(dollars in thousands, except per share data)
Amount Per Share
Total Cash Dividend
Quarter ended March 31, 2021
$
0.06 
$
3,009 
Quarter ended June 30, 2021
0.06 
3,006 
Quarter ended September 30, 2021
0.12 
6,217 
Quarter ended December 31, 2021
0.12 
6,214 
Quarter ended March 31, 2022
0.12 
6,225 
Quarter ended June 30, 2022
0.12 
6,126 
Quarter ended September 30, 2022
0.12 
6,139 
Quarter ended December 31, 2022
0.12 
6,138 
Dividend Limitations. California law places limits on the amount of dividends the Bank may pay to the Company without prior approval. Prior
regulatory approval is required to pay dividends which exceed the lesser of the Bank’s retained earnings or the Bank’s net profits for that year
combined with the retained net profits for the preceding two years. State and federal bank regulatory agencies also have authority to prohibit a
bank from paying dividends if such payment is deemed to be an unsafe or unsound practice, and the Federal Reserve has the same authority
over bank holding companies. We would not be able to pay a dividend in excess of our retained earnings, or where our liabilities would exceed
our assets.
The Federal Reserve has established requirements with respect to the maintenance of appropriate levels of capital by registered bank holding
companies. Compliance with such standards, as presently in effect, or as they may be amended from time to time, could possibly limit the amount
of dividends that we may pay in the future. The Federal Reserve has issued guidance on the payment of cash dividends by bank holding
companies. In the statement, the
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Federal Reserve expressed its view that a holding company experiencing earnings weaknesses should not pay cash dividends exceeding its net
income, or which could only be funded in ways that weaken the holding company’s financial health, such as by borrowing. Under Federal
Reserve guidance, as a general matter, the board of directors of a holding company should inform the Federal Reserve and should eliminate,
defer, or significantly reduce dividends if: (i) the holding company’s net income available to shareholders for the past four quarters, net of
dividends previously paid during that period, is not sufficient to fully fund the dividends; (ii) the holding company’s prospective rate of earnings
retention is not consistent with its capital needs and overall current and prospective financial condition; or (iii) the holding company will not meet,
or is in danger of not meeting, its minimum regulatory capital adequacy ratios. As a depository institution, the deposits of which are insured by the
FDIC, the Bank may not pay dividends or distribute any of its capital assets while it remains in default on any assessment due the FDIC. The
Bank currently is not in default under any of its obligations to the FDIC.
Shares Eligible for Sale Pursuant to Rule 144
An aggregate of 35.8 million shares of common stock held by the Trione Family Trusts, which were issued in private transactions, are eligible for
sale in accordance with Rule 144 under the Securities Act.
Item 6. Selected Financial Data
The following table sets forth the Company’s selected historical consolidated financial data for the years and as of the dates indicated. You should
read this information together with Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the
Company’s audited consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. The selected
historical consolidated financial data as of and for the years ended December 31, 2022 and 2021 are derived from our audited consolidated
financial statements, which are included elsewhere in this Annual Report on Form 10-K. The selected historical consolidated financial data as of
and for the years ended December  31, 2020, 2019 and 2018 (except as otherwise noted below) are derived from our audited consolidated
financial statements not included in this Annual Report on Form 10-K. The Company’s historical results for any prior period are not necessarily
indicative of future performance.
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(Dollars in thousands, except per share data)
As of or For the Years Ended December 31,
2022
2021
2020
2019
2018
Statements of Income and Financial Condition Data
Net income
$
80,198 
$
87,753 
$
39,912 
$
48,861 
$
45,060 
Pre-tax, pre-provision net earnings 
$
114,887 
$
113,200 
$
67,209 
$
70,714 
$
66,531 
Total assets
$
7,974,632 
$
7,179,957 
$
6,906,104 
$
7,045,828 
$
6,937,212 
Per Common Share
Diluted earnings per share
$
1.57 
$
1.70 
$
0.75 
$
0.87 
$
0.79 
Book value per share
$
13.36 
$
12.95 
$
11.75 
$
10.97 
$
10.31 
Tangible book value per share 
$
13.30 
$
12.88 
$
11.69 
$
10.91 
$
10.25 
Selected Ratios
Return on average:
Assets
1.06 %
1.22 %
0.56 %
0.69 %
0.70 %
Stockholders' equity
11.84 %
13.64 %
6.53 %
8.15 %
7.96 %
Dividend payout ratio
30.71 %
21.02 %
30.85 %
26.67 %
35.43 %
Net interest margin
2.39 %
2.40 %
1.97 %
1.84 %
1.98 %
Efficiency ratio 
35.79 %
34.32 %
52.38 %
46.86 %
48.51 %
Noninterest expense to average assets
0.85 %
0.82 %
1.04 %
0.88 %
0.98 %
Loan to deposit ratio
120.06 %
113.71 %
114.92 %
119.03 %
122.59 %
Credit Quality Ratios
Allowance for loan losses to loans
0.52 %
0.56 %
0.76 %
0.58 %
0.56 %
Allowance for loan losses to nonperforming loans
566.91 %
1,549.72 %
732.04 %
568.47 %
1,705.47 %
Nonperforming assets to total assets
0.08 %
0.03 %
0.09 %
0.09 %
0.03 %
Net (recoveries) charge-offs to average loans
— %
(0.00)%
0.01 %
(0.01)%
(0.01)%
Capital Ratios
Tier 1 leverage ratio
9.72 %
10.12 %
9.45 %
9.47 %
9.42 %
Total risk-based capital ratio
19.14 %
19.61 %
18.60 %
17.97 %
17.20 %
 Considered a non-GAAP financial measure. See Item 7. 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.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis is based on and should be read in conjunction with Part II. Item 6. Selected Financial Data and our
consolidated financial statements and the accompanying notes thereto contained elsewhere in this Annual 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.
The following discussion and analysis is intended to facilitate the understanding and assessment of significant changes and trends in our
business that accounted for the changes in our results of operations for the year ended December 31, 2022, as compared to our results of
operations for the year ended December 31, 2021, and our financial condition at December 31, 2022 as compared to our financial condition at
December 31, 2021.
In addition to historical information, this discussion and analysis contains forward-looking statements that are subject to certain risks and
uncertainties and are based on certain assumptions that we believe are reasonable but may prove to be inaccurate. Certain risks, uncertainties
and other factors, including those set forth in the “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” sections of this
Annual Report, may cause actual results to differ materially from those projected results discussed in the forward-looking statements appearing in
this discussion and analysis. Please read these sections carefully. We assume no obligation to update any of these forward-looking statements.
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 with $8.0 billion in assets at December 31, 2022. Our
(1)
(1)
(1)
(1)
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principal business is providing high-value, relationship-based banking products and services to our customers, which include real estate
investors, professionals, entrepreneurs, 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
jumbo single family residential properties on the West Coast.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“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 Financial Statements for the year ended December 31, 2022. 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.
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 can be reduced by loan principal charge-offs, net of recoveries. The
allowance can also be reduced by recapturing provisions when 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 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. In addition, we utilize a number of economic variables in estimating the allowance, with the most significant drivers being
unemployment levels and housing prices. Material changes in these economic variables may result in incremental changes in the estimated level
of our allowance. 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. The Company utilized the incurred loss methodology to determine its allowance
for loan losses at December 31, 2022. The Company adopted the CECL allowance methodology on January 1, 2023. The impact of the adoption
of CECL is still being evaluated but is not expected to have a material impact on our financial condition or results of operations.
Fair Value Measurement
We use estimates of fair value in applying various accounting standards for our 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.
Depending on the availability of observable inputs and prices, different valuation models could
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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 debt securities available for sale are recorded in our consolidated statements of financial condition and
comprehensive income (loss) while changes in the fair value of equity securities, loans held for sale and derivatives are recorded in the
consolidated statements of financial condition and in the consolidated statements of 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 Item 6. Selected Financial Data and Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations contain financial measures that are not measures recognized under GAAP and therefore, are considered
non‐GAAP financial measures, including pre-tax, pre-provision net earnings, efficiency ratio, tangible assets, tangible stockholders' equity and
tangible book value per share.
Our management uses these non‐GAAP financial measures in their analysis of the Company’s performance, financial condition and the efficiency
of its operations. We believe that these non‐GAAP financial measures provide a greater understanding of ongoing operations and enhance
comparability of results with prior periods and other companies, as well as demonstrate the effects of significant changes in the current period.
We also believe that investors find these non‐GAAP financial measures useful as they assist investors in understanding our underlying operating
performance and the analysis of ongoing operating trends. However, we acknowledge that our non-GAAP financial measures have a number of
limitations. 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.
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The following reconciliation table provides a more detailed analysis of these non-GAAP financial measures:
(Dollars in thousands, except per share data)
As of or For the Years Ended December 31,
2022
2021
2020
2019
2018
Pre-tax, Pre-provision Net Earnings
Income before provision for income taxes
$
113,737 
$
124,000 
$
56,659 
$
69,464 
$
62,931 
Plus: Provision for (reversal of) loan losses
1,150 
(10,800)
10,550 
1,250 
3,600 
Pre-tax, pre-provision net earnings
$
114,887 
$
113,200 
$
67,209 
$
70,714 
$
66,531 
Efficiency Ratio
Noninterest expense (numerator)
$
64,027 
$
59,145 
$
73,934 
$
62,368 
$
62,687 
Net interest income
177,254 
170,459 
138,623 
128,407 
125,087 
Noninterest income
1,660 
1,886 
2,520 
4,675 
4,131 
Operating revenue (denominator)
$
178,914 
$
172,345 
$
141,143 
$
133,082 
$
129,218 
Efficiency ratio
35.79 %
34.32 %
52.38 %
46.86 %
48.51 %
Tangible Book Value Per Share
Total assets
$
7,974,632 
$
7,179,957 
$
6,906,104 
$
7,045,828 
$
6,937,212 
Less: Goodwill
(3,297)
(3,297)
(3,297)
(3,297)
(3,297)
Tangible assets
7,971,335 
7,176,660 
6,902,807 
7,042,531 
6,933,915 
Less: Total liabilities
(7,292,096)
(6,510,824)
(6,292,413)
(6,431,364)
(6,356,067)
Tangible stockholders' equity (numerator)
$
679,239 
$
665,836 
$
610,394 
$
611,167 
$
577,848 
Period end shares outstanding (denominator)
51,073,272 
51,682,398 
52,220,266 
55,999,754 
56,379,066 
Tangible book value per share
$
13.30 
$
12.88 
$
11.69 
$
10.91 
$
10.25 
Key Factors Affecting Our Business
Interest Rates
Net interest income is the largest contributor to our net income and is the difference between the interest and fees earned on interest-earning
assets and the interest expense incurred in connection with interest-bearing liabilities. Net interest income is primarily a function of the average
balances and yields of these interest-earning assets and interest-bearing liabilities. These factors are influenced by internal considerations such
as product mix and risk appetite, as well as external influences such as economic conditions, competition for loans and deposits and market
interest rates.
The cost of our deposits and short-term wholesale borrowings is primarily based on short-term interest rates, which are largely driven by the
Federal Reserve’s actions and market competition. The yields generated by our loans and securities are typically affected by short-term and long-
term interest rates, which are driven by market competition and market rates often impacted by the Federal Reserve’s actions. The level of net
interest income is influenced by movements in such interest rates and the pace at which such movements occur.
Based on our liability sensitivity as discussed in Item 7A. ‘‘Quantitative and Qualitative Disclosures About Market Risk’’, increases in interest
rates, the pace of interest rate increases, and/or a flatter yield curve could have an adverse impact on our net interest income. Conversely,
decreases in interest rates, particularly at the short end, and/or a steepened yield curve would be expected to benefit our net interest income.
Operating Efficiency
We have invested significantly in our infrastructure, including our management, lending teams, technology systems and risk management
practices. As we have begun to leverage these investments, our efficiency has generally improved. However, due to the current rising interest
rate environment, which has generally had a greater impact on our cost of funds as compared to the yield on interest-earnings assets, our
efficiency ratio may become a less relevant measure of our expense management. As an alternative, we believe that the comparison of our
noninterest expense to total average assets will provide a better measure of our efficiency and expense management in this rate environment.
Credit Quality
We have well established loan policies and underwriting practices that have generally resulted in very low levels of charge-offs and
nonperforming assets. We strive to originate quality loans that will maintain the credit quality of our
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loan portfolio. However, credit trends in the markets in which we operate are largely impacted by economic conditions beyond our control and can
adversely impact our financial condition and results of operations.
Competition
The industry and businesses in which we operate are highly competitive. We may see increased competition in different areas including interest
rates, underwriting standards and product offerings and loan structure. While we seek to maintain an appropriate return on our investments, we
may experience continued pressure on our net interest margin as we operate in this competitive environment.
Economic Conditions
Our business and financial performance are affected by economic conditions generally in the United States and more directly in the markets of
California, Washington and Oregon where we primarily operate. The significant economic factors that are most relevant to our business and our
financial performance include, but are not limited to, real estate values, interest rates and unemployment rates.
Results of Operations - Years ended December 31, 2022 and 2021
Overview
For the year ended December 31, 2022 our net income was $80.2 million as compared to $87.8 million for the year ended December 31, 2021.
The decrease of $7.6 million, or 8.6%, was primarily attributable to a $12.0 million increase in the provision for loan losses and a $4.9 million
increase in noninterest expense, partially offset by an increase of $6.8 million in net interest income and a decrease of $2.7 million in the
provision for income taxes as compared to the prior year. Pre-tax, pre-provision net earnings increased by $1.7 million, or 1.5%, for the year
ended December 31, 2022 as compared to the prior year.
Net Interest Income
Net interest income totaled $177.3 million for the year ended December 31, 2022, an increase of $6.8 million, compared to the prior year primarily
due to higher interest income on loans, partially offset by higher interest expense on our deposit portfolio.
Net interest margin for the year ended December 31, 2022 was 2.39%, compared to 2.40% for the prior year. Our net interest margin reflects the
net impact of an increase in the cost of interest bearing liabilities, partially offset by an increase in the yield on interest earning assets. Due to the
liability sensitivity of our balance sheet, our interest-bearing liabilities generally reprice more quickly than our interest-earning assets. Over the
year, cost of our interest-bearing liabilities increased by 36 basis points primarily due to an increase in the cost of our deposits, while the yield on
our interest-earning assets increased by 32 basis points primarily due to an increase in our loan yield. Our net interest spread for the year ended
December 31, 2022 was 2.26%, decreasing by 4 basis points as compared to last year.
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 years ended December 31, 2022, 2021 and 2020. The average
balances are daily averages.
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For the Years Ended December 31,
2022
2021
2020
(Dollars in thousands)
Average
Balance
Interest
Inc/Exp
Yield/Rate
Average
Balance
Interest
Inc/Exp
Yield/Rate
Average
Balance
Interest
Inc/Exp
Yield/Rate
Interest-Earning Assets
Multifamily residential
$
4,375,648 
$
165,988 
3.79 %
$
4,199,639 
$
155,509 
3.70 %
$
4,063,607 
$
155,104 
3.82 %
Single family residential
2,040,239 
67,852 
3.33 %
1,897,575 
53,695 
2.83 %
1,907,940 
65,030 
3.41 %
Commercial real estate
185,908 
8,673 
4.67 %
196,456 
8,893 
4.53 %
206,639 
9,530 
4.61 %
Construction and land
21,620 
1,292 
5.98 %
18,920 
1,148 
6.07 %
20,199 
1,332 
6.59 %
Total loans 
6,623,415 
243,805 
3.68 %
6,312,590 
219,245 
3.47 %
6,198,385 
230,996 
3.73 %
Investment securities
654,794 
14,372 
2.19 %
653,479 
8,451 
1.29 %
647,174 
9,856 
1.52 %
Cash and cash equivalents
142,802 
2,776 
1.94 %
150,166 
223 
0.15 %
185,246 
538 
0.29 %
Total interest-earning assets
7,421,011 
260,953 
3.52 %
7,116,235 
227,919 
3.20 %
7,030,805 
241,390 
3.43 %
Noninterest-earning assets 
121,586 
66,937 
61,602 
Total assets
$
7,542,597 
$
7,183,172 
$
7,092,407 
Interest-Bearing Liabilities
Transaction accounts
$
171,077 
431 
0.25 %
$
158,956 
358 
0.22 %
$
178,655 
876 
0.48 %
Money market demand accounts
2,910,026 
26,873 
0.91 %
2,427,599 
11,889 
0.48 %
1,652,109 
14,862 
0.88 %
Time deposits
2,432,642 
29,179 
1.19 %
2,750,461 
23,365 
0.84 %
3,390,992 
57,593 
1.67 %
     Total deposits
5,513,745 
56,483 
1.02 %
5,337,016 
35,612 
0.66 %
5,221,756 
73,331 
1.38 %
FHLB advances
957,695 
18,904 
1.97 %
868,591 
14,535 
1.67 %
965,490 
21,761 
2.25 %
Junior subordinated debentures
61,857 
2,015 
3.26 %
61,857 
1,015 
1.64 %
61,857 
1,373 
2.22 %
Senior debt
94,719 
6,297 
6.65 %
94,596 
6,298 
6.66 %
94,473 
6,302 
6.67 %
Total interest-bearing liabilities
6,628,016 
83,699 
1.26 %
6,362,060 
57,460 
0.90 %
6,343,576 
102,767 
1.60 %
Noninterest-bearing deposit
accounts
149,443 
112,436 
69,208 
Noninterest-bearing liabilities
87,547 
65,184 
68,853 
Total liabilities
6,865,006 
6,539,680 
6,481,637 
Total stockholders' equity
677,591 
643,492 
610,770 
Total liabilities and stockholders'
equity
$
7,542,597 
$
7,183,172 
$
7,092,407 
Net interest spread 
2.26 %
2.30 %
1.83 %
Net interest income/margin
$
177,254 
2.39 %
$
170,459 
2.40 %
$
138,623 
1.97 %
(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 of deferred loan fees. Net deferred loan cost amortization totaled $12.6 million, $19.6 million and $16.2 million for the years
ended December 31, 2022, 2021 and 2020, respectively.
(2)    Noninterest-earning assets includes the allowance for loan losses.
(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.
Interest rates and operating interest differential. Increases and decreases in interest income and interest expense result from 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 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.
(1)
(2)
(3)
 (4)
33

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For the Years Ended December 31, 2022 vs 2021
Variance Due To
(Dollars in thousands)
Volume
Yield/Rate
Total
Interest-Earning Assets
Multifamily residential
$
6,630 
$
3,849 
$
10,479 
Single family residential
4,226 
9,931 
14,157 
Commercial real estate
(489)
269 
(220)
Construction and land
161 
(17)
144 
Total Loans
10,528 
14,032 
24,560 
Investment securities
17 
5,904 
5,921 
Cash and cash equivalents
(12)
2,565 
2,553 
Total interest-earning assets
10,533 
22,501 
33,034 
Interest-Bearing Liabilities
Transaction accounts
26 
47 
73 
Money market demand accounts
2,721 
12,263 
14,984 
Time deposits
(2,902)
8,716 
5,814 
Total deposits
(155)
21,026 
20,871 
FHLB advances
1,588 
2,781 
4,369 
Junior subordinated debentures
— 
1,000 
1,000 
Senior debt
8 
(9)
(1)
Total interest-bearing liabilities
1,441 
24,798 
26,239 
Net Interest Income
$
9,092 
$
(2,297)
$
6,795 
For the Years Ended December 31, 2021 vs 2020
Variance Due To
(Dollars in thousands)
Volume
Yield/Rate
Total
Interest-Earning Assets
Multifamily residential
$
5,240 
$
(4,835)
$
405 
Single family residential
(350)
(10,985)
(11,335)
Commercial real estate
(471)
(166)
(637)
Construction and land
(82)
(102)
(184)
Total Loans
4,337 
(16,088)
(11,751)
Investment securities
95 
(1,500)
(1,405)
Cash and cash equivalents
(89)
(226)
(315)
Total interest-earning assets
4,343 
(17,814)
(13,471)
Interest-Bearing Liabilities
Transaction accounts
(88)
(430)
(518)
Money market demand accounts
5,204 
(8,177)
(2,973)
Time deposits
(9,426)
(24,802)
(34,228)
Total deposits
(4,310)
(33,409)
(37,719)
FHLB advances
(2,025)
(5,201)
(7,226)
Junior subordinated debentures
— 
(358)
(358)
Senior debt
7 
(11)
(4)
Total interest-bearing liabilities
(6,328)
(38,979)
(45,307)
Net Interest Income
$
10,671 
$
21,165 
$
31,836 
Total interest income increased by $33.0 million, or 14.5%, for the year ended December 31, 2022 as compared to the prior year. Interest income
on loans increased $24.6 million to $243.8 million for the year ended December 31, 2022 from $219.2 million for the prior year. The improvement
was primarily due to a 21 basis point increase in loan yields, as well as growth in the average balance of loans of $310.8 million during the period.
The average balance
34

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of loans benefited from strong loan origination volumes and a slowing of prepayment speeds as compared to the same period last year, while
loan yields improved as a result of a $17.6 million improvement in the earnings on our interest rate swaps hedging fixed rate loans, and a $7.0
million decrease in accelerated loan cost amortization on prepaid loans, as well as loans being originated at higher current interest rates.
During the years ended December 31, 2022 and 2021, total loans increased $713.0 million and $247.6 million, respectively. The volume of new
loans originated totaled $2.1 billion and $2.4 billion for the years ended December 31, 2022 and 2021, respectively. Volume for the prior year
includes the purchase of a $287.8 million pool of fixed rate single family loans in February 2021. The weighted average rate on new loans for the
year ended December 31, 2022 was 4.00% compared to 3.30% for the prior year. The increase in the average coupon for current year
originations compared to the prior year was due to the general higher level of market interest rates. During the year ended December 31, 2022,
the Federal Open Market Committee increased the federal funds rate by 425 basis points. Loan payoffs and paydowns totaled $1.4 billion and
$2.1 billion for the years ended December 31, 2022 and 2021, respectively. The decrease in prepayments was due to rising market interest rates,
which impacted refinancing activity during the current year. The weighted average rate on loan payoffs during the year ended December 31, 2022
was 3.85% as compared to 3.93% for the prior year.
Total interest expense increased $26.2 million to $83.7 million for the year ended December 31, 2022 from $57.5 million for the prior year. Interest
expense on deposits increased $20.9 million to $56.5 million for the year ended December 31, 2022 from $35.6 million for the prior year. This
increase was primarily due to the cost of interest-bearing deposits increasing 36 basis points predominantly due to our deposit portfolio repricing
to higher current market interest rates. Additionally, interest expense on advances from the FHLB increased by $4.4 million during the year ended
December 31, 2022 as compared to the prior year due to increases in the average balance and cost of FHLB advances of $89.1 million and 30
basis points, respectively. The increase in the cost of FHLB advances was due to rising market interest rates. We generally use both deposits and
FHLB advances to fund net loan growth. We also use FHLB advances, with or without embedded interest rate caps, as a hedge of interest rate
risk, as we can strategically control the duration of those funds. A discussion of instruments used to mitigate interest rate risk can be found under
Part II - Item 7A. ‘‘Quantitative and Qualitative Disclosures About Market Risk.’’
Provision for Loan Losses
During the year ended December 31, 2022, provisions for loan losses totaled $1.2 million, compared to a reversal of provisions for loan losses of
$10.8 million for the year ended December 31, 2021. During the year ended December 31, 2022, loan loss provisions were recorded primarily
due to loan growth and incremental changes in classified loan balances, partially offset by a reversal of loan loss provisions related to the
remaining portion of qualitative reserves established early in the pandemic for uncertain economic risks that were no longer deemed necessary.
The recaptured loan loss provisions during the prior year were predominantly due to the reversal of a portion of our pandemic related qualitative
reserves.
Nonperforming loans totaled $6.5 million and $2.3 million, or 0.09% and 0.04% of total loans, at December 31, 2022 and 2021, respectively. The
increase in nonperforming assets was primarily due to one previously classified loan that was moved to nonaccrual status during the current year.
Classified loans, which includes loans graded Substandard and of greater risk, totaled $18.9 million and $12.1 million at December 31, 2022 and
2021, respectively. Criticized loans, which includes loans graded Special Mention and classified loans, were $22.3 million at December 31, 2022
compared to $16.7 million at December 31, 2021. The increase in classified and criticized loan balances was primarily attributed to isolated credit
related downgrades of several loans and is not thought to represent any particular declining credit trends in our loan portfolio. Our allowance for
loan losses as a percentage of total loans was 0.52% at December 31, 2022 as compared to 0.56% at December 31, 2021.
Noninterest Income
Noninterest income decreased by $226 thousand to $1.7 million for the year ended December 31, 2022 from $1.9 million for the year ended
December 31, 2021. The following table presents the major components of our noninterest income:
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For the Years Ended December 31,
(Dollars in thousands)
2022
2021
$ Increase
(Decrease)
% Increase
(Decrease)
Noninterest Income
FHLB dividends
$
1,588 
$
1,558 
$
30 
1.9 %
Fee income
750 
420 
330 
78.6 %
Other
(678)
(92)
(586)
637.0 %
Total noninterest income
$
1,660 
$
1,886 
$
(226)
(12.0)%
The decrease in noninterest income for the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily due to
a $1.4 million decline in market value on equity securities recorded during the current year compared to a decline in market value of $344
thousand recorded during the prior year, both attributed to the rise in market interest rates. This decrease was partially offset by a $366 increase
in income earned on CRA qualified investments and a $330 thousand increase in servicing fee income due to slower fair value declines in our
mortgage servicing rights due to higher current market interest rates.
Noninterest Expense
Noninterest expense increased $4.9 million, or 8.3%, to $64.0 million for the year ended December 31, 2022 from $59.1 million for 2021. The
following table presents the components of our noninterest expense:
For the Years Ended December 31,
(Dollars in thousands)
2022
2021
$ Increase
(Decrease)
% Increase
(Decrease)
Noninterest Expense
Compensation and related benefits
$
38,185 
$
38,624 
$
(439)
(1.1)%
Deposit insurance premium
2,019 
1,920 
99 
5.2 %
Professional and regulatory fees
2,441 
1,976 
465 
23.5 %
Occupancy
4,781 
4,933 
(152)
(3.1)%
Depreciation and amortization
2,949 
2,561 
388 
15.2 %
Data processing
4,089 
3,785 
304 
8.0 %
Marketing
3,512 
1,240 
2,272 
183.2 %
Merger costs
1,090 
— 
1,090 
N/A
Other expenses
4,961 
4,106 
855 
20.8 %
Total noninterest expense
$
64,027 
$
59,145 
$
4,882 
8.3 %
The increase in noninterest expense during the year ended December 31, 2022 as compared to the prior year was primarily attributable to a $2.3
million increase in marketing costs related to deposit gathering efforts and $1.0 million of costs incurred in connection with our previously
announced merger with WAFD. Additionally, other expenses increased primarily due to an $807 thousand increase in down payment assistance
costs associated with our Daisy program to support home ownership for low-to-moderate income borrowers. Our efficiency ratio was 35.8% for
the year ended December 31, 2022 compared to 34.3% for the prior year.
Income Tax Expense
For the years ended December  31, 2022 and 2021, we recorded income tax expense of $33.5 million and $36.2 million, respectively, with
effective tax rates of 29.5% and 29.2%, respectively.
Financial Condition - As of December 31, 2022 and 2021
Total assets at December  31, 2022 were $8.0 billion, an increase of $794.7 million, or 11.1%, from December  31, 2021. The increase was
primarily due to a $713.0 million increase in loans as compared to the prior year-end. Total liabilities were $7.3 billion at year end, an increase of
$781.3 million, or 12.0%, from December 31, 2021. The increase in total liabilities was primarily attributable to a $456.5 million increase in FHLB
advances and growth in our deposits of $301.1 million.
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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 December 31, 2022 and 2021, our
total loans amounted to $7.0 billion and $6.3 billion, respectively. The following table presents the balance and associated percentage of each
major product type within our portfolio as of the dates indicated.
As of December 31,
2022
2021
2020
2019
2018
(Dollars in thousands)
Amount
% of total
Amount
% of total
Amount
% of total
Amount
% of total
Amount
% of total
Real estate loans
Multifamily residential
$
4,500,500 
64.8 %
$
4,183,194 
66.9 %
$
4,075,893 
67.9 %
$
3,962,929 
64.1 %
$
3,650,967 
60.1 %
Single family residential
2,253,987 
32.4 %
1,859,524 
29.8 %
1,700,119 
28.3 %
1,993,484 
32.3 %
2,231,802 
36.7 %
Commercial real estate
171,767 
2.5 %
186,531 
3.0 %
202,189 
3.4 %
202,452 
3.3 %
183,559 
3.0 %
Construction and land
22,533 
0.3 %
18,094 
0.3 %
22,241 
0.4 %
20,665 
0.3 %
12,756 
0.2 %
Total loans before deferred items
6,948,787 
100.0 %
6,247,343 
100.0 %
6,000,442 
100.0 %
6,179,530 
100.0 %
6,079,084 
100.0 %
Deferred loan costs, net
61,658 
50,077 
49,374 
51,447 
51,546 
Total loans
$
7,010,445 
$
6,297,420 
$
6,049,816 
$
6,230,977 
$
6,130,630 
The relative composition of the loan portfolio has not changed significantly over the past few years. Our primary focus remains multifamily real
estate lending, which constituted 65% and 67% of our portfolio at December 31, 2022 and 2021, respectively. Single family residential lending is
our secondary lending emphasis and represented 32% and 30% of our portfolio at December 31, 2022 and 2021, respectively.
We recognize that our multifamily and single family residential loan products represent concentrations within our balance sheet. Multifamily loan
balances as a percentage of risk-based capital were 560% and 551% as of December 31, 2022 and 2021, respectively. Our single family loans
as a percentage of risk-based capital were 281% and 246% as of the same dates. Additionally, our loans are geographically concentrated with
borrowers and collateral properties on the West Coast. At December 31, 2022, 61%, 27% and 9% of our real estate loans were collateralized by
properties in southern California counties, northern California counties and Washington, respectively, compared to 63%, 26% and 9%,
respectively, at December 31, 2021.
Our lending strategy has been to 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
cash flow evaluations of income property loans and semi-annual stress testing.
We have a small portfolio of construction loans with commitments (funded and unfunded) totaling $38.7 million and $38.1 million at December 31,
2022 and 2021, respectively. As of December 31, 2022, the average loan commitment for our single family construction product, which includes
small tract housing and condominium projects, and our multifamily residential construction loans was $5.7 million and $3.4 million, respectively,
compared to $5.1 million and $6.4 million, respectively, at December 31, 2021. Our construction lending typically focuses on non-owner occupied
single family residential projects with completed per-unit values of $4.0 million or less and multifamily projects with loan commitments of $15.0
million or less. In late 2022, we stopped accepting any new construction loan applications.
37

Table of Contents
The following table presents the activity in our loan portfolio for the periods shown:
For the Years Ended December 31,
(Dollars in thousands)
2022
2021
2020
2019
2018
Loan increases:
Multifamily residential
$
1,193,933 
$
1,282,311 
$
904,588 
$
891,116 
$
1,119,617 
Single family residential
881,290 
768,614 
494,753 
591,177 
828,907 
Commercial real estate
24,471 
2,000 
12,106 
38,088 
84,808 
Construction and land
13,699 
27,612 
9,583 
33,618 
14,555 
Purchases
— 
287,751 
20,380 
10,052 
— 
Total loans originated and purchased
2,113,393 
2,368,288 
1,441,410 
1,564,051 
2,047,887 
Loan decreases:
Loan principal reductions and payoffs
(1,398,372)
(2,095,438)
(1,640,597)
(1,376,413)
(956,578)
Portfolio loan sales
— 
(1,706)
(825)
(68,325)
(19,603)
Other 
(1,996)
(23,540)
18,851 
(18,966)
17,377 
Total loan outflows
(1,400,368)
(2,120,684)
(1,622,571)
(1,463,704)
(958,804)
Net change in total loan portfolio
$
713,025 
$
247,604 
$
(181,161)
$
100,347 
$
1,089,083 
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, negative amortization and interest capitalized as a result of COVID-19 modifications.
Our loan portfolio increased $713.0 million during the year ended December 31, 2022. The growth of our loan portfolio was primarily due to new
loan originations exceeding $2.1 billion and a decrease of $697.1 million in loan curtailments as compared to the prior year due to a slowing of
refinancing activity correlated with the increase in market interest rates. Loan prepayment speeds were 18.2% and 27.4% during the years ended
December 31, 2022 and 2021, respectively.
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 December  31, 2022, our multifamily real estate
portfolio had an average loan balance of $1.7 million, an average unit count of 13.7 units, a weighted average loan to value of 56.7% and a
weighted average debt service coverage ratio of 1.5 times, as compared to an average loan balance of $1.6 million, an average unit count of 14.0
units, a weighted average loan to value of 56.9% and a weighted average debt service coverage ratio of 1.5 times at December 31, 2021.
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 loans to
refinance single family properties. Our underwriting criteria focuses on debt ratios, credit scores, liquidity of the borrower and the borrower’s cash
reserves. At December 31, 2022, our single family residential real estate portfolio had an average loan balance of $907 thousand, a weighted
average loan to value of 64.0% and a weighted average borrower credit score at origination/refreshed of 759. At December 31, 2021, our single
family residential real estate portfolio had an average loan balance of $859 thousand, a weighted average loan to value of 62.5% and a weighted
average borrower credit score at origination/refreshed of 759.
Commercial real estate loans. While not a large part of our portfolio during any period presented, we also lend on nonresidential commercial real
estate. Our nonresidential commercial real estate loans are generally used to finance the purchase or refinance of established multi-tenant
industrial, office and retail sites. At December 31,
(1)
(1) 
38

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2022, our commercial real estate portfolio had an average loan balance of $2.2 million, a weighted average loan to value of 53.9% and a
weighted average debt service coverage ratio of 1.7 times, as compared to an average loan balance of $2.1 million, a weighted average loan to
value of 54.2% and a weighted average debt service coverage ratio of 1.7 times at December 31, 2021.
Construction and land. Other categories of loans included in our portfolio consist of construction and land loans. Construction loans include a
single family construction product, which includes small tract housing and condominium projects, and multifamily construction projects. As of
December 31, 2022 and 2021, the Company had no land loans outstanding.
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
through 15 years
Due after 15 years
Total
As of December 31, 2022:
Loans
Real estate mortgage loans:
Multifamily residential
$
72  $
537  $
39,917  $
4,459,974  $
4,500,500 
Single family residential
27 
468 
51,443 
2,202,049 
2,253,987 
Commercial real estate
— 
41,505 
130,262 
— 
171,767 
Construction and land
17,464 
5,069 
— 
— 
22,533 
Total loans
$
17,563  $
47,579  $
221,622  $
6,662,023  $
6,948,787 
Fixed interest rates
$
—  $
197  $
45,045  $
270,285  $
315,527 
Floating or hybrid adjustable rates
17,563 
47,382 
176,577 
6,391,738 
6,633,260 
Total loans
$
17,563  $
47,579  $
221,622  $
6,662,023  $
6,948,787 
As of December 31, 2021:
Loans
Real estate mortgage loans:
Multifamily residential
$
30  $
2,225  $
37,730  $
4,143,209  $
4,183,194 
Single family residential
27 
631 
56,858 
1,802,008 
1,859,524 
Commercial real estate
— 
11,403 
175,128 
— 
186,531 
Construction and land
10,648 
7,446 
— 
— 
18,094 
Total loans
$
10,705  $
21,705  $
269,716  $
5,945,217  $
6,247,343 
Fixed interest rates
$
—  $
201  $
49,385  $
240,337  $
289,923 
Floating or hybrid adjustable rates
10,705 
21,504 
220,331 
5,704,880 
5,957,420 
Total loans
$
10,705  $
21,705  $
269,716  $
5,945,217  $
6,247,343 
Our fixed interest rate loans generally consist of 30 and 40-year loans that are primarily secured by single family residential properties, often in
conjunction with our efforts to provide affordable housing financing 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 three to ten years and then convert to quarterly or semi-annual
repricing adjustments thereafter. As of December 31, 2022 and 2021, $4.6 billion and $4.8 billion, respectively, of our floating or hybrid adjustable
rate loans were at their floor rates. The weighted average minimum interest rate on loans at their floor rates was 3.66% and 3.75% at
December 31, 2022 and 2021, respectively. Hybrid adjustable rate loans still within their initial fixed term totaled $5.7 billion and $5.1 billion at
December  31, 2022 and 2021, respectively. These loans had a weighted average term to first repricing date of 3.7 years and 3.6 years at
December 31, 2022 and 2021, respectively.
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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 origination. Particular emphasis is placed on our commercial portfolio where risk
assessments are 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 regrading based upon a credit score refresh, among other factors. On an ongoing
basis, we also monitor payment performance, delinquencies, and tax and property insurance compliance, as well as any other pertinent
information that may be available to determine the collectability of a loan. We believe our practices facilitate the early detection and remediation
of problems within our loan portfolio. Assigned risk 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 processes. 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.
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.
Troubled debt 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 ("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.
In conjunction with the passage of the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), as well as the revised interagency
guidance issued in April 2020, "Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working With Customers
Affected by the Coronavirus (Revised)", banks were provided the option, for loans meeting specific criteria, 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 did not recognize
eligible COVID-19 loan modifications as TDRs. Additionally, loans qualifying for these modifications were not required to be reported as
delinquent, non-accrual, impaired or criticized solely as a result of a COVID-19 loan modification. Since June 2021, all loans modified for
pandemic related payment deferral had returned to scheduled payments or were paid off in full.
40

