Live Oak Bancshares, Inc. Reports Second Quarter 2021 Results
WILMINGTON, N.C., July 21, 2021 (GLOBE NEWSWIRE) — Live Oak Bancshares, Inc. (Nasdaq: LOB) (“Live Oak” or “the Company”) today reported second quarter 2021 net earnings available to common shareholders of $63.6 million, or $1.41 per diluted share. The second quarter of 2021 included a pretax gain of $44.1 million related to an investment in Greenlight Financial Technologies, Inc. (“Greenlight”) accounted for as an equity security.
“The second quarter of 2021 showed strength across all of Live Oak’s key metrics. Our loan originations exceeded $1.0 billion, core revenues continued a strong growth trend, and our efforts in financial technology lifted earnings and capital,” said Live Oak Chairman and CEO James S. (Chip) Mahan, III. “We strongly believe in our model and will continue to focus on financial technology while serving the small business communities that are the backbone of the American economy. Our teams have an unwavering dedication to small business owners and the quarter reflects our commitment to fueling their growth.”
Second Quarter 2021 Key Measures
| (Dollars in thousands, except per share data) | Increase (Decrease) | ||||||||||||||||||
| 2Q 2021 | 2Q 2020 | Dollars | Percent | 1Q 2021 | |||||||||||||||
| Net interest income and servicing revenues | $ | 77,680 | $ | 47,589 | $ | 30,091 | 63 | % | $ | 76,384 | |||||||||
| Net income | 63,582 | 3,777 | 59,805 | 1,583 | 39,427 | ||||||||||||||
| Diluted earnings per share | 1.41 | 0.09 | 1.32 | 1,467 | 0.88 | ||||||||||||||
| Non-GAAP net income (1) | 63,582 | 3,777 | 59,805 | 1,583 | 39,340 | ||||||||||||||
| Non-GAAP diluted earnings per share (1) | 1.41 | 0.09 | 1.32 | 1,467 | 0.88 | ||||||||||||||
| Loan and lease production: | |||||||||||||||||||
| Loans and leases originated | $ | 1,153,693 | $ | 2,175,055 | $ | (1,021,362 | ) | (47 | )% | $ | 1,180,219 | ||||||||
| % Fully funded | 58.6 | % | 89.8 | % | n/a | n/a | 77.7 | % | |||||||||||
| Total loans and leases | $ | 6,506,334 | $ | 5,626,624 | $ | 879,710 | 16 | % | $ | 6,533,495 | |||||||||
| Total assets | 8,243,186 | 8,209,154 | 34,032 | 0 | 8,417,875 | ||||||||||||||
| Total deposits | 6,520,833 | 5,873,292 | 647,541 | 11 | 6,316,004 | ||||||||||||||
| (1) | See accompanying GAAP to Non-GAAP Reconciliation. |
Loans and Leases
At June 30, 2021, the total loan and lease portfolio was $6.51 billion, 15.6% above its level a year ago and 0.4% below its level at March 31, 2021. Compared to the first quarter of 2021, loans and leases held for investment decreased $15.3 million, or 0.3%, to $5.44 billion while loans held for sale decreased $11.8 million, or 1.1%, to $1.06 billion. Average loans and leases were $6.58 billion during the second quarter of 2021 compared to $6.35 billion during the first quarter of 2021. Excluding PPP, the total loan and lease portfolio increased by $1.64 billion, or 41.7%, compared the second quarter of 2020 and $490.6 million, or 9.6% compared to the first quarter of 2021.
The total loan and lease portfolio of $6.51 billion is comprised of $927.3 million of Paycheck Protection Program (“PPP”) loans, net of deferred fees and costs, at June 30, 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 inclusion of PPP loans carrying a 100% government guarantee. The total loan and lease portfolio at June 30, 2021, and March 31, 2021, of $6.51 billion and $6.53 billion, respectively, was comprised of 44.9% and 41.6% of unguaranteed loans and leases, respectively.
Loan and lease originations totaled $1.15 billion during the second quarter of 2021, a decrease of $26.5 million, or 2.2%, from the first quarter of 2021. Excluding PPP loans in each quarter, loan and lease originations totaled $1.11 billion for the second quarter of 2021, a 65.7% increase from the prior quarter and a 159.0% increase from the second quarter of 2020.
Deposits
Total deposits increased to $6.52 billion at June 30, 2021, an increase of $647.5 million compared to June 30, 2020, and an increase of $204.8 million compared to March 31, 2021.
The increase in total deposits from the prior quarter provides support for the growth in the loan and lease portfolio, excluding PPP loans, and origination activities during the second quarter of 2021. Average total interest-bearing deposits for the second quarter of 2021 increased $482 million, or 8.2%, to $6.35 billion, compared to $5.86 billion for the first quarter of 2021. The ratio of average total loans and leases to average interest-bearing deposits was 103.7% for the second quarter of 2021, compared to 108.2% for the first quarter of 2021. 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 $1.01 billion at June 30, 2021, compared to $1.72 billion and $1.47 billion at June 30, 2020, and March 31, 2021, respectively. During the second quarter of 2021, the Company decreased borrowings by $453.5 million primarily by reducing the outstanding balance in the Federal Reserve’s PPPLF to $961.0 million as of June 30, 2021, compared to $1.41 billion at March 31, 2021. 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.
