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Live Oak Bancshares, Inc. Reports Fourth Quarter 2022 Results
Press Releases

Live Oak Bancshares, Inc. Reports Fourth Quarter 2022 Results

WILMINGTON, N.C., Jan. 25, 2023 (GLOBE NEWSWIRE) — Live Oak Bancshares, Inc. (NYSE: LOB) (“Live Oak” or “the Company”) today reported fourth quarter of 2022 net income of $1.8 million, or $0.04 per diluted share. Net income for the year ended December 31, 2022, totaled $176.2 million, or $3.92 per diluted share.

“Live Oak closed 2022 with a strong quarter as our teams once again produced more than $1 billion in loan originations, ending a banner year that also reflected continued deposit growth and $96 million in organic capital growth,” said Live Oak Chairman and CEO James S. (Chip) Mahan III. “The strength and determination of the small business owners we serve is profound, and we believe our strong balance sheet and approach to lending, deposits, servicing and technology continues to set us apart as we advance our mission to serve the entrepreneurs who support our country’s economy.”

 
Year Over Year Highlights
 
(Dollars in thousands, except per share data)       Increase (Decrease)  
    2022       2021     Dollars   Percent  
Total revenue(1) $ 565,493     $ 456,985     $ 108,508     24 %
Total noninterest expense   314,226       230,987       83,239     36  
Income before taxes   210,324       210,788       (464 )    
Effective tax rate   16.2 %     20.8 %     n/a     n/a  
Net income $ 176,208     $ 166,995     $ 9,213     6 %
Diluted earnings per share   3.92       3.71       0.21     6  
Loan and lease production:                    
Loans and leases originated $ 4,007,621     $ 4,480,725     $ (473,104 )   (11 )%
% Fully funded   58.8 %     64.5 %     n/a     n/a  
Total loans and leases: $ 7,898,788     $ 6,637,781     $ 1,261,007     19 %
Total loans and leases, excluding PPP loans:   7,885,895       6,375,903       1,509,992     24  
Total assets:   9,855,498       8,213,393       1,642,105     20  
Total deposits:   8,884,928       7,112,044       1,772,884     25  

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

 
Fourth Quarter 2022 Key Measures
 
(Dollars in thousands, except per share data)       Increase (Decrease)    
  4Q 2022   3Q 2022   Dollars   Percent   4Q 2021
Total revenue(1) $ 104,973     $ 141,610     $ (36,637 )   (26 )%   $ 111,394  
Total noninterest expense   84,585       83,048       1,537     2       59,698  
Income before taxes   717       44,393       (43,676 )   (98 )     47,778  
Effective tax rate (149.9 )%     3.4 %     n/a     n/a       36.9 %
Net income $ 1,792     $ 42,868     $ (41,076 )   (96 )%   $ 30,147  
Diluted earnings per share   0.04       0.96       (0.92 )   (96 )   $ 0.66  
Loan and lease production:                  
Loans and leases originated $ 1,177,688     $ 1,005,235     $ 172,453     17 %   $ 1,083,623  
% Fully funded   58.1 %     54.0 %     n/a     n/a       54.1 %

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

Loans and Leases

At December 31, 2022, the total loan and lease portfolio was $7.90 billion, 6.9% above its level at September 30, 2022 and 19.0% above its level at December 31, 2021. This growth was the product of strong origination volumes. Compared to the third quarter of 2022, loans and leases held for investment increased $490.8 million, or 7.2%, to $7.34 billion while loans held for sale increased $17.0 million, or 3.2%, to $554.6 million. Average loans and leases were $7.64 billion during the fourth quarter of 2022 compared to $7.21 billion during the third quarter of 2022. Excluding Paycheck Protection Program (“PPP”) loans, the total loan and lease portfolio increased by $1.51 billion, or 23.7%, compared to December 31, 2021, and $518.7 million, or 7.0%, compared to September 30, 2022.

The total loan and lease portfolio of $7.90 billion includes $12.9 million of PPP loans, net of deferred fees and costs, at December 31, 2022. The total loan and lease portfolio at December 31, 2022, and September 30, 2022 was comprised of 57.7% and 56.6% of unguaranteed loans and leases, respectively.