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The following table provides details of our nonperforming and restructured assets as of the dates presented and certain other related information:
As of December 31,
(Dollars in thousands)
2022
2021
2020
2019
2018
Non-accrual loans
     Multifamily residential portfolio
$
3,509 
$
505 
$
522 
$
541 
$
564 
     Single family residential portfolio
2,962 
1,788 
5,791 
5,792 
1,448 
Total non-accrual loans
6,471 
2,293 
6,313 
6,333 
2,012 
Real estate owned
— 
— 
— 
— 
— 
Total nonperforming assets
$
6,471 
$
2,293 
$
6,313 
$
6,333 
$
2,012 
Performing TDRs
$
801 
$
1,204 
$
1,260 
$
1,305 
$
4,434 
Allowance for loan losses to period end nonperforming loans
566.91 %
1,549.72 %
732.04 %
568.47 %
1,705.47 %
Nonperforming loans to period end loans
0.09 %
0.04 %
0.10 %
0.10 %
0.03 %
Nonperforming assets to total assets
0.08 %
0.03 %
0.09 %
0.09 %
0.03 %
Nonperforming loans plus performing TDRs to total loans
0.10 %
0.06 %
0.13 %
0.12 %
0.11 %
When assessing whether a loan should be placed on non-accrual status because contractual payments appear doubtful, consideration is given to
information we collect from third parties and our borrowers to substantiate their future ability to repay principal and interest due on their loans as
contractually agreed.
Interest income recognized on non-accrual loans subsequent to their classification as non-accrual totaled $153 thousand and $125 thousand for
the years ended December 31, 2022 and 2021, respectively. For the years ended December 31, 2022 and 2021, the Company recorded $37
thousand and $94 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 $166 thousand and $15 thousand for the years
ended December 31, 2022 and 2021, respectively.
Potential Problem Loans. We utilize a risk grading system for our loans to aid us in evaluating the overall credit quality of our real estate loan
portfolio and assessing the adequacy of our allowance for loan losses. All loans are categorized into a risk category at the time of origination, re-
evaluated at least annually for proper classification in conjunction with our review of property and borrower financial information and re-evaluated
for proper risk grading as new information such as payment patterns, collateral condition and other relevant information comes to our attention.
We use the following industry accepted definitions for risk ratings.
•
Pass: Assets 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 loan is 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 our credit position at some future date. Special
mention assets are not adversely classified and do not expose us to sufficient risk to warrant adverse classification.
•
Substandard: Assets are inadequately protected by the current net worth 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 we will
sustain some loss, either directly or indirectly (i.e., the cost of monitoring), if the deficiencies are not corrected. 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.
41

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•
Loss: Assets are considered uncollectible and of such little value that its continuance as an asset, 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 achieved in the future.
The banking industry defines loans graded Special Mention or higher risk as ‘‘criticized’’ and loans graded Substandard or greater risk as
‘‘classified’’ loans. The following table shows our level of criticized and classified loans as of the periods indicated:
(Dollars in thousands)
Special Mention
Substandard
Doubtful
Loss
Total Criticized
Total Classified
As of December 31, 2022:
Multifamily residential
$
2,460  $
15,973  $
—  $
—  $
18,433  $
15,973 
Single family residential
— 
2,962 
— 
— 
2,962 
2,962 
Commercial real estate
953 
— 
— 
— 
953 
— 
Construction and land
— 
— 
— 
— 
— 
— 
Total
$
3,413  $
18,935  $
—  $
—  $
22,348  $
18,935 
Classified loans to period end loans
0.27 %
As of December 31, 2021:
Multifamily residential
$
4,586  $
10,320  $
—  $
—  $
14,906  $
10,320 
Single family residential
— 
1,788 
— 
— 
1,788 
1,788 
Commercial real estate
— 
— 
— 
— 
— 
— 
Construction and land
— 
— 
— 
— 
— 
— 
Total
$
4,586  $
12,108  $
—  $
—  $
16,694  $
12,108 
Classified loans to period end loans
0.19 %
As of December 31, 2020:
Multifamily residential
$
19,547  $
20,204  $
—  $
—  $
39,751  $
20,204 
Single family residential
7,132 
6,547 
— 
— 
13,679 
6,547 
Commercial real estate
3,599 
— 
— 
— 
3,599 
— 
Construction and land
— 
— 
— 
— 
— 
— 
Total
$
30,278  $
26,751  $
—  $
—  $
57,029  $
26,751 
Classified loans to period end loans
0.44 %
As of December 31, 2019:
Multifamily residential
$
19,708  $
1,700  $
—  $
—  $
21,408  $
1,700 
Single family residential
13,635 
8,808 
1,600 
— 
24,043 
10,408 
Commercial real estate
— 
— 
— 
— 
— 
— 
Construction and land
— 
— 
— 
— 
— 
— 
Total
$
33,343  $
10,508  $
1,600  $
—  $
45,451  $
12,108 
Classified loans to period end loans
0.20 %
As of December 31, 2018:
Multifamily residential
$
2,631  $
1,937  $
—  $
—  $
4,568  $
1,937 
Single family residential
380 
5,532 
— 
— 
5,912 
5,532 
Commercial real estate
1,489 
— 
— 
— 
1,489 
— 
Construction and land
2,537 
— 
— 
— 
2,537 
— 
Total
$
7,037  $
7,469  $
—  $
—  $
14,506  $
7,469 
Classified loans to period end loans
0.12 %
Potential problem loans represent loans that are currently performing but as to which there is information known to us about possible credit
problems that may result in disclosure of such loans as nonperforming at some time in the future. We define ‘‘potential problem loans’’ as loans
with a risk rating of ‘‘Substandard’’, ‘‘Doubtful’’ or ‘‘Loss’’ that are not included in the amounts of non-accrual or restructured loans. As we cannot
predict all circumstances that may cause our borrowers to default, there can be no assurance that these loans will not be placed on non-accrual
42

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status or become restructured. At December  31, 2022 and 2021, we have identified potential problem loans totaling $12.4 million and $9.8
million, respectively, that were all classified as ‘‘Substandard’’.
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 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 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 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.
 As of December 31,
2022
2021
2020
2019
2018
(Dollars in
thousands)
Allowance for
Loan Losses
% of Loans in
Each
Category
Allowance for
Loan Losses
% of Loans in
Each
Category
Allowance for
Loan Losses
% of Loans in
Each
Category
Allowance for
Loan Losses
% of Loans in
Each
Category
Allowance for
Loan Losses
% of Loans in
Each
Category
Multifamily
residential
$
26,417 
64.8 %
$
26,043 
66.9 %
$
33,259 
67.9 %
$
23,372 
64.1 %
$
21,326 
60.1 %
Single family
residential
8,564 
32.4 %
7,224 
29.8 %
9,372 
28.3 %
10,076 
32.3 %
10,125 
36.7 %
Commercial
real estate
1,539 
2.5 %
2,094 
3.0 %
3,347 
3.4 %
2,341 
3.3 %
2,441 
3.0 %
Construction
and land
165 
0.3 %
174 
0.3 %
236 
0.4 %
212 
0.3 %
422 
0.2 %
Total
$
36,685 
100.0 %
$
35,535 
100.0 %
$
46,214 
100.0 %
$
36,001 
100.0 %
$
34,314 
100.0 %
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Table of Contents
The following table provides information on the activity within the allowance for loan losses as of and for the periods indicated:
Years Ended December 31,
(Dollars in thousands)
2022
2021
2020
2019
2018
Loans held-for-investment
$
7,010,445 
$
6,297,420 
$
6,049,816 
$
6,230,977 
$
6,130,630 
Allowance for loan losses at beginning of period
$
35,535 
$
46,214 
$
36,001 
$
34,314 
$
30,312 
Charge-offs:
     Single family residential
— 
— 
(722)
— 
— 
Recoveries:
     Single family residential
— 
64 
85 
12 
12 
     Commercial real estate
— 
— 
— 
— 
90 
     Construction and land
— 
57 
300 
425 
300 
          Total recoveries
— 
121 
385 
437 
402 
Net recoveries (charge-offs)
— 
121 
(337)
437 
402 
Provision for (reversal of) loan losses
1,150 
(10,800)
10,550 
1,250 
3,600 
Allowance for loan losses at period end
$
36,685 
$
35,535 
$
46,214 
$
36,001 
$
34,314 
Allowance for loan losses to period end loans
0.52 %
0.56 %
0.76 %
0.58 %
0.56 %
Net (recoveries) charge-offs to average loans:
     Multifamily residential
— %
— %
— %
— %
— %
     Single family residential
— %
(0.00)%
0.03 %
(0.00)%
(0.00)%
     Commercial real estate
— %
— %
— %
— %
(0.06)%
     Construction and land
— %
(0.30)%
(1.49)%
(2.67)%
(1.11)%
Total net (recoveries) charge-offs to average loans
— %
(0.00)%
0.01 %
(0.01)%
(0.01)%
Investment Portfolio
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, 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. In addition, we have equity
securities which consist of investments in a qualified community reinvestment fund.
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The following table presents the book value of our investment portfolio:
As of December 31,
2022
2021
(Dollars in thousands)
 Book Value
% of Total
Book Value
% of Total
Available for sale debt securities:
Government and Government Sponsored Entities:
Commercial mortgage backed securities ("MBS") and collateralized
mortgage obligations ("CMOs")
$
340,736 
54.89 %
$
407,746 
61.52 %
Residential MBS and CMOs
199,384 
32.11 %
200,133 
30.19 %
Agency bonds
42,630 
6.87 %
10,831 
1.63 %
Other asset backed securities ("ABS")
24,598 
3.96 %
28,607 
4.32 %
Total available for sale debt securities
607,348 
97.83 %
647,317 
97.66 %
Held to maturity:
Government Sponsored Entities:
Residential MBS
3,047 
0.49 %
3,761 
0.57 %
Other investments
61 
0.01 %
68 
0.01 %
Total held to maturity debt securities
3,108 
0.50 %
3,829 
0.58 %
Equity securities
10,340 
1.67 %
11,693 
1.76 %
Total investment securities
$
620,796 
100.00 %
$
662,839 
100.00 %
The following table presents the book value of our investment portfolio by their stated maturities, as well as the weighted average yields for each
maturity range at December 31, 2022. The weighted average yield on investments is calculated based on the net interest earnings during the
year divided by the average investment balance throughout the year.
Due in one year or
less
Due after one year
through five years
Due after five years
through ten years
Due after ten years
Equity securities
Total
(Dollars in
thousands)
 Book
Value
Weighted
average yield
Book
Value
Weighted
average yield
Book Value
Weighted
average yield
Book Value
Weighted
average yield
Book Value
Weighted
average yield
Book Value
Weighted
average yield
Available for sale:
Government and Government Sponsored Entities:
Commercial
MBS and CMOs $
— 
— %
$
21,937 
3.23 %
$
81,006 
4.62 %
$
237,793 
2.88 %
$
— 
— %
$
340,736 
3.32 %
Residential MBS
and CMOs
— 
— %
9 
3.18 %
38 
4.27 %
199,337 
2.42 %
— 
— %
199,384 
2.42 %
Agency bonds
— 
— %
— 
— %
38,820 
3.65 %
3,810 
3.69 %
— 
— %
42,630 
3.65 %
Other ABS
— 
— %
— 
— %
— 
— %
24,598 
5.15 %
— 
— %
24,598 
5.15 %
Held to maturity:
Government Sponsored Entities:
Residential MBS
— 
— %
— 
— %
— %
3,047 
3.31 %
— 
— %
3,047 
3.31 %
Other investments
— 
— %
— 
— %
61 
3.88 %
— 
— %
— 
— %
61 
3.88 %
Equity Securities
— 
— %
— 
— %
— 
— %
— 
— %
10,340 
1.38 %
10,340 
1.38 %
Total
$
— 
— %
$
21,946 
3.23 %
$
119,925 
4.31 %
$
468,585 
2.81 %
$
10,340 
1.38 %
$
620,796 
3.09 %
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Table of Contents
The following table presents the fair value of our securities:
(Dollars in thousands)
Amortized Cost
Gross Unrealized
Gains
Gross Unrealized
Losses
Fair Value
As of December 31, 2022:
Available for sale:
Government and Government Sponsored Entities:
Commercial MBS and CMOs
$
365,207 
$
265 
$
(24,736)
$
340,736 
Residential MBS and CMOs
221,994 
22 
(22,632)
199,384 
Agency bonds
42,540 
189 
(99)
42,630 
Other ABS
25,763 
— 
(1,165)
24,598 
Total available for sale
655,504 
476 
(48,632)
607,348 
Held to maturity:
Government Sponsored Entities:
Residential MBS
3,047 
— 
(234)
2,813 
Other investments
61 
— 
— 
61 
Total held to maturity
3,108 
— 
(234)
2,874 
Equity securities
10,340 
— 
— 
10,340 
Total investment securities
$
668,952 
$
476 
$
(48,866)
$
620,562 
As of December 31, 2021:
Available for sale:
Government and Government Sponsored Entities:
Commercial MBS and CMOs
$
407,111 
$
3,281 
$
(2,646)
$
407,746 
Residential MBS and CMOs
200,775 
1,225 
(1,867)
200,133 
Agency bonds
10,587 
244 
— 
10,831 
Other ABS
28,720 
37 
(150)
28,607 
Total available for sale
647,193 
4,787 
(4,663)
647,317 
Held to maturity:
Government Sponsored Entities:
Residential MBS
3,761 
189 
— 
3,950 
Other investments
68 
— 
— 
68 
Total held to maturity
3,829 
189 
— 
4,018 
Equity securities
11,693 
— 
— 
11,693 
Total investment securities
$
662,715 
$
4,976 
$
(4,663)
$
663,028 
The unrealized losses on securities are attributed to interest rate changes rather than the marketability of the securities or the issuer’s ability to
honor redemption of the obligations, as the securities with losses are primarily obligations of or guaranteed by agencies sponsored by the U.S.
government. We have adequate liquidity with the ability and intent to hold these securities to maturity resulting in full recovery of the indicated
impairment. Accordingly, none of the unrealized losses on these securities have been determined to be other than temporary.
At December 31, 2022 and 2021, the average estimated remaining life of our available for sale investment portfolio was 5.10 years and 5.30
years, respectively.
Prepaid Expenses and Other Assets
Prepaid expenses and other assets totaled $120.2 million at December 31, 2022 compared to $56.3 million at December 31, 2021, an increase of
$64.0 million, or 113.7%. This increase was primarily due to an $18.2 million increase in the fair value of our swaps due to rising interest rates, an
additional $17.8 million investment in CRA qualified activities, the recording of right-of-use assets related to the adoption of the new lease
accounting standard on January 1, 2022, currently totaling $13.2 million, and an $11.7 million increase in deferred tax assets primarily related to
the decline in the fair value of available for sale investment securities. The new lease standard requires lessees to record a right-of-use asset and
lease liability for all long-term lease obligations.
46

Table of Contents
Deposits
Representing 80.1% of our total liabilities as of December 31, 2022, deposits are our primary source of funding for our business operations. We
have historically maintained and grown our deposit customer base in various rate environments based on our strong customer relationships,
evidenced in part by increased deposits over recent years, as well as our reputation as a safe, sound, secure and "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 newer emphasis placed on specialty/business affiliations and
transaction accounts. When competitively priced and/or for asset liability management purposes, we will supplement our deposits with wholesale
deposits.
Total deposits increased by $301.1 million, or 5.4%, to $5.8 billion at December 31, 2022 from $5.5 billion at December 31, 2021. Brokered
deposits increased $430.0 million, while retail deposits declined $129.0 million, during the year ended December  31, 2022. The increase in
brokered deposits was generally utilized to support loan growth and supplement retail deposit outflows. The decrease in retail deposits during
2022 was attributable to heightened competition from other financial institutions, the brokered certificate of deposit network, investments in US
Treasuries and other investment options due to the rapid and significant rise in market interest rates. During the current year, as a result of the
rising interest rate environment, we saw a change in customer preferences related to term deposits. Consequently, the proportion of non-maturity
deposits within the portfolio decreased to 46.3% at year end compared to 57.8% at December 31, 2021, while our portfolio of time deposits
increased to 53.7% at year end from 42.2% at December 31, 2021. We consider approximately 78.3% of our retail deposits at December 31,
2022 to be core deposits based on our internal methodology, which gives consideration to the tenure of customer relationships, product
penetration and the relative cost of the deposit accounts. Our cost of interest bearing deposits was 1.02% and 0.66% during the years ended
December  31, 2022 and 2021, respectively. The increase during the year ended December  31, 2022 compared to the prior year was
predominantly due to rising market interest rates.
Our loan to deposit ratio was 120% and 114% at December 31, 2022 and 2021, 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 supplement
loan growth and to strategically manage our interest rate risk, as well as our preference to maintain a large proportion of our assets in real estate
loans which generally provide a better yield than high-quality liquid investments.
The following table summarizes our deposit composition by average deposits and average rates paid for the years indicated:
December 31, 2022
December 31, 2021
(Dollars in thousands)
Average amount
Weighted average
rate paid
Percent of total
deposits
Average amount
Weighted average
rate paid
Percent of total
deposits
Noninterest-bearing deposit accounts
$
149,443 
— %
2.6 %
$
112,436 
— %
2.1 %
Interest-bearing transaction accounts
171,077 
0.25 %
3.0 %
158,956 
0.22 %
2.9 %
Money market demand accounts
2,910,026 
0.91 %
51.4 %
2,427,599 
0.48 %
44.5 %
Time deposits
2,432,642 
1.19 %
43.0 %
2,750,461 
0.84 %
50.5 %
Total
$
5,663,188 
0.98 %
100.0 %
$
5,449,452 
0.64 %
100.0 %
The following table sets forth the maturity of time deposits as of December 31, 2022:
(Dollars in thousands, except for column headings)
Insured
Uninsured
Remaining maturity:
Three months or less
$
292,522 
$
186,955 
Over three through six months
406,011 
249,604 
Over six through twelve months
1,109,324 
511,414 
Over twelve months
293,093 
85,450 
Total
$
2,100,950 
$
1,033,423 
Percent of time deposits to total deposits
35.98 %
17.70 %
47

Table of Contents
The Company estimated its balance of uninsured deposits at approximately $1.3 billion and $1.4 billion at December  31, 2022 and 2021,
respectively. At the same dates, the Company had $455.8 million and $25.8 million of wholesale deposits, respectively. As discussed above, the
increase in brokered deposits was utilized to fund loan growth during the year ended December 31, 2022.
FHLB Advances and Other Borrowings
In addition to deposits, we utilize collateralized FHLB borrowings to fund our asset 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 efforts to
reduce the liability sensitive position of our balance sheet. Total FHLB advances increased $456.5 million, or 60.7%, to $1.2 billion at
December 31, 2022 compared to $751.6 million at December 31, 2021. The increase in FHLB advances outstanding at December 31, 2022 as
compared to the prior year, was primarily utilized to fund loan growth during the year ended December 31, 2022. As of both December 31, 2022
and 2021, the Bank had a FHLB letter of credit outstanding totaling $62.6 million.
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 (the "Trusts") of which we own all the common securities, that have
issued trust preferred securities, ("Trust Securities"), to investors in private placement transactions. The proceeds of the securities qualify as Tier
1 capital under the applicable regulations for community banks with total assets less than $15 billion. In accordance with GAAP, the Trusts are not
consolidated in our consolidated statements of financial condition but rather, the common securities are included in our other assets and the
junior subordinated debentures ("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 the dates indicated:
December 31, 2022
December 31, 2021
Date
Maturity
Rate Index
Issuer
Amount
Rate
Amount
Rate
Issued
Date
(Quarterly Reset)
(Dollars in thousands)
Luther Burbank Statutory Trust
I
$
41,238 
6.15 %
$
41,238 
1.58 %
3/1/2006
6/15/2036
3 month LIBOR + 1.38%
Luther Burbank Statutory Trust
II
$
20,619 
6.39 %
$
20,619 
1.82 %
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.
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The following table presents information regarding our FHLB advances and other borrowings as of or for the periods indicated:
As of and for the Years Ended December 31,
(Dollars in thousands)
2022
2021
FHLB advances
Average amount outstanding during the period
$
957,695 
$
868,591 
Maximum amount outstanding at any month-end during the period
1,208,147 
1,048,647 
Balance outstanding at end of period
1,208,147 
751,647 
Weighted average maturity (in years)
1.7 
2.3 
Weighted average interest rate at end of period
2.64 %
1.68 %
Weighted average interest rate during the period
1.97 %
1.67 %
Junior subordinated deferrable interest debentures
Balance outstanding at end of period
$
61,857 
$
61,857 
Weighted average maturity (in years)
14.0 
15.0 
Weighted average interest rate at end of period
6.23 %
1.66 %
Weighted average interest rate during the period
3.26 %
1.64 %
Senior unsecured term notes
Balance outstanding at end of period
$
94,785 
$
94,662 
Weighted average maturity (in years)
1.7 
2.7 
Weighted average interest rate at end of period
6.65 %
6.66 %
Weighted average interest rate during the period
6.65 %
6.66 %
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 our 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 or for the dates indicated:
As of or for the Years Ended December 31,
(Dollars in thousands)
2022
2021
Outstanding at period end
$
56,500 
$
— 
Average amount outstanding
114,952 
110,837 
Maximum amount outstanding at any month end
288,900 
346,900 
Weighted average interest rate at end of period
4.65 %
— %
Weighted average interest rate during the period
2.23 %
0.14 %
Stockholders’ Equity
Stockholders’ equity totaled $682.5 million at December 31, 2022, an increase of $13.4 million, or 2.0%, compared to December 31, 2021. The
increase in stockholders' equity was primarily due to net income of $80.2 million, partially offset by a decline in the fair value of available for sale
investment securities, net of tax, of $34.3 million, dividends paid of $24.6 million and share repurchases of $9.7 million during the year ended
December 31, 2022.
During the year ended December 31, 2022, the Company repurchased 732 thousand of its shares at an average price of $13.30 per share and a
total cost of $9.7 million in connection with a $20.0 million share repurchase plan that was approved by the Company's board of directors on
October 30, 2020. The plan was completed during the second quarter of 2022. Throughout the term of the plan, the Company repurchased a total
of 1.6 million shares at an average price of $12.17.
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Off-Balance Sheet Arrangements
In the normal course of business, we enter into various transactions that are not included in our 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 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 obligations. The
decline in commitments to funds loans and lines of credit as compared to the prior year is primarily attributed to higher market interest rates, as
well as a strategic slowing in lending activity. The following is a summary of our off-balance sheet arrangements outstanding as of the dates
presented.
December 31,
(Dollars in thousands)
2022
2021
Commitments to fund loans and lines of credit
$
37,741 
$
132,769 
In connection with our Freddie Mac multifamily loan securitization, 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 $439 thousand and
$727 thousand at December 31, 2022 and 2021, respectively, which is included in other liabilities and accrued expenses in the consolidated
statements of financial condition.
As of December 31, 2022, the Company held interest rate swaps with an aggregate notional amount of $1.9 billion, two of which, with an
aggregate notional amount of $400 million, have effective dates in February and April 2023. The swaps provide a hedge against the interest rate
risk associated with both fixed rate loans and hybrid adjustable loans in their fixed rate period. Our swaps 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 amounts. As of December 31, 2022, these swaps carried a weighted average fixed rate payment of 1.85%, while receiving a
federal funds weighted average rate of 4.33%. The net hedging impact associated with our swaps is reported in interest income on loans.
We guarantee 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 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 other 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 are material to investors.
Contractual Obligations
The following table presents, as of December 31, 2022, our significant contractual obligations to third parties on debt and lease agreements and
service obligations. For more information about our contractual obligations, see Part II, Item 8. "Financial Statements and Supplementary Data",
Note 20. ‘‘Commitments and Contingencies,’’ in the notes to our consolidated financial statements.
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Payments Due by Period
Less than 1 Year
1 to 3 Years
3 to 5 Years
More than 5
Years
(Dollars in thousands)
Total
Contractual Cash Obligations
Time deposits 
$
2,755,830 
$
359,065 
$
19,478 
$
— 
$
3,134,373 
FHLB advances
306,500 
801,500 
100,000 
147 
1,208,147 
Senior debt
— 
95,000 
— 
— 
95,000 
Junior subordinated debentures
— 
— 
— 
61,857 
61,857 
Operating leases
3,463 
5,191 
4,167 
1,640 
14,461 
Significant contract 
1,721 
3,442 
615 
— 
5,778 
Total
$
3,067,514 
$
1,264,198 
$
124,260 
$
63,644 
$
4,519,616 
Amounts exclude interest.
 Included in total FHLB advances is a $200.0 million advance which matures in September 2025 and contains a FHLB quarterly call provision beginning in September
2023.
 We have one significant, long-term contract for core processing services which expires May 9, 2026. 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 2022 average monthly expense extrapolated over the remaining
life of the contract.
We believe that we will 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
Company’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 Company, 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 Company’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 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 Federal Reserve Bank ("FRB") discount window, draws on
(1)
 (1)(2)
 (1)
 (1)
(3)
(1) 
(2)
(3)
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established federal funds lines from unaffiliated commercial banks and the issuance of debt or equity securities. Our reliance on wholesale
funding sources may fluctuate as economic conditions and customer preferences change. We believe we have ample liquidity resources to fund
future growth and meet other cash needs as necessary.
Our total deposits at December 31, 2022 and 2021 were $5.8 billion and $5.5 billion, respectively. Based on the values of loans pledged as
collateral, our $1.2 billion of FHLB advances outstanding and our $62.6 million FHLB letter of credit outstanding, we had $1.4 billion of additional
borrowing capacity with the FHLB at December 31, 2022. Based on the values of other loans pledged as collateral, we had $274.5 million of
borrowing capacity with the FRB at December 31, 2022. There were no outstanding advances with the FRB at December 31, 2022. 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 December 31, 2022, none of which were 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. Available cash balances at correspondent banks, including
amounts at the FRB, totaled $185.9 million at December 31, 2022.
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 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 December 31, 2022 and 2021, 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.
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. Risk-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 required risk-weighting percentage for these loans.
Commercial real estate lending collateralized by real estate other than multifamily residential properties are generally risk weighted at 100%. Our
leverage ratio is not impacted by the composition of our assets.
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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:
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 December 31, 2022
Tier 1 Leverage Ratio
$
775,259 
9.72 %
$
319,051 
4.00 %
N/A
N/A
N/A
N/A
Common Equity Tier 1 Risk-Based Ratio
713,402 
16.80 %
191,066 
4.50 %
$
297,214 
7.00 %
N/A
N/A
Tier 1 Risk-Based Capital Ratio
775,259 
18.26 %
254,755 
6.00 %
360,902 
8.50 %
N/A
N/A
Total Risk-Based Capital Ratio
812,529 
19.14 %
339,673 
8.00 %
445,820 
10.50 %
N/A
N/A
As of December 31, 2021
Tier 1 Leverage Ratio
$
727,606 
10.12 %
$
287,509 
4.00 %
N/A
N/A
N/A
N/A
Common Equity Tier 1 Risk-Based Ratio
665,749 
17.09 %
175,296 
4.50 %
$
272,683 
7.00 %
N/A
N/A
Tier 1 Risk-Based Capital Ratio
727,606 
18.68 %
233,728 
6.00 %
331,115 
8.50 %
N/A
N/A
Total Risk-Based Capital Ratio
764,048 
19.61 %
311,638 
8.00 %
409,025 
10.50 %
N/A
N/A
Luther Burbank Savings
As of December 31, 2022
Tier 1 Leverage Ratio
$
856,631 
10.74 %
$
318,970 
4.00 %
N/A
N/A
$
398,712 
5.00 %
Common Equity Tier 1 Risk-Based Ratio
856,631 
20.19 %
190,945 
4.50 %
$
297,026 
7.00 %
275,809 
6.50 %
Tier 1 Risk-Based Capital Ratio
856,631 
20.19 %
254,593 
6.00 %
360,674 
8.50 %
339,458 
8.00 %
Total Risk-Based Capital Ratio
893,901 
21.07 %
339,458 
8.00 %
445,538 
10.50 %
424,322 
10.00 %
As of December 31, 2021
Tier 1 Leverage Ratio
$
799,457 
11.13 %
$
287,407 
4.00 %
N/A
N/A
$
359,259 
5.00 %
Common Equity Tier 1 Risk-Based Ratio
799,457 
20.54 %
175,190 
4.50 %
$
272,518 
7.00 %
253,052 
6.50 %
Tier 1 Risk-Based Capital Ratio
799,457 
20.54 %
233,587 
6.00 %
330,915 
8.50 %
311,449 
8.00 %
Total Risk-Based Capital Ratio
835,899 
21.47 %
311,449 
8.00 %
408,777 
10.50 %
389,311 
10.00 %
Impact of Inflation and Changing Prices
Our 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 7A. 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 (repricing risk), changes in the expected maturities of assets and liabilities
arising from embedded options, such as borrowers’ ability to prepay 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 ("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
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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 chairperson of 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
managing our risk 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 ("NII at Risk") and the Economic Value of Equity ("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 -300 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. As market interest rates have continued to increase, we anticipate expanding our yield curve shocks to -400 basis
points in future quarters.
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 Company'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 generally tend to be
negatively correlated historically for the Company. During weak economic times, our loan losses have been higher than normal, but the Federal
Reserve will generally reduce short-term interest rates in an attempt to stimulate the economy and add liquidity. As a result, our interest rate
spread will generally increase during those periods. During strong economic times, when the Federal Reserve raises short-term interest rates to
dampen economic activity, the Company’s interest rate spread decreases. These periods have historically been indicative of inflation and real
property value increases. As such, the decrease in net interest income is typically somewhat offset by 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 December 31, 2022. It
models instantaneous parallel shifts in market interest rates, implied by the forward yield curve over the next one year period.
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Interest Rate Risk to Earnings (NII)
December 31, 2022
(Dollars in millions)
Change in Interest Rates (basis points)
$ Change NII
% Change NII
+400 BP
$(13.2)
(22.6)%
+300 BP
(8.5)
(14.6)%
+200 BP
(4.7)
(8.1)%
+100 BP
(1.9)
(3.3)%
-100 BP
0.9
1.6 %
-200 BP
0.4
0.6 %
-300 BP
(1.3)
(2.3)%
The NII at Risk reported at December 31, 2022 reflects that our earnings were in a liability sensitive position in which an increase in interest rates
is expected to generate lower net interest income. During the year ended December 31, 2022, our NII at Risk increased in connection with
upward interest rate shocks as compared to December  31, 2021 primarily due to loan growth, lower loan market values and slower loan
prepayments, partially offset by an increase in the level of our hedged positions.
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)
December 31, 2022
(Dollars in millions)
Change in Interest Rates (basis points)
$ Change EVE
% Change EVE
+400 BP
$(331.5)
(54.8)%
+300 BP
(226.1)
(37.4)%
+200 BP
(134.8)
(22.3)%
+100 BP
(58.2)
(9.6)%
-100 BP
36.8
6.1 %
-200 BP
51.5
8.5 %
-300 BP
63.8
10.6 %
The EVE reported at December 31, 2022 reflects that our market value of capital was in a liability sensitive position in which an increase in
interest rates is expected to generate lower market values of capital. During the year ended December 31, 2022, our EVE increased as compared
to December 31, 2021 primarily due to faster betas in our deposit portfolio, a higher level of short-term interest rates and loan growth, partially
offset by an increase in the level of our hedged positions.
Certain shortcomings are inherent in the NII at Risk and EVE analyses presented above. Both the NII at Risk 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 long-term borrowings and derivatives, including interest
rate caps and swaps, to mitigate interest rate risk in accordance with regulations and our internal policy. We use or expect to use borrowings,
interest rate caps and swaps as macro hedges against
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interest 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 the repricing of assets and liabilities.
We are currently utilizing FHLB advances and interest rate swaps to hedge our liability sensitive interest rate risk position. As of December 31,
2022, the Company maintained ten interest rate swaps with an aggregate notional amount of $1.9 billion to primarily hedge the interest rate risk
associated with both fixed rate loans and hybrid adjustable loans in their fixed rate period. Two of these swaps with an aggregate notional amount
of $400 million, have effective dates in February and April 2023. All of our 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 derivatives, as well as the offsetting gain or loss on the hedged items
attributable to the hedged risk are recognized in interest income for loans in our consolidated statements of income. During the years ended
December 31, 2022 and 2021, the Company recognized an increase in interest income of $10.0 million and a reduction in interest income of $7.6
million, respectively, in connection with swaps. The increase in interest income during the current year was due to the rapidly rising interest rates
wherein the average variable rate on our interest rate swaps exceeded the average fixed rate owed by us. The prior year reduction in interest
income primarily related to two separate, two-year interest rate swaps with a total notional amount of $1.0 billion, which matured during the year
ended December 31, 2021.
The following table summarizes derivative instruments utilized by us as interest rate risk hedge positions as of December 31, 2022:
(Dollars in thousands)
Fair Value
Hedging Instrument
Hedge Accounting Type
Months to
Maturity
Notional
Other Assets
Other Liabilities
Interest rate swap
Fair value hedge
2 
$
350,000 
$
2,188 
$
— 
Interest rate swap
Fair value hedge
6 
300,000 
6,377 
— 
Interest rate swap
Fair value hedge
15 
100,000 
3,024 
— 
Interest rate swap
Fair value hedge
18 
100,000 
2,331 
— 
Interest rate swap
Fair value hedge
29 
100,000 
3,598 
— 
Interest rate swap
Fair value hedge
38 
200,000 
207 
— 
Interest rate swap
Fair value hedge
57 
100,000 
3,439 
— 
Interest rate swap
Fair value hedge
58 
200,000 
159 
— 
Interest rate swap
Fair value hedge
59 
200,000 
— 
1,056 
Interest rate swap 
Fair value hedge
65 
200,000 
— 
1,080 
$
1,850,000 
$
21,323 
$
2,136 
Effective date of February 23, 2023
Effective date of April 27, 2023
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. Additionally, contracts are in place to ensure that minimum transfer amounts and
collateral requirements are established.
 (1)
(2)
(1) 
(2) 
56

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Item 8. Financial Statements and Supplementary Data
Table of Contents
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID 173)
58
Consolidated Financial Statements:
Consolidated statements of financial condition
60
Consolidated statements of income
61
Consolidated statements of comprehensive income
62
Consolidated statements of changes in stockholders' equity
63
Consolidated statements of cash flows
64
Notes to consolidated financial statements
65
57

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Report of Independent Registered Public Accounting Firm
Shareholders and the Board of Directors of Luther Burbank Corporation
Santa Rosa, California
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated statements of financial condition of Luther Burbank Corporation (the "Company") as of
December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash
flows for each of the years in the two-year period ended December 31, 2022, and the related notes (collectively referred to as the "financial
statements"). We also have audited the Company’s internal control over financial reporting as of December 31, 2022, based on criteria
established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of
December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the two-year period ended December
31, 2022 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in
Internal Control – Integrated Framework: (2013) issued by COSO.
Basis for Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and
for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report. Our
responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial
reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether
effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits
also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a
reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A
company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance
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with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated
or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not
alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Allowance for Loan Losses – Qualitative Factors
As described in Notes 1 and 3 to the consolidated financial statements, the allowance for loan losses represents the estimated probable incurred
credit losses in the Company’s loan portfolio. At December 31, 2022, the allowance for loan losses was $36.7 million, which consists of two
primary components, $0.6 million of specific reserves related to impaired loans and $36.1 million of general reserves for probable incurred losses
related to loans that are not impaired. The general reserve component is based on historical loan loss experience, adjusted for qualitative factors
including economic conditions, the real estate market, volumes, delinquencies, and credit concentrations.
The qualitative factors are inherently subjective to determine and can have a significant impact on the component of the allowance for loan losses
related to general reserves.
Given the significance of qualitative factors to the overall allowance for loan losses, as well as the level of judgment and subjectivity involved in
management’s determination of the qualitative factors, we have identified auditing the qualitative factors to be a critical audit matter. Auditing the
qualitative factors involved a high degree of auditor judgment and required significant audit effort, including involvement of more experienced
audit personnel.
The primary procedures we performed to address this critical audit matter included:
•
Testing the operating effectiveness of controls over the qualitative factors, including controls addressing:
◦
The completeness and accuracy of the data and significant assumptions used as the basis for management’s judgments in
determination of the qualitative factors,
◦
The relevance and reliability of the external data used to support each of the qualitative factors,
◦
The appropriateness of management’s judgments impacting the determination of qualitative factors, and
◦
The mathematical accuracy of the calculation of qualitative factors.
•
Substantively testing management’s qualitative factors, including:
◦
Testing the completeness and accuracy of the data and significant assumptions used as the basis for management’s judgments,
◦
Testing the relevance and reliability of the external data used in the qualitative factors,
◦
Evaluating the appropriateness and sensitivity of the data and significant assumptions used in the determination of qualitative factors,
◦
Verifying the mathematical accuracy of management’s qualitative factors and
◦
Analytically evaluating the qualitative factors for directional consistency and for reasonableness.
/s/ Crowe LLP
We have served as the Company's auditor since 2011.
Sacramento, California
February 22, 2023
59

