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Live Oak Bancshares, Inc. Reports Fourth Quarter 2020 Results
ソース: Nasdaq GlobeNewswire / 27 1 2021 15:30:01 America/Chicago
WILMINGTON, N.C., Jan. 27, 2021 (GLOBE NEWSWIRE) -- Live Oak Bancshares, Inc. (Nasdaq: LOB) (“Live Oak” or “the Company”) today reported fourth quarter 2020 net earnings available to common shareholders of $29.6 million, or $0.68 per diluted share, as the Company continues to execute on our strategic priorities that we believe will deliver long-term earnings for our shareholders. Net earnings for the year ended December 31, 2020, totaled $59.5 million, or $1.43 per diluted share.
“Our mission to be America’s small business bank has never been more important. The past year was incredibly challenging for our country’s entrepreneurs, and their drive and determination reinforce why we want to fundamentally shift the way banking is done,” said James S. Mahan, III, Chairman and Chief Executive Officer of Live Oak Bancshares. “As our efforts to drive rapid change in financial technology gained momentum in 2020, our teams continued their relentless focus on supporting customers in a time unequaled in recent history. In 2020, we grew assets by $3 billion by serving small businesses across the U.S. and significantly increased net income. Our balance sheet and funding model position us very well to serve America’s small businesses in the coming year. We will continue to drive the core earnings of the bank, while providing vital capital to small business owners who are the cornerstone of our country’s economy.”
Year over Year Highlights
(Dollars in thousands, except per share data) Increase (Decrease) 2020 2019 Dollars Percent Net interest income and servicing revenues $ 221,323 $ 168,116 $ 53,207 32 % Net income 59,543 18,034 41,509 230 Diluted earnings per share 1.43 0.44 0.99 225 Non-GAAP net income (1) 60,507 18,220 42,287 232 Non-GAAP diluted earnings per share (1) 1.45 0.45 1.00 222 Loan and lease production: Loans and leases originated $ 4,450,198 $ 2,001,886 $ 2,448,312 122 % % Fully funded 78.6 % 51.4 % n/a n/a Total loans and leases: $ 6,320,552 $ 3,593,733 $ 2,726,819 76 % Total assets: 7,872,303 4,812,828 3,059,475 64 Total deposits: 5,712,828 4,226,980 1,485,848 35 Fourth Quarter 2020 Key Measures
(Dollars in thousands, except per share data) Increase (Decrease) Q4 2020 Q4 2019 Dollars Percent Q3 2020 Net interest income and servicing revenues $ 68,985 $ 44,741 $ 24,244 54 % $ 58,166 Net income 29,588 6,832 22,756 333 33,780 Diluted earnings per share 0.68 0.17 0.51 300 0.81 Non-GAAP net income (1) 29,778 6,832 22,946 336 34,554 Non-GAAP diluted earnings per share (1) 0.69 0.17 0.52 303 0.83 Loan and lease production: Loans and leases originated $ 808,010 $ 523,688 $ 284,322 54 % $ 966,499 % Fully funded 55.6 % 49.0 % n/a n/a 72.9 % (1) See accompanying GAAP to Non-GAAP Reconciliation.
Loans and Leases
At December 31, 2020, the total loan and lease portfolio increased to $6.32 billion, 75.9% above its level a year ago and 1.5% above its level at September 30, 2020. Compared to the third quarter of 2020, loans and leases held for investment increased $107.9 million, or 2.1%, to $5.15 billion while loans held for sale decreased $14.7 million, or 1.2%, to $1.18 billion. The total loan and lease portfolio at December 31, 2020, and September 30, 2020, of $6.32 billion and $6.23 billion, respectively, was comprised of 40.4% and 37.9% of unguaranteed loans and leases, respectively. Average loans and leases were $6.29 billion during the fourth quarter of 2020 compared to $5.87 billion during the third quarter of 2020.
The total loan and lease portfolio of $6.32 billion is comprised of $1.50 billion of Paycheck Protection Program (“PPP”) loans, net of deferred fees and costs, at December 31, 2020. PPP loans comprised $1.76 billion of the total loans and leases originated during the year ended December 31, 2020 and are carried at historical cost classified as held for investment.
Loan and lease originations for the year ended December 31, 2020, increased by 122.3% to $4.45 billion compared to $2.00 billion for the year ended December 31, 2019. Excluding PPP loans, loan and lease originations totaled $2.69 billion for the year ended December 31, 2020, an increase of 34.3% compared to the prior year. Loan and lease originations totaled $808.0 million during the fourth quarter of 2020, a decrease of $158.5 million, or 16.4%, from the third quarter of 2020.