Loan and lease originations totaled $1.18 billion during the fourth quarter of 2022, an increase of $172.5 million, or 17.2%, from the third quarter of 2022.

Deposits

Total deposits increased to $8.88 billion at December 31, 2022, an increase of $480.0 million compared to September 30, 2022, and an increase of $1.77 billion compared to December 31, 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 fourth quarter of 2022 increased $269.0 million, or 3.3%, to $8.36 billion, compared to $8.09 billion for the third quarter of 2022. The ratio of average total loans and leases to average interest-bearing deposits was 91.4% for the fourth quarter of 2022 compared to 89.1% for the third quarter of 2022.

Borrowings

Borrowings totaled $83.2 million at December 31, 2022, compared to $35.6 million and $318.3 million at September 30, 2022 and December 31, 2021, respectively. During the fourth quarter of 2022, the Company increased borrowings by $47.6 million primarily related to providing short term support for growth in the loan and lease portfolio. The decrease in borrowings as compared to December 31, 2021 is primarily related to the repayment of the Federal Reserve’s Paycheck Protection Liquidity Facility earlier in 2022.

Net Interest Income

Net interest income for the fourth quarter of 2022 increased to $85.9 million compared to $83.9 million for the third quarter of 2022 and $77.6 million for the fourth quarter of 2021.

The net interest margin for the fourth and third quarters of 2022 was 3.76% and 3.84%, respectively, a decrease of eight basis points quarter over quarter. This decrease was due to interest rate increases where deposits are repricing more rapidly than the Company’s loan portfolio. During the fourth quarter of 2022, the average cost of interest-bearing liabilities increased by 85 basis points while the average yield on interest-earning assets increased by 67 basis points.

The increase in net interest income for the fourth quarter of 2022 compared to the fourth quarter of 2021 was driven by growth in the total loan and lease portfolio. Partially mitigating this increase was a decrease in the net interest margin arising from an increase in interest-bearing liabilities combined with average cost of funds outpacing the average yield on interest-earning assets.

Noninterest Income

Noninterest income for the fourth quarter of 2022 decreased to $19.1 million compared to $57.7 million for the third quarter of 2022 and $33.8 million for the fourth quarter of 2021. The primary drivers behind decreased noninterest income are outlined below.

The largest driver of the decrease in noninterest income for the fourth quarter of 2022 as compared to the third quarter of 2022 arose from a decrease in equity method investment income of $31.0 million. This quarter over quarter decrease of $31.0 million was principally due to 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, LLC (“Payrailz”). The $4.8 million decrease in equity method investment income for the fourth quarter of 2022 as compared to the fourth quarter of 2021 was principally related to higher levels of pro-rata losses of equity method investees in 2022.

The loan servicing asset revaluation resulted in a loss of $5.0 million for the fourth quarter of 2022 compared to a loss of $1.3 million for the third quarter of 2022 and $4.2 million for the fourth quarter of 2021. Higher levels of losses in the loan servicing asset revaluation compared to the prior quarters was largely the result of weaker economic conditions related to the rapidly rising interest rate environment.

Net gains on sales of loans was $7.4 million, a $1.9 million decrease compared to the third quarter of 2022 and a $12.9 million decrease compared to the fourth quarter of 2021. During the second quarter of 2022, the Company began significantly decreasing loan sale volumes due to unusually weak market conditions depressing market premiums. The decrease in net gains on sales of loans compared to the third quarter of 2022 and fourth quarter of 2021 was largely the result of lower volume of loan sales combined with overall weaker market conditions compared to those experienced in the prior periods. The average guaranteed loan sale premium was 105%, 108% and 110% for the fourth quarter of 2022, third quarter of 2022 and fourth quarter of 2021, respectively. The volume of guaranteed loans sold was $144.3 million for the fourth quarter of 2022 compared to $148.1 million sold in the third quarter of 2022 and $199.0 million sold in the fourth quarter of 2021.

