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Live Oak Bancshares, Inc. Reports First Quarter 2021 Results

WILMINGTON, N.C., April 21, 2021 (GLOBE NEWSWIRE) -- Live Oak Bancshares, Inc. (Nasdaq: LOB) (“Live Oak” or “the Company”) today reported first quarter 2021 net earnings available to common shareholders of $39.4 million, or $0.88 per diluted share.

“Live Oak continued to serve America’s small businesses during the first quarter of 2021 and delivered strong results with $1.2 billion in loan and lease originations. The reopening of the Paycheck Protection Program allowed us to deliver just over $500 million in relief to small businesses during what is hopefully the end of this challenging period for our nation’s entrepreneurs,” said James S. Mahan, III, Chairman and Chief Executive Officer of Live Oak Bancshares. “Our net income grew to nearly $40 million for the quarter as our focus on providing solutions for small business owners and changing the financial technology landscape promoted our growth and advanced our core earnings.”

First Quarter 2021 Key Measures

(Dollars in thousands, except per share data)         Increase (Decrease)     
  1Q 2021  1Q 2020  Dollars  Percent  4Q 2020 
Net interest income and servicing revenues $76,384  $46,583  $29,801   64% $68,985 
Net income (loss)  39,427   (7,602)  47,029   619   29,588 
Diluted earnings (loss) per share  0.88   (0.19)  1.07   563   0.68 
Non-GAAP net income (loss) (1)  39,340   (7,602)  46,942   617   29,778 
Non-GAAP diluted earnings (loss) per share (1)  0.88   (0.19)  1.07   563   0.69 
Loan and lease production:                    
Loans and leases originated $1,180,219  $500,634  $679,585   136% $808,010 
% Fully funded  77.7%  57.6% n/a  n/a   55.6%
Total loans and leases $6,533,495  $3,813,455  $2,720,040   71% $6,320,400 
Total assets  8,417,875   5,273,569   3,144,306   60   7,872,303 
Total deposits  6,316,004   4,639,401   1,676,603   36   5,712,828 


(1)See accompanying GAAP to Non-GAAP Reconciliation.

 

Loans and Leases

At March 31, 2021, the total loan and lease portfolio increased to $6.53 billion, 71.3% above its level a year ago and 3.4% above its level at December 31, 2020. Compared to the fourth quarter of 2020, loans and leases held for investment increased $311.8 million, or 6.1%, to $5.46 billion while loans held for sale decreased $98.7 million, or 8.4%, to $1.08 billion. Average loans and leases were $6.35 billion during the first quarter of 2021 compared to $6.29 billion during the fourth quarter of 2020.

The total loan and lease portfolio of $6.53 billion is comprised of $1.45 billion of Paycheck Protection Program (“PPP”) loans, net of deferred fees and costs, at March 31, 2021, which are carried at historical cost classified as held for investment. The unguaranteed percentage of the total loan and lease portfolio is significantly influenced by the addition of PPP loans carrying a 100% government guarantee. The total loan and lease portfolio at March 31, 2021, and December 31, 2020, of $6.53 billion and $6.32 billion, respectively, was comprised of 41.6% and 40.4% of unguaranteed loans and leases, respectively.

Loan and lease originations totaled $1.18 billion during the first quarter of 2021, an increase of $372.2 million, or 46.1%, from the fourth quarter of 2020. Excluding PPP loans in each quarter, loan and lease originations totaled $672.4 million for the first quarter of 2021, a 16.8% decrease from the prior quarter and a 34.3% increase from the first quarter of 2020.

Deposits

Total deposits increased to $6.32 billion at March 31, 2021, an increase of $1.68 billion compared to March 31, 2020, and an increase of $603.2 million compared to December 31, 2020.

The increase in total deposits from the prior quarter provides support for the growth in the loan and lease portfolio and origination activities during the first quarter of 2021. Average total interest-bearing deposits for the first quarter of 2021 increased $314.5 million, or 5.7%, to $5.86 billion, compared to $5.55 billion for the fourth quarter of 2020. The ratio of average total loans and leases to average interest-bearing deposits was 108.2% for the first quarter of 2021, compared to 113.4% for the fourth quarter of 2020. The ratio is influenced by average PPP loan volume and the use of the Federal Reserve’s Paycheck Protection Program Liquidity Facility (“PPPLF”) classified as long-term borrowings.

