WILMINGTON, N.C., Oct. 26, 2016 (GLOBE NEWSWIRE) -- Live Oak Bancshares, Inc. (Nasdaq:LOB) (“Live Oak” or “the Company”) today reported third quarter net earnings available to common shareholders of $3.5 million, or $0.10 per diluted share, compared to $2.9 million, or $0.09 per diluted share, for the third quarter of 2015. The third quarter of 2016 included $3.4 million, or $0.06 per diluted share, in stock based compensation expense related to restricted stock awards with an effective grant date of May 24, 2016, for key employee retention, as discussed in Note 10 of our March 31, 2016 Form 10-Q.
“Live Oak continues on its growth mission to provide needed credit to small business owners across the country. Loan production volume was again at record levels in the third quarter. We have generated over $1 billion in loans in the first nine months of this year with continued future growth anticipated from newly established lines of business. We are on track to meet our expectation of $1.5 billion in origination volume for the full year and are hard at work to provide a complete digital banking experience for our customers. Our strategic repositioning designed to enhance levels of net interest income has started to deliver results,” said James S. Mahan, III, Chief Executive Officer of Live Oak.
Third Quarter 2016 Key Measures
| (Dollars in thousands) | Increase (Decrease) | |||||||||||||||||
| Q3 2016 | Q3 2015 | Dollars | Percent | Q2 2016 | ||||||||||||||
| Loan production: | ||||||||||||||||||
| Loans originated | $ | 381,050 | $ | 302,962 | $ | 78,088 | 26 | % | $ | 356,865 | ||||||||
| % Fully funded | 36.1 | % | 42.4 | % | n/a | n/a | 40.2 | % | ||||||||||
| Loan sales: | ||||||||||||||||||
| Guaranteed loans sold | $ | 210,610 | $ | 147,377 | $ | 63,233 | 43 | % | $ | 135,555 | ||||||||
| Net gains on sales of loans | 21,833 | 15,424 | 6,409 | 42 | 14,555 | |||||||||||||
| Average net gain on sale of loans, per million sold | 103.67 | 104.66 | (0.99 | ) | (1 | ) | 107.37 | |||||||||||
| Net interest income and servicing revenues | 17,491 | 10,847 | 6,644 | 61 | 14,998 | |||||||||||||
| Net income attributable to Live Oak Bancshares, Inc. | 3,479 | 2,901 | 578 | 20 | 123 | |||||||||||||
| Diluted earnings per share | 0.10 | 0.09 | 0.01 | 11 | 0.00 | |||||||||||||
| Non-GAAP net income (1) | 5,498 | 2,901 | 2,597 | 90 | 3,883 | |||||||||||||
| Non-GAAP diluted earnings per share (1) | 0.16 | 0.09 | 0.07 | 78 | 0.11 | |||||||||||||
| (1) See accompanying GAAP to Non-GAAP Reconciliation. | ||||||||||||||||||
Net Interest Income
Net interest income for the third quarter of 2016 increased to $11.6 million compared to $6.6 million for the third quarter of 2015. The increase was driven by the significant growth in the combined held for sale and held for investment loan portfolios attributable to steadily rising loan originations, in part due to the Company's efforts to grow recurring revenue sources by increasing the level of loans on the balance sheet. Another positive factor was a higher net interest margin which rose from 3.11% for the third quarter of 2015 to 3.32% for the third quarter of 2016, reflecting higher loan rates. The increase from the second quarter 2016 margin of 3.26% was principally due to a rising yield on interest earning assets combined with slightly lower funding costs in money market funds.
Provision for Loan Losses
The provision for loan losses for the third quarter of 2016 increased to $3.8 million compared to $3.5 million for the second quarter of 2016 and $1.2 million for the third quarter of 2015. Net charge-offs (recoveries) were $937 thousand in the third quarter of 2016 compared to ($240) thousand in the second quarter of 2016 and $243 thousand in the third quarter of 2015. Net charge-offs as a percentage of average held for investment loans, annualized, for the quarters ended September 31, 2016 and 2015 were 0.51% and 0.40%, respectively. The increase in net charge-offs contributed to the higher level of provision for the quarter and was largely attributable to a single problem credit that is in workout status. Net charge-offs for the first nine months of 2016 totaled $929 thousand as compared to $594 thousand for the first nine months of 2015. The higher provision in the third quarter also reflects the continued strong growth in the loan portfolio which contributed to the increase in the allowance for loan losses.
