WILMINGTON, N.C., Oct. 25, 2017 (GLOBE NEWSWIRE) -- Live Oak Bancshares, Inc. (Nasdaq:LOB) (“Live Oak” or “the Company”) today reported third quarter net earnings available to common shareholders of $12.9 million, or $0.33 per diluted share, compared to $3.5 million, or $0.10 per diluted share, for the third quarter of 2016.
“We are very pleased with our third quarter performance. We continue our mission to serve the needs of small businesses with year-to-date loan and lease originations of $1.45 billion nearly matching our production for all of 2016. Adding to this excitement, we also raised over $100 million in capital which will expedite the pursuit of our growth trajectory and the many exciting opportunities presented to us. The recent closing of our joint venture with First Data Corporation to create Apiture will significantly enhance our endeavor to revolutionize the industry with open API's on next generation financial institution platforms,” said James S. Mahan, III, Chief Executive Officer of Live Oak.
| Third Quarter 2017 Key Measures | |||||||||||||||||||
| (Dollars in thousands, except per share data) | Increase (Decrease) | ||||||||||||||||||
| Q3 2017 | Q3 2016 | Dollars | Percent | Q2 2017 | |||||||||||||||
| Loan production: | |||||||||||||||||||
| Loans and leases originated | $ | 395,682 | $ | 381,050 | $ | 14,632 | 4 | % | $ | 586,471 | |||||||||
| % Fully funded | 37.4 | % | 36.1 | % | n/a | n/a | 42.2 | % | |||||||||||
| Loan sales: | |||||||||||||||||||
| Guaranteed loans sold | $ | 163,843 | $ | 210,610 | $ | (46,767 | ) | (22 | )% | $ | 203,714 | ||||||||
| Net gains on sales of guaranteed loans | 18,148 | 21,833 | (3,685 | ) | (17 | ) | 18,676 | ||||||||||||
| Average net gain on sale of guaranteed loans, per million sold | 110.76 | 103.67 | 7.09 | 7 | 91.68 | ||||||||||||||
| Net interest income and servicing revenues | 27,515 | 17,491 | 10,024 | 57 | 24,566 | ||||||||||||||
| Net income attributable to Live Oak Bancshares, Inc. | 12,862 | 3,479 | 9,383 | 270 | 9,795 | ||||||||||||||
| Diluted earnings per share | 0.33 | 0.10 | 0.23 | 230 | 0.27 | ||||||||||||||
| Non-GAAP net income (1) | 13,323 | 5,498 | 7,825 | 142 | 10,227 | ||||||||||||||
| Non-GAAP diluted earnings per share (1) | 0.34 | 0.16 | 0.18 | 113 | 0.28 | ||||||||||||||
(1) See accompanying GAAP to Non-GAAP Reconciliation.
Loans and Leases
At September 30, 2017, the total loan and lease portfolio of $1.86 billion increased 67.5% above its level of a year ago. Net loans and leases held for investment increased $83.9 million, or 7.9%, to $1.15 billion at September 30, 2017, from $1.06 billion at June 30, 2017. Loans held for sale increased $83.4 million, or 13.7%, to $692.6 million at September 30, 2017, from $609.1 million at June 30, 2017. Loan and lease originations totaled $395.7 million during the third quarter, a decline from the prior quarter due to the seasonality of lending in the renewable energy sector. The total loan and lease portfolio at September 30, 2017, and June 30, 2017, of $1.86 billion and $1.69 billion, respectively, were comprised of approximately 60.6% and 61.7% of unguaranteed loans and leases, respectively.
Average loans and leases were $1.77 billion during the third quarter of 2017 compared to $1.61 billion during the second quarter of 2017.
Net Interest Income
Net interest income for the third quarter of 2017 increased to $21.0 million compared to $11.6 million for the third quarter of 2016. The increase was driven by the significant growth in the combined held for sale and held for investment loan and lease portfolios and reflected the Company's initiative to grow recurring revenue sources by increasing the level of loans and leases retained on the balance sheet. The net interest margin of 3.91% for the for the third quarter of 2017 was consistent with 3.92% for the second quarter of 2017. The net interest margin has risen by 59 basis points from the third quarter of 2016 as the Company has benefited from the repricing characteristics of its loan portfolio in the rising rate environment.
Noninterest Income
Noninterest income for the third quarter of 2017 totaled $25.1 million, compared to $25.4 million for the third quarter of 2016. Net gains on sales of loans decreased to $18.1 million in the third quarter of 2017 compared to $21.8 million in the third quarter of 2016 and was in line with $18.2 million in the second quarter of 2017. The decrease in revenue from the prior year was due to a reduction in the volume of guaranteed loan sales partially offset by an increase in the average net gain on sale of guaranteed loans. The $39.9 million reduction in the volume of guaranteed loans sales from the prior sequential quarter resulted from a decrease in the percentage of new loans that were fully funded at closing, a product of the aforementioned seasonality of renewable energy lending. This was countered by the increase in the average net gain on guaranteed loan sales to $110.7 thousand per million sold versus $91.7 thousand in the prior quarter. Loan servicing revenues of $6.5 million in the third quarter of 2017 rose by $630 thousand from the third quarter of 2016. The inclusion of Reltco, Inc. and National Assurance Title, Inc. (collectively referred to as "Reltco"), which were acquired in February 2017, contributed $2.0 million in noninterest income to the Company in the third quarter of 2017.
