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Live Oak Bancshares, Inc. Reports Third Quarter 2022 Results

10/26/22

WILMINGTON, N.C., Oct. 26, 2022 (GLOBE NEWSWIRE) -- Live Oak Bancshares, Inc. (Nasdaq: LOB) (“Live Oak” or “the Company”) today reported third quarter of 2022 net income of $42.9 million, or $0.96 per diluted share. The third quarter of 2022 included a pretax gain of $28.4 million related to the sale of the Company’s investment in Payrailz, LLC (“Payrailz”).

“Live Oak remains steadfastly dedicated to serving small business customers across our country with vital capital to create jobs, boost local economies and achieve more,” said Live Oak Bancshares Chairman and CEO James S. (Chip) Mahan III. “Once again this quarter, we recognized capital gains from a fintech investment, giving Live Oak more dry powder to further its mission to be America’s small business bank.”

Third Quarter 2022 Key Measures

(Dollars in thousands, except per share data)       Increase (Decrease)    
  3Q 2022   2Q 2022   Dollars   Percent   3Q 2021
Total revenue(1) $ 141,610     $ 208,463     $ (66,853 )     (32 )%   $ 103,011  
Total noninterest expense   83,048       80,879       2,169       3       55,459  
Income before taxes   44,393       122,317       (77,924 )     (64 )     43,233  
Effective tax rate   3.4 %     20.7 %     n/a       n/a       21.7 %
Net income $ 42,868     $ 97,039     $ (54,171 )     (56 )%   $ 33,839  
Diluted earnings per share   0.96       2.16       (1.20 )     (56 )     0.76  
Loan and lease production:                  
Loans and leases originated $ 1,005,235     $ 959,635     $ 45,600       5 %   $ 1,063,190  
% Fully funded   54.0 %     58.6 %     n/a       n/a       55.1 %
Total loans and leases: $ 7,391,031     $ 7,059,943     $ 331,088       5 %   $ 6,461,367  
Total loans and leases, excluding PPP loans:   7,367,153       6,998,579       368,574       5       5,971,595  
Total assets:   9,314,650       9,120,897       193,753       2       8,137,341  
Total deposits:   8,404,909       8,155,744       249,165       3       6,816,613  

(1) Total revenue consists of net interest income and total noninterest income.

 

Loans and Leases

As of September 30, 2022, the total loan and lease portfolio was $7.39 billion, 4.7% above its level at June 30, 2022, and 14.4% above its level a year ago. This growth was the product of strong origination volumes. Compared to the second quarter of 2022, loans and leases held for investment increased $993.2 million, or 16.9%, to $6.85 billion while loans held for sale decreased $662.1 million, or 55.2%, to $537.6 million. The decrease in loans held for sale was largely the result of a $754.7 million transfer of loans to held for investment classification, including $696.6 million in guaranteed loans, largely due to the impact of recent and anticipated future market conditions in a rising rate environment. Average loans and leases were $7.21 billion during the third quarter of 2022 compared to $6.93 billion during the second quarter of 2022. Excluding Paycheck Protection Program (“PPP”) loans, the total loan and lease portfolio increased by $368.6 million, or 5.3%, compared to June 30, 2022, and $1.40 billion, or 23.4%, compared to September 30, 2021.

The total loan and lease portfolio of $7.39 billion includes $23.9 million of PPP loans, net of deferred fees and costs, at September 30, 2022, which are carried at historical cost and classified as held for investment. The total loan and lease portfolio at September 30, 2022, and June 30, 2022 was comprised of 56.6% and 55.5% of unguaranteed loans and leases, respectively.

Loan and lease originations totaled $1.01 billion during the third quarter of 2022, an increase of $45.6 million, or 4.8%, from the second quarter of 2022. Loan and lease originations decreased $58.0 million, or 5.5%, from the third quarter of 2021.

