Live Oak Bancshares, Inc. Reports Fourth Quarter 2022 Results
01/25/2023 - 04:30 PM
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
Live Oak Bancshares, Inc. Quarterly Statements of Income (unaudited) 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) 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) 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 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
Live Oak Bancshares, Inc. Quarterly Average Balances and Net Interest Margin Three Months Ended December 31, 2022 Three Months Ended September 30, 2022 Average Interest Average Average Interest Average 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 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.