Noninterest Expense
Noninterest expense for the third quarter of 2017 was $35.9 million compared to $27.2 million for the third quarter of 2016 and $33.3 million for the second quarter of 2017.
The $8.6 million, or 31.7%, increase in noninterest expense for the third quarter of 2017 compared to the third quarter of 2016 reflected the ongoing expansion of the Company’s workforce and related infrastructure in support of its growth strategy. There were increases in salaries and employee benefits of $1.6 million, equipment expense of $1.6 million and other expense of $1.5 million. Salaries and employee benefits were largely influenced by the addition of Reltco personnel during the first quarter of 2017 along with resources to support the ongoing growth of the business platform. Total stock based compensation expense in the third quarter of 2017 was $2.0 million compared to $4.1 million for the third quarter of 2016. The increase in equipment expense reflected the higher levels of depreciation related to aircraft acquired in the first quarter of 2017 and solar panels acquired for the Company’s renewable energy leasing business. Other expenses increased primarily due to the addition of Reltco in the first quarter of 2017 combined with support expenses driven by business growth.
Compared to the second quarter of 2017, noninterest expense increased $2.6 million, or 7.7%. This increase was driven by higher levels of salaries and benefits and higher costs related to equipment, delivery of loan and lease products, and other initiatives to support the growing business segments and diversification of the Company. Total stock based compensation expense in the third quarter of 2017 was $2.0 million compared to $1.9 million for the second quarter of 2017.
Asset Quality
The unguaranteed exposure of nonperforming loans declined slightly to $3.3 million at September 30, 2017, compared to $3.5 million at June 30, 2017. Total unguaranteed nonperforming loans as a percentage of total loans and leases held for investment declined to 0.28% at September 30, 2017, compared to 0.33% at June 30, 2017. Total nonperforming loans increased slightly to $22.4 million in the third quarter of 2017 from $21.9 million at the end of the prior quarter.
The unguaranteed exposure of foreclosed assets increased to $446 thousand at September 30, 2017, from $345 thousand at June 30, 2017. Foreclosed assets increased $91 thousand to $2.2 million at September 30, 2017, from June 30, 2017.
Net charge-offs totaled to $959 thousand in the third quarter of 2017 compared to $191 thousand in the second quarter of 2017 and $937 thousand in the third quarter of 2016. Net charge-offs as a percentage of average held for investment loans and leases, annualized, for the quarters ended September 30, 2017 and 2016 were 0.34% and 0.51%, respectively. Net charge-offs for the first nine months of 2017 totaled $2.7 million compared to $929 thousand for the first nine months of 2016.
Provision for Loan and Lease Losses
The provision for loan and lease losses for the third quarter of 2017 totaled $2.4 million compared to $1.6 million for the second quarter of 2017 and $3.8 million for the third quarter of 2016. The third quarter of 2017 provision exceeded net charge-offs, thus adding to loan loss reserves in consideration of the continued growth of the loan portfolio.
The allowance for loan and lease losses totaled $21.0 million at September 30, 2017, compared to $19.6 million at June 30, 2017. The allowance for loan and lease losses as a percentage of total loans and leases held for investment was 1.80% at September 30, 2017 and June 30, 2017, respectively.
Income Tax
There was a net income tax benefit in the third quarter of 2017 of $5.1 million compared to a tax expense of $2.6 million in the third quarter of 2016 and $408 thousand in the second quarter of 2017. The negative effective rate in the third quarter of 2017 principally reflected an increase in anticipated investment in renewable energy assets generating investment tax credits. As the lessor of these assets, the Company is accomplishing broader strategic initiatives in the renewable energy sector.
Deposits
Total deposits increased by $141.2 million, or 7.5%, to $2.01 billion at September 30, 2017, compared to $1.87 billion at June 30, 2017, following successful deposit gathering campaigns. Average total interest-bearing deposits for the third quarter of 2017 increased $203.2 million, or 11.7%, to $1.94 billion, compared to $1.74 billion for the second quarter of 2017. The ratio of average total loans to average interest-bearing deposits was 91.1% for the third quarter of 2017, compared to 92.7% for the second quarter of 2017.
Conference Call
Live Oak will host a conference call to discuss quarterly results at 9:00 a.m. ET tomorrow morning (October 26, 2017). 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 99094314. 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 webcast will be archived on the Company's website for one year. A replay of the conference call will also be available until 5:00 p.m. ET November 2, 2017, and can be accessed by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international).
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; 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 Banking Company, a national online platform for small business lending.