Borrowings

Borrowings totaled $1.47 billion at March 31, 2021, compared to $50.0 million and $1.54 billion at March 31, 2020, and December 31, 2020, respectively. During the first quarter of 2021, the Company decreased borrowings by $76.1 million primarily by reducing the outstanding balance in the Federal Reserve’s PPPLF to $1.41 billion as of March 31, 2021, compared to $1.53 billion at December 31, 2020. The PPPLF has a 100% advance rate equal to the principal amount of PPP loans pledged as security and carries an interest rate of 0.35%, and loans financed under the PPPLF have a neutral impact on regulatory leverage capital ratios. The decrease in borrowings arising from the reduction in the PPPLF was offset by the addition of a five-year term loan at the Company totaling $49.7 million at March 31, 2021.

Net Interest Income

Net interest income for the first quarter of 2021 increased to $70.0 million compared to $40.2 million for the first quarter of 2020 and $62.3 million for the fourth quarter of 2020.

The increase for the first quarter of 2021 compared to the first quarter of 2020 was driven by the significant growth in the total loan and lease portfolios reflecting the Company's ongoing initiative to grow recurring revenue sources. The increase in net interest income comparing these two periods was also driven by the reduction in the average rate on interest bearing liabilities from 2.14% for the first quarter of 2020 to 1.02% for the first quarter of 2021.

The increase from the fourth quarter of 2020 arose primarily from a 48-basis point improvement in the net interest margin from 3.33% to 3.81%. The yield on interest earnings assets for the first quarter of 2021 increased 37 basis points compared to the fourth quarter of 2020 and was primarily driven by fees recognized on PPP loans originated in the second and third quarters of 2020. The asset yield improvement was complemented by the 11-basis point reduction in the average cost of interest bearing liabilities from 1.13% for the quarter ended December 31, 2020, to 1.02% for the quarter ended March 31, 2021. The reduction in the cost of interest bearing liabilities compared to the fourth quarter of 2020 was largely the result of the maturing and repricing of the certificates of deposit portfolio.

Noninterest Income

Noninterest income for the first quarter of 2021 increased to $31.1 million compared to $5.7 million for the first quarter of 2020 and $10.8 million for the fourth quarter of 2020. The primary drivers behind these increased levels of noninterest income are outlined below.   

The loan servicing asset revaluation resulted in a gain of $1.5 million for the first quarter of 2021 compared to a loss of $4.7 million for the first quarter of 2020 and a loss of $5.8 million for the fourth quarter of 2020. The increase in the loan servicing asset valuation was largely the result of improving market conditions and pricing for government guaranteed loans.

The net gain on loans accounted for under the fair value option totaled $4.2 million for the first quarter of 2021, a $14.9 million increase compared to the net loss for the first quarter of 2020 and a $9.0 million increase compared to the net loss for the fourth quarter of 2020. The valuation of loans was positively impacted by improving market conditions compared to the impacts of COVID-19 during 2020.

Equity method investments loss totaled $1.2 million for the first quarter of 2021, a $1.3 million improvement from the loss for the first quarter of 2020 and a $7.6 million improvement from the loss for the fourth quarter of 2020. The decrease in loss for the first quarter of 2021 compared to the fourth quarter of 2020 was largely due to the Company’s pro rata portion of income tax expense arising from Apiture’s conversion from a partnership to a corporation during the fourth quarter of 2020. Compared to the first quarter of 2020, the loss for the first quarter of 2021 was lower due to a reduction in losses experienced by several of the Company’s financial technology investees.

Other noninterest income increased $1.6 million to $3.5 million for the first quarter of 2021 compared to the first quarter of 2020. This increase was primarily driven by improvements in management fees related to the Company’s wealth and investment management services and gains from equity warrant assets.

