Live Oak Bancshares, Inc. Reports Third Quarter 2018 Results
WILMINGTON, N.C., Oct. 24, 2018 (GLOBE NEWSWIRE) — Live Oak Bancshares, Inc. (Nasdaq: LOB) (“Live Oak” or “the Company”) today reported third quarter net earnings available to common shareholders of $14.3 million, or $0.34 per diluted share, compared to $12.9 million, or $0.33 per diluted share, for the third quarter of 2017. During the third quarter of 2018, the Company incurred costs of $2.7 million, or $0.05 per diluted share, related to the exit of its title insurance business.
“Recurring revenue continues to grow through net interest income and servicing and further fortifies the Live Oak business model as we continue in our mission to empower small business owners. We are very excited about the opportunities we have on the horizon to serve the needs of more small businesses across the U.S. and revolutionize the financial services industry by driving technological advancements for digital banking through strategic alliances and investments,” said James S. Mahan, III, Chief Executive Officer of Live Oak.
Third Quarter 2018 Key Measures
| (Dollars in thousands, except per share data) | Increase (Decrease) | |||||||||||||||||
| Q3 2018 | Q3 2017 | Dollars | Percent | Q2 2018 | ||||||||||||||
| Net interest income and servicing revenues | $ | 35,230 | $ | 27,515 | $ | 7,715 | 28 | % | $ | 34,013 | ||||||||
| Net income | 14,252 | 12,862 | 1,390 | 11 | 14,253 | |||||||||||||
| Diluted earnings per share | 0.34 | 0.33 | 0.01 | 3 | 0.34 | |||||||||||||
| Non-GAAP net income (1) | 16,562 | 13,323 | 3,239 | 24 | 14,524 | |||||||||||||
| Non-GAAP diluted earnings per share (1) | 0.40 | 0.34 | 0.06 | 18 | 0.35 | |||||||||||||
| Loan and lease production: | ||||||||||||||||||
| Loans and leases originated | $ | 377,337 | $ | 395,682 | $ | (18,345 | ) | (5 | )% | $ | 491,797 | |||||||
| % Fully funded | 48.2 | % | 37.4 | % | n/a | n/a | 55.9 | % | ||||||||||
| Loan sales: | ||||||||||||||||||
| Guaranteed loans sold | $ | 298,073 | $ | 163,843 | $ | 134,230 | 82 | % | $ | 295,216 | ||||||||
| Net gains on sales of guaranteed loans | 21,406 | 18,148 | 3,258 | 18 | 24,388 | |||||||||||||
| Average net gain on sale of guaranteed loans, per million sold | 71.81 | 110.76 | (38.95 | ) | (35 | ) | 82.61 | |||||||||||
(1) See accompanying GAAP to Non-GAAP Reconciliation.
Loans and Leases
At September 30, 2018, the total loan and lease portfolio of $2.28 billion increased 22.3% above its level of a year ago and was essentially flat with its level at June 30, 2018. Compared to the second quarter of 2018, loans and leases held for investment increased $97.0 million, or 6.3%, to $1.63 billion while loans held for sale decreased $111.0 million, or 14.7%, to $646.5 million. Loan and lease originations totaled $377.3 million during the third quarter of 2018, a decline of $114.5 million, or 23.3%, from the second quarter of 2018 primarily resulting from seasonal slowdowns in the renewable energy sector combined with increased competition in existing verticals. The total loan and lease portfolio at September 30, 2018, and June 30, 2018, of $2.28 billion and $2.29 billion, respectively, was comprised of approximately 64.4% and 61.7% of unguaranteed loans and leases, respectively.
Average loans and leases were $2.31 billion during the third quarter of 2018 compared to $2.25 billion during the second quarter of 2018.
Net Interest Income
Net interest income for the third quarter of 2018 rose to $27.7 million compared to $21.0 million for the third quarter of 2017 and $27.0 million for the second quarter of 2018. The increase from the prior year was driven by the significant growth in the combined held for sale and held for investment loan and lease portfolios along with higher investment security holdings reflecting the Company’s ongoing initiative to grow recurring revenue sources. The increase from the second quarter of 2018 arose principally from a higher average loan and lease portfolio balance. The net interest margin for the third quarter of 2018 increased fifteen basis points to 3.61% versus 3.46% in the second quarter of 2018 due to lower average balances of liquid assets and interest-bearing liabilities coupled with an increased yield on the loan and lease portfolio. The Company anticipates that it is positioned to benefit from a rising rate environment with 74.7% of the total held for sale and held for investment loan and lease portfolio priced at variable rates that adjust on either a calendar monthly or quarterly basis.
Noninterest Income
Noninterest income for the third quarter of 2018 decreased to $24.3 million compared to $25.1 million for the third quarter of 2017 and $30.6 million for the second quarter of 2018.
Net gains on sales of loans increased to $22.0 million in the third quarter of 2018 compared to $18.1 million in the third quarter of 2017 and decreased compared to $23.1 million in the second quarter of 2018. The volume of guaranteed loan sales in the third quarter of 2018 rose to $298.1 million compared to $163.8 million in the third quarter of 2017 and $295.2 million in the second quarter of 2018. The average net gain on guaranteed loan sales decreased to $71.8 thousand per million sold in the third quarter of 2018 versus $110.8 thousand in the third quarter of 2017 and $82.6 thousand in the second quarter of 2018. The decline in average loan sale pricing was primarily driven by market conditions and the higher interest rate environment which has led to increased prepayment speeds and fewer active loan purchasers relative to the growing pool of loans available for sale.
