FY 2017 Q2 Investor Call January 31, 2017

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1 FY 2017 Q2 Investor Call January 31, 2017

2 Safe Harbor Statement Certain statements in this presentation are "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, and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of These statements are subject to numerous assumptions, risks and uncertainties, and represent only the Company s belief regarding future events, many of which, by their nature, are inherently uncertain and outside its control. Any forward-looking statements the Company may make speak only as of the date on which such statements are made. The Company s actual results and financial position may differ materially from the anticipated results and financial condition indicated in or implied by these forward-looking statements, and the Company makes no commitment to update or revise forward-looking statements to reflect new information or subsequent events or changes in expectations. For a discussion of some of the risks and important factors that could affect the Company s future results and financial condition, see Risk Factors and Management s Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements and Factors that Could Affect Future Results in our Annual Report on Form 10-K for the fiscal year ended June 30, 2016, as updated by our SEC filings, and any other cautionary statements, written or oral, that may be made or referred to in connection with such forward-looking statements. 2

3 Q2 FY17 and YTD FY17 Highlights Q2 FY17 YTD FY17 Loan Volume $139.9 million $239.1 million LASG: Purchased Loans $46.0 million invested on $51.1 million of UPB (1) (90.1% purchase price) $59.9 million invested on $67.9 million of UPB (1) (88.2% purchase price) Originated Loans $45.7 million $88.0 million Community Bank: Residential Mortgage Originations $18.7 million $44.7 million Commercial Originations $4.2 million $6.0 million SBA: Originations (2) $25.3 million $40.5 million Sales $17.5 million $24.8 million Net Interest Margin 4.94% 4.51% Purchased Loan Yield (3) 13.01% 11.73% Net Loan Growth $45.5 million (6% growth) $74.5 million (11% growth) Net Deposit Growth $34.2 million (4% growth) $39.1 million (5% growth) Share Repurchases (4) None 645,238 at $10.75 Earnings $3.1 million $4.9 million EPS (1) Unpaid principal balance (2) SBA originations during Q1 and Q2 include funded loans of $13.3 million and $24.7 million, respectively (3) Purchased loan yield for Q1 and Q2 included $1.3 million and $2.9 million of transactional interest income, respectively (4) From the inception of the repurchase program, the Company has purchased 1,970,000 shares at a $10.05 average repurchase price 3

4 Loan Purchasing Capacity By Trailing 5 Quarters (1) $100 $90 $80 $70 $90.6 $91.6 $81.3 $80.2 $60 $67.1 $50 $40 $30 $20 $10 $- (1) Every dollar of originations creates 0.67 dollars of purchased loan capacity 4

5 CRE Activity and Capacity By Trailing 5 Quarters $500 $400 Capacity under Regulatory Conditions $280.1 $146.2 million $300 $258.6 $273.4 $249.0 $248.6 $200 $100 $141.2 $150.4 $176.4 $200.6 $222.2 Owner Occupied CRE is not subject to regulatory conditions Owner Occupied CRE Non-Owner Occupied CRE 5

6 LASG Activity By Trailing 5 Quarters $100 $90 $80 $45.7 $70 $39.5 $60 $50 $40 $27.8 $31.8 $42.0 $46.0 $30 $35.9 $20 $10 $21.9 $18.8 $13.9 Purchased Originated 6

7 Purchased Loan Investment Basis and Discount Growth By Trailing 5 Quarters $350 $300 $250 $200 UPB $258.1 $6.3 $25.8 $226.0 UPB $266.3 $6.1 $26.5 $233.7 UPB $271.3 UPB (1) $269.5 $5.1 $5.1 $26.5 $27.3 $239.7 $237.1 UPB (1) $288.5 $5.7 $27.8 $255.0 $150 $100 $50 Net Investment Accretable Discount Non-accretable Discount (1) Q1 FY 17 and Q2 FY 17 includes $789 thousand and $975 thousand, respectively, of the guaranteed portion of SBA loans, which are held for sale. 7

