Categories: Wire Stories

Live Oak Bancshares, Inc. Reports First Quarter 2023 Results

WILMINGTON, N.C., April 26, 2023 (GLOBE NEWSWIRE) — Live Oak Bancshares, Inc. (NYSE: LOB) (“Live Oak” or “the Company”) today reported first quarter of 2023 net income of $398 thousand, or $0.01 per diluted share.

“The headlines for the first quarter of 2023 centered around deposits, liquidity, and credit. In the midst of this discourse, Live Oak weathered the noise and has a solid story to tell with continued deposit growth, a record first quarter for production backed by strong liquidity and healthy credit,” said Live Oak Chairman and CEO James S. (Chip) Mahan III. “We will continue to do what we have been doing since inception, diligently working to be America’s small business bank, while keeping a focus on soundness, profitability, and growth, in that order. Always.”

First Quarter 2023 Key Measures

(Dollars in thousands, except per share data)   Increase (Decrease)    
  1Q 2023   4Q 2022   Dollars   Percent   1Q 2022
Total revenue(1) $ 101,596     $ 104,973     $ (3,377 )   (3 )%   $ 110,447  
Total noninterest expense   78,962       84,585       (5,623 )   (7 )     65,714  
Income before taxes   3,613       717       2,896     404       42,897  
Effective tax rate   89.0 %     (149.9) %     n/a     n/a       19.6 %
Net income $ 398     $ 1,792     $ (1,394 )   (78 ) %   $ 34,509  
Diluted earnings per share   0.01       0.04       (0.03 )   (75 )     0.76  
Loan and lease production:                  
Loans and leases originated $ 1,030,882     $ 1,177,688     $ (146,806 )   (12 ) %   $ 865,063  
% Fully funded   54.5 %     58.1 %     n/a     n/a       55.9 %
Total loans and leases: $ 8,220,279     $ 7,898,788     $ 321,491     4 %   $ 6,766,876  
Total assets:   10,364,297       9,855,498       508,799     5       8,619,966  
Total deposits:   9,421,994       8,884,928       537,066     6       7,637,163  

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

Loans and Leases

As of March 31, 2023, the total loan and lease portfolio was $8.22 billion, 4.1% above its level at December 31, 2022, and 21.5% above its level a year ago. This growth was the product of strong origination volumes. Compared to the fourth quarter of 2022, loans and leases held for investment increased $342.8 million, or 4.7%, to $7.69 billion while loans held for sale decreased $21.3 million, or 3.8%, to $533.3 million. The decrease in loans held for sale was principally due to the impact of market conditions in a rising rate environment which has influenced management’s intent to hold a greater portion of loans as held for investment. Average loans and leases were $8.06 billion during the first quarter of 2023 compared to $7.64 billion during the fourth quarter of 2022. 

The total loan and lease portfolio at March 31, 2023, and December 31, 2022, was comprised of 40.9% and 42.3% of guaranteed loans and leases, respectively.

Loan and lease originations totaled $1.03 billion during the first quarter of 2023, a decrease of $146.8 million, or 12.5%, from the fourth quarter of 2022. Loan and lease originations increased $165.8 million, or 19.2%, from the first quarter of 2022.

Deposits

Total deposits increased to $9.42 billion at March 31, 2023, an increase of $537.1 million compared to December 31, 2022, and an increase of $1.78 billion compared to March 31, 2022. The increase in total deposits from prior periods was to support growth in the loan and lease portfolio, as well as enhance the Company’s liquidity profile in response to the recent banking crisis. In addition, the Company began offering the IntraFi Insured Cash Sweep product in the first quarter of 2023 whereby depositors have access to FDIC insurance in excess of $250 thousand.

Average total interest-bearing deposits for the first quarter of 2023 increased $520.6 million, or 6.2%, to $8.88 billion, compared to $8.36 billion for the fourth quarter of 2022. The ratio of average total loans and leases to average interest-bearing deposits was 90.8% for the first quarter of 2023, compared to 91.4% for the fourth quarter of 2022.

Borrowings

Borrowings totaled $30.8 million at March 31, 2023 compared to $83.2 million and $196.9 million at December 31, 2022, and March 31, 2022, respectively. During the first quarter of 2023, the Company decreased borrowings by $52.4 million and $166.1 million as compared to December 31, 2022, and March 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 while the decrease from the first quarter of 2022 was primarily the result of paying off the outstanding balance of the Federal Reserve’s Paycheck Protection Program Liquidity Facility in September 2022.