Partially offsetting the increase in noninterest income for the first quarter of 2021 compared to the fourth quarter of 2020, the Company’s net gains on sales of loans decreased $3.0 million to $11.9 million in the first quarter of 2021 compared to $15.0 million in the fourth quarter of 2020. While premium levels in the secondary market generally improved in the first quarter of 2021 compared to the fourth quarter of 2020, the average net gain on guaranteed loan sales decreased to $83.9 thousand per million sold versus $115.9 thousand, respectively. This decrease in the average guaranteed loan sale revenue was primarily driven by the Company’s choice to not elect fair value for all retained participating interests arising from new government guaranteed loan sales beginning in the first quarter of 2021. Not electing fair value generally results in a larger discount, which will reduce the amount of gain recognized at the date of sale. This larger discount is subsequently accreted into interest income over the underlying loan’s remaining term using the effective interest method. Management made this change of election in alignment with its ongoing effort to reduce volatility and drive more predictable revenue. In accordance with accounting standards, any loans for which fair value was previously elected will continue to be measured as such.

Noninterest Expense

Noninterest expense for the first quarter of 2021 increased to $58.3 million compared to $49.5 million for the first quarter of 2020 and $52.4 million for the fourth quarter of 2020.

Salaries and employee benefits for the first quarter of 2021 increased to $31.4 million compared to $28.1 million for the first quarter of 2020 and $29.5 million for the fourth quarter of 2020. The increase in salaries and benefits of $3.3 million compared to the first quarter of 2020 and $1.9 million compared to the fourth quarter of 2020 was primarily driven by the vesting of approximately 398 thousand restricted stock unit awards with market price conditions in the first quarter of 2021 that impacted both compensation expense and payroll tax expense by a combined $2.6 million. Additionally, the first quarter of 2021 included a severance payment of $750 thousand. In addition, the salary base grew from prior periods as the Company continued to expand its employee base consistent with strategic and growth initiatives.

Professional services expense increased to $3.8 million for the first quarter of 2021 compared to $1.9 million for the first quarter of 2020 and $1.7 million for the fourth quarter of 2020. The increase for the first quarter of 2021 was largely driven by an increase in legal fees related to the previously disclosed letter the Company received in December 2020 and the resulting putative class action filed against the Company and other parties in March 2021.

During the first quarter of 2021, the Company incurred $3.1 million in impairment charges related to a $3.9 million renewable energy tax credit investment. Investments of this type generate a return primarily through the realization of income tax credits and other benefits; accordingly, impairment of the investment amount is recognized in conjunction with the realization of related tax benefits. This investment generated a federal investment tax credit of $3.4 million which is included in the Company’s estimated annual effective tax rate.    Investments of this nature are part of the Company’s ongoing initiative to promote renewable energy sources.

Other noninterest expense in the first quarter of 2021 included $904 thousand of impairment expense on solar panels due to lower than expected energy production capability and a $525 thousand scholarship endowment in memory of one of the directors of the Company’s board.

The increase in noninterest expense for the first quarter of 2021 compared to the first quarter of 2020 was mitigated in part by a combined decrease in travel and advertising and marketing expense of $1.8 million.

Asset Quality

During the first quarter of 2021, the Company recognized net recoveries for loans carried at historical cost of $984 thousand compared to net charge-offs of $537 thousand in the fourth quarter of 2020 and $2.8 million in the first quarter of 2020. A previously charged-off hotel loan paid off during the first quarter of 2021 resulting in a net recovery of $1.7 million. Net (recoveries) charge-offs as a percentage of average held for investment loans and leases carried at historical cost, annualized, for the quarters ended March 31, 2021 and December 31, 2020, was (0.09)% and 0.05%, respectively.

Unguaranteed nonperforming (nonaccrual) loans and leases, excluding $5.8 million and $5.4 million accounted for under the fair value option at March 31, 2021, and December 31, 2020, respectively, increased to $24.7 million, or 0.53% of loans and leases held for investment which are carried at historical cost, at March 31, 2021, compared to $20.1 million, or 0.46%, at December 31, 2020.

The unguaranteed exposure of foreclosed assets increased $6 thousand to $941 thousand at March 31, 2021, compared to December 31, 2020. Foreclosed assets increased $30 thousand to $4.2 million at March 31, 2021, compared to December 31, 2020.

Provision for (Recovery of) Loan and Lease Credit Losses

The recovery of loan and lease credit losses for the first quarter of 2021 totaled $873 thousand compared to a provision of $11.8 million for the first quarter of 2020 and $8.6 million for the fourth quarter of 2020. The negative provision in the first quarter was primarily the result of improved forecasts related to employment and default expectations as the economic outlook has improved significantly over that experienced in 2020, combined with the effects of the earlier discussed recovery from a previously charged-off hotel loan.