Loans and leases held for investment, loan and lease originations, and average loans and leases were impacted by PPP loans originated in the second and third quarters of 2020. The unguaranteed percentage of the total loan and lease portfolio, as previously mentioned, is significantly influenced by the addition of PPP loans carrying a 100% government guarantee.
Deposits
Total deposits increased to $5.71 billion at December 31, 2020, an increase of $1.49 billion compared to December 31, 2019, and an increase of $6.8 million compared to September 30, 2020.
The modest increase in total deposits from the prior quarter is the result of utilization of heightened liquidity levels on the balance sheet at the start of the quarter in response to COVID-19 uncertainties. Average total interest-bearing deposits for the fourth quarter of 2020 decreased $138.6 million, or 2.4%, to $5.55 billion, compared to $5.69 billion for the third quarter of 2020. The ratio of average total loans and leases to average interest-bearing deposits was 113.4% for the fourth quarter of 2020, compared to 103.1% for the third quarter of 2020. The ratio is influenced by average PPP loan volume and the use of the Federal Reserve’s Paycheck Protection Program Liquidity Facility (“PPPLF”) classified as long-term borrowings.
Borrowings
Borrowings totaled $1.54 billion at December 31, 2020, compared to $14 thousand and $1.75 billion at December 31, 2019, and September 30, 2020, respectively. During the fourth quarter of 2020, the Company decreased borrowings by $205.0 million primarily by reducing the outstanding balance in the Federal Reserve’s PPPLF to $1.53 billion as of December 31, 2020. The PPPLF has a 100% advance rate equal to the principal amount of PPP loans pledged as security, carries an interest rate of 0.35% and loans financed under the PPPLF have a neutral impact on regulatory leverage capital ratios.
Net Interest Income
Net interest income for the fourth quarter of 2020 rose to $62.3 million compared to $38.0 million for the fourth quarter of 2019 and $51.4 million for the third quarter of 2020. Net interest income for the year ended December 31, 2020 totaled $194.7 million, a $54.6 million increase from the prior year primarily due to the increases in the volume of interest earning assets.
The increase for the fourth quarter of 2020 compared to the fourth quarter of 2019 was driven by the significant growth in the total loan and lease portfolios reflecting the Company's ongoing initiative to grow recurring revenue sources and further enhanced by the origination of $1.76 billion in PPP loans in the second and third quarters of 2020.
The increase from the third quarter of 2020 arose principally from a higher average loan and lease portfolio balance enhanced by a 56-basis point improvement in the net interest margin from 2.77% to 3.33%. The increase in interest earning asset yields of 39 basis points was primarily driven by fees recognized on PPP loans originated in the second and third quarters of 2020. The asset yield was complimented by the 14-basis point reduction in the average cost of interest-bearing liabilities from 1.27% for the quarter ended September 30, 2020, to 1.13% for the quarter ended December 31, 2020. The reduction in the cost of interest-bearing liabilities over the third quarter was largely the result of a lag in deposit repricing from the first quarter of 2020 cuts in federal funds rates combined with runoff of higher rate maturing deposits.
Noninterest Income
Noninterest income for the fourth quarter of 2020 decreased to $10.8 million compared to $20.1 million for the fourth quarter of 2019 and $47.0 million for the third quarter of 2020.
The primary drivers of the decrease compared to the fourth quarter of 2019 and the third quarter of 2020 were net loss on loans accounted for under the fair value option and equity method investment losses. The net loss on loans accounted for under the fair value option totaled $4.8 million for the fourth quarter of 2020, a $6.2 million decrease compared to the net gain for the fourth quarter of 2019 and a $8.2 million decrease compared to the net gain for the third quarter of 2020. The valuation of loans was negatively impacted by market conditions arising from the impact of COVID-19 and model refinements in recognition of loss experience in non-mature verticals. Equity method investments loss totaled $8.7 million for the fourth quarter of 2020, a $7.0 million increase from the loss for the fourth quarter of 2019 and a $7.5 million increase from the loss for the third quarter of 2020. The higher loss for the fourth quarter of 2020 was largely a product of the Company’s pro rata portion of income tax expense arising from an investee’s conversion from a partnership to a corporation.
