Live Oak Bancshares, Inc. Reports Fourth Quarter 2020 Results

January 27, 2021 4:30 PM EST

News and research before you hear about it on CNBC and others. Claim your 1-week free trial to StreetInsider Premium here.

WILMINGTON, N.C., Jan. 27, 2021 (GLOBE NEWSWIRE) -- Live Oak Bancshares, Inc. (Nasdaq: LOB) (“Live Oak” or “the Company”) today reported fourth quarter 2020 net earnings available to common shareholders of $29.6 million, or $0.68 per diluted share, as the Company continues to execute on our strategic priorities that we believe will deliver long-term earnings for our shareholders. Net earnings for the year ended December 31, 2020, totaled $59.5 million, or $1.43 per diluted share.

“Our mission to be America’s small business bank has never been more important. The past year was incredibly challenging for our country’s entrepreneurs, and their drive and determination reinforce why we want to fundamentally shift the way banking is done,” said James S. Mahan, III, Chairman and Chief Executive Officer of Live Oak Bancshares. “As our efforts to drive rapid change in financial technology gained momentum in 2020, our teams continued their relentless focus on supporting customers in a time unequaled in recent history. In 2020, we grew assets by $3 billion by serving small businesses across the U.S. and significantly increased net income. Our balance sheet and funding model position us very well to serve America’s small businesses in the coming year. We will continue to drive the core earnings of the bank, while providing vital capital to small business owners who are the cornerstone of our country’s economy.”

Year over Year Highlights

(Dollars in thousands, except per share data)         Increase (Decrease) 
  2020  2019  Dollars  Percent 
Net interest income and servicing revenues $221,323  $168,116  $53,207   32%
Net income  59,543   18,034   41,509   230 
Diluted earnings per share  1.43   0.44   0.99   225 
Non-GAAP net income (1)  60,507   18,220   42,287   232 
Non-GAAP diluted earnings per share (1)  1.45   0.45   1.00   222 
Loan and lease production:                
Loans and leases originated $4,450,198  $2,001,886  $2,448,312   122%
% Fully funded  78.6%  51.4% n/a  n/a 
Total loans and leases: $6,320,552  $3,593,733  $2,726,819   76%
Total assets:  7,872,303   4,812,828   3,059,475   64 
Total deposits:  5,712,828   4,226,980   1,485,848   35 

Fourth Quarter 2020 Key Measures

(Dollars in thousands, except per share data)         Increase (Decrease)     
  Q4 2020  Q4 2019  Dollars  Percent  Q3 2020 
Net interest income and servicing revenues $68,985  $44,741  $24,244   54% $58,166 
Net income  29,588   6,832   22,756   333   33,780 
Diluted earnings per share  0.68   0.17   0.51   300   0.81 
Non-GAAP net income (1)  29,778   6,832   22,946   336   34,554 
Non-GAAP diluted earnings per share (1)  0.69   0.17   0.52   303   0.83 
Loan and lease production:                    
Loans and leases originated $808,010  $523,688  $284,322   54% $966,499 
% Fully funded  55.6%  49.0% n/a  n/a   72.9%

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

Loans and Leases

At December 31, 2020, the total loan and lease portfolio increased to $6.32 billion, 75.9% above its level a year ago and 1.5% above its level at September 30, 2020. Compared to the third quarter of 2020, loans and leases held for investment increased $107.9 million, or 2.1%, to $5.15 billion while loans held for sale decreased $14.7 million, or 1.2%, to $1.18 billion. The total loan and lease portfolio at December 31, 2020, and September 30, 2020, of $6.32 billion and $6.23 billion, respectively, was comprised of 40.4% and 37.9% of unguaranteed loans and leases, respectively. Average loans and leases were $6.29 billion during the fourth quarter of 2020 compared to $5.87 billion during the third quarter of 2020.

The total loan and lease portfolio of $6.32 billion is comprised of $1.50 billion of Paycheck Protection Program (“PPP”) loans, net of deferred fees and costs, at December 31, 2020. PPP loans comprised $1.76 billion of the total loans and leases originated during the year ended December 31, 2020 and are carried at historical cost classified as held for investment.

Loan and lease originations for the year ended December 31, 2020, increased by 122.3% to $4.45 billion compared to $2.00 billion for the year ended December 31, 2019. Excluding PPP loans, loan and lease originations totaled $2.69 billion for the year ended December 31, 2020, an increase of 34.3% compared to the prior year. Loan and lease originations totaled $808.0 million during the fourth quarter of 2020, a decrease of $158.5 million, or 16.4%, from the third quarter of 2020.

