Press Releases

Live Oak Bancshares, Inc. Reports Fourth Quarter 2019 Results

01/22/20

WILMINGTON, N.C., Jan. 22, 2020 (GLOBE NEWSWIRE) -- Live Oak Bancshares, Inc. (Nasdaq: LOB) (“Live Oak” or “the Company”) today reported fourth quarter 2019 net earnings available to common shareholders of $6.8 million, or $0.17 per diluted share as the Company continues to execute on our strategic priorities that we believe will deliver long-term earnings for our shareholders.  Net earnings for the year ended totaled $18.0 million, or $0.44 per diluted share.

“Live Oak’s performance in 2019 was highlighted by strong growth, recurring revenues and profitability since making a strategic pivot a year ago to hold more loans on our balance sheet. The fourth quarter showed strength across all key metrics, and we aim to continue that momentum in the quarters to come,” said James S. Mahan, III, Chief Executive Officer of Live Oak. “In 2019, total assets grew by more than $1 billion and our deposit model successfully fired on all cylinders. We believe in our model and will continue to embrace innovation in financial technology while demonstrating a relentless dedication to American entrepreneurs who support our economy.”

Year over Year Highlights

 (Dollars in thousands, except per share data)                   Increase (Decrease)  
    2019     2018     Dollars     Percent  
Net interest income and servicing revenues   $ 168,116     $ 137,164     $ 30,952     23 %
Net income     18,034       51,448       (33,414 )   (65 )
Diluted earnings per share     0.44       1.24       (0.80 )   (65 )
Non-GAAP net income (1)     19,306       54,571       (35,265 )   (65 )
Non-GAAP diluted earnings per share (1)     0.47       1.32       (0.85 )   (64 )
Loan and lease production:                              
Loans and leases originated   $ 2,001,886     $ 1,765,680     $ 236,206     13 %
% Fully funded     51.4 %     56.5 %   n/a     n/a  
Total loans and leases:   $ 3,613,746     $ 2,530,812       1,082,934     43 %
Total assets:     4,814,970       3,670,449       1,144,521     31  
Total deposits:     4,229,122       3,149,583       1,079,539     34  

Fourth Quarter 2019 Key Measures

 (Dollars in thousands, except per share data)                   Increase (Decrease)          
    Q4 2019     Q4 2018     Dollars     Percent     Q3 2019  
Net interest income and servicing revenues   $ 44,741     $ 36,547     $ 8,194     22 %   $ 44,362  
Net income     6,832       10,490       (3,658 )   (35 )     3,895  
Diluted earnings per share     0.17       0.26       (0.09 )   (35 )     0.09  
Non-GAAP net income (1)     7,106       10,764       (3,658 )   (34 )     4,169  
Non-GAAP diluted earnings per share (1)     0.17       0.26       (0.09 )   (35 )     0.10  
Loan and lease production:                                      
Loans and leases originated   $ 523,688     $ 498,987     $ 24,701     5 %   $ 562,259  
% Fully funded     49.0 %     49.8 %   n/a     n/a       51.3 %

(1) See accompanying GAAP to Non-GAAP Reconciliation.

Loans and Leases

At December 31, 2019, the total loan and lease portfolio increased to $3.61 billion, 42.8% above its level a year ago and 8.0% above its level at September 30, 2019.  Compared to the third quarter of 2019, loans and leases held for investment increased $205.3 million, or 8.4%, to $2.65 billion while loans held for sale increased $63.4 million, or 7.0%, to $966.4 million. Loan and lease originations totaled $523.7 million during the fourth quarter of 2019, a decrease of $38.6 million, or 6.9%, from the third quarter of 2019.  Originations for year ended December 31, 2019, increased by 13.4% to $2.00 billion compared to $1.77 billion for the year ended December 31, 2018.  This continued growth in loan originations was across multiple legacy and new industry verticals as well as in our SBA generalist category.  The total loan and lease portfolio at December 31, 2019, and September 30, 2019, of $3.61 billion and $3.35 billion, respectively, was comprised of approximately 54.4% and 54.7% of unguaranteed loans and leases, respectively.

Average loans and leases were $3.50 billion during the fourth quarter of 2019 compared to $3.22 billion during the third quarter of 2019.