The net gain on loans accounted for under the fair value option totaled $571 thousand for the fourth quarter of 2022, a $3.8 million decrease compared to the $4.4 million net gain for the third quarter of 2022. This reduced gain in valuation of loans accounted for under the fair value option was largely the result of the above referenced negative market pricing trends combined with continued amortization of the portfolio of loans accounted for under the fair value option.

Noninterest Expense

Noninterest expense for the fourth quarter of 2022 totaled $84.6 million compared to $83.0 million for the third quarter of 2022 and $59.7 million for the fourth quarter of 2021. The primary drivers in the noninterest expense changes are outlined below.

Salaries and employee benefits for the fourth quarter of 2022 decreased $919 thousand compared to the third quarter of 2022 and increased $10.1 million compared to the fourth quarter of 2021. Driving the quarter over quarter decrease was an additional bonus accrual of $3.0 million that was included in the third quarter of 2022 related to the earlier discussed Payrailz gain. The increase over the fourth quarter of 2021 was principally the result of continued investment in human resources to support strategic and growth initiatives.

Advertising and marketing expense increased $1.3 million compared to the third quarter of 2022 and $2.0 million compared to the fourth quarter of 2021 as a continued investment in the Company’s lending and deposit market growth.

Technology expenses increased $1.1 million compared to the third quarter of 2022 and $2.4 million compared to the fourth quarter of 2021. The increase for both periods was primarily related to enhanced investments in the Company’s technology resources.

The Company incurred impairment charges related to new renewable energy tax credit investment transactions of $8.4 million in the fourth quarter of 2022 compared to $7.7 million in the third quarter of 2022. Investments of this type generate a return primarily through the realization of income tax credits and other benefits; accordingly, impairment of the investment amount is recognized in conjunction with the realization of related tax benefits. These investments generated federal investment tax credits in the fourth and third quarters of 2022 of $10.3 million and $6.1 million, respectively, which are reflected in the Company’s 2022 effective tax rate. Investments of this nature are part of the Company’s ongoing initiative to promote renewable energy sources.

Asset Quality

During the fourth quarter of 2022, the Company recognized net charge-offs for loans carried at historical cost of $1.4 million compared to $1.7 million in the third quarter of 2022 and $15 thousand in the fourth 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 December 31, 2022, September 30, 2022 and December 30, 2021, was 0.09%, 0.12% and 0.00%, respectively. Net charge-offs as a percentage of total average held for investment loans and leases carried at historical cost for the years ended December 31, 2022 and 2021, were 0.14% and 0.09%, respectively.

Unguaranteed nonperforming (nonaccrual) loans and leases, excluding $6.7 million and $2.7 million accounted for under the fair value option at December 31, 2022, and September 30, 2022, respectively, increased to $18.8 million, or 0.27% of loans and leases held for investment which are carried at historical cost, at December 31, 2022, compared to $14.3 million, or 0.23%, at September 30, 2022.

Provision for Loan and Lease Credit Losses

The provision for loan and lease credit losses for the fourth quarter of 2022 totaled $19.7 million compared to $14.2 million for the third quarter of 2022 and $3.9 million for the fourth quarter of 2021. The higher provision expense in the fourth quarter of 2022 was primarily the result of continued growth of the loan and lease portfolio combined with charge-off experience impacts and specific reserve growth related to a small number of relationships.

The allowance for credit losses on loans and leases totaled $96.6 million at December 31, 2022, compared to $78.3 million at September 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 1.41% and 1.23% at December 31, 2022, and September 30, 2022, respectively.

Income Tax

Income tax benefit and related effective tax rate was $1.1 million and (149.9)% for the fourth quarter of 2022. In comparison, income tax expense and related effective tax rates for the third quarter of 2022 and fourth quarter of 2021 were $1.5 million and 3.4%, and $17.6 million and 36.9%, respectively. The lower level of income tax expense for the fourth quarter of 2022 compared to the third quarter of 2022 was primarily the result of decreased pretax income combined with a research credit recognized during the quarter related to the Company’s ongoing investment in developing its technology-based platform. The lower level of income tax expense for the fourth quarter of 2022 compared to the fourth quarter of 2021 was primarily the result of a lower level of pretax income combined with higher levels of investment tax credits related to renewable energy investment transactions and additional impacts discussed above related to research credits.

