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Live Oak Bancshares, Inc. Reports Third Quarter 2023 Results

WILMINGTON, N.C., Oct. 25, 2023 (GLOBE NEWSWIRE) -- Live Oak Bancshares, Inc. (NYSE: LOB) (“Live Oak” or “the Company”) today reported third quarter of 2023 net income of $39.8 million, or $0.88 per diluted share.

“The success of our quarter shows that Live Oak Bank remains on a path of sustainable and sound growth to fulfill our mission to be America’s small business bank,” said Live Oak Chairman and CEO James S. (Chip) Mahan III. “Our products continue to be delivered with a focus on high-touch service, and our branchless technology-driven platform is an efficient way to get capital into the hands of small business owners.”

Third Quarter 2023 Key Measures

(Dollars in thousands, except per share data)   Increase (Decrease)  
 3Q 2023 2Q 2023 Dollars Percent 3Q 2022
Total revenue (1)$        127,301   $        108,458   $        18,843          17 % $        141,610  
Total noninterest expense         74,262            76,457            (2,195)         (3)           83,048  
Income before taxes         42,760            18,973            23,787          125            44,393  
Effective tax rate         6.9 %          7.5 % n/a n/a          3.4 %
Net income$        39,793   $        17,544   $        22,249          127 % $        42,868  
Diluted earnings per share         0.88            0.39            0.49          126            0.96  
Loan and lease production:         
Loans and leases originated$        1,073,255   $        861,033   $        212,222          25 % $        1,005,235  
% Fully funded         52.2 %          49.4 % n/a n/a          54.0 %
Total loans and leases:$        8,775,235   $        8,360,174   $        415,061          5 % $        7,391,031  
Total assets:         10,950,460            10,819,196            131,264          1            9,314,650  
Total deposits:         10,003,642            9,879,111            124,531          1            8,404,909  


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


Loans and Leases

As of September 30, 2023, the total loan and lease portfolio was $8.78 billion, 5.0% above its level at June 30, 2023, and 18.7% above its level a year ago. This growth was the product of strong origination volumes. Compared to the second quarter of 2023, loans and leases held for investment increased $366.2 million, or 4.7%, to $8.20 billion while loans held for sale increased $48.8 million, or 9.3%, to $572.6 million. Average loans and leases were $8.58 billion during the third quarter of 2023 compared to $8.29 billion during the second quarter of 2023. 

The total loan and lease portfolio at September 30, 2023, and June 30, 2023, was comprised of 39.0% and 39.6% of guaranteed loans and leases, respectively.

Loan and lease originations totaled $1.07 billion during the third quarter of 2023, an increase of $212.2 million, or 24.6%, from the second quarter of 2023. Loan and lease originations increased $68.0 million, or 6.8%, from the third quarter of 2022.

Deposits

Total deposits increased to $10.00 billion at September 30, 2023, an increase of $124.5 million compared to June 30, 2023, and an increase of $1.60 billion compared to September 30, 2022. The increase in total deposits from prior periods was to support growth in the loan and lease portfolio combined with strong deposit inflows.

Average total interest-bearing deposits for the third quarter of 2023 increased $208.5 million, or 2.2%, to $9.70 billion, compared to $9.49 billion for the second quarter of 2023. The ratio of average total loans and leases to average interest-bearing deposits was 88.5% for the third quarter of 2023, compared to 87.3% for the second quarter of 2023.

Net Interest Income

Net interest income for the third quarter of 2023 was $89.4 million compared to $84.3 million for the second quarter of 2023 and $83.9 million for the third quarter of 2022. The net interest margin for the third quarter of 2023 and second quarter of 2023 was 3.37% and 3.29%, respectively, an increase of 8 basis points quarter over quarter. This increase was due to higher average loan balances and yields outpacing increases in both volume and cost of deposits. During the third quarter of 2023, the average cost of interest-bearing liabilities increased by 13 basis points while the average yield on interest-earning assets increased by 18 basis points.

The increase in net interest income for the third quarter of 2023 compared to the third quarter of 2022 was driven by growth in average loans and leases held for investment. Partially mitigating this increase was a decrease in the net interest margin by 47 basis points arising from an increase in deposits 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 third quarter of 2023 was $37.9 million, an increase of $13.7 million compared to the second quarter of 2023, and a decrease of $19.8 million compared to the third quarter of 2022. The primary drivers in noninterest income changes are outlined below.

