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Live Oak Bancshares, Inc. Reports Third Quarter 2022 Results
ソース: Nasdaq GlobeNewswire / 26 10 2022 15:30:01 America/Chicago
WILMINGTON, N.C., Oct. 26, 2022 (GLOBE NEWSWIRE) -- Live Oak Bancshares, Inc. (Nasdaq: LOB) (“Live Oak” or “the Company”) today reported third quarter of 2022 net income of $42.9 million, or $0.96 per diluted share. The third quarter of 2022 included a pretax gain of $28.4 million related to the sale of the Company’s investment in Payrailz, LLC (“Payrailz”).
“Live Oak remains steadfastly dedicated to serving small business customers across our country with vital capital to create jobs, boost local economies and achieve more,” said Live Oak Bancshares Chairman and CEO James S. (Chip) Mahan III. “Once again this quarter, we recognized capital gains from a fintech investment, giving Live Oak more dry powder to further its mission to be America’s small business bank.”
Third Quarter 2022 Key Measures
(Dollars in thousands, except per share data) Increase (Decrease) 3Q 2022 2Q 2022 Dollars Percent 3Q 2021 Total revenue(1) $ 141,610 $ 208,463 $ (66,853 ) (32 )% $ 103,011 Total noninterest expense 83,048 80,879 2,169 3 55,459 Income before taxes 44,393 122,317 (77,924 ) (64 ) 43,233 Effective tax rate 3.4 % 20.7 % n/a n/a 21.7 % Net income $ 42,868 $ 97,039 $ (54,171 ) (56 )% $ 33,839 Diluted earnings per share 0.96 2.16 (1.20 ) (56 ) 0.76 Loan and lease production: Loans and leases originated $ 1,005,235 $ 959,635 $ 45,600 5 % $ 1,063,190 % Fully funded 54.0 % 58.6 % n/a n/a 55.1 % Total loans and leases: $ 7,391,031 $ 7,059,943 $ 331,088 5 % $ 6,461,367 Total loans and leases, excluding PPP loans: 7,367,153 6,998,579 368,574 5 5,971,595 Total assets: 9,314,650 9,120,897 193,753 2 8,137,341 Total deposits: 8,404,909 8,155,744 249,165 3 6,816,613 (1) Total revenue consists of net interest income and total noninterest income.
Loans and Leases
As of September 30, 2022, the total loan and lease portfolio was $7.39 billion, 4.7% above its level at June 30, 2022, and 14.4% above its level a year ago. This growth was the product of strong origination volumes. Compared to the second quarter of 2022, loans and leases held for investment increased $993.2 million, or 16.9%, to $6.85 billion while loans held for sale decreased $662.1 million, or 55.2%, to $537.6 million. The decrease in loans held for sale was largely the result of a $754.7 million transfer of loans to held for investment classification, including $696.6 million in guaranteed loans, largely due to the impact of recent and anticipated future market conditions in a rising rate environment. Average loans and leases were $7.21 billion during the third quarter of 2022 compared to $6.93 billion during the second quarter of 2022. Excluding Paycheck Protection Program (“PPP”) loans, the total loan and lease portfolio increased by $368.6 million, or 5.3%, compared to June 30, 2022, and $1.40 billion, or 23.4%, compared to September 30, 2021.
The total loan and lease portfolio of $7.39 billion includes $23.9 million of PPP loans, net of deferred fees and costs, at September 30, 2022, which are carried at historical cost and classified as held for investment. The total loan and lease portfolio at September 30, 2022, and June 30, 2022 was comprised of 56.6% and 55.5% of unguaranteed loans and leases, respectively.
Loan and lease originations totaled $1.01 billion during the third quarter of 2022, an increase of $45.6 million, or 4.8%, from the second quarter of 2022. Loan and lease originations decreased $58.0 million, or 5.5%, from the third quarter of 2021.
Deposits
Total deposits increased to $8.40 billion at September 30, 2022, an increase of $249.2 million compared to June 30, 2022, and an increase of $1.59 billion compared to September 30, 2021. The increase in total deposits from the prior periods provides support for the growth in the loan and lease portfolio.
