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Live Oak Bancshares, Inc. Reports Fourth Quarter 2023 Results

01/24/2024

WILMINGTON, N.C., Jan. 24, 2024 (GLOBE NEWSWIRE) -- Live Oak Bancshares, Inc. (NYSE: LOB) (“Live Oak” or “the Company”) today reported fourth quarter of 2023 net income of $16.2 million, or $0.36 per diluted share. Net income for the year ended December 31, 2023, totaled $73.9 million, or $1.64 per diluted share.

“Live Oak Bank spent 2023 doing what we do best -- growing loans, deposits, and revenue in our mission to support small business owners, our employees and our shareholders,” said Live Oak Chairman and CEO James S. (Chip) Mahan III. “When looking back at 2023, it is clear that our customers and our model were extraordinarily resilient. We are proud to serve America’s small business owners through all cycles and believe our fourth quarter results, and the historical performance of our bank, continue to demonstrate our strength in the market.”

Year Over Year Highlights

(Dollars in thousands, except per share data)       Increase (Decrease)
    2023       2022     Dollars   Percent
Total revenue (1) $ 457,038     $ 565,493     $ (108,455 )   (19)%
Total noninterest expense   322,885       314,226       8,659     3  
Income before taxes   82,830       210,324       (127,494 )   (61 )
Effective tax rate   10.8 %     16.2 %   n/a   n/a
Net income $ 73,898     $ 176,208     $ (102,310 )   (58)%
Diluted earnings per share   1.64       3.92       (2.28 )   (58 )
Loan and lease production:              
Loans and leases originated $ 3,946,873     $ 4,007,621     $ (60,748 )   (2)%
% Fully funded   55.1 %     58.8 %   n/a   n/a
Total loans and leases: $ 9,020,884     $ 7,898,788     $ 1,122,096     14 %
Total assets:   11,271,423       9,855,498       1,415,925     14  
Total deposits:   10,275,019       8,884,928       1,390,091     16  

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

Fourth Quarter  2023 Key Measures

(Dollars in thousands, except per share data)       Increase (Decrease)    
  4Q 2023   3Q 2023   Dollars   Percent   4Q 2022
Total revenue (1) $ 119,683     $ 127,301     $ (7,618 )   (6)%   $ 104,973  
Total noninterest expense   93,204       74,262       18,942     26       84,585  
Income before taxes   17,484       42,760       (25,276 )   (59 )     717  
Effective tax rate   7.6 %     6.9 %   n/a   n/a   (149.9)%
Net income $ 16,163     $ 39,793     $ (23,630 )   (59)%   $ 1,792  
Diluted earnings per share   0.36       0.88       (0.52 )   (59 )     0.04  
Loan and lease production:                  
Loans and leases originated $ 981,703     $ 1,073,255     $ (91,552 )   (9)%   $ 1,177,688  
% Fully funded   49.0 %     52.2 %   n/a   n/a     58.1 %

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

Loans and Leases

At December 31, 2023, the total loan and lease portfolio was $9.02 billion, 2.8% above its level at September 30, 2023 and 14.2% above its level at December 31, 2022. This growth was driven by strong origination volumes. Compared to the third quarter of 2023, loans and leases held for investment increased $431.2 million, or 5.3%, to $8.63 billion while loans held for sale decreased $185.6 million, or 32.4%, to $387.0 million. Average loans and leases were $8.84 billion during the fourth quarter of 2023 compared to $8.58 billion during the third quarter of 2023.

The total loan and lease portfolio at December 31, 2023, and September 30, 2023 was comprised of 37.8% and 39.0% of guaranteed loans and leases, respectively.

Loan and lease originations totaled $981.7 million during the fourth quarter of 2023, a decrease of $91.6 million, or 8.5%, from the third quarter of 2023.

Deposits

Total deposits increased to $10.28 billion at December 31, 2023, an increase of $271.4 million compared to September 30, 2023, and an increase of $1.39 billion compared to December 31, 2022. 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 fourth quarter of 2023 increased $137.5 million, or 1.4%, to $9.84 billion, compared to $9.70 billion for the third quarter of 2023. The ratio of average total loans and leases to average interest-bearing deposits was 89.9% for the fourth quarter of 2023 compared to 88.5% for the third quarter of 2023.