The Company changed the valuation techniques used to estimate the fair value of servicing rights and loans measured at fair value as a result of rising interest rates and their impacts on market conditions. These revisions provide estimates that the Company believes are more representative of fair value. These estimate changes were implemented as of July 1, 2023, and resulted in one-time adjustments on that date to increase the estimated value of the servicing asset by $13.7 million and loans measured at fair value by $1.3 million, or a total impact to noninterest income of $15.0 million.

The loan servicing asset revaluation resulted in a gain of $11.3 million for the third quarter of 2023 (inclusive of the one-time adjustment discussed above) compared to a $2.8 million loss for the second quarter of 2023 and a $1.3 million loss for the third quarter of 2022. The increase in the servicing asset revaluation for both comparative periods was principally the result of the above discussed third quarter of 2023 change in estimate.

Net gains on sales of loans for the third quarter of 2023 was $12.7 million, a $1.9 million increase compared to the second quarter of 2023, and a $3.4 million increase compared to the third quarter of 2022. The increase in net gains on sales of loans compared to the second quarter of 2023 was principally the result of the above discussed change in estimate effective during the third quarter of 2023, resulting in incrementally higher servicing asset values recognized when loans are sold and corresponding higher gains on sale. The increase in net gains on sales of loans compared to the third quarter of 2022 was principally the result of a higher volume of loan sales in the third quarter of 2023. The volume of guaranteed loans sold was $225.6 million for the third quarter of 2023, compared to $245.1 million sold in the second quarter of 2023, and $148.1 million sold in the third quarter of 2022. Partially mitigating the increase in net gains on loan sales was lower premiums in the third quarter of 2023 compared to the third quarter of 2022. The average gain on sale premium of guaranteed loans was 105%, 105% and 108% for the third quarter of 2023, second quarter of 2023 and third quarter of 2022, respectively.

Loans accounted for under the fair value option had a net loss of $568 thousand for the third quarter of 2023 (inclusive of the one-time adjustment discussed above), a $1.7 million net gain for the second quarter of 2023, and a $4.4 million net gain for the third quarter of 2022. The decrease in valuation of loans accounted for under the fair value option compared to the second quarter of 2023 was largely the result of credit losses partially offset by the previously discussed change in estimate. The decrease compared to the third quarter of 2022 was principally the result of negative market trends between the comparative periods.

Equity method investment losses totaled $1.0 million for the third quarter of 2023, a $30.2 million decrease from the net gain of $29.1 million in the third quarter of 2022. The decrease was principally related to the $28.4 million gain arising in the third quarter of 2022 associated with the acquisition of the Company’s ownership in Payrailz, LLC.

Noninterest Expense

Noninterest expense for the third quarter of 2023 totaled $74.3 million compared to $76.5 million for the second quarter of 2023 and $83.0 million for the third quarter of 2022. The primary driver for the decrease compared to the third quarter of 2022 was $7.7 million of impairment charges in the third quarter of 2022 primarily related to a new renewable energy tax credit investment.

Asset Quality

During the third quarter of 2023, the Company recognized net charge-offs for loans carried at historical cost of $9.1 million, compared to $1.2 million in the second quarter of 2023 and $1.7 million in the third quarter of 2022. The increase in net charge-offs was primarily related to a single borrower relationship for which a significant portion was reserved in the second quarter of 2023. 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, 2023, June 30, 2023 and September 30, 2022, was 0.48%, 0.06% and 0.12%, respectively.

Unguaranteed nonperforming (nonaccrual) loans and leases, excluding $6.5 million and $8.6 million accounted for under the fair value option at September 30, 2023, and June 30, 2023, respectively, decreased to $33.3 million, or 0.43%, of loans and leases held for investment which are carried at historical cost, at September 30, 2023, compared to $44.9 million, or 0.61%, at June 30, 2023.

Provision for Loan and Lease Credit Losses

The provision for loan and lease credit losses for the third quarter of 2023 totaled $10.3 million compared to $13.0 million for the second quarter of 2023 and $14.2 million for the third quarter of 2022. The provision expense in the third quarter of 2023 was primarily the result of continued growth of the loan and lease portfolio combined with specific reserve changes on individually evaluated loans and charge-off related impacts.