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LUTHER BURBANK CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollar amounts in thousands)
December 31, 2022
December 31, 2021
ASSETS
Cash and cash equivalents
$
185,895 
$
138,413 
Available for sale debt securities, at fair value
607,348 
647,317 
Held to maturity debt securities, at amortized cost (fair value of $2,874 and $4,018 at December 31,
2022 and 2021, respectively)
3,108 
3,829 
Equity securities, at fair value
10,340 
11,693 
Loans receivable, net of allowance for loan losses of $36,685 and $35,535 at December 31, 2022 and
2021, respectively
6,973,760 
6,261,885 
Accrued interest receivable
24,306 
17,761 
Federal Home Loan Bank ("FHLB") stock, at cost
32,694 
23,411 
Premises and equipment, net
13,661 
16,090 
Goodwill
3,297 
3,297 
Prepaid expenses and other assets
120,223 
56,261 
Total assets
$
7,974,632 
$
7,179,957 
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits
$
5,839,340 
$
5,538,243 
FHLB advances
1,208,147 
751,647 
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 $215
and $338 at December 31, 2022 and 2021, respectively)
94,785 
94,662 
Accrued interest payable
3,964 
118 
Other liabilities and accrued expenses
84,003 
64,297 
Total liabilities
7,292,096 
6,510,824 
Commitments and contingencies (Note 20)
Stockholders' equity:
Preferred stock, no par value; 5,000,000 shares authorized; none issued and outstanding at December
31, 2022 and 2021
— 
— 
Common stock, no par value; 100,000,000 shares authorized; 51,073,272 and 51,682,398 shares issued
and outstanding at December 31, 2022 and 2021, respectively
398,988 
406,904 
Retained earnings
317,711 
262,141 
Accumulated other comprehensive (loss) income, net of taxes
(34,163)
88 
Total stockholders' equity
682,536 
669,133 
Total liabilities and stockholders' equity
$
7,974,632 
$
7,179,957 
See accompanying notes to consolidated financial statements
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LUTHER BURBANK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Dollar amounts in thousands, except per share data)
For the Years Ended December 31,
2022
2021
Interest and fee income:
Loans
$
243,805 
$
219,245 
Investment securities
14,372 
8,451 
Cash and cash equivalents
2,776 
223 
Total interest and fee income
260,953 
227,919 
Interest expense:
Deposits
56,483 
35,612 
FHLB advances
18,904 
14,535 
Junior subordinated deferrable interest debentures
2,015 
1,015 
Senior debt
6,297 
6,298 
Total interest expense
83,699 
57,460 
Net interest income before provision for loan losses
177,254 
170,459 
Provision for (reversal of) loan losses
1,150 
(10,800)
Net interest income after provision for loan losses
176,104 
181,259 
Noninterest income:
FHLB dividends
1,588 
1,558 
Other income
72 
328 
Total noninterest income
1,660 
1,886 
Noninterest expense:
Compensation and related benefits
38,185 
38,624 
Deposit insurance premium
2,019 
1,920 
Professional and regulatory fees
2,441 
1,976 
Occupancy
4,781 
4,933 
Depreciation and amortization
2,949 
2,561 
Data processing
4,089 
3,785 
Marketing
3,512 
1,240 
Other expenses
6,051 
4,106 
Total noninterest expense
64,027 
59,145 
Income before provision for income taxes
113,737 
124,000 
Provision for income taxes
33,539 
36,247 
Net income
$
80,198 
$
87,753 
Basic earnings per common share
$
1.58 
$
1.70 
Diluted earnings per common share
$
1.57 
$
1.70 
Dividends per common share
$
0.48 
$
0.36 
See accompanying notes to consolidated financial statements
61

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LUTHER BURBANK CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollar amounts in thousands)
For the Years Ended December 31,
2022
2021
Net income
$
80,198 
$
87,753 
Other comprehensive loss:
Unrealized loss on available for sale debt securities:
Unrealized holding loss arising during the period
(48,280)
(9,370)
Tax effect
14,029 
2,721 
Total other comprehensive loss, net of tax
(34,251)
(6,649)
Comprehensive income
$
45,947 
$
81,104 
See accompanying notes to consolidated financial statements
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LUTHER BURBANK CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Dollar amounts in thousands, except per share data)
Accumulated Other
Comprehensive Income
(Loss) (Net of Taxes)
Total Stockholders'
Equity
Common Stock
Retained Earnings
Available for Sale
Securities
Shares
Amount
Balance, December 31, 2020
52,220,266 
$
414,120 
$
192,834 
$
6,737 
$
613,691 
Net income
— 
— 
87,753 
— 
87,753 
Other comprehensive loss
— 
— 
— 
(6,649)
(6,649)
Restricted stock award grants
295,058 
— 
— 
— 
— 
Settled restricted stock units
68,873 
— 
— 
— 
— 
Shares withheld to pay taxes on stock based
compensation
(85,825)
(901)
— 
— 
(901)
Restricted stock forfeitures
(54,130)
(72)
14 
— 
(58)
Stock based compensation expense
— 
2,601 
— 
— 
2,601 
Shares repurchased
(761,844)
(8,844)
— 
— 
(8,844)
Cash dividends ($0.36 per share)
— 
— 
(18,460)
— 
(18,460)
Balance, December 31, 2021
51,682,398 
406,904 
262,141 
88 
669,133 
Net income
— 
— 
80,198 
— 
80,198 
Other comprehensive loss
— 
— 
— 
(34,251)
(34,251)
Restricted stock award grants
218,048 
— 
— 
— 
— 
Settled restricted stock units
10,261 
— 
— 
— 
— 
Shares withheld to pay taxes on stock based
compensation
(66,190)
(926)
— 
— 
(926)
Restricted stock forfeitures
(39,172)
(79)
15 
— 
(64)
Stock based compensation expense
— 
2,823 
— 
— 
2,823 
Shares repurchased
(732,073)
(9,734)
— 
— 
(9,734)
Cash dividends ($0.48 per share)
— 
— 
(24,643)
— 
(24,643)
Balance, December 31, 2022
51,073,272 
$
398,988 
$
317,711 
$
(34,163)
$
682,536 
See accompanying notes to consolidated financial statements
63

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LUTHER BURBANK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
For the Years Ended December 31,
2022
2021
Cash flows from operating activities:
Net income
$
80,198 
$
87,753 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
2,949 
2,561 
Provision for (reversal of) loan losses
1,150 
(10,800)
Amortization of deferred loan costs, net
12,588 
19,627 
Amortization of premiums on investment securities, net
496 
2,246 
Stock based compensation expense, net of forfeitures
2,744 
2,529 
Deferred income tax expense (benefit)
2,344 
(778)
Change in fair value of mortgage servicing rights
227 
684 
Change in fair value of equity securities
1,353 
344 
Other items, net
293 
164 
Effect of changes in:
Accrued interest receivable
(6,545)
1,034 
Accrued interest payable
3,846 
(1,270)
Prepaid expenses and other assets
(11,326)
(5,375)
Other liabilities and accrued expenses
(5,393)
8,002 
Net cash provided by operating activities
84,924 
106,721 
Cash flows from investing activities:
Proceeds from maturities, paydowns and calls of available for sale debt securities
138,782 
153,326 
Proceeds from maturities and paydowns of held to maturity debt securities
710 
3,552 
Purchases of available for sale debt securities
(147,578)
(218,439)
Net (increase) decrease in loans receivable
(741,862)
7,678 
Proceeds from sale of loans
— 
1,731 
Purchase of loans, including discounts/premiums
— 
(286,917)
(Purchase) redemption of FHLB stock, net
(9,283)
1,711 
Purchase of premises and equipment
(520)
(434)
Net cash used in investing activities
(759,751)
(337,792)
Cash flows from financing activities:
Net increase in deposits
301,097 
273,914 
Proceeds from long-term FHLB advances
500,000 
350,000 
Repayment of long-term FHLB advances
(100,000)
(405,100)
Net change in short-term FHLB advances
56,500 
— 
Shares withheld for taxes on vested restricted stock
(926)
(901)
Shares repurchased
(9,734)
(8,844)
Cash paid for dividends
(24,628)
(18,446)
Net cash provided by financing activities
722,309 
190,623 
Increase (decrease) in cash and cash equivalents
47,482 
(40,448)
Cash and cash equivalents, beginning of period
138,413 
178,861 
Cash and cash equivalents, end of period
$
185,895 
$
138,413 
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest
$
79,853 
$
58,730 
Income taxes
$
30,640 
$
37,524 
Supplemental non-cash disclosures:
Lease liabilities arising from obtaining right-of-use assets
$
16,930 
$
— 
Non-cash investing activity:
Loans transferred to held for sale
$
— 
$
1,706 
See accompanying notes to consolidated financial statements
64