Loans and leases held for investment, loan and lease originations, and average loans and leases were impacted by PPP loans originated in the second and third quarters of 2020. The unguaranteed percentage of the total loan and lease portfolio, as previously mentioned, is significantly influenced by the addition of PPP loans carrying a 100% government guarantee.

Deposits

Total deposits increased to $5.71 billion at December 31, 2020, an increase of $1.49 billion compared to December 31, 2019, and an increase of $6.8 million compared to September 30, 2020.

The modest increase in total deposits from the prior quarter is the result of utilization of heightened liquidity levels on the balance sheet at the start of the quarter in response to COVID-19 uncertainties. Average total interest-bearing deposits for the fourth quarter of 2020 decreased $138.6 million, or 2.4%, to $5.55 billion, compared to $5.69 billion for the third quarter of 2020. The ratio of average total loans and leases to average interest-bearing deposits was 113.4% for the fourth quarter of 2020, compared to 103.1% for the third quarter of 2020. The ratio is influenced by average PPP loan volume and the use of the Federal Reserve’s Paycheck Protection Program Liquidity Facility (“PPPLF”) classified as long-term borrowings.

Borrowings

Borrowings totaled $1.54 billion at December 31, 2020, compared to $14 thousand and $1.75 billion at December 31, 2019, and September 30, 2020, respectively. During the fourth quarter of 2020, the Company decreased borrowings by $205.0 million primarily by reducing the outstanding balance in the Federal Reserve’s PPPLF to $1.53 billion as of December 31, 2020. The PPPLF has a 100% advance rate equal to the principal amount of PPP loans pledged as security, carries an interest rate of 0.35% and loans financed under the PPPLF have a neutral impact on regulatory leverage capital ratios.

Net Interest Income

Net interest income for the fourth quarter of 2020 rose to $62.3 million compared to $38.0 million for the fourth quarter of 2019 and $51.4 million for the third quarter of 2020. Net interest income for the year ended December 31, 2020 totaled $194.7 million, a $54.6 million increase from the prior year primarily due to the increases in the volume of interest earning assets.

The increase for the fourth quarter of 2020 compared to the fourth quarter of 2019 was driven by the significant growth in the total loan and lease portfolios reflecting the Company's ongoing initiative to grow recurring revenue sources and further enhanced by the origination of $1.76 billion in PPP loans in the second and third quarters of 2020.

The increase from the third quarter of 2020 arose principally from a higher average loan and lease portfolio balance enhanced by a 56-basis point improvement in the net interest margin from 2.77% to 3.33%. The increase in interest earning asset yields of 39 basis points was primarily driven by fees recognized on PPP loans originated in the second and third quarters of 2020. The asset yield was complimented by the 14-basis point reduction in the average cost of interest-bearing liabilities from 1.27% for the quarter ended September 30, 2020, to 1.13% for the quarter ended December 31, 2020. The reduction in the cost of interest-bearing liabilities over the third quarter was largely the result of a lag in deposit repricing from the first quarter of 2020 cuts in federal funds rates combined with runoff of higher rate maturing deposits.

Noninterest Income

Noninterest income for the fourth quarter of 2020 decreased to $10.8 million compared to $20.1 million for the fourth quarter of 2019 and $47.0 million for the third quarter of 2020.

The primary drivers of the decrease compared to the fourth quarter of 2019 and the third quarter of 2020 were net loss on loans accounted for under the fair value option and equity method investment losses. The net loss on loans accounted for under the fair value option totaled $4.8 million for the fourth quarter of 2020, a $6.2 million decrease compared to the net gain for the fourth quarter of 2019 and a $8.2 million decrease compared to the net gain for the third quarter of 2020. The valuation of loans was negatively impacted by market conditions arising from the impact of COVID-19 and model refinements in recognition of loss experience in non-mature verticals. Equity method investments loss totaled $8.7 million for the fourth quarter of 2020, a $7.0 million increase from the loss for the fourth quarter of 2019 and a $7.5 million increase from the loss for the third quarter of 2020. The higher loss for the fourth quarter of 2020 was largely a product of the Company’s pro rata portion of income tax expense arising from an investee’s conversion from a partnership to a corporation.