Deposits

Total deposits increased by $209.9 million to $4.23 billion at December 31, 2019 from $4.02 billion at September 30, 2019, in support of the growing loan and lease portfolio. Average total interest-bearing deposits for the fourth quarter of 2019 increased $247.4 million, or 6.5%, to $4.08 billion, compared to $3.83 billion for the third quarter of 2019. The ratio of average total loans and leases to average interest-bearing deposits was 85.8% for the fourth quarter of 2019, compared to 83.1% for the third quarter of 2019.

Net Interest Income

Net interest income for the fourth quarter of 2019 rose to $38.0 million compared to $28.8 million for the fourth quarter of 2018 and $37.5 million for the third quarter of 2019. The increase from the prior year was driven by the significant growth in the total loan and lease portfolios along with higher investment security holdings reflecting the Company's ongoing initiative to grow recurring revenue sources and strengthen its liquidity profile.  The slight increase from the third quarter of 2019 arose from a higher average loan and lease portfolio balance that was mitigated by a nineteen basis point decline in the net interest margin to 3.55%. The margin decline reflected the cumulative impact of recent Fed rate cuts that put pressure on earning asset yields coupled with the timing of repricing the Company’s variable rate loans. The decrease in earning asset yields outpaced the reduction in the average cost of interest-bearing liabilities.

Net interest income for the year ending December 31, 2019 totaled $140.1 million, a $32.0 million increase from the prior year due to the increases in the volume of interest earning assets.

Noninterest Income

Noninterest income for the fourth quarter of 2019 increased to $21.5 million compared to $18.1 million for the fourth quarter of 2018 and $18.6 million for the third quarter of 2019.  The primary driver of the increase compared to the fourth quarter of 2018 was higher revenue from the net gains on sales of loans. The Company’s net gains on sales of loans increased $5.7 million to $11.4 million in the fourth quarter of 2019 compared to $5.7 million in the fourth quarter of 2018 and increased $3.9 million compared to $7.4 million in the third quarter of 2019.  The volume of guaranteed loan sales in the fourth quarter of 2019 remained relatively flat at $105.0 million compared to $104.6 million in the fourth quarter of 2018 and $100.5 million in the third quarter of 2019.

The average net gain on guaranteed loan sales increased to $106.2 thousand per million sold in the fourth quarter of 2019 versus $59.8 thousand in the fourth quarter of 2018 and $80.5 thousand in the third quarter of 2019.  The increase in average loan sale pricing from the fourth quarter of 2018 was driven by the mix of loans sold by the Company, continued strength of market conditions for the purchase of guaranteed loans, and favorable fair value adjustments for exchange-traded interest rate lock commitments. The Company recorded $1.2 million in fair value net gains in exchange-traded interest rate lock commitments during the fourth quarter of 2019 compared to $1.5 million in fair value net losses during the third quarter of 2019.  Excluding fair value fluctuations in exchange-traded interest rate lock commitments, the average net gain on guaranteed loan sales was $94.9 thousand and $77.4 thousand per million sold in the fourth quarters of 2019 and 2018, respectively, and $95.0 thousand per million sold in the third quarter of 2019. 

Partially offsetting the increase in noninterest income compared to the fourth quarter of 2018 were decreased levels of loan servicing revenue and increased flow-through losses from investments accounted for under the equity method.   Loan servicing revenues of $6.7 million in the fourth quarter of 2019 decreased $1.0 million from the fourth quarter of 2018 as the outstanding balance of sold loans serviced has declined with the Company’s strategic shift to hold more guaranteed loans on balance sheet. Flow-through losses from investments accounted for under the equity method of $1.8 million in the fourth quarter of 2019 increased $2.8 million from income of $1.0 million in the fourth quarter of 2018. 

Partially offsetting the increase in noninterest income compared to the third quarter of 2019 was a decline in revenue from equity security investments following a $3.3 million gain in the prior quarter.  This gain was driven by observable fair market value changes in orderly transactions of underlying equity security investments.

The Company’s equity method and equity security portfolio is largely comprised of investments in strategic financial technology start-ups.

Noninterest Expense

Noninterest expense for the fourth quarter of 2019 increased to $44.4 million compared to $32.6 million for the fourth quarter of 2018 and $42.7 million for the third quarter of 2019.

Salaries and employee benefits for the fourth quarter of 2019 increased to $24.1 million compared to $14.5 million for the fourth quarter of 2018 and $22.7 million for the third quarter of 2019 as the Company invested in its workforce to support growth and a variety of initiatives.  The increase in salaries and benefits of $9.6 million compared to the fourth quarter of 2018 was largely influenced by the Company’s reversal of accrued incentive compensation in the fourth quarter of 2018 due to not meeting internal performance metrics for that year.