Average total interest-bearing deposits for the third quarter of 2022 increased $386.7 million, or 5.0%, to $8.09 billion, compared to $7.70 billion for the second quarter of 2022. The ratio of average total loans and leases to average interest-bearing deposits was 89.1% for the third quarter of 2022, compared to 89.9% for the second quarter of 2022.
Borrowings
Borrowings totaled $35.6 million at September 30, 2022, compared to $86.2 million and $575.0 million at June 30, 2022, and September 30, 2021, respectively. During the third quarter of 2022, the Company decreased borrowings by $50.6 million and $539.4 million as compared to June 30, 2022, and September 30, 2021, respectively, primarily by paying off the outstanding balance of the Federal Reserve’s Paycheck Protection Program Liquidity Facility by the end of September 2022.
Net Interest Income
Net interest income for the third quarter of 2022 increased to $83.9 million compared to $79.9 million for the second quarter of 2022 and $77.7 million for the third quarter of 2021.
The net interest margin for the third and second quarters of 2022 was 3.84% and 3.89%, respectively, a decrease of 5 basis points quarter over quarter. This decrease was due to recent interest rate increases where deposits are repricing more rapidly than the Company’s loan portfolio. During the third quarter of 2022, the average cost of interest-bearing liabilities increased by fifty-six basis points while the average yield on interest-earning assets increased by forty-eight basis points.
The increase in net interest income for the third quarter of 2022 compared to the third quarter of 2021 was driven by growth in the volume for the total loan and lease portfolio. Partially mitigating this increase was a decrease in the net interest margin arising from an increase in interest-bearing liabilities combined with average cost of funds outpacing the average yield on interest-earning assets.
Noninterest Income
Noninterest income for the third quarter of 2022 was $57.7 million, a decrease of $70.8 million compared to the second quarter of 2022 and an increase of $32.4 million, compared to the third quarter of 2021. The primary drivers in noninterest income changes are outlined below.
The largest driver of the decrease in noninterest income for the third quarter of 2022 as compared to the second quarter of 2022 arose from a decrease in equity method investment income of $89.9 million. This quarter over quarter decrease was due to the $120.5 million gain associated with Fiserv, Inc.’s acquisition of the Company’s ownership in Finxact, Inc. (“Finxact”) in the second quarter of 2022 being partially offset by the $28.4 million gain arising in the third quarter of 2022 associated with Jack Henry & Associates, Inc’s acquisition of the Company’s ownership in Payrailz. Correspondingly, the largest contributor to the increase in noninterest income for the third quarter of 2022 compared to the third quarter of 2021 was the Payrailz gain.
The loan servicing asset revaluation resulted in a loss of $1.3 million for the third quarter of 2022 compared to a $8.7 million loss for the second quarter of 2022 and a $5.9 million loss for the third quarter of 2021. The decrease in the loss on loan servicing asset revaluation for both periods was principally the result of positive movements in market pricing, particularly as it relates to variable products, during the third quarter of 2022.
Net gains on sales of loans for the third quarter of 2022 was $9.3 million, a $3.6 million increase compared to $5.6 million for the second quarter of 2022 and a $9.6 million decrease compared $18.9 million for the third quarter of 2021. During the second quarter of 2022, the Company significantly decreased loan sale volumes due to unusually weak market conditions. The increase in net gains on sales of loans over the second quarter of 2022 was largely the result of higher loan sale volumes combined with, to a lesser extent, signs of positive market trends for variable rate loans during the third quarter of 2022. The decrease in net gains on sales of loans compared to the third quarter of 2021 is the result of lower volume of loan sales combined with overall weaker market conditions compared to those experienced in the prior year. The average guaranteed gain on sale premium was 108%, 108% and 110% for the third quarter of 2022, second quarter of 2022 and third quarter of 2021, respectively. The volume of guaranteed loans sold was $148.1 million for the third quarter of 2022 compared to $68.8 million sold in the second quarter of 2022 and $201.9 million sold in the third quarter of 2021.
The net gain on loans accounted for under the fair value option totaled $4.4 million for the third quarter of 2022, a $8.9 million increase compared to the $4.5 million net loss for the second quarter of 2022 and a $5.5 million increase compared to the $1.0 million net loss for the third quarter of 2021. The increase in valuation of loans accounted for under the fair value option compared to both prior periods was largely the result of the above referenced signs of positive market pricing trends on variable rate loans combined with continued amortization of the portfolio of loans accounted for under the fair value option.