Additionally, the loan servicing asset revaluation resulted in a loss of $5.8 million for the fourth quarter of 2020 compared to a loss of $4.1 million for the fourth quarter of 2019 and a gain of $2.1 million for the third quarter of 2020. The increase in the negative loan servicing asset revaluation was largely the result of increased paydowns combined with the above mentioned COVID-19 impacted market conditions. Compared to the prior quarter, equity security investment gains decreased $14.6 million to $107 thousand for the fourth quarter of 2020 following the recognition of a $13.7 million non-cash gain during the third quarter of 2020 arising from the increase in the market value of the Company’s investment in Greenlight Financial Technology, Inc.

Partially offsetting the decrease in noninterest income, the Company’s net gains on sales of loans increased $3.6 million to $15.0 million in the fourth quarter of 2020 compared to $11.4 million in the fourth quarter of 2019 and increased $2.3 million compared to $12.7 million in the third quarter of 2020. The volume of guaranteed loan sales in the fourth quarter of 2020 remained relatively flat at $110.6 million compared to $105.0 million in the fourth quarter of 2019 and $114.7 million in the third quarter of 2020.

The average net gain on guaranteed loan sales increased to $115.9 thousand per million sold in the fourth quarter of 2020 versus $106.2 thousand in the fourth quarter of 2019 and $110.2 thousand in the third quarter of 2020. The increase in average guaranteed loan sale pricing from the fourth quarter of 2019 was driven by the mix of loans sold by the Company and market conditions for the purchase of guaranteed loans.

Noninterest Expense

Noninterest expense for the fourth quarter of 2020 increased to $52.4 million compared to $44.4 million for the fourth quarter of 2019 and $42.7 million for the third quarter of 2020.

Salaries and employee benefits for the fourth quarter of 2020 increased to $29.5 million compared to $24.1 million for the fourth quarter of 2019 and $24.2 million for the third quarter of 2020. The increase in salaries and benefits of $5.4 million compared to the fourth quarter of 2019 and $5.3 million compared to the third quarter of 2020 was largely driven by the vesting of approximately 2.5 million restricted stock unit awards with market price conditions that impacted both compensation expense and payroll tax expense by a combined $4.1 million.

Also contributing to the increase in noninterest expense was other expense of $4.2 million for the fourth quarter of 2020, an increase of $1.9 million compared to the fourth quarter of 2019 and $2.1 million from the third quarter of 2020. The increase in other expense for the fourth quarter of 2020 compared to the fourth quarter of 2019 and third quarter of 2020 was largely comprised of increased franchise tax accruals and other operational expenses. Also influencing the quarter over quarter increase in other expense was a third quarter recovery from a previously recognized asset impairment.

The increase in noninterest expense for the fourth quarter of 2020 compared to the fourth quarter of 2019 was mitigated in part by a decrease in travel expense of $1.2 million.

Asset Quality

Net charge-offs for loans carried at historical cost were $537 thousand in the fourth quarter of 2020 compared to $10.1 million in the third quarter of 2020 and $536 thousand in the fourth quarter of 2019. Net charge-offs as a percentage of average held for investment loans and leases carried at historical cost, annualized, for the quarters ended December 31, 2020 and 2019, was 0.05% and 0.13%, respectively. Net charge-offs for loans carried at historical cost for the year ended December 31, 2020, totaled $15.3 million compared to $1.4 million for the year ended December 31, 2019. The increase in net charge-offs for the year ended December 31, 2020, was principally driven by the third quarter reclassification of fifteen hotel loans from held for investment to held for sale totaling $81.2 million in net investment. The reclassification to held for sale resulted in a write down reflected in charge-offs of $9.8 million. Net charge-offs as a percentage of total average held for investment loans and leases carried at historical cost for the years ended December 31, 2020 and 2019, were 0.45% and 0.10%, respectively.

Unguaranteed nonperforming (nonaccrual) loans and leases, excluding $5.4 million and $7.5 million accounted for under the fair value option at December 31, 2020, and September 30, 2020, respectively, decreased to $20.1 million, or 0.46% of loans and leases held for investment which are carried at historical cost, at December 31, 2020, compared to $20.2 million, or 0.48%, at September 30, 2020.

The unguaranteed exposure of foreclosed assets increased $293 thousand to $935 thousand at December 31, 2020, compared to September 30, 2020. Foreclosed assets increased $891 thousand to $4.2 million at December 31, 2020, from $3.3 million at September 30, 2020.

