Luther Burbank Corporation Reports Earnings for the Quarter and Nine Months Ended September 30, 2020

Rhea-AI Summary

Luther Burbank Corporation (NASDAQ: LBC) declared a quarterly cash dividend of $0.0575 per common share, payable on November 16, 2020. For Q3 2020, the company reported net income of $14.3 million ($0.27 EPS), up from $9.3 million in Q2. The net interest margin improved to 2.03% from 1.88%. Loan production reached $235.2 million while retail deposits grew by $178.2 million. Remaining COVID-19 loan modifications are just 1.2% of the loan portfolio.

Positive

• Net income increased to $14.3 million, up from $9.3 million in the previous quarter.
• Improved net interest margin of 2.03%, up from 1.88%.

Negative

• Loan balances decreased due to reduced originations and elevated prepayments.

Quarterly Cash Dividend of $0.0575 Per Common Share Declared

Third Quarter 2020 Highlights

• Net income of $14.3 million, or $0.27 per diluted share for the quarter
• Net interest margin of 2.03% compared to 1.88% for Q2 2020
• Loan production of $235.2 million during the quarter
• Retail deposit growth of $178.2 million during the quarter
• Remaining COVID-19 loan modifications total 1.2% of the total aggregate loan portfolio balance
• Efficiency ratio of 44.6% for the quarter
• Book value per share of $11.62
  

SANTA ROSA, Calif., Oct. 27, 2020 (GLOBE NEWSWIRE) -- Luther Burbank Corporation (NASDAQ: LBC) (the “Company”), the holding company for Luther Burbank Savings (the “Bank”), today reported net income of $14.3 million and $31.2 million, or $0.27 and $0.58, diluted earnings per common share (“EPS”), for the three and nine months ended September 30, 2020, respectively.

Simone Lagomarsino, President and Chief Executive Officer, stated, “I'm proud to report our financial results for the quarter and nine months ended September 30, 2020. During the quarter, we reported net income of $14.3 million, or $0.27 per diluted share compared to $9.3 million, or $0.18 per diluted share during the linked quarter. Our improving results were primarily driven by growth in our net interest margin, which improved to 2.03% during the quarter and the reduction in our provision for loan losses, which benefited from positive credit trends related to borrowers impacted by the pandemic, and a general decline in the balance of our loan portfolio. Compared to the linked quarter, the cost of our interest bearing deposits has declined by 33 basis points as deposits continue to reprice down to lower current market interest rates. In addition, we've experienced robust growth in our retail deposits, which have increased by $363 million since the beginning of the year. The decline in the balance of our loan portfolio was primarily driven by reduced originations, as well as elevated prepayments, as we maintain somewhat tighter credit requirements, post COVID-19 outbreak, and as customers have generally been taking advantage of lower long-term interest rates by refinancing out of hybrid loans and into new, longer-term fixed rate loans. Additionally, I'm encouraged that we have been able to maintain our strong liquidity and capital positions during this period. As of September 30, 2020, we had access to $2.5 billion in liquidity resources and our Common Equity Tier 1 Capital ratio measured 15.4%."

Ms. Lagomarsino continued, "Despite the continued economic and societal impact of the COVID-19 pandemic, as well as the recent fires that have affected both Northern and Southern California, our team remains committed to providing uninterrupted banking services to our customers and communities. Since the pandemic started, we have successfully modified 269 loans for our customers requiring financial assistance with an aggregate outstanding loan balance of $397.5 million. Of these modified loans, I'm encouraged that over 80% have returned, or are returning, to their respective contractual loan payments within the next month. I'm also thankful that the fires appear to be contained and pleased to report that the financial impact to our loan portfolio appears to be nominal.”

Board Declares Quarterly Cash Dividend of $0.0575 Per Share

On October 27, 2020, the Board of Directors of the Company declared a quarterly cash dividend of $0.0575 per common share. The dividend is payable on November 16, 2020 to shareholders of record as of November 6, 2020.

Net Income

The Company reported net income of $14.3 million and $31.2 million, or $0.27 and $0.58 EPS, for the three and nine months ended September 30, 2020, respectively, compared to net income of $9.3 million, or $0.18 EPS, for the linked quarter and $36.4 million, or $0.65 EPS, for the nine months ended September 30, 2019. Pre-tax, pre-provision net earnings totaled $20.3 million and $54.9 million for the three and nine months ended September 30, 2020, respectively, compared to $18.5 million for the linked quarter and $52.1 million for the nine months ended September 30, 2019.

Pre-tax, pre-provision net earnings, a non-GAAP financial measure, is presented because management believes this financial metric provides stockholders with useful information for evaluating the profitability of the Company. A schedule reconciling our GAAP net income to pre-tax, pre-provision net earnings is provided in the tables below.

Net Interest Income

Q3 2020 vs Q2 2020

Net interest income in the third quarter of 2020 was $36.1 million, an increase of $3.0 million from the second quarter of 2020, primarily due to lower interest expense on our deposit portfolio, which has continued to benefit from the decline in market interest rates. During the quarter, the cost of interest bearing deposits declined by 33 basis points as compared to the linked quarter. The improvement in interest expense was partially offset by a decline in interest income earned on our loan portfolio caused by a decrease in the average yield of 7 basis points and a $46.2 million decline in the average balance of loans. The reduction in our loan yield was primarily caused by the prepayment of higher yielding loans, which are being replaced by loans at lower current interest rates, as well as a decrease in loan prepayment fees collected during the quarter. The decline in the average balance of loans was primarily due to loan prepayments exceeding loan originations during the current quarter.

Net interest margin for the third quarter of 2020 was 2.03%, compared to 1.88% for the previous quarter. Consistent with the discussion above, our net interest margin primarily benefited from the decline in the cost of interest bearing deposits, partially offset by a reduction in loan yields. Our net interest margin was further negatively impacted by an increase in the average balance of our lower yielding cash, cash equivalents and restricted cash, which increased by $115.0 million from the linked quarter caused primarily by the combination of growing deposits and declining loan balances. During the third quarter, the yield on our interest earning assets decreased by 12 basis points, while the cost of our interest bearing liabilities decreased by 31 basis points. Our net interest spread in the thir

FAQ

What are the Q3 2020 financial results for Luther Burbank Corporation (LBC)?

In Q3 2020, Luther Burbank Corporation reported a net income of $14.3 million, or $0.27 per diluted share.

What is the dividend declaration date for Luther Burbank Corporation (LBC)?

The board declared a quarterly cash dividend of $0.0575 per common share, payable on November 16, 2020.

How much did retail deposits grow for Luther Burbank Corporation (LBC) in Q3 2020?

Retail deposits grew by $178.2 million during Q3 2020.

What is the net interest margin for Luther Burbank Corporation (LBC) in Q3 2020?

The net interest margin improved to 2.03% in Q3 2020.