Additionally, the loan servicing asset revaluation resulted in a loss of $5.8 million for the fourth quarter of 2020 compared to a loss of $4.1 million for the fourth quarter of 2019 and a gain of $2.1 million for the third quarter of 2020. The increase in the negative loan servicing asset revaluation was largely the result of increased paydowns combined with the above mentioned COVID-19 impacted market conditions. Compared to the prior quarter, equity security investment gains decreased $14.6 million to $107 thousand for the fourth quarter of 2020 following the recognition of a $13.7 million non-cash gain during the third quarter of 2020 arising from the increase in the market value of the Company’s investment in Greenlight Financial Technology, Inc.
Partially offsetting the decrease in noninterest income, the Company’s net gains on sales of loans increased $3.6 million to $15.0 million in the fourth quarter of 2020 compared to $11.4 million in the fourth quarter of 2019 and increased $2.3 million compared to $12.7 million in the third quarter of 2020. The volume of guaranteed loan sales in the fourth quarter of 2020 remained relatively flat at $110.6 million compared to $105.0 million in the fourth quarter of 2019 and $114.7 million in the third quarter of 2020.
The average net gain on guaranteed loan sales increased to $115.9 thousand per million sold in the fourth quarter of 2020 versus $106.2 thousand in the fourth quarter of 2019 and $110.2 thousand in the third quarter of 2020. The increase in average guaranteed loan sale pricing from the fourth quarter of 2019 was driven by the mix of loans sold by the Company and market conditions for the purchase of guaranteed loans.
Noninterest Expense
Noninterest expense for the fourth quarter of 2020 increased to $52.4 million compared to $44.4 million for the fourth quarter of 2019 and $42.7 million for the third quarter of 2020.
Salaries and employee benefits for the fourth quarter of 2020 increased to $29.5 million compared to $24.1 million for the fourth quarter of 2019 and $24.2 million for the third quarter of 2020. The increase in salaries and benefits of $5.4 million compared to the fourth quarter of 2019 and $5.3 million compared to the third quarter of 2020 was largely driven by the vesting of approximately 2.5 million restricted stock unit awards with market price conditions that impacted both compensation expense and payroll tax expense by a combined $4.1 million.
Also contributing to the increase in noninterest expense was other expense of $4.2 million for the fourth quarter of 2020, an increase of $1.9 million compared to the fourth quarter of 2019 and $2.1 million from the third quarter of 2020. The increase in other expense for the fourth quarter of 2020 compared to the fourth quarter of 2019 and third quarter of 2020 was largely comprised of increased franchise tax accruals and other operational expenses. Also influencing the quarter over quarter increase in other expense was a third quarter recovery from a previously recognized asset impairment.
The increase in noninterest expense for the fourth quarter of 2020 compared to the fourth quarter of 2019 was mitigated in part by a decrease in travel expense of $1.2 million.
Asset Quality
Net charge-offs for loans carried at historical cost were $537 thousand in the fourth quarter of 2020 compared to $10.1 million in the third quarter of 2020 and $536 thousand in the fourth quarter of 2019. Net charge-offs as a percentage of average held for investment loans and leases carried at historical cost, annualized, for the quarters ended December 31, 2020 and 2019, was 0.05% and 0.13%, respectively. Net charge-offs for loans carried at historical cost for the year ended December 31, 2020, totaled $15.3 million compared to $1.4 million for the year ended December 31, 2019. The increase in net charge-offs for the year ended December 31, 2020, was principally driven by the third quarter reclassification of fifteen hotel loans from held for investment to held for sale totaling $81.2 million in net investment. The reclassification to held for sale resulted in a write down reflected in charge-offs of $9.8 million. Net charge-offs as a percentage of total average held for investment loans and leases carried at historical cost for the years ended December 31, 2020 and 2019, were 0.45% and 0.10%, respectively.
Unguaranteed nonperforming (nonaccrual) loans and leases, excluding $5.4 million and $7.5 million accounted for under the fair value option at December 31, 2020, and September 30, 2020, respectively, decreased to $20.1 million, or 0.46% of loans and leases held for investment which are carried at historical cost, at December 31, 2020, compared to $20.2 million, or 0.48%, at September 30, 2020.
The unguaranteed exposure of foreclosed assets increased $293 thousand to $935 thousand at December 31, 2020, compared to September 30, 2020. Foreclosed assets increased $891 thousand to $4.2 million at December 31, 2020, from $3.3 million at September 30, 2020.
Provision for Loan and Lease Credit Losses
The provision for loan and lease credit losses for the fourth quarter of 2020 totaled $8.6 million compared to $10.3 million for the third quarter of 2020 and $4.8 million for the fourth quarter of 2019. The Company adopted the new current expected credit losses (“CECL”) standard effective January 1, 2020, and accordingly determined to use forecasted levels of unemployment as a primary economic variable in forecasting future expected losses. Ongoing developments and changing economic forecasts related to the COVID-19 pandemic significantly influences the Company’s allowance for credit losses on loans and leases. This, combined with the growing loan and lease portfolio and model refinements in recognition of loss experience in non-mature verticals, resulted in $40.7 million of provision for loan and lease credit losses for the year ended December 31, 2020, compared to $15.2 million for the year ended December 31, 2019.