Also largely contributing to the increase in noninterest expense was FDIC insurance expense of $2.0 million for the fourth quarter of 2019, an increase of $1.5 million compared to the fourth quarter of 2018 and $1.9 million from the third quarter of 2019.  The year over year increase in FDIC insurance was related to increased premiums while the increase over the third quarter of 2019 was related to a large credit received in that quarter.   

The increase in noninterest expense for the fourth quarter of 2019 compared to the fourth quarter of 2018 was mitigated in part by a decrease in travel expense of $1.0 million

Partially offsetting the increase in noninterest expense for the fourth quarter of 2019 compared to the third quarter of 2019 were decreases in professional services, data processing, and loan related expenses of $1.1 million, $1.2 million, and $1.1 million, respectively.

Asset Quality

Net charge-offs decreased to $905 thousand in the fourth quarter of 2019 compared to $2.3 million in the third quarter of 2019 and $1.2 million in the fourth quarter of 2018.  Net charge-offs as a percentage of average held for investment loans and leases, annualized, for the quarters ended December 31, 2019 and 2018, was 0.14% and 0.28%, respectively.  Net charge-offs for the year ended December 31, 2019 totaled $3.8 million compared to $4.8 million for the year ended December 31, 2018.  Net charge-offs as a percentage of total average held for investment loans and leases for the years ended December 31, 2019 and 2018 were 0.17% and 0.31%, respectively.

The unguaranteed exposure of nonperforming (nonaccrual) loans decreased to $17.9 million, or 0.68% of loans and leases held for investment, at December 31, 2019, compared to $19.8 million, or 0.81%, at September 30, 2019.  Total nonperforming loans decreased to $76.3 million in the fourth quarter of 2019 from $80.8 million at the end of the prior quarter.

The unguaranteed exposure of foreclosed assets decreased $22 thousand to $1.1 million at December 31, 2019 compared to September 31, 2019.  Foreclosed assets decreased $90 thousand to $5.6 million at December 31, 2019, from $5.7 million at September 30, 2019.

Provision for Loan and Lease Losses

The provision for loan and lease losses for the fourth quarter of 2019 totaled $6.2 million compared to $7.2 million for the third quarter of 2019 and $6.8 million for the fourth quarter of 2018.  The provision expense is driven by growth in the loan and lease portfolio combined with ongoing changes in net charge-offs and criticized and classified loans and leases.

The allowance for loan and lease losses totaled $48.2 million at December 31, 2019, compared to $42.9 million at September 30, 2019. The allowance for loan and lease losses as a percentage of total loans and leases held for investment was 1.82% and 1.76% at December 31, 2019, and September 30, 2019, respectively.

Income Tax

Income tax expense was $2.1 million in the fourth quarter of 2019 compared to a net income tax benefit in the fourth quarter of 2018 of $3.0 million and an income tax expense of $2.4 million in the third quarter of 2019.  During the year ended December 31, 2018, the Company’s effective tax rate was predominantly driven by the leasing of renewable energy assets which generated investment tax credits.  For the year ended December 31, 2019, investment tax credits were less of a driver of the Company’s effective tax rate.

Shareholders’ Equity

During the fourth quarter of 2019, 900,000 shares of Class B common stock (non-voting) were converted to Class A common stock (voting) in connection with private sales. The conversion decreased the value of Class B common stock (non-voting) and increased the value of Class A common stock (voting) by $9.5 million.

Conference Call

Live Oak will host a conference call to discuss quarterly results at 9:00 a.m. ET tomorrow morning (January 23, 2020). Media representatives, analysts and the public are invited to listen to this discussion by calling (844) 743-2494 (domestic) or (661) 378-9528 (international) with conference ID 9470049. A live webcast of the conference call along with presentation materials referenced during the conference call will be available on the Investor Relations page of the Company’s website at http://investor.liveoakbank.com. A replay of the webcast will be archived on the Company's website for one year.  A replay of the conference call will also be available until 5:00 p.m. ETJanuary 30, 2020 and can be accessed by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international).

CFO Commentary

Additional commentary on the quarter by Brett Caines, Chief Financial Officer of the Company, is available at http://investor.liveoakbank.com in the supporting materials for the conference call.