Net Interest Income

Net interest income for the first quarter of 2023 was $82.0 million compared to $85.9 million for the fourth quarter of 2022 and $77.8 million for the first quarter of 2022. The net interest margin for the first quarter of 2023 and fourth quarter of 2022 was 3.46% and 3.76%, respectively, a decrease of 30 basis points quarter over quarter. This decrease was due to higher average liquidity levels as well as recent interest rate increases where new and existing deposits are repricing more rapidly than the Company’s total loan and lease portfolio. During the first quarter of 2023, the average cost of interest-bearing liabilities increased by 71 basis points while the average yield on interest-earning assets increased by 41 basis points.

The increase in net interest income for the first quarter of 2023 compared to the first 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 the increase in average cost of funds outpacing the increase in average yield on interest-earning assets.

Noninterest Income

Noninterest income for the first quarter of 2023 was $19.6 million, an increase of $508 thousand compared to the fourth quarter of 2022, and a decrease of $13.1 million compared to the first quarter of 2022. The primary drivers in noninterest income changes are outlined below.

The loan servicing asset revaluation resulted in a gain of $356 thousand for the first quarter of 2023 compared to a $5.0 million loss for the fourth quarter of 2022 and a $1.6 million loss for the first quarter of 2022. The net gain in the loan servicing asset revaluation during the first quarter of 2023 was principally related to positive movements in market premiums during the quarter.

Net gains on sales of loans for the first quarter of 2023 was $10.2 million, a $2.8 million increase compared to the fourth quarter of 2022, and a $10.8 million decrease compared to the first 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 combined with higher quarter over quarter market premiums. The decrease in the net gains on loan sales compared to the first quarter of 2022 was the result of lower loan sale volume and comparatively lower premiums in the first quarter of 2023. The average gain on sale premium of guaranteed loans was 106%, 105% and 109% for the first quarter of 2023, fourth quarter of 2022 and first quarter of 2022, respectively. The volume of guaranteed loans sold was $167.8 million for the first quarter of 2023, compared to $144.3 million sold in the fourth quarter of 2022, and $219.7 million sold in the first quarter of 2022.

Loans accounted for under the fair value option had a net loss of $4.5 million for the first quarter of 2023, a $571 thousand net gain for the fourth quarter of 2022, and a $516 thousand net gain for the first quarter of 2022. The decrease in valuation of loans accounted for under the fair value option compared to both prior periods was largely the result of negative market impacts related to rising interest rates.

Net equity method and equity security investment losses totaled $2.9 million for the first quarter of 2023, a $1.9 million increase in losses from the net loss for the fourth quarter of 2022. The increase was principally related to heightened levels of underlying losses in several of the Company’s equity method investees combined with lower levels of profit distributions from equity security investments.

Management fee income increased $2.0 million to $3.5 million for the first quarter of 2023 compared to the first quarter of 2022. Management fees are earned via Canapi Advisors investment advisory services for financial technology venture funds. This increase was principally due to four funds receiving advisory services in the first quarter of 2023 compared to two funds receiving advisory services in the first quarter of 2022. Canapi Advisors is one of the Company’s wholly owned subsidiaries.

Noninterest Expense

Noninterest expense for the first quarter of 2023 totaled $79.0 million compared to $84.6 million for the fourth quarter of 2022 and $65.7 million for the first quarter of 2022. The primary drivers in noninterest expense changes are outlined below.

Salaries and employee benefits for the first quarter of 2023 increased $2.2 million compared to the fourth quarter of 2022 and $6.3 million compared to the first quarter of 2022. This increase was largely the product of continued investment in human resources to support strategic and growth initiatives.

Professional services expense for the first quarter of 2023 decreased $1.5 million compared to the fourth quarter of 2022 and $1.9 million compared to the first quarter of 2022. This decrease was primarily driven by an insurance recovery of $1.3 million in the current quarter for previously expensed legal fees.

Advertising and marketing expense increased $1.9 million compared to the first quarter of 2022 as a continued investment in the Company’s lending and deposit market growth.

The Company incurred $8.4 million in impairment charges related to a renewable energy tax credit investment in the fourth quarter of 2022. Comparatively, there was $69 thousand in impairment charges in the first quarter of 2023.