Noninterest Expense
Noninterest expense for the third quarter of 2022 totaled $83.0 million compared to $80.9 million for the second quarter of 2022 and $55.5 million for the third quarter of 2021. The primary drivers in noninterest expense changes are outlined below.
Salaries and employee benefits for the third quarter of 2022 decreased $2.8 million compared to the second quarter of 2022 and increased $15.3 million compared to the third quarter of 2021. Additional bonus accruals of $7.5 million and $3.0 million were included in both the second and third quarters of 2022 related to the earlier discussed Finxact and Payrailz gains, respectively. The decrease in salaries and employee benefits compared to the second quarter of 2022 was principally due to the decrease in additional bonus accruals while the increase over the third quarter of 2021 was largely the product of continued investment in human resources to support strategic and growth initiatives, including the $3.0 million additional bonus accrual discussed above.
Technology expenses increased $2.0 million compared to the second quarter of 2022 and $1.6 million compared to the third quarter of 2021. The increase for both periods was primarily related to enhanced investments in the Company’s technology resources.
During the third quarter of 2022, the Company incurred $7.6 million in impairment charges related to a new renewable energy tax credit investment. Investments of this type generate a return primarily through the realization of income tax credits and other benefits; accordingly, impairment of the investment amount is recognized in conjunction with the realization of related tax benefits. This investment generated a federal investment tax credit of $6.1 million which is included in the Company’s estimated annual effective tax rate. Investments of this nature are part of the Company’s ongoing initiative to promote renewable energy sources.
Contributions and donations for the third quarter of 2022 decreased $5.3 million compared to the second quarter of 2022. This decrease was related to a special charitable donation during the second quarter of 2022 of $5.0 million made in connection with the Finxact gain discussed earlier.
Asset Quality
During the third quarter of 2022, the Company recognized net charge-offs for loans carried at historical cost of $1.7 million compared to net charge-offs of $2.5 million in both the second quarter of 2022 and third quarter of 2021. Net charge-offs as a percentage of average held for investment loans and leases carried at historical cost, annualized, for the quarters ended September 30, 2022, June 30, 2022, and September 30, 2021, was 0.12%, 0.19% and 0.21%, respectively.
Unguaranteed nonperforming (nonaccrual) loans and leases, excluding $2.7 million and $3.6 million accounted for under the fair value option at September 30, 2022, and June 30, 2022, respectively, increased to $14.3 million, or 0.23% of loans and leases held for investment which are carried at historical cost, at September 30, 2022, compared to $12.0 million, or 0.22%, at June 30, 2022.
Provision for Loan and Lease Credit Losses
The provision for loan and lease credit losses for the third quarter of 2022 totaled $14.2 million compared to $5.3 million for the second quarter of 2022 and $4.3 million for the third quarter of 2021. The level of provision expense in the third quarter of 2022 was the result of loan growth, charge-off experience impacts, the above discussed loan reclassification from held for sale to held for investment and changes in the macroeconomic outlook.
The allowance for credit losses on loans and leases totaled $78.3 million at September 30, 2022, compared to $65.9 million at June 30, 2022. The allowance for credit losses on loans and leases as a percentage of total loans and leases held for investment carried at historical cost was 1.23% and 1.24% at September 30, 2022, and June 30, 2022, respectively.
Income Tax
Income tax expense and related effective tax rate was $1.5 million and 3.4% for the third quarter of 2022, $25.3 million and 20.7% for the second quarter of 2022 and $9.4 million and 21.7% for the third quarter of 2021, respectively. The lower level of income tax expense for the third quarter of 2022 compared to the second quarter of 2022 and third quarter of 2021 was primarily the result of higher than anticipated investment tax credits related to renewable energy investments, arising from the impacts of the passage of the Inflation Reduction Act of 2022 combined with higher than expected costs as a result of the ongoing inflationary environment.
Shareholders’ Equity
Total shareholders’ equity increased by $10.5 million, or 1.3%, during the third quarter of 2022. This increase was primarily due to $42.9 million in net income partially offset by $36.0 million of negative market impacts on the Company’s available-for-sale investment portfolio included in accumulated other comprehensive loss.