Noninterest Income
Noninterest income for the third quarter of 2016 totaled $25.4 million, compared to $17.8 million for the third quarter of 2015. Net gains on sales of loans increased to $21.8 million in the third quarter of 2016 compared to $14.6 million in the second quarter of 2016 and $15.4 million in the third quarter of 2015 due to a much higher volume of loan sales. Loan servicing revenues rose by $1.6 million from the third quarter of 2015 to $5.9 million.
Noninterest Expense
Noninterest expense for the third quarter of 2016 was $27.2 million compared to $25.1 million for the second quarter of 2016 and$18.1 million for the third quarter of 2015. Salaries and employee benefits increased to $17.5 million from $9.9 million for the third quarter of 2015 as a result of increased staffing and developing infrastructure to support growing loan demand and multiple new initiatives of the Company, along with $3.4 million in stock based compensation expense related to restricted stock awards with an effective grant date of May 24, 2016 for key employee retention, as discussed in Note 10 of our March 31, 2016 Form 10-Q. Future expense associated with these restricted stock awards is expected to be $3.4 million in the fourth quarter of 2016, with subsequent quarterly expense declining to approximately $346 thousand through the end of the implied term. Total stock based compensation expense in the third quarter of 2016 was $4.1 million compared to $2.9 million for the second quarter of 2016 and $498 thousand for the third quarter of 2015.
Loans and Asset Quality
Net loans held for investment increased $73.6 million, or 10.9%, to $751.8 million at September 30, 2016, from $678.2 million at June 30, 2016. Loans held for sale increased $16.1 million, or 4.9%, to $345.3 million at September 30, 2016, from $329.2 million at June 30, 2016. The increase in both portfolios is the result of growth in loan origination activities. The combined total loan portfolio at September 30, 2016 and June 30, 2016, of $1.11 billion and $1.02 billion, respectively, were comprised of approximately 66.3% and 64.9% of unguaranteed loans, respectively. The combined total loan portfolio of $1.11 billion at September 30, 2016, rose by 58.1% above its level of a year ago.
Average loans were $1.09 billion during the third quarter of 2016 compared to $939.1 million during the second quarter of 2016.
The allowance for loan losses increased $2.9 million, or 23.3%, to $15.2 million at September 30, 2016, from $12.3 million at June 30, 2016. The increase in the allowance for loan losses was largely attributable to continued growth in the loan portfolio combined with the effects of charge-off experience, as discussed above. The allowance for loan losses as a percentage of total loans held for investment increased from 1.78% at June 30, 2016 to 1.98% at September 30, 2016.
The unguaranteed exposure of nonperforming loans amounted to $3.4 million at September 30, 2016, compared to $2.2 million at June 30, 2016. Total nonperforming loans increased to $14.0 million from $12.9 million at the end of the prior quarter. Total unguaranteed nonperforming loans as a percentage of total held for investment loans was 0.44% and 0.31% as of September 30, 2016, and June 30, 2016, respectively.
Foreclosed assets decreased $736 thousand to $2.2 million at September 30, 2016, from June 30, 2016.
Deposits
Total deposits increased by $262.2 million, or 23.0%, to $1.40 billion at September 30, 2016, compared to $1.14 billion at June 30, 2016, following successful deposit gathering campaigns. Average total interest bearing deposits for the third quarter of 2016 increased $156.6 million, or 14.5%, to $1.24 billion, compared to $1.08 billion for the second quarter of 2016. The ratio of average total loans to average interest bearing deposits was 87.7% for the third quarter of 2016, compared to 86.7% for the second quarter of 2016.