Conference Call

Live Oak will host a conference call to discuss the company’s financial results and business outlook tomorrow, January 26, 2023, at 9:00 a.m. ET. To listen to the call via a live audio webcast, visit http://investor.liveoakbank.com/. To participate via telephone, please register in advance at https://register.vevent.com/register/BI38276e2e147f4289a0d59072d04a6f09. Upon registration, participants will receive a confirmation email detailing how to join the conference call, including the dial-in number and unique passcode and that can be used to access the call. After the conference call, a replay will be available until February 2, 2023, 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; a deterioration of the credit rating for U.S. long-term sovereign debt, actions that the U.S. government may take to avoid exceeding the debt ceiling, and uncertainties surrounding the debt ceiling and the federal budget; adverse results, including related fees and expenses, from pending or future lawsuits, government investigations or private actions; and the other factors discussed in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) and available at the SEC’s Internet site (http://www.sec.gov). Except as required by law, the Company specifically disclaims any obligation to update any factors or to publicly announce the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.

About Live Oak Bancshares, Inc.

Live Oak Bancshares, Inc. (NYSE: LOB) is a financial holding company and the parent company of Live Oak Bank. Live Oak Bancshares and its subsidiaries partner with businesses that share a groundbreaking focus on service and technology to redefine banking. To learn more, visit www.liveoakbank.com.

Contacts:

William C. (BJ) Losch, III | CFO & Chief Banking Officer | Investor Relations | 910.765.9966
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 2022 Changes vs.
  4Q 2022   3Q 2022   2Q 2022   1Q 2022   4Q 2021   3Q 2022   4Q 2021
Interest income                     %   %
Loans and fees on loans $ 127,310     $ 107,880     $ 94,157     $ 89,198     $ 88,577     18.0     43.7  
Investment securities, taxable   6,716       5,506       4,046       3,399       3,455     22.0     94.4  
Other interest earning assets   2,584       2,448       1,044       185       171     5.6     1411.1  
Total interest income   136,610       115,834       99,247       92,782       92,203     17.9     48.2  
Interest expense                          
Deposits   50,357       31,553       18,777       14,348       13,817     59.6     264.5  
Borrowings   351       395       536       655       748     (11.1 )   (53.1 )
Total interest expense   50,708       31,948       19,313       15,003       14,565     58.7     248.1  
Net interest income   85,902       83,886       79,934       77,779       77,638     2.4     10.6  
Provision for loan and lease credit losses   19,671       14,169       5,267       1,836       3,918     38.8     402.1  
Net interest income after provision for loan and lease credit losses   66,231       69,717       74,667       75,943       73,720     (5.0 )   (10.2 )
Noninterest income                          
Loan servicing revenue   6,296       6,230       6,477       6,356       6,289     1.1     0.1  
Loan servicing asset revaluation   (5,016 )     (1,324 )     (8,668 )     (1,569 )     (4,160 )   (278.9 )   (20.6 )
Net gains on sales of loans   7,362       9,275       5,630       20,977       20,257     (20.6 )   (63.7 )
Net gain (loss) on loans accounted for under the fair value option   571       4,420       (4,461 )     516       (66 )   (87.1 )   965.2  
Equity method investments income (loss)   (1,818 )     29,136       119,056       (2,124 )     2,969     (106.2 )   (161.2 )
Equity security investments gains (losses), net   868       876       1,655       (44 )     218     (0.9 )   298.2  
Lease income   2,555       2,516       2,510       2,503       2,521     1.6     1.3  
Management fee income   3,200       2,844       2,558       1,488       1,482     12.5     115.9  
Other noninterest income   5,053       3,751       3,772       4,565       4,246     34.7     19.0  
Total noninterest income   19,071       57,724       128,529       32,668       33,756     (67.0 )   (43.5 )
Noninterest expense                          
Salaries and employee benefits   42,560       43,479       46,276       38,507       32,464     (2.1 )   31.1  
Travel expense   1,872       2,372       2,358       1,897       1,782     (21.1 )   5.1  
Professional services expense   2,453       2,505       3,988       2,791       3,724     (2.1 )   (34.1 )
Advertising and marketing expense   3,892       2,621       2,301       1,729       1,844     48.5     111.1  
Occupancy expense   3,469       2,519       2,773       2,327       2,045     37.7     69.6  
Technology expense   8,849       7,770       5,762       6,053       6,489     13.9     36.4  
Equipment expense   3,759       3,761       3,784       3,816       3,741     (0.1 )   0.5  
Other loan origination and maintenance expense   3,657       3,376       3,022       3,113       3,406     8.3     7.4  
Renewable energy tax credit investment impairment   8,446       7,721       50                 9.4     100.0  
FDIC insurance   2,923       2,697       2,164       1,972       1,931     8.4     51.4  
Contributions and donations   33       191       5,515       723       328     (82.7 )   (89.9 )
Other expense   2,672       4,036       2,886       2,786       1,944     (33.8 )   37.4  
Total noninterest expense   84,585       83,048       80,879       65,714       59,698     1.9     41.7  
Income before taxes   717       44,393       122,317       42,897       47,778     (98.4 )   (98.5 )
Income tax (benefit) expense   (1,075 )     1,525       25,278       8,388       17,631     (170.5 )   (106.1 )
Net income $ 1,792     $ 42,868     $ 97,039     $ 34,509     $ 30,147     (95.8 )   (94.1 )
Earnings per share                          
Basic $ 0.04     $ 0.97     $ 2.22     $ 0.79     $ 0.69     (95.9 )   (94.2 )
Diluted $ 0.04     $ 0.96     $ 2.16     $ 0.76     $ 0.66     (95.8 )   (93.9 )
Weighted average shares outstanding                          
Basic   44,005,220       43,914,920       43,824,707       43,701,943       43,492,172          
Diluted   44,794,941       44,797,109       44,803,278       45,227,536       45,474,530          