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LUTHER BURBANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 the Bank's wholly-owned subsidiary, Burbank Investor Services. The
Company also owns Burbank Financial Inc., a real estate investment company that provides limited loan administrative support to the
Bank, and all the common interests in Luther Burbank Statutory Trusts I and II, entities created to issue trust preferred securities.
The Bank conducts its business from its executive offices in Santa Rosa and Gardena, CA. It has ten full service branches in California
located in Sonoma, Marin, Santa Clara, and Los Angeles Counties and one full service branch in Washington located in King County.
Additionally, there are several loan production offices located throughout California.
On November 13, 2022, the Company entered into an Agreement and Plan of Reorganization (the “Merger Agreement”) with
Washington Federal, Inc. (“WAFD”), pursuant to which the Company will merge with and into WAFD (the “Corporate Merger”), with
WAFD surviving the Corporate Merger. Promptly following the Corporate Merger, the Company’s wholly-owned bank subsidiary, Luther
Burbank Savings, will be merged with and into Washington Federal Bank, dba WaFd Bank, the wholly-owned bank subsidiary of WAFD
(“WAFD Bank”), with WAFD Bank as the surviving institution. Closing of the transaction, which is expected to occur in 2023, is
contingent upon shareholder approval and receipt of all necessary regulatory approvals, along with the satisfaction of other customary
closing conditions.
Basis of Presentation
The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting standards and
prevailing practices within the banking industry and include the accounts of the Company and its wholly-owned subsidiaries. The
Company currently has two unconsolidated subsidiaries in the form of wholly-owned statutory business trusts, which were formed to
issue junior subordinated deferrable interest debentures. See Note 10, “Junior Subordinated Deferrable Interest Debentures,” for
additional information regarding these trusts. All intercompany accounts and transactions have been eliminated.
In preparing financial statements in conformity with generally accepted accounting principles ("GAAP"), management makes estimates
and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could
differ from those estimates and assumptions.
Cash and Cash Equivalents
Cash and cash equivalents include cash and deposits with other financial institutions with maturities of less than three months. Net cash
flows are reported for customer loan and deposit transactions, and interest-bearing deposits in other financial institutions.
Investment Securities
The Company classifies its investment securities into three categories, available for sale, held to maturity and equity, at the time of
purchase. Securities available for sale are carried at fair value, with unrealized holding gains and losses reported in other
comprehensive income (loss), net of applicable taxes. Investment securities held to maturity are measured at amortized cost, based on
the Company’s positive intent and ability to hold such securities to maturity. Equity securities are carried at fair value, with unrealized
holding gains and losses reported in other noninterest income within the consolidated statements of income.
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Interest income includes amortization/accretion of purchase premiums/discounts. Premiums and discounts are amortized, or accreted,
over the life of the related investment security, or the earliest call date with respect to premiums on callable securities, as an adjustment
to interest income using a method that approximates the interest method. Gains and losses on sales are recorded on the trade date and
determined using the specific identification method.
An investment security is impaired when its carrying value is greater than its fair value. Investment securities that are impaired are
evaluated on at least a quarterly basis and more frequently when economic or market conditions warrant such an evaluation to
determine whether such a decline in their fair value is other than temporary. Management utilizes criteria such as the magnitude and
duration of the decline and the intent and ability of the Company to retain its investment in the securities for a period of time sufficient to
allow for an anticipated recovery in fair value, in addition to the reasons underlying the decline, to determine whether the loss in value is
other than temporary. The term ‘‘other than temporary’’ is not intended to indicate that the decline is permanent, but indicates that the
prospect for a near-term recovery of value is not necessarily favorable, or that there is a lack of evidence to support a realizable value
equal to or greater than the carrying value of the investment. Once a decline in value is determined to be other than temporary, and
management does not intend to sell the security or it is more likely than not that the Company will not be required to sell the security
before recovery, only the portion of the impairment loss representing credit exposure is recognized as a charge to earnings, with the
balance recognized as a charge to other comprehensive (loss) income. If management intends to sell the security or it is more likely
than not that the Company will be required to sell the security before recovering its forecasted cost, the entire impairment loss is
recognized as a charge to earnings.
Loans Receivable
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their
outstanding unpaid principal balances, net of purchase premiums and discounts, deferred loan origination fees and costs and the
allowance for loan losses. Interest income is accrued on the unpaid principal balance. Premiums or discounts to acquire loans are
amortized over the life of the loan using a method that approximates the interest method. The Company charges fees for originating
loans. These fees, net of certain related direct loan origination costs, are deferred. The net deferred fees or costs on loans held for
investment are recognized as an adjustment of the loan’s yield over the contractual life of the loan using the interest method. The
Company ceases to amortize deferred fees or costs on loans for which the accrual of interest has been discontinued. Other loan fees
and charges representing service costs are reported in income when collected or earned.
Loans Held for Sale
Mortgage loans held for sale are sold with servicing rights released or retained. Realized gains and losses on sales of mortgage loans
are accounted for under the specific identification method and based on the difference between the selling price and the carrying value
of the related loan sold. The carrying value of mortgage loans sold servicing retained is reduced by the amount allocated to the servicing
right.
Concentration of Credit Risk
The majority of our customers are individuals and businesses located and doing business in the state of California, with approximately
half our loan collateral located in Los Angeles and Orange counties. The Company's exposure to credit risk is significantly affected by
changes in the economy of California, and specifically, Los Angeles and Orange Counties.
Allowance for Loan Losses
The allowance for loan losses represents the estimated probable incurred credit losses in the Company’s loan portfolio. Loan losses are
charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if
any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the nature
and volume of the portfolio, information about specific borrower circumstances, estimated collateral values, economic conditions, and
other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in
management’s judgment, should be charged off. The Company performs periodic and systematic detailed reviews of its loan portfolio to
assess the overall
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collectability of its loans. The Company’s methodology for assessing the appropriateness of the allowance consists of the combined total
of two key components.
The first component covers loans that are impaired. All loans are evaluated for impairment on a recurring basis. A loan is considered
impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due,
including principal and interest, according to the contractual terms of the loan agreement.
Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting
scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls
generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on case-by-
case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay,
the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest
owed.
Loans that are reported as troubled debt restructures (“TDRs”) are considered impaired. A restructuring of a debt constitutes a TDR if
the Company, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would
not otherwise consider. Restructured workout loans typically present an elevated level of credit risk as the borrowers are not able to
perform according to the original contractual terms.
Impaired loans and TDRs that are solely dependent on the operation or liquidation of collateral for repayment are measured for
impairment at the fair value of the collateral less estimated costs to sell. Impaired loans, including TDRs, that are not considered
collateral dependent, are measured based on the present value of loan payments expected to be received discounted at the loans’
original effective contractual interest rate. If the recorded investment in the impaired loans exceeds the value of funds to be received, an
allowance is established as a component of the total allowance for loan losses unless the loans are solely dependent on the collateral
for repayment, in which case the amount that exceeds the fair value of the collateral is charged off.
The second element of the allowance covers probable incurred losses inherent in performing loans that have yet to be specifically
identified for impairment. This component of the allowance is estimated by applying reserve factors based on average historical loss
experience for the previous nine to ten years to various loan stratifications based on factors affecting the perceived level of risk including
the type of collateral, loan program, and credit classification. The resulting loss amount is adjusted for qualitative factors to be reflective
of risks or trends affecting the loan portfolio including economic conditions, the real estate market, volumes, delinquencies, and credit
concentrations. The Company has identified the following loan portfolio segments based on collateral type:
Multifamily residential and commercial real estate loans - These loans typically involve greater principal amounts than other
types of loans, and repayment depends upon income generated, or expected to be generated, by the property securing the loan in
amounts sufficient to cover operating expenses and debt service, which may be adversely affected by changes in the economy or
local market conditions. Multifamily residential and commercial real estate loans also expose a lender to significant credit risk
because the collateral securing these loans typically cannot be sold as easily as single family residential real estate. In addition,
some commercial real estate loans are not fully amortizing and contain large balloon payments upon maturity. Such balloon
payments may require the borrower to either sell or refinance the underlying property in order to comply with the terms of the loan
agreement, which may increase the risk of default or non-payment.
Single family residential real estate loans - The degree of risk in single family residential real estate lending depends primarily on
the loan amount in relation to collateral value, the interest rate, and the borrower’s ability to repay in an orderly fashion. These loans
generally possess a lower inherent risk of loss than other real estate portfolio segments. Economic trends determined by
unemployment rates and other key economic indicators are closely correlated to the credit quality of these loans. Weak economic
trends indicate that the borrowers’ capacity to repay their obligations may be deteriorating.
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Construction and land loans - This type of lending generally possess a higher inherent risk of loss than other real estate portfolio
segments. A major risk arises from the necessity to complete projects within specified costs and timelines. Trends in the
construction industry significantly impact the credit quality of these loans, as demand drives construction activity. In addition, trends
in real estate values significantly impact the credit quality of these loans, as property values determine the economic viability of
construction projects.
The total allowance is increased by the provision for loan losses, which is charged against current period operating results, and
decreased by reversals of loan loss provisions as well as loan charge-offs, net of recoveries. Losses incurred upon the initial acquisition
of real estate owned through foreclosure are charged to the allowance for loan losses.
Accrued Interest Receivable on Loans
Interest receivable is only accrued if deemed collectible. It is the Company’s 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. At the time a loan is placed on non-accrual, accrued interest is reversed out of
interest income. 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.
Servicing Rights
When mortgage loans are sold with servicing retained, servicing rights are initially recorded at fair value. Fair value is based on a
valuation model that calculates the present value of estimated future net servicing income.
Under the fair value measurement method, 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, and such changes are included with
other income on the consolidated statements of income. The fair values of servicing rights are calculated using model assumptions
including factors such as prepayment rates, market rates and other model cash flow assumptions. Absent other changes, an increase
(decrease) to the estimated life of serviced loans would generally increase (decrease) the fair value of servicing rights. The fair value of
servicing rights are subject to significant fluctuation as a result of changes in estimates and when actual factors such as prepayment
speeds, default rates, and losses differ from model assumptions.
Servicing fee income, which is reported on the consolidated statements of income as a component of other income, is recorded for fees
earned for servicing loans. The fees are typically based on a contractual percentage of the outstanding principal and are recorded as
income when earned. Fair value adjustments are netted against loan servicing fee income.
Transfers of Financial Assets
Transfers of financial assets are accounted for as sales, when control over the assets has been relinquished. Control over transferred
assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of
conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not
maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.
Real Estate Owned ("REO")
Real estate acquired as a result of loan foreclosure or a deed in lieu of foreclosure is initially recorded at fair value less costs to sell
when acquired, establishing a new cost basis. Physical possession of a residential real estate property collateralizing a consumer
mortgage loan occurs when legal title is obtained upon completion of foreclosure or when the borrower conveys all interest in the
property to satisfy the loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Fair value is typically
based on a real estate appraisal. REO is subsequently accounted for at the lower of cost or fair
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value less estimated costs to sell. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense.
Costs after acquisition related to the development of REO are capitalized while operating costs are charged to expense. Gains or losses
realized and expenses incurred in connection with the disposition of foreclosed real estate are charged to noninterest income within the
consolidated statements of income.
Premises and Equipment
Premises and equipment are stated at cost, less accumulated depreciation and amortization. Land is carried at cost. The Company’s
policy is to depreciate buildings, furniture and equipment on the straight-line basis over the estimated useful lives of the various assets
and to amortize leasehold improvements over the shorter of the asset life or lease term as follows:
    Leasehold improvements        Lesser of term of lease or life of improvement
    Furniture and equipment        2 to 7 years
    Building         39 years
The Company evaluates the recoverability of long-lived assets on an ongoing basis. When assets are sold or otherwise disposed of, the
cost and related accumulated depreciation or amortization are removed from the accounts, and any resulting gain or loss is recognized
in income for the period. The cost of maintenance and repairs is charged to expense as incurred.
Federal Home Loan Bank Stock
As a member of the FHLB, the Bank is required to own capital stock in an amount specified by the level of FHLB borrowings and other
factors, and may invest in additional amounts. FHLB stock is carried at cost, classified as a restricted security and periodically evaluated
for impairment based on the ultimate recovery of par value. Cash dividends are reported as noninterest income on an accrual basis. At
December 31, 2022 and 2021, the Bank owned 326,935 and 234,108 shares, respectively, of $100 par value FHLB stock.
Goodwill
Goodwill arises from business combinations and is generally determined as the excess of the fair value of the consideration transferred
over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill determined to have an indefinite
useful life is not amortized, but tested for impairment at least annually or more frequently if events and circumstances exist that indicate
that a goodwill impairment test should be performed. If the carrying amount of the goodwill exceeds its fair value, an impairment loss is
recognized in the amount of the excess and the carrying value of the goodwill is reduced accordingly. Goodwill is the only intangible
asset with an indefinite life on the balance sheet. Based on an evaluation performed as of December 31, 2022 and 2021, management
determined that the implied fair value of goodwill exceeded its carrying value and no impairments were recognized.
Bank-Owned Life Insurance (“BOLI”)
Bank-owned life insurance is initially recorded at cost. Subsequently, BOLI is carried at the amount that can be realized under the
insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or amounts due that are
probable at settlement. Increases in contract value are recorded as noninterest income and insurance proceeds received are recorded
as a reduction of the contract value. As of both December  31, 2022 and 2021, the balance of BOLI totaled $18.2  million and was
included in prepaid expenses and other assets in the consolidated statements of financial condition.
Qualified Affordable Housing Project Investments
During the years ended December 31, 2022 and 2021, the Company invested in qualified affordable housing projects that are expected
to provide federal and state tax credits in the future. The investments are accounted for using the proportional amortization method. As
of December 31, 2022 and 2021, the Company was committed to invest $17.9 million and $9.8 million, respectively, of which $4.8 million
and $2.8 million, respectively, had been funded and was included in prepaid expenses and other assets in the consolidated statements
of financial condition. The total unfunded commitments related to the investments totaled $13.1 million and $7.0 million at December 31,
2022 and 2021, respectively, and were included in other liabilities and accrued expenses in the consolidated statements of financial
condition. During the
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years ended December  31, 2022 and 2021, the Company recognized amortization expense of $551  thousand and $386  thousand,
respectively, and tax benefits related to the investments of $192 thousand and $117 thousand, respectively. Amortization expense and
tax benefits are included in the provision for income taxes in the consolidated statements of income.
Reserve for Loan Commitments
The Company maintains a reserve within other liabilities associated with commitments to fund undisbursed loan commitments on
outstanding loans. This reserve is determined based upon the historical loss experience of similar loans held by the Company at each
period end. Any changes in this reserve amount are recognized through earnings as a component of noninterest expense. This reserve
is included in other liabilities and accrued expenses in the consolidated statements of financial condition.
Marketing
Marketing costs are expensed as incurred.
Derivatives
At the inception of a derivative contract, the Company designates the derivative as one of three types based on the Company’s
intentions and belief as to the likely effectiveness as a hedge. These three types are (1) a hedge of the fair value of a recognized asset
or liability or of an unrecognized firm commitment (‘‘fair value hedge’’), (2) a hedge of a forecasted transaction or the variability of cash
flows to be received or paid related to a recognized asset or liability (‘‘cash flow hedge’’), or (3) an instrument with no hedging
designation (‘‘stand-alone derivative’’). For a fair value hedge, the gain or loss on the derivative, as well as the offsetting loss or gain on
the hedged item, are recognized in earnings as fair values change. For a cash flow hedge, the gain or loss on the derivative is reported
in other comprehensive income and is reclassified into earnings in the same periods during which the hedged transaction affects
earnings. For both types of hedges, changes in the fair value of derivatives that are not highly effective in hedging the changes in fair
value or expected cash flows of the hedged item are recognized immediately in current earnings. Changes in the fair value of derivatives
that do not qualify for hedge accounting are reported in earnings, as noninterest income.
Net cash settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest expense, based on the
item being hedged. Net cash settlements on derivatives that do not qualify for hedge accounting are reported in noninterest income.
Cash flows on hedges are classified in the cash flow statement the same as the cash flows of the items being hedged.
The Company formally documents the relationship between derivatives and hedged items, as well as the risk-management objective
and the strategy for undertaking hedge transactions at the inception of the hedging relationship. This documentation includes linking fair
value or cash flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted
transactions. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivative
instruments that are used are highly effective in offsetting changes in fair values or cash flows of the hedged items. The Company
discontinues hedge accounting when it determines that the derivative is no longer effective in offsetting changes in the fair value or cash
flows of the hedged item, the derivative is settled or terminates, a hedged forecasted transaction is no longer probable, a hedged firm
commitment is no longer firm, or treatment of the derivative as a hedge is no longer appropriate or intended.
When hedge accounting is discontinued, subsequent changes in fair value of the derivative are recorded as noninterest income. When a
fair value hedge is discontinued, the hedged asset or liability is no longer adjusted for changes in fair value and the existing basis
adjustment is amortized or accreted over the remaining life of the asset or liability. When a cash flow hedge is discontinued but the
hedged cash flows or forecasted transactions are still expected to occur, gains or losses that were accumulated in other comprehensive
income are amortized into earnings over the same periods which the hedged transactions will affect earnings.
Fair Value of Financial Instruments
Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a
separate note. Fair value estimates involve uncertainties and
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matters of judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for
particular items. Changes in assumptions or in market conditions could significantly affect these estimates.
Income Taxes
Income tax expense is the total of the current year income tax due and the change in deferred tax assets and liabilities. Deferred tax
assets and liabilities are recognized for the tax consequences of temporary differences between the reported amount of assets and
liabilities and their tax bases. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date
of enactment.
The Company uses a comprehensive model for recognizing, measuring, presenting, and disclosing in the financial statements tax
positions taken or expected to be taken on a tax return. A tax position is recognized as a benefit only if it is ‘‘more likely than not’’ that
the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the
largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the ‘‘more
likely than not’’ test, no tax benefit is recorded.
The Company recognizes interest accrued and penalties related to income tax matters in tax expense. During the years ended
December 31, 2022 and 2021, the Company recognized no tax related interest or penalties.
Share-Based Compensation
The Company has issued awards of equity instruments, such as restricted stock awards (“RSAs”) and restricted stock units (“RSUs”), to
employees and certain nonemployee directors. Compensation expense related to restricted stock is based on the fair value of the
underlying stock on the award date and is amortized over the service period, defined as the vesting period, using the straight-line
method. The vesting period is generally three years for employees and one year for nonemployee directors. Compensation expense is
reduced for actual forfeitures as they occur. Unvested RSAs and RSUs participate with common stock in any dividends declared, but are
paid only on the shares which ultimately vest. Such dividends are accrued when declared and paid at the time of vesting.
Comprehensive Income
Comprehensive income (loss) includes net income and other comprehensive income (loss). The only item of other comprehensive
income (loss) for the Company are unrealized gains and losses on investment securities classified as available for sale, net of tax.
Reclassification adjustments resulting from gains or losses on investment securities available for sale that have been realized and
included in net income of the current period that also had been included in other comprehensive income as unrealized holding gains or
losses in the period in which they arose have been excluded from comprehensive income (loss) of the current period to avoid double
counting.
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. 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 common shares outstanding during each period, adjusted for the effect of dilutive potential common shares, such as
unvested restricted stock awards and units, calculated using the treasury stock method.
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(Dollars in thousands, except per share amounts)
Years Ended December 31,
2022
2021
Net income
$
80,198 
$
87,753 
Weighted average basic common shares outstanding
50,902,853 
51,582,890 
Add: Dilutive effects of assumed vesting of restricted stock
132,393 
186,208 
Weighted average diluted common shares outstanding
51,035,246 
51,769,098 
Income per common share:
Basic EPS
$
1.58 
$
1.70 
Diluted EPS
$
1.57 
$
1.70 
Anti-dilutive shares not included in calculation of diluted earnings per share
5,857 
8,084 
Related Party Transactions
In the normal course of business, the Company may accept deposits from officers, directors and other related parties. As of
December 31, 2022 and 2021, there were $19.7 million and $26.8 million, respectively, of such deposits. The Company does not permit
loans to officers, directors or other related parties, with the exception of overdraft protection in limited circumstances. As of
December 31, 2022 and 2021, there were no such overdraft loans outstanding.
Business Segments
While the chief decision-makers monitor the revenue streams of the various products and services, operations are managed and
financial performance is evaluated on a Company-wide basis. Discrete financial information is not available other than on a Company-
wide basis. Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable
operating segment.
Recently Issued Accounting Standards
FASB ASU 2016-02
On January 1, 2022, the Company adopted ASU No. 2016-02 “Leases (Topic 842)” and subsequent amendments thereto, which
requires the Company to recognize most leases on the balance sheet. The Company adopted the standard under a modified
retrospective approach as of the date of adoption and elected to apply several of the available practical expedients, including carryover
of historical lease determination and lease classification conclusions and accounting for lease and non-lease components in contracts in
which the Company is a lessee as a single lease component.
Adoption of the leasing standard resulted in the recognition of operating right-of-use assets of $15.8  million, and operating lease
liabilities of $16.3 million as of January 1, 2022. These amounts were determined based on the present value of remaining minimum
lease payments, discounted using the Company’s incremental borrowing rate as of the date of adoption. There was no material impact
to the timing of expense or income recognition in the Company’s consolidated statements of income. Prior periods were not restated and
continue to be presented under legacy GAAP. Disclosures about the Company’s leasing activities are presented in Note 6.
FASB ASU 2016-13
In June 2016, the Financial Accounting Standards Board ("FASB") issued guidance to replace the incurred loss model with an expected
loss model, which is referred to as the current expected credit loss ("CECL") model. The CECL model is applicable to the measurement
of credit losses on financial assets measured at amortized cost, including loan receivables, held to maturity debt securities, and
reinsurance receivables. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments,
standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor. The
transition will be applied as follows:
-    For debt securities with other than temporary impairment ("OTTI"), the guidance will be applied prospectively.
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-    For all other assets within the scope of CECL, a one-time cumulative-effect adjustment will be recognized in retained earnings,
net of tax, as of the beginning of the first reporting period in which the guidance is effective.
In determining an expected allowance under CECL, the Company has selected a credit loss model that utilizes an approach focused on
a loan's probability of default and loss given default. Through December 31, 2022, the Company concluded its model implementation
process, which included validating loan data, segmenting the portfolio, evaluating model results and sensitivities, completing a third
party validation, finalizing qualitative factor adjustments, developing policies and documenting and testing internal controls.
The Company adopted the CECL guidance on January 1, 2023. The impact of the adoption of CECL is still being evaluated but is not
expected to have a material impact on our financial condition or results of operation.
FASB ASU 2020-04
In March 2020, the FASB issued guidance to ease the potential burden in accounting for reference rate reform. The amendments in this
ASU are elective and apply to all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or
another reference rate expected to be discontinued due to reference rate reform. The guidance permits companies to:
–
Simplify accounting analyses for contract modifications.
–
Allow hedging relationships to continue without de-designation if there are qualifying changes in the critical terms of an existing
hedging relationship due to reference rate reform.
–
Allow a change in the systematic and rational method used to recognize in earnings the components excluded from the
assessment of hedge effectiveness.
–
Allow a change in the designated benchmark interest rate to a different eligible benchmark interest rate in a fair value hedging
relationship.
–
Allow for the shortcut method for a fair value hedging relationship to continue for the remainder of the hedging relationship.
–
Simplify the assessment of hedge ineffectiveness and provide temporary optional expedients for cash flow hedging relationships
affected by reference rate reform.
–
Allow a one-time election to sell or transfer debt securities classified as held to maturity that reference a rate affected by
reference rate reform and were classified as held to maturity before January 1, 2020.
These amendments are effective for all entities from the beginning of an interim period that includes the issuance date of this ASU. An
entity may elect to apply the amendments prospectively through December 31, 2022. The adoption of this standard is not expected to
have a material effect on the Company’s operating results or financial condition.
FASB ASU 2022-01
In March 2022, the FASB issued guidance under the of the last-of-layer hedging method in Accounting Standards Codification ("ASC")
815 to expand the current single-layer method to allow multiple layers of a single closed portfolio to be hedged. To reflect the expansion,
the last-of-layer method will be renamed the portfolio layer method. The amendments also expand the scope of and provide additional
guidance specific to the portfolio layer method for hedge accounting. The Company early adopted this standard during the fourth quarter
of 2022. The adoption of this standard did not have a material effect on the Company’s operating results or financial condition.
FASB ASU 2022-02
In March 2022, the FASB issued guidance to improve the usefulness of disclosures regarding certain loan refinancings, restructurings
and write-offs under ASC 326. The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that
have adopted the CECL methodology and enhance the disclosure requirements for certain loan refinancings and restructurings made to
borrowers experiencing financial difficulty. In addition, the amendments require disclosure of current period gross write-offs for financing
receivables and net investments in leases by year of origination. The Company adopted this guidance on January 1, 2023, concurrent
with its adoption of the CECL standard. The
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adoption of this standard did not have a material effect on the Company’s operating results or financial condition.
2.     INVESTMENT SECURITIES
Available for Sale
The following table summarizes the amortized cost and the estimated fair value of available for sale debt securities as of the dates
indicated:
(Dollars in thousands)
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
At December 31, 2022:
Government and Government Sponsored Entities:
Commercial mortgage backed securities ("MBS") and
collateralized mortgage obligations ("CMOs")
$
365,207 
$
265 
$
(24,736)
$
340,736 
Residential MBS and CMOs
221,994 
22 
(22,632)
199,384 
Agency bonds
42,540 
189 
(99)
42,630 
Other asset backed securities ("ABS")
25,763 
— 
(1,165)
24,598 
Total available for sale debt securities
$
655,504 
$
476 
$
(48,632)
$
607,348 
At December 31, 2021:
Government and Government Sponsored Entities:
Commercial MBS and CMOs
$
407,111 
$
3,281 
$
(2,646)
$
407,746 
Residential MBS and CMOs
200,775 
1,225 
(1,867)
200,133 
Agency bonds
10,587 
244 
— 
10,831 
Other ABS
28,720 
37 
(150)
28,607 
Total available for sale debt securities
$
647,193 
$
4,787 
$
(4,663)
$
647,317 
Net unrealized gains (losses) on available for sale investment securities are recorded as accumulated other comprehensive income
(loss) within stockholders’ equity and totaled $(34.2) million and $88 thousand, net of $14.0 million and $(36) thousand in tax assets
(liabilities) at December 31, 2022 and 2021, respectively. There were no sales or transfers of available for sale investment securities and
no realized gains or losses on these securities for the years ended December 31, 2022 or 2021.
The following tables summarize the gross unrealized losses and fair value of available for sale debt securities, aggregated by
investment category and length of time that individual securities have been in a continuous unrealized loss position:
December 31, 2022
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:
Commercial MBS and CMOs
$
188,155 
$
(6,165)
$
109,255 
$
(18,571)
$
297,410 
$
(24,736)
Residential MBS and CMOs
94,137 
(5,912)
99,831 
(16,720)
193,968 
(22,632)
Agency bonds
14,345 
(99)
— 
— 
14,345 
(99)
Other ABS
10,804 
(580)
13,794 
(585)
24,598 
(1,165)
Total available for sale debt
securities
$
307,441 
$
(12,756)
$
222,880 
$
(35,876)
$
530,321 
$
(48,632)
At December 31, 2022, the Company held 58 commercial MBS and CMOs of which 50 were in a loss position and 15 had been in a loss
position for twelve months or more. The Company held 90 residential MBS and CMOs of which 86 were in a loss position and 14 had
been in a loss position for twelve months
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or more. The Company held six agency bonds of which one was in a loss position for less than twelve months. The Company held three
other ABS of which all three were in a loss position and two had been in a loss position for twelve months or more.
December 31, 2021
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:
Commercial MBS and CMOs
$
157,031 
$
(2,632)
$
10,608 
$
(14)
$
167,639 
$
(2,646)
Residential MBS and CMOs
118,803 
(1,864)
247 
(3)
119,050 
(1,867)
Other ABS
15,253 
(150)
— 
— 
15,253 
(150)
Total available for sale debt
securities
$
291,087 
$
(4,646)
$
10,855 
$
(17)
$
301,942 
$
(4,663)
At December 31, 2021, the Company held 54 commercial MBS and CMOs of which 20 were in a loss position and two had been in a
loss position for twelve months or more. The Company held 88 residential MBS and CMOs of which 14 were in a loss position and four
had been in a loss position for twelve months or more. The Company held three other ABS of which two were in a loss position and
neither had been in a loss position for twelve 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 December 31,
2022 and 2021.
As of December  31, 2022 and 2021, 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 December 31, 2022:
Government Sponsored Entities:
Residential MBS
$
3,047 
$
— 
$
(234)
$
2,813 
Other investments
61 
— 
— 
61 
Total held to maturity investment securities
$
3,108 
$
— 
$
(234)
$
2,874 
As of December 31, 2021:
Government Sponsored Entities:
Residential MBS
$
3,761 
$
189 
$
— 
$
3,950 
Other investments
68 
— 
— 
68 
Total held to maturity investment securities
$
3,829 
$
189 
$
— 
$
4,018 
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
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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, 2022:
Government Sponsored Entities:
Residential MBS
$
2,813 
$
(234)
$
— 
$
— 
$
2,813 
$
(234)
At December 31, 2022, the Company had seven held to maturity residential MBS of which all seven were in a loss position and none
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, 2022 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 maturity, the Company does not consider these investments to be other-than-temporarily impaired at December 31,
2022.
The following table summarizes the scheduled maturities of available for sale and held to maturity investment securities as of
December 31, 2022:
December 31, 2022
(Dollars in thousands)
Amortized Cost
Fair Value
Available for sale debt securities
Five to ten years
$
38,756 
$
38,820 
Beyond ten years
3,784 
3,810 
MBS, CMOs and other ABS
612,964 
564,718 
Total available for sale debt securities
$
655,504 
$
607,348 
Held to maturity investments securities
Five to ten years
$
61 
$
61 
MBS
3,047 
2,813 
Total held to maturity debt securities
$
3,108 
$
2,874 
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. As such, mortgage
backed securities, collateralized mortgage obligations and other asset backed securities are not included in the maturity categories
above and instead are shown separately. No securities were pledged as of December 31, 2022 and 2021.
Equity Securities
Equity securities consist of investments in a qualified community reinvestment fund. At December 31, 2022 and 2021, the fair value of
equity securities totaled $10.3 million and $11.7 million, respectively. Changes in fair value are recognized in other noninterest income
and totaled $(1.4) million and $(344) thousand during the years ended December 31, 2022 and 2021, respectively. There were no sales
of equity securities during the years ended December 31, 2022 and 2021.
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3.     LOANS
Loans consist of the following:
December 31,
(Dollars in thousands)
2022
2021
Permanent mortgages on:
Multifamily residential
$
4,532,312 
$
4,210,735 
Single family residential
2,283,628 
1,881,676 
Commercial real estate
172,258 
187,097 
Construction and land
22,247 
17,912 
Total
7,010,445 
6,297,420 
Allowance for loan losses
(36,685)
(35,535)
Loans, net
$
6,973,760 
$
6,261,885 
Certain loans have been pledged to secure borrowing arrangements (see Note 9).
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The following table summarizes activity in and the allocation of the allowance for loan losses by portfolio segment and by impairment
methodology:
(Dollars in thousands)
Multifamily
Residential
Single Family
Residential
Commercial Real
Estate
Land and
Construction
Total
For the Year Ended December 31, 2022:
Allowance for loan losses:
Beginning balance allocated to portfolio
segments
$
26,043 
$
7,224 
$
2,094 
$
174 
$
35,535 
Provision for (reversal of) loan losses
374 
1,340 
(555)
(9)
1,150 
Charge-offs
— 
— 
— 
— 
— 
Recoveries
— 
— 
— 
— 
— 
Ending balance allocated to portfolio
segments
$
26,417 
$
8,564 
$
1,539 
$
165 
$
36,685 
Ending allowance balance allocated to:
Loans individually evaluated for
impairment
$
600 
$
25 
$
— 
$
— 
$
625 
Loans collectively evaluated for
impairment
25,817 
8,539 
1,539 
165 
36,060 
Ending balance
$
26,417 
$
8,564 
$
1,539 
$
165 
$
36,685 
Loans:
Ending balance: individually evaluated for
impairment
$
3,509 
$
6,381 
$
— 
$
— 
$
9,890 
Ending balance: collectively evaluated for
impairment
4,528,803 
2,277,247 
172,258 
22,247 
7,000,555 
Ending balance
$
4,532,312 
$
2,283,628 
$
172,258 
$
22,247 
$
7,010,445 
For the Year Ended December 31, 2021:
Allowance for loan losses:
Beginning balance allocated to portfolio
segments
$
33,259 
$
9,372 
$
3,347 
$
236 
$
46,214 
Reversal of provision for loan losses
(7,216)
(2,212)
(1,253)
(119)
(10,800)
Charge-offs
— 
— 
— 
— 
— 
Recoveries
— 
64 
— 
57 
121 
Ending balance allocated to portfolio
segments
$
26,043 
$
7,224 
$
2,094 
$
174 
$
35,535 
Ending allowance balance allocated to:
Loans individually evaluated for
impairment
$
— 
$
25 
$
— 
$
— 
$
25 
Loans collectively evaluated for
impairment
26,043 
7,199 
2,094 
174 
35,510 
Ending balance
$
26,043 
$
7,224 
$
2,094 
$
174 
$
35,535 
Loans:
Ending balance: individually evaluated for
impairment
$
505 
$
5,687 
$
— 
$
— 
$
6,192 
Ending balance: collectively evaluated for
impairment
4,210,230 
1,875,989 
187,097 
17,912 
6,291,228 
Ending balance
$
4,210,735 
$
1,881,676 
$
187,097 
$
17,912 
$
6,297,420 
The Company assigns a risk rating to all loans and periodically performs detailed reviews of all 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/or other characteristics of loan collateral. These credit quality
indicators are
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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 near future 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/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 table summarizes the loan portfolio allocated by management’s internal risk ratings at December 31, 2022 and 2021.
(Dollars in thousands)
Multifamily
Residential
Single Family
Residential
Commercial Real
Estate
Land and
Construction
Total
As of December 31, 2022:
Grade:
Pass
$
4,469,443 
$
2,269,325 
$
169,711 
$
22,247 
$
6,930,726 
Watch
44,436 
11,341 
1,594 
— 
57,371 
Special mention
2,460 
— 
953 
— 
3,413 
Substandard
15,973 
2,962 
— 
— 
18,935 
Total
$
4,532,312 
$
2,283,628 
$
172,258 
$
22,247 
$
7,010,445 
As of December 31, 2021:
Grade:
Pass
$
4,129,767 
$
1,856,942 
$
180,950 
$
17,523 
$
6,185,182 
Watch
66,062 
22,946 
6,147 
389 
95,544 
Special mention
4,586 
— 
— 
— 
4,586 
Substandard
10,320 
1,788 
— 
— 
12,108 
Total
$
4,210,735 
$
1,881,676 
$
187,097 
$
17,912 
$
6,297,420 
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The following table summarizes an aging analysis of the loan portfolio by the time past due at December 31, 2022 and 2021:
(Dollars in thousands)
30 Days
60 Days
90+ Days
Non-accrual
Current
Total
As of December 31, 2022:
Loans:
Multifamily residential
$
— 
$
— 
$
— 
$
3,509 
$
4,528,803 
$
4,532,312 
Single family residential
— 
— 
— 
2,962 
2,280,666 
2,283,628 
Commercial real estate
— 
— 
— 
— 
172,258 
172,258 
Construction and land
— 
— 
— 
— 
22,247 
22,247 
Total
$
— 
$
— 
$
— 
$
6,471 
$
7,003,974 
$
7,010,445 
As of December 31, 2021:
Loans:
Multifamily residential
$
— 
$
— 
$
— 
$
505 
$
4,210,230 
$
4,210,735 
Single family residential
271 
— 
— 
1,788 
1,879,617 
1,881,676 
Commercial real estate
— 
— 
— 
— 
187,097 
187,097 
Construction and land
— 
— 
— 
— 
17,912 
17,912 
Total
$
271 
$
— 
$
— 
$
2,293 
$
6,294,856 
$
6,297,420 
The following table summarizes information related to impaired loans:
(Dollars in thousands)
Recorded
Investment
Unpaid
Principal
Balance
Related
Allowance
Average
Recorded
Investment
Interest
Income
Cash
Basis
Interest
As of or for the year ended December 31, 2022:
With no related allowance recorded:
Multifamily residential
$
485 
$
562 
$
— 
$
687 
$
47 
$
47 
Single family residential
5,580 
5,779 
— 
5,858 
212 
106 
6,065 
6,341 
— 
6,545 
259 
153 
With an allowance recorded:
Multifamily residential
3,024 
3,002 
600 
233 
— 
— 
Single family residential
801 
798 
25 
820 
28 
— 
3,825 
3,800 
625 
1,053 
28 
— 
Total:
Multifamily residential
3,509 
3,564 
600 
920 
47 
47 
Single family residential
6,381 
6,577 
25 
6,678 
240 
106 
$
9,890 
$
10,141 
$
625 
$
7,598 
$
287 
$
153 
As of or for the year ended December 31, 2021:
With no related allowance recorded:
Multifamily residential
$
505 
$
582 
$
— 
$
802 
$
30 
$
30 
Single family residential
4,847 
5,033 
— 
4,544 
164 
95 
5,352 
5,615 
— 
5,346 
194 
125 
With an allowance recorded:
Single family residential
840 
836 
25 
859 
25 
— 
840 
836 
25 
859 
25 
— 
Total:
Multifamily residential
505 
582 
— 
802 
30 
30 
Single family residential
5,687 
5,869 
25 
5,403 
189 
95 
$
6,192 
$
6,451 
$
25 
$
6,205 
$
219 
$
125 
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The following table summarizes the recorded investment related to TDRs at December 31, 2022 and 2021:
December 31,
(Dollars in thousands)
2022
2021
Troubled debt restructurings:
Single family residential
$
1,211 
$
1,204 
The Company has allocated $25 thousand of its allowance for loan losses for loans modified in TDRs at both December 31, 2022 and
2021. The Company does not have commitments to lend additional funds to borrowers with loans whose terms have been modified in
TDRs.
During the year ended December 31, 2022, the Company modified the terms of one loan that qualified as a TDR. The following table
provides details of this modification:
(Dollars in thousands)
Number of Contracts
Pre-Modification
Outstanding Recorded
Investment
Post-Modification
Outstanding Recorded
Investment
Troubled debt restructurings:
Single family residential
1
$
405 
$
412 
Terms of the modification above included suspension of loan payments for six months and a similar extension of the loan term. The TDR
above resulted in no increase to the allowance for loan losses and no charge-offs primarily due to collateral support provided by the
secondary source of repayment. There were no new TDRs during the year ended December 31, 2021.
The Company had no TDRs with a subsequent payment default within twelve months following the modification during the years ended
December 31, 2022 and 2021. A loan is considered to be in payment default once it is 90 days contractually past due under the modified
terms.
4.     NONPERFORMING ASSETS
Nonperforming assets include nonperforming loans plus REO. The Company’s nonperforming assets at December 31, 2022 and 2021
are indicated below:
December 31,
(Dollars in thousands)
2022
2021
Non-accrual loans:
Multifamily residential
$
3,509 
$
505 
Single family residential
2,962 
1,788 
Total non-accrual loans
6,471 
2,293 
Real estate owned
— 
— 
Total nonperforming assets
$
6,471 
$
2,293 
Interest income on non-accrual loans is subsequently recognized on a cash basis as long as the remaining unpaid principal amount of
the loans are deemed to be fully collectible. If there’s doubt regarding the collectability of the loan, then any interest payments received
are applied to principal. Interest income was recognized on a cash basis on non-accrual loans during the years ended December 31,
2022 and 2021 totaling $153 thousand and $125 thousand, respectively. Contractual interest not recorded on nonperforming loans
during the years ended December 31, 2022 and 2021 totaled $20 thousand and $15 thousand, respectively.
Generally, non-accrual loans are considered impaired because the repayment of the loan will not be made in accordance with the
original contractual agreement.
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5.     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:
December 31,
(Dollars in thousands)
2022
2021
Mortgage loans serviced for:
Federal Home Loan Mortgage Corporation ("Freddie Mac")
$
80,478 
$
127,431 
Other financial institutions
37,503 
58,298 
Total mortgage loans serviced for others
$
117,981 
$
185,729 
Custodial account balances maintained in connection with serviced loans totaled $234 thousand and $5.0 million at December 31, 2022
and 2021, respectively.
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:
Years Ended December 31,
(Dollars in thousands)
2022
2021
Beginning balance
$
915 
$
1,599 
Additions
— 
— 
Disposals
— 
— 
Changes in fair value due to changes in assumptions
— 
— 
Other changes in fair value
(227)
(684)
Ending balance
$
688 
$
915 
Fair value as of December 31, 2022 was determined using a discount rate of 10%, prepayment speeds ranging from 3.5% to 32.3% and
a weighted average default rate of 5%. The weighted average prepayment speed at December 31, 2022 was 23.0%. Fair value as of
December 31, 2021 was determined using a discount rate of 10%, prepayment speeds ranging from 7.6% to 48.8% and a weighted
average default rate of 5%. The weighted average prepayment speed at December 31, 2021 was 29.2%.
6.     LEASES
The Company leases various office premises under long-term operating lease agreements. These leases expire between 2023 and
2033, with certain leases containing five year renewal options. The Company includes lease extension options in the lease term if it is
reasonably certain the Company will exercise the option, when considering the economic incentive to do so. Leases are classified as
operating or finance leases at the lease commencement date. Lease expense for operating leases and short-term leases is recognized
on a straight-line basis over the lease term. All of the Company’s leases are classified as operating leases and prior to the adoption of
ASU 2016-02 on January 1, 2022, were not recognized on the Company's consolidated statements of financial condition.
Upon adoption of the new lease standard on January 1, 2022, the Company recorded operating lease right-of-use assets and operating
lease liabilities on the Company's consolidated statements of financial condition. Right-of-use assets represent our right to use an
underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-
use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease
payments over the lease term.
The Company uses its incremental borrowing rate at lease commencement to discount lease payments when the rate implicit in the
lease is not readily determinable. The Company selected a FHLB advance
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rate at lease inception based on the lease term and other factors, as a reasonable incremental borrowing rate. In addition, the Company
has elected to account for any non-lease components in its leases as part of the associated lease component. The Company also has
elected to not recognize short-term leases with an original term of 12 months or less on the Company's consolidated statements of
financial condition.
Supplemental lease information as of or for the year ended December 31, 2022 is as follows:
(Dollars in thousands)
Operating lease right-of-use assets included in prepaid expenses and other assets
$
13,244 
Operating lease liabilities included in other liabilities and accrued expenses
$
13,316 
Weighted average remaining lease term (years) of operating leases
5.1
Weighted average discount rate of operating leases
2.69 %
Operating lease costs included in occupancy expense
$
3,670 
Cash paid for amounts included in the measurement of operating lease liabilities
$
4,099 
At December 31, 2022, future undiscounted lease payments with initial terms of one year or more are as follows:
(Dollars in thousands)
2023
$
3,463 
2024
2,803 
2025
2,388 
2026
2,203 
2027
1,964 
Thereafter
1,640 
Total undiscounted lease payments
14,461 
Less: Imputed interest
(1,145)
Net lease liabilities
$
13,316 
7.     PREMISES AND EQUIPMENT
Premises and equipment consist of the following:
December 31,
(Dollars in thousands)
2022
2021
Leasehold improvements
$
15,102 
$
15,008 
Furniture and equipment
8,660 
10,046 
Building
6,181 
6,181 
Land
2,429 
2,429 
Total
32,372 
33,664 
Less: accumulated depreciation
(18,711)
(17,574)
Premises and equipment, net
$
13,661 
$
16,090 
Depreciation and amortization expense for the years ended December  31, 2022 and 2021 totaled $2.9 million and $2.6 million,
respectively.
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8.     DEPOSITS
A summary of deposits at December 31, 2022 and 2021 is as follows:
December 31,
(Dollars in thousands)
2022
2021
Time deposits
$
3,134,373 
$
2,335,141 
Money market savings
1,718,008 
2,294,367 
Money market checking
728,231 
580,325 
Interest-bearing demand
158,068 
176,126 
Noninterest-bearing demand
100,660 
152,284 
Total
$
5,839,340 
$
5,538,243 
The Company had time deposits that met or exceeded the FDIC Insurance limit of $250 thousand of $1.3 billion and $1.1 billion at
December 31, 2022 and 2021, respectively.
The Company utilizes brokered deposits as an additional source of funding. The Company had brokered deposits of $455.8 million and
$25.8 million at December 31, 2022 and 2021, respectively. The increase in brokered deposits was utilized to fund loan growth and
supplement retail deposit outflows during the year ended December 31, 2022.
Maturities of the Company’s time deposits at December 31, 2022 are summarized as follows:
Year Ending December 31,
(Dollars in thousands)
2023
$
2,755,830 
2024
351,842 
2025
7,223 
2026
14,209 
2027
5,269 
$
3,134,373 
9.     FEDERAL HOME LOAN BANK AND FEDERAL RESERVE BANK ADVANCES
The Bank may borrow from the 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 December 31, 2022 and 2021, the Bank had pledged various mortgage loans totaling approximately
$4.2 billion and $2.4 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 $904.9 million and $583.0
million as of December 31, 2022 and 2021, respectively, secure this borrowing arrangement. There were no borrowings outstanding with