Conference Call
Live Oak will host a conference call to discuss third quarter results at 9:00 a.m. ET tomorrow morning (October 27, 2016). 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 94419161. 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 3, 2016, and can be accessed by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international).
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, a national online platform for small business lending.
Live Oak Bancshares, Inc.
Quarterly Statements of Income (unaudited)
(Dollars in thousands, except per share data)
| Three months ended | |||||||||||||||||||
| 3Q 2016 | 2Q 2016 | 1Q 2016 | 4Q 2015 | 3Q 2015 | |||||||||||||||
| Interest income | |||||||||||||||||||
| Loans and fees on loans | $ | 14,961 | $ | 12,902 | $ | 11,005 | $ | 10,474 | $ | 8,728 | |||||||||
| Investment securities, taxable | 337 | 252 | 251 | 224 | 211 | ||||||||||||||
| Other interest earning assets | 264 | 248 | 138 | 80 | 84 | ||||||||||||||
| Total interest income | 15,562 | 13,402 | 11,394 | 10,778 | 9,023 | ||||||||||||||
| Interest expense | |||||||||||||||||||
| Deposits | 3,689 | 3,243 | 2,444 | 2,105 | 1,997 | ||||||||||||||
| Borrowings | 242 | 242 | 241 | 203 | 395 | ||||||||||||||
| Total interest expense | 3,931 | 3,485 | 2,685 | 2,308 | 2,392 | ||||||||||||||
| Net interest income | 11,631 | 9,917 | 8,709 | 8,470 | 6,631 | ||||||||||||||
| Provision for loan losses | 3,806 | 3,453 | 1,433 | 1,467 | 1,212 | ||||||||||||||
| Net interest income after provision for loan losses | 7,825 | 6,464 | 7,276 | 7,003 | 5,419 | ||||||||||||||
| Noninterest income | |||||||||||||||||||
| Loan servicing revenue | 5,860 | 5,081 | 4,784 | 4,404 | 4,216 | ||||||||||||||
| Loan servicing asset revaluation | (3,421 | ) | (1,604 | ) | (26 | ) | (1,996 | ) | (2,650 | ) | |||||||||
| Net gains on sales of loans | 21,833 | 14,555 | 16,425 | 20,781 | 15,424 | ||||||||||||||
| Gain on sale of securities available-for-sale | 1 | — | — | 1 | 12 | ||||||||||||||
| Construction supervision fee income | 502 | 667 | 630 | 745 | 344 | ||||||||||||||
| Other noninterest income | 657 | 649 | 619 | 433 | 424 | ||||||||||||||
| Total noninterest income | 25,432 | 19,348 | 22,432 | 24,368 | 17,770 | ||||||||||||||
| Noninterest expense | |||||||||||||||||||
| Salaries and employee benefits | 17,471 | 15,411 | 12,993 | 12,700 | 9,949 | ||||||||||||||
| Travel expense | 2,218 | 2,330 | 1,846 | 1,465 | 2,200 | ||||||||||||||
| Professional services expense | 907 | 910 | 528 | 752 | 493 | ||||||||||||||
| Advertising and marketing expense | 1,097 | 1,365 | 963 | 1,156 | 1,051 | ||||||||||||||
| Occupancy expense | 1,058 | 1,055 | 1,193 | 1,555 | 703 | ||||||||||||||
| Data processing expense | 1,252 | 1,404 | 1,208 | 1,195 | 773 | ||||||||||||||
| Equipment expense | 611 | 534 | 551 | 646 | 642 | ||||||||||||||
| Other loan origination and maintenance expense | 806 | 621 | 574 | 685 | 673 | ||||||||||||||
| Other expense | 1,798 | 1,502 | 1,855 | 1,979 | 1,579 | ||||||||||||||