The allowance for credit losses on loans and leases totaled $52.3 million at December 31, 2020, compared to $44.2 million at September 30, 2020. 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 1.21% and 1.05% at December 31, 2020, and September 30, 2020, respectively. The allowance for credit losses on loans and leases as a percentage of total loans and leases held for investment carried at historical cost is heavily influenced by the 100% guaranteed PPP loans.
Income Tax
Income tax benefit in the fourth quarter of 2020 was $17.6 million compared to a net income tax expense in the fourth quarter of 2019 of $2.1 million and an income tax expense of $11.7 million in the third quarter of 2020. The income tax benefit for the fourth quarter of 2020 was principally the product of the previously mentioned vesting of restricted stock unit awards with market price conditions during the fourth quarter. Upon vesting, the fair value of these awards exceeded the total compensation cost recognized by the Company for book purposes, which resulted in the recognition of a tax benefit of $22.1 million. For the year ended December 31, 2020, there was a total income tax benefit of $12.2 million largely driven by the vesting of restricted stock awards in the fourth quarter in addition to a tax benefit of $3.7 million due to the enactment of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) on March 27, 2020, which allows the carryback of certain net operating losses to each of the five taxable years preceding the taxable year of such losses.
Shareholders’ Equity
Total shareholders’ equity decreased by $16.3 million, or 2.8%, during the fourth quarter of 2020. This decrease was principally due to cash paid for employee tax obligations in lieu of stock for settlement of vested restricted stock unit awards discussed above. Total cash paid in lieu of stock during the fourth quarter was $49.0 million.
During 2020, 1,807,774 shares of Class B common stock (non-voting) were converted to Class A common stock (voting) in connection with private sales. The conversion decreased the value of Class B common stock (non-voting) and increased the value of Class A common stock (voting) by $19.1 million.
Conference Call
Live Oak will host a conference call to discuss quarterly results at 9:00 a.m. ET tomorrow morning (January 28, 2021). Media representatives, analysts and the public are invited to listen to this discussion by calling (844) 743-2494 (domestic) or (661) 378-9528 (international) with conference ID 9778804. A live webcast of the conference call along with presentation materials referenced during the conference call will be available on the Investor Relations page of the Company’s website at http://investor.liveoakbank.com. A replay of the conference call will also be available until February 4, 2021 and can be accessed by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international).
CFO Commentary
Additional commentary on the quarter by Brett Caines, Chief Financial Officer of the Company, is available at http://investor.liveoakbank.com in the supporting materials for the conference call.
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; 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:
Brett Caines | CFO | Investor Relations | 910.796.1645
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 4Q 2020 3Q 2020 2Q 2020 1Q 2020 4Q 2019 Interest income Loans and fees on loans $ 79,166 $ 70,621 $ 62,022 $ 58,961 $ 57,017 Investment securities, taxable 3,345 4,123 3,786 3,762 3,911 Other interest earning assets 529 334 1,009 750 885 Total interest income 83,040 75,078 66,817 63,473 61,813 Interest expense Deposits 19,195 22,155 25,121 23,255 23,801 Borrowings 1,544 1,560 798 57 1 Total interest expense 20,739 23,715 25,919 23,312 23,802 Net interest income 62,301 51,363 40,898 40,161 38,011 Provision for loan and lease credit losses 8,634 10,274 9,958 11,792 4,809 Net interest income after provision for loan and lease credit losses 53,667 41,089 30,940 28,369 33,202 Noninterest income Loan servicing revenue 6,684 6,803 6,691 6,422 6,730 Loan servicing asset revaluation (5,756 ) 2,061 (1,571 ) (4,692 ) (4,135 ) Net gains on sales of loans 