Important Note Regarding Forward-Looking Statements

Statements in this press release that are based on other than historical data or that express the Company’s plans or expectations regarding future events or determinations are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Statements based on historical data are not intended and should not be understood to indicate the Company’s expectations regarding future events. Forward-looking statements provide current expectations or forecasts of future events or determinations. These forward-looking statements are not guarantees of future performance or determinations, nor should they be relied upon as representing management’s views as of any subsequent date. Forward-looking statements involve significant risks and uncertainties, and actual results may differ materially from those presented, either expressed or implied, in this press release. Factors that could cause actual results to differ materially from those expressed in the forward-looking statements include changes in Small Business Administration (“SBA”) rules, regulations or loan products, including the Section 7(a) program, changes in SBA standard operating procedures or changes in Live Oak Banking Company's status as an SBA Preferred Lender; changes in rules, regulations or procedures for other government loan programs, including those of the United States Department of Agriculture; a reduction in or the termination of the Company's ability to use the technology-based platform that is critical to the success of its business model, including a failure in or a breach of operational or security systems; competition from other lenders; the Company's ability to attract and retain key personnel; market and economic conditions and the associated impact on the Company; operational, liquidity and credit risks associated with the Company's business; the impact of heightened regulatory scrutiny of financial products and services and the Company's ability to comply with regulatory requirements and expectations; and the other factors discussed in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) and available at the SEC’s Internet site (http://www.sec.gov). Except as required by law, the Company specifically disclaims any obligation to update any factors or to publicly announce the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.

About Live Oak Bancshares, Inc.

Live Oak Bancshares, Inc. (Nasdaq: LOB) is a financial holding company and the parent company of Live Oak Banking CompanyLive Oak Bancshares and its subsidiaries partner with businesses that have a common focus of changing the banking industry by bringing efficiency and excellence to customers using technology and innovation.

Contacts:

Brett Caines | CFO | Investor Relations | 910.796.1645 & Micah Davis | CMO | Media Relations | 910.550.2255


Live Oak Bancshares, Inc.
Quarterly Statements of Income (unaudited)
(Dollars in thousands, except per share data)

    Three months ended   
    4Q 2019     3Q 2019     2Q 2019     1Q 2019     4Q 2018  
Interest income                                        
Loans and fees on loans   $ 57,017     $ 55,939     $ 49,914     $ 44,966     $ 40,628  
Investment securities, taxable     3,911       4,001       4,116       3,317       2,558  
Other interest earning assets     885       1,167       1,108       1,639       1,568  
Total interest income     61,813       61,107       55,138       49,922       44,754  
Interest expense                                        
Deposits     23,801       23,576       21,203       19,317       15,959  
Borrowings     1                          
Total interest expense     23,802       23,576       21,203       19,317       15,959  
Net interest income     38,011       37,531       33,935       30,605       28,795  
Provision for loan and leases losses     6,208       7,160       3,463       2,742       6,822  
Net interest income after provision for loan and lease losses     31,803       30,371       30,472       27,863       21,973  
Noninterest income                                        
Loan servicing revenue     6,730       6,831       7,063       7,410       7,752  
Loan servicing asset revaluation     (1,304 )     (859 )     (403 )     (2,246 )     (627 )
Net gains on sales of loans     11,364       7,425       6,015       4,198       5,687  
Equity method investments income (loss)     (1,769 )     (2,370 )     (1,736 )     (2,014 )     1,011  
Equity security investments gains (losses), net     54       3,343       32       103       79  
Gain on sale of investment securities available-for-sale     528       87             5        
Lease income     2,600       2,361       2,369       2,325       2,244  
Construction supervision fee income     240       360       386       779       323  
Other noninterest income     3,081       1,450       975       2,467       1,596  
Total noninterest income     21,524       18,628       14,701       13,027       18,065  
Noninterest expense                                        
Salaries and employee benefits     24,072       22,717       21,990       21,855       14,503  
Travel expense     2,246       1,934       1,541       1,200       3,269  
Professional services expense     983       2,073       1,621       2,182       1,233  
Advertising and marketing expense     1,630       1,277       1,665       1,364       1,023  
Occupancy expense     2,528       2,131       1,848       1,609       1,738  
Data processing expense     1,847       3,072       1,947       2,399       2,606  
Equipment expense     4,402       4,361       4,239       3,325       3,630  
Other loan origination and maintenance expense     2,390       3,535       1,708       1,639       1,482  
Renewable energy tax credit investment impairment                 602              
FDIC insurance     2,012       101       699       635       547  
Other expense     2,300       1,536       1,716       1,993       2,527  
Total noninterest expense     44,410       42,737       39,576       38,201       32,558  
Income before taxes     8,917       6,262       5,597       2,689       7,480  
Income tax expense (benefit)     2,085       2,367       662       317       (3,010 )
Net income   $ 6,832     $ 3,895     $ 4,935     $ 2,372     $ 10,490  
Earnings per share                                        
Basic   $ 0.17     $ 0.10     $ 0.12     $ 0.06     $ 0.26  
Diluted   $ 0.17     $ 0.09     $ 0.12     $ 0.06     $ 0.26  
Weighted average shares outstanding                                        
Basic     40,291,867       40,240,740       40,196,662       40,160,118       40,148,115  
Diluted     41,178,472       41,113,575       40,998,541       40,921,823       41,075,864  