Net Interest Income
Net interest income for the second quarter of 2021 increased to $71.5 million compared to $40.9 million for the second quarter of 2020 and $70.0 million for the first quarter of 2021.
The increase for the second quarter of 2021 compared to the second quarter of 2020 was driven by the significant growth in the total loan and lease portfolios. The increase in net interest income comparing these two periods was also driven by fees earned through the forgiveness of PPP loans and the reduction in the average rate on interest bearing liabilities from 1.65% for the second quarter of 2020 to 0.86% for the second quarter of 2021.
The net interest margin decreased from the first quarter of 2021 by 18 basis points, from 3.81% to 3.63%. The yield on interest earnings assets for the second quarter of 2021 decreased 34 basis points compared to the first quarter of 2021 and was primarily driven by a reduction in fees recognized on PPP loans. The reduction in asset yield was mitigated by the 16 basis point reduction in the average cost of interest-bearing liabilities from 1.02% for the quarter ended March 31, 2021, to 0.86% for the quarter ended June 30, 2021. The reduction in the cost of interest-bearing liabilities compared to the first quarter of 2021 was largely the result of the maturation and repricing of the certificates of deposit portfolio.
Noninterest Income
Noninterest income for the second quarter of 2021 increased to $70.1 million compared to $22.4 million for the second quarter of 2020 and $31.1 million for the first quarter of 2021. The primary drivers behind these increased levels of noninterest income are outlined below.
The largest driver of the increase in noninterest income for the second quarter of 2021 arose from equity security investment gains of $44.3 million, principally comprised of $44.1 million associated with the Company’s investment in Greenlight. This second quarter gain in Greenlight was the result of an increase in the observable fair market value of the Company’s investment through an arm’s length sale of a portion of the Company’s shares in the investee.
The loan servicing asset revaluation resulted in a loss of $3.2 million for the second quarter of 2021 compared to a loss of $1.6 million for the second quarter of 2020 and a gain of $1.5 million for the first quarter of 2021. The decrease in the loan servicing asset valuation from the prior quarter was largely the result of amortization of the guaranteed serviced loan portfolio.
The Company’s net gains on sales of loans increased $4.3 million compared to the first quarter of 2021 and increased $5.5 million compared to the second quarter of 2020. The average net gain on guaranteed loan sales increased to $114.8 thousand per million sold for the second quarter of 2021 versus $83.9 thousand per million sold for the first quarter of 2021. The quarter over quarter increase in premiums is largely the result of stimulus associated with the SBA program which removes the ongoing guarantee fee, typically paid by the purchaser, on loans originated under the Economic Aid Act. The volume of guaranteed loans sold decreased to $130.9 million for the second quarter of 2021 compared to $136.7 million sold in the prior quarter. The average net gain on guaranteed loan sales was $66.8 thousand per million sold for the second quarter of 2020, largely influenced by pandemic influenced market conditions.
The net gain on loans accounted for under the fair value option totaled $1.1 million for the second quarter of 2021, a $2.2 million increase compared to the net loss for the second quarter of 2020 and a $3.1 million decrease compared to the net gain of $4.2 million for the first quarter of 2021. The increase in valuation of loans accounted for under the fair value option over the second quarter of 2020 was positively impacted by continued improvement in market conditions while the decrease over the first quarter was largely related to the amortization of the portfolio.
Equity method investments loss arising from losses experienced by several of the Company’s financial technology investees totaled $2.3 million for the second quarter of 2021 compared to a loss of $1.2 million for the first quarter of 2021. Compared to the second quarter of 2020 the loss was largely unchanged.
Noninterest Expense
Noninterest expense for the second quarter of 2021 totaled $57.6 million compared to $48.1 million for the second quarter of 2020 and $58.3 million for the first quarter of 2021.Salaries and employee benefits for the second quarter of 2021 increased to $32.9 million compared to $30.8 million for the second quarter of 2020 and $31.4 million for the first quarter of 2021. The increase in salaries and employee benefits for both periods was principally related to continued investment in human resources to support strategic and growth initiatives.
Primary components of the change in salaries and employee benefits as compared to the second quarter of 2020 were $3.2 million in increased salaries and benefits combined with the vesting of 178 thousand restricted stock unit awards during the second quarter of 2021 with market price conditions that accelerated recognition of both stock compensation expense and payroll tax expense by a combined $1.8 million, partially offset by a decrease of $3.0 million largely related to the 2020 performance bonus pool that was available to all employees other than executive officers.
Primary components of the change in salaries and employee benefits as compared to the first quarter of 2021 was an additional bonus accrual of $4.0 million for all employees other than executive officers and executive management arising from the earnings associated with gains from the Company’s investment in Greenlight, partially offset by a decrease in payroll taxes and stock expense of $2.2 million largely related to vesting of approximately 398 thousand restricted stock unit awards that vested in the first quarter of 2021.
Travel expense for the second quarter of 2021 totaled $1.5 million compared to $364 thousand for the second quarter of 2020 and $659 thousand for the first quarter of 2021. Travel expenses increased to support the growth in loan origination volume and customer base as travel restrictions have lessened in recent months.