Provision for Loan and Lease Credit Losses

The provision for loan and lease credit losses for the fourth quarter of 2020 totaled $8.6 million compared to $10.3 million for the third quarter of 2020 and $4.8 million for the fourth quarter of 2019. The Company adopted the new current expected credit losses (“CECL”) standard effective January 1, 2020, and accordingly determined to use forecasted levels of unemployment as a primary economic variable in forecasting future expected losses. Ongoing developments and changing economic forecasts related to the COVID-19 pandemic significantly influences the Company’s allowance for credit losses on loans and leases. This, combined with the growing loan and lease portfolio and model refinements in recognition of loss experience in non-mature verticals, resulted in $40.7 million of provision for loan and lease credit losses for the year ended December 31, 2020, compared to $15.2 million for the year ended December 31, 2019.

The allowance for credit losses on loans and leases totaled $52.3 million at December 31, 2020, compared to $44.2 million at September 30, 2020. The allowance for credit losses on loans and leases as a percentage of total loans and leases held for investment carried at historical cost was 1.21% and 1.05% at December 31, 2020, and September 30, 2020, respectively. The allowance for credit losses on loans and leases as a percentage of total loans and leases held for investment carried at historical cost is heavily influenced by the 100% guaranteed PPP loans.

Income Tax

Income tax benefit in the fourth quarter of 2020 was $17.6 million compared to a net income tax expense in the fourth quarter of 2019 of $2.1 million and an income tax expense of $11.7 million in the third quarter of 2020. The income tax benefit for the fourth quarter of 2020 was principally the product of the previously mentioned vesting of restricted stock unit awards with market price conditions during the fourth quarter. Upon vesting, the fair value of these awards exceeded the total compensation cost recognized by the Company for book purposes, which resulted in the recognition of a tax benefit of $22.1 million. For the year ended December 31, 2020, there was a total income tax benefit of $12.2 million largely driven by the vesting of restricted stock awards in the fourth quarter in addition to a tax benefit of $3.7 million due to the enactment of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) on March 27, 2020, which allows the carryback of certain net operating losses to each of the five taxable years preceding the taxable year of such losses.

Shareholders’ Equity

Total shareholders’ equity decreased by $16.3 million, or 2.8%, during the fourth quarter of 2020. This decrease was principally due to cash paid for employee tax obligations in lieu of stock for settlement of vested restricted stock unit awards discussed above. Total cash paid in lieu of stock during the fourth quarter was $49.0 million.

During 2020, 1,807,774 shares of Class B common stock (non-voting) were converted to Class A common stock (voting) in connection with private sales. The conversion decreased the value of Class B common stock (non-voting) and increased the value of Class A common stock (voting) by $19.1 million.

Conference Call

Live Oak will host a conference call to discuss quarterly results at 9:00 a.m. ET tomorrow morning (January 28, 2021). Media representatives, analysts and the public are invited to listen to this discussion by calling (844) 743-2494 (domestic) or (661) 378-9528 (international) with conference ID 9778804. A live webcast of the conference call along with presentation materials referenced during the conference call will be available on the Investor Relations page of the Company’s website at http://investor.liveoakbank.com. A replay of the conference call will also be available until February 4, 2021 and can be accessed by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international).

CFO Commentary

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

Important Note Regarding Forward-Looking Statements

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

About Live Oak Bancshares, Inc.

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

Contacts:

Brett Caines | CFO | Investor Relations | 910.796.1645

Claire Parker | SVP Corporate Communications | Media Relations | 910.597.1592


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

  Three months ended 
  4Q 2020  3Q 2020  2Q 2020  1Q 2020  4Q 2019 
Interest income                    
Loans and fees on loans $79,166  $70,621  $62,022  $58,961  $57,017 
Investment securities, taxable  3,345   4,123   3,786   3,762   3,911 
Other interest earning assets  529   334   1,009   750   885 
Total interest income  83,040   75,078   66,817   63,473   61,813 
Interest expense                    
Deposits  19,195   22,155   25,121   23,255   23,801 
Borrowings  1,544   1,560   798   57   1 
Total interest expense  20,739   23,715   25,919   23,312   23,802 
Net interest income  62,301   51,363   40,898   40,161   38,011 
Provision for loan and lease credit losses  8,634   10,274   9,958   11,792   4,809 
Net interest income after provision for loan and lease credit losses  53,667   41,089   30,940   28,369   33,202 
Noninterest income                    
Loan servicing revenue  6,684   6,803   6,691   6,422   6,730 
Loan servicing asset revaluation  (5,756)  2,061   (1,571)  (4,692)  (4,135)
Net gains on sales of loans  14,976   12,690   10,695   11,112   11,364 
Net (loss) gain on loans accounted for under the fair value option  (4,759)  3,403   (1,089)  (10,638)  1,432 
Equity method investments income (loss)  (8,739)  (1,231)  (2,243)  (2,478)  (1,769)
Equity security investments gains (losses), net  107   14,705   161   (64)  54 
Gain (loss) on sale of investment securities available-for-sale, net     1,225   734   (79)  528 
Lease income  2,615   2,634   2,635   2,624   2,600 
Management fee income  2,206   1,296   1,206   1,644   1,556 
Other noninterest income  3,469   3,458   5,192   1,891   1,765 
Total noninterest income  10,803   47,044   22,411   5,742   20,125 
Noninterest expense                    
Salaries and employee benefits  29,477   24,203   30,782   28,063   24,072 
Travel expense  1,056   250   364   1,781   2,246 
Professional services expense  1,691   1,346   1,385   1,937   983 
Advertising and marketing expense  973   552   624   1,361   1,630 
Occupancy expense  2,302   2,079   1,955   2,421   2,528 
Data processing expense  3,414   3,009   2,764   3,157   1,847 
Equipment expense  4,002   4,314   4,652   4,635   4,402 
Other loan origination and maintenance expense  3,173   2,669   2,492   2,456   2,390 
FDIC insurance  2,147   2,095   1,721   1,510   2,012 
Other expense  4,200   2,133   1,361   2,170   2,300 
Total noninterest expense  52,435   42,650   48,100   49,491   44,410 
Income (loss) before taxes  12,035   45,483   5,251   (15,380)  8,917 
Income tax (benefit) expense  (17,553)  11,703   1,474   (7,778)  2,085 
Net income (loss) $29,588  $33,780  $3,777  $(7,602) $6,832 
Earnings (loss) per share                    
Basic $0.72  $0.83  $0.09  $(0.19) $0.17 
Diluted $0.68  $0.81  $0.09  $(0.19) $0.17 
Weighted average shares outstanding                    
Basic  41,320,851   40,542,696   40,506,671   40,334,179   40,291,867 
Diluted  43,333,707   41,549,632   41,122,025   41,074,049   41,178,472 



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

  As of the quarter ended 
  4Q 2020  3Q 2020  2Q 2020  1Q 2020  4Q 2019 
Assets                    
Cash and due from banks $297,167  $608,826  $1,256,958  $254,077  $124,610 
Federal funds sold  21,153   25,924   91,188   158,226   96,787 
Certificates of deposit with other banks  6,500   7,250   7,250   7,250   7,250 
Investment securities available-for-sale  750,098   765,777   779,794   574,168   540,045 
Loans held for sale (1)  1,175,470   1,190,200   976,594   996,050   966,447 
Loans and leases held for investment (2)  5,145,082   5,037,199   4,650,056   2,817,491   2,627,286 
Allowance for credit losses on loans and leases  (52,306)  (44,210)  (44,083)  (35,906)  (28,234)
Net loans and leases  5,092,776   4,992,989   4,605,973   2,781,585   2,599,052 
Premises and equipment, net  259,267   253,737   269,063   274,177   279,099 
Foreclosed assets  4,155   3,264   5,660   6,744   5,612 
Servicing assets  33,918   37,831   33,834   33,532   35,365 
Other assets  231,799   207,583   182,840   187,760   158,561 
Total assets $7,872,303  $8,093,381  $8,209,154  $5,273,569  $4,812,828 
Liabilities and Shareholders’ Equity                    
Liabilities                    
Deposits:                    
Noninterest-bearing $75,287  $58,771  $53,938  $51,275  $51,965 
Interest-bearing  5,637,541   5,647,273   5,819,354   4,588,126   4,175,015 
Total deposits  5,712,828   5,706,044   5,873,292   4,639,401   4,226,980 
Borrowings  1,542,093   1,747,083   1,721,029   50,012   14 
Other liabilities  49,532   56,090   66,398   50,384   53,448 
Total liabilities  7,304,453   7,509,217   7,660,719   4,739,797   4,280,442 
Shareholders’ equity                    
Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding               
Class A common stock (voting)  298,890   325,753   319,542   314,994   309,526 
Class B common stock (non-voting)  11,729   26,106   28,753   28,753   30,871 
Retained earnings  235,724   207,400   174,837   172,276   180,265 
Accumulated other comprehensive income  21,507   24,905   25,303   17,749   11,724 
Total equity  567,850   584,164   548,435   533,772   532,386 
Total liabilities and shareholders’ equity $7,872,303  $8,093,381  $8,209,154  $5,273,569  $4,812,828 