Contacts:
Brett Caines | CFO | Investor Relations | 910.796.1645 & Micah Davis | Marketing Director | Media Relations | 910.550.2255
| Live Oak Bancshares, Inc. | ||||||||||||||||||||
| Quarterly Statements of Income (unaudited) | ||||||||||||||||||||
| (Dollars in thousands, except per share data) | ||||||||||||||||||||
| Three months ended | ||||||||||||||||||||
| 3Q 2017 | 2Q 2017 | 1Q 2017 | 4Q 2016 | 3Q 2016 | ||||||||||||||||
| Interest income | ||||||||||||||||||||
| Loans and fees on loans | $ | 26,977 | $ | 23,559 | $ | 19,754 | $ | 16,239 | $ | 14,961 | ||||||||||
| Investment securities, taxable | 325 | 316 | 323 | 292 | 337 | |||||||||||||||
| Other interest earning assets | 870 | 470 | 342 | 383 | 264 | |||||||||||||||
| Total interest income | 28,172 | 24,345 | 20,419 | 16,914 | 15,562 | |||||||||||||||
| Interest expense | ||||||||||||||||||||
| Deposits | 6,758 | 5,592 | 4,543 | 4,283 | 3,689 | |||||||||||||||
| Borrowings | 389 | 361 | 235 | 239 | 242 | |||||||||||||||
| Total interest expense | 7,147 | 5,953 | 4,778 | 4,522 | 3,931 | |||||||||||||||
| Net interest income | 21,025 | 18,392 | 15,641 | 12,392 | 11,631 | |||||||||||||||
| Provision for loan and leases losses | 2,426 | 1,556 | 1,499 | 3,844 | 3,806 | |||||||||||||||
| Net interest income after provision for loan and lease losses | 18,599 | 16,836 | 14,142 | 8,548 | 7,825 | |||||||||||||||
| Noninterest income | ||||||||||||||||||||
| Loan servicing revenue | 6,490 | 6,174 | 5,923 | 5,668 | 5,860 | |||||||||||||||
| Loan servicing asset revaluation | (3,691 | ) | (1,164 | ) | (2,009 | ) | (3,340 | ) | (3,421 | ) | ||||||||||
| Net gains on sales of loans | 18,148 | 18,176 | 18,952 | 22,513 | 21,833 | |||||||||||||||
| Gain on sale of securities available-for-sale | — | — | — | — | 1 | |||||||||||||||
| Construction supervision fee income | 362 | 286 | 429 | 868 | 502 | |||||||||||||||
| Title insurance income | 1,968 | 2,397 | 1,438 | — | — | |||||||||||||||
| Other noninterest income | 1,783 | 798 | 1,020 | 618 | 657 | |||||||||||||||
| Total noninterest income | 25,060 | 26,667 | 25,753 | 26,327 | 25,432 | |||||||||||||||
| Noninterest expense | ||||||||||||||||||||
| Salaries and employee benefits | 19,037 | 17,968 | 18,682 | 17,121 | 17,471 | |||||||||||||||
| Travel expense | 2,289 | 2,148 | 1,598 | 1,811 | 2,218 | |||||||||||||||
| Professional services expense | 1,068 | 1,424 | 1,736 | 1,137 | 907 | |||||||||||||||
| Advertising and marketing expense | 1,516 | 1,976 | 1,485 | 1,109 | 1,097 | |||||||||||||||
| Occupancy expense | 1,473 | 1,350 | 1,195 | 1,267 | 1,058 | |||||||||||||||
| Data processing expense | 1,982 | 1,858 | 1,696 | 1,435 | 1,252 | |||||||||||||||
| Equipment expense | 2,228 | 1,703 | 1,074 | 550 | 611 | |||||||||||||||
| Other loan origination and maintenance expense | 1,601 | 981 | 1,005 | 824 | 806 | |||||||||||||||
| Renewable energy tax credit investment impairment | — | — | — | 3,197 | — | |||||||||||||||
| FDIC insurance | 858 | 724 | 726 | 910 | 210 | |||||||||||||||
| Title insurance closing services expense | 687 | 785 | 405 | — | — | |||||||||||||||
| Other expense | 3,117 | 2,383 | 3,383 | 3,023 | 1,588 | |||||||||||||||
| Total noninterest expense | 35,856 | 33,300 | 32,985 | 32,384 | 27,218 | |||||||||||||||
| Income before taxes | 7,803 | 10,203 | 6,910 | 2,491 | 6,039 | |||||||||||||||
| Income tax (benefit) expense | (5,059 | ) | 408 | 798 | (2,989 | ) | 2,561 | |||||||||||||
| Net income | 12,862 | 9,795 | 6,112 | 5,480 | 3,478 | |||||||||||||||