Professional services expense increased to $3.3 million for the second quarter of 2021 compared to $1.4 million for the second quarter of 2020 and decreased from $3.8 million for the first quarter of 2021. The increase for the second quarter of 2021 compared to the prior year was largely driven by an increase in legal fees.
Data processing expense for the second quarter of 2021 totaled $4.2 million compared to $2.8 million for the second quarter of 2020 and $3.9 million for the first quarter of 2021. The $1.5 million increase over the second quarter of 2020 was principally due to enhanced investments in the Company’s internal software technology resources.
The decrease in noninterest expense for the second quarter of 2021 compared to the first quarter of 2021 was also the result of impairment charges of $3.1 million related to renewable energy tax credit investments of $3.9 million in the first quarter of 2021. As mentioned in the prior quarter, 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.
Asset Quality
During the second quarter of 2021, the Company recognized net charge-offs for loans carried at historical cost of $2.4 million compared to net recoveries of $984 thousand in the first quarter of 2021 and net charge-offs $1.8 million in the second quarter of 2020. Net charge-offs (recoveries) as a percentage of average held for investment loans and leases carried at historical cost, annualized, for the quarters ended June 30, 2021 and March 31, 2021, was 0.21% and (0.09)%, respectively.
Unguaranteed nonperforming (nonaccrual) loans and leases, excluding $5.5 million and $5.8 million accounted for under the fair value option at June 30, 2021, and March 31, 2021, respectively, decreased to $22.5 million, or 0.48% of loans and leases held for investment which are carried at historical cost, at June 30, 2021, compared to $24.7 million, or 0.53%, at March 31, 2021.
The unguaranteed exposure of foreclosed assets decreased $486 thousand to $455 thousand at June 30, 2021, compared to March 31, 2021. Foreclosed assets decreased $2.4 million to $1.8 million at June 30, 2021, compared to March 31, 2021.
Provision for (Recovery of) Loan and Lease Credit Losses
The provision for loan and lease credit losses for the second quarter of 2021 totaled $7.8 million compared to a provision of $10.0 million for the second quarter of 2020 and a recovery of $873 thousand for the first quarter of 2021. The provision expense in the second quarter was primarily the result of the growing portfolio of loans and leases and the influence of current credit performance.
The allowance for credit losses on loans and leases totaled $57.8 million at June 30, 2021, compared to $52.4 million at March 31, 2021. 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 1.23% and 1.12% at June 30, 2021, and March 31, 2021, 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 continues to be heavily influenced by the 100% guaranteed PPP loans.
Income Tax
Income tax expense in the second quarter of 2021 was $12.6 million compared to an income tax expense in the second quarter of 2020 of $1.5 million and $4.2 million in the first quarter of 2021. The effective tax rate for the second quarter of 2021 of 16.5% is principally the result of the above renewable energy tax credit investments and an income tax benefits arising from the vesting of stock unit awards, 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 second quarter of 2021 compared to the income tax expense for the first quarter of 2021 was primarily the product of an increase of $32.6 million in income before taxes.
Shareholders’ Equity
Total shareholders’ equity increased by $67.0 million, or 11.3%, during the second 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 second quarter was $5.7 million.
During the second quarter of 2021, 181,926 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 $1.9 million.
Conference Call
Live Oak will host a conference call to discuss quarterly results at 9:00 a.m. ET tomorrow morning (July 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 5508559. 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 August 5, 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 | |||||||||||||||||||
| 2Q 2021 | 1Q 2021 | 4Q 2020 | 3Q 2020 | 2Q 2020 | |||||||||||||||
| Interest income | |||||||||||||||||||
| Loans and fees on loans | $ | 84,780 | $ | 84,993 | $ | 79,166 | $ | 70,621 | $ | 62,022 | |||||||||
| Investment securities, taxable | 2,975 | 2,929 | 3,345 | 4,123 | 3,786 | ||||||||||||||
| Other interest earning assets | 244 | 303 | 529 | 334 | 1,009 | ||||||||||||||
| Total interest income | 87,999 | 88,225 | 83,040 | 75,078 | 66,817 | ||||||||||||||
| Interest expense | |||||||||||||||||||