Borrowings

Borrowings totaled $23.4 million at December 31, 2023, compared to $25.8 million and $83.2 million at September 30, 2023 and December 31, 2022, respectively. The decrease from the fourth quarter of 2022 was principally due to paying off the Company’s Fed Funds line of credit.

Net Interest Income

Net interest income for the fourth quarter of 2023 increased to $89.6 million compared to $89.4 million for the third quarter of 2023 and $85.9 million for the fourth quarter of 2022.

The net interest margin for the fourth and third quarters of 2023 was 3.32% and 3.37%, respectively, a decrease of 5 basis points quarter over quarter. This decrease was principally the result of growth in loan yields being outpaced by the cost of deposits. The primary mitigant to loan yields in the fourth quarter of 2023 arose from the accelerated recognition of a large deferred expense, as a result of early payoffs on two loans, which was recognized as a reduction to interest income. The increase in cost of deposits was primarily driven by a large certificate of deposit maturity event in the fourth quarter renewing at higher current market rates. During the fourth quarter of 2023, the average cost of interest-bearing liabilities increased by 18 basis points while the average yield on interest-earning assets increased by 11 basis points.

The increase in net interest income for the fourth quarter of 2023 compared to the fourth quarter of 2022 was driven by growth in 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 fourth quarter of 2023 decreased to $30.1 million compared to $37.9 million for the third quarter of 2023 and increased from $19.1 million for the fourth quarter of 2022. The primary drivers behind changes in noninterest income are outlined below.

The loan servicing asset revaluation resulted in a loss of $4.0 million for the fourth quarter of 2023 compared to a gain of $11.3 million for the third quarter of 2023 and loss of $5.0 million for the fourth quarter of 2022. The $15.3 million quarter over quarter negative change in servicing asset revaluation was principally due to the third quarter of 2023 one-time positive adjustment of $13.7 million, arising from the Company’s change in valuation techniques used to estimate the fair value of servicing rights.

Net gains on sales of loans was $12.9 million, a $216 thousand increase compared to the third quarter of 2023 and a $5.5 million increase compared to the fourth quarter of 2022. The increase in net gains on sales of loans compared to the fourth quarter of 2022 was largely the result of a higher volume of loan sales. The average guaranteed loan sale premium was stable for all compared periods at 105% for the fourth quarter of 2023, third quarter of 2023 and fourth quarter of 2022. The volume of guaranteed loans sold was $239.1 million for the fourth quarter of 2023 compared to $225.6 million sold in the third quarter of 2023 and $144.3 million sold in the fourth quarter of 2022.

Other noninterest income for the fourth quarter of 2023 totaled $8.6 million compared to $3.5 million for the third quarter of 2023 and $5.1 million for the fourth quarter of 2022. The increase in noninterest income for both comparative periods was principally driven by a $4.4 million gain arising from the sale of one of the Company’s aircraft in the fourth quarter of 2023.

Noninterest Expense

Noninterest expense for the fourth quarter of 2023 totaled $93.2 million compared to $74.3 million for the third quarter of 2023 and $84.6 million for the fourth quarter of 2022. The primary drivers in the noninterest expense changes are outlined below.

Salaries and employee benefits for the fourth quarter of 2023 increased $1.3 million compared to the third quarter of 2023 and increased $1.7 million compared to the fourth quarter of 2022. Included in the fourth quarter of 2023 was a special employee bonus of $4.5 million. Excluding this special bonus, total salaries and employee benefits for the fourth quarter of 2023 decreased $3.2 million compared to the third quarter of 2023 and decreased $2.8 million compared to the fourth quarter of 2022.

The Company incurred impairment charges related to a new renewable energy tax credit investment transaction of $14.6 million in the fourth quarter of 2023 compared to none in the third quarter of 2023 and $8.4 million in the fourth quarter of 2022. 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. These investments generated federal investment tax credits in the fourth quarters of 2023 and 2022 of $16.4 million and $10.3 million, respectively, which are reflected in the Company’s effective tax rate for each respective year. Investments of this nature are part of the Company’s ongoing initiative to promote renewable energy sources.