The allowance for credit losses on loans and leases totaled $121.3 million at September 30, 2023, compared to $120.1 million at June 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 1.56% and 1.62% at September 30, 2023, and June 30, 2023, respectively.

Income Tax

Income tax expense and related effective tax rate was $3.0 million and 6.9% for the third quarter of 2023, $1.4 million and 7.5% for the second quarter of 2023 and $1.5 million and 3.4% for the third quarter of 2022, respectively. The higher level of income tax expense for the third quarter of 2023 compared to the second quarter of 2023 was principally related to increased pretax income. The higher level of income tax expense in the third quarter of 2023 compared to the third quarter of 2022 was primarily the result of higher than anticipated investment tax credits in the third quarter of 2022 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 inflationary environment.

Conference Call

Live Oak will host a conference call to discuss the company's financial results and business outlook tomorrow, October 26, 2023, at 9:00 a.m. ET. The call will be accessible by telephone and webcast using Conference ID: 73371580. 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:

William C. (BJ) Losch, III | President & 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 3Q 2023 Change vs.
 3Q 2023 2Q 2023 1Q 2023 4Q 2022 3Q 2022 2Q 2023 3Q 2022
Interest income          % %
Loans and fees on loans$        162,722  $        152,362  $        139,052  $        127,310  $        107,880          6.8          50.8 
Investment securities, taxable         8,701           8,503           7,547           6,716           5,506          2.3          58.0 
Other interest earning assets         9,188           8,847           4,817           2,584           2,448          3.9          275.3 
Total interest income         180,611           169,712           151,416           136,610           115,834          6.4          55.9 
Interest expense             
Deposits         90,914           85,003           67,595           50,357           31,553          7.0          188.1 
Borrowings         287           407           1,804           351           395          (29.5)         (27.3)
Total interest expense         91,201           85,410           69,399           50,708           31,948          6.8          185.5 
Net interest income         89,410           84,302           82,017           85,902           83,886          6.1          6.6 
Provision for loan and lease credit losses         10,279           13,028           19,021           19,671           14,169          (21.1)         (27.5)
Net interest income after provision for loan and lease credit losses         79,131           71,274           62,996           66,231           69,717          11.0          13.5 
Noninterest income             
Loan servicing revenue         6,990           6,687           6,380           6,296           6,230          4.5          12.2 
Loan servicing asset revaluation         11,335           (2,831)          356           (5,016)          (1,324)         500.4          956.1 
Net gains on sales of loans         12,675           10,804           10,175           7,362           9,275          17.3          36.7 
Net (loss) gain on loans accounted for under the fair value option         (568)          1,728           (4,529)          571           4,420          (132.9)         (112.9)
Equity method investments (loss) income         (1,034)          (2,055)          (2,952)          (1,818)          29,136          49.7          (103.5)
Equity security investments (losses) gains, net         (783)          121           77           868           876          (747.1)         (189.4)
Lease income         2,498           2,535           2,535           2,555           2,516          (1.5)         (0.7)
Management fee income         3,277           3,266           3,472           3,200           2,844          0.3          15.2 
Other noninterest income         3,501           3,901           4,065           5,053           3,751          (10.3)         (6.7)
Total noninterest income         37,891           24,156           19,579           19,071           57,724          56.9          (34.4)
Noninterest expense             
Salaries and employee benefits         42,947           43,066           44,765           42,560           43,479          (0.3)         (1.2)
Travel expense         2,197           2,770           2,411           1,872           2,372          (20.7)         (7.4)
Professional services expense         1,762           1,996           927           2,453           2,505          (11.7)         (29.7)
Advertising and marketing expense         3,446           3,009           3,603           3,892           2,621          14.5          31.5 
Occupancy expense         2,129           2,205           1,925           3,469           2,519          (3.4)         (15.5)
Technology expense         7,722           8,005           7,729           8,849           7,770          (3.5)         (0.6)
Equipment expense         3,676           4,023           3,818           3,759           3,761          (8.6)         (2.3)
Other loan origination and maintenance expense         3,498           3,442           3,927           3,657           3,376          1.6          3.6 
Renewable energy tax credit investment impairment         —           —           69           8,446           7,721          —          (100.0)
FDIC insurance         4,115           5,061           3,403           2,923           2,697          (18.7)         52.6 
Contributions and donations         —           —           —           33           191          —          (100.0)
Other expense         2,770           2,880           6,385           2,672           4,036          (3.8)         (31.4)
Total noninterest expense         74,262           76,457           78,962           84,585           83,048          (2.9)         (10.6)
Income before taxes         42,760           18,973           3,613           717           44,393          125.4          (3.7)
Income tax expense (benefit)         2,967           1,429           3,215           (1,075)          1,525          107.6          94.6 
Net income$        39,793  $        17,544  $        398  $        1,792  $        42,868          126.8          (7.2)
Earnings per share             
Basic$        0.89  $        0.40  $        0.01  $        0.04  $        0.97          122.5          (8.2)
Diluted$        0.88  $        0.39  $        0.01  $        0.04  $        0.96          125.6          (8.3)
Weighted average shares outstanding             
Basic         44,408,997           44,327,474           44,157,156           44,005,220           43,914,920     
Diluted         45,268,745           44,835,089           44,964,616           44,794,941           44,797,109     