Live Oak Bancshares, Inc.
Quarterly Balance Sheets (unaudited)
(Dollars in thousands)

    As of the quarter ended  
    4Q 2019     3Q 2019     2Q 2019     1Q 2019     4Q 2018  
Assets                                        
Cash and due from banks   $ 126,752     $ 159,527     $ 115,292     $ 221,159     $ 316,823  
Federal funds sold     96,787       88,919       68,153       64,708        
Certificates of deposit with other banks     7,250       7,250       7,250       7,250       7,250  
Investment securities available-for-sale     540,045       570,795       576,275       569,739       380,490  
Loans held for sale     966,447       903,095       857,837       772,481       687,393  
Loans and leases held for investment     2,647,299       2,441,953       2,225,473       2,002,124       1,843,419  
Allowance for loan and lease losses     (48,247 )     (42,944 )     (38,048 )     (35,111 )     (32,434 )
Net loans and leases     2,599,052       2,399,009       2,187,425       1,967,013       1,810,985  
Premises and equipment, net     279,099       280,942       281,126       271,810       262,524  
Foreclosed assets     5,612       5,702       6,044       1,374       1,094  
Servicing assets     35,365       37,583       41,687       44,324       47,641  
Operating lease right-of-use assets     2,427       1,890       1,996       2,136        
Other assets     156,134       148,985       131,216       136,053       156,249  
Total assets   $ 4,814,970     $ 4,603,697     $ 4,274,301     $ 4,058,047     $ 3,670,449  
Liabilities and Shareholders Equity                                        
Liabilities                                        
Deposits:                                        
Noninterest-bearing   $ 54,107     $ 56,373     $ 55,416     $ 53,843     $ 53,993  
Interest-bearing     4,175,015       3,962,894       3,666,181       3,474,562       3,095,590  
Total deposits     4,229,122       4,019,267       3,721,597       3,528,405       3,149,583  
Borrowings     14       1,310       1,361       1,410       1,457  
Operating lease liabilities     2,619       2,041       2,162       2,314        
Other liabilities     50,829       52,860       30,195       25,538       25,849  
Total liabilities     4,282,584       4,075,478       3,755,315       3,557,667       3,176,889  
Shareholders equity                                        
Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding                              
Class A common stock (voting)     309,526       296,925       284,987       281,994       278,945  
Class B common stock (non-voting)     30,871       40,401       49,168       49,168       49,168  
Retained earnings     180,265       174,641       171,954       168,225       167,124  
Accumulated other comprehensive income (loss)     11,724       16,252       12,877       993       (1,677 )
Total equity     532,386       528,219       518,986       500,380       493,560  
Total liabilities and shareholders equity   $ 4,814,970     $ 4,603,697     $ 4,274,301     $ 4,058,047     $ 3,670,449  


Live Oak Bancshares, Inc.
Statements of Income (unaudited)
(Dollars in thousands, except per share data)

