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LOB Live Oak Bancshares

Filed: 21 Apr 21, 4:49pm

Exhibit 99.1

LIVE OAK BANCSHARES, INC. REPORTS FIRST QUARTER 2021 RESULTS

Wilmington, NC, April 21, 2021 - 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.

1


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.

2


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.

3


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.

4


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

5


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

 

6


 

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.

 

 

 

 

 

 

 

7


 

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.

8


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.

9


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

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10


 

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.

 

11