14,976 12,690 10,695 11,112 11,364 Net (loss) gain on loans accounted for under the fair value option (4,759 ) 3,403 (1,089 ) (10,638 ) 1,432 Equity method investments income (loss) (8,739 ) (1,231 ) (2,243 ) (2,478 ) (1,769 ) Equity security investments gains (losses), net 107 14,705 161 (64 ) 54 Gain (loss) on sale of investment securities available-for-sale, net — 1,225 734 (79 ) 528 Lease income 2,615 2,634 2,635 2,624 2,600 Management fee income 2,206 1,296 1,206 1,644 1,556 Other noninterest income 3,469 3,458 5,192 1,891 1,765 Total noninterest income 10,803 47,044 22,411 5,742 20,125 Noninterest expense Salaries and employee benefits 29,477 24,203 30,782 28,063 24,072 Travel expense 1,056 250 364 1,781 2,246 Professional services expense 1,691 1,346 1,385 1,937 983 Advertising and marketing expense 973 552 624 1,361 1,630 Occupancy expense 2,302 2,079 1,955 2,421 2,528 Data processing expense 3,414 3,009 2,764 3,157 1,847 Equipment expense 4,002 4,314 4,652 4,635 4,402 Other loan origination and maintenance expense 3,173 2,669 2,492 2,456 2,390 FDIC insurance 2,147 2,095 1,721 1,510 2,012 Other expense 4,200 2,133 1,361 2,170 2,300 Total noninterest expense 52,435 42,650 48,100 49,491 44,410 Income (loss) before taxes 12,035 45,483 5,251 (15,380 ) 8,917 Income tax (benefit) expense (17,553 ) 11,703 1,474 (7,778 ) 2,085 Net income (loss) $ 29,588 $ 33,780 $ 3,777 $ (7,602 ) $ 6,832 Earnings (loss) per share Basic $ 0.72 $ 0.83 $ 0.09 $ (0.19 ) $ 0.17 Diluted $ 0.68 $ 0.81 $ 0.09 $ (0.19 ) $ 0.17 Weighted average shares outstanding Basic 41,320,851 40,542,696 40,506,671 40,334,179 40,291,867 Diluted 43,333,707 41,549,632 41,122,025 41,074,049 41,178,472 Live Oak Bancshares, Inc.
Quarterly Balance Sheets (unaudited)
(Dollars in thousands)As of the quarter ended 4Q 2020 3Q 2020 2Q 2020 1Q 2020 4Q 2019 Assets Cash and due from banks $ 297,167 $ 608,826 $ 1,256,958 $ 254,077 $ 124,610 Federal funds sold 21,153 25,924 91,188 158,226 96,787 Certificates of deposit with other banks 6,500 7,250 7,250 7,250 7,250 Investment securities available-for-sale 750,098 765,777 779,794 574,168 540,045 Loans held for sale (1) 1,175,470 1,190,200 976,594 996,050 966,447 Loans and leases held for investment (2) 5,145,082 5,037,199 4,650,056 2,817,491 2,627,286 Allowance for credit losses on loans and leases (52,306 ) (44,210 ) (44,083 ) (35,906 ) (28,234 ) Net loans and leases 5,092,776 4,992,989 4,605,973 2,781,585 2,599,052 Premises and equipment, net 259,267 253,737 269,063 274,177 279,099 Foreclosed assets 4,155 3,264 5,660 6,744 5,612 Servicing assets 33,918 37,831 33,834 33,532 35,365 Other assets 231,799 207,583 182,840 187,760 158,561 Total assets $ 7,872,303 $ 8,093,381 $ 8,209,154 $ 5,273,569 $ 4,812,828 Liabilities and Shareholders’ Equity Liabilities Deposits: Noninterest-bearing $ 75,287 $ 58,771 $ 53,938 $ 51,275 $ 51,965 Interest-bearing 5,637,541 5,647,273 5,819,354 4,588,126 4,175,015 Total deposits 5,712,828 5,706,044 5,873,292 4,639,401 4,226,980 Borrowings 1,542,093 1,747,083 1,721,029 50,012 14 Other liabilities 49,532 56,090 66,398 50,384 53,448 Total liabilities 7,304,453 7,509,217 7,660,719 4,739,797 4,280,442 Shareholders’ equity Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding — — — — — Class A common stock (voting) 298,890 325,753 319,542 314,994 309,526 Class B common stock (non-voting) 11,729 26,106 28,753 28,753 30,871 Retained earnings 235,724 207,400 174,837 172,276 180,265 Accumulated other comprehensive income 21,507 24,905 25,303 17,749 11,724 Total equity 567,850 584,164 548,435 533,772 532,386 Total liabilities and shareholders’ equity $ 7,872,303 $ 8,093,381 $ 8,209,154 $ 5,273,569 $ 4,812,828 (1) Includes $36.1 million, $30.4 million, $32.1 million, $19.2 million and $16.2 million measured at fair value for the quarters ended December 31, 2020, September 30, 2020, June 30, 2020, March 31, 2020 and December 31, 2019, respectively. (2) Includes $815.4 million, $845.7 million, $834.6 million, $831.4 million and $824.5 million measured at fair value for the quarters ended December 31, 2020, September 30, 2020, June 30, 2020, March 31, 2020 and December 31, 2019, respectively. Live Oak Bancshares, Inc.