Conference Call
Live Oak will host a conference call to discuss the company's financial results and business outlook tomorrow, October 27, 2022, at 9:00 a.m. ET. To participate via telephone, please register in advance at this link: https://register.vevent.com/register/BI8691db015f994feb8d94d064927ef770. Upon registration, all telephone participants will receive a confirmation email detailing how to join the conference call, including the dial-in number along with a unique passcode and registrant ID that can be used to access the call. The call can also be accessed via a live audio webcast at http://investor.liveoakbank.com. After the conference call, a replay will be available until November 3, 2022, at the same audio webcast link.
Important Note Regarding Forward-Looking Statements
Statements in this press release that are based on other than historical data or that express the Company’s plans or expectations regarding future events or determinations are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Statements based on historical data are not intended and should not be understood to indicate the Company’s expectations regarding future events. Forward-looking statements provide current expectations or forecasts of future events or determinations. These forward-looking statements are not guarantees of future performance or determinations, nor should they be relied upon as representing management’s views as of any subsequent date. Forward-looking statements involve significant risks and uncertainties, and actual results may differ materially from those presented, either expressed or implied, in this press release. Factors that could cause actual results to differ materially from those expressed in the forward-looking statements include changes in Small Business Administration (“SBA”) rules, regulations or loan products, including the Section 7(a) program, changes in SBA standard operating procedures or changes in Live Oak Banking Company's status as an SBA Preferred Lender; changes in rules, regulations or procedures for other government loan programs, including those of the United States Department of Agriculture; the potential impacts of the Coronavirus Disease 2019 (COVID-19) pandemic on trade (including supply chains and export levels), travel, employee productivity and other economic activities that may have a destabilizing and negative effect on financial markets, economic activity and customer behavior; a reduction in or the termination of the Company's ability to use the technology-based platform that is critical to the success of its business model, including a failure in or a breach of operational or security systems; competition from other lenders; the Company's ability to attract and retain key personnel; market and economic conditions and the associated impact on the Company; operational, liquidity and credit risks associated with the Company's business; the impact of heightened regulatory scrutiny of financial products and services and the Company's ability to comply with regulatory requirements and expectations; adverse results, including related fees and expenses, from pending or future lawsuits, government investigations or private actions; and the other factors discussed in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) and available at the SEC’s Internet site (http://www.sec.gov). Except as required by law, the Company specifically disclaims any obligation to update any factors or to publicly announce the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.
About Live Oak Bancshares, Inc.