Deposits

Total deposits increased to $8.40 billion at September 30, 2022, an increase of $249.2 million compared to June 30, 2022, and an increase of $1.59 billion compared to September 30, 2021. The increase in total deposits from the prior periods provides support for the growth in the loan and lease portfolio.

Average total interest-bearing deposits for the third quarter of 2022 increased $386.7 million, or 5.0%, to $8.09 billion, compared to $7.70 billion for the second quarter of 2022. The ratio of average total loans and leases to average interest-bearing deposits was 89.1% for the third quarter of 2022, compared to 89.9% for the second quarter of 2022.

Borrowings

Borrowings totaled $35.6 million at September 30, 2022, compared to $86.2 million and $575.0 million at June 30, 2022, and September 30, 2021, respectively. During the third quarter of 2022, the Company decreased borrowings by $50.6 million and $539.4 million as compared to June 30, 2022, and September 30, 2021, respectively, primarily by paying off the outstanding balance of the Federal Reserve’s Paycheck Protection Program Liquidity Facility by the end of September 2022.

Net Interest Income

Net interest income for the third quarter of 2022 increased to $83.9 million compared to $79.9 million for the second quarter of 2022 and $77.7 million for the third quarter of 2021.

The net interest margin for the third and second quarters of 2022 was 3.84% and 3.89%, respectively, a decrease of 5 basis points quarter over quarter. This decrease was due to recent interest rate increases where deposits are repricing more rapidly than the Company’s loan portfolio. During the third quarter of 2022, the average cost of interest-bearing liabilities increased by fifty-six basis points while the average yield on interest-earning assets increased by forty-eight basis points.

The increase in net interest income for the third quarter of 2022 compared to the third quarter of 2021 was driven by growth in the volume for the total loan and lease portfolio. Partially mitigating this increase was a decrease in the net interest margin arising from an increase in interest-bearing liabilities combined with average cost of funds outpacing the average yield on interest-earning assets.

Noninterest Income

Noninterest income for the third quarter of 2022 was $57.7 million, a decrease of $70.8 million compared to the second quarter of 2022 and an increase of $32.4 million, compared to the third quarter of 2021. The primary drivers in noninterest income changes are outlined below.

The largest driver of the decrease in noninterest income for the third quarter of 2022 as compared to the second quarter of 2022 arose from a decrease in equity method investment income of $89.9 million. This quarter over quarter decrease was due to the $120.5 million gain associated with Fiserv, Inc.’s acquisition of the Company’s ownership in Finxact, Inc. (“Finxact”) in the second quarter of 2022 being partially offset by the $28.4 million gain arising in the third quarter of 2022 associated with Jack Henry & Associates, Inc’s acquisition of the Company’s ownership in Payrailz. Correspondingly, the largest contributor to the increase in noninterest income for the third quarter of 2022 compared to the third quarter of 2021 was the Payrailz gain.

The loan servicing asset revaluation resulted in a loss of $1.3 million for the third quarter of 2022 compared to a $8.7 million loss for the second quarter of 2022 and a $5.9 million loss for the third quarter of 2021. The decrease in the loss on loan servicing asset revaluation for both periods was principally the result of positive movements in market pricing, particularly as it relates to variable products, during the third quarter of 2022.

Net gains on sales of loans for the third quarter of 2022 was $9.3 million, a $3.6 million increase compared to $5.6 million for the second quarter of 2022 and a $9.6 million decrease compared $18.9 million for the third quarter of 2021. During the second quarter of 2022, the Company significantly decreased loan sale volumes due to unusually weak market conditions. The increase in net gains on sales of loans over the second quarter of 2022 was largely the result of higher loan sale volumes combined with, to a lesser extent, signs of positive market trends for variable rate loans during the third quarter of 2022. The decrease in net gains on sales of loans compared to the third quarter of 2021 is the result of lower volume of loan sales combined with overall weaker market conditions compared to those experienced in the prior year. The average guaranteed gain on sale premium was 108%, 108% and 110% for the third quarter of 2022, second quarter of 2022 and third quarter of 2021, respectively. The volume of guaranteed loans sold was $148.1 million for the third quarter of 2022 compared to $68.8 million sold in the second quarter of 2022 and $201.9 million sold in the third quarter of 2021.