the FRB as of December 31, 2022 and 2021.
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The following table discloses the Bank’s outstanding advances from the FHLB of San Francisco:
As of December 31, 2022
Outstanding Balances
Minimum
Interest Rate
Maximum
Interest Rate
Weighted
Average Rate
(Dollars in thousands)
December 31,
2022
December 31,
2021
Maturity Dates
Fixed rate short-term
$
56,500 
$
— 
4.65 %
4.65 %
4.65 %
January 2023
Fixed rate long-term
1,151,647 
751,647 
0.38 %
7.33 %
2.55 %
March 2023 to
March 2030
$
1,208,147 
$
751,647 
 Included in total fixed rate long-term advances is a $200.0 million advance which matures in September 2025 and contains a FHLB quarterly call
provision beginning in September 2023.
The Bank's available borrowing capacity based on pledged loans to the FHLB and FRB totaled $1.7 billion and $1.2 billion at
December 31, 2022 and 2021, respectively. As of December 31, 2022 and 2021, the Bank had aggregate loan balances of $1.1 billion
and $2.5 billion, respectively, available to pledge to the FHLB and FRB to increase its borrowing capacity. As of December 31, 2022 and
2021, the Bank pledged as collateral a $62.6 million FHLB letter of credit to Freddie Mac related to our multifamily securitization
reimbursement obligation.
Short-term borrowings are borrowings with original maturities of 90 days or less. During the years ended December 31, 2022 and 2021,
there was a maximum amount of short-term borrowings outstanding of $406.9 million and $352.9 million, respectively, and an average
amount outstanding of $115.0 million and $110.8 million, respectively, with a weighted average interest rate of 2.23% and 0.14%,
respectively.
The following table summarizes scheduled principal payments on FHLB advances over the next five years as of December 31, 2022:
Year Ending December 31,
(Dollars in thousands)
2023
$
306,500 
2024
500,000 
2025
301,500 
2026
100,000 
2027
— 
Thereafter
147 
Total
$
1,208,147 
10.     JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
The Company formed 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 "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, is included in other assets in the consolidated statements of financial condition. The sole asset of the Trusts are the Notes
that they hold.
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
(1)
(1)
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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 December 31, 2022 and 2021:
December 31, 2022
December 31, 2021
Date
Maturity
Rate Index
Issuer
Amount
Rate
Amount
Rate
Issued
Date
(Quarterly Reset)
(Dollars in thousands)
Luther Burbank Statutory
Trust I
$
41,238 
6.15 %
$
41,238 
1.58 %
3/1/2006
6/15/2036
3 month LIBOR + 1.38%
Luther Burbank Statutory
Trust II
$
20,619 
6.39 %
$
20,619 
1.82 %
3/1/2007
6/15/2037
3 month LIBOR + 1.62%
11.     SENIOR DEBT
In September 2014, the Company issued $95.0 million in senior unsecured term notes to qualified institutional investors. The following
table summarizes information on these notes as of December 31, 2022 and 2021:
December 31, 2022
December 31, 2021
(Dollars in thousands)
Principal
Unamortized
Debt Issuance
Costs
Principal
Unamortized
Debt Issuance
Costs
Maturity Date
Fixed
Interest
Rate
Senior Unsecured Term Notes
$
95,000 
$
215 
$
95,000 
$
338 
9/30/2024
6.50 %
12.     INCOME TAXES
The provision for income taxes for the years ended December 31, 2022 and 2021 consists of the following:
Years Ended December 31,
(Dollars in thousands)
2022
2021
Federal:
Current
$
20,113 
$
24,333 
Deferred
1,567 
(980)
Total federal tax provision
21,680 
23,353 
State:
Current
11,082 
12,692 
Deferred
777 
202 
Total state tax provision
11,859 
12,894 
Total income tax provision
$
33,539 
$
36,247 
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The provision for income taxes for the years ended December 31, 2022 and 2021 differs from the statutory federal rate of 21% due to
the following:
Years Ended December 31,
(Dollars in thousands)
2022
2021
Statutory U.S. federal income tax
$
23,885 
$
26,040 
Increase resulting from:
State taxes, net of federal benefit
9,521 
10,180 
Other
133 
27 
Provision for income taxes
$
33,539 
$
36,247 
Deferred tax assets (liabilities) included in other assets in the accompanying consolidated statements of financial condition consist of the
following:
December 31,
(Dollars in thousands)
2022
2021
Deferred tax assets:
Unrealized loss on securities
$
13,993 
$
— 
Allowance for loan losses
10,830 
10,568 
Deferred compensation
7,650 
8,199 
Lease liabilities
3,869 
— 
State tax deduction
2,319 
2,408 
Other
1,177 
612 
Total deferred tax assets
39,838 
21,787 
Deferred tax liabilities:
Loan fee income
(11,498)
(8,719)
Lease right-of-use assets
(3,848)
— 
Federal Home Loan Bank stock dividend income deferred for tax purposes
(837)
(873)
Unrealized gain on securities
— 
(36)
Other
(597)
(786)
Total deferred tax liabilities
(16,780)
(10,414)
Net deferred tax assets
$
23,058 
$
11,373 
In assessing the Company’s ability to realize deferred tax assets, management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those temporary differences become deductible. Management considers
projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable
income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes
it is more likely than not that the Company will realize all benefits related to these deductible differences as of December 31, 2022 and
2021.
There were no unrecognized tax benefits for the years ended December 31, 2022 and 2021.
Until July 1, 1996, the Bank was allowed a special bad debt deduction based on a percentage of federal taxable income or on specified
experience formulas in arriving at federal taxable income. For reserves established in taxable years beginning prior to December 31,
1987, a deferred tax liability was not required to be accrued but has been included as a restriction on retained earnings because such
amounts may require the recognition of a tax liability if, in the future, (1) the Bank’s retained earnings represented by these reserves is
used for purposes other than to absorb losses from bad debts, including dividends or distributions in liquidation or (2) there is a change
in the federal tax law. The cumulative amount of these untaxed reserves was approximately $3.1 million at both December 31, 2022 and
2021. Retained earnings at both December 31, 2022 and 2021 included approximately $930 thousand representing the tax effect of
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such cumulative bad debt deductions for which no deferred income taxes have been provided. In the event that these reserves are
subject to realization, the tax on these reserves will be assessed and paid at the entity level. Management has determined that this
portion of retained earnings will not be used in a manner that will create an income tax liability.
The Company is subject to U.S. federal income tax as well as various other state income taxes. The Company is no longer subject to
examination by taxing authorities for years before 2018 for California tax filings and 2019 for federal and most other state tax filings.
13.     REGULATORY MATTERS
The Company is a registered bank holding company and is subject to regulation, examination, and supervision by the FRB. The Bank is
subject to regulation, examination, and supervision by the FDIC and the California Department of Financial Protection and Innovation
("DFPI").
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. 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.
The Basel III Capital Rules require institutions to retain a capital conservation buffer, composed entirely of CET1, of 2.5% above these
required minimum capital ratio levels. Banking organizations that fail to maintain the minimum 2.5% capital conservation buffer could
face restrictions on capital distributions or discretionary bonus payments to executive officers. Restrictions would begin phasing in where
the banking organization’s capital conservation buffer was below 2.5% at the beginning of a quarter, and distributions and discretionary
bonus payments would be completely prohibited if no capital conservation buffer exists.
The Bank is also governed by numerous federal and state laws and regulations, including the FDIC Improvement Act of 1991, which
established five categories of capital adequacy ranging from “well-capitalized” to critically undercapitalized (although these items are not
utilized to represent overall financial condition). The FDIC utilizes these categories of capital adequacy to determine various matters,
including, but not limited to, prompt corrective action and deposit insurance premium assessment levels. Capital levels and adequacy
classifications may also be subject to qualitative judgments by the Bank’s regulators regarding, among other factors, the components of
capital and risk weighting. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized,
capital distributions and asset growth are limited, and capital restoration plans are required.
As of December 31, 2022 and 2021, the Company and the Bank met all capital adequacy requirements to which they are subject. Also,
as of December 31, 2022 and 2021, 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 December 31, 2022 that management believes
have changed its “well-capitalized” categorization.
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The Company’s and Bank’s actual capital amounts and ratios are presented as follows:
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 December 31, 2022
Tier 1 Leverage Ratio
$
775,259 
9.72 %
$
319,051 
4.00 %
N/A
N/A
N/A
N/A
Common Equity Tier 1 Risk-Based
Ratio
713,402 
16.80 %
191,066 
4.50 %
$
297,214 
7.00 %
N/A
N/A
Tier 1 Risk-Based Capital Ratio
775,259 
18.26 %
254,755 
6.00 %
360,902 
8.50 %
N/A
N/A
Total Risk-Based Capital Ratio
812,529 
19.14 %
339,673 
8.00 %
445,820 
10.50 %
N/A
N/A
As of December 31, 2021
Tier 1 Leverage Ratio
$
727,606 
10.12 %
$
287,509 
4.00 %
N/A
N/A
N/A
N/A
Common Equity Tier 1 Risk-Based
Ratio
665,749 
17.09 %
175,296 
4.50 %
$
272,683 
7.00 %
N/A
N/A
Tier 1 Risk-Based Capital Ratio
727,606 
18.68 %
233,728 
6.00 %
331,115 
8.50 %
N/A
N/A
Total Risk-Based Capital Ratio
764,048 
19.61 %
311,638 
8.00 %
409,025 
10.50 %
N/A
N/A
Luther Burbank Savings
As of December 31, 2022
Tier 1 Leverage Ratio
$
856,631 
10.74 %
$
318,970 
4.00 %
N/A
N/A
$
398,712 
5.00 %
Common Equity Tier 1 Risk-Based
Ratio
856,631 
20.19 %
190,945 
4.50 %
$
297,026 
7.00 %
275,809 
6.50 %
Tier 1 Risk-Based Capital Ratio
856,631 
20.19 %
254,593 
6.00 %
360,674 
8.50 %
339,458 
8.00 %
Total Risk-Based Capital Ratio
893,901 
21.07 %
339,458 
8.00 %
445,538 
10.50 %
424,322 
10.00 %
As of December 31, 2021
Tier 1 Leverage Ratio
$
799,457 
11.13 %
$
287,407 
4.00 %
N/A
N/A
$
359,259 
5.00 %
Common Equity Tier 1 Risk-Based
Ratio
799,457 
20.54 %
175,190 
4.50 %
$
272,518 
7.00 %
253,052 
6.50 %
Tier 1 Risk-Based Capital Ratio
799,457 
20.54 %
233,587 
6.00 %
330,915 
8.50 %
311,449 
8.00 %
Total Risk-Based Capital Ratio
835,899 
21.47 %
311,449 
8.00 %
408,777 
10.50 %
389,311 
10.00 %
Dividends
In the ordinary course of business, the Company is dependent upon dividends from the Bank to provide funds for the payment of
dividends to shareholders and to provide for other cash requirements. Banking regulations may limit the amount of dividends that may
be paid. Approval by regulatory authorities is required if the effect of dividends declared would cause the regulatory capital of the Bank
to fall below specified minimum levels. Approval is also required if dividends declared exceed the net profits for that year combined with
the retained net profits for the preceding two years.
The Company has paid cash dividends of $24.6 million and $18.4 million during the years ended December  31, 2022 and 2021.
Payment of stock or cash dividends in the future will depend upon the Company's earnings and financial condition, and other factors
deemed relevant by the Company’s Board of Directors, as well as the Company’s legal ability to pay dividends. Accordingly, no
assurance can be given that any dividends will be declared in the future. Given the pending merger with WAFD, and the desire to
preserve capital in the current uncertain economic environment, the Company’s board of directors, on January 24, 2023, decided to
suspend any further quarterly cash dividends.
14.     DERIVATIVES AND HEDGING ACTIVITIES
From time to time, the Company utilizes interest rate swaps and other derivative financial instruments as part of its asset liability
management strategy to manage interest rate risk positions. The notional amount of interest rate swaps do not represent amounts
exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the
individual interest rate swap agreements.
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Fair Value Hedges of Interest Rate Risk
As of December 31, 2022, the Company held ten interest rate swaps with a total notional amount of $1.9 billion, two of which, with an
aggregate notional amount of $400 million, have effective dates in February and April 2023. The swaps provide a hedge against the
interest rate risk associated with both fixed rate loans and hybrid adjustable loans in their fixed rate period.
All outstanding 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.
Any gain or loss on the derivatives, as well as any offsetting loss or gain on the hedged items attributable to the hedged risk are
recognized in interest income on loans.
The following table presents the effect of the Company’s interest rate swaps on the consolidated statements of income for the years
ended December 31, 2022 and 2021:
Years Ended December 31,
(Dollars in thousands)
2022
2021
Derivative - interest rate swaps:
Interest income (loss)
$
10,189 
$
(7,570)
Hedged items - loans:
Interest loss
(170)
(31)
Net increase (decrease) in interest income
$
10,019 
$
(7,601)
The following table presents the fair value of the Company’s interest rate swaps, as well as their classification in the consolidated
statements of financial condition as of December 31, 2022 and 2021:
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 December 31, 2022:
Interest Rate Swaps
$
1,850,000 
Prepaid Expenses and
Other Assets
$
21,323 
Other Liabilities and
Accrued Expenses
$
2,136 
As of December 31, 2021:
Interest Rate Swaps
$
650,000 
Prepaid Expenses and
Other Assets
$
3,108 
Other Liabilities and
Accrued Expenses
$
— 
As of December 31, 2022 and 2021, the following amounts were recorded in the 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 December 31, 2022:
Loans receivable, net
$
1,430,641 
$
(19,359)
As of December 31, 2021:
Loans receivable, net
$
646,890 
$
(3,110)
These amounts include the amortized cost basis of portfolio loans used to designate hedging relationships in which the hedged item is the
stated amount of assets in the closed portfolios anticipated to be outstanding for the designated hedge period. At December 31, 2022 and
2021, the amortized cost basis of the portfolio loans used in these hedging relationships were $3.9 billion and $1.0 billion, respectively.
 (1)
(1) 
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15.     EMPLOYEE BENEFIT PLANS
Salary Continuation Arrangements
The Company has individual salary continuation agreements with certain current and former key executives and directors. These
agreements are accounted for as deferred compensation arrangements and are unsecured and unfunded. Benefits under these
agreements are fixed for each participant and are payable over a specific period following their retirement or at an earlier date such as
termination without cause, the sale of the Company, or death. Participants vest in these agreements based on their years of service
subsequent to being covered under these agreements.
The accrued obligation of $15.4 million and $17.3 million as of December 31, 2022 and 2021, respectively, is included in other liabilities
and accrued expenses in the accompanying consolidated statements of financial condition. The Company recognized compensation
expense of $(805) thousand and $2.3 million related to these agreements for the years ended December  31, 2022 and 2021,
respectively.
The Company has purchased insurance on the lives of the participants to help offset the cost of the benefits accrued under these
agreements and provide death benefits to fund obligations in the event an employee dies prior to retirement. The cash surrender value
of such policies was $18.2 million at both December 31, 2022 and 2021, respectively, and is reflected in prepaid expenses and other
assets in the accompanying consolidated statements of financial condition. Earnings on these life insurance policies were $73 thousand
and $16 thousand for the years ended December 31, 2022 and 2021, respectively.
401(k) Plan
The Company maintains a 401(k) Savings Plan for substantially all employees age 18 or older who have completed at least six months
of service. Employees may contribute up to the maximum statutory allowable contribution which was $20,500 and $19,500 for 2022 and
2021, respectively. The Company matches 100% of employee salary contribution deferrals up to 3% of pay, plus 50% of employee
salary contribution deferrals from 3% to 5% of pay. Company contributions for both years ended December 31, 2022 and 2021 were
$1.1 million.
16.     STOCK BASED COMPENSATION
The Company’s stock based compensation consists of RSUs and RSAs granted under the Luther Burbank Corporation Omnibus Equity
and Incentive Compensation Plan ("Omnibus Plan"). In connection with its initial public offering ("IPO") in December 2017, the Company
granted RSUs in exchange for unvested phantom stock related to a then discontinued employee benefit plan that awarded phantom
stock to certain key executives and nonemployee directors. The RSUs were granted on a per share basis, with the same vesting
schedule and deferral elections that existed for the original phantom stock awards. Post IPO, the Company typically grants RSAs to
nonemployee directors and certain employees on an annual basis. RSA grants vest ratably over one year for nonemployee directors
and ratably over three to four years for employees.
All RSAs and RSUs are granted at the fair value of the common stock at the time of the award. 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 years ended
December 31, 2022 and 2021 totaled $2.7 million and $2.5 million, respectively. The fair value of RSAs that vested during the years
ended December 31, 2022 and 2021 was $2.7 million and $2.4 million, respectively.
As of December  31, 2022 and 2021, there was $2.4 million and $2.6 million, respectively, of unrecognized compensation expense
related to 414,004 and 489,703 unvested shares of RSAs, respectively, which amounts are expected to be recognized over a weighted
average period of 1.74 years and 1.69 years, respectively. As of December 31, 2022 and 2021, 81,225 and 91,486 shares, respectively,
of RSUs were vested and remain unsettled per the original deferral elections. There were no unvested RSUs at December 31, 2022 and
2021.
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The following table summarizes share information about RSAs and RSUs:
Years Ended December 31,
2022
2021
Number of
Shares
Weighted
Average Grant
Date Fair Value
Number of
Shares
Weighted
Average Grant
Date Fair Value
Beginning of the period balance
581,189 
$
10.56 
605,916 
$
10.93 
Shares granted
218,048 
13.78 
295,058 
10.17 
Shares settled
(264,836)
10.49 
(265,655)
11.02 
Shares forfeited
(39,172)
12.01 
(54,130)
10.30 
End of the period balance
495,229 
$
11.89 
581,189 
$
10.56 
Under its Omnibus Plan, the Company reserved 3,360,000 shares of common stock for new awards. At December 31, 2022 and 2021,
there were 1,682,468 and 1,861,344 shares, respectively, of common stock reserved and available for grant through restricted stock or
other awards under the Omnibus Plan. RSU awards were initially issued to replace unvested phantom stock awards under the Luther
Burbank Corporation Phantom Stock Plan and were excluded from the shares reserved and available for grant under the Omnibus Plan.
17.     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:
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For cash, cash equivalents and restricted cash, accrued interest receivable and payable, demand deposits and short-term borrowings,
the carrying amount was estimated to be fair value. The fair value of accrued interest receivable/payable balances were 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 and held to maturity debt securities, which include primarily debt securities issued by U.S. government
sponsored agencies, were based on quoted market prices for similar securities.
Fair values for equity securities, which consist of investments in a qualified community reinvestment fund, were based on quoted market
prices.
Loans were valued using the exit price notion. The fair value was estimated using market quotes for similar assets or the present value
of future cash flows, discounted using a market rate for similar products and giving consideration to estimated prepayment risk and
credit risk. The fair value of loans was determined utilizing estimates resulting in a Level 3 classification.
Impaired loans  were measured for impairment based on the present value of expected future cash flows discounted at the 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
was 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.
The fair value of servicing rights was determined using a valuation model that utilizes interest rate, prepayment speed, and default rate
assumptions that market participants would use in estimating future net servicing income and that can be validated against available
market data.
The fair values of derivatives were based on valuation models using observable market data as of the measurement date.
Fair values for fixed-rate time deposits were estimated using discounted cash flow analyses using interest rates offered at each
reporting date by the Company for time deposits with similar remaining maturities. For deposits with no contractual maturity, the fair
value was assumed to equal the carrying value.
The fair value of FHLB advances was estimated based on discounting the future cash flows using the market rate currently offered for
similar terms.
The fair value of subordinated debentures was based on an indication of value provided by a third-party broker.
For senior debt, the fair value was based on an indication of value provided by a third-party broker.
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Fair Value of Financial Instruments
The carrying and estimated fair values of the Company’s financial instruments were as follows:
Fair Level Measurements Using
(Dollars in thousands)
Carrying
Amount
Fair Value
Level 1
Level 2
Level 3
As of December 31, 2022:
Financial assets:
Cash and cash equivalents
$
185,895 
$
185,895 
$
185,895 
$
— 
$
— 
Debt securities:
Available for sale
607,348 
607,348 
— 
607,348 
— 
Held to maturity
3,108 
2,874 
— 
2,874 
— 
Equity securities
10,340 
10,340 
— 
10,340 
— 
Loans receivable, net
6,973,760 
6,743,783 
— 
— 
6,743,783 
Accrued interest receivable
24,306 
24,306 
58 
4,171 
20,077 
FHLB stock
32,694 
N/A
N/A
N/A
N/A
Interest rate swaps
21,323 
21,323 
— 
21,323 
— 
Financial liabilities:
Deposits
$
5,839,340 
$
5,789,929 
$
2,449,966 
$
3,339,963 
$
— 
FHLB advances
1,208,147 
1,153,511 
— 
1,153,511 
— 
Junior subordinated deferrable
interest debentures
61,857 
56,967 
— 
56,967 
— 
Senior debt
94,785 
94,652 
— 
94,652 
— 
Accrued interest payable
3,964 
3,964 
— 
3,964 
— 
Interest rate swaps
2,136 
2,136 
— 
2,136 
— 
As of December 31, 2021:
Financial assets:
Cash and cash equivalents
$
138,413 
$
138,413 
$
138,413 
$
— 
$
— 
Debt securities:
Available for sale
647,317 
647,317 
— 
647,317 
— 
Held to maturity
3,829 
4,018 
— 
4,018 
— 
Equity securities
11,693 
11,693 
— 
11,693 
— 
Loans receivable, net
6,261,885 
6,297,548 
— 
— 
6,297,548 
Accrued interest receivable
17,761 
17,761 
1 
927 
16,833 
FHLB stock
23,411 
N/A
N/A
N/A
N/A
Interest rate swaps
3,108 
3,108 
— 
3,108 
— 
Financial liabilities:
Deposits
$
5,538,243 
$
5,541,417 
$
2,918,102 
$
2,623,315 
$
— 
FHLB advances
751,647 
755,981 
— 
755,981 
— 
Junior subordinated deferrable
interest debentures
61,857 
61,545 
— 
61,545 
— 
Senior debt
94,662 
103,361 
— 
103,361 
— 
Accrued interest payable
118 
118 
— 
118 
— 
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.
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Assets and Liabilities Recorded at Fair Value
The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring and
nonrecurring basis as of December 31, 2022 and 2021.
Recurring Basis
The Company is required or permitted to record the following assets and liabilities at fair value on a recurring basis:
(Dollars in thousands)
Fair Value
Level 1
Level 2
Level 3
As of December 31, 2022:
Financial Assets:
Available for sale debt securities:
Government and Government Sponsored Entities:
Commercial MBS and CMOs
$
340,736 
$
— 
$
340,736 
$
— 
Residential MBS and CMOs
199,384 
— 
199,384 
— 
Agency bonds
42,630 
— 
42,630 
— 
Other ABS
24,598 
— 
24,598 
— 
Total available for sale debt securities
$
607,348 
— 
$
607,348 
— 
Equity securities
$
10,340 
$
— 
$
10,340 
$
— 
Mortgage servicing rights
688 
— 
— 
688 
Interest rate swaps
21,323 
— 
21,323 
— 
Financial Liabilities:
Interest rate swaps
$
2,136 
$
— 
$
2,136 
$
— 
As of December 31, 2021:
Financial Assets:
Available for sale debt securities:
Government and Government Sponsored Entities:
Commercial MBS and CMOs
$
407,746 
$
— 
$
407,746 
$
— 
Residential MBS and CMOs
200,133 
— 
200,133 
— 
Agency bonds
10,831 
— 
10,831 
— 
Other ABS
28,607 
— 
28,607 
— 
Total available for sale debt securities
$
647,317 
$
— 
$
647,317 
$
— 
Equity securities
$
11,693 
$
— 
$
11,693 
$
— 
Mortgage servicing rights
915 
— 
— 
915 
Interest rate swaps
3,108 
— 
3,108 
— 
There were no transfers between Level 1 and Level 2 during 2022 or 2021.
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.
As of December 31, 2022 and 2021, there were no assets or liabilities measured at fair value on a non-recurring basis and the Company
held no REO.
18.     VARIABLE INTEREST ENTITIES ("VIE")
The Company is involved with VIEs through its loan securitization activities. The Company evaluated 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,
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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. The assessment includes an evaluation of the
Company's continuing involvement with the VIE and the nature and significance of its variable interests.
Multifamily loan securitization
With respect to the securitization transaction with Freddie Mac which settled September 27, 2017, the Company's variable interests
reside with a reimbursement agreement entered into with Freddie Mac that obligates the Company to reimburse Freddie Mac for
defaulted contractual principal and interest payments identified after the ultimate resolution of any 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 Company released all servicing obligations and rights to Freddie Mac who was designated as the Master
Servicer. As Master Servicer, Freddie Mac appointed the Company 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 Company and
Freddie Mac. Freddie Mac, in its capacity as Master Servicer, can terminate the Company in its role as sub-servicer and direct such
responsibilities accordingly. In evaluating the variable interests and continuing involvement in the VIE, the Company determined that 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 Company 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. Hence, the Company determined that
the VIE associated with the multifamily securitization should not be included in the consolidated financial statements of the Company.
The Company believes its maximum exposure to loss as a result of 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. The reserve for estimated losses with respect to the reimbursement obligation totaled $439 thousand and $727
thousand as of December 31, 2022 and 2021, respectively, based upon an analysis of quantitative and qualitative data of the underlying
loans included in the securitization pool. No disbursements have been made in connection with the reimbursement obligation.
19.     LOAN SALE AND SECURITIZATION ACTIVITIES
The Company periodically sells 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 to date on September 27, 2017 with
Freddie Mac. The transaction involved the sale of $626  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 obligation.
As sub-servicer for Freddie Mac, the Bank is required to maintain a minimum net worth in accordance with GAAP of not less than
$2.0 million. If the Bank's capital were to fall below this threshold, Freddie Mac would have the authority to terminate and assume the
Bank’s sub-servicing duties. At December 31, 2022, the Bank’s net worth was $825.8 million which equates to its Tier 1 capital of $856.6
million plus goodwill of $3.3 million and accumulated other comprehensive income related to net unrealized losses on available for sale
securities of $34.2 million.
General representations and warranties associated with loan sales and the securitization transaction require the Company 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 Company breaches its
representations and warranties, the Company would generally be required to cure such instances through a repurchase or substitution
of the subject loan(s).
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With respect to the securitization transaction, the Company 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 Company 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.
The following table provides cash flows associated with the Company's loan sale activities:
Years Ended December 31,
(Dollars in thousands)
2022
2021
Proceeds from loan sales
$
— 
$
1,731 
Servicing fees
330 
555 
The following table provides information about the loans transferred through sales or securitization and not recorded in the consolidated
statements of financial condition, for which the Company's continuing involvement includes sub-servicing or servicing responsibilities
and/or reimbursement obligations:
(Dollars in thousands)
Single Family
Residential
Multifamily
Residential
As of December 31, 2022:
Principal balance of loans
$
11,000 
$
106,981 
Loans 90+ days past due
— 
— 
Charge-offs, net
— 
— 
As of December 31, 2021:
Principal balance of loans
12,243 
173,486 
Loans 90+ days past due
— 
— 
Charge-offs, net
— 
— 
20.     COMMITMENTS AND CONTINGENCIES
Financial Instruments With Off-Balance Sheet Risk
The Company is a party to financial instruments with 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 loans in process, and
involve, to varying degrees, credit risk and interest rate risk in excess of the amount recognized in the Company’s consolidated
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 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 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 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 December  31, 2022 and 2021, the Company had outstanding commitments of approximately $37.7 million and $132.8 million,
respectively, for loans and lines of credit. Unfunded loan commitment reserves totaled $125 thousand and $153 thousand at
December 31, 2022 and 2021, respectively.
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Contingencies
At present, there are no pending or threatened proceedings against the Company which, if determined adversely, would have a material
effect on the Company’s business, financial position, results of operations or cash flows. 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.
Insured portions of these balances are limited to $250 thousand per institution based on FDIC insurance limits. At December 31, 2022
and 2021, the Company had $25.0 million and $25.5 million, respectively, in uninsured cash balances. The Company also has
established federal funds lines of credit with correspondent banks totaling $50.0 million at both December 31, 2022 and 2021, none of
which were advanced at those dates. The Company periodically monitors the financial condition and capital adequacy of these
correspondent banks.
21.     PARENT COMPANY ONLY FINANCIAL INFORMATION
Summary parent company only financial information for the years ended December 31, 2022 and 2021 is as follows:
CONDENSED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands)
December 31,
2022
2021
ASSETS
Cash and cash equivalents
$
10,622 
$
20,073 
Investment in Bank
825,765 
802,843 
Investment in Burbank Financial, Inc.
36 
333 
Investment in Luther Burbank Statutory Trusts I & II
1,857 
1,857 
Receivable from Bank
246 
241 
Other assets
836 
354 
Total assets
$
839,362 
$
825,701 
LIABILITIES AND STOCKHOLDERS' EQUITY
Junior subordinated deferrable interest debentures
$
61,857 
$
61,857 
Other borrowings
94,785 
94,662 
Interest payable on junior subordinated deferrable interest debentures
182 
49 
Other liabilities and accrued expenses
2 
— 
Stockholders' equity
682,536 
669,133 
Total liabilities and stockholders' equity
$
839,362 
$
825,701 
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CONDENSED STATEMENTS OF INCOME
(Dollars in thousands)
Years Ended December 31,
2022
2021
Net interest expense
$
(8,313)
$
(7,313)
Dividend income from Bank
29,200 
22,700 
Dividend income from Burbank Financial, Inc.
300 
— 
Other noninterest income
60 
30 
Other operating expense
(457)
(308)
Income before income tax benefit and undistributed net income of
subsidiaries
20,790 
15,109 
Income tax benefit
2,532 
2,213 
Income before undistributed net income of subsidiaries
23,322 
17,322 
Equity in undistributed net income of subsidiaries
56,876 
70,431 
Net income 
$
80,198 
$
87,753 
 The group files a single tax return and the subsidiaries are treated, for federal, California and Oregon tax purposes, as divisions of a
single corporation. The Company’s share of income tax expense is based on the amount which would be payable or receivable if
separate returns were filed. Accordingly, the Company’s equity in the net income of its subsidiaries, including the Bank, are excluded
from the computation of income taxes for financial statement purposes. For the years ended December  31, 2022 and 2021, the
Company provided tax at the rates of 21.0%, 10.84% and 6.6% for federal, California and Oregon taxes, respectively.
CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Years Ended December 31,
2022
2021
Cash flows from operating activities:
Net income
$
80,198 
$
87,753 
Adjustments to reconcile net income to net cash provided by operating
activities:
Equity in undistributed net income of subsidiaries
(56,876)
(70,431)
Change in receivable from Bank
(5)
6 
Stock based compensation
2,744 
2,529 
Net change in other assets and liabilities
(224)
(618)
Net cash provided by operating activities
25,837 
19,239 
Cash flows from financing activities:
Cash paid for dividends
(24,628)
(18,446)
Shares withheld for taxes on vested restricted stock
(926)
(901)
Shares repurchased
(9,734)
(8,844)
Net cash used in financing activities
(35,288)
(28,191)
Decrease in cash and cash equivalents
(9,451)
(8,952)
Cash and cash equivalents, beginning of year
20,073 
29,025 
Cash and cash equivalents, end of year
$
10,622 
$
20,073 
(1)
(1)
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
As of the end of the period covered by this Annual Report on Form 10-K, the Company carried out an evaluation, under the supervision and with
the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and
operation of its disclosure controls and procedures. In designing and evaluating the disclosure controls and procedures, management recognizes
that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired
control objectives, and management was required to apply judgment in evaluating its controls and procedures. Based on this evaluation, the
Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective as of the end of the period covered by this report. See Exhibits 31 and 32
for the Certification statements issued by the Company’s Chief Executive Officer and Chief Financial Officer, respectively.
Changes in Internal Control over Financial Reporting - There were no changes in the Company’s internal control over financial reporting (as such
term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2022, that have materially
affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Report on Management’s Assessment of Internal Controls over Financial Reporting - Management of the Company is responsible for establishing
and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Our
internal control system is a process designed to provide reasonable assurance regarding the preparation and fair presentation of published
financial statements in accordance with GAAP. All internal control systems, no matter how well designed, have inherent limitations and can only
provide reasonable assurance with respect to financial reporting.
As of December  31, 2022, management assessed the effectiveness of the Company’s internal control over financial reporting based on the
criteria for effective internal control over financial reporting established in “Internal Control-Integrated Framework,” issued by the Committee of
Sponsoring Organizations of the Treadway Commission in 2013. Based on this assessment, management determined that the Company
maintained effective internal control over financial reporting as of December 31, 2022.
Crowe LLP, the independent registered public accounting firm that audited the consolidated financial statements of the Company included in this
Annual Report on Form 10-K, issued an audit report on the Company’s internal control over financial reporting as of December 31, 2022. Their
report is included in Part II, Item 8, under the heading “Report of Independent Registered Public Accounting Firm.”
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
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PART III.
Item 10. Directors, Executive Officers and Corporate Governance
Board of Directors
We currently have eight (8) directors. In accordance with our bylaws and California law, our Board of Directors ("Board") oversees the
management of the business and affairs of the Company. Our directors are elected annually by our shareholders at our annual shareholder
meeting for one-year terms. There are no familial relationships between any directors or executive officers.  
Our Directors
Name
Age
Director Since
Independent
Victor Trione
75
1983
No
Simone Lagomarsino
61
2018
No
Renu Agrawal
59
2020
Yes
John C. Erickson
61
2017
Yes
Anita Gentle Newcomb
68
2014
Yes
Bradley M. Shuster
68
1999
Yes
Thomas C. Wajnert
79
2013
Yes
M. Max Yzaguirre
62
2021
Yes
Biographies of Our Directors
Victor S. Trione—Chair of the Board of Directors
Mr. Trione, age 75, 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: 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.  
Simone Lagomarsino—Director, President and Chief Executive Officer
Ms. Lagomarsino, age 61, serves as President and Chief Executive Officer of the Company and the Bank. She has served on our Board of
Directors since 2018. Prior to joining the Company, Ms. Lagomarsino served as President and CEO of the Western Bankers Association and as a
director of Pacific Premier Bancorp (NASDAQ: PPBI). From 2011 to 2017, she served as CEO of Heritage Oaks Bank and as President and CEO
of Heritage Oaks Bancorp. Previous to that, she held executive positions with City National Bank, Hawthorne Savings, Kinecta Federal Credit
Union, Ventura County National Bank and Warner Center Bank. Ms. Lagomarsino is regularly honored in financial services industry organizations
and publications and in 2013 was named by American Banker as Community Banker of the Year. In addition to her role at the Company, Ms.
Lagomarsino has served as Chair of the Board of Directors of the Federal Home Loan Bank of San Francisco since 2022 and as a director since
2013. She has served on the board of directors of the Federal Reserve Bank of San Francisco since 2022 and was re-elected in 2022 to a three-
year term. She served as a director of Hannon Armstrong Sustainable Infrastructure Capital, Inc. (NYSE: HASI) from 2019 to 2022. Ms.
Lagomarsino holds an M.B.A in Finance from Claremont Graduate University and a B.A. in Economics from Claremont McKenna College. 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.
Renu Agrawal—Director
Dr. Agrawal, age 59, serves on the Audit and Risk Committee and on the Governance and Nominating Committee. She has served on our Board
of Directors since 2020. Dr. Agrawal has held several leadership positions specializing
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in growth and transforming business models. In addition to the Company, Dr. Agrawal serves on the board of Woodruff-Sawyer & Co., an
insurance brokerage and consulting firm in the U.S. and she serves on both their Audit and Compensation committees. She also serves on the
board of Allvue Systems, a provider of technology for investment managers in the private capital and credit markets industry. From 2006 to 2019,
she held various positions with Wells Fargo & Company, including as Executive Vice President and Chief Operating Officer for its Financial
Institutions Group from 2017 to 2019 and as the head of its International Treasury Management business from 2012 to 2017. She played a
leadership role in the Wells Fargo-Wachovia merger. Earlier, Dr. Agrawal was Chief Operating Officer at ValleyCrest Companies and Quisic
Corporation. She began her career as a scientist at Polaroid and worked at McKinsey & Company. Dr. Agrawal is a founding member of Neythri,
a global community of South Asian professional women committed to helping each other succeed, and in 2018 she received the National Asian
Pacific American Corporate Achievement Award. Dr. Agrawal holds an M.B.A. from MIT Sloan School of Management and a Ph.D. in Materials
Science and Engineering from MIT. She graduated with a B.Tech in Metallurgy from IIT, Kanpur. We believe Dr. Agrawal's extensive knowledge of
banking and executive management roles give her valuable insight and enable her to make significant contributions as a member of our Board.
John C. Erickson—Director
Mr. Erickson, age 61, serves on the Audit and Risk Committee and on the Compensation Committee. He has served on our Board of Directors
since 2017. Mr. Erickson has more than 35 years of financial services experience, including serving for over 30 years at Union Bank, N.A. He
served in many executive roles across Union Bank, N.A., 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 was Chair of the Board 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. Since 2019, Mr. Erickson has also served on the board of Bank of Hawaii (NYSE:
BOH), where he serves on the Nominating & Corporate Governance Committee and as Vice Chair of the Audit & Risk 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.
Anita Gentle Newcomb—Director
Ms. Newcomb, age 68, serves as Chair of the Audit and Risk Committee and also serves on the Governance and Nominating Committee. She
has served on our Board of Directors since 2014. Ms. Newcomb’s experience spans over four decades in the financial services industry as a
commercial banker, investment banker, strategic consultant and Board member. She has advised regional and community 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 served on the board of the Federal Reserve Bank of Richmond – Baltimore Branch
from 2010 through 2015. Ms. Newcomb holds an M.B.A. in Finance from The University of Houston and a B.S. in Accounting from Auburn
University. In 2022, Ms. Newcomb was honored by Auburn University Alumni Association with its Lifetime Achievement Award. Ms. Newcomb is
also a certified public accountant (inactive). Ms. Newcomb qualifies as an "audit committee financial expert" 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—Director
Mr. Shuster, age 68, serves as Chair of the Compensation Committee and also serves on the Governance and Nominating Committee. He 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. He also serves as Chairman of the Board of McGrath RentCorp (NASDAQ: MGRC). Prior to founding National MI, Mr.
Shuster 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 LLP, where he served as partner-in-charge of Deloitte’s Northern California
Insurance and Mortgage Banking practices. Mr. Shuster holds a B.S. from the University of California, Berkeley and an M.B.A. from the University
of California, Los Angeles. In addition, he has received both CPA and CFA certifications. We believe Mr. Shuster's experience leading a public
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company, as well as his service on public company boards and his tenure on our Board, give him valuable insight and enable him to make
significant contributions as a member of our Board.
Thomas C. Wajnert—Director
Mr. Wajnert, age 79, serves as our Lead Independent Director, Chair of the Governance and Nominating Committee, and a member of the
Compensation Committee. He has served on our Board of Directors since 2013. Mr. Wajnert launched his career in 1968 with US Leasing, a
NYSE-listed company. For over 40 years, Mr. Wajnert navigated the changing currents of the equipment leasing industry and built an impressive
list of accomplishments, including serving as Chief Executive Officer and Chairman of AT&T Capital Corporation, an international, full-service
equipment leasing and commercial finance company, from 1984 to 1996. Mr. Wajnert has extensive public company board experience at
Reynolds American as Chairman and at Solera, UDR, Inc., NYFIX, and JLG Industries as a 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, gives him valuable insight and enables him to make significant contributions as a member of our Board.
M. Max Yzaguirre—Director
Mr. Yzaguirre, age 62, serves on the Audit and Risk Committee and the Compensation Committee. He has served on our Board of Directors
since 2021. Mr. Yzaguirre’s experience includes domestic and international business, government and law as well as expertise in a wide variety
of industries and sectors. He currently serves on the board of Aris Water Solutions, Inc. (NYSE: ARIS), is Chairman of its Compensation
Committee and serves on its Audit Committee. He also serves on the board of Altria Group, Inc. (NYSE: MO) and serves on its Innovation
Committee and Finance Committee. Mr. Yzaguirre served on the boards of directors of BBVA USA Bancshares, Inc. and BBVA USA Bank from
2009 to 2021, and on the boards of directors of Texas Regional Bancshares and Texas State Bank from 2000 to 2006. He served as Executive
Chairman of the energy infrastructure construction company, Forbes Bros. Holdings, Ltd., from 2019 to 2021, and as its U.S. Chairman and Chief
Executive Officer from 2017 to 2019. He was Chairman and CEO of Isolux Ingenieria USA, L.L.C., the US operation of Isolux Corsan, a Spanish
engineering, procurement and construction company. Mr. Yzaguirre is also a member of the Latino Corporate Directors Association (LCDA). Mr.
Yzaguirre qualifies as an "audit committee financial expert" as defined in SEC rules. We believe Mr. Yzaguirre's extensive knowledge of banking
and executive management roles, as well as his service on public company boards, give him valuable insight and enable him to make significant
contributions as a member of our Board.
Board Diversity Matrix
Total Number of Directors
8
Female
Male
Non-Binary
Did Not Disclose
Part I: Gender Identity
Directors
3
5
—
—
Part II: Demographic Background
African American or Black
—
—
—
—
Alaskan Native or Native American
—
—
—
—
Asian
1
—
—
—
Hispanic or Latinx
—
1
—
—
Native Hawaiian or Pacific Islander
—
—
—
—
White
2
4
—
—
Two or More Races or Ethnicities
—
—
—
—
LGBTQ+
—
Did Not Disclose
—
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Executive Officers
Name
Age
Position
Simone Lagomarsino
61
President and Chief Executive Officer
William Fanter
52
Executive Vice President, Head of Retail Banking
Tammy Mahoney
56
Executive Vice President, Chief Risk Officer
Parham Medhat
49
Executive Vice President, Chief Operations and Technology Officer
Greg Smith
50
Senior Vice President, General Counsel and Corporate Secretary
Alexander Stefani
43
Executive Vice President, Chief Credit Officer
Laura Tarantino
57
Executive Vice President, Chief Financial Officer and Assistant Corporate Secretary
Simone Lagomarsino. Please see "Biographies of Our Directors" for the biographical information of Ms. Lagomarsino, who also serves as a
member of our Board of Directors.
William Fanter. Mr. Fanter joined the Company in 2020 and serves as the 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, as well as business banking activities. Mr. Fanter is also a member of the Company's Executive Committee
and serves as our Diversity, Equity and Inclusion Officer. Prior to joining the Company, Mr. Fanter served as Executive Vice President, Head of
Retail Banking at Opus Bank from 2019 to 2020 and as Senior Vice President, Consumer and Business Banking Market Executive at U.S. Bank
from 2003 to 2019. His background also includes positions as Director of Automation Services at Kirchman Corporation; and several roles
culminating with Senior Vice President, Chief Operating Officer at GreatBanc, Inc. In addition to his role at the Company, Mr. Fanter serves as a
faculty member for the Consumer Bankers Association Executive Banking School, Furman University.
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.
She is an ABA Certified Enterprise Risk Professional, ABA Certified Regulatory Compliance Manager and an Institute of Internal Auditors
Certified Internal Auditor, and maintains an ISACA Cybersecurity Fundamentals Certificate; Ms. Mahoney holds a B.S. in Business Administration
– Finance from San Diego State University.
Parham Medhat. Mr. Medhat serves as Chief Operations and Technology Officer. In this role, Mr. Medhat is responsible for deposit operations,
loan servicing, information technology, and project management; he is also a member of the Company's Executive Committee. Prior to joining the
Company in 2019, Mr. Medhat served as Executive Vice President, Chief Operating Officer at CTBC from 2014 to 2019; previous to that as
Senior Vice President, Director of Bank Operations at Opus Bank; and in several roles over thirteen years at CapitalSource Bank. Mr. Medhat
holds an M.A. in Educational–Instructional Technology from California State University, Dominguez Hills and a B.A. in Industrial/Organizational
Psychology from California State University, Long Beach.
Greg Smith. Mr. Smith serves as the Company’s Senior Vice President, General Counsel and Corporate Secretary and as a member of its
Executive Committee. He has responsibility for the Company’s legal affairs and corporate governance. Prior to joining the Company in 2022, Mr.
Smith served as Vice President, Deputy General Counsel and Secretary of First American Financial Corporation (NYSE: FAF) from 2020 to 2022
and from 2010 to 2020 as its Assistant General Counsel and Assistant Secretary. Prior to First American, he served as Associate General
Counsel for Eclipsys Corporation and as an associate with O’Melveny & Myers, LLP. Mr. Smith holds a J.D. from the University of Minnesota Law
School and a B.S. in Business Administration – Management Information Systems from Brigham Young University.
Alexander Stefani. Mr. Stefani serves as Chief Credit Officer, a position he has held since 2021. In this role, Mr. Stefani oversees the Company's
credit administration program, including loan underwriting, portfolio monitoring and special assets, as well as the appraisal and loan operations
departments. He is also a member of the Company's Executive Committee. Mr. Stefani has held a number of roles with the Bank since joining in
2004, including Director of Income Property Lending, Underwriting Manager of the Income Property Lending Department, Loan Underwriter
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and Loan Officer. Mr. Stefani holds an M.A. in Political Science from San Francisco State University and a B.A. in Political Science from Sonoma
State University. Mr. Stefani is a graduate of the Pacific Coast Banking School.
Laura Tarantino. Ms. Tarantino serves as Chief Financial Officer, 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 joined the Bank 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.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires our directors and executive officers and persons who own more than 10% of the outstanding shares
of common stock to file reports with the SEC disclosing their ownership of common stock at the time they become subject to Section 16(a) and
changes in such ownership that occur during the year. Based solely on a review of copies of such reports furnished to us, or on written
representations that no reports were required, we believe that all directors, executive officers and holders of more than 10% of the common stock
complied in a timely manner with the filing requirements applicable to them with respect to transactions during the year ended December 31,
2022, except for two Form 4's that were not timely filed for Parham Medhat.
Corporate Governance
Audit and Risk Committee
Our Audit and Risk Committee consists of Ms. Newcomb (Committee Chair), Mr. Erickson, Ms. Agrawal and Mr. Yzaguirre. Our Audit and Risk
Committee is responsible for, among other things: monitoring the integrity of, and assessing the adequacy of, our financial statements, the
financial reporting process and our system of internal accounting and financial controls; selecting our independent public accounting firm and
assessing its qualification, independence and performance; monitoring the internal audit function; reviewing and, if appropriate, pre-approving all
audit and permissible non-audit services performed by the independent public accounting firm; assisting our Board in ensuring compliance with
laws, regulations, policies and procedures; overseeing the effectiveness of the Company's enterprise risk management structure and systems;
and reviewing and, if appropriate, approving related party transactions.
Our Board of Directors has determined that each of Ms. Newcomb, Mr. Erickson, Ms. Agrawal and Mr. Yzaguirre satisfy the requirements for
independence as an audit committee member and that all satisfy the requirements for financial literacy under the rules and regulations of the
Nasdaq Stock Market ("Nasdaq"). Each of Ms. Newcomb, Mr. Erickson and Mr. Yzaguirre qualifies as an “audit committee financial expert” as
defined in the SEC rules and satisfy the financial sophistication requirements of Nasdaq.
Code of Ethics and Business Conduct
Our Board has adopted a Code of Ethics and Business Conduct governing all of our directors, officers and other employees and a Code of Ethics
for Chief Executive Officer and Senior Financial Officers, which are available on our website at https://ir.lutherburbanksavings.com/corporate-
governance/governance-overview. To the extent our Board waives or amends any provisions of these codes of ethics, we will disclose within four
business days such waivers or amendments on the above website.
Item 11. Executive Compensation
We are a “smaller reporting company.” As such, under SEC rules, we are not required to include a Compensation Discussion and Analysis
section in this Annual Report on Form 10-K or in our Proxy Statement and have elected to comply with other reduced compensation disclosure
requirements as permitted under SEC rules. We are also permitted to limit reporting of compensation disclosures to our principal executive officer
and our two other most highly compensated executive officers, which are referred to as our "named executive officers."
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Summary Compensation Table
The following table sets forth information regarding the compensation earned by or paid or awarded to each of our named executive officers
during 2022 and 2021.
Name and Principal
Position
Year
Salary
Stock
Awards