Live Oak Bancshares, Inc. (Nasdaq: LOB) is a financial holding company and the parent company of Live Oak Bank. Live Oak Bancshares and its subsidiaries partner with businesses that share a groundbreaking focus on service and technology to redefine banking. To learn more, visit www.liveoakbank.com.
Contacts:
William C. (BJ) Losch, III | CFO & Chief Banking Officer | Investor Relations | 910.765.9966
Claire Parker | SVP Corporate Communications | Media Relations | 910.597.1592Live Oak Bancshares, Inc.
Quarterly Statements of Income (unaudited)
(Dollars in thousands, except per share data)Three Months Ended 3Q 2022 Changes vs. 3Q 2022 2Q 2022 1Q 2022 4Q 2021 3Q 2021 2Q 2022 3Q 2021 Interest income % % Loans and fees on loans $ 107,880 $ 94,157 $ 89,198 $ 88,577 $ 89,388 14.6 20.7 Investment securities, taxable 5,506 4,046 3,399 3,455 3,174 36.1 73.5 Other interest earning assets 2,448 1,044 185 171 224 134.5 992.9 Total interest income 115,834 99,247 92,782 92,203 92,786 16.7 24.8 Interest expense Deposits 31,553 18,777 14,348 13,817 14,159 68.0 122.8 Borrowings 395 536 655 748 892 (26.3 ) (55.7 ) Total interest expense 31,948 19,313 15,003 14,565 15,051 65.4 112.3 Net interest income 83,886 79,934 77,779 77,638 77,735 4.9 7.9 Provision for loan and lease credit losses 14,169 5,267 1,836 3,918 4,319 169.0 228.1 Net interest income after provision for loan and lease credit losses 69,717 74,667 75,943 73,720 73,416 (6.6 ) (5.0 ) Noninterest income Loan servicing revenue 6,230 6,477 6,356 6,289 6,278 (3.8 ) (0.8 ) Loan servicing asset revaluation (1,324 ) (8,668 ) (1,569 ) (4,160 ) (5,878 ) 84.7 77.5 Net gains on sales of loans 9,275 5,630 20,977 20,257 18,860 64.7 (50.8 ) Net gain (loss) on loans accounted for under the fair value option 4,420 (4,461 ) 516 (66 ) (1,030 ) 199.1 529.1 Equity method investments income (loss) 29,136 119,056 (2,124 ) 2,969 (1,250 ) (75.5 ) 2,430.9 Equity security investments gains (losses), net 876 1,655 (44 ) 218 176 (47.1 ) 397.7 Lease income 2,516 2,510 2,503 2,521 2,527 0.2 (0.4 ) Management fee income 2,844 2,558 1,488 1,482 1,489 11.2 91.0 Other noninterest income 3,751 3,772 4,565 4,246 4,104 (0.6 ) (8.6 ) Total noninterest income 57,724 128,529 32,668 33,756 25,276 (55.1 ) 128.4 Noninterest expense Salaries and employee benefits 43,479 46,276 38,507 32,464 28,202 (6.0 ) 54.2 Travel expense 2,372 2,358 1,897 1,782 1,819 0.6 30.4 Professional services expense 2,505 3,988 2,791 3,724 4,251 (37.2 ) (41.1 ) Advertising and marketing expense 2,621 2,301 1,729 1,844 1,631 13.9 60.7 Occupancy expense 2,519 2,773 2,327 2,045 2,042 (9.2 ) 23.4 Technology expense 7,770 5,762 6,053 6,489 6,150 34.8 26.3 Equipment expense 3,761 3,784 3,816 3,741 3,706 (0.6 ) 1.5 Other loan origination and maintenance expense 3,376 3,022 3,113 3,406 3,489 11.7 (3.2 ) Renewable energy tax credit investment impairment 7,721 50 — — 60 15,342.0 12,768.3 FDIC insurance 2,697 2,164 1,972 1,931 1,670 24.6 61.5 Contributions and donations 191 5,515 723 328 523 (96.5 ) (63.5 ) Other expense 4,036 2,886 2,786 1,944 1,916 39.8 110.6 Total noninterest expense 83,048 80,879 65,714 59,698 55,459 2.7 49.7 Income before taxes 44,393 122,317 42,897 47,778 43,233 (63.7 ) 2.7 Income tax expense 1,525 25,278 8,388 17,631 9,394 (94.0 ) (83.8 ) Net income $ 42,868 $ 97,039 $ 34,509 $ 30,147 $ 33,839 (55.8 ) 26.7 Earnings per share Basic $ 0.97 $ 2.22 $ 0.79 $ 0.69 $ 0.78 (56.3 ) 24.4 Diluted $ 0.96 $ 2.16 $ 0.76 $ 0.66 $ 0.76 (55.6 ) 26.3 Weighted average shares outstanding Basic 43,914,920 43,824,707 43,701,943 43,492,172 43,329,889 Diluted 44,797,109 44,803,278 45,227,536 45,474,530 45,040,690
Live Oak Bancshares, Inc.
