Exhibit 99.1
Section 2: EX-99.1
LIVE OAK BANCSHARES, INC. REPORTS SECOND QUARTER 2017 RESULTS
Wilmington, NC, July 26, 2017 - Live Oak Bancshares, Inc. (Nasdaq: LOB) (“Live Oak” or “the Company”) today reported second quarter net earnings available to common shareholders of $9.8 million, or $0.27 per diluted share, compared to $123 thousand, or $0.00 per diluted share, for the second quarter of 2016. The Company achieved record-level production in the second quarter with loan and lease originations of $586.5 million.
“We exited the first half of 2017 having generated loans and leases in excess of $1 billion dollars along with strong earnings momentum. Our highest-ever origination level in the second quarter fully demonstrates the growing power of the Live Oak business model. With $45 million in total revenues for the quarter, our steady investments in resources and initiatives are generating excellent returns. We will continue to innovate and invest in new strategic opportunities that will empower small businesses throughout the U.S. and benefit the Company for the long term,” said James S. Mahan, III, Chief Executive Officer of Live Oak.
Second Quarter 2017 Key Measures
|
| | | | | | | | | | | | | | | | | | |
(Dollars in thousands, except per share data) | | | | Increase (Decrease) | | |
| Q2 2017 | | Q2 2016 | | Dollars | | Percent | | Q1 2017 |
Loan production: | | | | | | | | | |
Loans and leases originated | $ | 586,471 |
| | $ | 356,865 |
| | $ | 229,606 |
| | 64 | % | | $ | 468,663 |
|
% Fully funded | 42.2 | % | | 40.2 | % | | n/a |
| | n/a |
| | 63.2 | % |
Loan sales: | | | | |
| |
| | |
Guaranteed loans sold | $ | 203,714 |
| | $ | 135,555 |
| | $ | 68,159 |
| | 50 | % | | $ | 208,715 |
|
Net gains on sales of guaranteed loans | 18,676 |
| | 14,555 |
| | 4,121 |
| | 28 |
| | 18,952 |
|
Average net gain on sale of guaranteed loans, per million sold | 91.68 |
| | 107.37 |
| | (15.69 | ) | | (15 | ) | | 90.80 |
|
Net interest income and servicing revenues | 24,566 |
| | 14,998 |
| | 9,568 |
| | 64 |
| | 21,564 |
|
Net income attributable to Live Oak Bancshares, Inc. | 9,795 |
| | 123 |
| | 9,672 |
| | 7,863 |
| | 6,112 |
|
Diluted earnings per share | 0.27 |
| | 0.00 |
| | 0.27 |
| | 100 |
| | 0.17 |
|
Non-GAAP net income (1) | 10,227 |
| | 3,883 |
| | 6,344 |
| | 163 |
| | 6,808 |
|
Non-GAAP diluted earnings per share (1) | 0.28 |
| | 0.11 |
| | 0.17 |
| | 155 |
| | 0.19 |
|
(1) See accompanying GAAP to Non-GAAP Reconciliation.
Loans and Leases
Net loans and leases held for investment increased $83.9 million, or 8.5%, to $1.06 billion at June 30, 2017, from $981.1 million at March 31, 2017. Loans held for sale increased $96.6 million, or 18.9%, to $609.1 million at June 30, 2017, from $512.5 million at March 31, 2017. The increase in both portfolios was driven by record volumes of loan and lease originations, which rose by 64.3% above the prior year level to $586.5 million. The combined total loan and lease portfolio at June 30, 2017, and March 31, 2017, of $1.69 billion and $1.51 billion, respectively, were comprised of approximately 61.7% and 63.4% of unguaranteed loans and leases, respectively. At June 30, 2017, the total loan and lease portfolio of $1.69 billion increased 66.1% above its level of a year ago.
Average loans and leases were $1.61 billion during the second quarter of 2017 compared to $1.42 billion during the first quarter of 2017.
Net Interest Income
Net interest income for the second quarter of 2017 increased to $18.4 million compared to $9.9 million for the second quarter of 2016. The increase was driven by the significant growth in the combined held for sale and held for investment loan and lease portfolios. It also reflects the Company's prior decision to grow recurring revenue sources by increasing the level of loans and leases retained on the balance sheet. Net interest income further benefited from a steadily rising net interest margin, which rose from 3.76% for the for the first quarter of 2017 to 3.92% for the second quarter of 2017 as the rise in yields on interest earnings assets outpaced those on the Company's funding sources.