    Twelve months ended  
    December 31, 2019     December 31, 2018  
Interest income                
Loans and fees on loans   $ 207,836     $ 147,310  
Investment securities, taxable     15,345       8,733  
Other interest earning assets     4,799       6,600  
Total interest income     227,980       162,643  
Interest expense                
Deposits     87,897       54,469  
Borrowings     1       131  
Total interest expense     87,898       54,600  
Net interest income     140,082       108,043  
Provision for loan and lease losses     19,573       13,058  
Net interest income after provision for loan and lease losses     120,509       94,985  
Noninterest income                
Loan servicing revenue     28,034       29,121  
Loan servicing asset revaluation     (4,812 )     (18,765 )
Net gains on sales of loans     29,002       75,170  
Equity method investments income (loss)     (7,889 )     (386 )
Equity security investments gains (losses), net     3,532       213  
Gain on sale of investment securities available-for-sale     620        
Lease income     9,655       7,966  
Construction supervision fee income     1,765       2,277  
Title insurance income           2,775  
Other noninterest income     7,973       5,394  
Total noninterest income     67,880       103,765  
Noninterest expense                
Salaries and employee benefits     90,634       77,411  
Travel expense     6,921       9,156  
Professional services expense     6,859       4,878  
Advertising and marketing expense     5,936       6,015  
Occupancy expense     8,116       7,065  
Data processing expense     9,265       12,010  
Equipment expense     16,327       13,724  
Other loan origination and maintenance expense     9,272       5,967  
Renewable energy tax credit investment impairment     602        
FDIC insurance     3,447       3,234  
Title insurance closing services expense           912  
Impairment expense on goodwill and other intangibles, net           2,680  
Other expense     7,545       9,652  
Total noninterest expense     164,924       152,704  
Income before taxes     23,465       46,046  
Income tax expense (benefit)     5,431       (5,402 )
Net income   $ 18,034     $ 51,448  
Earnings per share                
Basic   $ 0.45     $ 1.28  
Diluted   $ 0.44     $ 1.24  
Weighted average shares outstanding                
Basic     40,222,758       40,056,230  
Diluted     41,053,514       41,446,750  


Live Oak Bancshares, Inc.
Quarterly Selected Financial Data
(Dollars in thousands, except per share data)

    As of and for the three months ended  
    4Q 2019     3Q 2019     2Q 2019     1Q 2019     4Q 2018  
Income Statement Data                                        
Net income   $ 6,832     $ 3,895     $ 4,935     $ 2,372     $ 10,490  
Per Common Share                                        
Net income, basic   $ 0.17     $ 0.10     $ 0.12     $ 0.06     $ 0.26  
Net income, diluted     0.17       0.09       0.12       0.06       0.26  
Dividends declared     0.03       0.03       0.03       0.03       0.03  
Book value     13.20       13.12       12.90       12.45       12.29  
Tangible book value (1)     13.20       13.12       12.90       12.45       12.29  
Performance Ratios                                        
Return on average assets (annualized)     0.58 %     0.35 %     0.48 %     0.25 %     1.20 %
Return on average equity (annualized)     5.06       2.94       3.85       1.88       8.64  
Net interest margin     3.55       3.74       3.70       3.63       3.72  
Efficiency ratio (1)     75.26       76.22       81.37       87.56       69.48  
Noninterest income to total revenue     35.58       33.07       30.23       29.85       38.55  
Selected Loan Metrics                                        
Loans and leases originated   $ 523,688     $ 562,259     $ 525,088     $ 390,851     $ 498,987  
Guaranteed loans sold     105,002       100,498       71,934       62,940       104,646  
Average net gain on sale of guaranteed loans     106.16       80.51       80.12       61.30       59.83  
Adjusted average net gain on sale of guaranteed loans (2)     94.86       94.98       93.74       89.04       77.42  
Outstanding balance of sold loans serviced:                                        
Guaranteed     2,746,480       2,802,073       2,870,108       2,952,774       3,045,460  
Unguaranteed     224,127       211,095       183,991       179,307       174,066  
Total     2,970,607       3,013,168       3,054,099       3,132,081       3,219,526  
Asset Quality Ratios                                        
Allowance for loan losses to loans and leases held for investment     1.82 %     1.76 %     1.71 %     1.75 %     1.76 %
Net charge-offs   $ 905     $ 2,264     $ 526     $ 65     $ 1,185  
Net charge-offs to average loans and leases held for investment (3)     0.14 %     0.39 %     0.10 %     0.01 %     0.28 %
Nonperforming loans   $ 76,307     $ 80,757     $ 65,473     $ 70,692     $ 57,690  
Foreclosed assets     5,612       5,702       6,044       1,374       1,094  
Nonperforming loans (unguaranteed exposure)     17,908       19,817       18,352       20,186       14,488  
Foreclosed assets (unguaranteed exposure)     1,120       1,142       1,228       170       148  
Nonperforming loans not guaranteed by the SBA and foreclosures   $ 19,028     $ 20,959     $ 19,580     $ 20,356     $ 14,636  
Nonperforming loans and foreclosures, not guaranteed by the SBA, to total assets     0.40 %     0.46 %     0.46 %     0.50 %     0.40 %
Capital Ratios                                        
Common equity tier 1 capital (to risk-weighted assets)     14.85 %     15.22 %     15.94 %     16.68 %     17.10 %
Total capital (to risk-weighted assets)     16.10       16.47       17.19       17.92       18.28  
Tier 1 risk based capital (to risk-weighted assets)     14.85       15.22       15.94       16.68       17.10  
Tier 1 leverage capital (to average assets)     10.65       11.12       11.77       12.34       13.40  

Notes to Quarterly Selected Financial Data

(1) See accompanying GAAP to Non-GAAP Reconciliation.