(1)Includes $36.1 million, $30.4 million, $32.1 million, $19.2 million and $16.2 million measured at fair value for the quarters ended December 31, 2020, September 30, 2020, June 30, 2020, March 31, 2020 and December 31, 2019, respectively.
(2)Includes $815.4 million, $845.7 million, $834.6 million, $831.4 million and $824.5 million measured at fair value for the quarters ended December 31, 2020, September 30, 2020, June 30, 2020, March 31, 2020 and December 31, 2019, respectively.



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

  Twelve months ended 
  December 31, 2020  December 31, 2019 
Interest income        
Loans and fees on loans $270,770  $207,836 
Investment securities, taxable  15,016   15,345 
Other interest earning assets  2,622   4,799 
Total interest income  288,408   227,980 
Interest expense        
Deposits  89,726   87,897 
Borrowings  3,959   1 
Total interest expense  93,685   87,898 
Net interest income  194,723   140,082 
Provision for loan and lease credit losses  40,658   15,212 
Net interest income after provision for loan and lease credit losses  154,065   124,870 
Noninterest income        
Loan servicing revenue  26,600   28,034 
Loan servicing asset revaluation  (9,958)  (16,581)
Net gains on sales of loans  49,473   29,002 
Net (loss) gain on loans accounted for under the fair value option  (13,083)  7,408 
Equity method investments income (loss)  (14,691)  (7,889)
Equity security investments gains (losses), net  14,909   3,532 
Gain on sale of investment securities available-for-sale, net  1,880   620 
Lease income  10,508   9,655 
Management fee income  6,352   1,742 
Other noninterest income  14,010   7,996 
Total noninterest income  86,000   63,519 
Noninterest expense        
Salaries and employee benefits  112,525   90,634 
Travel expense  3,451   6,921 
Professional services expense  6,359   6,859 
Advertising and marketing expense  3,510   5,936 
Occupancy expense  8,757   8,116 
Data processing expense  12,344   9,265 
Equipment expense  17,603   16,327 
Other loan origination and maintenance expense  10,790   9,272 
Renewable energy tax credit investment impairment     602 
FDIC insurance  7,473   3,447 
Other expense  9,864   7,545 
Total noninterest expense  192,676   164,924 
Income before taxes  47,389   23,465 
Income tax (benefit) expense  (12,154)  5,431 
Net income $59,543  $18,034 
Earnings per share        
Basic $1.46  $0.45 
Diluted $1.43  $0.44 
Weighted average shares outstanding        
Basic  40,677,496   40,222,758 
Diluted  41,771,250   41,053,514 