Loan servicing revenues of $7.5 million in the third quarter of 2018 rose by $1.0 million, or 15.7%, from the third quarter of 2017 and by $541 thousand, or 7.8%, from the second quarter of 2018. The net loss resulting from the revaluation of the servicing asset totaled $9.4 million for the third quarter of 2018, an increase of $5.7 million compared to the third quarter of 2017 and the second quarter of 2018, largely because of the aforementioned market conditions.
Lease income from solar panels contributed $2.2 million in noninterest income in the third quarter of 2018, compared to $682 thousand in the third quarter of 2017 and $1.9 million in the second quarter of 2018. The Company began offering operating lease agreements for solar panels to third parties at the end of the first quarter of 2017.
Title insurance income for the third quarter of 2018 was $479 thousand compared to $2.0 million in the third quarter of 2017 and $996 thousand in the second quarter of 2018. The Company exited the title insurance business during the third quarter of 2018 with the sale of Reltco, Inc.
Noninterest Expense
Noninterest expense for the third quarter of 2018 was $41.2 million compared to $35.9 million for the third quarter of 2017 and $40.8 million for the second quarter of 2018. The $5.4 million, or 15.0%, increase versus the prior year period reflected the ongoing expansion of the Company’s workforce, industry verticals, infrastructure, and new products in support of its growth strategy.
Salaries and employee benefits for the third quarter of 2018 increased to $20.6 million compared to $19.0 million for the third quarter of 2017 and decreased from $22.1 million for the second quarter of 2018. Included in these totals is stock-based compensation expense in the third quarter of 2018 of $2.5 million compared to $2.0 million for the third quarter of 2017 and $2.2 million for the second quarter of 2018. The reduction in salaries and benefits for the third quarter of 2018 was influenced by the Company’s departure from the title insurance business which was partially offset by the ongoing expansion of the Company’s workforce and infrastructure to support its initiatives.
Compared to the third quarter of 2017, there were increases in data processing expense of $1.7 million and equipment expense of $1.4 million. Largely influencing the increase in data processing was the contribution of software development resources to Apiture LLC in the third quarter of 2017 which transferred the recognition of costs associated with the Company’s technology development from salaries and employee benefits to data processing. The increase in equipment expense reflected the higher levels of depreciation related to solar panels acquired for the Company’s renewable energy leasing business.
During the third quarter of 2018, the Company recorded a $2.7 million net impairment expense associated with the sale of Reltco.
Asset Quality
The unguaranteed exposure of nonperforming loans increased to $12.9 million, or 0.79% of total loans and leases held for investment, at September 30, 2018, compared to $11.5 million, or 0.75%, at June 30, 2018. Total nonperforming loans increased to $52.7 million in the third quarter of 2018 from $46.1 million at the end of the prior quarter and was primarily related to older verticals.
The unguaranteed exposure of foreclosed assets decreased to $158 thousand at September 30, 2018, from $197 thousand at June 30, 2018. Foreclosed assets decreased $296 thousand to $1.4 million at September 30, 2018, from $1.7 million at June 30, 2018.
Net charge-offs increased to $2.3 million in the third quarter of 2018 compared to $787 thousand in the second quarter of 2018 and $959 thousand in the third quarter of 2017. Net charge-offs as a percentage of average held for investment loans and leases, annualized, for the quarters ended September 30, 2018 and 2017, were 0.57% and 0.34%, respectively.
Provision for Loan and Lease Losses
There was a negative provision for loan and lease losses for the third quarter of 2018 totaling $243 thousand compared to provision expenses of $2.1 million for the second quarter of 2018 and $2.4 million for the third quarter of 2017. The negative provision is primarily a result from updating historical loss factors for industry verticals as they mature, consistent with our methodology for estimating the allowance for loan and lease losses.
The allowance for loan and lease losses totaled $26.8 million at September 30, 2018, compared to $29.4 million at June 30, 2018. The allowance for loan and lease losses as a percentage of total loans and leases held for investment was 1.64% and 1.91% at September 30, 2018, and June 30, 2018, respectively.
Income Tax
There was a net income tax benefit in the third quarter of 2018 of $3.2 million compared to $5.1 million in the third quarter of 2017 and a tax expense of $491 thousand in the second quarter of 2018. The Company’s effective tax rate is predominantly driven by the leasing of renewable energy assets that generate investment tax credits. As the lessor of these assets, the Company is accomplishing broader strategic initiatives in the renewable energy sector.
Deposits
Total deposits decreased slightly by $44.9 million to $2.92 billion at September 30, 2018 from $2.97 billion at June 30, 2018, consistent with desired liquidity levels and stable loan and lease portfolio levels during the quarter. Average total interest-bearing deposits for the third quarter of 2018 decreased $86.7 million, or 2.9%, to $2.91 billion, compared to $2.99 billion for the second quarter of 2018. The ratio of average total loans and leases to average interest-bearing deposits was 79.3% for the third quarter of 2018, compared to 75.1% for the second quarter of 2018.