Noninterest Income
Noninterest income for the second quarter of 2017 rose to $26.7 million, compared to $19.3 million for the second quarter of 2016. Net gains on sales of loans increased to $18.2 million in the second quarter of 2017 compared to $14.6 million in the second quarter of 2016 and decreased slightly versus the $19.0 million in the first quarter of 2017. The increase from the prior year was due to a higher volume of guaranteed loan sales partially offset by a reduction in the average net gain on sale of guaranteed loans. The decline from the prior quarter was due to a lower volume of guaranteed loans sold during the second quarter of 2017 partly mitigated by a slight increase in the average net gain on guaranteed loan sales. Loan servicing revenues of $6.2 million in the second quarter of 2017 rose by $1.1 million from the second quarter of 2016. The inclusion of Reltco, Inc. and National Assurance Title, Inc. (collectively referred to as "Reltco") which were acquired in February 2017 contributed $2.4 million in noninterest income to the Company in the second quarter of 2017.
Noninterest Expense
Noninterest expense for the second quarter of 2017 was $33.3 million compared to $25.1 million for the second quarter of 2016 and $33.0 million for the first quarter of 2017.
The $8.2 million, or 32.5%, increase in noninterest expense for the second quarter of 2017 compared to the second quarter of 2016 was principally driven by increased salaries and employee benefits of $2.6 million, equipment expense of $1.2 million and other expense of $1.0 million. Salaries and employee benefits were largely influenced by the addition of Reltco personnel during the first quarter of 2017 along with resources to support the ongoing growth of the business platform. Total stock based compensation expense in the second quarter of 2017 was $1.9 million compared to $2.9 million for the second quarter of 2016. The increase in equipment expense reflected the higher levels of depreciation related to aircraft acquired in the first quarter of 2017 and solar panels acquired to meet leasing commitments, while other expense increased primarily due to the addition of Reltco in the first quarter of 2017 combined with support expenses driven by business growth.
Compared to the first quarter of 2017, noninterest expense increased $315 thousand, or 1.0%. This modest increase was driven by higher levels of investment in travel, advertising, occupancy, data processing and equipment to support the growing levels of business. Total stock based compensation expense in the second quarter of 2017 was $1.9 million compared to $1.8 million for the first quarter of 2017.
Asset Quality
The unguaranteed exposure of nonperforming loans declined slightly to $3.5 million at June 30, 2017, compared to $3.6 million at March 31, 2017. Total nonperforming loans also decreased to $21.9 million in the second quarter of 2017 from $22.5 million at the end of the prior quarter. Total unguaranteed nonperforming loans as a percentage of total loans and leases held for investment declined to 0.33% at June 30, 2017, compared to 0.36% at March 31, 2017.
Foreclosed assets increased $434 thousand to $2.1 million at June 30, 2017, from March 31, 2017. The unguaranteed exposure of foreclosed assets increased to $345 thousand at June 30, 2017, from $304 thousand at March 31, 2017.
Net charge-offs decreased to $191 thousand in the second quarter of 2017 compared to $1.5 million in the first quarter of 2017 and net recoveries of $240 thousand in the second quarter of 2016. Net charge-offs (recoveries) as a percentage of average held for investment loans and leases, annualized, for the quarters ended June 30, 2017 and 2016 were 0.07% and (0.18)%, respectively. Net charge-offs (recoveries) for the first six months of 2017 totaled $1.7 million compared to $(8) thousand for the first six months of 2016.
Provision for Loan and Lease Losses
The provision for loan and lease losses for the second quarter of 2017 totaled $1.6 million compared to $1.5 million for the first quarter of 2017 and $3.5 million for the second quarter of 2016. The second quarter of 2017 provision exceeded net charge-offs and reflects the continued growth of the loan portfolio.
The allowance for loan and lease losses totaled $19.6 million at June 30, 2017, compared to $18.2 million at March 31, 2017, due to the aforementioned growth of the portfolio. The allowance for loan and lease losses as a percentage of total loans and leases held for investment was 1.80% at June 30, 2017, compared to 1.82% at March 31, 2017.
Income Tax
Income tax expense in the second quarter of 2017 totaled $408 thousand compared to an income tax expense of $557 thousand in the second quarter of 2016 and $798 thousand in the first quarter of 2017. The effective rate of 4.0% in the second quarter of 2017 principally reflected the ongoing generation of investment tax credits by the renewable energy leasing activity which derives from the Company’s broader strategic initiatives in the renewable energy sector.