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

 As of the quarter ended 3Q 2023 Change vs.
 3Q 2023 2Q 2023 1Q 2023 4Q 2022 3Q 2022 2Q 2023 3Q 2022
Assets          % %
Cash and due from banks$        534,774  $        808,131  $        463,186  $        280,239  $        335,046          (33.8)         59.6 
Federal funds sold         —           —           —           136,397           68,324          —          (100.0)
Certificates of deposit with other banks         3,750           4,000           4,000           4,000           4,250          (6.3)         (11.8)
Investment securities available-for-sale         1,099,878           1,133,146           1,149,691           1,014,719           1,005,372          (2.9)         9.4 
Loans held for sale         572,604           523,776           533,292           554,610           537,649          9.3          6.5 
Loans and leases held for investment (1)         8,202,631           7,836,398           7,686,987           7,344,178           6,853,382          4.7          19.7 
Allowance for credit losses on loans and leases         (121,273)          (120,116)          (108,242)          (96,566)          (78,291)         (1.0)         (54.9)
Net loans and leases         8,081,358           7,716,282           7,578,745           7,247,612           6,775,091          4.7          19.3 
Premises and equipment, net         258,041           269,485           268,138           263,290           260,285          (4.2)         (0.9)
Foreclosed assets         6,701           —           —           —           1,178          100.0          468.8 
Servicing assets         47,127           31,042           29,357           26,323           29,081          51.8          62.1 
Other assets         346,227           333,334           337,888           328,308           298,374          3.9          16.0 
Total assets$        10,950,460  $        10,819,196  $        10,364,297  $        9,855,498  $        9,314,650          1.2          17.6 
Liabilities and shareholders’ equity             
Liabilities             
Deposits:             
Noninterest-bearing$        239,536  $        229,833  $        176,439  $        194,100  $        170,336          4.2          40.6 
Interest-bearing         9,764,106           9,649,278           9,245,555           8,690,828           8,234,573          1.2          18.6 
Total deposits         10,003,642           9,879,111           9,421,994           8,884,928           8,404,909          1.3          19.0 
Borrowings         25,847           28,317           30,767           83,203           35,616          (8.7)         (27.4)
Other liabilities         70,603           79,280           88,729           76,334           71,957          (10.9)         (1.9)
Total liabilities         10,100,092           9,986,708           9,541,490           9,044,465           8,512,482          1.1          18.7 
Shareholders’ equity             
Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding         —           —           —           —           —          —          — 
Class A common stock (voting)         340,929           341,032           334,672           330,854           325,632          —          4.7 
Class B common stock (non-voting)         —           —           —           —           —          —          — 
Retained earnings         627,759           589,036           572,530           572,497           571,778          6.6          9.8 
Accumulated other comprehensive loss         (118,320)          (97,580)          (84,395)          (92,318)          (95,242)         21.3          24.2 
Total shareholders' equity         850,368           832,488           822,807           811,033           802,168          2.1          6.0 
Total liabilities and shareholders’ equity$        10,950,460  $        10,819,196  $        10,364,297  $        9,855,498  $        9,314,650          1.2          17.6 


(1)Includes $410.1 million, $441.8 million, $467.0 million, $494.5 million and $512.2 million measured at fair value for the quarters ended September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022, and September 30, 2022 respectively.