Conference Call
Live Oak will host a conference call to discuss quarterly results at 9:00 a.m. ET tomorrow morning (October 25, 2018). 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 9884327. A live webcast of the conference call along with presentation materials referenced during the conference call will be available on the Investor Relations page of the Company’s website at http://investor.liveoakbank.com. A replay of the webcast will be archived on the Company’s website for one year. A replay of the conference call will also be available until 5:00 p.m. ET November 1, 2018, 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; a reduction in or the termination of the Company’s ability to use the technology-based platform that is critical to the success of its business model, including a failure in or a breach of operational or security systems; competition from other lenders; the Company’s ability to attract and retain key personnel; market and economic conditions and the associated impact on the Company; operational, liquidity and credit risks associated with the Company’s business; the impact of heightened regulatory scrutiny of financial products and services and the Company’s ability to comply with regulatory requirements and expectations; and the other factors discussed in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) and available at the SEC’s Internet site (http://www.sec.gov). Except as required by law, the Company specifically disclaims any obligation to update any factors or to publicly announce the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.
About Live Oak Bancshares, Inc.
Live Oak Bancshares, Inc. (Nasdaq: LOB) is a financial holding company and the parent company of Live Oak Banking Company. Live Oak Bancshares and its subsidiaries partner with businesses that have a common focus of changing the banking industry by bringing efficiency and excellence to customers using technology and innovation.
Contacts:
Brett Caines | CFO | Investor Relations | 910.796.1645 & Micah Davis | Marketing Director | Media Relations | 910.550.2255
Live Oak Bancshares, Inc.
Quarterly Statements of Income (unaudited)
(Dollars in thousands, except per share data)
| Three months ended | |||||||||||||||||||
| 3Q 2018 | 2Q 2018 | 1Q 2018 | 4Q 2017 | 3Q 2017 | |||||||||||||||
| Interest income | |||||||||||||||||||
| Loans and fees on loans | $ | 37,724 | $ | 36,267 | $ | 32,691 | $ | 29,343 | $ | 26,977 | |||||||||
| Investment securities, taxable | 2,528 | 2,530 | 1,117 | 468 | 325 | ||||||||||||||
| Other interest earning assets | 1,638 | 2,179 | 1,215 | 725 | 870 | ||||||||||||||
| Total interest income | 41,890 | 40,976 | 35,023 | 30,536 | 28,172 | ||||||||||||||
| Interest expense | |||||||||||||||||||
| Deposits | 14,165 | 13,927 | 10,418 | 7,330 | 6,758 | ||||||||||||||
| Borrowings | 1 | 1 | 129 | 230 | 389 | ||||||||||||||
| Total interest expense | 14,166 | 13,928 | 10,547 | 7,560 | 7,147 | ||||||||||||||
| Net interest income | 27,724 | 27,048 | 24,476 | 22,976 | 21,025 | ||||||||||||||
| Provision for (recovery of) loan and leases losses | (243 | ) | 2,087 | 4,392 | 4,055 | 2,426 | |||||||||||||
| Net interest income after provision for loan and lease losses | 27,967 | 24,961 | 20,084 | 18,921 | 18,599 | ||||||||||||||
| Noninterest income | |||||||||||||||||||
| Loan servicing revenue | 7,506 | 6,965 | 6,898 | 6,001 | 6,490 | ||||||||||||||
| Loan servicing asset revaluation | (9,380 | ) | (3,670 | ) | (5,088 | ) | (6,307 | ) | (3,691 | ) | |||||||||
| Net gains on sales of loans | 22,004 | 23,061 | 24,418 | 23,314 | 18,148 | ||||||||||||||
| Lease income | 2,194 | 1,920 | 1,608 | 1,165 | 682 | ||||||||||||||
| Gain on contribution to equity method investment | — | — | — | 68,000 | — | ||||||||||||||
| Construction supervision fee income | 578 | 597 | 779 | 699 | 362 | ||||||||||||||
| Title insurance income | 479 | 996 | 1,300 | 1,762 | 1,968 | ||||||||||||||
| Other noninterest income | 950 | 744 | 841 | 807 | 1,101 | ||||||||||||||
| Total noninterest income | 24,331 | 30,613 | 30,756 | 95,441 | 25,060 | ||||||||||||||
| Noninterest expense | |||||||||||||||||||
| Salaries and employee benefits | 20,553 | 22,146 | 20,209 | 18,982 | 19,037 | ||||||||||||||
| Travel expense | 2,003 | 2,041 | 1,843 | 2,089 | 2,289 | ||||||||||||||
| Professional services expense | 1,228 | 1,119 | 1,298 | 709 | 1,068 | ||||||||||||||
| Advertising and marketing expense | 1,462 | 1,868 | 1,662 | 1,386 | 1,516 | ||||||||||||||