The net gain on loans accounted for under the fair value option totaled $4.4 million for the third quarter of 2022, a $8.9 million increase compared to the $4.5 million net loss for the second quarter of 2022 and a $5.5 million increase compared to the $1.0 million net loss for the third quarter of 2021. The increase in valuation of loans accounted for under the fair value option compared to both prior periods was largely the result of the above referenced signs of positive market pricing trends on variable rate loans combined with continued amortization of the portfolio of loans accounted for under the fair value option.

Noninterest Expense

Noninterest expense for the third quarter of 2022 totaled $83.0 million compared to $80.9 million for the second quarter of 2022 and $55.5 million for the third quarter of 2021. The primary drivers in noninterest expense changes are outlined below.

Salaries and employee benefits for the third quarter of 2022 decreased $2.8 million compared to the second quarter of 2022 and increased $15.3 million compared to the third quarter of 2021. Additional bonus accruals of $7.5 million and $3.0 million were included in both the second and third quarters of 2022 related to the earlier discussed Finxact and Payrailz gains, respectively. The decrease in salaries and employee benefits compared to the second quarter of 2022 was principally due to the decrease in additional bonus accruals while the increase over the third quarter of 2021 was largely the product of continued investment in human resources to support strategic and growth initiatives, including the $3.0 million additional bonus accrual discussed above.

Technology expenses increased $2.0 million compared to the second quarter of 2022 and $1.6 million compared to the third quarter of 2021. The increase for both periods was primarily related to enhanced investments in the Company’s technology resources.

During the third quarter of 2022, the Company incurred $7.6 million in impairment charges related to a new renewable energy tax credit investment. Investments of this type generate a return primarily through the realization of income tax credits and other benefits; accordingly, impairment of the investment amount is recognized in conjunction with the realization of related tax benefits. This investment generated a federal investment tax credit of $6.1 million which is included in the Company’s estimated annual effective tax rate. Investments of this nature are part of the Company’s ongoing initiative to promote renewable energy sources.

Contributions and donations for the third quarter of 2022 decreased $5.3 million compared to the second quarter of 2022. This decrease was related to a special charitable donation during the second quarter of 2022 of $5.0 million made in connection with the Finxact gain discussed earlier.

Asset Quality

During the third quarter of 2022, the Company recognized net charge-offs for loans carried at historical cost of $1.7 million compared to net charge-offs of $2.5 million in both the second quarter of 2022 and third quarter of 2021. Net charge-offs as a percentage of average held for investment loans and leases carried at historical cost, annualized, for the quarters ended September 30, 2022, June 30, 2022, and September 30, 2021, was 0.12%, 0.19% and 0.21%, respectively.

Unguaranteed nonperforming (nonaccrual) loans and leases, excluding $2.7 million and $3.6 million accounted for under the fair value option at September 30, 2022, and June 30, 2022, respectively, increased to $14.3 million, or 0.23% of loans and leases held for investment which are carried at historical cost, at September 30, 2022, compared to $12.0 million, or 0.22%, at June 30, 2022.

Provision for Loan and Lease Credit Losses

The provision for loan and lease credit losses for the third quarter of 2022 totaled $14.2 million compared to $5.3 million for the second quarter of 2022 and $4.3 million for the third quarter of 2021. The level of provision expense in the third quarter of 2022 was the result of loan growth, charge-off experience impacts, the above discussed loan reclassification from held for sale to held for investment and changes in the macroeconomic outlook.

The allowance for credit losses on loans and leases totaled $78.3 million at September 30, 2022, compared to $65.9 million at June 30, 2022. The allowance for credit losses on loans and leases as a percentage of total loans and leases held for investment carried at historical cost was 1.23% and 1.24% at September 30, 2022, and June 30, 2022, respectively.