Other noninterest expense increased by $3.7 million during the first quarter of 2023 compared to the fourth quarter of 2022 and $3.5 million compared to the first quarter of 2022, largely related to $2.8 million in increased levels of reserves on unfunded commitments. This increase was a result of refinements to the assumptions for estimating the reserve in the first quarter of 2023.

Asset Quality

During the first quarter of 2023, the Company recognized net charge-offs for loans carried at historical cost of $6.7 million compared to $1.4 million in the fourth quarter of 2022 and $2.4 million in the first quarter of 2022. Net charge-offs as a percentage of average held for investment loans and leases carried at historical cost, annualized, for the quarters ended March 31, 2023, December 31, 2022 and March 31, 2022, was 0.38%, 0.09% and 0.19%, respectively. The increase in net charge-offs in the first quarter of 2023 was primarily isolated to two relationships.

Unguaranteed nonperforming (nonaccrual) loans and leases, excluding $8.2 million and $6.7 million accounted for under the fair value option at March 31, 2023, and December 31, 2022, respectively, increased to $22.0 million, or 0.30% of loans and leases held for investment which are carried at historical cost, at March 31, 2023, compared to $18.8 million, or 0.27%, at December 31, 2022.

Provision for Loan and Lease Credit Losses

The provision for loan and lease credit losses for the first quarter of 2023 totaled $19.0 million compared to $19.7 million for the fourth quarter of 2022 and $1.8 million for the first quarter of 2022. The provision expense in the first quarter of 2023 was primarily the result of continued growth of the loan and lease portfolio combined with portfolio trends and changes in the macroeconomic outlook.

The allowance for credit losses on loans and leases totaled $108.2 million at March 31, 2023 compared to $96.6 million at December 31, 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 1.50% and 1.41% at March 31, 2023, and December 31, 2022, respectively.

Income Tax

Income tax expense (benefit) and related effective tax rate was $3.2 million and 89.0% for the first quarter of 2023, $(1.1) million and (149.9)% for the fourth quarter of 2022 and $8.4 million and 19.6% for the first quarter of 2022, respectively. The higher level of income tax expense for the first quarter of 2023 compared to the fourth quarter of 2022 was primarily the result of discrete items related to stock compensation expense while the lower level of income tax expense compared to the first quarter of 2022 was principally related to decreased pretax income.

Conference Call

Live Oak will host a conference call to discuss the company’s financial results and business outlook tomorrow, April 27, 2023, at 9:00 a.m. ET. The call will be accessible by telephone and webcast using Conference ID: 21279493. 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.: 888.886.7786
International: +1 416.764.8658
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; 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; 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:

William C. (BJ) Losch, III | CFO & Chief Banking Officer | Investor Relations | 910.202.6926
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   1Q 2023 Change vs.
  1Q 2023   4Q 2022   3Q 2022   2Q 2022   1Q 2022   4Q 2022   1Q 2022
Interest income                     %   %
Loans and fees on loans $ 139,052     $ 127,310     $ 107,880     $ 94,157     $ 89,198     9.2     55.9  
Investment securities, taxable   7,547       6,716       5,506       4,046       3,399     12.4     122.0  
Other interest earning assets   4,817       2,584       2,448       1,044       185     86.4     2503.8  
Total interest income   151,416       136,610       115,834       99,247       92,782     10.8     63.2  
Interest expense                          
Deposits   67,595       50,357       31,553       18,777       14,348     34.2     371.1  
Borrowings   1,804       351       395       536       655     414.0     175.4  
Total interest expense   69,399       50,708       31,948       19,313       15,003     36.9     362.6  
Net interest income   82,017       85,902       83,886       79,934       77,779     (4.5 )   5.4  
Provision for loan and lease credit losses   19,021       19,671       14,169       5,267       1,836     (3.3 )   936.0  
Net interest income after provision for loan and lease credit losses   62,996       66,231       69,717       74,667       75,943     (4.9 )   (17.0 )
Noninterest income                          
Loan servicing revenue   6,380       6,296       6,230       6,477       6,356     1.3     0.4  
Loan servicing asset revaluation   356       (5,016 )     (1,324 )     (8,668 )     (1,569 )   107.1     122.7  
Net gains on sales of loans   10,175       7,362       9,275       5,630       20,977     38.2     (51.5 )
Net (loss) gain on loans accounted for under the fair value option   (4,529 )     571       4,420       (4,461 )     516     (893.2 )   (977.7 )
Equity method investments income (loss)   (2,952 )     (1,818 )     29,136       119,056       (2,124 )   (62.4 )   (39.0 )
Equity security investments gains (losses), net   77       868       876       1,655       (44 )   (91.1 )   275.0  
Lease income   2,535       2,555       2,516       2,510       2,503     (0.8 )   1.3  
Management fee income   3,472       3,200       2,844       2,558       1,488     8.5     133.3  
Other noninterest income   4,065       5,053       3,751       3,772       4,565     (19.6 )   (11.0 )
Total noninterest income   19,579       19,071       57,724       128,529       32,668     2.7     (40.1 )
Noninterest expense                          
Salaries and employee benefits   44,765       42,560       43,479       46,276       38,507     5.2     16.3  
Travel expense   2,411       1,872       2,372       2,358       1,897     28.8     27.1  
Professional services expense   927       2,453       2,505       3,988       2,791     (62.2 )   (66.8 )
Advertising and marketing expense   3,603       3,892       2,621       2,301       1,729     (7.4 )   108.4  
Occupancy expense   1,925       3,469       2,519       2,773       2,327     (44.5 )   (17.3 )
Technology expense   7,729       8,849       7,770       5,762       6,053     (12.7 )   27.7  
Equipment expense   3,818       3,759       3,761       3,784       3,816     1.6     0.1  
Other loan origination and maintenance expense   3,927       3,657       3,376       3,022       3,113     7.4     26.1  
Renewable energy tax credit investment impairment   69       8,446       7,721       50           (99.2 )   100.0  
FDIC insurance   3,403       2,923       2,697       2,164       1,972     16.4     72.6  
Contributions and donations   56       33       191       5,515       723     69.7     (92.3 )
Other expense   6,329       2,672       4,036       2,886       2,786     136.9     127.2  
Total noninterest expense   78,962       84,585       83,048       80,879       65,714     (6.6 )   20.2  
Income before taxes   3,613       717       44,393       122,317       42,897     403.9     (91.6 )
Income tax expense (benefit)   3,215       (1,075 )     1,525       25,278       8,388     399.1     (61.7 )
Net income $ 398     $ 1,792     $ 42,868     $ 97,039     $ 34,509     (77.8 )   (98.8 )
Earnings per share                          
Basic $ 0.01     $ 0.04     $ 0.97     $ 2.22     $ 0.79     (75.0 )   (98.7 )
Diluted $ 0.01     $ 0.04     $ 0.96     $ 2.16     $ 0.76     (75.0 )   (98.7 )
Weighted average shares outstanding                          
Basic   44,157,156       44,005,220       43,914,920       43,824,707       43,701,943          
Diluted   44,964,616       44,794,941       44,797,109       44,803,278       45,227,536          


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

  As of the quarter ended   1Q 2023 Change vs.
  1Q 2023   4Q 2022   3Q 2022   2Q 2022   1Q 2022   4Q 2022   1Q 2022
Assets                     %   %
Cash and due from banks $ 463,186     $ 280,239     $ 335,046     $ 580,493     $ 477,778     65.3     (3.1 )
Federal funds sold         136,397       68,324       51,694       29,993     (100.0 )   (100.0 )
Certificates of deposit with other banks   4,000       4,000       4,250       4,250       4,250         (5.9 )
Investment securities available-for-sale   1,149,691       1,014,719       1,005,372       927,968       844,577     13.3     36.1  
Loans held for sale (1)   533,292       554,610       537,649       1,199,734       1,028,635     (3.8 )   (48.2 )
Loans and leases held for investment (2)   7,686,987       7,344,178       6,853,382       5,860,209       5,738,241     4.7     34.0  
Allowance for credit losses on loans and leases   (108,242 )     (96,566 )     (78,291 )     (65,863 )     (63,058 )   12.1     71.7  
Net loans and leases   7,578,745       7,247,612       6,775,091       5,794,346       5,675,183     4.6     33.5  
Premises and equipment, net   268,138       263,290       260,285       257,926       254,865     1.8     5.2  
Foreclosed assets               1,178       191       198         (100.0 )
Servicing assets   29,357       26,323       29,081       28,661       36,286     11.5     (19.1 )
Other assets   337,888       328,308       298,374       275,634       268,201     2.9     26.0  
Total assets $ 10,364,297     $ 9,855,498     $ 9,314,650     $ 9,120,897     $ 8,619,966     5.2     20.2  
Liabilities and Shareholders’ Equity                          
Liabilities                          
Deposits:                          
Noninterest-bearing $ 176,439     $ 194,100     $ 170,336     $ 119,371     $ 86,342     (9.1 )   104.3  
Interest-bearing   9,245,555       8,690,828       8,234,573       8,036,373       7,550,821     6.4     22.4  
Total deposits   9,421,994       8,884,928       8,404,909       8,155,744       7,637,163     6.0     23.4  
Borrowings   30,767       83,203       35,616       86,209       196,911     (63.0 )   (84.4 )
Other liabilities   88,729       76,334       71,957       87,282       72,565     16.2     22.3  
Total liabilities   9,541,490       9,044,465       8,512,482       8,329,235       7,906,639     5.5     20.7  
Shareholders’ equity                          
Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding                                    
Class A common stock (voting)   334,672       330,854       325,632       320,924       315,607     1.2     6.0  
Class B common stock (non-voting)                                    
Retained earnings   572,530       572,497       571,778       530,021       434,226         31.9  
Accumulated other comprehensive loss   (84,395 )     (92,318 )     (95,242 )     (59,283 )     (36,506 )   (8.6 )   131.2  
Total shareholders’ equity   822,807       811,033       802,168       791,662       713,327     1.5     15.3  
Total liabilities and shareholders’ equity $ 10,364,297     $ 9,855,498     $ 9,314,650     $ 9,120,897     $ 8,619,966     5.2     20.2  