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

  As of and for the three months ended 
  4Q 2020  3Q 2020  2Q 2020  1Q 2020  4Q 2019 
Income Statement Data                    
Net income (loss) $29,588  $33,780  $3,777  $(7,602) $6,832 
Per Common Share                    
Net income (loss), basic $0.72  $0.83  $0.09  $(0.19) $0.17 
Net income (loss), diluted  0.68   0.81   0.09   (0.19)  0.17 
Dividends declared  0.03   0.03   0.03   0.03   0.03 
Book value  13.38   14.69   13.53   13.22   13.20 
Tangible book value (1)  13.28   14.30   13.43   13.22   13.20 
Performance Ratios                    
Return on average assets (annualized)  1.49%  1.67%  0.22%  (0.61)%  0.58%
Return on average equity (annualized)  19.86   23.64   2.68   (5.64)  5.06 
Net interest margin  3.33   2.77   2.56   3.55   3.57 
Efficiency ratio (1)  71.73   43.89   76.87   107.63   77.09 
Noninterest income to total revenue  14.78   47.15   34.64   12.66   34.02 
Selected Loan Metrics                    
Loans and leases originated $808,010  $966,499  $2,175,055  $500,634  $523,688 
Guaranteed loans sold  110,588   114,731   154,980   162,297   105,002 
Average net gain on sale of guaranteed loans  115.94   110.19   66.76   63.71   106.16 
Adjusted average net gain on sale of guaranteed loans (2)  114.07   107.99   65.94   83.48   94.86 
Outstanding balance of sold loans serviced:                    
Guaranteed  2,819,625   2,878,664   2,840,429   2,761,015   2,746,480 
Unguaranteed  385,998   264,829   231,602   223,587   224,127 
Total  3,205,623   3,143,493   3,072,031   2,984,602   2,970,607 
Asset Quality Ratios                    
Allowance for credit losses to loans and leases held for investment (4)  1.21%  1.05%  1.16%  1.81%  1.57%
Net charge-offs (4) $537  $10,147  $1,781  $2,799  $536 
Net charge-offs to average loans and leases held for investment (3) (4)   0.05%  1.03%  0.21%  0.58%  0.13%
Nonperforming loans and leases (4) (5) $46,110  $46,749  $40,275  $34,088  $21,937 
Foreclosed assets  4,155   3,264   5,660   6,744   5,612 
Nonperforming loans and leases (unguaranteed exposure) (4) (5)  20,078   20,153   13,122   9,623   7,224 
Foreclosed assets (unguaranteed exposure)  935   642   1,199   1,478   1,120 
Nonperforming loans and leases not guaranteed by the SBA and foreclosures (4) (5) $21,013  $20,795  $14,321  $11,101  $8,344 
Nonperforming loans, leases and foreclosures, not guaranteed by the SBA, to total assets (4) (5)  0.30%  0.29%  0.20%  0.25%  0.21%
Nonperforming loans accounted for under the fair value option $35,499  $47,434  $46,221  $60,558  $49,739 
Nonperforming loans accounted for under the fair value option (unguaranteed exposure)  5,387   7,495   6,352   8,193   6,700 
Capital Ratios                    
Common equity tier 1 capital (to risk-weighted assets)  12.21%  13.09%  12.84%  13.81%  14.90%
Total capital (to risk-weighted assets)  13.45   14.19   13.99   14.83   15.74 
Tier 1 risk based capital (to risk-weighted assets)  12.21   13.09   12.84   13.81   14.90 
Tier 1 leverage capital (to average assets)  8.40   8.44   7.96   9.94   10.65 

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



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

  Three months ended
December 31, 2020
  Three months ended
September 30, 2020
 
  Average Balance  Interest  Average Yield/Rate  Average Balance  Interest  Average Yield/Rate 
Interest earning assets:                        
Interest earning balances in other banks $384,811  $524   0.54% $681,408  $320   0.18%
Federal funds sold  24,420   5   0.08   54,979   14   0.10 
Investment securities  722,353   3,345   1.84   755,412   4,123   2.17 
Loans held for sale  1,179,502   15,414   5.18   1,084,024   14,399   5.27 
Loans and leases held for investment (1)  5,114,069   63,752   4.95   4,782,075   56,222   4.66 
Total interest earning assets  7,425,155   83,040   4.44   7,357,898   75,078   4.05 
Less: allowance for credit losses on loans and leases  (44,286)          (44,054)        
Non-interest earning assets  581,882           778,826         
Total assets $7,962,751          $8,092,670         
Interest bearing liabilities:                        
Interest bearing checking $309,787  $460   0.59% $500,007  $747   0.59%
Savings  1,929,378   3,226   0.66   1,669,199   3,674   0.87 
Money market accounts  92,372   73   0.31   95,151   83   0.35 
Certificates of deposit  3,217,854   15,436   1.90   3,423,643   17,651   2.05 
Total interest bearing deposits  5,549,391   19,195   1.37   5,688,000   22,155   1.55 
Borrowings  1,702,129   1,544   0.36   1,733,805   1,560   0.36 
Total interest bearing liabilities  7,251,520   20,739   1.13   7,421,805   23,715   1.27 
Non-interest bearing deposits  56,427           43,993         
Non-interest bearing liabilities  58,955           55,353         
Shareholders' equity  595,849           571,519         
Total liabilities and shareholders' equity $7,962,751          $8,092,670         
Net interest income and interest rate spread     $62,301   3.31%     $51,363   2.78%
Net interest margin          3.33           2.77 
Ratio of average interest-earning assets to average interest-bearing liabilities          102.39%          99.14%