Income Tax

Income tax expense and related effective tax rate was $1.5 million and 3.4% for the third quarter of 2022, $25.3 million and 20.7% for the second quarter of 2022 and $9.4 million and 21.7% for the third quarter of 2021, respectively. The lower level of income tax expense for the third quarter of 2022 compared to the second quarter of 2022 and third quarter of 2021 was primarily the result of higher than anticipated investment tax credits related to renewable energy investments, arising from the impacts of the passage of the Inflation Reduction Act of 2022 combined with higher than expected costs as a result of the ongoing inflationary environment.

Shareholders’ Equity

Total shareholders’ equity increased by $10.5 million, or 1.3%, during the third quarter of 2022. This increase was primarily due to $42.9 million in net income partially offset by $36.0 million of negative market impacts on the Company’s available-for-sale investment portfolio included in accumulated other comprehensive loss.

Conference Call

Live Oak will host a conference call to discuss the company's financial results and business outlook tomorrow, October 27, 2022, at 9:00 a.m. ET. To participate via telephone, please register in advance at this link: https://register.vevent.com/register/BI8691db015f994feb8d94d064927ef770. Upon registration, all telephone participants will receive a confirmation email detailing how to join the conference call, including the dial-in number along with a unique passcode and registrant ID that can be used to access the call. The call can also be accessed via a live audio webcast at http://investor.liveoakbank.com. After the conference call, a replay will be available until November 3, 2022, at the same audio webcast link.

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; the potential impacts of the Coronavirus Disease 2019 (COVID-19) pandemic on trade (including supply chains and export levels), travel, employee productivity and other economic activities that may have a destabilizing and negative effect on financial markets, economic activity and customer behavior; 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; adverse results, including related fees and expenses, from pending or future lawsuits, government investigations or private actions; 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 Bank. Live Oak Bancshares and its subsidiaries partner with businesses that share a groundbreaking focus on service and technology to redefine banking. To learn more, visit www.liveoakbank.com.

Contacts:

William C. (BJ) Losch, III | CFO & Chief Banking Officer | Investor Relations | 910.765.9966
Claire Parker | SVP Corporate Communications | Media Relations | 910.597.1592

 

 