 
Live Oak Bancshares, Inc.
Quarterly Balance Sheets (unaudited)
(Dollars in thousands)
 
  As of the quarter ended   4Q 2022 Change vs.
  4Q 2022   3Q 2022   2Q 2022   1Q 2022   4Q 2021   3Q 2022   4Q 2021
Assets                     %   %
Cash and due from banks $ 280,239     $ 335,046     $ 580,493     $ 477,778     $ 187,203     (16.4 )   49.7  
Federal funds sold   136,397       68,324       51,694       29,993       16,547     99.6     724.3  
Certificates of deposit with other banks   4,000       4,250       4,250       4,250       4,750     (5.9 )   (15.8 )
Investment securities available-for-sale   1,014,719       1,005,372       927,968       844,577       906,052     0.9     12.0  
Loans held for sale (1)   554,610       537,649       1,199,734       1,028,635       1,116,519     3.2     (50.3 )
Loans and leases held for investment (2)   7,344,178       6,853,382       5,860,209       5,738,241       5,521,262     7.2     33.0  
Allowance for credit losses on loans and leases   (96,566 )     (78,291 )     (65,863 )     (63,058 )     (63,584 )   23.3     51.9  
Net loans and leases   7,247,612       6,775,091       5,794,346       5,675,183       5,457,678     7.0     32.8  
Premises and equipment, net   263,290       260,285       257,926       254,865       240,196     1.2     9.6  
Foreclosed assets         1,178       191       198       620     (100.0 )   (100.0 )
Servicing assets   26,323       29,081       28,661       36,286       33,574     (9.5 )   (21.6 )
Other assets   328,308       298,374       275,634       268,201       250,254     10.0     31.2  
Total assets $ 9,855,498     $ 9,314,650     $ 9,120,897     $ 8,619,966     $ 8,213,393     5.8     20.0  
Liabilities and Shareholders’ Equity                          
Liabilities                          
Deposits:                          
Noninterest-bearing $ 194,100     $ 170,336     $ 119,371     $ 86,342     $ 89,279     14.0     117.4  
Interest-bearing   8,690,828       8,234,573       8,036,373       7,550,821       7,022,765     5.5     23.8  
Total deposits   8,884,928       8,404,909       8,155,744       7,637,163       7,112,044     5.7     24.9  
Borrowings   83,203       35,616       86,209       196,911       318,289     133.6     (73.9 )
Other liabilities   76,334       71,957       87,282       72,565       67,927     6.1     12.4  
Total liabilities   9,044,465       8,512,482       8,329,235       7,906,639       7,498,260     6.2     20.6  
Shareholders’ equity                          
Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding                                    
Class A common stock (voting)   330,854       325,632       320,924       315,607       310,970     1.6     6.4  
Class B common stock (non-voting)                           1,324         (100.0 )
Retained earnings   572,497       571,778       530,021       434,226       400,893     0.1     42.8  
Accumulated other comprehensive (loss) income   (92,318 )     (95,242 )     (59,283 )     (36,506 )     1,946     3.1     (4,844.0 )
Total shareholders’ equity   811,033       802,168       791,662       713,327       715,133     1.1     13.4  
Total liabilities and shareholders’ equity $ 9,855,498     $ 9,314,650     $ 9,120,897     $ 8,619,966     $ 8,213,393     5.8     20.0  