(1)
Nonequity Incentive
Plan Compensation
(2)
Change in Pension
Value and
Nonqualified
Deferred
Compensation
Earnings (3)
All Other
Compensa-tion

(4)
Total
Simone Lagomarsino
2022
$
792,308 
$
800,013 
$
600,000 
$
— 
$
34,931 
$
2,227,252 
President and Chief
Executive Officer
2021
700,000 
800,001 
656,250 
— 
33,023 
2,189,274 
Laura Tarantino
2022
374,231 
225,006 
277,500 
— 
34,985 
911,722 
EVP, Chief Financial
Officer
2021
357,500 
225,004 
335,000 
602,751 
33,148 
1,553,403 
Tammy Mahoney
2022
354,615 
200,010 
270,000 
— 
26,894 
851,519 
EVP, Chief Risk Officer
2021
333,077 
200,000 
315,000 
— 
25,592 
873,669 
(1) The amounts represent the aggregate grant date fair value of restricted stock awards, determined in accordance with FASB ASC Topic 718,
excluding the effect of estimated forfeitures during the applicable vesting periods. Refer to Note 16 — Stock Based Compensation in Part II - Item
8. "Notes to Consolidated Financial Statements,” for a discussion of the relevant assumptions used to determine the grant date fair value of these
awards. For more information regarding our long-term equity incentive plan and the grants of these awards, see discussion under the caption
“Narrative Discussion of Summary Compensation Table — Equity Incentive Compensation” below.
(2) The amounts shown in this column represent each named executive officer's annual cash incentive bonus that was earned in such year but
awarded at the discretion of the Compensation Committee and paid in the subsequent fiscal year. For more information regarding annual cash
incentive awards paid to our named executive officers, see the discussion under the caption “Narrative Discussion of Summary Compensation
Table — Non-Equity Incentive Compensation” below.
(3) Represents the value of the increase in the accumulated benefit under the Salary Continuation Agreement with Ms. Tarantino. We account for
this agreement as a deferred compensation agreement and the obligation is unsecured and unfunded. No amount was reported for 2022 as the
change in pension value for the year declined by $29,462 as a result of higher discount rates attributed to increasing long-term market interest
rates. Of the amount reported for 2021, 62% was attributed to a decrease in the discount factor used to calculate the present value of the
accumulated benefit reflecting historically low interest rates. No amount was paid in 2022 under this agreement and it was not considered for
purposes of determining the identities of the named executive officers. For more information regarding the salary continuation agreement with Ms.
Tarantino, see discussion under the caption “Narrative Discussion of Summary Compensation Table — Employment Agreements” below.
(4) Other compensation consisted of the following items:
Name
Year
Insurance Premiums
and HSA
Contributions
401(k) Matching
Contributions
Cell Phone
Reimbursements
Simone Lagomarsino
2022 $
21,825 
$
12,200 
$
906 
2021
20,448 
11,600 
975 
Laura Tarantino
2022
21,825 
12,200 
960 
2021
20,723 
11,600 
825 
Tammy Mahoney
2022
13,794 
12,200 
900 
2021
13,092 
11,600 
900 
Narrative Discussion of Summary Compensation Table
We have compensated our named executive officers through a combination of base salary, annual cash incentive awards, long-term equity
incentive compensation and other benefits including perquisites. Each of our named
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executive officers has substantial responsibilities in connection with the day-to-day operations of the Company, and together function as a
leadership team responsible for the success of the organization.
In regard to the planned merger with WAFD discussed in Note 1 in Part II - Item 8. "Notes to Consolidated Financial Statements,” the Merger
Agreement imposes certain restrictions on our ability to operate our compensation program in the ordinary course and consistent with past
practices. For example, without WAFD's consent, we are not able to enter into or amend or renew any employment, severance, change in control,
retention, bonus, salary continuation or similar agreement or arrangement with any of our named executive officers; increase salaries or wages of
our named executive officers; or grant any equity awards to our named executive officers. We expect the Merger Agreement restrictions to impact
our 2023 compensation program, but the 2022 and 2021 amounts reported in the Summary Compensation Table above were awarded or paid in
the ordinary course as described in our Compensation Philosophy below.
Compensation Philosophy. The objectives of our compensation practices are to attract and retain highly qualified executives, motivate and
reward those executives for managing and improving the operations of the Company while prudently controlling risks, and align the interests of
our executives with the interests of our shareholders over the long-term. Our goal is to pay for performance, thereby rewarding officers whose
contributions positively impact the Company. We strive to provide overall compensation within a competitive range of the market for executive
talent for similarly-sized regional banks, although we do not manage to a specific percentile of market when making executive pay decisions.
Base Salary. The base salaries of our named executive officers are reviewed and approved by the Compensation Committee. In establishing
base salaries, the Compensation Committee has relied on external market data. In addition to considering the information from such sources, the
Compensation Committee has considered:
•
each officer's scope of responsibility;
•
each officer's years of experience;
•
the types and amount of the elements of compensation to be paid to each officer;
•
our financial performance and performance concerning other aspects of our operations, such as our growth, asset quality, profitability, risk
management and other matters, including the status of our relationship with the banking regulatory agencies; and
•
each officer's individual performance and contributions to our performance, including leadership and teamwork.
Equity Incentive Compensation. Our named executive officers are eligible, subject to the Merger Agreement restrictions, to receive annual equity
awards designed to align the interests of our executives with the interests of our shareholders over the long-term. These awards are intended to
recognize and reward those officers who contribute meaningfully to our performance for the year. Generally, payment of an award is contingent
upon our overall performance, including the satisfaction of minimum Company performance triggers and metrics set by the Compensation
Committee, and upon individual performance. The amount of the awards is subject to the discretion of the Compensation Committee each year
as to what amounts are awarded.
Non-Equity Incentive Compensation. Our named executive officers are eligible to receive annual cash awards. These awards are intended to
recognize and reward those officers who contribute meaningfully to our performance for the year. Generally, payment of an award is contingent
upon our overall performance, including the satisfaction of minimum Company performance triggers and metrics set by the Compensation
Committee, and upon individual performance. For the named executive officers, a target bonus is set by contract. The amount of the awards is
subject to the discretion of the Compensation Committee each year as to what amounts are payable.
401(k) Plan. Our 401(k) Plan is designed to provide retirement benefits to all eligible full-time and part-time employees. The 401(k) Plan provides
employees with the opportunity to save for retirement on a tax-favored basis. Our named executive officers, all of whom were eligible to
participate in the 401(k) Plan during 2022 and 2021, may elect to participate in the 401(k) Plan on the same basis as all other employees. We
have elected a safe harbor 401(k) Plan and as such make matching contributions of up to 100% of employee salary contribution deferrals up to
3% of pay, plus 50% of employee salary contribution deferrals from 3% to 5% of pay for each payroll period, subject to a cap of $12,200 for any
employee in 2022 and $11,600 in 2021. An employee must contribute to receive the matching contribution.
Health and Welfare Benefits. Our named executive officers are eligible to participate in the same benefit plans designed for all of our eligible full-
time and part-time employees, including health, dental, vision, disability and basic
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group life insurance coverage. Our named executive officers are entitled to life insurance in an amount equal to twice their base salaries, subject
to a maximum coverage of $500,000. The purpose of our employee benefit plans is to help us attract and retain quality employees, including
executives, by offering benefit plans similar to those typically offered by our competitors.
Perquisites. We provide our executive officers with a limited number of perquisites that we believe are reasonable and consistent with our overall
compensation program to better enable us to attract and retain superior employees for key positions. The Compensation Committee will
periodically review the levels of perquisites and other personal benefits provided to our executive officers. Based on these periodic reviews,
perquisites may be awarded or adjusted on an individual basis.
Role of Executive Officers. The Chair of the Board and CEO make recommendations to the Compensation Committee regarding the
compensation of the Company's executive officers. The Chairman makes recommendations to the Compensation Committee regarding the
compensation of the Company's CEO. The CEO is not present during voting or deliberation regarding her own compensation.
Role of Independent Compensation Consultant. To facilitate the fulfillment of its duties, the Compensation Committee has sole authority to retain
outside advisers, including compensation consultants, to assist the Compensation Committee with executive compensation matters. The
Compensation Committee has sole authority to approve the fees and retention terms of any such advisers or consultants. The Compensation
Committee engaged Semler Brossy as its independent compensation consultant to review the Company’s executive compensation program in
2022 and 2021.  Semler Brossy also provided advice and information on other executive compensation matters, including executive pay
components, prevailing market practices, and relevant legal and regulatory requirements.
The Compensation Committee considered whether there were any conflicts of interest created by its engagement of Semler Brossy to provide
compensation consulting services. Its consideration focused on (i) the fact that Semler Brossy does not provide any services to the Company
other than compensation consulting services to the Compensation Committee, (ii) the conflicts of interest policies and procedures of the
Company and of Semler Brossy, (iii) the lack of any relationships between Semler Brossy and members of our Board, (iv) the fact that our
common stock is not owned by Semler Brossy and (v) the lack of any relationships between Semler Brossy and any of our executive officers.
Semler Brossy serves as the independent compensation consultant for NMI Holdings, Inc., a company of which the Chair of our Compensation
Committee is Executive Chair. The Chair of our Compensation Committee does not serve on the Compensation Committee of NMI Holdings, Inc.
Our Compensation Committee was aware of the engagement of Semler Brossy by NMI Holdings, Inc. and determined that this arrangement did
not preclude Semler Brossy from acting as an independent compensation consultant to the committee. Based on this assessment, the
Compensation Committee concluded that no conflicts of interest existed with respect to Semler Brossy or its engagement by the Compensation
Committee.
Employment Agreements. We have employment agreements with each of our named executive officers, and a salary continuation agreement
with Ms. Tarantino.
Ms. Lagomarsino. Ms. Lagomarsino was appointed President and Chief Executive Officer of the Company effective January 2, 2019. We entered
into an employment agreement with Ms. Lagomarsino on November 30, 2018. The employment agreement had an initial three-year term with
automatic one-year renewal periods thereafter, unless Ms. Lagomarsino or the Company provides notice of non-renewal at least 60 days prior to
the next renewal date. Ms. Lagomarsino has a base salary for 2023 of $800,000, subject to review at least annually. Ms. Lagomarsino is eligible
to earn a discretionary bonus, in an amount determined by the Compensation Committee, subject to the achievement of the Company's
performance goals and individual performance goals. The target bonus is 75% of base salary. Ms. Lagomarsino is entitled to participate in our
Omnibus Equity and Incentive Compensation Plan ("Omnibus Plan") and all other benefit plans or programs generally available to similarly
situated employees of the Bank.
Ms. Lagomarsino may terminate employment at any time with or without "good reason," as defined in the employment agreement. The Company
can terminate the employment agreement at any time, with or without "cause," as defined in the employment agreement. In the event that Ms.
Lagomarsino's employment is terminated by the Company without cause or by Ms. Lagomarsino with good reason, subject to Ms. Lagomarsino's
execution and non-revocation of a release of the Company, she would be entitled to (i) an amount equal to her base salary for 24 months to be
paid in the same manner as if she had remained employed with the Company; (ii) a pro rata target bonus for the calendar year in which the
termination occurs to be paid in the same manner as if she had remained
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employed with the Company, provided that the applicable performance conditions are met at the conclusion of the calendar year in which the
termination occurs; and, (iii) reimbursement of COBRA coverage for 24 months. Following a termination during a change-in-control period, as
defined in the agreement, Ms. Lagomarsino would be entitled to: (i) an amount equal to her base salary and target bonus for 36 months to be
paid in the same manner as if she had remained employed with the Company; (ii) a pro rata target bonus for the calendar year in which the
termination occurs; (iii) the vesting of each outstanding award under the Omnibus Plan; and, (iv) reimbursement of COBRA coverage for 24
months. Upon death or disability, per the terms of the applicable award agreements, all unvested equity awards would vest immediately.
Ms. Tarantino and Ms. Mahoney. On November 30, 2018, the Company entered into a restated and amended employment agreement with Ms.
Tarantino and an employment agreement with Ms. Mahoney, both effective January 2, 2019. The agreements had an initial three-year term, with
automatic one-year renewal periods thereafter, unless Ms. Tarantino or Ms. Mahoney or the Company provides notice of non-renewal at least 60
days prior to the next renewal date. Ms. Tarantino has a base salary for 2023 of $370,000, subject to review at least annually. Ms. Mahoney has a
base salary for 2023 of $360,000, subject to review at least annually. Under their agreements, Ms. Tarantino and Ms. Mahoney are each eligible
to earn annual discretionary bonuses, in amounts determined by the Compensation Committee, subject to the achievement of the Company's
performance goals and individual performance goals. The target bonus is 75% of base salary. Ms. Tarantino and Ms. Mahoney are entitled to
participate in the Omnibus Plan and all other benefit plans or programs generally available to similarly situated employees of the Bank.
Ms. Tarantino and Ms. Mahoney may terminate employment at any time with or without "good reason," as defined in the employment agreement.
The Company can terminate these employment agreements at any time, with or without "cause," as defined in the employment agreements.
In the event that Ms. Tarantino's employment is terminated by the Company without cause or by her with good reason, subject to her execution
and non-revocation of a release of the Company, she would be entitled to (i) an amount equal to her base salary and target bonus for 24 months
to be paid in the same manner as if she had remained employed with the Company; (ii) two times the target bonus for the calendar year in which
the termination occurs to be paid in the same manner as if she had remained employed with the Company, provided that the applicable
performance conditions are met at the conclusion of the calendar year in which the termination occurs; (iii) the vesting of each outstanding award
to her under the Omnibus Plan; and, (iv) reimbursement of COBRA coverage for 24 months. Following a change in control, Ms. Tarantino would
receive the severance payments described above, provided, however, that the payment of two times the target bonus would not be conditioned
on the satisfaction of the applicable performance criteria.
In the event that Ms. Mahoney's employment is terminated by the Company without cause or by her with good reason, subject to her execution
and non-revocation of a release of the Company, she would be entitled to (i) an amount equal to her base salary for 18 months to be paid in the
same manner as if the named executive had remained employed with the Company and (ii) reimbursement of COBRA coverage for 18 months.
Following a change in control, Ms. Mahoney would receive the severance payments described above, provided, however, that the Company
would pay her an amount equal to her base salary and target bonus for 24 months and each of her outstanding awards under the Omnibus Plan
would become fully vested.
Upon death or disability of the named executive officer, per the terms of the applicable award agreements, all unvested equity awards would vest
immediately.
Confidentiality and Restrictive Covenants. Under the employment agreements, each of the named executive officers agrees to maintain the
confidentiality of confidential information, including customer non-public information and the Company's confidential information. In addition, each
of the named executive officers is subject to employee and customer non-solicitation covenants. The non-solicitation restrictions apply for the
duration of employment and following termination for a period of 24 months.
Salary Continuation Agreements. We have also entered into a salary continuation agreement with Ms. Tarantino. We account for this agreement
as a deferred compensation arrangement and the obligation is unsecured and unfunded. Ms. Tarantino's benefit is fixed at 80% of base salary in
the year in which she separates from service with the Company, payable for 20 years. On November 30, 2018, the Bank also entered into a
Second Amendment to Ms. Tarantino's salary continuation agreement which provides that should Ms. Tarantino be subject to an early involuntary
termination, as defined therein, the amount of the benefit payable to her under the salary continuation agreement will be 80% of compensation
notwithstanding the vesting of the benefit at the time of any such early
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involuntary termination. The full amount of the award is payable if Ms. Tarantino's service terminates other than for cause, in the event of death,
or a termination of service without cause within 36 months after a change in control of the Company. In the event of termination for cause, as
defined in the salary continuation agreement, no benefit shall be awarded.
Outstanding Equity Awards at 2022 Fiscal Year-End
The following table provides information regarding outstanding stock awards held by the named executive officers as of December 31, 2022.  
Name of Executive
Number of Shares or Units of
Stock

that have not Vested

(#)
Market Value of
Shares or Units of Stock

that have not Vested

($)
Simone Lagomarsino
146,394 (1)
$
1,626,437 
Laura Tarantino
36,872 (2)
409,648 
Tammy Mahoney
32,544 (3)
361,675 
(1) Represents awards of restricted stock granted effective January 24, 2019, January 28, 2020, January 26, 2021 and January 25, 2022. This
amount includes (i) 81,293 shares that vested on January 1, 2023; (ii) 45,791 shares that vest on January 1, 2024; and (iii) 19,310 shares that
vest on January 1, 2025.
(2) Represents awards of restricted stock granted effective January 28, 2020, January 26, 2021 and January 25, 2022. This amount includes (i)
18,562 shares that vested on January 1, 2023; (ii) 12,879 shares that vest on January 1, 2024; and (iii) 5,431 shares that vest on January 1,
2025.
(3) Represents awards of restricted stock granted effective January 28, 2020, January 26, 2021, and January 25, 2022. This amount includes (i)
16,279 shares that vested on January 1, 2023; (ii) 11,448 shares that vest on January 1, 2024; and (iii) 4,827 shares that vest on January 1,
2025.
Pay-Versus-Performance
The following table provides information regarding our pay-versus-performance analysis for the years ended December 31, 2022 and 2021.
Year
Summary
Compensation Table
Total for PEO
Compensation
Actually Paid to PEO
(1)
Average Summary
Compensation Table
Total for Non-PEO
NEOs
Average Compensation
Actually Paid to Non-PEO
NEOs (1)
Value of Initial Fixed
$100 Investment
Based on Total
Shareholder Return
Net Income
 (in thousands)
2022 $
2,227,252  $
1,811,641  $
881,621  $
783,451  $
121.04  $
80,198 
2021
2,189,274 
2,877,906 
1,251,739 
1,412,586 
147.35
87,753 
(1) Compensation actually paid makes required adjustments to the total amount of compensation shown for our Primary Executive Officer
("PEO"), Ms. Lagomarsino, and Named Executive Officers ("NEOs") other than our PEO, in the Summary Compensation Table ("SCT") included
earlier in this Item 11 and in our 2023 Proxy Statement. These NEOs were Ms. Tarantino and Ms. Mahoney for 2022 and Ms. Tarantino and Ms.
Liana Prieto, our former EVP and General Counsel, for 2021. Adjustments include: excluding the stock awards amount listed in the SCT; adding
the fair value as of year end of equity awards granted during the covered year; and adjusting for the year over year change in fair value of equity
awards granted prior to the covered year that remained unvested as of the end of the covered year. Ms. Lagomarsino was granted 57,930 and
79,444 shares of restricted stock during 2022 and 2021, respectively. All other NEOs were granted a total of 30,776 and 42,205 shares of
restricted stock for the same periods, respectively. Ms. Lagomarsino held 88,464 and 88,208 shares of restricted stock at December 31, 2022
and 2021, respectively, which had been granted in a year prior to the covered period and which remained unvested and outstanding at that time.
All other NEOs held a total of 38,650 and 36,354 shares of restricted stock as of the same dates, respectively, which had been granted in a year
prior to the covered period and which
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remained unvested and outstanding at that time. At December 31, 2022, 2021 and 2020, the fair market value of the Company's stock was
$11.11, $14.04 and $9.80 per share, respectively.
Relationship between Pay and Total Shareholder Return
The graph below reflects the relationship among the compensation actually paid to the PEO, the average compensation actually paid to the non-
PEO NEOs and the Company’s cumulative total shareholder return (assuming an initial fixed investment of $100 on December 31, 2020 and
reinvestment of any dividends) for the years ended December 31, 2022 and 2021.
Relationship between Pay and Net Income
The graph below reflects the relationship among the compensation actually paid to the PEO, the average compensation actually paid to the non-
PEO NEOs and the Company’s net income for the years ended December 31, 2022 and 2021.
Director Compensation
During 2022, our non-employee directors received cash compensation for service as follows: (i) $50,000 annual retainer for directors; (ii) $50,000
annual retainer for all committee chairs; (iii) $25,000 annual retainer for all committee members; and (iv) $50,000 annual retainer for our Lead
Independent Director. These fees are paid quarterly. Non-employee directors serving on the Board as of January 1, 2022, received an award of
4,345 shares of restricted stock which vested on January 1, 2023.
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The following table sets forth information regarding compensation paid to our directors for 2022 that were not named executive officers:
 
Fees Earned
 
 
Name
Fees Earned or Paid
in Cash
Shares of Restricted
Stock Awarded
All Other
Compensation
Total (1)
Renu Agrawal
$
100,000 
4,345 
$
— 
$
160,004 
John C. Erickson
100,000 
4,345 
— 
160,004 
Jack Krouskup (2)
50,000 
— 
— 
50,000 
Anita Gentle Newcomb
125,000 
4,345 
— 
185,004 
Bradley M. Shuster
125,000 
4,345 
— 
185,004 
Victor S. Trione, Chair (3)
775,000 
— 
21,825 
796,825 
Thomas C. Wajnert
175,000 
4,345 
— 
235,004 
M.Max Yzaguirre
100,000 
4,345 
— 
160,004 
(1) Totals in this column include fees paid in cash plus the aggregate grant date fair value of restricted stock awards for the year ended December
31, 2022, computed in accordance with FASB ASC Topic 718 based on the closing price of $13.81 per share on January 25, 2022.
(2) Mr. Krouskup retired from the Board of Directors effective January 3, 2022.
(3) Mr. Trione's "All Other Compensation" consists of $21,825 paid in insurance premiums and HSA contributions. Total compensation does not
include an amount for the Salary Continuation Agreement with Mr. Trione as the accumulated benefit declined by $414,677 for 2022. We account
for this agreement as a deferred compensation arrangement and the obligation is unsecured and unfunded. The decrease in Mr. Trione's
accumulated benefit under his Salary Continuation Agreement in 2022 was entirely attributed to an increase in the discount rate used to calculate
the present value of the accumulated benefit reflecting increasing long-term interest rates during the year. Mr. Trione's benefit is fixed at $318,400
per year upon separation from service and is payable for 20 years. The full amount of the award is payable if Mr. Trione's service terminates other
than for cause, in the event of death, or a termination of service without cause within 36 months after a change in control of the Company. In the
event of a termination for cause, as defined in the agreement, no benefit shall be awarded. No amount was paid in 2022 under this agreement.
Compensation Committee Interlocks and Insider Participation
Our Compensation Committee consists of Mr. Shuster (Committee Chair), Mr. Erickson, Mr. Wajnert and Mr. Yzaguirre. No member of our
Compensation Committee (i) is or has ever been an employee of the Company or our Bank, (ii) was, during the last completed fiscal year, a
participant in any related party transaction requiring disclosure under “Certain Relationships and Related Party Transactions,” other than deposit
transactions in the ordinary course of the Bank's business on substantially the same terms as provided to non-related parties, or (iii) had, during
the last completed fiscal year, any other interlocking relationship requiring disclosure under applicable SEC rules.
112

Table of Contents
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth the beneficial ownership of our common stock as of February 17, 2023 based on total outstanding common shares
of 51,103,710 as of that date by:
•
each shareholder known by us to beneficially own more than 5% of our outstanding common stock;
•
each of our directors;
•
each of our named executive officers; and
•
all of our directors and executive officers as a group.
Name of Beneficial Owner(1)
Amount and Nature

of Beneficial

Ownership(2)
Percent of Class
Directors
 
Renu Agrawal (3)
15,643 
*
John C. Erickson (3)
51,420 
*
Simone Lagomarsino (4)
279,059 
*
Anita Gentle Newcomb (3)
60,962 
*
Bradley M. Shuster (3)
55,064 
*
Victor S. Trione (5)
11,025,000 
21.57 %
Thomas C. Wajnert (3)
77,963 
*
M. Max Yzaguirre (3)
9,684 
*
Named Executive Officers Who Are Not Directors
 
Tammy Mahoney (6)
41,922 
*
Laura Tarantino (7)
163,263 
*
All Directors and Executives as a Group (14 persons) (8)
11,878,732 
23.24 %
5% Shareholders Who Are Not Directors
 
 
Victor Henry David Trione Trust (9)
10,500,000 
20.55 %
Madelyne Victoria Trione Trust (10)
10,500,000 
20.55 %
Mark H. Trione and Catherine L. Trione Trust (11)
4,220,000 
8.26 %
John Francis Hamann, as trustee and in an individual retirement account (12)
14,283,000 
27.95 %
Theodore A. Hellman, solely as a trustee (12)
14,280,000 
27.94 %
Barry A. Beal, Jr., solely as the manager of VHT Management LLC, the fiduciary advisor to the
Victor Henry David Trione Trust (13)
10,500,000 
20.55 %
 
* Indicates one percent or less.
(1) Unless otherwise noted, the address for each shareholder listed in the table above is: c/o Luther Burbank Corporation, ATTN: Corporate
Secretary, 1515 W. 190th Street, Suite 275, Gardena, CA 90248.
(2) We have determined beneficial ownership in accordance with the rules of the SEC.  These rules generally provide that a person is the
beneficial owner of securities if such person has or shares the power to vote or direct the voting of securities, or to dispose or direct the
disposition of securities. A security holder is also deemed to be, as of any date, the beneficial owner of all securities that such security holder has
the right to acquire within 60 days after such date through (i) the exercise of any option or warrant, (ii) the conversion of a security, (iii) the power
to revoke a trust, discretionary account or similar arrangement or (iv) the automatic termination of a trust, discretionary account or similar
arrangement.  Except as disclosed in the footnotes to this table and subject to applicable community property laws, to our knowledge, each
person identified in the table has sole voting and investment power over all of the shares shown opposite such person’s name.
(3) Includes 5,339 shares of restricted stock of which the listed director has voting control.
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Table of Contents
(4) Includes 65,101 shares of restricted stock of which Ms. Lagomarsino has voting control. Ms. Lagomarsino shares voting and investment
power with respect to 173,828 of these shares.
(5) The indicated ownership is based upon a Section 13G report filed with the SEC by the beneficial owner on February 14, 2023, reporting
beneficial ownership as of February 14, 2023, as well as Section 16 reports filed on Forms 3 and 4 with the SEC. Reported shares are held in a
revocable trust for the benefit of Mr. Trione, as to which he serves as trustee. Does not include shares held in the Victor Henry David Trione Trust
or the Madelyne Victoria Trione Trust, trusts for the benefit of Mr. Trione's adult children, and as to which he disclaims beneficial ownership.
(6) Includes 16,275 shares of restricted stock of which Ms. Mahoney has voting control.
(7) Includes (i) 18,310 shares of restricted stock of which Ms. Tarantino retains voting control and (ii) 63,120 restricted stock units which have
vested but are subject to a deferral election. Ms. Tarantino shares voting and investment power with respect to 10,651 of the shares.
(8) Includes shares owned by our executive officers and directors as of February 17, 2023, or entities they control, including shares of restricted
stock of which they retain voting control and any restricted stock units that have fully vested but are subject to a deferral.
(9) The indicated ownership is based solely upon an amended Section 13D report filed with the SEC by the beneficial owners on August 10,
2022, reporting beneficial ownership as of August 1, 2022. South Dakota Trust Company, the trustee, exercises voting and investment power
over these shares pursuant to instructions given by VHT Mangement LLC, through its manager, Barry A. Beal, Jr., the fiduciary investment
advisor to the Victor Henry David Trione Trust. Consequently, Mr. Beal may be deemed the beneficial owner of such securities. The address for
the trust is South Dakota Trust Company, 201 S. Philips Ave., Ste. 200, Sioux Falls, SD 57104.
(10) The indicated ownership is based solely upon an amended Section 13D report filed with the SEC by the beneficial owners on August 10,
2022, reporting beneficial ownership as of August 1, 2022. John Francis Hamann and Theodore A. Hellman, as co-trustees of the Madelyne
Victoria Trione Trust, possess the voting and investment power with respect to the securities beneficially owned by the trust and may be deemed
the beneficial owner of such securities. The address for the trust is P.O. Box NN, Santa Rosa, CA 95402 (Attn: John Hamann).
(11) The indicated ownership is based solely upon a Section 13G report filed with the SEC by the beneficial owners on February 14, 2023,
reporting beneficial ownership as of February 14, 2023. Reported shares are held in a revocable trust for the benefit of Mark H. Trione and
Catherine L. Trione, as to which they each serve as trustee. The address for Mr. Mark Trione and Mrs. Trione is 101 D Street, Santa Rosa, CA
95404. Does not include 1,260,000 shares held in each of three irrevocable trusts for the benefit of their three adult children, and as to which they
disclaim beneficial ownership.
(12) The indicated ownership is based solely upon an amended Section 13D report filed with the SEC by the beneficial owners on August 10,
2022, reporting beneficial ownership as of August 1, 2022, as well as Section 16 reports filed on Forms 3 and 5 with the SEC. John Francis
Hamann and Theodore A. Hellman, as co-trustees of the Madelyne Victoria Trione Trust, the Denise Catherine Trione 1997 Irrevocable Trust, the
Sally Patricia Trione 1997 Irrevocable Trust, and the Henry Mark Trione 1997 Irrevocable Trust, possess the voting and investment power with
respect to the securities beneficially owned by these trusts and may be deemed the beneficial owners of such securities. Based solely upon Form
5 reports filed with the SEC, Mr. Hamann is also the beneficial owner of 1,000 shares held in The Hamann Family Trust, as to which he serves as
a co-trustee, and 2,000 shares held by Mr. Hamann in an individual retirement account. The address for the trusts, the trustees and Mr. Hamann
is P.O. Box NN, Santa Rosa, CA 95402 (Attn: John Hamann).
(13) The indicated ownership is based solely upon an amended Section 13D report filed with the SEC by the beneficial owners on August 10,
2022, reporting beneficial ownership as of August 1, 2022. South Dakota Trust Company, the trustee, exercises voting and investment power
over these shares pursuant to instructions given by VHT Management LLC, through its manager, Barry A. Beal, Jr., the fiduciary investment
advisor to the Victor Henry David Trione Trust. Consequently, Mr. Beal may be deemed the beneficial owner of such securities. The address for
VHT Management LLC and Mr. Beal is 104 S. Pecos, Midland, TX 79701.    
As of the date of the Merger Agreement, each director and certain executive officers of the Company entered into a shareholder agreement with
the Company and WAFD (each a “Shareholder Agreement”) pursuant to which he or she has agreed, among other things to vote all shares of the
Company's common stock beneficially owned by him or her in favor of adoption and approval of the Merger Agreement and any other matters
required to be approved for
114

Table of Contents
the consummation of the merger with WAFD and WAFD Bank. As of February 17, 2023, these persons collectively beneficially owned
approximately 23.19% of the outstanding shares of the Company’s common stock. If the Merger Agreement is approved by the Company’s
shareholders and all other conditions for closing the merger transaction are satisfied, the Company will undergo a change in control. WAFD’s
interest pursuant to the Shareholder Agreements is not reflected in the table above with respect to principal shareholders of the Company.
Securities Authorized for Issuance Under Equity Compensation Plans 
The following table sets forth information regarding outstanding options and other rights to purchase or acquire common stock granted under the
Company's compensation plans as of December 31, 2022:
Equity Compensation Plan Information 
Plan category
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
Weighted average
exercise price of
outstanding options,
warrants and rights
Number of securities
remaining available for
future issuance under
equity compensation
plans excluding securities
reflected in column (a)
 
(a)
(b)
(c)
Equity compensation plans approved by security holders (1)
N/A
N/A
1,682,468 
Equity compensation plans not approved by security holders
— 
— 
— 
Total
— 
— 
1,682,468 
(1)    Consists of the Company's Omnibus Equity and Incentive Compensation Plan. For additional information, see Notes 15 and 16 to the Consolidated
Financial Statements. 
Item 13. Certain Relationships and Related Transactions, and Director Independence
Director Independence
Our Board has evaluated the independence of its members based upon the rules of Nasdaq.  Applying these standards, our Board has
affirmatively determined that each of Ms. Agrawal, Mr. Erickson, Ms. Newcomb, Mr. Shuster, Mr. Wajnert and Mr. Yzaguirre is an independent
director, as defined under the applicable rules. Ms. Agrawal is a director of Woodruff-Sawyer & Co., a provider of insurance brokerage and
consulting services to the Company in the ordinary course, but our Board determined that this does not affect her independence. In addition, each
member of the Audit and Risk Committee and the Compensation Committee is independent under the additional standards applicable to the
respective committee under the Securities Exchange Act of 1934, as amended, and Nasdaq rules.
Controlled Company Status
We are a "controlled company" within the meaning of the corporate governance standards of Nasdaq because trusts established for the benefit of
our Chair, Mr. Victor S. Trione, his brother, Mr. Mark Trione and his wife Catherine, and each of the adult children of Messrs. Trione (collectively,
the "Trione Family Trusts"), control more than 50% of the outstanding shares of our common stock. If they vote in the same manner, they have
the ability to determine the outcome of all matters put to a shareholder vote, including the election of directors. So long as the Trione Family
Trusts continue to own a majority of our outstanding stock we will remain a "controlled company." Under the Nasdaq rules, a controlled company
may elect not to comply with certain corporate governance requirements, including the requirements that a majority of the board of directors
consist of independent directors and to have board-level compensation and nominating and corporate governance committees consisting entirely
of independent directors. We do not currently rely on any of the corporate governance exemptions available to a controlled company.
115

Table of Contents
Certain Relationships and Related Party Transactions
Banking Transactions
Our Bank does not make loans to, nor does it have any outstanding loans to, directors, executive officers, principal shareholders or their related
interests ("Insiders"). Our Bank has deposit relationships with some of our Insiders. These deposit relationships are in the ordinary course of
business on substantially the same terms as those prevailing at the time for comparable transactions with persons not related to us.
Policies and Procedures Regarding Related Party Transactions
Transactions by us with related parties are subject to formal written policies, as well as regulatory requirements and restrictions. These
requirements include Sections 23A and 23B of the Federal Reserve Act and Regulation W, 12 C.F.R. 223, which govern certain transactions by
us with our affiliates, and Regulation O, 12 C.F.R. 215, which governs certain extensions of credit by us to our Insiders. The Audit and Risk
Committee reviews and, if appropriate, approves any related party transactions.
Related Party Transactions
There were no reportable transactions during the fiscal year ended December 31, 2022 in which we have participated and in which one or more
of our Insiders had a direct or material interest.
Item 14. Principal Accountant Fees and Services
The following table presents the aggregate fees billed by Crowe LLP for the two most recent fiscal years ended December 31, 2022 and 2021:
 
2022
2021
Audit Fees (1)
$
725,000 
$
499,000 
Audit-Related Fees (2)
16,000 
15,000 
Tax Fees (3)
40,000 
50,000 
All Other Fees (4)
37,000 
41,000 
Total Fees
$
818,000 
$
605,000 
(1) Audit fees relate to services rendered in connection with (i) the annual independent audit of the Company’s financial statements included in
Part II - Item 8, including reviews of the financial statements included in the Company's Quarterly Reports on Form 10-Q during the years ended
December 31, 2022 and 2021; and (ii) services that are normally provided by the auditor in connection with statutory and regulatory filings or
engagements; comfort letters and consents; as well as other accounting and financial reporting consultation necessary to comply with the
standards of the Public Company Accounting Oversight Board ("PCAOB").
(2) Audit-related fees relate to services rendered in connection with assurance and related services that are reasonably related to the
performance of the audit or review of the Company's financial statements.
(3) Tax fees are fees for tax compliance, tax advice and tax planning.
(4) All other fees are fees for any service not included in the first three categories, including a Uniform Single Attestation Program for Mortgage
Bankers audit and other miscellaneous services.
Pre-Approval Policies and Procedures
Pursuant to its charter, the Audit and Risk Committee reviews and pre-approves audit and permissible non-audit services performed by the
Company’s independent registered public accounting firm as well as the scope, fees, and other terms of such services. The Audit and Risk
Committee may not approve any service that individually or in the aggregate may impair, in the Audit and Risk Committee’s opinion, the
independence of the independent registered public accounting firm.  For fiscal years 2022 and 2021, all of the audit and non-audit services
provided by the Company’s independent registered public accounting firm were pre-approved by the Audit and Risk Committee in accordance
with the Audit and Risk Committee Charter.
116

Table of Contents
PART IV.
Item 15. Exhibits, Financial Statement Schedules
(a)(1) Financial Statements
The following consolidated financial statements of Luther Burbank Corporation and our subsidiaries and related reports of our independent
public accounting firm are incorporated by reference from Part II, Item 8. Financial Statements and Supplementary Data of the Report.
Report of Independent Registered Public Accounting Firm - Crowe LLP
Consolidated Financial Statements
Consolidated Statements of Financial Condition as of December 31, 2022 and 2021
Consolidated Statements of Income for the years ended December 31, 2022 and 2021
Consolidated Statements of Comprehensive Income for the years ended December 31, 2022 and 2021
Consolidated Statements of Shareholders' Equity for the years ended December 31, 2022 and 2021
Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
No financial statement schedules are provided because the information called for is not applicable or not required or the required information is
shown either in the Consolidated Financial Statements or the Notes thereto.
(3) Exhibits
Each management contract or compensatory plan or arrangement in which any director or named executive officer of the Company, as defined
by Item 402(a)(3) of Regulation S-K (17 C.F.R. §229.402(a)(3)), participates that is included among the exhibits listed on the Exhibit Index is
identified on the Exhibit Index by an asterisk (*).
Incorporated by Reference
Exhibit
Number
Description
Filed
Herewith
Form
File No.
Exhibit
Filing Date
2.1
Agreement and Plan of Reorganization, dated November 13, 2022,
by and between Washington Federal, Inc. and Luther Burbank
Corporation**
8-K
001-38317
2.1
11/14/2022
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
8-K
001-38317
3.1
4/27/2018
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.
4.2
Description of Registrant's Securities
10-K
001-38317
4.2
3/11/2020
*10.1
Employment Agreement, dated November 30, 2018, between Luther
Burbank Corporation and Simone Lagomarsino
8-K
001-38317
10.2
12/6/2018
*10.2
Amended and Restated Employment Agreement by and between
Luther Burbank Corporation and Laura Tarantino, dated November
30, 2018
8-K
001-38317
10.3
12/6/2018
*10.3
Employment Agreement, dated November 30, 2018, between Luther
Burbank Savings and Tammy Mahoney
X
*10.4
Amended and Restated Salary Continuation Agreement, dated April
25, 2006, between Luther Burbank Savings and Victor S. Trione
S-1
333-221455
10.5
11/9/2017
117

Table of Contents
Incorporated by Reference
Exhibit
Number
Description
Filed
Herewith
Form
File No.
Exhibit
Filing Date
*10.4.1
First Amendment to Amended and Restated Salary Continuation
Agreement, dated December 5, 2008, between Luther Burbank
Savings and Victor S. Trione
S-1
333-221455
10.6
11/9/2017
*10.4.2
Second Amendment to Amended and Restated Salary Continuation
Agreement, dated May 2, 2016, between Luther Burbank Savings
and Victor S. Trione
S-1
333-221455
10.7
11/9/2017
*10.5
Amended and Restated Salary Continuation Agreement, dated
January 1, 2005, between Luther Burbank Savings and John G.
Biggs
S-1
333-221455
10.8
11/9/2017
*10.5.1
First Amendment to Amended and Restated Salary Continuation
Agreement, dated December 5, 2008, between Luther Burbank
Savings and John G. Biggs
S-1
333-221455
10.9
11/9/2017
*10.5.2
Second Amendment to Amended and Restated Salary Continuation
Agreement, dated November 6, 2017 between Luther Burbank
Savings and John G. Biggs
S-1
333-221455
10.21
11/9/2017
*10.6
Salary Continuation Agreement, dated April 25, 2006, between Luther
Burbank Savings and Laura Tarantino
S-1
333-221455
10.10
11/9/2017
*10.6.1
First Amendment to Salary Continuation Agreement, dated December
5, 2008, between Luther Burbank Savings and Laura Tarantino
S-1
333-221455
10.11
11/9/2017
*10.6.2
Second Amendment to the Salary Continuation Agreement between
Luther Burbank Savings and Laura Tarantino, dated November 30,
2018
8-K
001-38317
10.5
12/6/2018
*10.7
Form of Indemnification Agreement, dated November 11, 2011,
between Luther Burbank Corporation and each of Bradley M. Shuster
and Victor S. Trione, and dated August 28, 2014 between Luther
Burbank Corporation and Anita Gentle Newcomb
S-1
333-221455
10.12
11/9/2017
*10.8
Form of Indemnification Agreement, dated November 17, 2011
between Luther Burbank Savings and Bradley M. Shuster and Victor
S. Trione, and dated August 28, 2014 between Luther Burbank
Savings and Anita Gentle Newcomb
S-1
333-221455
10.13
11/9/2017
*10.9
Form of Indemnification Agreement, dated March 15, 2012, between
Luther Burbank Savings and Laura Tarantino
S-1
333-221455
10.14
11/9/2017
*10.10
Luther Burbank Corporation Executive Severance and Change In
Control Plan and Summary Plan Description
X
*10.11
Luther 
Burbank 
Corporation 
Omnibus 
Equity 
and 
Incentive
Compensation Plan
S-1
333-221455
10.19
11/9/2017
*10.11.1
Form Luther Burbank Corporation Restricted Stock Award Agreement
X
10.12
S Corporation Termination and Tax Sharing Agreement
10-K
001-38317
10.17
3/16/2018
10.13
Form of Shareholder Agreement, dated November 13, 2022, among
Luther Burbank Corporation, Washington Federal, Inc. and each
director and certain executive officers of Luther Burbank Corporation
8-K
001-38317
Annex A
to Ex. 2.1
11/14/2022
21
Subsidiaries of the Registrant
X
23.1
Consent of Crowe LLP
X
24.1
Power of Attorney (included on signature page hereto)
X
31.1
Rule 13a-14(a) Certification of Chief Executive Officer
X
31.2
Rule 13a-14(a) Certification of Chief Financial Officer
X
32.1
Section 1350 Certification of Chief Executive Officer
X
32.2
Section 1350 Certification of Chief Financial Officer
X
101.INS
XBRL Instance Document - the instance document does not appear
in the Interactive Data File because its XBRL tags are embedded
within the Inline XBRL document
X
101.SCH
Inline XBRL Taxonomy Extension Schema Document
X
118

Table of Contents
Incorporated by Reference
Exhibit
Number
Description
Filed
Herewith
Form
File No.
Exhibit
Filing Date
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
X
101.DEF
Inline XBRL Taxonomy Extension Definitions Linkbase Document
X
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
X
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
X
104
Cover Page Interactive Data File (formatted as Inline XBRL and
contained in Exhibit 101)
X
* Management contract or compensatory plan or arrangement.
** Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule will be furnished supplementally to the SEC
upon request; provided, however, that the parties may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended, for any document so furnished.
Item 16. Form 10-K Summary
Not applicable.
119

Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: February 22, 2023
By: /s/ Simone Lagomarsino
Simone Lagomarsino
President and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of Luther Burbank Corporation (the “Company”) hereby severally constitute and appoint
Simone Lagomarsino and Laura Tarantino as our true and lawful attorneys and agents, each acting alone and with full power of substitution
and re-substitution, to do any and all things in our names in the capacities indicated below which said Simone Lagomarsino or Laura Tarantino
may deem necessary or advisable to enable the Company to comply with the Securities Exchange Act of 1934, and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection with the report on Form 10-K, or amendment thereto, including
specifically, but not limited to, power and authority to sign for us in our names in the capacities indicated below the report on Form 10-K, or
amendment thereto; and we hereby approve, ratify and confirm all that said Simone Lagomarsino or Laura Tarantino shall do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report on Form 10-K, has been signed by the following
persons in the capacities and on the dates indicated.
Signature
Position
Date
/s/ SIMONE LAGOMARSINO
President and Chief Executive Officer,
February 22, 2023
Simone Lagomarsino
Director (Principal Executive Officer)
/s/ LAURA TARANTINO
Executive Vice President and Chief Financial
February 22, 2023
Laura Tarantino
Officer (Principal Financial & Accounting Officer)
/s/ VICTOR S. TRIONE
Chairman
February 22, 2023
Victor S. Trione
/s/ RENU AGRAWAL
Director
February 22, 2023
Renu Agrawal
/s/ JOHN C. ERICKSON
Director
February 22, 2023
John C. Erickson
/s/ ANITA GENTLE NEWCOMB
Director
February 22, 2023
Anita Gentle Newcomb
/s/ BRADLEY M. SHUSTER
Director
February 22, 2023
Bradley M. Shuster
/s/ THOMAS C. WAJNERT
Director
February 22, 2023
Thomas C. Wajnert
/s/ M. MAX YZAGUIRRE
Director
February 22, 2023
M. Max Yzaguirre
120

Exhibit 10.3
EMPLOYMENT AGREEMENT
This Employment Agreement (the “Agreement”), dated as of the date executed below, is entered into by and between Luther
Burbank Corporation, a California corporation (the “Company”), and Tammy J. Mahoney (“Executive”).
INTRODUCTION
The Company and its operating subsidiaries (“Affiliates”) are engaged in the business of banking. The Company desires to employ
the Executive, and Executive desires to be employed, under the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the promises and mutual covenants herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
I.
EMPLOYMENT; TERM; DUTIES
1.1
Employment. Upon the terms and conditions set forth herein, the Company employs Executive, and Executive accepts
employment, as the Company’s Chief Risk Officer. During the Term, Executive will also serve without additional
compensation as the Chief Risk Officer of the Affiliates. Executive will report directly to the Company’s President and Chief
Executive Officer.
1.2
Term; At-Will Employment. Subject to Article IV below, Executive’s employment will be for an initial term of three (3) years
commencing on January 2, 2019 (“Effective Date”), with one (1) year automatic extensions unless terminated in writing by
either party sixty (60) days in advance of the end of the initial term or any one (1) year extension period (“Term”).
Notwithstanding anything to the contrary which may be contained in this Agreement, Executive’s employment hereunder is at
will, which means that the Company or Executive may terminate Executive’s employment at any time, with or without Cause
or Good Reason, or for no reason at all.
1.3
Duties. During the Term, Executive will perform such executive duties for the Company and/or its Affiliates, consistent with
Executive’s position, as may reasonably be assigned to Executive from time to time. Executive will reasonably devote
Executive’s productive business time, attention and energies to the performance of Executive’s duties under the Agreement.
Executive will use Executive’s best efforts to advance the interests and business of the Company and its Affiliates. Executive
will abide by all rules, regulations, and policies of the Company, as may be in effect from time to time. Notwithstanding the
foregoing, Executive may act for Executive’s own account in passive-type investments where the time allocated for those
activities does not interfere with or create a conflict of interest with the discharge of Executive’s duties for the Company.
1.4
Exclusive Agreement. Executive represents and warrants to the Company that there are no agreements or arrangements,
whether written or oral, in effect which would prevent Executive from rendering Executive’s exclusive services to the
Company during the Term. Executive commits to providing exclusive employment services to the Company and will accept
no other employment.