The allowance for credit losses on loans and leases totaled $52.4 million at March 31, 2021, compared to $52.3 million at December 31, 2020. The allowance for credit losses on loans and leases as a percentage of total loans and leases held for investment carried at historical cost was 1.12% and 1.21% at March 31, 2021, and December 31, 2020, respectively. The allowance for credit losses on loans and leases as a percentage of total loans and leases held for investment carried at historical cost is heavily influenced by the 100% guaranteed PPP loans.

Income Tax

Income tax expense in the first quarter of 2021 was $4.2 million compared to a net income tax benefit in the first quarter of 2020 of $7.8 million and an income tax benefit of $17.6 million in the fourth quarter of 2020. The effective tax rate for the first quarter of 2021 of 9.6% is principally the result of the above discussed renewable energy tax credit investments and an income tax benefit of $4.3 million arising from the vesting of restricted stock unit awards with market price conditions, as the fair value of these awards exceeded the total compensation cost recognized by the Company for book purposes.

The increase in the income tax expense for the first quarter of 2021 compared to the income tax benefit for the fourth quarter of 2020 was primarily the product of an increase of $31.6 million in income before taxes and the vesting of restricted stock unit awards with market price conditions during the fourth quarter of 2020 that resulted in the recognition of a tax benefit of $22.1 million during the fourth quarter of 2020.

Shareholders’ Equity

Total shareholders’ equity increased by $22.5 million, or 4.0%, during the first quarter of 2021. This increase was primarily due to net income, partially offset by cash paid for employee tax obligations in lieu of stock for settlement of vested restricted stock unit awards discussed above. Total cash paid in lieu of stock during the first quarter was $11.3 million.

During the first quarter of 2021, 415,504 shares of Class B common stock (non-voting) were converted to Class A common stock (voting) in connection with private sales. The conversion decreased the value of Class B common stock (non-voting) and increased the value of Class A common stock (voting) by $4.4 million.

Conference Call

Live Oak will host a conference call to discuss quarterly results at 9:00 a.m. ET tomorrow morning (April 22, 2021). Media representatives, analysts and the public are invited to listen to this discussion by calling (844) 743-2494 (domestic) or (661) 378-9528 (international) with conference ID 4360354. A live webcast of the conference call along with presentation materials referenced during the conference call will be available on the Investor Relations page of the Company’s website at http://investor.liveoakbank.com. A replay of the conference call will also be available until May 6, 2021 and can be accessed by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international).

CFO Commentary

Additional commentary on the quarter by Brett Caines, Chief Financial Officer of the Company, is available at http://investor.liveoakbank.com in the supporting materials for the conference call.

Important Note Regarding Forward-Looking Statements

Statements in this press release that are based on other than historical data or that express the Company’s plans or expectations regarding future events or determinations are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Statements based on historical data are not intended and should not be understood to indicate the Company’s expectations regarding future events. Forward-looking statements provide current expectations or forecasts of future events or determinations. These forward-looking statements are not guarantees of future performance or determinations, nor should they be relied upon as representing management’s views as of any subsequent date. Forward-looking statements involve significant risks and uncertainties, and actual results may differ materially from those presented, either expressed or implied, in this press release. Factors that could cause actual results to differ materially from those expressed in the forward-looking statements include changes in Small Business Administration (“SBA”) rules, regulations or loan products, including the Section 7(a) program, changes in SBA standard operating procedures or changes in Live Oak Banking Company's status as an SBA Preferred Lender; changes in rules, regulations or procedures for other government loan programs, including those of the United States Department of Agriculture; the potential impacts of the Coronavirus Disease 2019 (COVID-19) pandemic on trade (including supply chains and export levels), travel, employee productivity and other economic activities that may have a destabilizing and negative effect on financial markets, economic activity and customer behavior; a reduction in or the termination of the Company's ability to use the technology-based platform that is critical to the success of its business model, including a failure in or a breach of operational or security systems; competition from other lenders; the Company's ability to attract and retain key personnel; market and economic conditions and the associated impact on the Company; operational, liquidity and credit risks associated with the Company's business; the impact of heightened regulatory scrutiny of financial products and services and the Company's ability to comply with regulatory requirements and expectations; and the other factors discussed in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) and available at the SEC’s Internet site (http://www.sec.gov). Except as required by law, the Company specifically disclaims any obligation to update any factors or to publicly announce the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.