Deposits
Total deposits increased by $232.6 million, or 14.2%, to $1.87 billion at June 30, 2017, compared to $1.64 billion at March 31, 2017, following successful deposit gathering campaigns. Average total interest-bearing deposits for the second quarter of 2017 increased $205.3 million, or 13.1%, to $1.74 billion, compared to $1.53 billion for the first quarter of 2017. The ratio of average total loans to average interest-bearing deposits was 92.7% for the second quarter of 2017, unchanged from the first quarter of 2017.
Conference Call
Live Oak will host a conference call to discuss quarterly results at 9:00 a.m. ET tomorrow morning (July 27, 2017). 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 51147900. 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 August 2, 2017, 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.
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 |
| 2Q 2017 | | 1Q 2017 | | 4Q 2016 | | 3Q 2016 | | 2Q 2016 |
Interest income | | | | | | | | | |
Loans and fees on loans | $ | 23,559 |
| | $ | 19,754 |
| | $ | 16,239 |
| | $ | 14,961 |
| | $ | 12,902 |
|
Investment securities, taxable | 316 |
| | 323 |
| | 292 |
| | 337 |
| | 252 |
|
Other interest earning assets | 470 |
| | 342 |
| | 383 |
| | 264 |
| | 248 |
|
Total interest income | 24,345 |
| | 20,419 |
| | 16,914 |
| | 15,562 |
| | 13,402 |
|
Interest expense | | | | | | | | | |
Deposits | 5,592 |
| | 4,543 |
| | 4,283 |
| | 3,689 |
| | 3,243 |
|
Borrowings | 361 |
| | 235 |
| | 239 |
| | 242 |
| | 242 |
|
Total interest expense | 5,953 |
| | 4,778 |
| | 4,522 |
| | 3,931 |
| | 3,485 |
|
Net interest income | 18,392 |
| | 15,641 |
| | 12,392 |
| | 11,631 |
| | 9,917 |
|
Provision for loan and leases losses | 1,556 |
| | 1,499 |
| | 3,844 |
| | 3,806 |
| | 3,453 |
|
Net interest income after provision for loan and lease losses | 16,836 |
| | 14,142 |
| | 8,548 |
| | 7,825 |
| | 6,464 |
|
Noninterest income | | | | | | | | | |
Loan servicing revenue | 6,174 |
| | 5,923 |
| | 5,668 |
| | 5,860 |
| | 5,081 |
|
Loan servicing asset revaluation | (1,164 | ) | | (2,009 | ) | | (3,340 | ) | | (3,421 | ) | | (1,604 | ) |
Net gains on sales of loans | 18,176 |
| | 18,952 |
| | 22,513 |
| | 21,833 |
| | 14,555 |
|
Gain on sale of securities available-for-sale | — |
| | — |
| | — |
| | 1 |
| | — |
|
Construction supervision fee income | 286 |
| | 429 |
| | 868 |
| | 502 |
| | 667 |
|
Title insurance income | 2,397 |
| | 1,438 |
| | — |
| | — |
| | — |
|
Other noninterest income | 798 |
| | 1,020 |
| | 618 |
| | 657 |
| | 649 |
|
Total noninterest income | 26,667 |
| | 25,753 |
| | 26,327 |
| | 25,432 |
| | 19,348 |
|
Noninterest expense | | | | | | | | | |
Salaries and employee benefits | 17,968 |
| | 18,682 |
| | 17,121 |
| | 17,471 |
| | 15,411 |
|
Travel expense | 2,148 |
| | 1,598 |
| | 1,811 |
| | 2,218 |
| | 2,330 |
|
Professional services expense | 1,424 |
| | 1,736 |
| | 1,137 |
| | 907 |
| | 910 |
|
Advertising and marketing expense | 1,976 |
| | 1,485 |
| | 1,109 |
| | 1,097 |
| | 1,365 |
|
Occupancy expense | 1,350 |
| | 1,195 |
| | 1,267 |
| | 1,058 |
| | 1,055 |
|
Data processing expense | 1,858 |
| | 1,696 |
| | 1,435 |
| | 1,252 |
| | 1,404 |
|
Equipment expense | 1,703 |
| | 1,074 |
| | 550 |
| | 611 |
| | 534 |
|