Quarterly Balance Sheets (unaudited)
(Dollars in thousands)As of the quarter ended 3Q 2022 Change vs. 3Q 2022 2Q 2022 1Q 2022 4Q 2021 3Q 2021 2Q 2022 3Q 2021 Assets % % Cash and due from banks $ 335,046 $ 580,493 $ 477,778 $ 187,203 $ 336,362 (42.3 ) (0.4 ) Federal funds sold 68,324 51,694 29,993 16,547 10,672 32.2 540.2 Certificates of deposit with other banks 4,250 4,250 4,250 4,750 6,000 — (29.2 ) Investment securities available-for-sale 1,005,372 927,968 844,577 906,052 861,377 8.3 16.7 Loans held for sale(1) 537,649 1,199,734 1,028,635 1,116,519 1,042,756 (55.2 ) (48.4 ) Loans and leases held for investment(2) 6,853,382 5,860,209 5,738,241 5,521,262 5,418,611 16.9 26.5 Allowance for credit losses on loans and leases (78,291 ) (65,863 ) (63,058 ) (63,584 ) (59,681 ) 18.9 31.2 Net loans and leases 6,775,091 5,794,346 5,675,183 5,457,678 5,358,930 16.9 26.4 Premises and equipment, net 260,285 257,926 254,865 240,196 244,212 0.9 6.6 Foreclosed assets 1,178 191 198 620 883 516.8 33.4 Servicing assets 29,081 28,661 36,286 33,574 33,968 1.5 (14.4 ) Other assets 298,374 275,634 268,201 250,254 242,181 8.3 23.2 Total assets $ 9,314,650 $ 9,120,897 $ 8,619,966 $ 8,213,393 $ 8,137,341 2.1 14.5 Liabilities and Shareholders’ Equity Liabilities Deposits: Noninterest-bearing $ 170,336 $ 119,371 $ 86,342 $ 89,279 $ 77,026 42.7 121.1 Interest-bearing 8,234,573 8,036,373 7,550,821 7,022,765 6,739,587 2.5 22.2 Total deposits 8,404,909 8,155,744 7,637,163 7,112,044 6,816,613 3.1 23.3 Borrowings 35,616 86,209 196,911 318,289 575,021 (58.7 ) (93.8 ) Other liabilities 71,957 87,282 72,565 67,927 56,284 (17.6 ) 27.8 Total liabilities 8,512,482 8,329,235 7,906,639 7,498,260 7,447,918 2.2 14.3 Shareholders’ equity Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding — — — — — — — Class A common stock (voting) 325,632 320,924 315,607 310,970 304,085 1.5 7.1 Class B common stock (non-voting) — — — 1,324 5,404 — (100.0 ) Retained earnings 571,778 530,021 434,226 400,893 371,869 7.9 53.8 Accumulated other comprehensive (loss) income (95,242 ) (59,283 ) (36,506 ) 1,946 8,065 60.7 (1,280.9 ) Total shareholders' equity 802,168 791,662 713,327 715,133 689,423 1.3 16.4 Total liabilities and shareholders’ equity $ 9,314,650 $ 9,120,897 $ 8,619,966 $ 8,213,393 $ 8,137,341 2.1 14.5 (1) Includes $23.5 million, $25.1 million, $25.3 million and $27.4 million measured at fair value for the quarters ended June 30, 2022, March 31, 2022, December 31, 2021 and September 30, 2021, respectively.
(2) Includes $512.2 million, $530.6 million, $600.6 million, $645.2 million and $698.0 million measured at fair value for the quarters ended September 30, 2022, June 30, 2022, March 31, 2022, December 31, 2021 and September 30, 2021, respectively.Live Oak Bancshares, Inc.
Statements of Income (unaudited)
(Dollars in thousands, except per share data)Nine Months Ended September 30, 2022 September 30, 2021 Interest income Loans and fees on loans $ 291,235 $ 259,161 Investment securities, taxable 12,951 9,078 Other interest earning assets 3,677 771 Total interest income 307,863 269,010 Interest expense Deposits 64,678 45,923 Borrowings 1,586 3,940 Total interest expense 66,264 49,863 Net interest income 241,599 219,147 Provision for loan and lease credit losses 21,272 11,292 Net interest income after provision for loan and lease credit losses 220,327 207,855 Noninterest income Loan servicing revenue 19,063 18,930 Loan servicing asset revaluation (11,561 ) (7,566 ) Net gains on sales of loans 35,882 47,023 Net gain on loans accounted for under the fair value option 475 4,323 Equity method investments income (loss) 146,068 (4,685 ) Equity security investments gains (losses), net 2,487 44,534 Lease income 7,529 7,742 Management fee income 6,890 4,896 Other noninterest income 12,088 11,247 Total noninterest income 218,921 126,444 Noninterest expense Salaries and employee benefits 128,262 92,468 Travel expense 6,627 4,027 Professional services expense 9,284 11,411 Advertising and marketing expense 6,651 3,158 Occupancy expense 7,619 6,378 Technology expense 19,585 16,159 Equipment expense 11,361 11,128 Other loan origination and maintenance expense 9,511 10,123 Renewable energy tax credit investment impairment 7,771 3,187 FDIC insurance 6,833 5,139 Contributions and donations 6,429 2,003 Other expense 9,708 6,108 Total noninterest expense 229,641 171,289 Income before taxes 209,607 163,010 Income tax expense 35,191 26,162 Net income $ 174,416 $ 136,848 Earnings per share Basic $ 3.98 $ 3.18 Diluted $ 3.88 $ 3.05 Weighted average shares outstanding Basic 43,814,648 43,061,642 Diluted 44,943,432 44,936,014
Live Oak Bancshares, Inc.