| Deposits | 14,820 | 16,944 | 19,195 | 22,155 | 25,121 | ||||||||||||||
| Borrowings | 1,717 | 1,331 | 1,544 | 1,560 | 798 | ||||||||||||||
| Total interest expense | 16,537 | 18,275 | 20,739 | 23,715 | 25,919 | ||||||||||||||
| Net interest income | 71,462 | 69,950 | 62,301 | 51,363 | 40,898 | ||||||||||||||
| Provision for (recovery of) loan and lease credit losses | 7,846 | (873 | ) | 8,634 | 10,274 | 9,958 | |||||||||||||
| Net interest income after provision for (recovery of) loan and lease credit losses | 63,616 | 70,823 | 53,667 | 41,089 | 30,940 | ||||||||||||||
| Noninterest income | |||||||||||||||||||
| Loan servicing revenue | 6,218 | 6,434 | 6,684 | 6,803 | 6,691 | ||||||||||||||
| Loan servicing asset revaluation | (3,181 | ) | 1,493 | (5,756 | ) | 2,061 | (1,571 | ) | |||||||||||
| Net gains on sales of loans | 16,234 | 11,929 | 14,976 | 12,690 | 10,695 | ||||||||||||||
| Net gain (loss) on loans accounted for under the fair value option | 1,135 | 4,218 | (4,759 | ) | 3,403 | (1,089 | ) | ||||||||||||
| Equity method investments income (loss) | (2,278 | ) | (1,157 | ) | (8,739 | ) | (1,231 | ) | (2,243 | ) | |||||||||
| Equity security investments gains (losses), net | 44,253 | 105 | 107 | 14,705 | 161 | ||||||||||||||
| Gain on sale of investment securities available-for-sale, net | — | — | — | 1,225 | 734 | ||||||||||||||
| Lease income | 2,616 | 2,599 | 2,615 | 2,634 | 2,635 | ||||||||||||||
| Management fee income | 1,473 | 1,934 | 2,206 | 1,296 | 1,206 | ||||||||||||||
| Other noninterest income | 3,641 | 3,502 | 3,469 | 3,458 | 5,192 | ||||||||||||||
| Total noninterest income | 70,111 | 31,057 | 10,803 | 47,044 | 22,411 | ||||||||||||||
| Noninterest expense | |||||||||||||||||||
| Salaries and employee benefits | 32,900 | 31,366 | 29,477 | 24,203 | 30,782 | ||||||||||||||
| Travel expense | 1,549 | 659 | 1,056 | 250 | 364 | ||||||||||||||
| Professional services expense | 3,329 | 3,831 | 1,691 | 1,346 | 1,385 | ||||||||||||||
| Advertising and marketing expense | 875 | 652 | 973 | 552 | 624 | ||||||||||||||
| Occupancy expense | 2,224 | 2,112 | 2,302 | 2,079 | 1,955 | ||||||||||||||
| Data processing expense | 4,234 | 3,894 | 3,414 | 3,009 | 2,764 | ||||||||||||||
| Equipment expense | 4,385 | 4,354 | 4,002 | 4,314 | 4,652 | ||||||||||||||
| Other loan origination and maintenance expense | 3,307 | 3,327 | 3,173 | 2,669 | 2,492 | ||||||||||||||
| Renewable energy tax credit investment impairment | — | 3,127 | — | — | — | ||||||||||||||
| FDIC insurance | 1,704 | 1,765 | 2,147 | 2,095 | 1,721 | ||||||||||||||
| Other expense | 3,051 | 3,185 | 4,200 | 2,133 | 1,361 | ||||||||||||||
| Total noninterest expense | 57,558 | 58,272 | 52,435 | 42,650 | 48,100 | ||||||||||||||
| Income before taxes | 76,169 | 43,608 | 12,035 | 45,483 | 5,251 | ||||||||||||||
| Income tax expense (benefit) | 12,587 | 4,181 | (17,553 | ) | 11,703 | 1,474 | |||||||||||||
| Net income | $ | 63,582 | $ | 39,427 | $ | 29,588 | $ | 33,780 | $ | 3,777 | |||||||||
| Earnings per share | |||||||||||||||||||
| Basic | $ | 1.48 | $ | 0.92 | $ | 0.72 | $ | 0.83 | $ | 0.09 | |||||||||
| Diluted | $ | 1.41 | $ | 0.88 | $ | 0.68 | $ | 0.81 | $ | 0.09 | |||||||||
| Weighted average shares outstanding | |||||||||||||||||||
| Basic | 43,173,312 | 42,673,615 | 41,320,851 | 40,542,696 | 40,506,671 | ||||||||||||||
| Diluted | 45,062,392 | 44,696,850 | 43,333,707 | 41,549,632 | 41,122,025 | ||||||||||||||
Live Oak Bancshares, Inc.
Quarterly Balance Sheets (unaudited)
(Dollars in thousands)
| As of the quarter ended | |||||||||||||||||||
| 2Q 2021 | 1Q 2021 | 4Q 2020 | 3Q 2020 | 2Q 2020 | |||||||||||||||
| Assets | |||||||||||||||||||
| Cash and due from banks | $ | 428,907 | $ | 630,081 | $ | 297,167 | $ | 608,826 | $ | 1,256,958 | |||||||||
| Federal funds sold | 9,917 | 5,461 | 21,153 | 25,924 | 91,188 | ||||||||||||||
| Certificates of deposit with other banks | 6,000 | 6,500 | 6,500 | 7,250 | 7,250 | ||||||||||||||
| Investment securities available-for-sale | 817,896 | 775,177 | 750,098 | 765,777 | 779,794 | ||||||||||||||
| Loans held for sale (1) | 1,064,911 | 1,076,741 | 1,175,470 | 1,190,200 | 976,594 | ||||||||||||||
| Loans and leases held for investment (2) | 5,441,423 | 5,456,754 | 5,144,930 | 5,037,094 | 4,650,030 | ||||||||||||||
| Allowance for credit losses on loans and leases | (57,848 | ) | (52,417 | ) | (52,306 | ) | (44,210 | ) | (44,083 | ) | |||||||||
| Net loans and leases | 5,383,575 | 5,404,337 | 5,092,624 | 4,992,884 | 4,605,947 | ||||||||||||||
| Premises and equipment, net | 249,069 | 253,774 | 259,267 | 253,737 | 269,063 | ||||||||||||||
| Foreclosed assets | 1,793 | 4,185 | 4,155 | 3,264 | 5,660 | ||||||||||||||
| Servicing assets | 36,966 | 37,744 | 33,918 | 37,831 | 33,834 | ||||||||||||||