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

  Three Months Ended   3Q 2022 Changes vs.
  3Q 2022   2Q 2022   1Q 2022   4Q 2021   3Q 2021   2Q 2022   3Q 2021
Interest income                     %   %
Loans and fees on loans $ 107,880     $ 94,157     $ 89,198     $ 88,577     $ 89,388     14.6     20.7  
Investment securities, taxable   5,506       4,046       3,399       3,455       3,174     36.1     73.5  
Other interest earning assets   2,448       1,044       185       171       224     134.5     992.9  
Total interest income   115,834       99,247       92,782       92,203       92,786     16.7     24.8  
Interest expense                          
Deposits   31,553       18,777       14,348       13,817       14,159     68.0     122.8  
Borrowings   395       536       655       748       892     (26.3 )   (55.7 )
Total interest expense   31,948       19,313       15,003       14,565       15,051     65.4     112.3  
Net interest income   83,886       79,934       77,779       77,638       77,735     4.9     7.9  
Provision for loan and lease credit losses   14,169       5,267       1,836       3,918       4,319     169.0     228.1  
Net interest income after provision for loan and lease credit losses   69,717       74,667       75,943       73,720       73,416     (6.6 )   (5.0 )
Noninterest income                          
Loan servicing revenue   6,230       6,477       6,356       6,289       6,278     (3.8 )   (0.8 )
Loan servicing asset revaluation   (1,324 )     (8,668 )     (1,569 )     (4,160 )     (5,878 )   84.7     77.5  
Net gains on sales of loans   9,275       5,630       20,977       20,257       18,860     64.7     (50.8 )
Net gain (loss) on loans accounted for under the fair value option   4,420       (4,461 )     516       (66 )     (1,030 )   199.1     529.1  
Equity method investments income (loss)   29,136       119,056       (2,124 )     2,969       (1,250 )   (75.5 )   2,430.9  
Equity security investments gains (losses), net   876       1,655       (44 )     218       176     (47.1 )   397.7  
Lease income   2,516       2,510       2,503       2,521       2,527     0.2     (0.4 )
Management fee income   2,844       2,558       1,488       1,482       1,489     11.2     91.0  
Other noninterest income   3,751       3,772       4,565       4,246       4,104     (0.6 )   (8.6 )
Total noninterest income   57,724       128,529       32,668       33,756       25,276     (55.1 )   128.4  
Noninterest expense                          
Salaries and employee benefits   43,479       46,276       38,507       32,464       28,202     (6.0 )   54.2  
Travel expense   2,372       2,358       1,897       1,782       1,819     0.6     30.4  
Professional services expense   2,505       3,988       2,791       3,724       4,251     (37.2 )   (41.1 )
Advertising and marketing expense   2,621       2,301       1,729       1,844       1,631     13.9     60.7  
Occupancy expense   2,519       2,773       2,327       2,045       2,042     (9.2 )   23.4  
Technology expense   7,770       5,762       6,053       6,489       6,150     34.8     26.3  
Equipment expense   3,761       3,784       3,816       3,741       3,706     (0.6 )   1.5  
Other loan origination and maintenance expense   3,376       3,022       3,113       3,406       3,489     11.7     (3.2 )
Renewable energy tax credit investment impairment   7,721       50                   60     15,342.0     12,768.3  
FDIC insurance   2,697       2,164       1,972       1,931       1,670     24.6     61.5  
Contributions and donations   191       5,515       723       328       523     (96.5 )   (63.5 )
Other expense   4,036       2,886       2,786       1,944       1,916     39.8     110.6  
Total noninterest expense   83,048       80,879       65,714       59,698       55,459     2.7     49.7  
Income before taxes   44,393       122,317       42,897       47,778       43,233     (63.7 )   2.7  
Income tax expense   1,525       25,278       8,388       17,631       9,394     (94.0 )   (83.8 )
Net income $ 42,868     $ 97,039     $ 34,509     $ 30,147     $ 33,839     (55.8 )   26.7  
Earnings per share                          
Basic $ 0.97     $ 2.22     $ 0.79     $ 0.69     $ 0.78     (56.3 )   24.4  
Diluted $ 0.96     $ 2.16     $ 0.76     $ 0.66     $ 0.76     (55.6 )   26.3  
Weighted average shares outstanding                          
Basic   43,914,920       43,824,707       43,701,943       43,492,172       43,329,889          
Diluted   44,797,109       44,803,278       45,227,536       45,474,530       45,040,690          


 