| Total noninterest expense | 27,218 | 25,132 | 21,711 | 22,133 | 18,063 | ||||||||||||||
| Income before taxes | 6,039 | 680 | 7,997 | 9,238 | 5,126 | ||||||||||||||
| Income tax expense | 2,561 | 557 | 3,314 | 3,523 | 2,228 | ||||||||||||||
| Net income | 3,478 | 123 | 4,683 | 5,715 | 2,898 | ||||||||||||||
| Net loss attributable to noncontrolling interest | 1 | — | 8 | 1 | 3 | ||||||||||||||
| Net income attributable to Live Oak Bancshares, Inc. | $ | 3,479 | $ | 123 | $ | 4,691 | $ | 5,716 | $ | 2,901 | |||||||||
| Earnings per share | |||||||||||||||||||
| Basic | $ | 0.10 | $ | 0.00 | $ | 0.14 | $ | 0.17 | $ | 0.09 | |||||||||
| Diluted | $ | 0.10 | $ | 0.00 | $ | 0.13 | $ | 0.16 | $ | 0.09 | |||||||||
| Weighted average shares outstanding | |||||||||||||||||||
| Basic | 34,206,943 | 34,189,217 | 34,176,753 | 34,169,855 | 32,824,587 | ||||||||||||||
| Diluted | 35,001,817 | 35,206,125 | 34,954,592 | 35,079,486 | 33,917,282 | ||||||||||||||
Live Oak Bancshares, Inc.
Quarterly Balance Sheets (unaudited)
(Dollars in thousands)
| As of the quarter ended | |||||||||||||||||||
| 3Q 2016 | 2Q 2016 | 1Q 2016 | 4Q 2015 | 3Q 2015 | |||||||||||||||
| Assets | |||||||||||||||||||
| Cash and due from banks | $ | 355,485 | $ | 175,506 | $ | 226,556 | $ | 102,607 | $ | 129,881 | |||||||||
| Certificates of deposit with other banks | 7,500 | 8,500 | 9,000 | 10,250 | 10,000 | ||||||||||||||
| Investment securities available-for-sale | 70,334 | 66,804 | 55,674 | 53,762 | 51,628 | ||||||||||||||
| Loans held for sale | 345,277 | 329,206 | 537,293 | 480,619 | 443,871 | ||||||||||||||
| Loans held for investment | 766,977 | 690,517 | 313,633 | 279,969 | 259,552 | ||||||||||||||
| Allowance for loan losses | (15,178 | ) | (12,309 | ) | (8,616 | ) | (7,415 | ) | (6,153 | ) | |||||||||
| Net loans | 751,799 | 678,208 | 305,017 | 272,554 | 253,399 | ||||||||||||||
| Premises and equipment, net | 60,646 | 61,064 | 61,839 | 62,653 | 62,641 | ||||||||||||||
| Foreclosed assets | 2,235 | 2,971 | 3,020 | 2,666 | 1,258 | ||||||||||||||
| Servicing assets | 49,729 | 48,454 | 47,377 | 44,230 | 40,590 | ||||||||||||||
| Other assets | 26,735 | 24,591 | 22,765 | 23,281 | 19,498 | ||||||||||||||
| Total assets | $ | 1,669,740 | $ | 1,395,304 | $ | 1,268,541 | $ | 1,052,622 | $ | 1,012,766 | |||||||||
| Liabilities and Shareholders’ Equity | |||||||||||||||||||
| Liabilities | |||||||||||||||||||
| Deposits: | |||||||||||||||||||
| Noninterest-bearing | $ | 28,461 | $ | 22,942 | $ | 21,125 | $ | 21,502 | $ | 20,420 | |||||||||
| Interest-bearing | 1,374,556 | 1,117,855 | 994,340 | 783,286 | 742,208 | ||||||||||||||
| Total deposits | 1,403,017 | 1,140,797 | 1,015,465 | 804,788 | 762,628 | ||||||||||||||
| Long term borrowings | 28,074 | 28,173 | 28,271 | 28,375 | 42,079 | ||||||||||||||
| Other liabilities | 24,497 | 18,984 | 20,372 | 19,971 | 13,963 | ||||||||||||||
| Total liabilities | 1,455,588 | 1,187,954 | 1,064,108 | 853,134 | 818,670 | ||||||||||||||
| Shareholders’ equity | |||||||||||||||||||