(1) Includes $23.5 million and $25.1 million measured at fair value for the quarters ended June 30, 2022 and March 31, 2022, respectively.

(2) Includes $467.0 million, $494.5 million, $512.2 million, $530.6 million and $600.6 million measured at fair value for the quarters ended March 31, 2023, December 31, 2022, September 30, 2022, June 30, 2022 and March 31, 2022, respectively.  


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

  As of and for the three months ended
  1Q 2023   4Q 2022   3Q 2022   2Q 2022   1Q 2022
Income Statement Data                  
Net income $ 398     $ 1,792     $ 42,868     $ 97,039     $ 34,509  
Per Common Share                  
Net income, diluted $ 0.01     $ 0.04     $ 0.96     $ 2.16     $ 0.76  
Dividends declared   0.03       0.03       0.03       0.03       0.03  
Book value   18.58       18.41       18.24       18.05       16.29  
Tangible book value (1)   18.50       18.32       18.15       17.97       16.20  
Performance Ratios                  
Return on average assets (annualized)   0.02 %     0.08 %     1.86 %     4.40 %     1.65 %
Return on average equity (annualized)   0.19       0.88       20.79       46.14       18.94  
Net interest margin   3.46       3.76       3.84       3.89       4.02  
Efficiency ratio (1)   77.72       80.58       58.65       38.80       59.50  
Noninterest income to total revenue   19.27       18.17       40.76       61.66       29.58  
Selected Loan Metrics                  
Loans and leases originated $ 1,030,882     $ 1,177,688     $ 1,005,235     $ 959,635     $ 865,063  
Outstanding balance of sold loans serviced   3,616,701       3,481,885       3,345,907       3,329,616       3,381,883  
Asset Quality Ratios                  
Allowance for credit losses to loans and leases held for investment (3)   1.50 %     1.41 %     1.23 %     1.24 %     1.23 %
Net charge-offs (3) $ 6,669     $ 1,396     $ 1,741     $ 2,462     $ 2,362  
Net charge-offs to average loans and leases held for investment (2) (3)   0.38 %     0.09 %     0.12 %     0.19 %     0.19 %
                   
Nonperforming loans and leases at historical cost (3)                  
Unguaranteed $ 22,002     $ 18,784     $ 14,334     $ 11,974     $ 19,475  
Guaranteed   63,696       54,608       45,730       33,794       32,828  
Total   85,698       73,392       60,064       45,768       52,303  
Unguaranteed nonperforming historical cost loans and leases, to loans and leases held for investment (3)   0.30 %     0.27 %     0.23 %     0.22 %     0.38 %
                   