Statements of Income (unaudited)
(Dollars in thousands, except per share data)Twelve months ended December 31, 2020 December 31, 2019 Interest income Loans and fees on loans $ 270,770 $ 207,836 Investment securities, taxable 15,016 15,345 Other interest earning assets 2,622 4,799 Total interest income 288,408 227,980 Interest expense Deposits 89,726 87,897 Borrowings 3,959 1 Total interest expense 93,685 87,898 Net interest income 194,723 140,082 Provision for loan and lease credit losses 40,658 15,212 Net interest income after provision for loan and lease credit losses 154,065 124,870 Noninterest income Loan servicing revenue 26,600 28,034 Loan servicing asset revaluation (9,958 ) (16,581 ) Net gains on sales of loans 49,473 29,002 Net (loss) gain on loans accounted for under the fair value option (13,083 ) 7,408 Equity method investments income (loss) (14,691 ) (7,889 ) Equity security investments gains (losses), net 14,909 3,532 Gain on sale of investment securities available-for-sale, net 1,880 620 Lease income 10,508 9,655 Management fee income 6,352 1,742 Other noninterest income 14,010 7,996 Total noninterest income 86,000 63,519 Noninterest expense Salaries and employee benefits 112,525 90,634 Travel expense 3,451 6,921 Professional services expense 6,359 6,859 Advertising and marketing expense 3,510 5,936 Occupancy expense 8,757 8,116 Data processing expense 12,344 9,265 Equipment expense 17,603 16,327 Other loan origination and maintenance expense 10,790 9,272 Renewable energy tax credit investment impairment — 602 FDIC insurance 7,473 3,447 Other expense 9,864 7,545 Total noninterest expense 192,676 164,924 Income before taxes 47,389 23,465 Income tax (benefit) expense (12,154 ) 5,431 Net income $ 59,543 $ 18,034 Earnings per share Basic $ 1.46 $ 0.45 Diluted $ 1.43 $ 0.44 Weighted average shares outstanding Basic 40,677,496 40,222,758 Diluted 41,771,250 41,053,514 Live Oak Bancshares, Inc.
Quarterly Selected Financial Data
(Dollars in thousands, except per share data)As of and for the three months ended 4Q 2020 3Q 2020 2Q 2020 1Q 2020 4Q 2019 Income Statement Data Net income (loss) $ 29,588 $ 33,780 $ 3,777 $ (7,602 ) $ 6,832 Per Common Share Net income (loss), basic $ 0.72 $ 0.83 $ 0.09 $ (0.19 ) $ 0.17 Net income (loss), diluted 0.68 0.81 0.09 (0.19 ) 0.17 Dividends declared 0.03 0.03 0.03 0.03 0.03 Book value 13.38 14.69 13.53 13.22 13.20 Tangible book value (1) 13.28 14.30 13.43 13.22 13.20 Performance Ratios Return on average assets (annualized) 1.49 % 1.67 % 0.22 % (0.61 )% 0.58 % Return on average equity (annualized) 19.86 23.64 2.68 (5.64 ) 5.06 Net interest margin 3.33 2.77 2.56 3.55 3.57 Efficiency ratio (1) 71.73 43.89 76.87 107.63 77.09 Noninterest income to total revenue 14.78 47.15 34.64 12.66 34.02 Selected Loan Metrics Loans and leases originated $ 808,010 $ 966,499 $ 2,175,055 $ 500,634 $ 523,688 Guaranteed loans sold 110,588 114,731 154,980 162,297 105,002 Average net gain on sale of guaranteed loans 115.94 110.19 66.76 63.71 106.16 Adjusted average net gain on sale of guaranteed loans (2) 114.07 107.99 65.94 83.48 94.86 Outstanding balance of sold loans serviced: Guaranteed 2,819,625 2,878,664 2,840,429 2,761,015 2,746,480 Unguaranteed 385,998 264,829 231,602 223,587 224,127 Total 3,205,623 3,143,493 3,072,031 2,984,602 2,970,607 Asset Quality Ratios Allowance for credit losses to loans and leases held for investment (4) 1.21 % 1.05 % 1.16 % 1.81 % 1.57 % Net charge-offs (4) $ 537 $ 10,147 $ 1,781 $ 2,799 $ 536 Net