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

 Nine Months Ended
 September 30, 2023 September 30, 2022
Interest income   
Loans and fees on loans$        454,136  $        291,235 
Investment securities, taxable         24,751           12,951 
Other interest earning assets         22,852           3,677 
Total interest income         501,739           307,863 
Interest expense   
Deposits         243,512           64,678 
Borrowings         2,498           1,586 
Total interest expense         246,010           66,264 
Net interest income         255,729           241,599 
Provision for loan and lease credit losses         42,328           21,272 
Net interest income after provision for loan and lease credit losses         213,401           220,327 
Noninterest income   
Loan servicing revenue         20,057           19,063 
Loan servicing asset revaluation         8,860           (11,561)
Net gains on sales of loans         33,654           35,882 
Net (loss) gain on loans accounted for under the fair value option         (3,369)          475 
Equity method investments (loss) income         (6,041)          146,068 
Equity security investments (losses) gains, net         (585)          2,487 
Lease income         7,568           7,529 
Management fee income         10,015           6,890 
Other noninterest income         11,467           12,088 
Total noninterest income         81,626           218,921 
Noninterest expense   
Salaries and employee benefits         130,778           128,262 
Travel expense         7,378           6,627 
Professional services expense         4,685           9,284 
Advertising and marketing expense         10,058           6,651 
Occupancy expense         6,259           7,619 
Technology expense         23,456           19,585 
Equipment expense         11,517           11,361 
Other loan origination and maintenance expense         10,867           9,511 
Renewable energy tax credit investment impairment         69           7,771 
FDIC insurance         12,579           6,833 
Contributions and donations         —           6,429 
Other expense         12,035           9,708 
Total noninterest expense         229,681           229,641 
Income before taxes         65,346           209,607 
Income tax expense         7,611           35,191 
Net income$        57,735  $        174,416 
Earnings per share   
Basic$        1.30  $        3.98 
Diluted$        1.28  $        3.88 
Weighted average shares outstanding   
Basic         44,298,798           43,814,648 
Diluted         45,023,739           44,943,432 


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

 As of and for the three months ended
 3Q 2023 2Q 2023 1Q 2023 4Q 2022 3Q 2022
Income Statement Data         
Net income$        39,793   $        17,544   $        398   $        1,792   $        42,868  
Per Common Share         
Net income, diluted$        0.88   $        0.39   $        0.01   $        0.04   $        0.96  
Dividends declared         0.03            0.03            0.03            0.03            0.03  
Book value         19.12            18.77            18.58            18.41            18.24  
Tangible book value (1)         19.04            18.69            18.50            18.32            18.15  
Performance Ratios         
Return on average assets (annualized)         1.46 %          0.66 %          0.02 %          0.08 %          1.86 %
Return on average equity (annualized)         18.68            8.26            0.19            0.88            20.79  
Net interest margin         3.37            3.29            3.46            3.76            3.84  
Efficiency ratio (1)         58.34            70.49            77.72            80.58            58.65  
Noninterest income to total revenue         29.76            22.27            19.27            18.17            40.76  
Selected Loan Metrics         
Loans and leases originated$        1,073,255   $        861,033   $        1,030,882   $        1,177,688   $        1,005,235  
Outstanding balance of sold loans serviced         4,028,575            3,813,852            3,616,701            3,481,885            3,345,907  
Asset Quality Ratios         
Allowance for credit losses to loans and leases held for investment (3)         1.56 %          1.62 %          1.50 %          1.41 %          1.23 %
Net charge-offs (3)$        9,122   $        1,154   $        6,669   $        1,396   $        1,741  
Net charge-offs to average loans and leases held for investment (2) (3)         0.48 %          0.06 %          0.38 %          0.09 %          0.12 %
          
Nonperforming loans and leases at historical cost (3)         
Unguaranteed$        33,255   $        44,899   $        22,002   $        18,784   $        14,334  
Guaranteed         65,837            66,322            63,696            54,608            45,730  
Total         99,092            111,221            85,698            73,392            60,064  
Unguaranteed nonperforming historical cost loans and leases, to loans and leases held for investment (3)         0.43 %          0.61 %          0.30 %          0.27 %          0.23 %
          