| Non-cumulative perpetual preferred stock (Series A), no shares authorized, issued or outstanding at September 30, 2016, June 30, 2016, March 31, 2016 and December 31, 2015, 6,800 shares authorized, issued and outstanding for September 30, 2015 | — | — | — | — | — | ||||||||||||||
| Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding | — | — | — | — | — | ||||||||||||||
| Class A common stock (voting) | 145,284 | 141,181 | 138,199 | 137,492 | 136,852 | ||||||||||||||
| Class B common stock (non-voting) | 50,015 | 50,015 | 50,015 | 50,015 | 50,015 | ||||||||||||||
| Retained earnings | 18,723 | 15,928 | 16,147 | 12,140 | 7,108 | ||||||||||||||
| Accumulated other comprehensive income (loss) | 130 | 201 | 47 | (192 | ) | 87 | |||||||||||||
| Total shareholders’ equity attributed to Live Oak Bancshares, Inc. | 214,152 | 207,325 | 204,408 | 199,455 | 194,062 | ||||||||||||||
| Noncontrolling interest | — | 25 | 25 | 33 | 34 | ||||||||||||||
| Total equity | 214,152 | 207,350 | 204,433 | 199,488 | 194,096 | ||||||||||||||
| Total liabilities and shareholders’ equity | $ | 1,669,740 | $ | 1,395,304 | $ | 1,268,541 | $ | 1,052,622 | $ | 1,012,766 | |||||||||
Live Oak Bancshares, Inc.
Quarterly Selected Financial Data
(Dollars in thousands, except per share data)
| As of and for the three months ended | |||||||||||||||||||
| 3Q 2016 | 2Q 2016 | 1Q 2016 | 4Q 2015 | 3Q 2015 | |||||||||||||||
| Income Statement Data | |||||||||||||||||||
| Net income attributable to Live Oak Bancshares, Inc. | $ | 3,479 | $ | 123 | $ | 4,691 | $ | 5,716 | $ | 2,901 | |||||||||
| Per Common Share | |||||||||||||||||||
| Net income, basic | $ | 0.10 | $ | 0.00 | $ | 0.14 | $ | 0.17 | $ | 0.09 | |||||||||
| Net income, diluted | 0.10 | 0.00 | 0.13 | 0.16 | 0.09 | ||||||||||||||
| Dividends declared | 0.02 | 0.01 | 0.02 | 0.01 | 0.01 | ||||||||||||||
| Book value | 6.26 | 6.06 | 5.98 | 5.84 | 5.68 | ||||||||||||||
| Tangible book value (1) | 6.26 | 6.06 | 5.98 | 5.84 | 5.68 | ||||||||||||||
| Performance Ratios | |||||||||||||||||||
| Return on average assets (annualized) | 0.91 | % | 0.04 | % | 1.67 | % | 2.18 | % | 1.19 | % | |||||||||
| Return on average equity (annualized) | 6.54 | 0.24 | 9.38 | 11.60 | 7.15 | ||||||||||||||
| Net interest margin | 3.32 | 3.26 | 3.52 | 3.66 | 3.11 | ||||||||||||||
| Efficiency ratio (1) | 73.44 | 85.88 | 69.72 | 67.40 | 74.06 | ||||||||||||||
| Noninterest income to total revenue | 68.62 | 66.11 | 72.03 | 74.21 | 72.81 | ||||||||||||||
| Selected Loan Metrics | |||||||||||||||||||
| Loans originated | $ | 381,050 | $ | 356,865 | $ | 284,530 | $ | 330,798 | $ | 302,962 | |||||||||
| Guaranteed loans sold | 210,610 | 135,555 | 155,643 | 219,328 | 147,377 | ||||||||||||||
| Average net gain on sale of loans | 103.67 | 107.37 | 105.53 | 94.75 | 104.66 | ||||||||||||||
| Held for sale guaranteed loans (note amount) (2) | 692,278 | 639,356 | 541,595 | 497,875 | 499,303 | ||||||||||||||
| Quarterly increase (decrease) in note amount of held for sale guaranteed loans | 52,922 | 97,761 | 42,292 | (1,428 | ) | 68,071 | |||||||||||||