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

  As of the quarter ended   3Q 2022 Change vs.
  3Q 2022   2Q 2022   1Q 2022   4Q 2021   3Q 2021   2Q 2022   3Q 2021
Assets                     %   %
Cash and due from banks $ 335,046     $ 580,493     $ 477,778     $ 187,203     $ 336,362     (42.3 )   (0.4 )
Federal funds sold   68,324       51,694       29,993       16,547       10,672     32.2     540.2  
Certificates of deposit with other banks   4,250       4,250       4,250       4,750       6,000         (29.2 )
Investment securities available-for-sale   1,005,372       927,968       844,577       906,052       861,377     8.3     16.7  
Loans held for sale(1)   537,649       1,199,734       1,028,635       1,116,519       1,042,756     (55.2 )   (48.4 )
Loans and leases held for investment(2)   6,853,382       5,860,209       5,738,241       5,521,262       5,418,611     16.9     26.5  
Allowance for credit losses on loans and leases   (78,291 )     (65,863 )     (63,058 )     (63,584 )     (59,681 )   18.9     31.2  
Net loans and leases   6,775,091       5,794,346       5,675,183       5,457,678       5,358,930     16.9     26.4  
Premises and equipment, net   260,285       257,926       254,865       240,196       244,212     0.9     6.6  
Foreclosed assets   1,178       191       198       620       883     516.8     33.4  
Servicing assets   29,081       28,661       36,286       33,574       33,968     1.5     (14.4 )
Other assets   298,374       275,634       268,201       250,254       242,181     8.3     23.2  
Total assets $ 9,314,650     $ 9,120,897     $ 8,619,966     $ 8,213,393     $ 8,137,341     2.1     14.5  
Liabilities and Shareholders’ Equity                          
Liabilities                          
Deposits:                          
Noninterest-bearing $ 170,336     $ 119,371     $ 86,342     $ 89,279     $ 77,026     42.7     121.1  
Interest-bearing   8,234,573       8,036,373       7,550,821       7,022,765       6,739,587     2.5     22.2  
Total deposits   8,404,909       8,155,744       7,637,163       7,112,044       6,816,613     3.1     23.3  
Borrowings   35,616       86,209       196,911       318,289       575,021     (58.7 )   (93.8 )
Other liabilities   71,957       87,282       72,565       67,927       56,284     (17.6 )   27.8  
Total liabilities   8,512,482       8,329,235       7,906,639       7,498,260       7,447,918     2.2     14.3  
Shareholders’ equity                          
Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding                                    
Class A common stock (voting)   325,632       320,924       315,607       310,970       304,085     1.5     7.1  
Class B common stock (non-voting)                     1,324       5,404         (100.0 )
Retained earnings   571,778       530,021       434,226       400,893       371,869     7.9     53.8  
Accumulated other comprehensive (loss) income   (95,242 )     (59,283 )     (36,506 )     1,946       8,065     60.7     (1,280.9 )
Total shareholders' equity   802,168       791,662       713,327       715,133       689,423     1.3     16.4  
Total liabilities and shareholders’ equity $ 9,314,650     $ 9,120,897     $ 8,619,966     $ 8,213,393     $ 8,137,341     2.1     14.5  
                           

(1)  Includes $23.5 million, $25.1 million, $25.3 million and $27.4 million measured at fair value for the quarters ended June 30, 2022, March 31, 2022, December 31, 2021 and September 30, 2021, respectively.
(2)  Includes $512.2 million, $530.6 million, $600.6 million, $645.2 million and $698.0 million measured at fair value for the quarters ended September 30, 2022, June 30, 2022, March 31, 2022, December 31, 2021 and September 30, 2021, respectively.

 

 

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

  Nine Months Ended
  September 30, 2022   September 30, 2021
Interest income      
Loans and fees on loans $ 291,235     $ 259,161  
Investment securities, taxable   12,951       9,078  
Other interest earning assets   3,677       771  
Total interest income   307,863       269,010  
Interest expense      
Deposits   64,678       45,923  
Borrowings   1,586       3,940  
Total interest expense   66,264       49,863  
Net interest income   241,599       219,147  
Provision for loan and lease credit losses   21,272       11,292  
Net interest income after provision for loan and lease credit losses   220,327       207,855  
Noninterest income      
Loan servicing revenue   19,063       18,930  
Loan servicing asset revaluation   (11,561 )     (7,566 )
Net gains on sales of loans   35,882       47,023  
Net gain on loans accounted for under the fair value option   475       4,323  
Equity method investments income (loss)   146,068       (4,685 )
Equity security investments gains (losses), net   2,487       44,534  
Lease income   7,529       7,742  
Management fee income   6,890       4,896  
Other noninterest income   12,088       11,247  
Total noninterest income   218,921       126,444  
Noninterest expense      
Salaries and employee benefits   128,262       92,468  
Travel expense   6,627       4,027  
Professional services expense   9,284       11,411  
Advertising and marketing expense   6,651       3,158  
Occupancy expense   7,619       6,378  
Technology expense   19,585       16,159  
Equipment expense   11,361       11,128  
Other loan origination and maintenance expense   9,511       10,123  
Renewable energy tax credit investment impairment   7,771       3,187  
FDIC insurance   6,833       5,139  
Contributions and donations   6,429       2,003  
Other expense   9,708       6,108  
Total noninterest expense   229,641       171,289  
Income before taxes   209,607       163,010  
Income tax expense   35,191       26,162  
Net income $ 174,416     $ 136,848  
Earnings per share      
Basic $ 3.98     $ 3.18  
Diluted $ 3.88     $ 3.05  
Weighted average shares outstanding      
Basic   43,814,648       43,061,642  
Diluted   44,943,432       44,936,014  