| Occupancy expense | 1,588 | 1,882 | 1,857 | 2,177 | 1,473 | ||||||||||||||
| Data processing expense | 3,661 | 2,906 | 2,837 | 2,913 | 1,982 | ||||||||||||||
| Equipment expense | 3,649 | 3,368 | 3,077 | 2,474 | 2,228 | ||||||||||||||
| Other loan origination and maintenance expense | 1,742 | 1,414 | 1,329 | 1,383 | 1,601 | ||||||||||||||
| Renewable energy tax credit investment impairment | — | — | — | 690 | — | ||||||||||||||
| FDIC insurance | 1,105 | 1,010 | 572 | 898 | 858 | ||||||||||||||
| Title insurance closing services expense | 114 | 372 | 426 | 541 | 687 | ||||||||||||||
| Impairment expense on goodwill and other intangibles, net | 2,680 | — | — | 3,648 | — | ||||||||||||||
| Other expense | 1,459 | 2,704 | 2,962 | 3,134 | 3,117 | ||||||||||||||
| Total noninterest expense | 41,244 | 40,830 | 38,072 | 41,024 | 35,856 | ||||||||||||||
| Income before taxes | 11,054 | 14,744 | 12,768 | 73,338 | 7,803 | ||||||||||||||
| Income tax expense (benefit) | (3,198 | ) | 491 | 315 | 1,608 | (5,059 | ) | ||||||||||||
| Net income | $ | 14,252 | $ | 14,253 | $ | 12,453 | $ | 71,730 | $ | 12,862 | |||||||||
| Earnings per share | |||||||||||||||||||
| Basic | $ | 0.36 | $ | 0.36 | $ | 0.31 | $ | 1.80 | $ | 0.34 | |||||||||
| Diluted | $ | 0.34 | $ | 0.34 | $ | 0.30 | $ | 1.74 | $ | 0.33 | |||||||||
| Weighted average shares outstanding | |||||||||||||||||||
| Basic | 40,119,561 | 40,027,336 | 39,926,781 | 39,879,345 | 37,366,041 | ||||||||||||||
| Diluted | 41,688,430 | 41,619,647 | 41,399,930 | 41,184,793 | 38,644,677 | ||||||||||||||
Live Oak Bancshares, Inc.
Quarterly Balance Sheets (unaudited)
(Dollars in thousands)
| As of the quarter ended | |||||||||||||||||||
| 3Q 2018 | 2Q 2018 | 1Q 2018 | 4Q 2017 | 3Q 2017 | |||||||||||||||
| Assets | |||||||||||||||||||
| Cash and due from banks | $ | 368,565 | $ | 392,941 | $ | 527,952 | $ | 295,271 | $ | 260,907 | |||||||||
| Certificates of deposit with other banks | 750 | 2,250 | 2,250 | 3,000 | 3,250 | ||||||||||||||
| Investment securities available-for-sale | 374,284 | 382,890 | 376,453 | 93,355 | 76,575 | ||||||||||||||
| Loans held for sale | 646,475 | 757,494 | 720,511 | 680,454 | 692,586 | ||||||||||||||
| Loans and leases held for investment | 1,631,337 | 1,534,368 | 1,442,077 | 1,343,973 | 1,169,887 | ||||||||||||||
| Allowance for loan and lease losses | (26,797 | ) | (29,350 | ) | (28,050 | ) | (24,190 | ) | (21,027 | ) | |||||||||
| Net loans and leases | 1,604,540 | 1,505,018 | 1,414,027 | 1,319,783 | 1,148,860 | ||||||||||||||
| Premises and equipment, net | 263,861 | 234,817 | 216,831 | 178,790 | 129,233 | ||||||||||||||
| Foreclosed assets | 1,429 | 1,725 | 1,519 | 1,281 | 2,231 | ||||||||||||||
| Servicing assets | 49,261 | 52,689 | 53,120 | 52,298 | 53,392 | ||||||||||||||
| Other assets | 135,592 | 143,145 | 148,200 | 134,242 | 65,155 | ||||||||||||||
| Total assets | $ | 3,444,757 | $ | 3,472,969 | $ | 3,460,863 | $ | 2,758,474 | $ | 2,432,189 | |||||||||
| Liabilities and Shareholders’ Equity | |||||||||||||||||||
| Liabilities | |||||||||||||||||||
| Deposits: | |||||||||||||||||||
| Noninterest-bearing | $ | 48,622 | $ | 46,192 | $ | 48,755 | $ | 57,868 | $ | 55,260 | |||||||||
| Interest-bearing | 2,875,666 | 2,923,044 | 2,924,586 | 2,202,395 | 1,957,631 | ||||||||||||||
| Total deposits | 2,924,288 | 2,969,236 | 2,973,341 | 2,260,263 | 2,012,891 | ||||||||||||||
| Long term borrowings | 1,506 | 3,385 | 3,489 | 26,564 | 26,872 | ||||||||||||||
| Other liabilities | 41,733 | 37,362 | 35,197 | 34,714 | 27,835 | ||||||||||||||
| Total liabilities | 2,967,527 | 3,009,983 | 3,012,027 | 2,321,541 | 2,067,598 | ||||||||||||||
| Shareholders’ equity | |||||||||||||||||||
| Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding | — | — | — | — | — | ||||||||||||||
| Class A common stock (voting) | 276,831 | 274,043 | 271,451 | 268,557 | 266,336 | ||||||||||||||
| Class B common stock (non-voting) | 49,168 | 49,168 | 49,168 | 49,168 | 49,168 | ||||||||||||||
| Retained earnings | 157,839 | 144,791 | 131,739 | 120,241 | 49,707 | ||||||||||||||
| Accumulated other comprehensive loss | (6,608 | ) | (5,016 | ) | (3,522 | ) | (1,033 | ) | (620 | ) | |||||||||
| Total equity | 477,230 | 462,986 | 448,836 | 436,933 | 364,591 | ||||||||||||||
| Total liabilities and shareholders’ equity | $ | 3,444,757 | $ | 3,472,969 | $ | 3,460,863 | $ | 2,758,474 | $ | 2,432,189 | |||||||||
Live Oak Bancshares, Inc.