| Estimated net gain to be recognized on quarterly increase in guaranteed loans held for sale (3) | 5,486 | 10,497 | 4,463 | N/A | 7,124 | ||||||||||||||
| Asset Quality Ratios | |||||||||||||||||||
| Allowance for loan losses to loans held for investment | 1.98 | % | 1.78 | % | 2.75 | % | 2.65 | % | 2.37 | % | |||||||||
| Net charge-offs (recoveries) to average loans held for investment (4) | 0.51 | (0.18 | ) | 0.30 | 0.30 | 0.40 | |||||||||||||
| Nonperforming loans | $ | 14,023 | $ | 12,902 | $ | 14,829 | $ | 12,367 | $ | 18,384 | |||||||||
| Foreclosed assets | 2,235 | 2,971 | 3,020 | 2,666 | 1,258 | ||||||||||||||
| Nonperforming loans (unguaranteed exposure) | 3,354 | 2,174 | 2,421 | 2,037 | 2,562 | ||||||||||||||
| Foreclosed assets (unguaranteed exposure) | 304 | 433 | 438 | 373 | 48 | ||||||||||||||
| Nonperforming loans not guaranteed by the SBA and foreclosures | 3,658 | 2,607 | 2,859 | 2,410 | 2,610 | ||||||||||||||
| Nonperforming loans and foreclosures, not guaranteed by the SBA, to total assets | 0.22 | % | 0.19 | % | 0.23 | % | 0.23 | % | 0.26 | % | |||||||||
| Capital Ratios | |||||||||||||||||||
| Common equity tier 1 capital (to risk-weighted assets) | 16.63 | % | 18.26 | % | 20.61 | % | 23.22 | % | 24.40 | % | |||||||||
| Total capital (to risk-weighted assets) | 17.88 | 19.43 | 21.54 | 24.12 | 25.21 | ||||||||||||||
| Tier 1 risk based capital (to risk-weighted assets) | 16.63 | 18.26 | 20.61 | 23.22 | 24.40 | ||||||||||||||
| Tier 1 leverage capital (to average assets) | 13.18 | 14.32 | 17.09 | 18.36 | 19.07 | ||||||||||||||
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) The estimated revenue from the sale of the quarterly increase in guaranteed loans is based on the average net gain on sale of loans for that quarter.
(4) Quarterly net charge-offs as a percentage of quarterly average loans held for investment, annualized.
Live Oak Bancshares, Inc.
Quarterly Average Balances and Net Interest Margin
(Dollars in thousands)
| Three months ended September 30, 2016 | Three months ended June 30, 2016 | |||||||||||||||||||||
| Average Balance | Interest | Average Yield/Rate | Average Balance | Interest | Average Yield/Rate | |||||||||||||||||
| Interest earning assets: | ||||||||||||||||||||||
| Interest earning balances in other banks | $ | 231,238 | $ | 264 | 0.45 | % | $ | 224,838 | $ | 248 | 0.44 | % | ||||||||||
| Investment securities | 69,869 | 337 | 1.91 | 56,261 | 252 | 1.80 | ||||||||||||||||
| Loans held for sale | 358,867 | 4,996 | 5.52 | 398,087 | 5,527 | 5.57 | ||||||||||||||||
| Loans held for investment (1) | 728,041 | 9,965 | 5.43 | 540,988 | 7,375 | 5.47 | ||||||||||||||||
| Total interest earning assets | 1,388,015 | 15,562 | 4.45 | 1,220,174 | 13,402 | 4.41 | ||||||||||||||||
| Less: allowance for loan losses | (12,188 | ) | (8,792 | ) | ||||||||||||||||||
| Non-interest earning assets | 146,159 | 145,343 | ||||||||||||||||||||
| Total assets | $ | 1,521,986 | $ | 1,356,725 | ||||||||||||||||||