About Live Oak Bancshares, Inc.

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

Contacts:
Brett Caines | CFO | Investor Relations | 910.796.1645
Claire Parker | SVP Corporate Communications | Media Relations | 910.597.1592


Live Oak Bancshares, Inc.
Quarterly Statements of Income (unaudited)
(Dollars in thousands, except per share data)

  Three months ended 
  1Q 2021  4Q 2020  3Q 2020  2Q 2020  1Q 2020 
Interest income                    
Loans and fees on loans $84,993  $79,166  $70,621  $62,022  $58,961 
Investment securities, taxable  2,929   3,345   4,123   3,786   3,762 
Other interest earning assets  303   529   334   1,009   750 
Total interest income  88,225   83,040   75,078   66,817   63,473 
Interest expense                    
Deposits  16,944   19,195   22,155   25,121   23,255 
Borrowings  1,331   1,544   1,560   798   57 
Total interest expense  18,275   20,739   23,715   25,919   23,312 
Net interest income  69,950   62,301   51,363   40,898   40,161 
(Recovery of) provision for loan and lease credit losses  (873)  8,634   10,274   9,958   11,792 
Net interest income after (recovery of) provision for loan and lease credit losses  70,823   53,667   41,089   30,940   28,369 
Noninterest income                    
Loan servicing revenue  6,434   6,684   6,803   6,691   6,422 
Loan servicing asset revaluation  1,493   (5,756)  2,061   (1,571)  (4,692)
Net gains on sales of loans  11,929   14,976   12,690   10,695   11,112 
Net gain (loss) on loans accounted for under the fair value option  4,218   (4,759)  3,403   (1,089)  (10,638)
Equity method investments income (loss)  (1,157)  (8,739)  (1,231)  (2,243)  (2,478)
Equity security investments gains (losses), net  105   107   14,705   161   (64)
Gain (loss) on sale of investment securities available-for-sale, net        1,225   734   (79)
Lease income  2,599   2,615   2,634   2,635   2,624 
Management fee income  1,934   2,206   1,296   1,206   1,644 
Other noninterest income  3,502   3,469   3,458   5,192   1,891 
Total noninterest income  31,057   10,803   47,044   22,411   5,742 
Noninterest expense                    
Salaries and employee benefits  31,366   29,477   24,203   30,782   28,063 
Travel expense  659   1,056   250   364   1,781 
Professional services expense  3,831   1,691   1,346   1,385   1,937 
Advertising and marketing expense  652   973   552   624   1,361 
Occupancy expense  2,112   2,302   2,079   1,955   2,421 
Data processing expense  3,894   3,414   3,009   2,764   3,157 
Equipment expense  4,354   4,002   4,314   4,652   4,635 
Other loan origination and maintenance expense  3,327   3,173   2,669   2,492   2,456 
Renewable energy tax credit investment impairment  3,127             
FDIC insurance  1,765   2,147   2,095   1,721   1,510 
Other expense  3,185   4,200   2,133   1,361   2,170 
Total noninterest expense  58,272   52,435   42,650   48,100   49,491 
Income (loss) before taxes  43,608   12,035   45,483   5,251   (15,380)
Income tax expense (benefit)  4,181   (17,553)  11,703   1,474   (7,778)
Net income (loss) $39,427  $29,588  $33,780  $3,777  $(7,602)
Earnings (loss) per share                    
Basic $0.92  $0.72  $0.83  $0.09  $(0.19)
Diluted $0.88  $0.68  $0.81  $0.09  $(0.19)
Weighted average shares outstanding                    
Basic  42,673,615   41,320,851   40,542,696   40,506,671   40,334,179 
Diluted  44,696,850   43,333,707   41,549,632   41,122,025   41,074,049 
                     

Live Oak Bancshares, Inc.
Quarterly Balance Sheets (unaudited)
(Dollars in thousands)