| Net loss attributable to noncontrolling interest | — | — | — | — | 1 | |||||||||||||||
| Net income attributable to Live Oak Bancshares, Inc. | $ | 12,862 | $ | 9,795 | $ | 6,112 | $ | 5,480 | $ | 3,479 | ||||||||||
| Earnings per share | ||||||||||||||||||||
| Basic | $ | 0.34 | $ | 0.28 | $ | 0.18 | $ | 0.16 | $ | 0.10 | ||||||||||
| Diluted | $ | 0.33 | $ | 0.27 | $ | 0.17 | $ | 0.16 | $ | 0.10 | ||||||||||
| Weighted average shares outstanding | ||||||||||||||||||||
| Basic | 37,366,041 | 34,618,721 | 34,466,904 | 34,235,375 | 34,206,943 | |||||||||||||||
| Diluted | 38,644,677 | 35,942,041 | 35,646,918 | 35,208,433 | 35,001,817 | |||||||||||||||
| Live Oak Bancshares, Inc. | ||||||||||||||||||||
| Quarterly Balance Sheets (unaudited) | ||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| As of the quarter ended | ||||||||||||||||||||
| 3Q 2017 | 2Q 2017 | 1Q 2017 | 4Q 2016 | 3Q 2016 | ||||||||||||||||
| Assets | ||||||||||||||||||||
| Cash and due from banks | $ | 260,907 | $ | 207,373 | $ | 158,887 | $ | 238,008 | $ | 355,485 | ||||||||||
| Certificates of deposit with other banks | 3,250 | 5,750 | 6,000 | 7,250 | 7,500 | |||||||||||||||
| Investment securities available-for-sale | 76,575 | 72,993 | 68,630 | 71,056 | 70,334 | |||||||||||||||
| Loans held for sale | 692,586 | 609,138 | 512,501 | 394,278 | 345,277 | |||||||||||||||
| Loans and leases held for investment | 1,169,887 | 1,084,503 | 999,270 | 907,566 | 766,977 | |||||||||||||||
| Allowance for loan losses | (21,027 | ) | (19,560 | ) | (18,195 | ) | (18,209 | ) | (15,178 | ) | ||||||||||
| Net loans and leases | 1,148,860 | 1,064,943 | 981,075 | 889,357 | 751,799 | |||||||||||||||
| Premises and equipment, net | 129,233 | 125,008 | 101,398 | 64,661 | 60,646 | |||||||||||||||
| Foreclosed assets | 2,231 | 2,140 | 1,706 | 1,648 | 2,235 | |||||||||||||||
| Servicing assets | 53,392 | 53,675 | 53,584 | 51,994 | 49,729 | |||||||||||||||
| Other assets | 65,155 | 57,087 | 48,344 | 37,009 | 26,735 | |||||||||||||||
| Total assets | $ | 2,432,189 | $ | 2,198,107 | $ | 1,932,125 | $ | 1,755,261 | $ | 1,669,740 | ||||||||||
| Liabilities and Shareholders’ Equity | ||||||||||||||||||||
| Liabilities | ||||||||||||||||||||
| Deposits: | ||||||||||||||||||||
| Noninterest-bearing | $ | 55,260 | $ | 40,966 | $ | 38,029 | $ | 27,990 | $ | 28,461 | ||||||||||
| Interest-bearing | 1,957,631 | 1,830,755 | 1,601,114 | 1,457,086 | 1,374,556 | |||||||||||||||
| Total deposits | 2,012,891 | 1,871,721 | 1,639,143 | 1,485,076 | 1,403,017 | |||||||||||||||
| Short term borrowings | — | 10,000 | 13,100 | — | — | |||||||||||||||
| Long term borrowings | 26,872 | 52,173 | 27,473 | 27,843 | 28,074 | |||||||||||||||
| Other liabilities | 27,835 | 26,582 | 26,220 | 19,495 | 24,497 | |||||||||||||||
| Total liabilities | 2,067,598 | 1,960,476 | 1,705,936 | 1,532,414 | 1,455,588 | |||||||||||||||
| Shareholders’ equity | ||||||||||||||||||||
| Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding | — | — | — | — | — | |||||||||||||||
| Class A common stock (voting) | 266,336 | 150,939 | 147,933 | 149,966 | 145,284 | |||||||||||||||
| Class B common stock (non-voting) | 49,168 | 49,168 | 50,015 | 50,015 | 50,015 | |||||||||||||||
| Retained earnings | 49,707 | 38,041 | 28,938 | 23,518 | 18,723 | |||||||||||||||
| Accumulated other comprehensive (loss) income | (620 | ) | (517 | ) | (697 | ) | (652 | ) | 130 | |||||||||||
| Total shareholders’ equity attributed to Live Oak Bancshares, Inc. | 364,591 | 237,631 | 226,189 | 222,847 | 214,152 | |||||||||||||||