(1)   Includes $23.5 million, $25.1 million, and $25.3 million measured at fair value for the quarters ended June 30, 2022, March 31, 2022, and December 31, 2021, respectively.

(2)   Includes $494.5 million, $512.2 million, $530.6 million, $600.6 million, and $645.2 million measured at fair value for the quarters ended December 31, 2022, September 30, 2022, June 30, 2022, March 31, 2022, and December 31, 2021, respectively.

 
 
Live Oak Bancshares, Inc.
Statements of Income (unaudited)
(Dollars in thousands, except per share data)
 
  Twelve Months Ended
  December 31, 2022   December 31, 2021
Interest income      
Loans and fees on loans $ 418,545     $ 347,738  
Investment securities, taxable   19,667       12,533  
Other interest earning assets   6,261       942  
Total interest income   444,473       361,213  
Interest expense      
Deposits   115,035       59,740  
Borrowings   1,937       4,688  
Total interest expense   116,972       64,428  
Net interest income   327,501       296,785  
Provision for loan and lease credit losses   40,943       15,210  
Net interest income after provision for loan and lease credit losses   286,558       281,575  
Noninterest income      
Loan servicing revenue   25,359       25,219  
Loan servicing asset revaluation   (16,577 )     (11,726 )
Net gains on sales of loans   43,244       67,280  
Net gain on loans accounted for under the fair value option   1,046       4,257  
Equity method investments income (loss)   144,250       (1,716 )
Equity security investments gains (losses), net   3,355       44,752  
Lease income   10,084       10,263  
Management fee income   10,090       6,378  
Other noninterest income   17,141       15,493  
Total noninterest income   237,992       160,200  
Noninterest expense      
Salaries and employee benefits   170,822       124,932  
Travel expense   8,499       5,809  
Professional services expense   11,737       15,135  
Advertising and marketing expense   10,543       5,002  
Occupancy expense   11,088       8,423  
Technology expense   28,434       22,648  
Equipment expense   15,120       14,869  
Other loan origination and maintenance expense   13,168       13,529  
Renewable energy tax credit investment impairment   16,217       3,187  
FDIC insurance   9,756       7,070  
Contributions and donations   6,462       2,331  
Other expense   12,380       8,052  
Total noninterest expense   314,226       230,987  
Income before taxes   210,324       210,788  
Income tax expense   34,116       43,793  
Net income $ 176,208     $ 166,995  
Earnings per share      
Basic $ 4.02     $ 3.87  
Diluted $ 3.92     $ 3.71  
Weighted average shares outstanding      
Basic   43,862,291       43,169,935  
Diluted   44,906,310       45,071,304  
       

 
Live Oak Bancshares, Inc.
Quarterly Selected Financial Data
(Dollars in thousands, except per share data)
 