Asset Quality

During the fourth quarter of 2023, the Company recognized net charge-offs for loans carried at historical cost of $4.4 million compared to $9.1 million in the third quarter of 2023 and $1.4 million in the fourth quarter of 2022. Net charge-off activity in the fourth quarter of 2023 was largely related to four loans spread across three verticals. Net charge-offs as a percentage of average held for investment loans and leases carried at historical cost, annualized, for the quarters ended December 31, 2023, September 30, 2023 and December 31, 2022, was 0.22%, 0.48% and 0.09%, respectively. Net charge-offs as a percentage of total average held for investment loans and leases carried at historical cost for the years ended December 31, 2023 and 2022, were 0.29% and 0.14%, respectively.

Unguaranteed nonperforming (nonaccrual) loans and leases, excluding $7.2 million and $6.5 million accounted for under the fair value option at December 31, 2023, and September 30, 2023, respectively, increased to $39.3 million, or 0.48% of loans and leases held for investment which are carried at historical cost, at December 31, 2023, compared to $33.3 million, or 0.43%, at September 30, 2023.

Provision for Loan and Lease Credit Losses

The provision for loan and lease credit losses for the fourth quarter of 2023 totaled $9.0 million compared to $10.3 million for the third quarter of 2023 and $19.7 million for the fourth quarter of 2022. The lower provision expense in the fourth quarter of 2023 compared to the fourth quarter of 2022 was primarily the result of a decline in reserves related to loans individually evaluated for impairment.

The allowance for credit losses on loans and leases totaled $125.8 million at December 31, 2023, compared to $121.3 million at September 30, 2023. 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 1.53% and 1.56% at December 31, 2023, and September 30, 2023, respectively.

Income Tax

Income tax expense (benefit) and related effective tax rate was $1.3 million and 7.6% for the fourth quarter of 2023, $3.0 million and 6.9% for the third quarter of 2023, and $(1.1) million and (149.9)% for the fourth quarter of 2022, respectively. The higher level of income tax expense for the fourth quarter of 2023 compared to the fourth quarter of 2022 was primarily the result of a higher level of pretax income combined with higher levels of investment tax credits related to renewable energy investment transactions in the fourth quarter of 2023 in conjunction with recognition of a research credit recognized during the fourth quarter of 2022.

Conference Call

Live Oak will host a conference call to discuss the company's financial results and business outlook tomorrow, January 25, 2024, at 9:00 a.m. ET. The call will be accessible by telephone and webcast using Conference ID: 19103652. A supplementary slide presentation will be posted to the website prior to the event, and a replay will be available for 12 months following the event. The conference call details are as follows:

Live Telephone Dial-In

U.S.: 888.259.6580
International: +1 416.764.8624
Pass Code: None Required

Live Webcast Log-In

Webcast Link: investor.liveoakbank.com
Registration: Name and Email Required
Multi-Factor Code: Provided After Registration

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 impacts of global health crises and pandemics, such as 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; recent adverse developments in the banking industry highlighted by high-profile bank failures and the potential impact of such developments on customer confidence, liquidity, and regulatory responses to these developments; 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; changes in political and economic conditions, including any prolonged U.S. government shutdown; the impact of heightened regulatory scrutiny of financial products and services and the Company's ability to comply with regulatory requirements and expectations; a deterioration of the credit rating for U.S. long-term sovereign debt, actions that the U.S. government may take to avoid exceeding the debt ceiling, and uncertainties surrounding the debt ceiling and the federal budget; 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. (NYSE: 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:

Walter J. Phifer, CFO | Investor Relations | 910.202.6926
Claire Parker | 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   4Q 2023 Change vs.
  4Q 2023   3Q 2023   2Q 2023   1Q 2023   4Q 2022   3Q 2023   4Q 2022
Interest income                     %   %
Loans and fees on loans $ 169,531     $ 162,722     $ 152,362     $ 139,052     $ 127,310     4.2     33.2  
Investment securities, taxable   8,746       8,701       8,503       7,547       6,716     0.5     30.2  
Other interest earning assets   8,259       9,188       8,847       4,817       2,584     (10.1 )   219.6  
Total interest income   186,536       180,611       169,712       151,416       136,610     3.3     36.5  
Interest expense                          
Deposits   96,695       90,914       85,003       67,595       50,357     6.4     92.0  
Borrowings   265       287       407       1,804       351     (7.7 )   (24.5 )
Total interest expense   96,960       91,201       85,410       69,399       50,708     6.3     91.2  
Net interest income   89,576       89,410       84,302       82,017       85,902     0.2     4.3  
Provision for loan and lease credit losses   8,995       10,279       13,028       19,021       19,671     (12.5 )   (54.3 )
Net interest income after provision for loan and lease credit losses   80,581       79,131       71,274       62,996       66,231     1.8     21.7  
Noninterest income                          
Loan servicing revenue   7,342       6,990       6,687       6,380       6,296     5.0     16.6  
Loan servicing asset revaluation   (3,974 )     11,335       (2,831 )     356       (5,016 )   (135.1 )   20.8  
Net gains on sales of loans   12,891       12,675       10,804       10,175       7,362     1.7     75.1  
Net (loss) gain on loans accounted for under the fair value option   (170 )     (568 )     1,728       (4,529 )     571     70.1     (129.8 )
Equity method investments income (loss)   47       (1,034 )     (2,055 )     (2,952 )     (1,818 )   104.5     102.6  
Equity security investments (losses) gains, net   (384 )     (783 )     121       77       868     51.0     (144.2 )
Lease income   2,439       2,498       2,535       2,535       2,555     (2.4 )   (4.5 )
Management fee income   3,309       3,277       3,266       3,472       3,200     1.0     3.4  
Other noninterest income   8,607       3,501       3,901       4,065       5,053     145.8     70.3  
Total noninterest income   30,107       37,891       24,156       19,579       19,071     (20.5 )   57.9  
Noninterest expense                          
Salaries and employee benefits   44,274       42,947       43,066       44,765       42,560     3.1     4.0  
Travel expense   1,544       2,197       2,770       2,411       1,872     (29.7 )   (17.5 )
Professional services expense   3,052       1,762       1,996       927       2,453     73.2     24.4  
Advertising and marketing expense   2,501       3,446       3,009       3,603       3,892     (27.4 )   (35.7 )
Occupancy expense   2,231       2,129       2,205       1,925       3,469     4.8     (35.7 )
Technology expense   8,402       7,722       8,005       7,729       8,849     8.8     (5.1 )
Equipment expense   3,480       3,676       4,023       3,818       3,759     (5.3 )   (7.4 )
Other loan origination and maintenance expense   3,937       3,498       3,442       3,927       3,657     12.6     7.7  
Renewable energy tax credit investment impairment   14,575                   69       8,446     100.0     72.6  
FDIC insurance   4,091       4,115       5,061       3,403       2,923     (0.6 )   40.0  
Contributions and donations                           33         (100.0 )
Other expense   5,117       2,770       2,880       6,385       2,672     84.7     91.5  
Total noninterest expense   93,204       74,262       76,457       78,962       84,585     25.5     10.2  
Income before taxes   17,484       42,760       18,973       3,613       717     (59.1 )   2,338.5  
Income tax expense (benefit)   1,321       2,967       1,429       3,215       (1,075 )   (55.5 )   222.9  
Net income $ 16,163     $ 39,793     $ 17,544     $ 398     $ 1,792     (59.4 )   802.0  
Earnings per share                          
Basic $ 0.36     $ 0.89     $ 0.40     $ 0.01     $ 0.04     (59.6 )   800.0  
Diluted $ 0.36     $ 0.88     $ 0.39     $ 0.01     $ 0.04     (59.1 )   800.0  
Weighted average shares outstanding                          
Basic   44,516,646       44,408,997       44,327,474       44,157,156       44,005,220          
Diluted   45,306,506       45,268,745       44,835,089       44,964,616       44,794,941          