8 LASG Portfolio Q2 FY17 Return Summary ( ¹ ) Purchased Originated Lending Securities s Regularly Scheduled Interest & Accretion 8.01% 5.89% 0.99% 6.41% Accelerated Accretion & Fees Recognized on Loan Payoffs 5.00% 0.00% 0.00% 2.35% 13.01% 5.89% 0.99% 8.76% (1) The total return on purchased loans represents scheduled accretion, accelerated accretion, gains on asset sales, and other noninterest income recorded during the period divided by the average invested balance, which includes loans held for sale, on an annualized basis. The total return does not include the effect of purchased loan charge-offs or recoveries in the quarter. return is considered a non-gaap financial measure. 8

9 LASG Loan Portfolio Statistics Average investment (excluding securities lending) is $694/loan Broker-dealer loans total $48 million ($12 million each) Broker Dealer Loans 9% $3MM-$4MM 9% Investment Size >$4MM 14% $2MM-$3MM 15% -500K 13% $1MM-$2MM 25% $500K-$1MM 15% Purchased Loan Net Investment Basis % >90% 65% 80-90% 24% 0-60% 2% 60-70% 1% 70-80% 8% Net investment basis of 88% for purchased loans Collateral Type Collateral State (1) Diverse collateral types focused primarily in five major real estate sectors: office, industrial, retail, hospitality, and multifamily Multifamily 13% Securities 9% Retail 16% All Other 15% Industrial 13% Office 11% Hospitality 13% Other CRE 10% Non Real Estate 16% FL 3% AZ 4% TX 4% All Other 25% IL 6% NJ 7% CA 17% NY 18% Geographically diverse with collateral in 37 different states CA and NY represent combined 35% of portfolio (1) Excludes $48 million of secured loans to broker-dealers 9

10 SBA Division Activity Originations & Guaranty Sales (1) Net Gain on Sale (2) $30 $25 $20 $25.3 Thousands $2,000 $1,800 $1,600 $1,400 $1,620 $1,734 $15 $10 $5 $16.3 $7.5 $17.4 $11.9 $10.4 $14.2 $15.2 $7.4 $17.5 $1,200 $1,000 $800 $600 $400 $200 $679 $1,205 $743 Originations Guaranty Sales (1) Loan sales include originations from both current and prior quarters (2) Servicing asset included in net gain by quarter: Q $199 thousand; Q $360 thousand; Q $442 thousand; Q $218 thousand; and Q2 17: $428 thousand. 10

11 SBA Sale Pipeline $40 $35 $10.9 million in SBA guarantees.9 undisbursed $35.7 $30 $25 $2.5 million gain on sale, net $24.8 $3.8 $6.2 $20 $15 $10 $5 SBA Sales- YTD SBA loans held for sale(1) Other SBA loans(2) (1) Represents SBA loans that are closed and fully funded (5 loans with an average guarantee balance of $752 thousand) (2) Represents SBA loans that are closed, but not fully funded (11 loans with an average guarantee balance of $643 thousand) 11

12 Net Income For Trailing 5 Quarters Thousands $3,500 $3,000 $3,100 $2,500 $2,000 $2,199 $1,500 $1,744 $1,809 $1,751 $1,000 $500 12

13 Loan Portfolio Roll Forward: Trailing Twelve Months $1,200 $1,000 $17.3 $68.3 $50.9 $12.0 $248.3 $183.5 $800 $766.9 $600 $679.4 $400 $200 Balance at 12/31/2015 LASG Purchases & Originations Community Bank Originations (1) SBA Originations SBA Loan Sales Loans to Broker Dealers (2) Run-Off (3) Balance at 12/31/2016 (1) Does not Include $80.4 million of residential mortgages that were originated for sale (2) Represents pay off of one loan to broker-dealer for $12.0 million (3) Run-off includes scheduled amortization, principal pay downs and payoffs 13

14 Loan Mix As of Trailing 5 Quarter Ends (1) $900 $800 $687 $704 $700 $729 $776 $700 $600 $226 $234 $240 $237 $255 $500 $400 $156 $170 $175 $207 $231 $300 $200 $26 $25 $134 $126 $27 $34 $43 $124 $117 $114 $100 $85 $89 $86 $86 $85 $60 $60 $48 $48 $48 LASG Purchased LASG Originated SBA Community Bank Residential/Consumer Community Bank Commercial Loans to Broker-Dealers (1) Includes loans held for sale 14