Quarterly Selected Financial Data
(Dollars in thousands, except per share data)As of and for the three months ended 3Q 2022 2Q 2022 1Q 2022 4Q 2021 3Q 2021 Income Statement Data Net income $ 42,868 $ 97,039 $ 34,509 $ 30,147 $ 33,839 Per Common Share Net income, diluted $ 0.96 $ 2.16 $ 0.76 $ 0.66 $ 0.76 Dividends declared 0.03 0.03 0.03 0.03 0.03 Book value 18.24 18.05 16.29 16.39 15.89 Tangible book value (1) 18.15 17.97 16.20 16.31 15.80 Performance Ratios Return on average assets (annualized) 1.86 % 4.40 % 1.65 % 1.47 % 1.64 % Return on average equity (annualized) 20.79 46.14 18.94 16.80 19.67 Net interest margin 3.84 3.89 4.02 4.02 3.99 Efficiency ratio (1) 58.65 38.80 59.50 53.59 53.84 Noninterest income to total revenue 40.76 61.66 29.58 30.30 24.54 Selected Loan Metrics Loans and leases originated $ 1,005,235 $ 959,635 $ 865,063 $ 1,083,623 $ 1,063,190 Outstanding balance of sold loans serviced 3,345,907 3,329,616 3,381,883 3,298,828 3,212,271 Asset Quality Ratios Allowance for credit losses to loans and leases held for investment (3) 1.23 % 1.24 % 1.23 % 1.30 % 1.26 % Net charge-offs (3) $ 1,741 $ 2,462 $ 2,362 $ 15 $ 2,485 Net charge-offs to average loans and leases held for investment (2) (3) 0.12 % 0.19 % 0.19 % — % 0.21 % Nonperforming loans and leases at historical cost (3) Unguaranteed $ 14,334 $ 11,974 $ 19,475 $ 15,987 $ 20,450 Guaranteed 45,730 33,794 32,828 26,546 28,888 Total 60,064 45,768 52,303 42,533 49,338 Unguaranteed nonperforming historical cost loans and leases, to loans and leases held for investment (3) 0.23 % 0.22 % 0.38 % 0.33 % 0.43 % Nonperforming loans at fair value (4) Unguaranteed $ 2,736 $ 3,615 $ 4,451 $ 4,791 $ 6,303 Guaranteed 25,169 27,895 30,850 33,471 36,708 Total 27,905 31,510 35,301 38,262 43,011 Unguaranteed nonperforming fair value loans to loans held for investment (4) 0.53 % 0.68 % 0.74 % 0.74 % 0.90 % Capital Ratios Common equity tier 1 capital (to risk-weighted assets) 13.16 % 13.14 % 12.10 % 12.38 % 12.56 % Tier 1 leverage capital (to average assets) 9.49 9.44 8.87 8.87 8.82 Notes to Quarterly Selected Financial Data
(1) See accompanying GAAP to Non-GAAP Reconciliation.
(2) Quarterly net charge-offs as a percentage of quarterly average loans and leases held for investment, annualized.
(3) Loans and leases at historical cost only (excludes loans measured at fair value).
(4) Loans accounted for under the fair value option only (excludes loans and leases carried at historical cost).Live Oak Bancshares, Inc.