charge-offs to average loans and leases held for investment (3) (4) 0.05 % 1.03 % 0.21 % 0.58 % 0.13 % Nonperforming loans and leases (4) (5) $ 46,110 $ 46,749 $ 40,275 $ 34,088 $ 21,937 Foreclosed assets 4,155 3,264 5,660 6,744 5,612 Nonperforming loans and leases (unguaranteed exposure) (4) (5) 20,078 20,153 13,122 9,623 7,224 Foreclosed assets (unguaranteed exposure) 935 642 1,199 1,478 1,120 Nonperforming loans and leases not guaranteed by the SBA and foreclosures (4) (5) $ 21,013 $ 20,795 $ 14,321 $ 11,101 $ 8,344 Nonperforming loans, leases and foreclosures, not guaranteed by the SBA, to total assets (4) (5) 0.30 % 0.29 % 0.20 % 0.25 % 0.21 % Nonperforming loans accounted for under the fair value option $ 35,499 $ 47,434 $ 46,221 $ 60,558 $ 49,739 Nonperforming loans accounted for under the fair value option (unguaranteed exposure) 5,387 7,495 6,352 8,193 6,700 Capital Ratios Common equity tier 1 capital (to risk-weighted assets) 12.21 % 13.09 % 12.84 % 13.81 % 14.90 % Total capital (to risk-weighted assets) 13.45 14.19 13.99 14.83 15.74 Tier 1 risk based capital (to risk-weighted assets) 12.21 13.09 12.84 13.81 14.90 Tier 1 leverage capital (to average assets) 8.40 8.44 7.96 9.94 10.65 Notes to Quarterly Selected Financial Data
(1) See accompanying GAAP to Non-GAAP Reconciliation.
(2) Excludes fair value gain/loss on exchange-traded interest rate futures contracts.
(3) Quarterly net charge-offs as a percentage of quarterly average loans and leases held for investment, annualized.
(4) Excludes loans measured at fair value.
(5) The quarters ended December 31, 2020 and September 30, 2020 exclude one $6.1 million hotel loan classified as held for sale.Live Oak Bancshares, Inc.
Quarterly Average Balances and Net Interest Margin
(Dollars in thousands)Three months ended
December 31, 2020Three months ended
September 30, 2020Average Balance Interest Average Yield/Rate Average Balance Interest Average Yield/Rate Interest earning assets: Interest earning balances in other banks $ 384,811 $ 524 0.54 % $ 681,408 $ 320 0.18 % Federal funds sold 24,420 5 0.08 54,979 14 0.10 Investment securities 722,353 3,345 1.84 755,412 4,123 2.17 Loans held for sale 1,179,502 15,414 5.18 1,084,024 14,399 5.27 Loans and leases held for investment (1) 5,114,069 63,752 4.95 4,782,075 56,222 4.66 Total interest earning assets 7,425,155 83,040 4.44 7,357,898 75,078 4.05 Less: allowance for credit losses on loans and leases (44,286 ) (44,054 ) Non-interest earning assets 581,882 778,826 Total assets $ 7,962,751 $ 8,092,670 Interest bearing liabilities: Interest bearing checking $ 309,787 $ 460 0.59 % $ 500,007 $ 747 0.59 % Savings 1,929,378 3,226 0.66 1,669,199 3,674 0.87 Money market accounts 92,372 73 0.31 95,151 83 0.35 Certificates of deposit 3,217,854 15,436 1.90 3,423,643 17,651 2.05 Total interest bearing deposits 5,549,391 19,195 1.37 5,688,000 22,155 1.55 Borrowings 1,702,129 1,544 0.36 1,733,805 1,560 0.36 Total interest bearing liabilities 7,251,520 20,739 1.13 7,421,805 23,715 1.27 Non-interest bearing deposits 56,427 43,993 Non-interest bearing liabilities 58,955 55,353 Shareholders' equity 595,849 571,519 Total liabilities and shareholders' equity $ 7,962,751 $ 8,092,670 Net interest income and interest rate spread $ 62,301 3.31 % $ 51,363 2.78 % Net interest margin 3.33 2.77 Ratio of average interest-earning assets to average interest-bearing liabilities 102.39 % 99.14 % (1) Average loan and lease balances include non-accruing loans.
Live Oak Bancshares, Inc.