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

  As of the quarter ended   4Q 2023 Change vs.
  4Q 2023   3Q 2023   2Q 2023   1Q 2023   4Q 2022   3Q 2023   4Q 2022
Assets                     %   %
Cash and due from banks $ 582,540     $ 534,774     $ 808,131     $ 463,186     $ 280,239     8.9     107.9  
Federal funds sold                           136,397         (100.0 )
Certificates of deposit with other banks   250       3,750       4,000       4,000       4,000     (93.3 )   (93.8 )
Investment securities available-for-sale   1,126,160       1,099,878       1,133,146       1,149,691       1,014,719     2.4     11.0  
Loans held for sale   387,037       572,604       523,776       533,292       554,610     (32.4 )   (30.2 )
Loans and leases held for investment(1)   8,633,847       8,202,631       7,836,398       7,686,987       7,344,178     5.3     17.6  
Allowance for credit losses on loans and leases   (125,840 )     (121,273 )     (120,116 )     (108,242 )     (96,566 )   3.8     30.3  
Net loans and leases   8,508,007       8,081,358       7,716,282       7,578,745       7,247,612     5.3     17.4  
Premises and equipment, net   257,881       258,041       269,485       268,138       263,290     (0.1 )   (2.1 )
Foreclosed assets   6,481       6,701                       (3.3 )   100.0  
Servicing assets   48,591       47,127       31,042       29,357       26,323     3.1     84.6  
Other assets   354,476       346,227       333,334       337,888       328,308     2.4     8.0  
Total assets $ 11,271,423     $ 10,950,460     $ 10,819,196     $ 10,364,297     $ 9,855,498     2.9     14.4  
Liabilities and Shareholders’ Equity                          
Liabilities                          
Deposits:                          
Noninterest-bearing $ 259,270     $ 239,536     $ 229,833     $ 176,439     $ 194,100     8.2     33.6  
Interest-bearing   10,015,749       9,764,106       9,649,278       9,245,555       8,690,828     2.6     15.2  
Total deposits   10,275,019       10,003,642       9,879,111       9,421,994       8,884,928     2.7     15.6  
Borrowings   23,354       25,847       28,317       30,767       83,203     (9.6 )   (71.9 )
Other liabilities   70,384       70,603       79,280       88,729       76,334     (0.3 )   (7.8 )
Total liabilities   10,368,757       10,100,092       9,986,708       9,541,490       9,044,465     2.7     14.6  
Shareholders’ equity                          
Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding                                    
Class A common stock (voting)   344,568       340,929       341,032       334,672       330,854     1.1     4.1  
Class B common stock (non-voting)                                    
Retained earnings   642,817       627,759       589,036       572,530       572,497     2.4     12.3  
Accumulated other comprehensive (loss) income   (84,719 )     (118,320 )     (97,580 )     (84,395 )     (92,318 )   (28.4 )   (8.2 )
Total shareholders’ equity   902,666       850,368       832,488       822,807       811,033     6.2     11.3  
Total liabilities and shareholders’ equity $ 11,271,423     $ 10,950,460     $ 10,819,196     $ 10,364,297     $ 9,855,498     2.9     14.4  

(1) Includes $388.0 million, $410.1 million, $441.8 million, $467.0 million and $494.5 million measured at fair value for the quarters ended December 31, 2023, September 30, 2023, June 30, 2023, March 31, 2023, and December 31, 2022, respectively.