Statements of Income (unaudited)
(Dollars in thousands, except per share data)
| Nine months ended | |||||||
| September 30, 2018 | September 30, 2017 | ||||||
| Interest income | |||||||
| Loans and fees on loans | $ | 106,682 | $ | 70,290 | |||
| Investment securities, taxable | 6,175 | 964 | |||||
| Other interest earning assets | 5,032 | 1,682 | |||||
| Total interest income | 117,889 | 72,936 | |||||
| Interest expense | |||||||
| Deposits | 38,510 | 16,893 | |||||
| Borrowings | 131 | 985 | |||||
| Total interest expense | 38,641 | 17,878 | |||||
| Net interest income | 79,248 | 55,058 | |||||
| Provision for loan losses | 6,236 | 5,481 | |||||
| Net interest income after provision for loan losses | 73,012 | 49,577 | |||||
| Noninterest income | |||||||
| Loan servicing revenue | 21,369 | 18,587 | |||||
| Loan servicing asset revaluation | (18,138 | ) | (6,864 | ) | |||
| Net gains on sales of loans | 69,483 | 55,276 | |||||
| Lease income | 5,722 | 691 | |||||
| Construction supervision fee income | 1,954 | 1,077 | |||||
| Title insurance income | 2,775 | 5,803 | |||||
| Other noninterest income | 2,535 | 2,910 | |||||
| Total noninterest income | 85,700 | 77,480 | |||||
| Noninterest expense | |||||||
| Salaries and employee benefits | 62,908 | 55,687 | |||||
| Travel expense | 5,887 | 6,035 | |||||
| Professional services expense | 3,645 | 4,228 | |||||
| Advertising and marketing expense | 4,992 | 4,977 | |||||
| Occupancy expense | 5,327 | 4,018 | |||||
| Data processing expense | 9,404 | 5,536 | |||||
| Equipment expense | 10,094 | 5,005 | |||||
| Other loan origination and maintenance expense | 4,485 | 3,587 | |||||
| FDIC insurance | 2,687 | 2,308 | |||||
| Title insurance closing services expense | 912 | 1,877 | |||||
| Impairment expense on goodwill and other intangibles, net | 2,680 | — | |||||
| Other expense | 7,125 | 8,883 | |||||
| Total noninterest expense | 120,146 | 102,141 | |||||
| Income before taxes | 38,566 | 24,916 | |||||
| Income tax benefit | (2,392 | ) | (3,853 | ) | |||
| Net income | $ | 40,958 | $ | 28,769 | |||
| Earnings per share | |||||||
| Basic | $ | 1.02 | $ | 0.81 | |||
| Diluted | $ | 0.98 | $ | 0.78 | |||
| Weighted average shares outstanding | |||||||
| Basic | 40,025,265 | 35,485,371 | |||||
| Diluted | 41,586,987 | 36,730,054 | |||||
Live Oak Bancshares, Inc.
Quarterly Selected Financial Data
(Dollars in thousands, except per share data)
| As of and for the three months ended | |||||||||||||||||||
| 3Q 2018 | 2Q 2018 | 1Q 2018 | 4Q 2017 | 3Q 2017 | |||||||||||||||
| Income Statement Data | |||||||||||||||||||
| Net income | $ | 14,252 | $ | 14,253 | $ | 12,453 | $ | 71,730 | $ | 12,862 | |||||||||
| Per Common Share | |||||||||||||||||||
| Net income, basic | $ | 0.36 | $ | 0.36 | $ | 0.31 | $ | 1.80 | $ | 0.34 | |||||||||
| Net income, diluted | 0.34 | 0.34 | 0.30 | 1.74 | 0.33 | ||||||||||||||
| Dividends declared | 0.03 | 0.03 | 0.03 | 0.03 | 0.03 | ||||||||||||||
| Book value | 11.89 | 11.55 | 11.23 | 10.95 | 9.15 | ||||||||||||||
| Tangible book value (1) | 11.89 | 11.45 | 11.13 | 10.85 | 8.84 | ||||||||||||||
| Performance Ratios | |||||||||||||||||||
| Return on average assets (annualized) | 1.65 | % | 1.61 | % | 1.64 | % | 11.21 | % | 2.18 | % | |||||||||
| Return on average equity (annualized) | 12.08 | 12.34 | 11.08 | 68.33 | 16.79 | ||||||||||||||
| Net interest margin | 3.61 | 3.46 | 3.72 | 4.07 | 3.91 | ||||||||||||||
| Efficiency ratio (1) | 79.23 | 70.81 | 68.93 | 34.64 | 77.80 | ||||||||||||||
| Noninterest income to total revenue | 46.74 | 53.09 | 55.69 | 80.60 | 54.38 | ||||||||||||||
| Selected Loan Metrics | |||||||||||||||||||
| Loans and leases originated | $ | 377,337 | $ | 491,797 | $ | 397,559 | $ | 483,422 | $ | 395,682 | |||||||||
| Guaranteed loans sold | 298,073 | 295,216 | 247,243 | 211,654 | 163,843 | ||||||||||||||
| Average net gain on sale of guaranteed loans | 71.81 | 82.61 | 98.76 | 110.15 | 110.76 | ||||||||||||||
| Held for sale guaranteed loans (note amount) (2) | 896,464 | 1,075,801 | 1,068,886 | 1,087,636 | 1,093,385 | ||||||||||||||
| Outstanding balance of sold loans serviced: | |||||||||||||||||||
| Guaranteed | 3,102,820 | 2,951,379 | 2,812,108 | 2,680,641 | 2,584,163 | ||||||||||||||
| Unguaranteed | 170,784 | 155,939 | 174,867 | 169,355 | 135,705 | ||||||||||||||
| Total | 3,273,604 | 3,107,318 | 2,986,975 | 2,849,996 | 2,719,868 | ||||||||||||||