 

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

  As of and for the three months ended
  3Q 2022   2Q 2022   1Q 2022   4Q 2021   3Q 2021
Income Statement Data                  
Net income $ 42,868     $ 97,039     $ 34,509     $ 30,147     $ 33,839  
Per Common Share                  
Net income, diluted $ 0.96     $ 2.16     $ 0.76     $ 0.66     $ 0.76  
Dividends declared   0.03       0.03       0.03       0.03       0.03  
Book value   18.24       18.05       16.29       16.39       15.89  
Tangible book value (1)   18.15       17.97       16.20       16.31       15.80  
Performance Ratios                  
Return on average assets (annualized)   1.86 %     4.40 %     1.65 %     1.47 %     1.64 %
Return on average equity (annualized)   20.79       46.14       18.94       16.80       19.67  
Net interest margin   3.84       3.89       4.02       4.02       3.99  
Efficiency ratio (1)   58.65       38.80       59.50       53.59       53.84  
Noninterest income to total revenue   40.76       61.66       29.58       30.30       24.54  
Selected Loan Metrics                  
Loans and leases originated $ 1,005,235     $ 959,635     $ 865,063     $ 1,083,623     $ 1,063,190  
Outstanding balance of sold loans serviced   3,345,907       3,329,616       3,381,883       3,298,828       3,212,271  
Asset Quality Ratios                  
Allowance for credit losses to loans and leases held for investment (3)   1.23 %     1.24 %     1.23 %     1.30 %     1.26 %
Net charge-offs (3) $ 1,741     $ 2,462     $ 2,362     $ 15     $ 2,485  
Net charge-offs to average loans and leases held for investment (2) (3)   0.12 %     0.19 %     0.19 %     %     0.21 %
                   
Nonperforming loans and leases at historical cost (3)                  
Unguaranteed $ 14,334     $ 11,974     $ 19,475     $ 15,987     $ 20,450  
Guaranteed   45,730       33,794       32,828       26,546       28,888  
Total   60,064       45,768       52,303       42,533       49,338  
Unguaranteed nonperforming historical cost loans and leases, to loans and leases held for investment (3)   0.23 %     0.22 %     0.38 %     0.33 %     0.43 %
                   
Nonperforming loans at fair value (4)                  
Unguaranteed $ 2,736     $ 3,615     $ 4,451     $ 4,791     $ 6,303  
Guaranteed   25,169       27,895       30,850       33,471       36,708  
Total   27,905       31,510       35,301       38,262       43,011  
Unguaranteed nonperforming fair value loans to loans held for investment (4)   0.53 %     0.68 %     0.74 %     0.74 %     0.90 %
Capital Ratios                  
Common equity tier 1 capital (to risk-weighted assets)   13.16 %     13.14 %     12.10 %     12.38 %     12.56 %
Tier 1 leverage capital (to average assets)   9.49       9.44       8.87       8.87       8.82  

Notes to Quarterly Selected Financial Data

(1)  See accompanying GAAP to Non-GAAP Reconciliation.
(2)  Quarterly net charge-offs as a percentage of quarterly average loans and leases held for investment, annualized.
(3)  Loans and leases at historical cost only (excludes loans measured at fair value).
(4)  Loans accounted for under the fair value option only (excludes loans and leases carried at historical cost).