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



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

  As of and for the three months ended 
  4Q 2020  3Q 2020  2Q 2020  1Q 2020  4Q 2019 
Total shareholders’ equity $567,850  $584,164  $548,435  $533,772  $532,386 
Less:                    
Goodwill  1,797   1,797   1,797       
Other intangible assets  2,179   2,218   2,294       
Tangible shareholders’ equity (a) $563,874  $580,149  $544,344  $533,772  $532,386 
Shares outstanding (c)  42,452,446   40,575,982   40,525,632   40,380,201   40,316,974 
Total assets $7,872,303  $8,093,381  $8,209,154  $5,273,569  $4,812,828 
Less:                    
Goodwill  1,797   1,797   1,797       
Other intangible assets  2,179   2,218   2,294       
Tangible assets (b) $7,868,327  $8,089,366  $8,205,063  $5,273,569  $4,812,828 
Tangible shareholders’ equity to tangible assets (a/b)  7.17%  7.17%  6.63%  10.12%  11.06%
Tangible book value per share (a/c) $13.28  $14.30  $13.43  $13.22  $13.20 
Efficiency ratio:                    
Noninterest expense (d) $52,435  $42,650  $48,100  $49,491  $44,410 
Net interest income  62,301   51,363   40,898   40,161   38,011 
Noninterest income  10,803   47,044   22,411   5,742   20,125 
Less: gain (loss) on sale of securities     1,225   734   (79)  528 
Adjusted operating revenue (e) $73,104  $97,182  $62,575  $45,982  $57,608 
Efficiency ratio (d/e)  71.73%  43.89%  76.87%  107.63%  77.09%



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

  Three months ended  Twelve months ended 
  4Q 2020  3Q 2020  4Q 2019  4Q 2020  4Q 2019 
Reconciliation of net income to non-GAAP net income:                    
Net income $29,588  $33,780  $6,832  $59,543  $18,034 
Loss (gain) on sale of aircraft  6         6   (357)
Impairment on aircraft held for sale  244   1,019      1,263    
Renewable energy tax credit investment impairment              602 
Income tax effects and adjustments for non-GAAP items *  (60)  (245)     (305)  (59)
Non-GAAP net income $29,778  $34,554  $6,832  $60,507  $18,220 
* Estimated at 24.0%                    
Non-GAAP earnings per share:                    
Basic $0.72  $0.85  $0.17  $1.49  $0.45 
Diluted $0.69  $0.83  $0.17  $1.45  $0.44 
Weighted-average shares outstanding:                    
Basic  41,320,851   40,542,696   40,291,867   40,677,496   40,222,758 
Diluted  43,333,707   41,549,632   41,178,472   41,771,250   41,053,514 
Reconciliation of financial statement line items as reported to non-GAAP:                    
Noninterest income, as reported $10,803  $47,044  $20,125  $86,000  $63,519 
Gain on sale of aircraft              (357)
Noninterest income, non-GAAP $10,803  $47,044  $20,125  $86,000  $63,162 
Noninterest expense, as reported $52,435  $42,650  $44,410  $192,676  $164,924 
Loss on sale of aircraft  (6)        (6)   
Impairment on aircraft held for sale  (244)  (1,019)     (1,263)   
Renewable energy tax credit investment impairment              (602)
Noninterest expense, non-GAAP $52,185  $41,631  $44,410  $191,407  $164,322 
Income before taxes, as reported $12,035  $45,483  $8,917  $47,389  $23,465 
Loss (gain) on sale of aircraft  6         6   (357)
Impairment on aircraft held for sale  244   1,019      1,263    
Renewable energy tax credit investment impairment              602 
Income before taxes, non-GAAP $12,285  $46,502  $8,917  $48,658  $23,710 
Income tax (benefit) expense, as reported $(17,553) $11,703  $2,085  $(12,154) $5,431 
Income tax effects and adjustments for non-GAAP items  60   245      305   59 
Income tax (benefit) expense, non-GAAP $(17,493) $11,948  $2,085  $(11,849) $5,490 

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




Serious News for Serious Traders! Try StreetInsider.com Premium Free!

You May Also Be Interested In





Related Categories

Globe Newswire, Press Releases

Related Entities

Dividend, FDIC, Earnings