| Noncontrolling interest | — | — | — | — | — | |||||||||||||||
| Total equity | 364,591 | 237,631 | 226,189 | 222,847 | 214,152 | |||||||||||||||
| Total liabilities and shareholders’ equity | $ | 2,432,189 | $ | 2,198,107 | $ | 1,932,125 | $ | 1,755,261 | $ | 1,669,740 | ||||||||||
| Live Oak Bancshares, Inc. | ||||||||
| Statements of Income (unaudited) | ||||||||
| (Dollars in thousands, except per share data) | ||||||||
| Nine months ended | ||||||||
| September 30, 2017 | September 30, 2016 | |||||||
| Interest income | ||||||||
| Loans and fees on loans | $ | 70,290 | $ | 38,868 | ||||
| Investment securities, taxable | 964 | 840 | ||||||
| Other interest earning assets | 1,682 | 650 | ||||||
| Total interest income | 72,936 | 40,358 | ||||||
| Interest expense | ||||||||
| Deposits | 16,893 | 9,376 | ||||||
| Borrowings | 985 | 725 | ||||||
| Total interest expense | 17,878 | 10,101 | ||||||
| Net interest income | 55,058 | 30,257 | ||||||
| Provision for loan losses | 5,481 | 8,692 | ||||||
| Net interest income after provision for loan losses | 49,577 | 21,565 | ||||||
| Noninterest income | ||||||||
| Loan servicing revenue | 18,587 | 15,725 | ||||||
| Loan servicing asset revaluation | (6,864 | ) | (5,051 | ) | ||||
| Net gains on sales of loans | 55,276 | 52,813 | ||||||
| Gain on sale of securities available-for-sale | — | 1 | ||||||
| Construction supervision fee income | 1,077 | 1,799 | ||||||
| Title insurance income | 5,803 | — | ||||||
| Other noninterest income | 3,601 | 1,925 | ||||||
| Total noninterest income | 77,480 | 67,212 | ||||||
| Noninterest expense | ||||||||
| Salaries and employee benefits | 55,687 | 45,875 | ||||||
| Travel expense | 6,035 | 6,394 | ||||||
| Professional services expense | 4,228 | 2,345 | ||||||
| Advertising and marketing expense | 4,977 | 3,425 | ||||||
| Occupancy expense | 4,018 | 3,306 | ||||||
| Data processing expense | 5,536 | 3,864 | ||||||
| Equipment expense | 5,005 | 1,696 | ||||||
| Other loan origination and maintenance expense | 3,587 | 2,001 | ||||||
| FDIC insurance | 2,308 | 507 | ||||||
| Title insurance closing services expense | 1,877 | — | ||||||
| Other expense | 8,883 | 4,648 | ||||||
| Total noninterest expense | 102,141 | 74,061 | ||||||
| Income before taxes | 24,916 | 14,716 | ||||||
| Income tax (benefit) expense | (3,853 | ) | 6,432 | |||||
| Net income | 28,769 | 8,284 | ||||||
| Net loss attributable to noncontrolling interest | — | 9 | ||||||
| Net income attributable to Live Oak Bancshares, Inc. | $ | 28,769 | $ | 8,293 | ||||
| Earnings per share | ||||||||
| Basic | $ | 0.81 | $ | 0.24 | ||||
| Diluted | $ | 0.78 | $ | 0.24 | ||||
| Weighted average shares outstanding | ||||||||
| Basic | 35,485,371 | 34,191,014 | ||||||
| Diluted | 36,730,054 | 35,003,422 | ||||||
| Live Oak Bancshares, Inc. | ||||||||||||||||||||
| Quarterly Selected Financial Data | ||||||||||||||||||||
| (Dollars in thousands, except per share data) | ||||||||||||||||||||
| As of and for the three months ended | ||||||||||||||||||||
| 3Q 2017 | 2Q 2017 | 1Q 2017 | 4Q 2016 | 3Q 2016 | ||||||||||||||||
| Income Statement Data | ||||||||||||||||||||
| Net income attributable to Live Oak Bancshares, Inc. | $ | 12,862 | $ | 9,795 | $ | 6,112 | $ | 5,480 | $ | 3,479 | ||||||||||
| Per Common Share | ||||||||||||||||||||
| Net income, basic | $ | 0.34 | $ | 0.28 | $ | 0.18 | $ | 0.16 | $ | 0.10 | ||||||||||
| Net income, diluted | 0.33 | 0.27 | 0.17 | 0.16 | 0.10 | |||||||||||||||
| Dividends declared | 0.03 | 0.02 | 0.02 | 0.02 | 0.02 | |||||||||||||||