15 Deposit Mix By Trailing 5 Quarter Ends $1,000 $900 $727 $753 $800 $805 $840 $800 $700 $353 $353 $351 $322 $336 $600 $500 $400 $300 $208 $234 $275 $302 $320 $200 $100 $101 $105 $107 $107 $107 $64 $61 $67 $74 $77 Demand Savings and Interest Checking Money Market Time 15

16 Key Components of Income For Trailing 5 Quarters Net Interest Income Before Loan Loss Provision Noninterest Income Thousands $15,000 $12,500 $10,172 $9,254 (1) $10,713 $9,775 $11,833 Thousands $3,500 $3,000 $1,624 $2,035 $2,411 $1,808 $2,690 $2,943 $10,000 $1,524 $2,612 $1,327 $912 $9,189 $7,500 $8,342 $8,448 $8,890 $7,560 $5,000 $2,500 Base Net Interest Income Transactional Interest Income $2,500 $337 $392 $1,734 $2,000 $335 $542 $1,500 $398 $1,620 $1,205 $743 $1,000 $679 $500 $619 $547 $495 $523 $399 Other Non Interest Income Gain on Sale of SBA loans Gain on Sale of Residential Loans (1) Base interest income includes $385 thousand of LASG originated fees related to one loan in the quarter ended June 30,

17 Revenue and Noninterest Expense for Trailing 5 Quarters $ $11.8 $11.3 $13.1 $ $8.2 $8.4 $9.4 $8.6 $ Revenue(1) Non Interest Expense (1) Revenue includes net interest income before loan loss provision and noninterest income 17

18 Residential Mortgage Originations & Gain On Sale By Trailing 5 Quarters Residential Mortgage Originations Residential Mortgage Gain On Sale $30 $25 $20 $15.5 $ $15.3 $2.0 $2.6 $23.6 $ $18.1 Thousands $600 $500 $400 $300 $398 $335 $392 $542 $337 $10 $200 $5 $100 Originated for sale Originated for portfolio 18

19 Loan Performance & Average Loan Balance For Trailing 5 Quarters Loan Performance Average Loan Balance For Trailing 5 Quarters (3) 15.0% 13.5% 12.0% 10.5% 9.0% 12.74% 9.88% 10.88% 10.40% 13.01% $800 $700 $600 $500 $648 $438 $692 $703 $702 $467 $470 $470 $743 $ % 6.0% 4.5% 3.0% 5.15% 4.87% 5.25% 4.25% 5.87% (2) 5.32% 4.73% 4.07% 5.29% 4.94% $400 $300 $200 $210 $225 $233 $232 $ % $ % NIM Originated Loan Yield(1) Purchased Loan Yield Purchased Originated (1) Excludes secured loans to broker-dealers (2) Originated loan yield includes $385 thousand (37 bps) of LASG originated fees related to one loan in the quarter ended June 30, 2016 (3) Includes loans held for sale 19

20 Asset Quality Metrics 3.00% 2.50% 2.00% 1.50% 1.00% NPAs / Assets & NPLs / Loans NPAs/Assets NPLs/Loans 1.76% 1.42% 1.46% 1.32% 1.33% 1.22% 1.13% 0.96% $10.0 $5.0 Classified Commercial Loans (1) $8.9 $6.7 $4.5 $ % 0.00% 6/30/14 6/30/15 6/30/16 12/31/16.0 6/30/14 6/30/15 6/30/16 12/31/16 Allowance for Loan Losses / Gross Loans NCOs / Average Loans (2) 0.70% 0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 0.00% ALL/Gross Loans 0.63% ALL/Gross Loans Adjusted (3) 0.56% 0.49% 0.37% 0.41% 0.34% 0.31% 0.26% 6/30/14 6/30/15 6/30/16 12/31/ % 0.30% 0.25% 0.20% 0.15% 0.10% 0.05% 0.00% 0.18% 0.06% 0.06% 0.03% 6/30/2014 6/30/2015 6/30/ /31/2016 (1) Classified loans includes commercial real estate, commercial business, and construction loans risk rated under the Company s internal loan rating system (2) Trailing twelve months of net charge-offs divided by average loans for the same period (3) ALLL / Gross Loans Adjusted excludes loans to broker/dealers and purchased loans 20