| Interest bearing liabilities: | ||||||||||||||||||||||
| Money market accounts | $ | 471,447 | $ | 866 | 0.73 | % | $ | 412,592 | $ | 797 | 0.77 | % | ||||||||||
| Certificates of deposit | 767,887 | 2,823 | 1.46 | 670,144 | 2,446 | 1.46 | ||||||||||||||||
| Total interest bearing deposits | 1,239,334 | 3,689 | 1.18 | 1,082,736 | 3,243 | 1.20 | ||||||||||||||||
| Other borrowings | 28,172 | 242 | 3.41 | 28,270 | 242 | 3.43 | ||||||||||||||||
| Total interest bearing liabilities | 1,267,506 | 3,931 | 1.23 | 1,111,006 | 3,485 | 1.26 | ||||||||||||||||
| Non-interest bearing deposits | 20,742 | 19,311 | ||||||||||||||||||||
| Non-interest bearing liabilities | 20,807 | 18,518 | ||||||||||||||||||||
| Shareholders' equity | 212,914 | 207,865 | ||||||||||||||||||||
| Noncontrolling interest | 17 | 25 | ||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 1,521,986 | $ | 1,356,725 | ||||||||||||||||||
| Net interest income and interest rate spread | $ | 11,631 | 3.22 | % | $ | 9,917 | 3.15 | % | ||||||||||||||
| Net interest margin | 3.32 | 3.26 | ||||||||||||||||||||
| Ratio of average interest-earning assets to average interest-bearing liabilities | 109.51 | % | 109.83 | % | ||||||||||||||||||
(1) Average loan 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 2016 | 2Q 2016 | 1Q 2016 | 4Q 2015 | 3Q 2015 | |||||||||||||||
| Total shareholders’ equity | $ | 214,152 | $ | 207,350 | $ | 204,433 | $ | 199,488 | $ | 194,096 | |||||||||
| Less: | |||||||||||||||||||
| Goodwill | — | — | — | — | — | ||||||||||||||
| Other intangible assets | — | — | — | — | 103 | ||||||||||||||
| Tangible shareholders’ equity (a) | $ | 214,152 | $ | 207,350 | $ | 204,433 | $ | 199,488 | $ | 193,993 | |||||||||
| Shares outstanding (c) | 34,215,050 | 34,192,382 | 34,183,878 | 34,172,899 | 34,167,500 | ||||||||||||||
| Total assets | $ | 1,669,740 | $ | 1,395,304 | $ | 1,268,541 | $ | 1,052,622 | $ | 1,012,766 | |||||||||
| Less: | |||||||||||||||||||
| Goodwill | — | — | — | — | — | ||||||||||||||
| Other intangible assets | — | — | — | — | 103 | ||||||||||||||
| Tangible assets (b) | $ | 1,669,740 | $ | 1,395,304 | $ | 1,268,541 | $ | 1,052,622 | $ | 1,012,663 | |||||||||
| Tangible shareholders’ equity to tangible assets (a/b) | 12.83 | % | 14.86 | % | 16.12 | % | 18.95 | % | 19.16 | % | |||||||||
| Tangible book value per share (a/c) | $ | 6.26 | $ | 6.06 | $ | 5.98 | $ | 5.84 | $ | 5.68 | |||||||||
| Efficiency ratio: | |||||||||||||||||||
| Noninterest expense (d) | $ | 27,218 | $ | 25,132 | $ | 21,711 | $ | 22,133 | $ | 18,063 | |||||||||
| Net interest income | 11,631 | 9,917 | 8,709 | 8,470 | 6,631 | ||||||||||||||
| Noninterest income | 25,432 | 19,348 | 22,432 | 24,368 | 17,770 | ||||||||||||||
| Less: gain on sale of securities | 1 | — | — | 1 | 12 | ||||||||||||||
| Adjusted operating revenue (e) | $ | 37,062 | $ | 29,265 | $ | 31,141 | $ | 32,837 | $ | 24,389 | |||||||||
| Efficiency ratio (d/e) | 73.44 | % | 85.88 | % | 69.72 | % | 67.40 | % | 74.06 | % | |||||||||
Live Oak Bancshares, Inc.