  As of and for the three months ended
  4Q 2022   3Q 2022   2Q 2022   1Q 2022   4Q 2021
Income Statement Data                  
Net income $ 1,792     $ 42,868     $ 97,039     $ 34,509     $ 30,147  
Per Common Share                  
Net income, diluted $ 0.04     $ 0.96     $ 2.16     $ 0.76     $ 0.66  
Dividends declared   0.03       0.03       0.03       0.03       0.03  
Book value   18.41       18.24       18.05       16.29       16.39  
Tangible book value (1)   18.32       18.15       17.97       16.20       16.31  
Performance Ratios                  
Return on average assets (annualized)   0.08 %     1.86 %     4.40 %     1.65 %     1.47 %
Return on average equity (annualized)   0.88       20.79       46.14       18.94       16.80  
Net interest margin   3.76       3.84       3.89       4.02       4.02  
Efficiency ratio (1)   80.58       58.65       38.80       59.50       53.59  
Noninterest income to total revenue   18.17       40.76       61.66       29.58       30.30  
Selected Loan Metrics                  
Loans and leases originated $ 1,177,688     $ 1,005,235     $ 959,635     $ 865,063     $ 1,083,623  
Outstanding balance of sold loans serviced   3,481,885       3,345,907       3,329,616       3,381,883       3,298,828  
Asset Quality Ratios                  
Allowance for credit losses to loans and leases held for investment (3)   1.41 %     1.23 %     1.24 %     1.23 %     1.30 %
Net charge-offs (3) $ 1,396     $ 1,741     $ 2,462     $ 2,362     $ 15  
Net charge-offs to average loans and leases held for investment (2) (3)   0.09 %     0.12 %     0.19 %     0.19 %     %
                   
Nonperforming loans and leases at historical cost (3)                  
Unguaranteed $ 18,784     $ 14,334     $ 11,974     $ 19,475     $ 15,987  
Guaranteed   54,608       45,730       33,794       32,828       26,546  
Total   73,392       60,064       45,768       52,303       42,533  
Unguaranteed nonperforming historical cost loans and leases, to loans and leases held for investment (3)   0.27 %     0.23 %     0.22 %     0.38 %     0.33 %
                   
Nonperforming loans at fair value (4)                  
Unguaranteed $ 6,678     $ 2,736     $ 3,615     $ 4,451     $ 4,791  
Guaranteed   38,212       25,169       27,895       30,850       33,471  
Total   44,890       27,905       31,510       35,301       38,262  
Unguaranteed nonperforming fair value loans to loans held for investment (4)   1.35 %     0.53 %     0.68 %     0.74 %     0.74 %
Capital Ratios                  
Common equity tier 1 capital (to risk-weighted assets)   12.46 %     13.16 %     13.14 %     12.10 %     12.38 %
Tier 1 leverage capital (to average assets)   9.26       9.49       9.44       8.87       8.87  
                   

Notes to Quarterly Selected Financial Data
(1)   See accompanying GAAP to Non-GAAP Reconciliation.
(2)   Quarterly net charge-offs as a percentage of quarterly average loans and leases held for investment, annualized.
(3)   Loans and leases at historical cost only (excludes loans measured at fair value).
(4)   Loans accounted for under the fair value option only (excludes loans and leases carried at historical cost).

 
 
Live Oak Bancshares, Inc.
Quarterly Average Balances and Net Interest Margin
(Dollars in thousands)
 