 

 

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

  Three Months Ended
September 30, 2022
  Three Months Ended
June 30, 2022
  Average
Balance
  Interest   Average
Yield/Rate
  Average
Balance
  Interest   Average
Yield/Rate
Interest-earning assets:                      
Interest-earning balances in other banks $ 225,959     $ 1,375     2.41 %   $ 328,014     $ 848       1.04 %
Federal funds sold   187,014       1,073     2.28       78,216       196       1.01  
Investment securities   1,040,076       5,506     2.10       915,106       4,046       1.77  
Loans held for sale   1,000,912       16,156     6.40       1,119,094       15,969       5.72  
Loans and leases held for investment(1)   6,208,447       91,724     5.86       5,805,907       78,188       5.40  
Total interest-earning assets   8,662,408       115,834     5.31       8,246,337       99,247       4.83  
Less: Allowance for credit losses on loans and leases   (65,511 )             (62,566 )        
Noninterest-earning assets   598,220               644,495          
Total assets $ 9,195,117             $ 8,828,266          
Interest-bearing liabilities:                      
Savings $ 4,009,928     $ 16,775     1.66 %   $ 3,894,177     $ 7,538       0.78 %
Money market accounts   100,074       72     0.29       93,072       56       0.24  
Certificates of deposit   3,978,793       14,706     1.47       3,714,882       11,183       1.21  
Total deposits   8,088,795       31,553     1.55       7,702,131       18,777       0.98  
Borrowings   63,207       395     2.48       132,969       536       1.62  
Total interest-bearing liabilities   8,152,002       31,948     1.55       7,835,100       19,313       0.99  
Noninterest-bearing deposits   133,676               96,123          
Noninterest-bearing liabilities   84,597               55,725          
Shareholders' equity   824,842               841,318          
Total liabilities and shareholders' equity $ 9,195,117             $ 8,828,266          
Net interest income and interest rate spread     $ 83,886     3.76 %       $ 79,934       3.84 %
Net interest margin           3.84               3.89  
Ratio of average interest-earning assets to average interest-bearing liabilities           106.26 %             105.25 %

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

 

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

  As of and for the three months ended
  3Q 2022   2Q 2022   1Q 2022   4Q 2021   3Q 2021
Total shareholders’ equity $ 802,168     $ 791,662     $ 713,327     $ 715,133     $ 689,423  
Less:                  
Goodwill   1,797       1,797       1,797       1,797       1,797  
Other intangible assets   1,912       1,950       1,988       2,026       2,065  
Tangible shareholders’ equity (a) $ 798,459     $ 787,915     $ 709,542     $ 711,310     $ 685,561  
Shares outstanding (c)   43,981,350       43,854,011       43,787,660       43,619,070       43,381,014  
Total assets $ 9,314,650     $ 9,120,897     $ 8,619,966     $ 8,213,393     $ 8,137,341  
Less:                  
Goodwill   1,797       1,797       1,797       1,797       1,797  
Other intangible assets   1,912       1,950       1,988       2,026       2,065  
Tangible assets (b) $ 9,310,941     $ 9,117,150     $ 8,616,181     $ 8,209,570     $ 8,133,479  
Tangible shareholders’ equity to tangible assets (a/b)   8.58 %     8.64 %     8.23 %     8.66 %     8.43 %
Tangible book value per share (a/c) $ 18.15     $ 17.97     $ 16.20     $ 16.31     $ 15.80  
Efficiency ratio:                  
Noninterest expense (d) $ 83,048     $ 80,879     $ 65,714     $ 59,698     $ 55,459  
Net interest income   83,886       79,934       77,779       77,638       77,735  
Noninterest income   57,724       128,529       32,668       33,756       25,276  
Total revenue (e) $ 141,610     $ 208,463     $ 110,447     $ 111,394     $ 103,011  
Efficiency ratio (d/e)   58.65 %     38.80 %     59.50 %     53.59 %     53.84 %

 

This press release presents the non-GAAP financial measures. The adjustments to reconcile from the non-GAAP financial measures to the applicable GAAP financial measure 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.

 


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Source: Live Oak Bancshares, Inc.