Nonperforming loans at fair value (4)                  
Unguaranteed $ 8,193     $ 6,678     $ 2,736     $ 3,615     $ 4,451  
Guaranteed   43,968       38,212       25,169       27,895       30,850  
Total   52,161       44,890       27,905       31,510       35,301  
Unguaranteed nonperforming fair value loans to loans held for investment (4)   1.75 %     1.35 %     0.53 %     0.68 %     0.74 %
Capital Ratios                  
Common equity tier 1 capital (to risk-weighted assets)   11.67 %     12.46 %     13.16 %     13.14 %     12.10 %
Tier 1 leverage capital (to average assets)   8.70       9.26       9.49       9.44       8.87  

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
March 31, 2023
  Three Months Ended
December 31, 2022
  Average Balance   Interest   Average Yield/Rate   Average Balance   Interest   Average Yield/Rate
Interest-earning assets:                      
Interest-earning balances in other banks $ 220,114     $ 3,193   5.88 %   $ 138,819     $ 1,063   3.04 %
Federal funds sold   140,033       1,624   4.70       160,944       1,521   3.75  
Investment securities   1,187,377       7,547   2.58       1,128,105       6,716   2.36  
Loans held for sale   560,155       11,986   8.68       573,280       11,635   8.05  
Loans and leases held for investment(1)   7,497,824       127,066   6.87       7,066,106       115,675   6.49  
Total interest-earning assets   9,605,503       151,416   6.39       9,067,254       136,610   5.98  
Less: Allowance for credit losses on loans and leases   (94,283 )             (77,977 )        
Noninterest-earning assets   600,471               476,204          
Total assets $ 10,111,691             $ 9,465,481          
Interest-bearing liabilities:                      
Interest-bearing checking $ 21,668     $ 271   5.07 %   $     $   %
Savings   4,207,286       36,251   3.49       4,096,034       28,587   2.77  
Money market accounts   114,084       137   0.49       117,843       121   0.41  
Certificates of deposit   4,535,363       30,936   2.77       4,143,894       21,649   2.07  
Total deposits   8,878,401       67,595   3.09       8,357,771       50,357   2.39  
Borrowings   158,508       1,804   4.62       36,264       351   3.84  
Total interest-bearing liabilities   9,036,909       69,399   3.11       8,394,035       50,708   2.40  
Noninterest-bearing deposits   177,078               182,727          
Noninterest-bearing liabilities   64,409               69,814          
Shareholders’ equity   833,295               818,905          
Total liabilities and shareholders’ equity $ 10,111,691             $ 9,465,481          
Net interest income and interest rate spread     $ 82,017   3.28 %       $ 85,902   3.58 %
Net interest margin         3.46             3.76  
Ratio of average interest-earning assets to average interest-bearing liabilities         106.29 %           108.02 %

(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
  1Q 2023   4Q 2022   3Q 2022   2Q 2022   1Q 2022
Total shareholders’ equity $ 822,807     $ 811,033     $ 802,168     $ 791,662     $ 713,327  
Less:                  
Goodwill   1,797       1,797       1,797       1,797       1,797  
Other intangible assets   1,835       1,873       1,912       1,950       1,988  
Tangible shareholders’ equity (a) $ 819,175     $ 807,363     $ 798,459     $ 787,915     $ 709,542  
Shares outstanding (c)   44,290,840       44,061,244       43,981,350       43,854,011       43,787,660  
Total assets $ 10,364,297     $ 9,855,498     $ 9,314,650     $ 9,120,897     $ 8,619,966  
Less:                  
Goodwill   1,797       1,797       1,797       1,797       1,797  
Other intangible assets   1,835       1,873       1,912       1,950       1,988  
Tangible assets (b) $ 10,360,665     $ 9,851,828     $ 9,310,941     $ 9,117,150     $ 8,616,181  
Tangible shareholders’ equity to tangible assets (a/b)   7.91 %     8.20 %     8.58 %     8.64 %     8.23 %
Tangible book value per share (a/c) $ 18.50     $ 0.02     $ 0.02     $ 17.97     $ 16.20  
Efficiency ratio:                  
Noninterest expense (d) $ 78,962     $ 84,585     $ 83,048     $ 80,879     $ 65,714  
Net interest income   82,017       85,902       83,886       79,934       77,779  
Noninterest income   19,579       19,071       57,724       128,529       32,668  
Total revenue (e) $ 101,596     $ 104,973     $ 141,610     $ 208,463     $ 110,447  
Efficiency ratio (d/e)   77.72 %     80.58 %     58.65 %     38.80 %     59.50 %

This press release presents 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.

 

Alex

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