(2) Excludes fair value gain/loss on exchange-traded interest rate lock commitments.

(3) Quarterly net charge-offs as a percentage of quarterly average loans and leases held for investment, annualized.


Live Oak Bancshares, Inc.
Quarterly Average Balances and Net Interest Margin
(Dollars in thousands)

    Three months ended December 31, 2019     Three months ended September 30, 2019  
    Average Balance     Interest     Average Yield/Rate     Average Balance     Interest     Average Yield/Rate  
Interest earning assets:                                                
Interest earning balances in other banks   $ 196,717     $ 885       1.78 %   $ 205,342     $ 1,167       2.25 %
Investment securities     549,879       3,911       2.82       554,871       4,001       2.86  
Loans held for sale     954,396       15,539       6.46       910,837       15,982       6.96  
Loans and leases held for investment (1)     2,545,624       41,478       6.46       2,313,615       39,957       6.85  
Total interest earning assets     4,246,616       61,813       5.77       3,984,665       61,107       6.08  
Less: allowance for loan and lease losses     (42,982 )                     (37,995 )                
Non-interest earning assets     527,280                       501,369                  
Total assets   $ 4,730,914                     $ 4,448,039                  
Interest bearing liabilities:                                                
Savings   $ 1,096,640     $ 5,077       1.84 %   $ 1,036,858     $ 5,501       2.10 %
Money market accounts     83,540       112       0.53       91,813       179       0.77  
Certificates of deposit     2,897,225       18,612       2.55       2,701,350       17,896       2.63  
Total interest bearing deposits     4,077,405       23,801       2.32       3,830,021       23,576       2.44  
Other borrowings     557       1       0.71       1,359              
Total interest bearing liabilities     4,077,962       23,802       2.32       3,831,380       23,576       2.44  
Non-interest bearing deposits     56,444                       51,781                  
Non-interest bearing liabilities     56,754                       35,654                  
Shareholders' equity     539,754                       529,224                  
Total liabilities and shareholders' equity   $ 4,730,914                     $ 4,448,039                  
Net interest income and interest rate spread           $ 38,011       3.45             $ 37,531       3.64  
Net interest margin                     3.55                       3.74  
Ratio of average interest-earning assets to average interest-bearing liabilities                     104.14 %                     104.00 %

(1)   Average loan and lease balances include non-accruing loans.


Live Oak Bancshares, Inc.
GAAP to Non-GAAP Reconciliation
(Dollars in thousands)

    As of and for the three months ended  
    4Q 2019     3Q 2019     2Q 2019     1Q 2019     4Q 2018  
Total shareholders’ equity   $ 532,386     $ 528,219     $ 518,986     $ 500,380     $ 493,560  
Less:                                        
Goodwill                              
Other intangible assets                              
Tangible shareholders’ equity (a)   $ 532,386     $ 528,219     $ 518,986     $ 500,380     $ 493,560  
Shares outstanding (c)     40,316,974       40,272,908       40,220,916       40,175,079       40,155,792  
Total assets   $ 4,814,970     $ 4,603,697     $ 4,274,301     $ 4,058,047     $ 3,670,449  
Less:                                        
Goodwill                              
Other intangible assets                              
Tangible assets (b)   $ 4,814,970     $ 4,603,697     $ 4,274,301     $ 4,058,047     $ 3,670,449  
Tangible shareholders’ equity to tangible assets (a/b)     11.06 %     11.47 %     12.14 %     12.33 %     13.45 %
Tangible book value per share (a/c)   $ 13.21     $ 13.12     $ 12.90     $ 12.45     $ 12.29  
Efficiency ratio:                                        
Noninterest expense (d)   $ 44,410     $ 42,737     $ 39,576     $ 38,201     $ 32,558  
Net interest income     38,011       37,531       33,935       30,605       28,795  
Noninterest income     21,524       18,628       14,701       13,027       18,065  
Less: gain on sale of securities     528       87             5        
Adjusted operating revenue (e)   $ 59,007     $ 56,072     $ 48,636     $ 43,627     $ 46,860  
Efficiency ratio (d/e)     75.26 %     76.22 %     81.37 %     87.56 %     69.48 %