Quarterly Average Balances and Net Interest Margin
(Dollars in thousands)Three Months Ended
September 30, 2022Three Months Ended
June 30, 2022Average
BalanceInterest Average
Yield/RateAverage
BalanceInterest Average
Yield/RateInterest-earning assets: Interest-earning balances in other banks $ 225,959 $ 1,375 2.41 % $ 328,014 $ 848 1.04 % Federal funds sold 187,014 1,073 2.28 78,216 196 1.01 Investment securities 1,040,076 5,506 2.10 915,106 4,046 1.77 Loans held for sale 1,000,912 16,156 6.40 1,119,094 15,969 5.72 Loans and leases held for investment(1) 6,208,447 91,724 5.86 5,805,907 78,188 5.40 Total interest-earning assets 8,662,408 115,834 5.31 8,246,337 99,247 4.83 Less: Allowance for credit losses on loans and leases (65,511 ) (62,566 ) Noninterest-earning assets 598,220 644,495 Total assets $ 9,195,117 $ 8,828,266 Interest-bearing liabilities: Savings $ 4,009,928 $ 16,775 1.66 % $ 3,894,177 $ 7,538 0.78 % Money market accounts 100,074 72 0.29 93,072 56 0.24 Certificates of deposit 3,978,793 14,706 1.47 3,714,882 11,183 1.21 Total deposits 8,088,795 31,553 1.55 7,702,131 18,777 0.98 Borrowings 63,207 395 2.48 132,969 536 1.62 Total interest-bearing liabilities 8,152,002 31,948 1.55 7,835,100 19,313 0.99 Noninterest-bearing deposits 133,676 96,123 Noninterest-bearing liabilities 84,597 55,725 Shareholders' equity 824,842 841,318 Total liabilities and shareholders' equity $ 9,195,117 $ 8,828,266 Net interest income and interest rate spread $ 83,886 3.76 % $ 79,934 3.84 % Net interest margin 3.84 3.89 Ratio of average interest-earning assets to average interest-bearing liabilities 106.26 % 105.25 % (1) Average loan and lease balances include non-accruing loans and leases.
Live Oak Bancshares, Inc.
GAAP to Non-GAAP Reconciliation
(Dollars in thousands)As of and for the three months ended 3Q 2022 2Q 2022 1Q 2022 4Q 2021 3Q 2021 Total shareholders’ equity $ 802,168 $ 791,662 $ 713,327 $ 715,133 $ 689,423 Less: Goodwill 1,797 1,797 1,797 1,797 1,797 Other intangible assets 1,912 1,950 1,988 2,026 2,065 Tangible shareholders’ equity (a) $ 798,459 $ 787,915 $ 709,542 $ 711,310 $ 685,561 Shares outstanding (c) 43,981,350 43,854,011 43,787,660 43,619,070 43,381,014 Total assets $ 9,314,650 $ 9,120,897 $ 8,619,966 $ 8,213,393 $ 8,137,341 Less: Goodwill 1,797 1,797 1,797 1,797 1,797 Other intangible assets 1,912 1,950 1,988 2,026 2,065 Tangible assets (b) $ 9,310,941 $ 9,117,150 $ 8,616,181 $ 8,209,570 $ 8,133,479 Tangible shareholders’ equity to tangible assets (a/b) 8.58 % 8.64 % 8.23 % 8.66 % 8.43 % Tangible book value per share (a/c) $ 18.15 $ 17.97 $ 16.20 $ 16.31 $ 15.80 Efficiency ratio: Noninterest expense (d) $ 83,048 $ 80,879 $ 65,714 $ 59,698 $ 55,459 Net interest income 83,886 79,934 77,779 77,638 77,735 Noninterest income 57,724 128,529 32,668 33,756 25,276 Total revenue (e) $ 141,610 $ 208,463 $ 110,447 $ 111,394 $ 103,011 Efficiency ratio (d/e) 58.65 % 38.80 % 59.50 % 53.59 % 53.84 % This press release presents the non-GAAP financial measures. The adjustments to reconcile from the non-GAAP financial measures to the applicable GAAP financial measure are included where applicable in financial results presented in accordance with GAAP. The Company considers these adjustments to be relevant to ongoing operating results. The Company believes that excluding the amounts associated with these adjustments to present the non-GAAP financial measures provides a meaningful base for period-to-period comparisons, which will assist regulators, investors, and analysts in analyzing the operating results or financial position of the Company. The non-GAAP financial measures are used by management to assess the performance of the Company’s business for presentations of Company performance to investors, and for other reasons as may be requested by investors and analysts. The Company further believes that presenting the non-GAAP financial measures will permit investors and analysts to assess the performance of the Company on the same basis as that applied by management. Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although non-GAAP financial measures are frequently used by shareholders to evaluate a company, they have limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of results reported under GAAP.