| Other assets | 244,152 | 223,875 | 231,951 | 207,688 | 182,866 | ||||||||||||||
| Total assets | $ | 8,243,186 | $ | 8,417,875 | $ | 7,872,303 | $ | 8,093,381 | $ | 8,209,154 | |||||||||
| Liabilities and Shareholders’ Equity | |||||||||||||||||||
| Liabilities | |||||||||||||||||||
| Deposits: | |||||||||||||||||||
| Noninterest-bearing | $ | 89,768 | $ | 75,794 | $ | 75,287 | $ | 58,771 | $ | 53,938 | |||||||||
| Interest-bearing | 6,431,065 | 6,240,210 | 5,637,541 | 5,647,273 | 5,819,354 | ||||||||||||||
| Total deposits | 6,520,833 | 6,316,004 | 5,712,828 | 5,706,044 | 5,873,292 | ||||||||||||||
| Borrowings | 1,012,431 | 1,465,961 | 1,542,093 | 1,747,083 | 1,721,029 | ||||||||||||||
| Other liabilities | 52,575 | 45,550 | 49,532 | 56,090 | 66,398 | ||||||||||||||
| Total liabilities | 7,585,839 | 7,827,515 | 7,304,453 | 7,509,217 | 7,660,719 | ||||||||||||||
| Shareholders’ equity | |||||||||||||||||||
| Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding | — | — | — | — | — | ||||||||||||||
| Class A common stock (voting) | 299,809 | 298,525 | 298,890 | 325,753 | 319,542 | ||||||||||||||
| Class B common stock (non-voting) | 5,404 | 7,330 | 11,729 | 26,106 | 28,753 | ||||||||||||||
| Retained earnings | 339,011 | 275,377 | 235,724 | 207,400 | 174,837 | ||||||||||||||
| Accumulated other comprehensive income | 13,123 | 9,128 | 21,507 | 24,905 | 25,303 | ||||||||||||||
| Total shareholders’ equity | 657,347 | 590,360 | 567,850 | 584,164 | 548,435 | ||||||||||||||
| Total liabilities and shareholders’ equity | $ | 8,243,186 | $ | 8,417,875 | $ | 7,872,303 | $ | 8,093,381 | $ | 8,209,154 | |||||||||
| (1) | Includes $29.0 million, $35.9 million, $36.1 million, $30.4 million and $32.1 million measured at fair value for the quarters ended June 30, 2021, March 31, 2021, December 31, 2020, September 30, 2020 and June 30, 2020, respectively. |
| (2) | Includes $743.2 million, $790.8 million, $815.4 million, $845.7 million and $834.6 million measured at fair value for the quarters ended June 30, 2021, March 31, 2021, December 31, 2020, September 30, 2020 and June 30, 2020, respectively. |
Live Oak Bancshares, Inc.
Statements of Income (unaudited)
(Dollars in thousands, except per share data)
| Six months ended | |||||||
| June 30, 2021 | June 30, 2020 | ||||||
| Interest income | |||||||
| Loans and fees on loans | $ | 169,773 | $ | 120,983 | |||
| Investment securities, taxable | 5,904 | 7,548 | |||||
| Other interest earning assets | 547 | 1,759 | |||||
| Total interest income | 176,224 | 130,290 | |||||
| Interest expense | |||||||
| Deposits | 31,764 | 48,376 | |||||
| Borrowings | 3,048 | 855 | |||||
| Total interest expense | 34,812 | 49,231 | |||||
| Net interest income | 141,412 | 81,059 | |||||
| Provision for loan and lease credit losses | 6,973 | 21,750 | |||||
| Net interest income after provision for loan and lease credit losses | 134,439 | 59,309 | |||||
| Noninterest income | |||||||
| Loan servicing revenue | 12,652 | 13,113 | |||||
| Loan servicing asset revaluation | (1,688 | ) | (6,263 | ) | |||
| Net gains on sales of loans | 28,163 | 21,807 | |||||
| Net gain (loss) on loans accounted for under the fair value option | 5,353 | (11,727 | ) | ||||
| Equity method investments income (loss) | (3,435 | ) | (4,721 | ) | |||
| Equity security investments gains (losses), net | 44,358 | 97 | |||||
| Gain on sale of investment securities available-for-sale, net | — | 655 | |||||
| Lease income | 5,215 | 5,259 | |||||
| Management fee income | 3,407 | 2,850 | |||||
| Other noninterest income | 7,143 | 7,083 | |||||
| Total noninterest income | 101,168 | 28,153 | |||||
| Noninterest expense | |||||||
| Salaries and employee benefits | 64,266 | 58,845 | |||||
| Travel expense | 2,208 | 2,145 | |||||
| Professional services expense | 7,160 | 3,322 | |||||
| Advertising and marketing expense | 1,527 | 1,985 | |||||
| Occupancy expense | 4,336 | 4,376 | |||||
| Data processing expense | 8,128 | 5,921 | |||||
| Equipment expense | 8,739 | 9,287 | |||||
| Other loan origination and maintenance expense | 6,634 | 4,948 | |||||
| Renewable energy tax credit investment impairment | 3,127 | — | |||||
| FDIC insurance | 3,469 | 3,231 | |||||
| Other expense | 6,236 | 3,531 | |||||
| Total noninterest expense | 115,830 | 97,591 | |||||
| Income (loss) before taxes | 119,777 | (10,129 | ) | ||||
| Income tax expense (benefit) | 16,768 | (6,304 | ) | ||||
| Net income (loss) | $ | 103,009 | $ | (3,825 | ) | ||
| Earnings (loss) per share | |||||||
| Basic | $ | 2.40 | $ | (0.10 | ) | ||
| Diluted | $ | 2.29 | $ | (0.10 | ) | ||
| Weighted average shares outstanding | |||||||
| Basic | 42,924,844 | 40,420,425 | |||||
| Diluted | 44,881,002 | 41,098,037 | |||||
Live Oak Bancshares, Inc.