| Book value | 9.15 | 6.86 | 6.54 | 6.51 | 6.26 | |||||||||||||||
| Tangible book value (1) | 8.84 | 6.50 | 6.17 | 6.51 | 6.26 | |||||||||||||||
| Performance Ratios | ||||||||||||||||||||
| Return on average assets (annualized) | 2.18 | % | 1.89 | % | 1.33 | % | 1.26 | % | 0.91 | % | ||||||||||
| Return on average equity (annualized) | 16.79 | 16.53 | 10.93 | 9.95 | 6.54 | |||||||||||||||
| Net interest margin | 3.91 | 3.92 | 3.76 | 3.08 | 3.32 | |||||||||||||||
| Efficiency ratio (1) | 77.80 | 73.90 | 79.69 | 83.64 | 73.44 | |||||||||||||||
| Noninterest income to total revenue | 54.38 | 59.18 | 62.21 | 68.00 | 68.62 | |||||||||||||||
| Selected Loan Metrics | ||||||||||||||||||||
| Loans and leases originated | $ | 395,682 | $ | 586,471 | $ | 468,663 | $ | 514,565 | $ | 381,050 | ||||||||||
| Guaranteed loans sold | 163,843 | 203,714 | 208,715 | 260,125 | 210,610 | |||||||||||||||
| Average net gain on sale of guaranteed loans | 110.76 | 91.68 | 90.80 | 86.55 | 103.67 | |||||||||||||||
| Held for sale guaranteed loans (note amount) (2) | 1,093,385 | 1,005,753 | 866,260 | 754,834 | 692,278 | |||||||||||||||
| Quarterly increase (decrease) in note amount of held for sale guaranteed loans | 87,632 | 139,493 | 111,426 | 62,556 | 52,922 | |||||||||||||||
| Estimated net gain to be recognized on quarterly increase in guaranteed loans held for sale (3) | 9,707 | 12,789 | 10,117 | 5,414 | 5,486 | |||||||||||||||
| Asset Quality Ratios | ||||||||||||||||||||
| Allowance for loan losses to loans and leases held for investment | 1.80 | % | 1.80 | % | 1.82 | % | 2.01 | % | 1.98 | % | ||||||||||
| Net charge-offs | $ | 959 | $ | 191 | $ | 1,513 | $ | 813 | $ | 937 | ||||||||||
| Net charge-offs to average loans and leases held for investment (4) | 0.34 | % | 0.07 | % | 0.63 | % | 0.39 | % | 0.51 | % | ||||||||||
| Nonperforming loans | $ | 22,420 | $ | 21,856 | $ | 22,469 | $ | 23,781 | $ | 14,023 | ||||||||||
| Foreclosed assets | 2,231 | 2,140 | 1,706 | 1,648 | 2,235 | |||||||||||||||
| Nonperforming loans (unguaranteed exposure) | 3,299 | 3,546 | 3,643 | 4,784 | 3,354 | |||||||||||||||
| Foreclosed assets (unguaranteed exposure) | 446 | 345 | 304 | 246 | 304 | |||||||||||||||
| Nonperforming loans not guaranteed by the SBA and foreclosures | 3,745 | 3,891 | 3,947 | 5,030 | 3,658 | |||||||||||||||
| Nonperforming loans and foreclosures, not guaranteed by the SBA, to total assets | 0.15 | % | 0.18 | % | 0.20 | % | 0.29 | % | 0.22 | % | ||||||||||
| Capital Ratios | ||||||||||||||||||||
| Common equity tier 1 capital (to risk-weighted assets) | 17.78 | % | 11.93 | % | 12.79 | % | 15.35 | % | 16.63 | % | ||||||||||
| Total capital (to risk-weighted assets) | 18.93 | 13.08 | 14.01 | 16.60 | 17.88 | |||||||||||||||
| Tier 1 risk based capital (to risk-weighted assets) | 17.78 | 11.93 | 12.79 | 15.35 | 16.63 | |||||||||||||||
| Tier 1 leverage capital (to average assets) | 13.99 | 9.93 | 10.60 | 12.03 | 13.18 | |||||||||||||||
Notes to Quarterly Selected Financial Data
(1) See accompanying GAAP to Non-GAAP Reconciliation.
(2) Includes the entire note amount, including undisbursed funds for the multi-advance loans.
(3) The estimated revenue from the sale of the quarterly increase in guaranteed loans is based on the average net gain on sale of loans for that quarter. This is an estimate based on the respective quarter activity and does not reflect actual gains to be recognized.
(4) Quarterly net charge-offs as a percentage of quarterly average loans and leases held for investment, annualized.