| Asset Quality Ratios | |||||||||||||||||||
| Allowance for loan losses to loans and leases held for investment | 1.64 | % | 1.91 | % | 1.95 | % | 1.80 | % | 1.80 | % | |||||||||
| Net charge-offs | $ | 2,310 | $ | 787 | $ | 532 | $ | 892 | $ | 959 | |||||||||
| Net charge-offs to average loans and leases held for investment (3) | 0.57 | % | 0.21 | % | 0.15 | % | 0.28 | % | 0.34 | % | |||||||||
| Nonperforming loans | $ | 52,709 | $ | 46,105 | $ | 36,776 | $ | 23,480 | $ | 22,420 | |||||||||
| Foreclosed assets | 1,429 | 1,725 | 1,519 | 1,281 | 2,231 | ||||||||||||||
| Nonperforming loans (unguaranteed exposure) | 12,897 | 11,466 | 7,386 | 3,610 | 3,299 | ||||||||||||||
| Foreclosed assets (unguaranteed exposure) | 158 | 197 | 101 | 90 | 446 | ||||||||||||||
| Nonperforming loans not guaranteed by the SBA and foreclosures | $ | 13,055 | $ | 11,663 | $ | 7,487 | $ | 3,700 | $ | 3,745 | |||||||||
| Nonperforming loans and foreclosures, not guaranteed by the SBA, to total assets | 0.38 | % | 0.34 | % | 0.22 | % | 0.13 | % | 0.15 | % | |||||||||
| Capital Ratios | |||||||||||||||||||
| Common equity tier 1 capital (to risk-weighted assets) | 16.95 | % | 16.78 | % | 16.36 | % | 17.81 | % | 17.78 | % | |||||||||
| Total capital (to risk-weighted assets) | 18.01 | 17.97 | 17.51 | 18.91 | 18.93 | ||||||||||||||
| Tier 1 risk based capital (to risk-weighted assets) | 16.95 | 16.78 | 16.36 | 17.81 | 17.78 | ||||||||||||||
| Tier 1 leverage capital (to average assets) | 12.53 | 11.81 | 13.32 | 15.53 | 13.99 | ||||||||||||||
Notes to Quarterly Selected Financial Data
(1) See accompanying GAAP to Non-GAAP Reconciliation.
(2) Includes the entire note amount, including undisbursed funds for the multi-advance loans.
(3) Quarterly net charge-offs as a percentage of quarterly average loans and leases held for investment, annualized.
Live Oak Bancshares, Inc.
Quarterly Average Balances and Net Interest Margin
(Dollars in thousands)
| Three months ended September 30, 2018 | Three months ended June 30, 2018 | |||||||||||||||||||||
| Average Balance | Interest | Average Yield/Rate | Average Balance | Interest | Average Yield/Rate | |||||||||||||||||
| Interest earning assets: | ||||||||||||||||||||||
| Interest earning balances in other banks | $ | 349,739 | $ | 1,638 | 1.86 | % | $ | 505,351 | $ | 2,179 | 1.73 | % | ||||||||||
| Investment securities | 388,520 | 2,528 | 2.58 | 383,154 | 2,530 | 2.65 | ||||||||||||||||
| Loans held for sale | 693,517 | 11,270 | 6.45 | 744,789 | 11,937 | 6.43 | ||||||||||||||||
| Loans and leases held for investment (1) | 1,612,699 | 26,454 | 6.51 | 1,504,738 | 24,330 | 6.49 | ||||||||||||||||
| Total interest earning assets | 3,044,475 | 41,890 | 5.46 | 3,138,032 | 40,976 | 5.24 | ||||||||||||||||
| Less: allowance for loan and lease losses | (29,266 | ) | (27,930 | ) | ||||||||||||||||||
| Non-interest earning assets | 434,963 | 424,100 | ||||||||||||||||||||
| Total assets | $ | 3,450,172 | $ | 3,534,202 | ||||||||||||||||||
| Interest bearing liabilities: | ||||||||||||||||||||||
| Interest bearing checking | $ | 31,950 | $ | 87 | 1.08 | % | $ | 36,926 | $ | 100 | 1.09 | % | ||||||||||
| Savings | 943,958 | 4,026 | 1.69 | 998,521 | 4,061 | 1.63 | ||||||||||||||||
| Money market accounts | 120,702 | 314 | 1.03 | 151,880 | 463 | 1.22 | ||||||||||||||||
| Certificates of deposit | 1,810,040 | 9,738 | 2.13 | 1,806,063 | 9,303 | 2.07 | ||||||||||||||||
| Total interest bearing deposits | 2,906,650 | 14,165 | 1.93 | 2,993,390 | 13,927 | 1.87 | ||||||||||||||||
| Other borrowings | 3,365 | 1 | 0.12 | 3,488 | 1 | 0.11 | ||||||||||||||||
| Total interest bearing liabilities | 2,910,015 | 14,166 | 1.93 | 2,996,878 | 13,928 | 1.86 | ||||||||||||||||
| Non-interest bearing deposits | 46,272 | 53,922 | ||||||||||||||||||||
| Non-interest bearing liabilities | 21,804 | 21,217 | ||||||||||||||||||||
| Shareholders’ equity | 472,081 | 462,185 | ||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 3,450,172 | $ | 3,534,202 | ||||||||||||||||||
| Net interest income and interest rate spread | $ | 27,724 | 3.53 | % | $ | 27,048 | 3.38 | % | ||||||||||||||
| Net interest margin | 3.61 | 3.46 | ||||||||||||||||||||
| Ratio of average interest-earning assets to average interest-bearing liabilities | 104.62 | % | 104.71 | % | ||||||||||||||||||
(1) Average loan and lease balances include non-accruing loans.