Quarterly Selected Financial Data
(Dollars in thousands, except per share data)
| As of and for the three months ended | |||||||||||||||||||
| 2Q 2021 | 1Q 2021 | 4Q 2020 | 3Q 2020 | 2Q 2020 | |||||||||||||||
| Income Statement Data | |||||||||||||||||||
| Net income | $ | 63,582 | $ | 39,427 | $ | 29,588 | $ | 33,780 | $ | 3,777 | |||||||||
| Per Common Share | |||||||||||||||||||
| Net income, basic | $ | 1.48 | $ | 0.92 | $ | 0.72 | $ | 0.83 | $ | 0.09 | |||||||||
| Net income, diluted | 1.41 | 0.88 | 0.68 | 0.81 | 0.09 | ||||||||||||||
| Dividends declared | 0.03 | 0.03 | 0.03 | 0.03 | 0.03 | ||||||||||||||
| Book value | 15.19 | 13.74 | 13.38 | 14.69 | 13.53 | ||||||||||||||
| Tangible book value (1) | 15.10 | 13.65 | 13.28 | 14.30 | 13.43 | ||||||||||||||
| Performance Ratios | |||||||||||||||||||
| Return on average assets (annualized) | 3.01 | % | 1.98 | % | 1.49 | % | 1.67 | % | 0.22 | % | |||||||||
| Return on average equity (annualized) | 41.30 | 26.89 | 19.86 | 23.64 | 2.68 | ||||||||||||||
| Net interest margin | 3.63 | 3.81 | 3.33 | 2.77 | 2.56 | ||||||||||||||
| Efficiency ratio (1) | 40.66 | 57.69 | 71.73 | 43.89 | 76.87 | ||||||||||||||
| Noninterest income to total revenue | 49.52 | 30.75 | 14.78 | 47.15 | 34.64 | ||||||||||||||
| Selected Loan Metrics | |||||||||||||||||||
| Loans and leases originated | $ | 1,153,693 | $ | 1,180,219 | $ | 808,010 | $ | 966,499 | $ | 2,175,055 | |||||||||
| Guaranteed loans sold | 130,858 | 136,747 | 110,588 | 114,731 | 154,980 | ||||||||||||||
| Average net gain on sale of guaranteed loans | 114.77 | 83.92 | 115.94 | 110.19 | 66.76 | ||||||||||||||
| Adjusted average net gain on sale of guaranteed loans (2) | 114.77 | 83.92 | 114.07 | 107.99 | 65.94 | ||||||||||||||
| Outstanding balance of sold loans serviced: | |||||||||||||||||||
| Guaranteed | 2,694,931 | 2,843,963 | 2,819,625 | 2,878,664 | 2,840,429 | ||||||||||||||
| Unguaranteed | 439,137 | 372,764 | 385,998 | 264,829 | 231,602 | ||||||||||||||
| Total | 3,134,068 | 3,216,727 | 3,205,623 | 3,143,493 | 3,072,031 | ||||||||||||||
| Asset Quality Ratios | |||||||||||||||||||
| Allowance for credit losses to loans and leases held for investment (4) | 1.23 | % | 1.12 | % | 1.21 | % | 1.05 | % | 1.16 | % | |||||||||
| Net charge-offs (recoveries) (4) | $ | 2,417 | $ | (984 | ) | $ | 537 | $ | 10,147 | $ | 1,781 | ||||||||
| Net charge-offs (recoveries) to average loans and leases held for investment (3) (4) | 0.21 | % | (0.09 | )% | 0.05 | % | 1.03 | % | 0.21 | % | |||||||||
| Nonperforming loans and leases (4) (5) | $ | 48,009 | $ | 57,371 | $ | 46,110 | $ | 46,749 | $ | 40,275 | |||||||||
| Foreclosed assets | 1,793 | 4,185 | 4,155 | 3,264 | 5,660 | ||||||||||||||
| Nonperforming loans and leases (unguaranteed exposure) (4) (5) | 22,458 | 24,738 | 20,078 | 20,153 | 13,122 | ||||||||||||||
| Foreclosed assets (unguaranteed exposure) | 455 | 941 | 935 | 642 | 1,199 | ||||||||||||||
| Nonperforming loans and leases not guaranteed by the SBA and foreclosures (4) (5) | $ | 22,913 | $ | 25,679 | $ | 21,013 | $ | 20,795 | $ | 14,321 | |||||||||
| Nonperforming loans, leases and foreclosures, not guaranteed by the SBA, to total assets (4) (5) | 0.31 | % | 0.34 | % | 0.30 | % | 0.29 | % | 0.20 | % | |||||||||
| Nonperforming loans accounted for under the fair value option | $ | 39,826 | $ | 40,234 | $ | 35,499 | $ | 47,434 | $ | 46,221 | |||||||||
| Nonperforming loans accounted for under the fair value option (unguaranteed exposure) | 5,503 | 5,838 | 5,387 | 7,495 | 6,352 | ||||||||||||||
| Capital Ratios | |||||||||||||||||||