| Live Oak Bancshares, Inc. | ||||||||||||||||||||||
| Quarterly Average Balances and Net Interest Margin | ||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||
| Three months ended September 30, 2017 | Three months ended June 30, 2017 | |||||||||||||||||||||
| Average Balance | Interest | Average Yield/Rate | Average Balance | Interest | Average Yield/Rate | |||||||||||||||||
| Interest earning assets: | ||||||||||||||||||||||
| Interest earning balances in other banks | $ | 292,066 | $ | 870 | 1.18 | % | $ | 199,904 | $ | 470 | 0.94 | % | ||||||||||
| Investment securities | 73,312 | 325 | 1.76 | 69,544 | 316 | 1.82 | ||||||||||||||||
| Loans held for sale | 653,342 | 9,922 | 6.03 | 562,984 | 8,226 | 5.86 | ||||||||||||||||
| Loans and leases held for investment (1) | 1,116,209 | 17,055 | 6.06 | 1,050,074 | 15,333 | 5.86 | ||||||||||||||||
| Total interest earning assets | 2,134,929 | 28,172 | 5.24 | 1,882,506 | 24,345 | 5.19 | ||||||||||||||||
| Less: allowance for loan and lease losses | (19,544 | ) | (18,198 | ) | ||||||||||||||||||
| Non-interest earning assets | 242,014 | 209,484 | ||||||||||||||||||||
| Total assets | $ | 2,357,399 | $ | 2,073,792 | ||||||||||||||||||
| Interest bearing liabilities: | ||||||||||||||||||||||
| Interest bearing checking | $ | 35,127 | $ | 51 | 0.58 | % | $ | 40,541 | $ | 57 | 0.56 | % | ||||||||||
| Savings | 196,220 | 682 | 1.38 | 3,809 | 12 | 1.26 | ||||||||||||||||
| Money market accounts | 453,985 | 1,303 | 1.14 | 475,265 | 1,114 | 0.94 | ||||||||||||||||
| Certificates of deposit | 1,257,072 | 4,722 | 1.49 | 1,219,542 | 4,409 | 1.45 | ||||||||||||||||
| Total interest bearing deposits | 1,942,404 | 6,758 | 1.38 | 1,739,157 | 5,592 | 1.29 | ||||||||||||||||
| Other borrowings | 42,219 | 389 | 3.66 | 42,765 | 361 | 3.39 | ||||||||||||||||
| Total interest bearing liabilities | 1,984,623 | 7,147 | 1.43 | 1,781,922 | 5,953 | 1.34 | ||||||||||||||||
| Non-interest bearing deposits | 43,652 | 32,718 | ||||||||||||||||||||
| Non-interest bearing liabilities | 22,650 | 22,165 | ||||||||||||||||||||
| Shareholders' equity | 306,474 | 236,987 | ||||||||||||||||||||
| Noncontrolling interest | — | — | ||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 2,357,399 | $ | 2,073,792 | ||||||||||||||||||
| Net interest income and interest rate spread | $ | 21,025 | 3.81 | % | $ | 18,392 | 3.85 | % | ||||||||||||||
| Net interest margin | 3.91 | 3.92 | ||||||||||||||||||||
| Ratio of average interest-earning assets to average interest-bearing liabilities | 107.57 | % | 105.64 | % | ||||||||||||||||||
(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 | ||||||||||||||||||||
| 3Q 2017 | 2Q 2017 | 1Q 2017 | 4Q 2016 | 3Q 2016 | ||||||||||||||||
| Total shareholders’ equity | $ | 364,591 | $ | 237,631 | $ | 226,189 | $ | 222,847 | $ | 214,152 | ||||||||||
| Less: | ||||||||||||||||||||
| Goodwill | 7,278 | 7,266 | 7,165 | — | — | |||||||||||||||
| Other intangible assets | 5,126 | 5,292 | 5,410 | — | — | |||||||||||||||
| Tangible shareholders’ equity (a) | $ | 352,187 | $ | 225,073 | $ | 213,614 | $ | 222,847 | $ | 214,152 | ||||||||||
| Shares outstanding (c) | 39,862,147 | 34,639,848 | 34,600,819 | 34,253,602 | 34,215,050 | |||||||||||||||
| Total assets | $ | 2,432,189 | $ | 2,198,107 | $ | 1,932,125 | $ | 1,755,261 | $ | 1,669,740 | ||||||||||
| Less: | ||||||||||||||||||||
| Goodwill | 7,278 | 7,266 | 7,165 | — | — | |||||||||||||||
| Other intangible assets | 5,126 | 5,292 | 5,410 | — | — | |||||||||||||||
| Tangible assets (b) | $ | 2,419,785 | $ | 2,185,549 | $ | 1,919,550 | $ | 1,755,261 | $ | 1,669,740 | ||||||||||
| Tangible shareholders’ equity to tangible assets (a/b) | 14.55 | % | 10.30 | % | 11.13 | % | 12.70 | % | 12.83 | % | ||||||||||
| Tangible book value per share (a/c) | $ | 8.84 | $ | 6.50 | $ | 6.17 | $ | 6.51 | $ | 6.26 | ||||||||||
| Efficiency ratio: | ||||||||||||||||||||
| Noninterest expense (d) | $ | 35,856 | $ | 33,300 | $ | 32,985 | $ | 32,384 | $ | 27,218 | ||||||||||
| Net interest income | 21,025 | 18,392 | 15,641 | 12,392 | 11,631 | |||||||||||||||
| Noninterest income | 25,060 | 26,667 | 25,753 | 26,327 | 25,432 | |||||||||||||||