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Exhibit 10.3
II.
COMPENSATION
1.1
Compensation. For all services rendered by Executive and all covenants and conditions undertaken by Executive pursuant
to the Agreement, the Company will pay, and Executive will accept, as full compensation, the amounts set forth in this Article
II.
1.2
Base Salary. The base salary will be paid at an annual rate of two hundred eighty eight thousand seven hundred fifty dollars
($288,750), payable by the Company in accordance with the Company’s normal payroll process. Executive’s Base Salary will
be adjusted solely at the discretion of the Compensation Committee of the Board (the “Compensation Committee”).
1.3
Annual Target Bonus. Executive is eligible for an annual performance bonus with a target payout of seventy-five percent
(75%) of Executive’s Base Salary (the “Target Bonus”) based on specific performance criteria set by the Compensation
Committee. The Target Bonus will be payable no later than March 15  of the year following the year to which it relates and
Executive will not have earned or have any rights to such Target Bonus unless Executive remains employed by the Company
on the last day of the year to which the Target Bonus relates and the Compensation Committee has certified that all required
performance standards have been met.
1.4
Equity Grants. Executive is eligible for annual grants of equity and equity-based awards under the Luther Burbank
Corporation Omnibus Equity and Incentive Compensation Plan (the “Omnibus Plan”).
1.5
Reserved.
1.6
Deductions. The Company will deduct from the compensation described in the Agreement any federal, state or local
withholding taxes, social security contributions and any other amounts which may be required to be deducted or withheld by
the Company pursuant to any federal, state or local laws, rules or regulations.
1.7
Clawback Provisions. Notwithstanding any other provision in the Agreement to the contrary, any bonus, award under the
Omnibus Plan or any other compensation paid to the Executive pursuant to the Agreement or any other agreement or
arrangement with the Company is subject to recovery under any law, government regulation, stock exchange listing
requirement or policy adopted by the Board (or a committee thereof), and will be subject to such deductions and clawback as
may be required to be made pursuant to such law, government regulation, stock exchange listing requirement or policy. The
Board (or a committee thereof) will make any determination for clawback or recovery in its reasonable discretion and in
accordance with any applicable law, regulation stock exchange listing requirement or policy.
III. BENEFITS; EXPENSES
1.1
Benefits. During the Term, Executive will be entitled to participate in such group life, health, accident, disability or
hospitalization insurance plans, pension plans and retirement plans as the Company may make available to its other similarly
situated executive employees as a group, subject to the terms and conditions of any such plans. Executive’s participation in
all such plans will be at a level, and on terms and conditions, that are commensurate with Executive’s position and
responsibilities at the Company. The Company will communicate the material terms of all benefit plans and programs in
compliance with applicable law.
th
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Exhibit 10.3
1.2
Expenses. The Company agrees that Executive is authorized to incur reasonable and appropriate expenses in the
performance of Executive’s duties and in promoting the business of the Company. The Company will make reasonable
efforts to reimburse Executive within thirty (30) days of receipt of properly remitted expenses but a delay in reimbursement
will not be considered a breach of the Agreement.
1.3
Vacation. Each year, Executive will annually accrue thirty (30) days of vacation plus predetermined holidays pursuant to
Company policy.
1.4
Company Policies. The Company will timely provide Executive all Company policies applicable to Executive.
1.5
Reserved.
IV. TERMINATION
1.1
Termination. Executive’s employment will terminate at the end of the Term or earlier as provided in this Article.
1.2
Death; Total Disability. Executive’s employment will automatically terminate upon Executive’s death. Executive’s employment
will terminate upon Executive becoming “Totally Disabled.” Executive will be considered “Totally Disabled” if Executive has
been physically or mentally incapacitated so as to render Executive incapable of performing the essential functions of any
substantial gainful activity that is expected to result in death or to last for a continuous period of at least 12 months.
Executive’s receipt of disability benefits under the Company’s long-term disability plan or receipt of Social Security disability
benefits will be deemed conclusive evidence of Total Disability for purposes of this Agreement.
1.3
Termination for Cause by the Company. The Company may terminate Executive’s employment for “Cause” at any time after
providing a notice of termination for Cause to Executive. For purposes of this Agreement, Cause means (i) engaging in
conduct which is demonstrably and materially injurious to the Company or any Affiliate, or that materially harms the
reputation, good will, or business of the Company or any Affiliate; (ii) being convicted of, or entering a plea of guilty or nolo
contedere (or similar plea), to a criminal offense involving dishonesty, breach of trust, fraud, or moral turpitude; (iii) the
suspension, removal or prohibition from participating in the conduct of the Company’s affairs by an order issued under the
Federal Deposit Insurance Act or any comparable provision of federal or state law; (iv) having been found liable in any
Securities and Exchange Commission or other civil or criminal securities law action or any cease and desist order applicable
to Executive is entered (regardless of whether or not Executive admits or denies liability); (v) gross negligence,
insubordination, or material violation of any duty of loyalty or other fiduciary duty to the Company or any other material
misconduct on Executive’s part; (vi) the willful refusal or negligent failure to perform assigned duties; (vii) having used or
disclosed, without authorization, confidential or proprietary information of the Company and its Affiliates; (viii) having
breached any written agreement with the Company not to disclose any information pertaining to the Company or its Affiliates
or their customers, suppliers and businesses; (ix) having breached any agreement relating to non-solicitation, non-
competition, or the ownership or protection of the intellectual property of the Company or its Affiliates; (x) having materially
breached any applicable federal, state or local laws or regulations governing Executive’s duties with the Company or any of
the Company’s material policies
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Exhibit 10.3
applicable to Executive, whether currently in effect or later adopted; or (xi) Executive has failed to perform or habitually
neglected Executive’s duties after written notice thereof to Executive and a thirty (30) day cure period.
1.4
Termination by the Company without Cause. The Company may terminate Executive’s employment without Cause at any
time upon written notice to Executive.
1.5
Voluntary Termination by Executive. Executive may terminate employment hereunder with or without Good Reason at any
time upon written notice to the Company. For purposes of this Agreement, Executive will be treated as having resigned for
Good Reason if and only if Executive resigns as a result of the occurrence of one or more of the following events:
a) a significant material detrimental change in Executive’s position or responsibilities, including a material change in
duties that represents a substantial reduction in the position or responsibilities in effect immediately prior thereto; the
assignment to Executive of any significant duties or responsibilities that are materially inconsistent with such position;
except in connection with termination of Executive’s employment for Cause, as a result of Executive’s Total Disability
or death, or by Executive other than for Good Reason;
b) a material reduction in Executive’s Base Salary or Target Bonus other than in connection with a general reduction in
wages for all senior executive employees of the Company; or,
c) any material breach by the Company of its obligations to Executive under this Agreement.
Notwithstanding the foregoing, Executive will not be treated as having resigned for Good Reason unless Executive notifies
the Company in writing of the event constituting Good Reason not more than thirty (30) days after Executive knows, or with
the exercise of reasonable diligence would have known, of the occurrence of such event, the Company fails within thirty (30)
days after receipt of such notice to cure such event and return Executive to the position Executive would have been in had
the event not occurred, and Executive resigns after the end of such thirty (30) day cure period, but in no event more than two
(2) years after the occurrence of the event; provided, however, that in no event will Executive’s failure to notify the Company
of the occurrence of any event constituting Good Reason, or to resign as a result of such event, in either case within the
applicable time period, be construed as consent to the occurrence of future events, whether or not similar to the initial
occurrence.
1.6
Executive’s Temporary Suspension. If Executive is suspended or temporarily prohibited from participating in the Company’s
affairs by a notice served under section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1818 et seq.), the
Company’s obligations under the Agreement will be suspended as of the date of service unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the Company may in its discretion (i) pay Executive all or part of the
compensation withheld while its obligations under this Agreement were suspended, and (ii) reinstate (in whole or in part) any
of its obligations which were suspended.
1.7
Resignation as a Director on Termination of Employment. If Executive’s employment is terminated for any reason or for no
reason, and if Executive is then a member of the Board of Directors of the Company or of any Affiliate, Executive will within
two (2) days after such termination of employment resign from the Board of the Company and any Affiliate by
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Exhibit 10.3
delivering to the Company (and each Affiliate, as applicable) a letter or other written communication addressed to the Board
stating that Executive is resigning from the Board effective immediately.
V. PAYMENTS DUE UPON TERMINATION
1.1
Termination by Reason of Death or Total Disability. In the event that Executive’s employment is terminated by reason of
Executive’s death or Total Disability, the Company will pay the following amounts to Executive, Executive’s beneficiary or
estate, as applicable (i) any accrued but unpaid Base Salary for services rendered to the date of termination, any accrued
but unpaid expenses required to be reimbursed under the Agreement, any accrued vacation, and any earned but unpaid
bonuses for the prior calendar year (“Accrued Compensation”); (ii) any benefits accrued through the date of termination to
which Executive may be entitled pursuant to the Company’s plan, policies and arrangements, as determined and paid in
accordance with the terms of such plans, policies and arrangements (“Plan Benefits”); and, (iii) a pro rata Target Bonus for
the calendar year in which the Death or Total Disability occurs based on the number of days Executive was employed in such
calendar year; provided, however, that such bonus will be paid at the time it would have been paid had Executive not
terminated employment and will be paid only if the applicable performance conditions are met at the conclusion of the
calendar year and the amount will be determined based on the actual satisfaction of the applicable performance criteria.
1.2
Termination for Cause. In the event that Executive’s employment is terminated by the Company for Cause the Company will
pay to Executive Accrued Compensation and Plan Benefits.
1.3
Voluntary Termination by Executive. In the Event that Executive voluntarily terminates employment other than for Good
Reason, the Company will pay to Executive Accrued Compensation and Plan Benefits.
1.4
Termination by the Company Without Cause; Termination by Executive for Good Reason. In the event that Executive’s
employment is terminated by the Company for reasons other than death, Total Disability or Cause, or Executive terminates
employment for Good Reason, the Company will pay the following amounts to Executive:
a) Accrued Compensation;
b) Plan Benefits;
c) Subject to Executive’s execution and non-revocation of the Release (as defined below), an amount equal to
Executive’s Base Salary (as then in effect) for eighteen (18) months, with payments beginning on the first
administratively feasible payroll date following the date the Release becomes effective, with the first payment totaling
the amount of individual payments that would have been made from the termination date through the date of the
payment, and subsequent payments continuing at the same time and in the same manner as the Base Salary would
have been paid if Executive had remained in active employment until the end of such period. Notwithstanding the
foregoing, in the event that the period for consideration of the Release and the revocation period crosses two (2)
calendar years, the first administratively feasible payroll date will be deemed to be the first payroll date in the second
calendar year that occurs on or after the expiration of the revocation period, regardless of the date the Release is
signed. Further
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Exhibit 10.3
notwithstanding the foregoing, the Company may in its discretion change the timing of the payment of any amounts to
the extent such amounts are not subject to Section 409A of the Internal Revenue Code (the “Code”).
d) Subject to Executive’s execution and non-revocation of the Release and timely election of COBRA, the Company will
pay Executive in monthly installments for eighteen (18) months an amount equal to the monthly cost of COBRA
continuation coverage for the medical plan at the date of termination at the level of coverage then in effect for
Executive, less the active rate for such coverage.
e) Each of the payments of severance (including installments) and continued medical benefits above are designated as
separate payments for purposes of Code Section 409A. As a result, to the extent applicable, (i) payments that are
made on or before the 15  day of the third month of the calendar year following the applicable year of termination,
and (ii) any additional payments that are made on or before the last day of the second calendar year following the
year of Executive’s termination and do not exceed the lesser of two times Base Salary or two times the limit under
Code Section 401(a)(17) then in effect, are exempt from the requirements of Code Section 409A. Notwithstanding
any provision of the Agreement to the contrary, if Executive is designated as a “specified employee” within the
meaning of Code Section 409A, to the extent the payments to be made during the six month period following
Executive’s “separation from service” from the Company (within the meaning of Code Section 409A) constitute
“nonqualified deferred compensation” (within the meaning of Code Section 409A, a “Separation from Service”), the
payments will be withheld and the amount of the payments withheld will be paid in a lump sum, without interest,
during the seventh month after the date of Executive’s Separation from Service (or such earlier date upon which such
amounts can be paid under Code Section 409A without resulting in a prohibited distribution, including as a result of
Executive’s death).
1.5
Cancellation and Refund of Termination Benefits for Subsequently Discovered Cause. Notwithstanding any provision of the
Agreement to the contrary, if after and within one (1) year of Executive’s termination of employment, the Company becomes
aware of facts that would have allowed the Company to terminate Executive’s employment for Cause, then without regard to
any notice or cure periods, to the extent permitted by law, the Company may elect to cancel any and all payments under
Section 5(c)-(f) due Executive, but not yet paid, under this Agreement.
1.6
Release. For purposes of the Agreement, Release means that specific document which the Company will present to
Executive for consideration and execution after any termination of employment pursuant to Section 5.5 and Article VI,
wherein if Executive agrees to such, Executive will irrevocably and unconditionally release and forever discharge the
Company, its Affiliates and related parties from any and all causes of action which Executive at that time had or may have
against the Company (excluding any claim for indemnity, claims under this Agreement, any claim under state workers’
compensation or unemployment laws, any claim under COBRA, or any claims that cannot be released as a matter of law).
The Release will be provided to Executive as soon as practical after Executive’s termination date, but in any event in
sufficient time so that Executive will have adequate time to review the Release as provided by applicable law.
th
Page 6

Exhibit 10.3
VI. CERTAIN TERMINATIONS DURING A CHANGE-IN-CONTROL PERIOD
1.1
Additional Severance. Subject to reduction as may be required under the Agreement, in the event a Change-in-Control
occurs and Executive terminates employment for Good Reason during a Change-in-Control Period, or the Company
terminates Executive’s employment without Cause (and for reason other than death or Total Disability) during a Change-in-
Control Period, the Company will, subject to Executive’s execution of the Release, pay the payments and benefits provided
for in Section 5.4 in the same form as provided therein and subject to the same terms and conditions thereunder; provided,
however, that (i) the Company will pay Executive an amount equal to Executive’s Base Salary and Target Bonus (as then in
effect) for twenty-four (24) months; and, (ii) each outstanding award under the Omnibus Plan that the Company granted to
Executive will become fully vested. For purposes of the Agreement, “Change-in-Control” means a change-in-control as
defined under the Omnibus Plan. For purposes of the Agreement, “Change-in-Control Period” means the period commencing
on the date on which a Change-in-Control occurs and ending on the first anniversary of the date on which a Change-in-
Control occurs.
1.2
Golden Parachute. Notwithstanding the foregoing, if the total payments to be paid to Executive under the Agreement, along
with any other payments to Executive by the Company, would result in the Executive being subject to the excise tax imposed
by Section 4999 of the Code (commonly referred to as the “Golden Parachute Tax”), the Company will reduce the aggregate
payments to the largest amount which can be paid to Executive without triggering the excise tax, but only if and to the extent
that such reduction would result in Executive retaining larger aggregate after-tax payments. The determination of the excise
tax and the aggregate after-tax payments to be received by Executive will be made by the Compensation Committee. If
payments are to be reduced, the payments made latest in time will be reduced first and if payments are to be made at the
same time, non-cash payments will be reduced before cash payments.
VII. NON-DISCLOSURE; RESTRICTIVE COVENANTS
1.1
Non-disclosure of Confidential Information. “Confidential Information” means any and all private proprietary information
affecting or relating to the business of the Company and its Affiliates, including without limitation, financial data, customer
lists and data, licensing arrangements, borrower or prospective borrower information, regardless of the form in which it is
handled or maintained (including, without limitation, bank and credit card account numbers, income and credit information,
and social security numbers), loan files, business strategies, pricing information, product development, intellectual, or other
materials of any kind or nature (whether or not entitled to protection under applicable copyright laws, or reduced or embodied
in any medium or tangible form), including without limitation, all copyrights, patents, trademarks, service marks, trade
secrets, contract rights, ideas, concepts, technologies, logos, hardware, software, and as may be embodied in any and all
computer programs, tapes, diskettes, or disks, mailing lists, lists of actual or prospective customers and/or suppliers,
notebooks, documents, memoranda, reports, files, correspondence, charts, lists and all other
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Exhibit 10.3
written, printed or otherwise recorded material of any kind whatsoever and any other information, whether or not reduced to
writing, including “know-how”, ideas, concepts, research, processes and plans. “Confidential Information” does not include
information that is in the public domain, information that is generally known in the trade, or information that Executive can
prove Executive acquired wholly independently of Executive’s employment with the Company. Executive will not, at any time
during the Term or thereafter, directly or indirectly, disclose or furnish to any other person, form or corporation any
Confidential Information, except in the course of the proper performance of Executive’s duties hereunder or as required by
law (in which event Executive will give prior written notice to the Company and will cooperate with Company and Company’s
counsel in complying with such legal requirements). Promptly upon the termination of Executive’s employment hereunder for
any reason or whenever the Company so requests, Executive will surrender to the Company all documents, hardware,
software, loan files, work papers, lists, memoranda, records and other data (including all copies) constituting or pertaining in
any way to any of the Confidential Information.
1.2
Non-Competition. Executive will not, during the Term directly (i) compete with the Company; or (ii) have an interest in, be
employed by, be engaged in or participate in the ownership, management, operation or control of, or act in any advisory or
other capacity for, any competing entity which conducts its business within the States of California, Washington or Oregon;
provided, however, that notwithstanding the foregoing, Executive may make solely passive investments in any competing
entity the common stock of which is “publicly held,” and of which the Executive will not own or control, directly or indirectly, in
the aggregate securities which constitute more than one percent (1%) of the voting rights or equity ownership of such
competing entity; or (iii) solicit or divert any business or any customer from the Company or assist any person, firm or
corporation in doing so or attempting to do so; or (iv) cause or seek to cause any person, firm or corporation to refrain from
dealing or doing business with the Company or assist any person, firm or corporation in doing so or attempting to do so.
1.3
Non-Solicitation. Executive will not, for a period of two (2) years from the date of any termination or expiration of Executive’s
employment hereunder, directly or indirectly:
a) acquire any financial interest in or perform any services for Executive or any other entity in connection with a
business in which Executive’s interest, duties or activities would inherently require Executive to reveal any
Confidential Information; or, solicit or cause to be solicited the disclosure of, or disclose any Confidential Information
for any purpose whatsoever.
b) Solicit or cause others to solicit, directly or indirectly, any person employed by the Company (a “Current Employee”)
to leave employment with the Company. The term “solicit” includes, but is not limited to the following (regardless of
whether done directly or indirectly): (i) requesting that a Current Employee change employment, (ii) assisting a
Current Employee in finding employment elsewhere, (iii) inquiring if a Current Employee might have an interest in
employment elsewhere, or (iv) informing others of the name of status of, or other information about, a Current
Employee for purposes of inducing the Current Employee to leave the Company.
1.4
Non-Disparagement. Executive agrees, other than with regard to employees in the good faith performance of Executive’s
duties with the Company while employed by the Company, both during and after Executive’s employment with the Company
terminates, not to knowingly
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Exhibit 10.3
disparage the Company or its officers, directors, employees or agents in any manner likely to be materially harmful to it or
them or its business or their business, business reputation or personal reputation. This paragraph will not be violated by
statements by the Executive which are truthful, complete and made in good faith in required response to legal process or
governmental inquiry. Executive agrees that any breach of this non-disparagement provision will be deemed a material
breach of this Agreement. Likewise, the Company agrees not to disparage Executive or Executive’s business or personal
reputation, provided, however, that this provision will not be violated by statements by the Company which are truthful,
complete, and made in good faith in required governmental disclosures or in response to legal process or governmental
inquiry.
1.5
Breach of Provisions. In the event that Executive breaches any of the provisions of Article VII, in addition to and without
limiting or waiving any other remedies available to the Company at law or in equity, the Company will be entitled to
immediate injunctive relief in any court, domestic or foreign, having the capability to grant such relief, without the necessity of
posting a bond, to restrain any such breach or threatened breach and to enforce the provisions of Article VII. Executive
acknowledges and agrees that there is no adequate remedy at law for any such breach or threatened breach and, in the
event that any action or proceeding is brought seeking injunctive relief, Executive will not use as a defense thereto that there
is an adequate remedy at law.
1.6
Reasonable Restrictions. The parties acknowledge that the foregoing restriction, the duration and the territorial scope
thereof, are under all of the circumstances reasonable and necessary for the protection of the Company and its business.
1.7
Cooperation in Litigation. Executive will cooperate with the Company, during Executive’s employment (and following
Executive’s termination of employment for any reason for a period of two (2) years thereafter), by making Executive
reasonably available to testify on behalf of the Company or any Affiliate in any action, suit, or proceeding, whether civil,
criminal, administrative, or investigative, and to reasonably assist the Company or any such Affiliate in any such action, suit,
or proceeding by providing information and meeting and consulting with the Board or its representatives or counsel, as
reasonably requested; provided, however, that the same does not materially interfere with Executive’s then current
professional activities. The Company will reimburse Executive for all expenses reasonably incurred by Executive in
connection with Executive’s provision of testimony or assistance.
1.8
Definition. For purposes of Article VII, the term “Company” will be deemed to include (i) any successor of the Company; (ii)
any subsidiary of the Company (including, without limitation, any entity in which the Company owns 50% or more of the
issues and outstanding equity), and (iii) any entity that is under the control or common control of the Company (including, by
way of illustration and not as a limitation, any joint venture in which the Company or one of its subsidiaries is a party.)
VIII.DISPUTE RESOLUTION; BINDING ARBITRATION
1.1
Employment Matters. This Article applies to any controversy or claim between Executive and the Company arising out of or
relating to or concerning this Agreement or any aspect of Executive’s employment with the Company or the termination of
that employment (together, an “Employment Matter”). This includes, but is not limited to, any and all employment-related
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Exhibit 10.3
claims or controversies, such as breach of employment agreement, breach of the covenant of good faith and fair dealing,
negligent supervision or hiring, wrongful discharge in violation of public policy, unpaid wages under the state or federal wage
payment laws, breach of privacy claims, intentional or negligent infliction of emotional distress claims, fraud,
misrepresentation, defamation, and any claims that could be asserted under all state and federal anti-discrimination laws,
including, but not limited to, the California Fair Employment and Housing Act, Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act, the Americans with Disabilities Act, the California Labor Code, and the Family and
Medical Leave Act. Executive specifically agrees to arbitrate all claims for discrimination under the procedure set forth in this
Article and not through a court of law. This Agreement is further intended to apply to any claim Executive may have against
any of the Company’s officers, directors, employees, agents, or any of its Affiliates, and to any and all past and future
employment relationships Executive may have with the Company regardless of job position or title.
1.2
Negotiation. The parties will attempt in good faith to resolve through negotiation any dispute, claim, or controversy arising out
of or relating to this Agreement. Either party may initiate negotiations by providing written notice to the other party. Such
notice will set forth the subject of the dispute and the relief requested. The recipient of such notice will respond in writing
within ten (10) days with a statement of its respective position on and recommended solution to the dispute. If the dispute is
not resolved by this exchange of correspondence, the parties, and/or their representatives, will meet at a mutually agreeable
time and place within twenty (20) days of the date of the initial notice in order to exchange relevant information and
perspectives, and to attempt to resolve the dispute.
1.3
Mandatory Arbitration. Any controversy arising out of or relating to this Agreement, its enforcement or interpretation, or
because of an alleged breach, default, or misrepresentation in connection with any of its provisions, or any other controversy
arising out of Executive’s employment, including, but not limited to, any state or federal statutory claims, will be submitted to
arbitration in the County of Sonoma, California, before a sole arbitrator selected from Judicial Arbitration and Mediation
Services, Inc., or its successor (“JAMS”), or if JAMS is no longer able to supply the arbitrator, such arbitrator will be selected
from the American Arbitration Association, and will be conducted in accordance with California Code of Civil Procedure §
1280 et seq. as the exclusive forum for the resolution of such dispute; provided, however, that in the event that provisional
injunctive relief is not available, or is not available in a timely manner, through such arbitration, then provisional injunctive
relief may, but need not, be sought by either party to this Agreement in a court of law while arbitration proceedings are
pending, and any provisional injunctive relief granted by such court will remain effective until the matter is finally determined
by the Arbitrator. Either Executive or the Company may initiate the arbitration process by delivering a written request for
arbitration to the other party within the time limits that would apply to the filing of a civil complaint in state or federal district
court, as applicable to the claim at issue. A late request will be void. Final resolution of any dispute through arbitration may
include any remedy or relief which the Arbitrator deems just and equitable, including any and all remedies provided by
applicable state or federal statutes. At the conclusion of the arbitration, the Arbitrator will issue a written decision that sets
forth the essential findings and conclusions upon which the Arbitrator’s award or decision is based. Any award or relief
granted by the Arbitrator will be final and binding on the parties and may be
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Exhibit 10.3
enforced by any court of competent jurisdiction. The Company will be responsible for payment of the forum costs of any
arbitration hereunder, including the Arbitrator’s fee. Executive and the Company further agree that in any proceeding to
enforce the terms of this Agreement, the prevailing party will be entitled to its reasonable attorneys’ fees and costs incurred
in connection with resolution of the dispute in addition to any other relief granted. Notwithstanding this provision, the parties
may mutually agree to mediate any dispute prior to or following submission to arbitration.
1.4
Waiver of Jury Trial. To the extent permitted by law, Executive and the Company acknowledge and agree that they are
hereby waiving any rights to a trial by jury in any action, proceeding or counterclaim brought by either of the parties against
the other in connection with any matter whatsoever arising out of or in any way connected with this Agreement or Executive’s
employment. Executive and the Company acknowledge that this consent and agreement to mandatory and binding
arbitration is a material inducement to enter into the Agreement and that each party will continue to be bound by and to rely
on this consent and agreement in their related future dealings. Executive and the Company further warrant and represent
that each has reviewed this consent and agreement with legal counsel of its own choosing, or has had an opportunity to do
so, and that it knowingly and voluntarily gives this consent and enters into this agreement having had the opportunity to
consult with legal counsel. This consent and agreement is irrevocable, meaning that it may not be modified either orally or in
writing, and this consent and agreement will apply to any subsequent amendments, renewals, supplements or modifications
to the Agreement or any other agreement or document entered into between the parties in connection with the Agreement,
including, but not limited to any Release. Notwithstanding the provisions of this Agreement, Executive will have the right to
file for workers’ compensation and unemployment insurance benefits with the appropriate state agencies, unfair labor
practice charges with the National Labor Relations Board, or an administrative charge with the Equal Employment
Opportunity Commission, California Department of Fair Employment and Housing, or any similar state agency.
1.5
Jurisdiction and Choice of Forum. Executive and the Company irrevocably submit to the exclusive jurisdiction of any state or
federal court located in the County of Sonoma, California over any Employment Matter that is not otherwise arbitrated or
resolved pursuant to Section 8.2. This includes any action or proceeding to compel arbitration or to enforce an arbitration
award. Executive and the Company (i) acknowledge that the forum stated in this Section has a reasonable relation to this
Agreement, (ii) waive, to the extent permitted by law, any objection to personal jurisdiction or to the laying of venue of any
action or proceeding covered by this Section in the forum stated in this Section, including any objection on grounds of forum
non conveniens or the like, (iii) agree not to commence any such action or proceeding in any forum other than the forum
stated in this Section, and (iv) agree that, to the extent permitted by law, a final and non-appealable judgment in any such
action or proceeding in any such court will be conclusive and binding on Executive and the Company.
1.6
Governing Law. This Agreement, and all questions related to its viability, interpretation, performance and enforcement, as
well as the legal relations hereby created between Executive and the Company, will be governed by and construed under,
and interpreted and enforced in accordance with, the laws of the State of California, notwithstanding any California or other
conflict of law provision to the contrary.
Page 11

Exhibit 10.3
1.7
ERISA. Article VIII will not apply to any claims or disputes arising out of or relating to any Company plan subject to the
Employee Retirement Income and Security Act (“ERISA”), which claims or disputes will be subject to ERISA.
IX. MISCELLANEOUS
1.1
Company’s Default. If Company is in default (as defined in Section 3(x)(1) of the Federal Deposit Insurance Act), all
obligations under the Agreement will terminate as of the date of default, except to the extent it is determined that continuation
of the Agreement is necessary for the continued operation of the Company by the Company’s then federal or state regulator.
1.2
Binding Effect. The Agreement will be binding upon and inure to the benefit of the parties and their respective legal
representatives, heirs, distributees, successors and assigns.
1.3
Assignment. The Company may assign the Agreement to any successor in interest to its business, or to any subsidiary of
the Company, and Executive agrees to be employed by such assignee as though such assignee were originally the employer
named herein. Executive acknowledges that the services to be rendered by Executive are unique and personal, and,
accordingly, Executive may not assign any of Executive’s rights or delegate any of Executive’s duties or obligations under the
Agreement.
1.4
Notices. Any notice provided for herein will be in writing and will be deemed to have been given or made when personally
delivered or three (3) days following deposit for mailing by first class registered or certified mail, return receipt requested, or if
delivered by electronic mail, upon confirmation of receipt of the transmission, to the address of the other party set forth below
or to such other address as may be specified by notice given in accordance with this Section.
If to the Company: Legal Department, Luther Burbank Corporation, 1500 Rosecrans Avenue, Suite 300, Manhattan Beach,
CA 90266; legal@lbsavings.com
If to Executive, the Executive’s last known address of record.
1.5
Severability. If any provision of the Agreement, or portion thereof, will be held invalid or unenforceable by a court of
competent jurisdiction, such invalidity or unenforceability will attach to only such provision or portion thereof, and will not in
any manner affect or render invalid or unenforceable any other provision of the Agreement or portion thereof, and the
Agreement will be carried out as if such invalid or unenforceable provision or portion thereof were not contained herein. In
addition, any invalid or unenforceable provision or portion thereof will be deemed, without further action on the part of the
parties, modified, amended or limited to the extent necessary to render the same valid and enforceable.
1.6
Indemnity. The Company will, to the fullest extent permitted by law, indemnify Executive with respect to, and hold Executive
harmless from and against, all expenses (including reasonable attorneys’ fees), liabilities, judgments, penalties, fines and
amounts paid in settlement reasonably incurred by Executive or on behalf of Executive in connection with such legal
proceedings or any claim, issue or matter therein, for any breach of any representation, warranty or obligation hereunder by
the Company or the Company’s gross negligence or intentionally tortious misconduct.
1.7
Waiver. No waiver by a party of a breach or default by the other party will be considered valid unless in writing signed by
such waiving party, and no such waiver will be deemed a waiver of any subsequent breach or default of the same or any
other nature.
Page 12

Exhibit 10.3
1.8
Entire Agreement. The Agreement sets forth the entire agreement between the parties with respect to the subject matter
hereof, and supersedes any and all prior agreements or understandings between the Company and Executive (including any
prior employment or change-in-control agreements), whether written or oral, fully or partially performed, relating to any or all
matters covered by and contained or otherwise dealt with in this Agreement.
1.9
Amendment. No modification, change or amendment of the Agreement or of any of its provisions will be valid unless in
writing and signed by the party against whom such claimed modification, change or amendment is sought to be enforced.
1.10
Authority. The parties each represent and warrant that they have the power, authority and right to enter into the Agreement
and carry out and perform the terms, covenants and conditions hereof.
1.11
Survival. The respective rights and obligations of the parties hereunder will survive any termination of the Agreement to the
extent necessary for the intended preservation of such rights and obligations.
1.12
Counterparts. The Agreement may be executed in counterparts, each of which will be deemed an original, and all of which
together will constitute one and the same instrument.
IN WITNESS THEREOF, the parties hereto have executed the Agreement as of __November 30, 2018__.
COMPANY
Luther Burbank Corporation
By: /s/ John Biggs        
Name: John Biggs        
Title: President & CEO        
Executive
/s/ Tammy Mahoney        
Page 13

Exhibit 10.10
LUTHER BURBANK CORPORATION
EXECUTIVE SEVERANCE AND CHANGE IN CONTROL PLAN AND SUMMARY PLAN DESCRIPTION
1.
Purpose of the Plan. Luther Burbank Corporation, a California corporation, established this Executive Severance and
Change in Control Plan to provide severance protection for a select group of executives in the event of a qualifying
termination of employment. The severance benefits provided under this Plan are conditioned on an Eligible Employee’s
execution of a Participation Agreement upon becoming eligible for the Plan and a waiver and release of all employment-
related claims against the Company at the time of a Qualifying Termination. This Plan document also serves as the summary
plan description of the Plan.
2.
Definitions. As used in the Plan, the following terms shall have the meanings set forth below: “Administrator” means the
Compensation Committee of the board of directors of the Company or, subject to Section 9, any delegate thereof.
“Affiliate” means any entity that directly or indirectly controls, is controlled by or is under common control with, the Company.
“Base Salary” means a Participant’s annual base salary as in effect immediately prior to a termination of employment that
constitutes a Qualifying Termination (disregarding any reduction in annual base salary that is the grounds for a Good Reason
resignation).
“Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange Act, except that a Person shall not be
deemed to be the “Beneficial Owner” of any securities which are properly reported on a Form 13-F.
“Cause” means, as determined by the Company, the Participant’s (i) engaging in conduct which is demonstrably and
materially injurious to the Company or any Affiliate, or that materially harms the reputation, good will, or business of the
Company or any Affiliate; (ii) conviction of, or plea of guilty or nolo contedere (or similar plea) to, a criminal offense involving
dishonesty, breach of trust, fraud, or moral turpitude; (iii) suspension, removal or prohibition from participating in the conduct
of the Company’s affairs by an order issued under the Federal Deposit insurance Act or any comparable provision of federal
or state law; (iv) having been found liable in any Securities and Exchange Commission or other civil or criminal securities law
action or any cease and desist order applicable to Participant is entered (regardless of whether or not Participant admits or
denies liability); (v) gross negligence, insubordination, or material violation of any duty of loyalty or other fiduciary duty to the
Company or any other material misconduct on Participant’s part;
(vi) willful refusal or negligent failure to perform assigned duties; (vii) having used or disclosed, without authorization,
confidential or proprietary information of the Company and its Affiliates;
(viii) having breached any written agreement with the Company not to disclose any information pertaining to the Company or
its Affiliates or their customers, suppliers and businesses; (ix) having breached any agreement related to non-solicitation,
non-competition, or the ownership or protection of the intellectual property of the Company or its Affiliates; (x) having
materially breached any applicable federal, state or local laws or regulations governing Participant’s duties