| Common equity tier 1 capital (to risk-weighted assets) | 12.45 | % | 12.16 | % | 12.15 | % | 13.09 | % | 12.84 | % | |||||||||
| Total capital (to risk-weighted assets) | 13.63 | 13.32 | 13.39 | 14.19 | 13.99 | ||||||||||||||
| Tier 1 risk based capital (to risk-weighted assets) | 12.45 | 12.16 | 12.15 | 13.09 | 12.84 | ||||||||||||||
| Tier 1 leverage capital (to average assets) | 8.70 | 8.50 | 8.40 | 8.44 | 7.96 | ||||||||||||||
| 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 | Three Months Ended | ||||||||||||||||||||||
| June 30, 2021 | March 31, 2021 | ||||||||||||||||||||||
| Average Balance | Interest | Average Yield/Rate | Average Balance | Interest | Average Yield/Rate | ||||||||||||||||||
| Interest earning assets: | |||||||||||||||||||||||
| Interest earning balances in other banks | $ | 514,232 | $ | 234 | 0.18 | % | $ | 331,260 | $ | 297 | 0.36 | % | |||||||||||
| Federal funds sold | 29,199 | 10 | 0.14 | 28,202 | 6 | 0.09 | |||||||||||||||||
| Investment securities | 764,017 | 2,975 | 1.56 | 736,158 | 2,929 | 1.61 | |||||||||||||||||
| Loans held for sale | 1,134,259 | 15,216 | 5.38 | 1,158,844 | 15,077 | 5.28 | |||||||||||||||||
| Loans and leases held for investment (1) | 5,447,839 | 69,564 | 5.12 | 5,186,963 | 69,916 | 5.47 | |||||||||||||||||
| Total interest earning assets | 7,889,546 | 87,999 | 4.47 | 7,441,427 | 88,225 | 4.81 | |||||||||||||||||
| Less: allowance for credit losses on loans and leases |
(51,994 | ) | (52,317 | ) | |||||||||||||||||||
| Non-interest earning assets | 623,895 | 593,573 | |||||||||||||||||||||
| Total assets | $ | 8,461,447 | $ | 7,982,683 | |||||||||||||||||||
| Interest bearing liabilities: | |||||||||||||||||||||||
| Interest bearing checking | $ | 60,439 | $ | 86 | 0.57 | % | $ | 250,005 | $ | 356 | 0.58 | % | |||||||||||
| Savings | 3,101,733 | 4,309 | 0.56 | 2,356,598 | 3,512 | 0.60 | |||||||||||||||||
| Money market accounts | 104,826 | 82 | 0.31 | 105,753 | 83 | 0.32 | |||||||||||||||||
| Certificates of deposit | 3,078,789 | 10,343 | 1.35 | 3,151,575 | 12,993 | 1.67 | |||||||||||||||||
| Total interest bearing deposits | 6,345,787 | 14,820 | 0.94 | 5,863,931 | 16,944 | 1.17 | |||||||||||||||||
| Borrowings | 1,368,742 | 1,717 | 0.50 | 1,429,177 | 1,331 | 0.38 | |||||||||||||||||
| Total interest bearing liabilities | 7,714,529 | 16,537 | 0.86 | 7,293,108 | 18,275 | 1.02 | |||||||||||||||||
| Non-interest bearing deposits | 85,824 | 63,917 | |||||||||||||||||||||
| Non-interest bearing liabilities | 45,309 | 39,155 | |||||||||||||||||||||
| Shareholders’ equity | 615,785 | 586,503 | |||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 8,461,447 | $ | 7,982,683 | |||||||||||||||||||
| Net interest income and interest rate spread | $ | 71,462 | 3.61 | % | $ | 69,950 | 3.79 | % | |||||||||||||||
| Net interest margin | 3.63 | 3.81 | |||||||||||||||||||||
| Ratio of average interest-earning assets to average interest-bearing liabilities | 102.27 | % | 102.03 | % | |||||||||||||||||||
| (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 | |||||||||||||||||||
| 2Q 2021 | 1Q 2021 | 4Q 2020 | 3Q 2020 | 2Q 2020 | |||||||||||||||
| Total shareholders’ equity | $ | 657,347 | $ | 590,360 | $ | 567,850 | $ | 584,164 | $ | 548,435 | |||||||||
| Less: | |||||||||||||||||||
| Goodwill | 1,797 | 1,797 | 1,797 | 1,797 | 1,797 | ||||||||||||||
| Other intangible assets | 2,103 | 2,141 | 2,179 | 2,218 | 2,294 | ||||||||||||||
| Tangible shareholders’ equity (a) | $ | 653,447 | $ | 586,422 | $ | 563,874 | $ | 580,149 | $ | 544,344 | |||||||||
| Shares outstanding (c) | 43,264,460 | 42,951,344 | 42,452,446 | 40,575,982 | 40,525,632 | ||||||||||||||