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

  Twelve Months Ended
  December 31, 2023   December 31, 2022
Interest income      
Loans and fees on loans $ 623,667     $ 418,545  
Investment securities, taxable   33,497       19,667  
Other interest earning assets   31,111       6,261  
Total interest income   688,275       444,473  
Interest expense      
Deposits   340,207       115,035  
Borrowings   2,763       1,937  
Total interest expense   342,970       116,972  
Net interest income   345,305       327,501  
Provision for loan and lease credit losses   51,323       40,943  
Net interest income after provision for loan and lease credit losses   293,982       286,558  
Noninterest income      
Loan servicing revenue   27,399       25,359  
Loan servicing asset revaluation   4,886       (16,577 )
Net gains on sales of loans   46,545       43,244  
Net (loss) gain on loans accounted for under the fair value option   (3,539 )     1,046  
Equity method investments (loss) income   (5,994 )     144,250  
Equity security investments (losses) gains, net   (969 )     3,355  
Lease income   10,007       10,084  
Management fee income   13,324       10,090  
Other noninterest income   20,074       17,141  
Total noninterest income   111,733       237,992  
Noninterest expense      
Salaries and employee benefits   175,052       170,822  
Travel expense   8,922       8,499  
Professional services expense   7,737       11,737  
Advertising and marketing expense   12,559       10,543  
Occupancy expense   8,490       11,088  
Technology expense   31,858       28,434  
Equipment expense   14,997       15,120  
Other loan origination and maintenance expense   14,804       13,168  
Renewable energy tax credit investment impairment   14,644       16,217  
FDIC insurance   16,670       9,756  
Contributions and donations         6,462  
Other expense   17,152       12,380  
Total noninterest expense   322,885       314,226  
Income before taxes   82,830       210,324  
Income tax expense   8,932       34,116  
Net income $ 73,898     $ 176,208  
Earnings per share      
Basic $ 1.67     $ 4.02  
Diluted $ 1.64     $ 3.92  
Weighted average shares outstanding      
Basic   44,353,708       43,862,291  
Diluted   45,094,879       44,906,310  

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

  As of and for the three months ended
  4Q 2023   3Q 2023   2Q 2023   1Q 2023   4Q 2022
Income Statement Data                  
Net income $ 16,163     $ 39,793     $ 17,544     $ 398     $ 1,792  
Per Common Share                  
Net income, diluted $ 0.36     $ 0.88     $ 0.39     $ 0.01     $ 0.04  
Dividends declared   0.03       0.03       0.03       0.03       0.03  
Book value   20.23       19.12       18.77       18.58       18.41  
Tangible book value(1)   20.15       19.04       18.69       18.50       18.32  
Performance Ratios                  
Return on average assets (annualized)   0.58 %     1.46 %     0.66 %     0.02 %     0.08 %
Return on average equity (annualized)   7.36       18.68       8.26       0.19       0.88  
Net interest margin   3.32       3.37       3.29       3.46       3.76  
Efficiency ratio(1)   77.88       58.34       70.49       77.72       80.58  
Noninterest income to total revenue   25.16       29.76       22.27       19.27       18.17  
Selected Loan Metrics                  
Loans and leases originated $ 981,703     $ 1,073,255     $ 861,033     $ 1,030,882     $ 1,177,688  
Outstanding balance of sold loans serviced   4,238,328       4,028,575       3,813,852       3,616,701       3,481,885  
Asset Quality Ratios                  
Allowance for credit losses to loans and leases held for investment(3)   1.53 %     1.56 %     1.62 %     1.50 %     1.41 %
Net charge-offs(3) $ 4,428     $ 9,122     $ 1,154     $ 6,669     $ 1,396  
Net charge-offs to average loans and leases held for investment(2) (3)   0.22 %     0.48 %     0.06 %     0.38 %     0.09 %
                   
Nonperforming loans and leases at historical cost(3)                  
Unguaranteed $ 39,285     $ 33,255     $ 44,899     $ 22,002     $ 18,784  
Guaranteed   95,678       65,837       66,322       63,696       54,608  
Total   134,963       99,092       111,221       85,698       73,392  
Unguaranteed nonperforming historical cost loans and leases, to loans and leases held for investment(3)   0.48 %     0.43 %     0.61 %     0.30 %     0.27 %
                   
Nonperforming loans at fair value(4)                  
Unguaranteed $ 7,230     $ 6,518     $ 8,602     $ 8,193     $ 6,678  
Guaranteed   41,244       39,378       45,114       43,968       38,212  
Total   48,474       45,896       53,716       52,161       44,890  
Unguaranteed nonperforming fair value loans to loans held for investment(4)   1.86 %     1.59 %     1.95 %     1.75 %     1.35 %
                   