  As of the quarter ended 
  1Q 2021  4Q 2020  3Q 2020  2Q 2020  1Q 2020 
Assets                    
Cash and due from banks $630,081  $297,167  $608,826  $1,256,958  $254,077 
Federal funds sold  5,461   21,153   25,924   91,188   158,226 
Certificates of deposit with other banks  6,500   6,500   7,250   7,250   7,250 
Investment securities available-for-sale  775,177   750,098   765,777   779,794   574,168 
Loans held for sale (1)  1,076,741   1,175,470   1,190,200   976,594   996,050 
Loans and leases held for investment (2)  5,456,754   5,144,930   5,037,094   4,650,030   2,817,405 
Allowance for credit losses on loans and leases  (52,417)  (52,306)  (44,210)  (44,083)  (35,906)
Net loans and leases  5,404,337   5,092,624   4,992,884   4,605,947   2,781,499 
Premises and equipment, net  253,774   259,267   253,737   269,063   274,177 
Foreclosed assets  4,185   4,155   3,264   5,660   6,744 
Servicing assets  37,744   33,918   37,831   33,834   33,532 
Other assets  223,875   231,951   207,688   182,866   187,846 
Total assets $8,417,875  $7,872,303  $8,093,381  $8,209,154  $5,273,569 
Liabilities and Shareholders’ Equity                    
Liabilities                    
Deposits:                    
Noninterest-bearing $75,794  $75,287  $58,771  $53,938  $51,275 
Interest-bearing  6,240,210   5,637,541   5,647,273   5,819,354   4,588,126 
Total deposits  6,316,004   5,712,828   5,706,044   5,873,292   4,639,401 
Borrowings  1,465,961   1,542,093   1,747,083   1,721,029   50,012 
Other liabilities  45,550   49,532   56,090   66,398   50,384 
Total liabilities  7,827,515   7,304,453   7,509,217   7,660,719   4,739,797 
Shareholders’ equity                    
Preferred stock, no par value, 1,000,000 shares 
authorized, none issued or outstanding
               
Class A common stock (voting)  298,525   298,890   325,753   319,542   314,994 
Class B common stock (non-voting)  7,330   11,729   26,106   28,753   28,753 
Retained earnings  275,377   235,724   207,400   174,837   172,276 
Accumulated other comprehensive income  9,128   21,507   24,905   25,303   17,749 
Total shareholders' equity  590,360   567,850   584,164   548,435   533,772 
Total liabilities and shareholders’ equity $8,417,875  $7,872,303  $8,093,381  $8,209,154  $5,273,569 


(1)Includes $35.9 million, $36.1 million, $30.4 million, $32.1 million and $19.2 million measured at fair value for the quarters ended March 31, 2021, December 31, 2020, September 30, 2020, June 30, 2020 and March 31, 2020, respectively.
  
(2)Includes $790.8 million, $815.4 million, $845.7 million, $834.6 million and $831.4 million measured at fair value for the quarters ended March 31, 2021, December 31, 2020, September 30, 2020, June 30, 2020 and March 31, 2020, respectively.


Live Oak Bancshares, Inc.
Quarterly Selected Financial Data
(Dollars in thousands, except per share data)