| Total assets | $ | 8,243,186 | $ | 8,417,875 | $ | 7,872,303 | $ | 8,093,381 | $ | 8,209,154 | |||||||||
| Less: | |||||||||||||||||||
| Goodwill | 1,797 | 1,797 | 1,797 | 1,797 | 1,797 | ||||||||||||||
| Other intangible assets | 2,103 | 2,141 | 2,179 | 2,218 | 2,294 | ||||||||||||||
| Tangible assets (b) | $ | 8,239,286 | $ | 8,413,937 | $ | 7,868,327 | $ | 8,089,366 | $ | 8,205,063 | |||||||||
| Tangible shareholders’ equity to tangible assets (a/b) | 7.93 | % | 6.97 | % | 7.17 | % | 7.17 | % | 6.63 | % | |||||||||
| Tangible book value per share (a/c) | $ | 15.10 | $ | 13.65 | $ | 13.28 | $ | 14.30 | $ | 13.43 | |||||||||
| Efficiency ratio: | |||||||||||||||||||
| Noninterest expense (d) | $ | 57,558 | $ | 58,272 | $ | 52,435 | $ | 42,650 | $ | 48,100 | |||||||||
| Net interest income | 71,462 | 69,950 | 62,301 | 51,363 | 40,898 | ||||||||||||||
| Noninterest income | 70,111 | 31,057 | 10,803 | 47,044 | 22,411 | ||||||||||||||
| Less: gain (loss) on sale of securities | — | — | — | 1,225 | 734 | ||||||||||||||
| Adjusted operating revenue (e) | $ | 141,573 | $ | 101,007 | $ | 73,104 | $ | 97,182 | $ | 62,575 | |||||||||
| Efficiency ratio (d/e) | 40.66 | % | 57.69 | % | 71.73 | % | 43.89 | % | 76.87 | % | |||||||||
Live Oak Bancshares, Inc.
GAAP to Non-GAAP Reconciliation (Continued)
(Dollars in thousands)
| Three Months Ended | Six Months Ended | ||||||||||||||||||
| 2Q 2021 | 1Q 2021 | 2Q 2020 | 2Q 2021 | 2Q 2020 | |||||||||||||||
| Reconciliation of net income (loss) to non-GAAP net income (loss): | |||||||||||||||||||
| Net income (loss) | $ | 63,582 | $ | 39,427 | $ | 3,777 | $ | 103,009 | $ | (3,825 | ) | ||||||||
| Gain on sale of aircraft | — | (114 | ) | — | (114 | ) | — | ||||||||||||
| Income tax effects and adjustments for non-GAAP items * | — | 27 | — | 27 | — | ||||||||||||||
| Non-GAAP net income (loss) | $ | 63,582 | $ | 39,340 | $ | 3,777 | $ | 102,922 | $ | (3,825 | ) | ||||||||
| * Estimated at 24.0% | |||||||||||||||||||
| Non-GAAP earnings (loss) per share: | |||||||||||||||||||
| Basic | $ | 1.48 | $ | 0.92 | $ | 0.09 | $ | 2.40 | $ | (0.10 | ) | ||||||||
| Diluted | $ | 1.41 | $ | 0.88 | $ | 0.09 | $ | 2.29 | $ | (0.10 | ) | ||||||||
| Weighted-average shares outstanding: | |||||||||||||||||||
| Basic | 43,173,312 | 42,673,615 | 40,506,671 | 42,924,844 | 40,420,425 | ||||||||||||||
| Diluted | 45,062,392 | 44,696,850 | 41,122,025 | 44,881,002 | 41,098,037 | ||||||||||||||
| Reconciliation of financial statement line items as reported to non-GAAP: | |||||||||||||||||||
| Noninterest income, as reported | $ | 70,111 | $ | 31,057 | $ | 22,411 | $ | 101,168 | $ | 28,153 | |||||||||
| Gain on sale of aircraft | — | (114 | ) | — | (114 | ) | — | ||||||||||||
| Noninterest income, non-GAAP | $ | 70,111 | $ | 30,943 | $ | 22,411 | $ | 101,054 | $ | 28,153 | |||||||||
| Income (loss) before taxes, as reported | $ | 76,169 | $ | 43,608 | $ | 5,251 | $ | 119,777 | $ | (10,129 | ) | ||||||||
| Gain on sale of aircraft | — | (114 | ) | — | (114 | ) | — | ||||||||||||
| Income (loss) before taxes, non-GAAP | $ | 76,169 | $ | 43,494 | $ | 5,251 | $ | 119,663 | $ | (10,129 | ) | ||||||||
| Income tax expense (benefit), as reported | $ | 12,587 | $ | 4,181 | $ | 1,474 | $ | 16,768 | $ | (6,304 | ) | ||||||||
| Income tax effects and adjustments for non-GAAP items | — | (27 | ) | — | (27 | ) | — | ||||||||||||
| Income tax expense (benefit), non-GAAP | $ | 12,587 | $ | 4,154 | $ | 1,474 | $ | 16,741 | $ | (6,304 | ) | ||||||||
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.