  Three Months Ended
December 31, 2022
  Three Months Ended
September 30, 2022
  Average
Balance
  Interest   Average
Yield/Rate
  Average
Balance
  Interest   Average
Yield/Rate
Interest-earning assets:                      
Interest-earning balances in other banks $ 138,819     $ 1,063   3.04 %   $ 225,959     $ 1,375   2.41 %
Federal funds sold   160,944       1,521   3.75       187,014       1,073   2.28  
Investment securities   1,128,105       6,716   2.36       1,040,076       5,506   2.10  
Loans held for sale   573,280       11,635   8.05       1,000,912       16,156   6.40  
Loans and leases held for investment(1)   7,066,106       115,675   6.49       6,208,447       91,724   5.86  
Total interest-earning assets   9,067,254       136,610   5.98       8,662,408       115,834   5.31  
Less: Allowance for credit losses on loans and leases   (77,977 )             (65,511 )        
Noninterest-earning assets   476,204               598,220          
Total assets $ 9,465,481             $ 9,195,117          
Interest-bearing liabilities:                      
Savings $ 4,096,034     $ 28,587   2.77 %   $ 4,009,928     $ 16,775   1.66 %
Money market accounts   117,843       121   0.41       100,074       72   0.29  
Certificates of deposit   4,143,894       21,649   2.07       3,978,793       14,706   1.47  
Total deposits   8,357,771       50,357   2.39       8,088,795       31,553   1.55  
Borrowings   36,264       351   3.84       63,207       395   2.48  
Total interest-bearing liabilities   8,394,035       50,708   2.40       8,152,002       31,948   1.55  
Noninterest-bearing deposits   182,727               133,676          
Noninterest-bearing liabilities   69,814               84,597          
Shareholders’ equity   818,905               824,842          
Total liabilities and shareholders’ equity $ 9,465,481             $ 9,195,117          
Net interest income and interest rate spread     $ 85,902   3.58 %       $ 83,886   3.76 %
Net interest margin         3.76             3.84  
Ratio of average interest-earning assets to average interest-bearing liabilities         108.02 %           106.26 %

(1)   Average loan and lease balances include non-accruing loans and leases.

 
 
Live Oak Bancshares, Inc.
GAAP to Non-GAAP Reconciliation
(Dollars in thousands)
  As of and for the three months ended
  4Q 2022   3Q 2022   2Q 2022   1Q 2022   4Q 2021
Total shareholders’ equity $ 811,033     $ 802,168     $ 791,662     $ 713,327     $ 715,133  
Less:                  
Goodwill   1,797       1,797       1,797       1,797       1,797  
Other intangible assets   1,873       1,912       1,950       1,988       2,026  
Tangible shareholders’ equity (a) $ 807,363     $ 798,459     $ 787,915     $ 709,542     $ 711,310  
Shares outstanding (c)   44,061,244       43,981,350       43,854,011       43,787,660       43,619,070  
Total assets $ 9,855,498     $ 9,314,650     $ 9,120,897     $ 8,619,966     $ 8,213,393  
Less:                  
Goodwill   1,797       1,797       1,797       1,797       1,797  
Other intangible assets   1,873       1,912       1,950       1,988       2,026  
Tangible assets (b) $ 9,851,828     $ 9,310,941     $ 9,117,150     $ 8,616,181     $ 8,209,570  
Tangible shareholders’ equity to tangible assets (a/b)   8.20 %     8.58 %     8.64 %     8.23 %     8.66 %
Tangible book value per share (a/c) $ 18.32     $ 18.15     $ 17.97     $ 16.20     $ 16.31  
Efficiency ratio:                  
Noninterest expense (d) $ 84,585     $ 83,048     $ 80,879     $ 65,714     $ 59,698  
Net interest income   85,902       83,886       79,934       77,779       77,638  
Noninterest income   19,071       57,724       128,529       32,668       33,756  
Total revenue (e) $ 104,973     $ 141,610     $ 208,463     $ 110,447     $ 111,394  
Efficiency ratio (d/e)   80.58 %     58.65 %     38.80 %     59.50 %     53.59 %
                                       

This press release presents the non-GAAP financial measures. The adjustments to reconcile from the non-GAAP financial measures to the applicable GAAP financial measure are included where applicable in financial results presented in accordance with GAAP. The Company considers these adjustments to be relevant to ongoing operating results. The Company believes that excluding the amounts associated with these adjustments to present the non-GAAP financial measures provides a meaningful base for period-to-period comparisons, which will assist regulators, investors, and analysts in analyzing the operating results or financial position of the Company. The non-GAAP financial measures are used by management to assess the performance of the Company’s business for presentations of Company performance to investors, and for other reasons as may be requested by investors and analysts. The Company further believes that presenting the non-GAAP financial measures will permit investors and analysts to assess the performance of the Company on the same basis as that applied by management. Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although non-GAAP financial measures are frequently used by shareholders to evaluate a company, they have limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of results reported under GAAP. 

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