  As of and for the three months ended 
  1Q 2021  4Q 2020  3Q 2020  2Q 2020  1Q 2020 
Income Statement Data                    
Net income (loss) $39,427  $29,588  $33,780  $3,777  $(7,602)
Per Common Share                    
Net income (loss), basic $0.92  $0.72  $0.83  $0.09  $(0.19)
Net income (loss), diluted  0.88   0.68   0.81   0.09   (0.19)
Dividends declared  0.03   0.03   0.03   0.03   0.03 
Book value  13.74   13.38   14.69   13.53   13.22 
Tangible book value (1)  13.65   13.28   14.30   13.43   13.22 
Performance Ratios                    
Return on average assets (annualized)  1.98%  1.49%  1.67%  0.22%  (0.61)%
Return on average equity (annualized)  26.89   19.86   23.64   2.68   (5.64)
Net interest margin  3.81   3.33   2.77   2.56   3.55 
Efficiency ratio (1)  57.69   71.73   43.89   76.87   107.63 
Noninterest income to total revenue  30.75   14.78   47.15   34.64   12.66 
Selected Loan Metrics                    
Loans and leases originated $1,180,219  $808,010  $966,499  $2,175,055  $500,634 
Guaranteed loans sold  136,747   110,588   114,731   154,980   162,297 
Average net gain on sale of guaranteed loans  83.92   115.94   110.19   66.76   63.71 
Adjusted average net gain on sale of guaranteed loans (2)  83.92   114.07   107.99   65.94   83.48 
Outstanding balance of sold loans serviced:                    
Guaranteed  2,843,963   2,819,625   2,878,664   2,840,429   2,761,015 
Unguaranteed  372,764   385,998   264,829   231,602   223,587 
Total  3,216,727   3,205,623   3,143,493   3,072,031   2,984,602 
Asset Quality Ratios                    
Allowance for credit losses to loans and leases held for investment (4)  1.12%  1.21%  1.05%  1.16%  1.81%
Net charge-offs (recoveries) (4) $(984) $537  $10,147  $1,781  $2,799 
Net charge-offs (recoveries) to average loans and leases held for investment (3) (4)  (0.09)%  0.05%  1.03%  0.21%  0.58%
Nonperforming loans and leases (4) (5) $57,371  $46,110  $46,749  $40,275  $34,088 
Foreclosed assets  4,185   4,155   3,264   5,660   6,744 
Nonperforming loans and leases (unguaranteed exposure) (4) (5)  24,738   20,078   20,153   13,122   9,623 
Foreclosed assets (unguaranteed exposure)  941   935   642   1,199   1,478 
Nonperforming loans and leases not guaranteed by the SBA and foreclosures (4) (5) $25,679  $21,013  $20,795  $14,321  $11,101 
Nonperforming loans, leases and foreclosures, not guaranteed by the SBA, to total assets (4) (5)  0.34%  0.30%  0.29%  0.20%  0.25%
Nonperforming loans accounted for under the fair value option $40,234  $35,499  $47,434  $46,221  $60,558 
Nonperforming loans accounted for under the fair value option (unguaranteed exposure)  5,838   5,387   7,495   6,352   8,193 
Capital Ratios                    
Common equity tier 1 capital (to risk-weighted assets)  12.16%  12.15%  13.09%  12.84%  13.81%
Total capital (to risk-weighted assets)  13.32   13.39   14.19   13.99   14.83 
Tier 1 risk based capital (to risk-weighted assets)  12.16   12.15   13.09   12.84   13.81 
Tier 1 leverage capital (to average assets)  8.50   8.40   8.44   7.96   9.94 


Notes to Quarterly Selected Financial Data
(1)See accompanying GAAP to Non-GAAP Reconciliation.
(2)Excludes fair value gain/loss on exchange-traded interest rate futures contracts.
(3)Quarterly net charge-offs as a percentage of quarterly average loans and leases held for investment, annualized.
(4)Excludes loans measured at fair value.
(5)The quarters ended December 31, 2020 and September 30, 2020 exclude one $6.1 million hotel loan classified as held for sale.

 
Live Oak Bancshares, Inc.
Quarterly Average Balances and Net Interest Margin
(Dollars in thousands)

  Three Months Ended
March 31, 2021
  Three Months Ended
December 31, 2020
 
  Average Balance  Interest  Average Yield/Rate  Average Balance  Interest  Average Yield/Rate 
Interest earning assets:                        
Interest earning balances in other banks $331,260  $297   0.36% $384,811  $524   0.54%
Federal funds sold  28,202   6   0.09   24,420   5   0.08 
Investment securities  736,158   2,929   1.61   722,353   3,345   1.84 
Loans held for sale  1,158,844   15,077   5.28   1,179,474   15,414   5.18 
Loans and leases held for investment (1)  5,186,963   69,916   5.47   5,113,948   63,752   4.95 
Total interest earning assets  7,441,427   88,225   4.81   7,425,006   83,040   4.44 
Less: allowance for credit losses on loans and leases  (52,317)          (44,286)        
Non-interest earning assets  593,573           582,031         
Total assets $7,982,683          $7,962,751         
Interest bearing liabilities:                        
Interest bearing checking $250,005  $356   0.58% $309,787  $460   0.59%
Savings  2,356,598   3,512   0.60   1,929,378   3,226   0.66 
Money market accounts  105,753   83   0.32   92,372   73   0.31 
Certificates of deposit  3,151,575   12,993   1.67   3,217,854   15,436   1.90 
Total interest bearing deposits  5,863,931   16,944   1.17   5,549,391   19,195   1.37 
Borrowings  1,429,177   1,331   0.38   1,702,129   1,544   0.36 
Total interest bearing liabilities  7,293,108   18,275   1.02   7,251,520   20,739   1.13 
Non-interest bearing deposits  63,917           56,427         
Non-interest bearing liabilities  39,155           58,955         
Shareholders' equity  586,503           595,849         
Total liabilities and shareholders' equity $7,982,683          $7,962,751         
Net interest income and interest rate spread     $69,950   3.79%     $62,301   3.31%
Net interest margin          3.81           3.33 
Ratio of average interest-earning assets to average interest-bearing liabilities          102.03%          102.39%