GAAP to Non-GAAP Reconciliation
(Dollars in thousands)As of and for the three months ended 4Q 2020 3Q 2020 2Q 2020 1Q 2020 4Q 2019 Total shareholders’ equity $ 567,850 $ 584,164 $ 548,435 $ 533,772 $ 532,386 Less: Goodwill 1,797 1,797 1,797 — — Other intangible assets 2,179 2,218 2,294 — — Tangible shareholders’ equity (a) $ 563,874 $ 580,149 $ 544,344 $ 533,772 $ 532,386 Shares outstanding (c) 42,452,446 40,575,982 40,525,632 40,380,201 40,316,974 Total assets $ 7,872,303 $ 8,093,381 $ 8,209,154 $ 5,273,569 $ 4,812,828 Less: Goodwill 1,797 1,797 1,797 — — Other intangible assets 2,179 2,218 2,294 — — Tangible assets (b) $ 7,868,327 $ 8,089,366 $ 8,205,063 $ 5,273,569 $ 4,812,828 Tangible shareholders’ equity to tangible assets (a/b) 7.17 % 7.17 % 6.63 % 10.12 % 11.06 % Tangible book value per share (a/c) $ 13.28 $ 14.30 $ 13.43 $ 13.22 $ 13.20 Efficiency ratio: Noninterest expense (d) $ 52,435 $ 42,650 $ 48,100 $ 49,491 $ 44,410 Net interest income 62,301 51,363 40,898 40,161 38,011 Noninterest income 10,803 47,044 22,411 5,742 20,125 Less: gain (loss) on sale of securities — 1,225 734 (79 ) 528 Adjusted operating revenue (e) $ 73,104 $ 97,182 $ 62,575 $ 45,982 $ 57,608 Efficiency ratio (d/e) 71.73 % 43.89 % 76.87 % 107.63 % 77.09 % Live Oak Bancshares, Inc.
GAAP to Non-GAAP Reconciliation (Continued)
(Dollars in thousands)Three months ended Twelve months ended 4Q 2020 3Q 2020 4Q 2019 4Q 2020 4Q 2019 Reconciliation of net income to non-GAAP net income: Net income $ 29,588 $ 33,780 $ 6,832 $ 59,543 $ 18,034 Loss (gain) on sale of aircraft 6 — — 6 (357 ) Impairment on aircraft held for sale 244 1,019 — 1,263 — Renewable energy tax credit investment impairment — — — — 602 Income tax effects and adjustments for non-GAAP items * (60 ) (245 ) — (305 ) (59 ) Non-GAAP net income $ 29,778 $ 34,554 $ 6,832 $ 60,507 $ 18,220 * Estimated at 24.0% Non-GAAP earnings per share: Basic $ 0.72 $ 0.85 $ 0.17 $ 1.49 $ 0.45 Diluted $ 0.69 $ 0.83 $ 0.17 $ 1.45 $ 0.44 Weighted-average shares outstanding: Basic 41,320,851 40,542,696 40,291,867 40,677,496 40,222,758 Diluted 43,333,707 41,549,632 41,178,472 41,771,250 41,053,514 Reconciliation of financial statement line items as reported to non-GAAP: Noninterest income, as reported $ 10,803 $ 47,044 $ 20,125 $ 86,000 $ 63,519 Gain on sale of aircraft — — — — (357 ) Noninterest income, non-GAAP $ 10,803 $ 47,044 $ 20,125 $ 86,000 $ 63,162 Noninterest expense, as reported $ 52,435 $ 42,650 $ 44,410 $ 192,676 $ 164,924 Loss on sale of aircraft (6 ) — — (6 ) — Impairment on aircraft held for sale (244 ) (1,019 ) — (1,263 ) — Renewable energy tax credit investment impairment — — — — (602 ) Noninterest expense, non-GAAP $ 52,185 $ 41,631 $ 44,410 $ 191,407 $ 164,322 Income before taxes, as reported $ 12,035 $ 45,483 $ 8,917 $ 47,389 $ 23,465 Loss (gain) on sale of aircraft 6 — — 6 (357 ) Impairment on aircraft held for sale 244 1,019 — 1,263 — Renewable energy tax credit investment impairment — — — — 602 Income before taxes, non-GAAP $ 12,285 $ 46,502 $ 8,917 $ 48,658 $ 23,710 Income tax (benefit) expense, as reported $ (17,553 ) $ 11,703 $ 2,085 $ (12,154 ) $ 5,431 Income tax effects and adjustments for non-GAAP items 60 245 — 305 59 Income tax (benefit) expense, non-GAAP $ (17,493 ) $ 11,948 $ 2,085 $ (11,849 ) $ 5,490 This press release presents the non-GAAP financial measures. The adjustments to reconcile from the applicable GAAP financial measure to the non-GAAP financial measures 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.