LUTHER BURBANK CORPORATION
EXECUTIVE SEVERANCE AND CHANGE IN CONTROL PLAN AND SUMMARY PLAN DESCRIPTION
with the Company or any of the Company’s material policies applicable to Participant, whether currently in effect or later
adopted; or (xi) failure to perform or habitual neglect of Participant’s duties after written notice thereof to Participant and a
thirty (30) day cure period.
“Change in Control” means a change in control as defined in the Luther Burbank Corporation Omnibus Equity and Incentive
Plan.
“Change-in-Control Period” means, in the event of a Change in Control, the period beginning on the date of the event of
Change in Control and ending on the first anniversary date of the event of a Change in Control.
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
“Company” means Luther Burbank Corporation and, unless the context indicates otherwise, its Affiliates.
“Disability” means the Participant has been physically or mentally incapacitated so as to render Participant incapable of
performing the essential functions of any substantially gainful activity, that is expected to result in death, or to last for a
continuous period of at least twelve (12) months. Executive’s receipt of disability benefits under the Company’s long-term
disability plan or receipt of Social Security disability benefits will be deemed conclusive evidence of Disability for purposes of
the Plan.
“Eligible Employee” means any employee of the Company who is classified as a section 16 officer under the Exchange Act.
“ERISA” means the Employment Retirement Income Security Act of 1974, as it may be amended from time to time.
“Good Reason” means the occurrence of any of the following circumstances, without the Participant’s written consent, which
remains uncured by the Company within thirty (30) days after the Company’s receipt of notice thereof from the Participant;
provided that such notice must be received by the Company within thirty (30) days after the date the circumstance
constituting Good Reason first came into existence: (i) a material reduction in the Participant’s Base Salary or Target Bonus
opportunity, other than a reduction that is part of and consistent with a reduction in compensation of all similarly situated
employees of the Company; or (ii) a relocation of the Participant’s principal place of employment more than fifty (50) miles
from the Participant’s previous principal place of employment (unless such relocation does not increase Participant’s
commute by more than twenty (20) miles).
“Individual Severance Agreement” means a contractual agreement between the Company and an individual who is or
becomes a Participant that provides for severance benefits outside of a Company benefit plan.
“Participant” means an Eligible Employee who becomes a participant in the Plan as set forth in Section 3.
“Participation Agreement” means an agreement, in a form adopted by the Administrator, by which an Eligible Employee
agrees to participate in the Plan pursuant to its terms and conditions. “Person” shall have the meaning given in Section 3(a)
(9) of the Exchange act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i)
the Company or any of its Affiliates, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the
Company or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities or
(iv) a corporation owned, directly or indirectly, by the
Page 2

LUTHER BURBANK CORPORATION
EXECUTIVE SEVERANCE AND CHANGE IN CONTROL PLAN AND SUMMARY PLAN DESCRIPTION
stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.
“Plan” means the Luther Burbank Corporation Executive Severance and Change in Control Plan and Summary Plan
Description, as it may be amended from time to time.
“Qualifying Termination” means a termination of a Participant’s employment with the Company due to (i) a termination by the
Company without Cause or (ii) a resignation by the Participant for Good Reason; provided that, in either case, the
termination occurs while the Plan remains in effect or during an extended period in which the Participant remains eligible for
Plan benefits under Section 8. For the avoidance of doubt, no Qualifying Termination shall have occurred as a result of a
termination of employment that is on account of the Participant’s death, disability or voluntary retirement; due to a
termination for Cause; or merely because a Participant’s employment is transferred to an Affiliate.
“Qualifying Termination Date” means, with respect to a Qualifying Termination, the date on which a Participant’s employment
with the Company terminates.
“Section 409A” means section 409A of the Code, any successor provisions thereto, and the guidance issued thereunder, as
mended from time to time.
“Severance Payments” means the payments and benefits for which Participants experiencing a Qualifying Termination are
eligible pursuant to Section 4.
“Target Bonus” means the target bonus opportunity available to Participant and documented in the Company’s offer letter to
Participant or a subsequent document approved by the Administrator.
3.
Plan Participation. An Eligible Employee shall become a Participant in the Plan upon delivery of a signed Participation
Agreement to the Administrator and shall remain a Participant eligible for benefits under the Plan until (i) the individual
ceases to be employed by the Company under circumstances not constituting a Qualified Termination, (ii) the individual
materially breaches the Participation Agreement, (iii) the Plan terminates (or the individual ceases to be an Eligible
Employee due to a Plan amendment) prior to the individual’s termination of employment and any extended period during
which the individual remains eligible for Plan benefits under Section 8 expires, or (iv) the individual has a Qualifying
Termination and all of the Severance Payments owed to the individual have been made.
4.
Severance Payments. A Participant experiencing a Qualifying Termination shall be eligible for the payments and benefits
described in this Section, subject to (i) the Participant’s continued employment through the employment termination date
identified in a termination notice provided by the Company or resignation notice provided by the Participant (unless this
condition is waived by the Company), (ii) the Participant’s timely execution, delivery and non-revocation of a general release
of claims against the Company substantially in the form provided by the Company at the time of a Qualifying Termination
(“General Release”), and (iii) the Participant’s continued compliance with the terms of the General Release and any non-
competition, non- solicitation, non-disclosure or similar restrictive covenant obligation owed to the Company. For the
avoidance of doubt, in the event of the Participant’s material breach of the terms of the General Release or any such
restrictive covenant, the Company’s obligation to pay Severance
Page 3

LUTHER BURBANK CORPORATION
EXECUTIVE SEVERANCE AND CHANGE IN CONTROL PLAN AND SUMMARY PLAN DESCRIPTION
Payments shall cease, and the Company shall be entitled to repayment by the Participant of any cash Severance Payments
made to the Participant.
a.
Cash Severance.
i.
Subject to the conditions set forth above and the terms of the General Release, upon a Qualifying
Termination, the Participant shall be eligible for a cash payment equal to twelve (12) months of Base Salary.
For a Qualifying Termination that occurs during a Change-in-Control Period, the Participant shall be eligible
for a cash payment equal to twenty-four (24) months of Base Salary, plus two (2) times the Participant’s
Target Bonus.
ii. Subject to Section 5, the cash payment shall be made in substantially equal installments, on the Company’s
regular payroll schedule, commencing on the first payroll date that is at least fifteen (15) days following the
Qualifying Termination Date.. Provided, however, that in no case shall any payment be made prior to the
expiration of the revocation period of the General Release and any installment payment shall be delayed and
instead be made (absent a revocation of the General Release) at the same time as the payment for the first
installment date that occurs after the expiration of the revocation period. Notwithstanding the foregoing, if any
amount of the cash payment under the Plan constitutes nonqualified deferred compensation subject to
Section 409A and the time in which the Participant delivers an executed General Release could affect
whether the Participant would receive such amount in the Participant’s taxable year in which the General
Release review period begins or the subsequent taxable year, then such installment payment will be paid
(absent a revocation of the General Release) at the same time as the payment for the earliest installment date
on or following the date when the amount would have otherwise been paid (without regard to this sentence)
which occurs in the subsequent taxable year.
b.
Other Severance Benefits. If the Participant timely elects COBRA continued coverage under a Company group
health plan, the Company shall pay the Participant an additional monthly amount, on an after tax-basis, equal to the
COBRA continuation coverage premiums of such plan(s) (including coverage for any of the Participant’s eligible
dependents who were covered immediately before the Participant’s termination of employment) for a period of up to
twenty-four (24) months so long as the Participant continues such continuation coverage. Notwithstanding the
foregoing, no such amounts shall be payable by the Company prior to the expiration of the revocation period of the
General Release, provided that the Company shall pay any such withheld amounts to the Participant (absent a
revocation of the General Release) promptly after the expiration of the revocation period. The Company’s obligations
under this Section 4(b)(i) shall cease immediately upon the Company’s determination that providing the benefits
described therein could reasonably result in a violation of applicable law or in the imposition of an excise tax on the
Company.
c.
Coordination with Individual Severance Agreements. Notwithstanding the foregoing, unless otherwise expressly
provided in an Individual Severance Agreement referencing the Plan, the cash and in-kind benefits described in this
Section 4 shall be reduced by the
Page 4

LUTHER BURBANK CORPORATION
EXECUTIVE SEVERANCE AND CHANGE IN CONTROL PLAN AND SUMMARY PLAN DESCRIPTION
amount of any cash or comparable in-kind benefits the Participant is entitled to receive under any Individual
Severance Agreement.
d.
Clawback. Notwithstanding anything in the Plan to the contrary, the Company will be entitled to the extent permitted
or required by applicable law, Company policy or the requirements of an exchange on which the Company’s common
stock may be listed for trading, in each case, as in effect from time to time, to effectuate a forfeiture of all or part of the
Severance Payments and/or recoup compensation of whatever kind paid by the Company pursuant to the Plan.
5.
Six-Month Delay for Specified Employees. Notwithstanding any provision of this Plan to the contrary, if a Participant is a
“specified employee” then, to the extent required under Treasury Regulation section 1.409A-3(i)(2), any payments that
constitute “nonqualified deferral of compensation” that become due upon the Participant’s “separation from service” (other
than due to the Participant’s death) and that would have been made under the terms of the Plan within the six-month period
commencing on the Participant’s “separation from service” shall be delayed and instead be made as soon as practicable
after the end of such six-month period. For purposes of Section 5, the terms “specified employee”, “nonqualified deferred
compensation”, and “separation from service” have the meanings given to them under Section 409A.
6.
Term of the Plan. The Plan is effective as of October 26, 2021 and shall remain in effect for a term of three (3) years
thereafter, subject to an extension of the term or an earlier termination by the Company. No Severance Payments shall be
due with respect to a termination of employment that occurs after the full term of the Plan as set forth above expires.
7.
Section 280G Golden Parachute Cutback. Notwithstanding anything in the Plan to the contrary, if any Severance
Payments payable to the Participant under the Plan would constitute “parachute payments” and, either alone or when
combined with any other “parachute payments” payable to the Participant, would result in any “excess parachute payments”
becoming subject to the excise tax imposed by section 4999 of the Code, or any successor provision thereto (the “Excise
Tax”) the Company will reduce such Severance Payments to the largest amount which can be paid to Participant without
triggering the Excise Tax, but only if and to the extent that such reduction would result in Participant retaining larger
aggregate after-tax payments. The determination of the excise tax and the aggregate after-tax payments to be received by
Participant shall be made by the Administrator. If payments are to be reduced, the payments made latest in time will be
reduced first and if payments are to be made at the same time, non-cash payments will be reduced before cash payments.
8.
Amendment and Termination. The Plan may be amended (including an amendment to terminate the Plan) by the
Company at any time; provided that no action to amend the Plan shall become effective for a Participant for a period of six
(6) months following the delivery of a notice to such Participant regarding the amendment (or, if later, the end of a change-in-
Control Period that begins prior to the action to amend the Plan), during which period the Participant will continue to be
eligible for Severance Payments for a Qualifying Termination (under the Plan terms in effect prior to such amendment), or (ii)
impair the rights of any Participant to receive Severance
Page 5

LUTHER BURBANK CORPORATION
EXECUTIVE SEVERANCE AND CHANGE IN CONTROL PLAN AND SUMMARY PLAN DESCRIPTION
Payments for a Qualifying Termination that occurs prior to the amendment (under the terms of the Plan at the time of the
Qualifying Termination).
9.
Administration of the Plan. The Plan shall be administered by the Administrator, whose actions and determinations in such
capacity shall be final, conclusive and binding upon all persons. The Administrator may employ attorneys, consultants,
accountants, agents and other individuals to assist in administration of the Plan, and the Company and its officers and
directors shall be entitled to rely upon the advice, opinions or valuations of any such individuals. The Administrator shall have
full authority to interpret the terms and the intent of the Plan and to adopt such rules, regulations, forms, and guidelines for
administering the Plan as the Administrator may deem necessary or proper. The Administrator may delegate administrative
authority of the Plan (other than the selection of Participants), in whole or in part, to one or more officers or employees of the
Company, provided that no such delegates shall have the authority to interpret or administer the terms of the Plan pertaining
to Participants who are subject to section 16 of the Exchange Act.
10. Claims. If a Participant believes that any benefit under the Plan to which he or she is entitled has not been provided in
accordance with the terms of the Plan, the Participant or his or her authorized representative may submit a claim to the
Administrator in writing, along with any information or documentation needed to process the claim. Exhaustion of the claim
and review procedures of this Section is a prerequisite to the filing of any suit, action or proceeding in any court of
law (or, if permitted under the Plan, before any arbitration body), to the fullest extent permitted under ERISA and
other applicable law.
a.
Initial Claim. The Administrator will respond to an initial claim request by written notice within 90 days after it
receives the request and any such information and documentation. If the Administrator denies the claim, in whole or
in part, it will give written notice of the decision to the claimant (which term includes the claimant’s authorized
representative) that sets forth, in a manner calculated to be understood by the claimant, (i) the specific reason(s) for
the denial, (ii) a specific reference to the pertinent Plan provision(s) on which the denial is based, (iii) any additional
information or documentation the claimant may need to perfect the claim, along with an explanation of why the
additional information or documentation is needed, and (iv) the procedure and timeframe for further review of the
claim, including a statement regarding the claimant’s right to bring a civil action under section 502(a) of ERISA
following an adverse benefit determination upon review.
b.
Request for Review of Claim Denial. The claimant shall have the right to make a request in writing to the
Administrator to review any initial claim denial within 60 days after receiving the notice of the denial. The claimant has
the right, upon written request, to review and receive copies, free of charge, of any documents, records or other
information relevant to the claimant’s denied claim and may submit written comments, documents, records and other
information in connection with the request for review (even if not submitted with the initial claim). The Administrator
will respond to the request for review by written notice within 60 days after receiving the request. If the Administrator
continues to deny the claim, in whole or in part, the notice will set forth, in a manner calculated to be understood by
the claimant, (i) the specific reason(s) for the denial, (ii) a specific reference to the pertinent Plan provision(s) on
which the decision is based, (iii) a
Page 6

LUTHER BURBANK CORPORATION
EXECUTIVE SEVERANCE AND CHANGE IN CONTROL PLAN AND SUMMARY PLAN DESCRIPTION
statement that the claimant has the right, upon written request, to review or receive copies, free of charge, of any
documents, records or other information relevant to the claimant’s denied claim, and (iv) a statement regarding the
claimant’s right to bring a civil action under section 502(a) of ERISA.
c.
ERISA Compliance. The claims procedures of this Section shall be construed and interpreted in a manner
consistent with the applicable provisions of section 503 of ERISA.
d.
Limitation on Civil Action. No suit, claim or action to seek benefits under the Plan shall be permitted that is initiated
more than three (3) years following the date a Participant would first be entitled to a payment or benefit under the
terms of the Plan (disregarding any period during which the Plan’s internal claim procedures described in Section
10(a) and 10(b) are pending).
11. Miscellaneous Provisions.
a.
Governing Law. To the extent not preempted by ERISA or any other federal law, the Plan and the rights of all
persons under the Plan shall be construed and interpreted in accordance with the laws of the state of California
without regard to its conflict of law principles.
b.
Effect on Other Plans. With respect to the Participants of the Plan, this Plan supersedes any severance benefit
plan, policy or practice currently or previously maintained by the Company, and no Participant in the Plan shall be
entitled to receive both benefits under this Plan and benefits under any other severance benefit plan, policy or
practice for the same termination of employment, provided that, for the avoidance of doubt, participation in the Plan
will not cause any Participant to forfeit any rights to accrued compensation and benefits that are non-forfeitable under
applicable law. Section 4(c) shall govern the coordination of severance benefits between the Plan and any Individual
Severance Agreement.
c.
Severability. If any part of the Plan is declared by any court or governmental authority to be unlawful or invalid, such
unlawfulness or invalidity shall not serve to invalidate any portion of the Plan not declared to be unlawful or invalid.
Any section or part of a section so declared to be unlawful or invalid shall, if possible, be construed in a manner that
will give effect to the terms of such section or part of a section to the fullest extent possible while remaining lawful and
valid.
d.
Section 409A. It is intended that the Plan will comply with Section 409A, including to the fullest extent applicable any
exceptions to the requirements of Section 409A (such as, without limitation, for short-term deferrals, separation pay
arrangements, reimbursement, and in-kind distributions), and the Plan shall be administered accordingly and
interpreted and construed consistent with such intent. To the extent that any provision of the Plan would fail to comply
with the applicable requirements of Section 409A, the Administrator may, in its sole and absolute discretion and
without requiring a Participant’s consent, make such modification to the Plan and/or Severance Payments to the
extent it determines necessary or advisable to comply with the requirements of Section 409A; provided, however, that
the Company shall in no event be obligated to pay any interest, compensation or penalties in respect of any such
modifications. If any
Page 7

LUTHER BURBANK CORPORATION
EXECUTIVE SEVERANCE AND CHANGE IN CONTROL PLAN AND SUMMARY PLAN DESCRIPTION
amount payable to a Participant under the Plan is to be paid in two or more installments, each installment shall be
treated as a separate payment for purposes of Section 409A.
e.
No Implied Rights. No individual shall have any claim or right to become a Participant in the Plan, except pursuant
to Section 3. Nothing contained in the Plan shall confer upon any Participant any right with respect to the continuation
of his or her employment by the Company or interfere in any way with the right of the Company at any time to
terminate such employment. No Severance Payments shall be treated as compensation for purposes of determining
any benefits payable under any Company retirement, life insurance or other employee benefit plan, unless otherwise
provided under the terms of such plan or required by applicable law.
f.
Withholding. The Company shall withhold from any Severance Payment all federal, state, local or other taxes as it
deems necessary or appropriate to comply with applicable law.
g.
No Assignment; Successors. None of a Participant’s rights or interest under the Plan shall be assigned, transferred
or alienated, in whole or in part, during the lifetime of the Participant. If a Participant dies after becoming entitled to
any cash Severance Payments but before the full amount of such payments are made, the unpaid cash amounts
shall be paid to the Participant’s heirs or to the authorized representative of the participant’s estate as set forth in
Section 4(a). This Plan shall be binding upon and inure to the benefit of the Company and its successors and
assigns.
h.
Unfunded Plan. The Plan shall be unfunded. The adoption of the Plan shall not be deemed to create a trust or other
funded arrangement. Any rights to Severance Payments under the Plan shall be those of a general unsecured
creditor of the Company.
i.
Notices; Forfeiture by Missing Participant.
i.
Unless notified of any change, all notices to the Company regarding the Plan must be delivered to the
Administrator as set forth herein.
ii. All notices to a Participant shall be sent to the Participant’s last recorded address with the Company. It is the
responsibility of each Participant to maintain a current address with the Company. A Participant who fails to
update his or her address for any period when a Severance Payment is due and cannot otherwise be located
by the Administrator after expending reasonable efforts shall forfeit any right or interest in any payment or
benefit otherwise due such Participant under the Plan.
j.
Arbitration. To the fullest extent permitted by applicable law, any dispute that may arise concerning the Plan shall be
resolved via arbitration consistent with the employment arbitration rules of the American Arbitration Association, and
the decision resulting from such arbitration shall be final, conclusive and binding on the parties. Notwithstanding the
foregoing, the parties may seek enforcement of an arbitration award and the Company may seek injunctive relief to
enforce a restrictive covenant contained in the General Release in any court of competent jurisdiction.
k.
Binding Effect on Successors to the Company. The Company shall make commercially reasonable efforts to
require any successor to the Company (or successor to substantially all of the business or assets of the Company)
that does not otherwise assume the sponsorship of the Plan by operation of law to expressly agree in writing to fulfill
any of the Company’s obligations toward any then-existing Participant that have arisen under the terms of the Plan at
such time.
Page 8

LUTHER BURBANK CORPORATION
EXECUTIVE SEVERANCE AND CHANGE IN CONTROL PLAN AND SUMMARY PLAN DESCRIPTION

Attachment: ERISA Rights and Plan Sponsor Information
ERISA provides that all Plan Participants shall be entitled to:
Receive Information About Your Plan and Benefits
Examine, without charge, at the plan administrator's office and at other specified locations, such as worksites and
union halls, all documents governing the plan, including (if applicable) insurance contracts and collective bargaining
agreements, and a copy of the latest annual report (Form 5500 Series) filed by the plan with the U.S. Department of
Labor and available at the Public Disclosure Room of the Employee Benefits Security Administration.
Obtain, upon written request to the plan administrator, copies of documents governing the operation of the plan,
including (if applicable) insurance contracts and collective bargaining agreements, and copies of the latest annual
report (Form 5500 Series) and updated summary plan description. The Administrator may make a reasonable charge
for the copies.
Prudent Actions by Plan Fiduciaries
In addition to creating rights for plan participants ERISA imposes duties upon the people who are responsible for the
operation of the employee benefit plan. The people who operate your plan, called "fiduciaries" of the plan, have a
duty to do so prudently and in the interest of you and other plan participants and beneficiaries. No one, including your
employer, your union, or any other person, may fire you or otherwise discriminate against you in any way to prevent
you from obtaining a welfare benefit or exercising your rights under ERISA.
Enforce Your Rights
If your claim for a benefit is denied or ignored, in whole or in part, you have a right to know why this was done, to
obtain copies of documents relating to the decision without charge, and to appeal any denial, all within certain time
schedules.
Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request a copy of plan
documents or the latest annual report from the plan and do not receive them within 30 days, you may file suit in a
federal court. In such a case, the court may require the plan administrator to provide the materials and pay you up to
$110 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control
of the administrator. If you have a claim for benefits which is denied or ignored, in whole or in part, you may file suit in
a state or federal court. In addition, if you disagree with the plan's decision or lack thereof concerning the qualified
status of a domestic relations order or a medical child support order, you may file suit in federal court. If it should
happen that plan fiduciaries misuse the plan's money, or if you are discriminated against for asserting your rights, you
may seek assistance from the U.S. Department of Labor, or you may file suit in a Federal court. The court will decide
who
Page 9

LUTHER BURBANK CORPORATION
EXECUTIVE SEVERANCE AND CHANGE IN CONTROL PLAN AND SUMMARY PLAN DESCRIPTION
should pay court costs and legal fees. If you are successful, the court may order the person you have sued to pay
these costs and fees. If you lose, the court may order you to pay these costs and fees, for example, if it finds your
claim is frivolous.
Assistance with Your Questions
If you have any questions about your plan, you should contact the Administrator. If you have any questions about this
statement or about your rights under ERISA, or if you need assistance in obtaining documents from the Administrator,
you should contact the nearest office of the Employee Benefits Security Administration, U.S. Department of Labor,
listed in your telephone directory or the Division of Technical Assistance and Inquiries, Employee Benefits Security
Administration, U.S. Department of Labor, 200 Constitution Avenue N.W., Washington, D.C. 20210. You may also
obtain certain publications about your rights and responsibilities under ERISA by calling the publications hotline of the
Employee Benefits Security Administration.
Page 10

LUTHER BURBANK CORPORATION
EXECUTIVE SEVERANCE AND CHANGE IN CONTROL PLAN AND SUMMARY PLAN DESCRIPTION
Administrative Facts
Plan Name    Luther Burbank Corporation Executive Severance and Change in Control Plan
Plan Sponsor    Luther Burbank Corporation 520 3rd Street, Floor 4 Santa Rosa, CA 95401-
6414
Type of Plan    Unfunded employee welfare benefit plan that provides severance benefits
Source of Contributions to Plan    Employer payments from general corporate assets
Plan Year    The Plan Year is January 1 through December 31
Employer Identification Number    68-0270948

Plan Number    506
Plan Administrator    The Compensation Committee of the Board of Directors
c/o General Counsel & Corporate Secretary Luther Burbank Corporation
1515 W. 190  Street, Suite 275
Gardena, CA 90248
310-606-8925

Agent for Receiving Service of    Legal Department
Legal Process    Luther Burbank Corporation
1515 W. 190  Street, Suite 275
Gardena, CA 90248


th
th
Page 11

Exhibit 10.11.1
Luther Burbank Corporation.
Restricted Stock Award Agreement
This Restricted Stock Award Agreement (the “Award Agreement”) is entered into as of [DATE], by and between
Luther Burbank Corporation a California corporation (the “Company”), and [INSERT] (the “Participant”).
WHEREAS, effective as of [DATE] (the “Grant Date”), the Committee granted the Participant Restricted Stock
pursuant to the Luther Burbank Corporation Omnibus Equity and Incentive Compensation Plan (the “Plan”).
NOW, THEREFORE, in consideration of the promises and the mutual covenants contained herein, the Company
and the Participant hereby agree as follows:
1.
Grant of Restricted Stock. The Company hereby grants to the Participant [INSERT] Shares of Restricted
Stock.
2.
Vesting and Forfeiture.
(a)
General Rule - Time-Based Vesting. Except as otherwise provided below, as long as the Participant
continues to be an employee or non-employee director of the Company, the Restricted Stock granted to the Participant
hereunder shall become vested, nonforfeitable and unrestricted as specified in the table below:
Vest Schedule – Restricted Stock Award
Vest Date
Vest Quantity
(b)
Termination of Employment. In the event that the Participant’s employment with the Company terminates
for any reason during the Period of Restriction, then any unvested Restricted Stock shall be forfeited. Notwithstanding
the forgoing, the Participant shall become fully vested in all Restricted Stock on the Participant’s death, Disability or the
Participant’s involuntary termination of employment without Cause from the Company within twelve (12) months following
a Change-in-Control.
3.
Rights as Stockholder. During the Period of Restriction, the Participant shall have all of the rights of a
stockholder of the Company, including the right to any dividends; provided, however, that any dividends paid on the
Shares of Restricted Stock shall be held in escrow and subject to forfeiture until after the Period of Restriction as
provided for under Section 8.8 of the Plan.
4.
Section 83(b) Election. The Participant is expressly permitted to make an election under Section 83(b) of
the Internal Revenue Code of 1986, as amended (the “Code”) to include in gross income the amounts specified therein. If
the Participant makes such an election, he or she shall notify the Company of such election within ten (10) days of filing
notice of the election with the Internal Revenue Service or other governmental authority, in addition to any filing or
notification required pursuant to regulations issued under Code Section 83(b) or other applicable provision. (A copy of the
form of election is attached hereto as Exhibit A.)

5.
Withholding. The Company has the right to require, before the issuance or delivery of any Shares, payment
by the Participant of any federal, state or local taxes required by law to be withheld upon the issuance of any Shares.
Subject to the determination of the Committee in its sole discretion, payment of such withholding requirements may be
made:
(a)
in cash,
(b)
by delivery of Shares registered in the name of the Participant,
(c)
by the Company withholding Shares that have a Fair Market Value at the time the Shares become vested
equal to the amount required to be withheld; or
(d)
any combination of (a), (b) and (c) above.
6.
Transferability. At all times during the Period of Restriction, the Restricted Stock will be nontransferable,
and may not be pledged, assigned or alienated in any way, except by will or by the laws of descent and distribution.
7.
Taxes. The Participant hereby agrees to pay federal, state or local taxes, if any, required by law to be paid
in respect of the receipt and/or vesting of the Restricted Stock.
8.
Notices. All notices shall be written and shall be sufficiently made if personally delivered or if sent by
nationally-recognized overnight courier, by facsimile, or by registered or certified mail, return receipt requested and
postage prepaid, which notice shall be effective upon receipt. Each such notice shall be addressed as follows:
If to the Company, to:
Legal Department
Luther Burbank Savings
1515 W 190th Street, Suite 275
Gardena, CA 90248
legal@lbsavings.com
If to the Participant, at the Participant’s last known address on the books and records of the Company. Any such notice
may be sent to such other address as the party to whom notice is to be given may have furnished to the other party in
writing in accordance herewith.
9.
Plan. The Award Agreement is subject to all the terms and conditions set forth in the Plan, which is hereby
incorporated by reference. Capitalized terms used, but not defined in this Award Agreement, have the meanings set forth
in the Plan. In the event of an express conflict between any term, provision or condition of this Award Agreement and
those of the Plan, the terms, provisions or conditions of this Award Agreement shall control if the conflict arises with
respect to a matter for which the Committee has discretion under the terms of the Plan. All other conflicting terms,
conditions or provisions shall be governed and administered in accordance with the terms, conditions or provisions of the
Plan. (A copy of the Plan is attached hereto as Exhibit B, and the Participant acknowledges his receipt and
understanding of the terms of the Plan.)
10.
Lock-Up Agreement. The Participant agrees, if requested by the Company and an underwriter of Shares
(or other securities) of the Company, not to sell or otherwise transfer or dispose of any Shares (or other securities) of the
Company held by the Participant following the effective date of a registration statement filed under the Securities Act of
1933 for the
Page | 2

duration of such time period as may be requested by the Company or the underwriter, without the prior written consent of
the Company or such underwriter, as the case may be.
11.
Right of Setoff. The Company may, to the extent permitted by applicable law, deduct from and set off
against any amounts the Company may owe to the Participant from time to time, including amounts payable in
connection with the Restricted Stock, wages, fringe benefits, or other compensation owed to the Participant, such
amounts as may be owed by the Participant to the Company. The Participant shall remain liable for any part of the
Participant’s payment obligation not satisfied through such deduction and setoff.
12.
No Continuation Rights. Nothing in this Award Agreement shall confer upon the Participant the right to
continue providing services to the Company or to interfere with or limit the right of the Company to terminate the
Participant’s services at any time.
13.
Undertaking by Participant. The Participant hereby agrees to take whatever additional actions and execute
whatever additional documents the Committee may, in its discretion, deem necessary or advisable in order to carry out or
effect one or more of the obligations or restrictions imposed on the Participant pursuant to the express provisions of this
Award Agreement and the Plan.
14.
Binding Effect. This Award Agreement shall be binding upon, and inure to the benefit of, the successors
and assigns of the Company and upon persons who acquire the rights to the Restricted Stock granted hereunder by will
or through the laws of descent and distribution.
15.
Singular, Plural, Gender. Whenever used herein, except where the context clearly indicates to the contrary,
nouns in the singular shall include the plural, and the masculine pronoun shall include the feminine gender.
16.
Headings. Headings of the paragraphs contained in this Award Agreement are inserted for convenience
and reference and shall not be used in interpreting or construing the terms and provisions of the Award Agreement.
17.
Entire Agreement; Modification. This Award Agreement and the Plan constitute the entire agreement
between the parties with respect to the terms and supersede all prior or written or oral negotiations, commitments,
representations and agreements with respect thereto. Except as otherwise provided in Section 20, the terms and
conditions set forth in this Award Agreement may only be modified or amended in a writing, signed by both parties. The
Award Agreement may not be cancelled without the Participant’s written consent.
18.
Severability. In the event any one or more of the provisions of this Award Agreement shall be held invalid,
illegal or unenforceable in any respect in any jurisdiction, such provision or provisions shall be automatically deemed
amended, but only to the extent necessary to render such provision or provisions valid, legal and enforceable in such
jurisdiction, and the validity, legality and enforceability of the remaining provisions of this Award Agreement shall not in
any way be affected or impaired thereby.
19.
Applicable Law. This Award Agreement shall be interpreted, administered and otherwise subject to the
laws of the State of California, without giving effect to principles of conflicts of law.
20.
Section 409A of the Code. Notwithstanding any other provision of this Award Agreement or the Plan to the
contrary, the Company intends that the Restricted Stock will be exempt from Section 409A of the Code pursuant to
Treas. Reg. Section 1.409A-1(b)(6)(i).
Page | 3

However, to the extent that the Restricted Stock under this Award Agreement ever becomes subject to Section 409A of
the Code, any provision or term within this Award Agreement that is inconsistent with Section 409A of the Code and the
accompanying regulations and other guidance related thereto shall be revised and construed to the minimal extent
possible for such provision or term to meet the Section 409A of the Code requirements to prevent application of the
twenty percent (20%) Section 409A of the Code penalty to the Participant. Notwithstanding anything in this Award
Agreement or the Plan to the contrary, such revision or modification may be made without Participant’s consent. The
Company is given the fullest latitude necessary to accomplish this objective.
*    *    *
Page | 4

IN WITNESS WHEREOF, the Company and the Participant have executed this Award Agreement as of the day
and year first written above.
Luther Burbank Corporation
__________________________________________
[NAME]
[TITLE]
Participant
By:         
    [INSERT
Page | 5

Exhibit A
Form of Section 83(b) Election
The undersigned (“Taxpayer”) hereby elects under Section 83(b) of the Internal Revenue Code of 1986, as amended (the
“Code”), and Treas. Reg. § 1.83-2 to include in his gross income the excess of the fair market value of the property
described below at the time of transfer to the Taxpayer (determined without regard to any lapse restrictions as defined
below) over the amount (if any) paid therefor by the Taxpayer. In compliance with Treas. Reg. § 1.83-2(e) the Taxpayer
provides the following information:
1.
The Taxpayer’s name, address and taxpayer identification number are as follows:
[INSERT NAME AND ADDRESS]
Taxpayer identification number:    [INSERT SSN]
2.
The property with respect to which this election is being made is [INSERT No. of Shares] shares of Common
Stock of Luther Burbank Corporation (the “Company”) (the “Shares”).
3.
The date of the transfer of the Shares is [INSERT DATE]. This election is made for the taxable year of the
Taxpayer ending [INSERT DATE].
4.
The nature of the restrictions to which the Shares are subject is as follows:

The Shares are subject to a [INSERT VESTING TERMS] vesting schedule set forth in a Restricted Stock Award
Agreement dated [INSERT DATE], by and between the Taxpayer and the Company (the “Award Agreement”).
5.
The fair market value of such Shares at the time of transfer to the Taxpayer, determined without regard to any
lapse restrictions as defined in Treas. Reg. § 1.83-3(i), is [INSERT] per share.
6.
The amount paid for the Shares is $0.00 per share.
7.
In accordance with Treas. Reg. §1.83-2(d) and Treas. Reg. §1.83-2(e)(7), a copy of this statement has been
furnished by the Taxpayer to the Company.
The date of this election is [INSERT DATE].
    

Name: _________________________

EXHIBIT 21
LUTHER BURBANK CORPORATION
SUBSIDIARIES OF REGISTRANT
Name of Entity
Jurisdiction of Organization
Ownership Interest
Luther Burbank Corporation - Registrant
California
Luther Burbank Savings
California
100%
Burbank Investor Services
California
100% owned by Luther Burbank Savings
Burbank Financial Inc.
California
100%
Luther Burbank Statutory Trust I
Delaware
100% of Common Securities
Luther Burbank Statutory Trust II
Delaware
100% of Common Securities

EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement No. 333-221981 on Form S-8 of Luther Burbank Corporation of our
report dated February 22, 2023 relating to the financial statements and effectiveness of internal control over financial reporting, appearing in this
Annual Report on Form 10-K.
/s/ Crowe LLP
Sacramento, California
February 22, 2023

EXHIBIT 31.1
LUTHER BURBANK CORPORATION
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934.
I, Simone Lagomarsino, certify that:
a.
I have reviewed this report on Form 10-K of Luther Burbank Corporation;
b.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
c.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
d.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)    designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)        designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)        evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and
d)        disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant’s

fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
e.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the
equivalent functions):
a)    all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial
information; and
b)        any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date:     February 22, 2023
By: /s/ Simone Lagomarsino
Chief Executive Officer
(Principal Executive Officer)

EXHIBIT 31.2
LUTHER BURBANK CORPORATION
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934.
I, Laura Tarantino, certify that:
a.
I have reviewed this report on Form 10-K of Luther Burbank Corporation;
b.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
c.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
d.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)    designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
b)        designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)        evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and
d)        disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant’s

fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
e.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the
equivalent functions):
a)    all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial
information; and
b)        any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date:     February 22, 2023
By: /s/ Laura Tarantino
Chief Financial Officer
(Principal Financial Officer)

EXHIBIT 32.1
LUTHER BURBANK CORPORATION
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002.
I, Simone Lagomarsino, state and attest that:
1.
I am the Chief Executive Officer of Luther Burbank Corporation (the "Corporation").
2.
I hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
•    The Annual Report on Form 10-K of the Corporation for the year ended December 31, 2022 (the “Report”) fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
•    The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Corporation as of, and for, the periods presented.
Date:     February 22, 2023
By: /s/ Simone Lagomarsino
Chief Executive Officer
(Principal Executive Officer)

EXHIBIT 32.2
LUTHER BURBANK CORPORATION
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002.
I, Laura Tarantino, state and attest that:
1.
I am the Chief Financial Officer of Luther Burbank Corporation (the "Corporation").
2.
I hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
•    The Annual Report on Form 10-K of the Corporation for the year ended December 31, 2022 (the “Report”) fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
•    The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Corporation as of, and for, the periods presented.
Date:     February 22, 2023
By: /s/ Laura Tarantino
Chief Financial Officer
(Principal Financial Officer)