(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 
  1Q 2021  4Q 2020  3Q 2020  2Q 2020  1Q 2020 
Total shareholders’ equity $590,360  $567,850  $584,164  $548,435  $533,772 
Less:                    
Goodwill  1,797   1,797   1,797   1,797    
Other intangible assets  2,141   2,179   2,218   2,294    
Tangible shareholders’ equity (a) $586,422  $563,874  $580,149  $544,344  $533,772 
Shares outstanding (c)  42,951,344   42,452,446   40,575,982   40,525,632   40,380,201 
Total assets $8,417,875  $7,872,303  $8,093,381  $8,209,154  $5,273,569 
Less:                    
Goodwill  1,797   1,797   1,797   1,797    
Other intangible assets  2,141   2,179   2,218   2,294    
Tangible assets (b) $8,413,937  $7,868,327  $8,089,366  $8,205,063  $5,273,569 
Tangible shareholders’ equity to tangible assets (a/b)  6.97%  7.17%  7.17%  6.63%  10.12%
Tangible book value per share (a/c) $13.65  $13.28  $14.30  $13.43  $13.22 
Efficiency ratio:                    
Noninterest expense (d) $58,272  $52,435  $42,650  $48,100  $49,491 
Net interest income  69,950   62,301   51,363   40,898   40,161 
Noninterest income  31,057   10,803   47,044   22,411   5,742 
Less: gain (loss) on sale of securities        1,225   734   (79)
Adjusted operating revenue (e) $101,007  $73,104  $97,182  $62,575  $45,982 
Efficiency ratio (d/e)  57.69%  71.73%  43.89%  76.87%  107.63%
                     

Live Oak Bancshares, Inc.
GAAP to Non-GAAP Reconciliation (Continued)
(Dollars in thousands)

  Three Months Ended 
  1Q 2021  4Q 2020  1Q 2020 
Reconciliation of net income (loss) to non-GAAP net income (loss):            
Net income (loss) $39,427  $29,588  $(7,602)
(Gain) loss on sale of aircraft  (114)  6    
Impairment on aircraft held for sale     244    
Income tax effects and adjustments for non-GAAP items *  27   (60)   
Non-GAAP net income (loss) $39,340  $29,778  $(7,602)
* Estimated at 24.0%            
Non-GAAP earnings (loss) per share:            
Basic $0.92  $0.72  $(0.19)
Diluted $0.88  $0.69  $(0.19)
Weighted-average shares outstanding:            
Basic  42,673,615   41,320,851   40,334,179 
Diluted  44,696,850   43,333,707   41,074,049 
Reconciliation of financial statement line items as reported to non-GAAP:            
Noninterest income, as reported $31,057  $10,803  $5,742 
Gain on sale of aircraft  (114)      
Noninterest income, non-GAAP $30,943  $10,803  $5,742 
Noninterest expense, as reported $58,272  $52,435  $49,491 
Loss on sale of aircraft     (6)   
Impairment on aircraft held for sale     (244)   
Noninterest expense, non-GAAP $58,272  $52,185  $49,491 
Income (loss) before taxes, as reported $43,608  $12,035  $(15,380)
(Gain) loss on sale of aircraft  (114)  6    
Impairment on aircraft held for sale     244    
Income (loss) before taxes, non-GAAP $43,494  $12,285  $(15,380)
Income tax expense (benefit), as reported $4,181  $(17,553) $(7,778)
Income tax effects and adjustments for non-GAAP items  (27)  60    
Income tax expense (benefit), non-GAAP $4,154  $(17,493) $(7,778)
             

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


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