Nonperforming loans at fair value (4)         
Unguaranteed$        6,518   $        8,602   $        8,193   $        6,678   $        2,736  
Guaranteed         39,378            45,114            43,968            38,212            25,169  
Total         45,896            53,716            52,161            44,890            27,905  
Unguaranteed nonperforming fair value loans to fair value loans held for investment (4)         1.59 %          1.95 %          1.75 %          1.35 %          0.53 %
          
Capital Ratios         
Common equity tier 1 capital (to risk-weighted assets)         11.63 %          11.55 %          11.67 %          12.46 %          13.16 %
Tier 1 leverage capital (to average assets)         8.56            8.46            8.70            9.26            9.49  


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, 2023
 Three Months Ended
June 30, 2023
 Average Balance Interest Average Yield/Rate Average Balance Interest Average Yield/Rate
Interest-earning assets:           
Interest-earning balances in other banks$        677,857  $        9,188          5.38 % $        731,427  $        8,847          4.85 %
Investment securities         1,257,740           8,701          2.74            1,252,320           8,503          2.72  
Loans held for sale         602,109           13,271          8.74            516,378           12,153          9.44  
Loans and leases held for investment (1)         7,978,870           149,451          7.43            7,773,816           140,209          7.23  
Total interest-earning assets         10,516,576           180,611          6.81            10,273,941           169,712          6.63  
Less: Allowance for credit losses on loans and leases         (119,941)              (108,552)    
Noninterest-earning assets        499,508               499,661     
Total assets$        10,896,143      $        10,665,050     
Interest-bearing liabilities:           
Interest-bearing checking$        300,059  $        4,217          5.58 % $        300,046  $        3,968          5.30 %
Savings         4,588,085           45,778          3.96            4,277,850           41,930          3.93  
Money market accounts         136,879           202          0.59            121,382           184          0.61  
Certificates of deposit         4,675,075           40,717          3.46            4,792,289           38,921          3.26  
Total deposits         9,700,098           90,914          3.72            9,491,567           85,003          3.59  
Borrowings         27,425           287          4.15            37,997           407          4.30  
Total interest-bearing liabilities         9,727,523           91,201          3.72            9,529,564           85,410          3.59  
Noninterest-bearing deposits         237,545               205,741     
Noninterest-bearing liabilities         78,930               80,427     
Shareholders' equity         852,145               849,318     
Total liabilities and shareholders' equity$        10,896,143      $        10,665,050     
Net interest income and interest rate spread  $        89,410          3.09 %   $        84,302          3.04 %
Net interest margin            3.37               3.29  
Ratio of average interest-earning assets to average interest-bearing liabilities            108.11 %             107.81 %


(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 2023 2Q 2023 1Q 2023 4Q 2022 3Q 2022
Total shareholders’ equity$        850,368   $        832,488   $        822,807   $        811,033   $        802,168  
Less:         
Goodwill         1,797            1,797            1,797            1,797            1,797  
Other intangible assets         1,759            1,797            1,835            1,873            1,912  
Tangible shareholders’ equity (a)$        846,812   $        828,894   $        819,175   $        807,363   $        798,459  
Shares outstanding (c)         44,480,215            44,351,715            44,290,840            44,061,244            43,981,350  
Total assets$        10,950,460   $        10,819,196   $        10,364,297   $        9,855,498   $        9,314,650  
Less:         
Goodwill         1,797            1,797            1,797            1,797            1,797  
Other intangible assets         1,759            1,797            1,835            1,873            1,912  
Tangible assets (b)$        10,946,904   $        10,815,602   $        10,360,665   $        9,851,828   $        9,310,941  
Tangible shareholders’ equity to tangible assets (a/b)         7.74 %          7.66 %          7.91 %          8.20 %          8.58 %
Tangible book value per share (a/c)$        19.04   $        18.69   $        18.50   $        18.32   $        18.15  
Efficiency ratio:         
Noninterest expense (d)$        74,262   $        76,457   $        78,962   $        84,585   $        83,048  
Net interest income         89,410            84,302            82,017            85,902            83,886  
Noninterest income         37,891            24,156            19,579            19,071            57,724  
Total revenue (e)$        127,301   $        108,458   $        101,596   $        104,973   $        141,610  
Efficiency ratio (d/e)         58.34 %          70.49 %          77.72 %          80.58 %          58.65 %


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.


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