Live Oak Bancshares, Inc.
GAAP to Non-GAAP Reconciliation
(Dollars in thousands)
| As of and for the three months ended | |||||||||||||||||||
| 3Q 2018 | 2Q 2018 | 1Q 2018 | 4Q 2017 | 3Q 2017 | |||||||||||||||
| Total shareholders’ equity | $ | 477,230 | $ | 462,986 | $ | 448,836 | $ | 436,933 | $ | 364,591 | |||||||||
| Less: | |||||||||||||||||||
| Goodwill | — | — | — | — | 7,278 | ||||||||||||||
| Other intangible assets | — | 3,980 | 4,122 | 4,264 | 5,126 | ||||||||||||||
| Tangible shareholders’ equity (a) | $ | 477,230 | $ | 459,006 | $ | 444,714 | $ | 432,669 | $ | 352,187 | |||||||||
| Shares outstanding (c) | 40,140,417 | 40,086,409 | 39,974,148 | 39,895,583 | 39,862,147 | ||||||||||||||
| Total assets | $ | 3,444,757 | $ | 3,472,969 | $ | 3,460,863 | $ | 2,758,474 | $ | 2,432,189 | |||||||||
| Less: | |||||||||||||||||||
| Goodwill | — | — | — | — | 7,278 | ||||||||||||||
| Other intangible assets | — | 3,980 | 4,122 | 4,264 | 5,126 | ||||||||||||||
| Tangible assets (b) | $ | 3,444,757 | $ | 3,468,989 | $ | 3,456,741 | $ | 2,754,210 | $ | 2,419,785 | |||||||||
| Tangible shareholders’ equity to tangible assets (a/b) | 13.85 | % | 13.23 | % | 12.87 | % | 15.71 | % | 14.55 | % | |||||||||
| Tangible book value per share (a/c) | $ | 11.89 | $ | 11.45 | $ | 11.13 | $ | 10.85 | $ | 8.84 | |||||||||
| Efficiency ratio: | |||||||||||||||||||
| Noninterest expense (d) | $ | 41,244 | $ | 40,830 | $ | 38,072 | $ | 41,024 | $ | 35,856 | |||||||||
| Net interest income | 27,724 | 27,048 | 24,476 | 22,976 | 21,025 | ||||||||||||||
| Noninterest income | 24,331 | 30,613 | 30,756 | 95,441 | 25,060 | ||||||||||||||
| Less: gain on sale of securities | — | — | — | — | — | ||||||||||||||
| Adjusted operating revenue (e) | $ | 52,055 | $ | 57,661 | $ | 55,232 | $ | 118,417 | $ | 46,085 | |||||||||
| Efficiency ratio (d/e) | 79.23 | % | 70.81 | % | 68.93 | % | 34.64 | % | 77.80 | % | |||||||||
| Live Oak Bancshares, Inc. GAAP to Non-GAAP Reconciliation (Continued) (Dollars in thousands)
|
|||||||||||||||||||
| Three months ended | Nine months ended | ||||||||||||||||||
| 3Q 2018 | 2Q 2018 | 3Q 2017 | 3Q 2018 | 3Q 2017 | |||||||||||||||
| Reconciliation of net income to non-GAAP net income for non-routine income and expenses: | |||||||||||||||||||
| Net income | $ | 14,252 | $ | 14,253 | $ | 12,862 | $ | 40,958 | $ | 28,769 | |||||||||
| Stock based compensation expense for restricted stock awards with an effective grant date of May 24, 2016, as discussed in Note 10 of our March 31, 2016 Form 10-Q | 360 | 357 | 286 | 1,069 | 1,010 | ||||||||||||||
| Merger costs for acquisition of Reltco and Apiture investment | — | — | 390 | — | 1,156 | ||||||||||||||
| Trade-in loss on aircraft | — | — | — | — | 206 | ||||||||||||||
| Impairment expense on goodwill and other intangibles, net | 2,680 | — | — | 2,680 | — | ||||||||||||||
| Renewable energy tax credit investment income, impairment and loss | — | — | — | — | 38 | ||||||||||||||
| Income tax effects and adjustments for non-GAAP items * | (730 | ) | (86 | ) | (270 | ) | (900 | ) | (964 | ) | |||||||||
| Other renewable energy tax expense | — | — | 44 | — | 132 | ||||||||||||||
| Non-GAAP net income | $ | 16,562 | $ | 14,524 | $ | 13,312 | $ | 43,807 | $ | 30,347 | |||||||||
| * Estimated at 24.0% for 2018 and 40.0% for 2017 | |||||||||||||||||||
| Non-GAAP earnings per share: | |||||||||||||||||||
| Basic | $ | 0.41 | $ | 0.36 | $ | 0.36 | $ | 1.09 | $ | 0.86 | |||||||||
| Diluted | $ | 0.40 | $ | 0.35 | $ | 0.34 | $ | 1.05 | $ | 0.83 | |||||||||
| Weighted-average shares outstanding: | |||||||||||||||||||
| Basic | 40,119,561 | 40,027,336 | 37,366,041 | 40,025,265 | 35,485,371 | ||||||||||||||
| Diluted | 41,688,430 | 41,619,647 | 38,644,677 | 41,586,987 | 36,370,054 | ||||||||||||||