Live Oak Bancshares, Inc.
GAAP to Non-GAAP Reconciliation (Continued)
(Dollars in thousands)

    Three months ended     Twelve months ended  
    4Q 2019     3Q 2019     4Q 2018     4Q 2019     4Q 2018  
Reconciliation of net income to non-GAAP net income for non-routine income and expenses:                                        
Net income   $ 6,832     $ 3,895     $ 10,490     $ 18,034     $ 51,448  
Gain on sale of aircraft                       (357 )      
Stock based compensation expense for restricted
  stock awards with an effective grant date of May
  24, 2016, as discussed in Note 10 of our March
  31, 2016 Form 10-Q
    360       360       360       1,429       1,429  
Impairment expense on goodwill and other intangibles, net                             2,680  
Renewable energy tax credit investment, impairment                       602        
Income tax effects and adjustments for non-GAAP items *     (86 )     (86 )     (86 )     (402 )     (986 )
Non-GAAP net income   $ 7,106     $ 4,169     $ 10,764     $ 19,306     $ 54,571  
* Estimated at 24.0%                                        
Non-GAAP earnings per share:                                        
Basic   $ 0.18     $ 0.10     $ 0.27     $ 0.48     $ 1.36  
Diluted   $ 0.17     $ 0.10     $ 0.26     $ 0.47     $ 1.32  
Weighted-average shares outstanding:                                        
Basic     40,291,867       40,240,740       40,148,115       40,222,758       40,056,230  
Diluted     41,178,472       41,113,575       41,075,864       41,053,514       41,446,750  
Reconciliation of financial statement line items as reported to adjusted for non-routine income and expenses:                                        
Noninterest income, as reported   $ 21,524     $ 18,628     $ 18,065     $ 67,880     $ 103,765  
Gain on sale of aircraft                       (357 )      
Noninterest income, as adjusted   $ 21,524     $ 18,628     $ 18,065     $ 67,523     $ 103,765  
Noninterest expense, as reported   $ 44,410     $ 42,737     $ 32,558     $ 164,924     $ 152,704  
Stock based compensation expense     (360 )     (360 )     (360 )     (1,429 )     (1,429 )
Impairment expense on goodwill and other intangibles, net                             (2,680 )
Renewable energy tax credit investment, impairment                       (602 )      
Noninterest expense, as adjusted   $ 44,050     $ 42,377     $ 32,198     $ 162,893     $ 148,595  
Income before taxes, as reported   $ 8,917     $ 6,262     $ 7,480     $ 23,465     $ 46,046  
Gain on sale of aircraft                       (357 )      
Stock based compensation expense     360       360       360       1,429       1,429  
Impairment expense on goodwill and other intangibles, net                             2,680  
Renewable energy tax credit investment impairment and loss                       602        
Income before taxes, as adjusted   $ 9,277     $ 6,622     $ 7,840     $ 25,139     $ 50,155  
Income tax expense (benefit), as reported   $ 2,085     $ 2,367     $ (3,010 )   $ 5,431     $ (5,402 )
Income tax effects and adjustments for non-recurring income and expenses     86       86       86       402       986  
Income tax expense (benefit), as adjusted   $ 2,171     $ 2,453     $ (2,924 )   $ 5,833     $ (4,416 )

This press release presents the non-GAAP financial measures previously shown. The adjustments to reconcile from the applicable GAAP financial measure to the non-GAAP financial measures are included where applicable in financial results presented in accordance with GAAP. The Company considers these adjustments to be relevant to ongoing operating results. The Company believes that excluding the amounts associated with these adjustments to present the non-GAAP financial measures provides a meaningful base for period-to-period comparisons, which will assist regulators, investors, and analysts in analyzing the operating results or financial position of the Company. The non-GAAP financial measures are used by management to assess the performance of the Company’s business for presentations of Company performance to investors, and for other reasons as may be requested by investors and analysts. The Company further believes that presenting the non-GAAP financial measures will permit investors and analysts to assess the performance of the Company on the same basis as that applied by management. Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although non-GAAP financial measures are frequently used by shareholders to evaluate a company, they have limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of results reported under GAAP.

 

Live-Oak-Bancshares-Logo_p.jpg

Source: Live Oak Bancshares, Inc.