GAAP to Non-GAAP Reconciliation (Continued)
(Dollars in thousands)
| Three months ended | Nine months ended | ||||||||||||||||||
| 9/30/2016 | 6/30/2016 | 9/30/2015 | 9/30/2016 | 9/30/2015 | |||||||||||||||
| Reconciliation of net income to non-GAAP net income for non-routine income and expenses: | |||||||||||||||||||
| Net income attributable to Live Oak Bancshares, Inc. | $ | 3,479 | $ | 123 | $ | 2,901 | $ | 8,293 | $ | 14,910 | |||||||||
| Gain on sale of investment in non-consolidated affiliate | — | — | — | — | (3,782 | ) | |||||||||||||
| Provision for loans reclassified as held for investment | — | 4,023 | — | 4,023 | — | ||||||||||||||
| 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 | 3,365 | 2,243 | — | 5,608 | — | ||||||||||||||
| Income tax effects and adjustments for non-GAAP items * | (1,346 | ) | (2,506 | ) | — | (3,852 | ) | 1,513 | |||||||||||
| Non-GAAP net income | $ | 5,498 | $ | 3,883 | $ | 2,901 | $ | 14,072 | $ | 12,641 | |||||||||
| * Estimated at 40.0% | |||||||||||||||||||
| Non-GAAP earnings per share: | |||||||||||||||||||
| Basic | $ | 0.16 | $ | 0.11 | $ | 0.09 | $ | 0.41 | $ | 0.42 | |||||||||
| Diluted | $ | 0.16 | $ | 0.11 | $ | 0.09 | $ | 0.40 | $ | 0.41 | |||||||||
| Weighted-average shares outstanding: | |||||||||||||||||||
| Basic | 34,206,943 | 34,189,217 | 32,824,587 | 34,191,014 | 30,037,436 | ||||||||||||||
| Diluted | 35,001,817 | 35,206,125 | 33,917,282 | 35,217,704 | 30,930,230 | ||||||||||||||
| Reconciliation of financial statement line items as reported to adjusted for non-routine income and expenses: | |||||||||||||||||||
| Noninterest income, as reported | $ | 25,432 | $ | 19,348 | $ | 17,770 | $ | 67,212 | $ | 59,960 | |||||||||
| Gain on sale of investment in non-consolidated affiliate | — | — | — | — | (3,782 | ) | |||||||||||||
| Noninterest income, as adjusted | 25,432 | 19,348 | 17,770 | 67,212 | 56,178 | ||||||||||||||
| Provision for loan losses, as reported | 3,806 | 3,453 | 1,212 | 8,692 | 2,339 | ||||||||||||||
| Provision for loans reclassified as held for investment | — | (4,023 | ) | — | (4,023 | ) | — | ||||||||||||
| Provision for loan losses, as adjusted | 3,806 | (570 | ) | 1,212 | 4,669 | 2,339 | |||||||||||||
| Noninterest expense, as reported | 27,218 | 25,132 | 18,063 | 74,061 | 49,581 | ||||||||||||||
| Stock based compensation expense | (3,365 | ) | (2,243 | ) | — | (5,608 | ) | — | |||||||||||
| Noninterest expense, as adjusted | 23,853 | 22,889 | 18,063 | 68,453 | 49,581 | ||||||||||||||
| Income tax expense, as reported | 2,561 | 557 | 2,228 | 6,432 | 10,272 | ||||||||||||||
| Income tax effects and adjustments for non-recurring income and expenses | 1,346 | 2,506 | — | 3,852 | (1,513 | ) | |||||||||||||
| Income tax expense, as adjusted | $ | 3,907 | $ | 3,063 | $ | 2,228 | $ | 10,284 | $ | 8,759 | |||||||||
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.