| Reconciliation of financial statement line items as reported to adjusted for non-routine income and expenses: | |||||||||||||||||||
| Noninterest income, as reported | $ | 24,331 | $ | 30,613 | $ | 25,060 | $ | 85,700 | $ | 77,480 | |||||||||
| Renewable energy tax credit investment income | — | — | — | — | (20 | ) | |||||||||||||
| Noninterest income, as adjusted | $ | 24,331 | $ | 30,613 | $ | 25,060 | $ | 85,700 | $ | 77,460 | |||||||||
| Noninterest expense, as reported | $ | 41,244 | $ | 40,830 | $ | 35,856 | $ | 120,146 | $ | 102,141 | |||||||||
| Stock based compensation expense | (360 | ) | (357 | ) | (286 | ) | (1,069 | ) | (1,010 | ) | |||||||||
| Merger costs associated with Reltco and Apiture investment | — | — | (390 | ) | — | (1,156 | ) | ||||||||||||
| Trade-in loss on aircraft | — | — | — | — | (206 | ) | |||||||||||||
| Impairment expense on goodwill and other intangibles, net | (2,680 | ) | — | — | (2,680 | ) | — | ||||||||||||
| Renewable energy tax credit investment impairment and loss | — | — | — | — | (58 | ) | |||||||||||||
| Noninterest expense, as adjusted | $ | 38,204 | $ | 40,473 | $ | 35,180 | $ | 116,397 | $ | 99,711 | |||||||||
| Income before taxes, as reported | $ | 11,054 | $ | 14,744 | $ | 7,803 | $ | 38,566 | $ | 24,916 | |||||||||
| Renewable energy tax credit investment income | — | — | — | — | (20 | ) | |||||||||||||
| Stock based compensation expense | 360 | 357 | 286 | 1,069 | 1,010 | ||||||||||||||
| Merger costs associated with Reltco and Apiture investment | — | — | 390 | — | 1,156 | ||||||||||||||
| Trade-in loss on aircraft | — | — | — | — | 206 | ||||||||||||||
| Impairment expense on goodwill and other intangibles, net | 2,680 | — | — | 2,680 | — | ||||||||||||||
| Renewable energy tax credit investment impairment and loss | — | — | — | — | 58 | ||||||||||||||
| Income before taxes, as adjusted | $ | 14,094 | $ | 15,101 | $ | 8,479 | $ | 42,315 | $ | 27,326 | |||||||||
| Income tax expense (benefit), as reported | $ | (3,198 | ) | $ | 491 | $ | (5,059 | ) | $ | (2,392 | ) | $ | (3,853 | ) | |||||
| Income tax effects and adjustments for non-recurring income and expenses | 730 | 86 | 270 | 900 | 964 | ||||||||||||||
| Other renewable energy tax expense | — | — | (44 | ) | — | (132 | ) | ||||||||||||
| Income tax expense (benefit), as adjusted | $ | (2,468 | ) | $ | 577 | $ | (4,833 | ) | $ | (1,492 | ) | $ | (3,021 | ) | |||||
This press release presents the non-GAAP financial measures previously shown. The adjustments to reconcile from the applicable GAAP financial measure to the non-GAAP financial measures are included where applicable in financial results presented in accordance with GAAP. The Company considers these adjustments to be relevant to ongoing operating results. The Company believes that excluding the amounts associated with these adjustments to present the non-GAAP financial measures provides a meaningful base for period-to-period comparisons, which will assist regulators, investors, and analysts in analyzing the operating results or financial position of the Company. The non-GAAP financial measures are used by management to assess the performance of the Company’s business for presentations of Company performance to investors, and for other reasons as may be requested by investors and analysts. The Company further believes that presenting the non-GAAP financial measures will permit investors and analysts to assess the performance of the Company on the same basis as that applied by management. Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although non-GAAP financial measures are frequently used by shareholders to evaluate a company, they have limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of results reported under GAAP.