Capital Ratios                  
Common equity tier 1 capital (to risk-weighted assets)   11.73 %     11.63 %     11.55 %     11.67 %     12.46 %
Tier 1 leverage capital (to average assets)   8.58       8.56       8.46       8.70       9.26  

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
December 31, 2023
  Three Months Ended
September 30, 2023
  Average
Balance
  Interest   Average
Yield/Rate
  Average
Balance
  Interest   Average
Yield/Rate
Interest-earning assets:                      
Interest-earning balances in other banks $ 598,720     $ 8,259   5.47 %   $ 677,857     $ 9,188   5.38 %
Investment securities   1,251,467       8,746   2.77       1,257,740       8,701   2.74  
Loans held for sale   477,155       10,825   9.00       602,109       13,271   8.74  
Loans and leases held for investment(1)   8,363,881       158,706   7.53       7,978,870       149,451   7.43  
Total interest-earning assets   10,691,223       186,536   6.92       10,516,576       180,611   6.81  
Less: Allowance for credit losses on loans and leases   (120,257 )             (119,941 )        
Noninterest-earning assets   482,615               499,508          
Total assets $ 11,053,581             $ 10,896,143          
Interest-bearing liabilities:                      
Interest-bearing checking $ 300,064     $ 4,262   5.64 %   $ 300,059     $ 4,217   5.58 %
Savings   4,633,563       47,192   4.04       4,588,085       45,778   3.96  
Money market accounts   128,486       198   0.61       136,879       202   0.59  
Certificates of deposit   4,775,497       45,043   3.74       4,675,075       40,717   3.46  
Total deposits   9,837,610       96,695   3.90       9,700,098       90,914   3.72  
Borrowings   24,887       265   4.22       27,425       287   4.15  
Total interest-bearing liabilities   9,862,497       96,960   3.90       9,727,523       91,201   3.72  
Noninterest-bearing deposits   240,009               237,545          
Noninterest-bearing liabilities   72,272               78,930          
Shareholders' equity   878,803               852,145          
Total liabilities and shareholders' equity $ 11,053,581             $ 10,896,143          
Net interest income and interest rate spread     $ 89,576   3.02 %       $ 89,410   3.09 %
Net interest margin         3.32             3.37  
Ratio of average interest-earning assets to average interest-bearing liabilities         108.40 %           108.11 %

(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
  4Q 2023   3Q 2023   2Q 2023   1Q 2023   4Q 2022
Total shareholders’ equity $ 902,666     $ 850,368     $ 832,488     $ 822,807     $ 811,033  
Less:                  
Goodwill   1,797       1,797       1,797       1,797       1,797  
Other intangible assets   1,721       1,759       1,797       1,835       1,873  
Tangible shareholders’ equity (a) $ 899,148     $ 846,812     $ 828,894     $ 819,175     $ 807,363  
Shares outstanding (c)   44,617,673       44,480,215       44,351,715       44,290,840       44,061,244  
Total assets $ 11,271,423     $ 10,950,460     $ 10,819,196     $ 10,364,297     $ 9,855,498  
Less:                  
Goodwill   1,797       1,797       1,797       1,797       1,797  
Other intangible assets   1,721       1,759       1,797       1,835       1,873  
Tangible assets (b) $ 11,267,905     $ 10,946,904     $ 10,815,602     $ 10,360,665     $ 9,851,828  
Tangible shareholders’ equity to tangible assets (a/b)   7.98 %     7.74 %     7.66 %     7.91 %     8.20 %
Tangible book value per share (a/c) $ 20.15     $ 19.04     $ 18.69     $ 18.50     $ 18.32  
Efficiency ratio:                  
Noninterest expense (d) $ 93,204     $ 74,262     $ 76,457     $ 78,962     $ 84,585  
Net interest income   89,576       89,410       84,302       82,017       85,902  
Noninterest income   30,107       37,891       24,156       19,579       19,071  
Total revenue (e) $ 119,683     $ 127,301     $ 108,458     $ 101,596     $ 104,973  
Efficiency ratio (d/e)   77.88 %     58.34 %     70.49 %     77.72 %     80.58 %

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.

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