Santa Rosa’s Luther Burbank Savings posts record earnings in Q3
Luther Burbank Corp. (Nasdaq: LBC) set a record in net income of $24.74 million for the third quarter, the holding company for the savings bank announced.
The performance windfall marks an over 16% increase from the second quarter ending June 30 and was 72.8% above the previous third quarter’s $14.31 million, an increase of more than $10 million.
“This is the highest earnings we’ve posted in our 38-year history,” President and CEO Simone Lagomarsino confirmed with the Business Journal after the conference call Wednesday.
She tipped her hat to the staff’s “hard work” and the Santa Rosa-based bank’s “disciplined approach to pricing, underwriting and growth” as major factors in its “continued strong performance.”
A key barometer to the results, net interest margin improved by 2.47% — which showed interest income generated for the bank outweighed relative expenses.
The financial institution also saw much gain in being able to “recapture” $4 million in loan-loss provisions, which are cash reserves set aside to cover possible problem loans. Careful “monitoring” and a hopeful economy brought those loans up to par with the bank’s standards.
“We said at the beginning of the pandemic that we didn’t know if it would cause a recession,” the bank president said.
In particular, a 43% decline in “criticized loans” — which are considered those in danger of default — was welcome news in the midst of a pandemic and uncertain economic impact.
With much of the bank’s loan portfolio driven by income property —at a majority two-thirds of those accounts —and single-family residences, total loans graced the balance sheet for this past quarter to the tune of $6.34 billion. That figure reflects a slight drop from the previous quarter’s $6.44 billion but a gain from last year’s $6.14 billion.
Lagomarsino pointed to a sizzling real estate market with substantially low interest rates as contributing to new loan activity and refinances.
Further, loan production clicked off in the first nine months of the year has already exceeded a full-year’s amount in both 2020 and 2019.
Total deposits also illustrated upward movement with $5.58 billion reported by the end of the quarter on Sept. 30. This figure contrasts the previous quarter and the same period in 2020 by a respective consecutive growth of about $200 million.
The third quarter’s $45.11 million in net interest income — defined as the difference between revenue generated by interest-bearing assets and the costs of servicing liabilities — also showed an increase of $4.21 million from the prior three months ending June 30.
The Sonoma County bank will pay a cash dividend of 12 cents per common share from third quarter results on Nov. 15.
When asked if she agreed with some pundits’ recent suggestion of a thriving market propped up by strong bank performances, Lagomarsino described the relationship as “circular” in nature.
“Banks generally do well when the economy does well. The moves the Federal Reserve made in pushing funds into the system helped. Delinquencies across banks are low, and people do seem to be spending,” she said.
As for building into the future, the bank plans to work on its digital strategic plan designed to better manage customer relations by improving its online platform for users opening accounts and other activities. The digital plan represents a way the bank adjusts to a new online banking world.
With total assets exceeding $7.25 billion as of June 30, Luther Burbank Savings operates 10 branches in Northern and Southern California, one branch in Washington and seven lending offices located throughout the West, including Oregon.
Susan Wood covers law, cannabis, production, biotech, energy, transportation, agriculture as well as banking and finance. For 25 years, Susan has worked for a variety of publications including the North County Times, now a part of the Union Tribune in San Diego County, along with the Tahoe Daily Tribune and Lake Tahoe News. She graduated from Fullerton College. Reach her at 530-545-8662 or susan.wood@busjrnl.com