| Less: gain on sale of securities | — | — | — | — | 1 | |||||||||||||||
| Adjusted operating revenue (e) | $ | 46,085 | $ | 45,059 | $ | 41,394 | $ | 38,719 | $ | 37,062 | ||||||||||
| Efficiency ratio (d/e) | 77.80 | % | 73.90 | % | 79.69 | % | 83.64 | % | 73.44 | % | ||||||||||
| Live Oak Bancshares, Inc. | ||||||||||||||||||||
| GAAP to Non-GAAP Reconciliation (Continued) | ||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Three months ended | Nine months ended | |||||||||||||||||||
| 3Q 2017 | 2Q 2017 | 3Q 2016 | 3Q 2017 | 3Q 2016 | ||||||||||||||||
| Reconciliation of net income to non-GAAP net income for non-routine income and expenses: | ||||||||||||||||||||
| Net income attributable to Live Oak Bancshares, Inc. | $ | 12,862 | $ | 9,795 | $ | 3,479 | $ | 28,769 | $ | 8,293 | ||||||||||
| Provision for loans reclassified as held for investment | — | — | — | — | 4,023 | |||||||||||||||
| Stock based compensation expense for restricted stock awards with an effective grant date of May 24, 2016, as discussed in Note 10 of our March 31, 2016 Form 10-Q | 286 | 378 | 3,365 | 1,010 | 5,608 | |||||||||||||||
| Merger costs for acquisition of Reltco and Apiture investment | 390 | 250 | — | 1,156 | — | |||||||||||||||
| Trade-in loss on aircraft | — | — | — | 206 | — | |||||||||||||||
| Renewable energy tax credit investment income, impairment and loss | 19 | 19 | — | 57 | — | |||||||||||||||
| Income tax effects and adjustments for non-GAAP items * | (278 | ) | (259 | ) | (1,346 | ) | (972 | ) | (3,852 | ) | ||||||||||
| Other renewable energy tax expense | 44 | 44 | — | 132 | — | |||||||||||||||
| Non-GAAP net income | $ | 13,323 | $ | 10,227 | $ | 5,498 | $ | 30,358 | $ | 14,072 | ||||||||||
| * Estimated at 40.0% | ||||||||||||||||||||
| Non-GAAP earnings per share: | ||||||||||||||||||||
| Basic | $ | 0.36 | $ | 0.30 | $ | 0.16 | $ | 0.86 | $ | 0.41 | ||||||||||
| Diluted | $ | 0.34 | $ | 0.28 | $ | 0.16 | $ | 0.83 | $ | 0.40 | ||||||||||
| Weighted-average shares outstanding: | ||||||||||||||||||||
| Basic | 37,366,041 | 34,618,721 | 34,206,943 | 35,485,371 | 34,191,014 | |||||||||||||||
| Diluted | 38,644,677 | 35,942,041 | 35,001,817 | 36,370,054 | 35,003,422 | |||||||||||||||
| Reconciliation of financial statement line items as reported to adjusted for non-routine income and expenses: | ||||||||||||||||||||
| Noninterest income, as reported | $ | 25,060 | $ | 26,667 | $ | 25,432 | $ | 77,480 | $ | 67,212 | ||||||||||
| Renewable energy tax credit investment income | (10 | ) | (10 | ) | — | (30 | ) | — | ||||||||||||
| Noninterest income, as adjusted | 25,050 | 26,657 | 25,432 | 77,450 | 67,212 | |||||||||||||||
| Provision for loan losses, as reported | 2,426 | 1,556 | 3,806 | 5,481 | 8,692 | |||||||||||||||
| Provision for loans reclassified as held for investment | — | — | — | — | (4,023 | ) | ||||||||||||||
| Provision for loan losses, as adjusted | 2,426 | 1,556 | 3,806 | 5,481 | 4,669 | |||||||||||||||
| Noninterest expense, as reported | 35,856 | 33,300 | 27,218 | 102,141 | 74,061 | |||||||||||||||
| Stock based compensation expense | (286 | ) | (378 | ) | (3,365 | ) | (1,010 | ) | (5,608 | ) | ||||||||||
| Merger costs associated with Reltco and Apiture investment | (390 | ) | (250 | ) | — | (1,156 | ) | — | ||||||||||||
| Trade-in loss on aircraft | — | — | — | (206 | ) | — | ||||||||||||||
| Renewable energy tax credit investment impairment and loss | (29 | ) | (29 | ) | — | (87 | ) | — | ||||||||||||
| Noninterest expense, as adjusted | 35,151 | 32,643 | 23,853 | 99,682 | 68,453 | |||||||||||||||
| Income tax (benefit) expense, as reported | (5,059 | ) | 408 | 2,561 | (3,853 | ) | 6,432 | |||||||||||||
| Income tax effects and adjustments for non-recurring income and expenses | 278 | 259 | 1,346 | 972 | 3,852 | |||||||||||||||
| Other renewable energy tax expense | (44 | ) | (44 | ) | — | (132 | ) | — | ||||||||||||
| Income tax expense, as adjusted | $ | (4,825 | ) | $ | 623 | $ | 3,907 | $ | (3,013 | ) | $ | 10,284 | ||||||||
This press release presents the non-GAAP financial measures previously shown. 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.