Other loan origination and maintenance expense | 981 |
| | 1,005 |
| | 824 |
| | 806 |
| | 621 |
|
Renewable energy tax credit investment impairment | — |
| | — |
| | 3,197 |
| | — |
| | — |
|
FDIC insurance | 724 |
| | 726 |
| | 910 |
| | 210 |
| | 148 |
|
Title insurance closing services expense | 785 |
| | 405 |
| | — |
| | — |
| | — |
|
Other expense | 2,383 |
| | 3,383 |
| | 3,023 |
| | 1,588 |
| | 1,354 |
|
Total noninterest expense | 33,300 |
| | 32,985 |
| | 32,384 |
| | 27,218 |
| | 25,132 |
|
Income before taxes | 10,203 |
| | 6,910 |
| | 2,491 |
| | 6,039 |
| | 680 |
|
Income tax expense (benefit) | 408 |
| | 798 |
| | (2,989 | ) | | 2,561 |
| | 557 |
|
Net income | 9,795 |
| | 6,112 |
| | 5,480 |
| | 3,478 |
| | 123 |
|
Net loss attributable to noncontrolling interest | — |
| | — |
| | — |
| | 1 |
| | — |
|
Net income attributable to Live Oak Bancshares, Inc. | $ | 9,795 |
| | $ | 6,112 |
| | $ | 5,480 |
| | $ | 3,479 |
| | $ | 123 |
|
Earnings per share | | | | | | | | | |
Basic | $ | 0.28 |
| | $ | 0.18 |
| | $ | 0.16 |
| | $ | 0.10 |
| | $ | 0.00 |
|
Diluted | $ | 0.27 |
| | $ | 0.17 |
| | $ | 0.16 |
| | $ | 0.10 |
| | $ | 0.00 |
|
Weighted average shares outstanding | | | | | | | | | |
Basic | 34,618,721 |
| | 34,466,904 |
| | 34,235,375 |
| | 34,206,943 |
| | 34,189,217 |
|
Diluted | 35,942,041 |
| | 35,646,918 |
| | 35,208,433 |
| | 35,001,817 |
| | 35,206,125 |
|
Live Oak Bancshares, Inc.
Quarterly Balance Sheets (unaudited)
(Dollars in thousands)
|
| | | | | | | | | | | | | | | | | | | |
| As of the quarter ended |
| 2Q 2017 | | 1Q 2017 | | 4Q 2016 | | 3Q 2016 | | 2Q 2016 |
Assets | | | | | | | | | |
Cash and due from banks | $ | 207,373 |
| | $ | 158,887 |
| | $ | 238,008 |
| | $ | 355,485 |
| | $ | 175,506 |
|
Certificates of deposit with other banks | 5,750 |
| | 6,000 |
| | 7,250 |
| | 7,500 |
| | 8,500 |
|
Investment securities available-for-sale | 72,993 |
| | 68,630 |
| | 71,056 |
| | 70,334 |
| | 66,804 |
|
Loans held for sale | 609,138 |
| | 512,501 |
| | 394,278 |
| | 345,277 |
| | 329,206 |
|
Loans and leases held for investment | 1,084,503 |
| | 999,270 |
| | 907,566 |
| | 766,977 |
| | 690,517 |
|
Allowance for loan losses | (19,560 | ) | | (18,195 | ) | | (18,209 | ) | | (15,178 | ) | | (12,309 | ) |
Net loans and leases | 1,064,943 |
| | 981,075 |
| | 889,357 |
| | 751,799 |
| | 678,208 |
|
Premises and equipment, net | 125,008 |
| | 101,398 |
| | 64,661 |
| | 60,646 |
| | 61,064 |
|
Foreclosed assets | 2,140 |
| | 1,706 |
| | 1,648 |
| | 2,235 |
| | 2,971 |
|
Servicing assets | 53,675 |
| | 53,584 |
| | 51,994 |
| | 49,729 |
| | 48,454 |
|
Other assets | 57,087 |
| | 48,344 |
| | 37,009 |
| | 26,735 |
| | 24,591 |
|
Total assets | $ | 2,198,107 |
| | $ | 1,932,125 |
| | $ | 1,755,261 |
| | $ | 1,669,740 |
| | $ | 1,395,304 |
|
Liabilities and Shareholders’ Equity | | | | | | | | | |
Liabilities | | | | | | | | | |
Deposits: | | | | | | | | | |
Noninterest-bearing | $ | 40,966 |
| | $ | 38,029 |
| | $ | 27,990 |
| | $ | 28,461 |
| | $ | 22,942 |
|
Interest-bearing | 1,830,755 |
| | 1,601,114 |
| | 1,457,086 |
| | 1,374,556 |
| | 1,117,855 |
|
Total deposits | 1,871,721 |
| | 1,639,143 |
| | 1,485,076 |
| | 1,403,017 |
| | 1,140,797 |
|
Short term borrowings | 10,000 |
| | 13,100 |
| | — |
| | — |
| | — |
|
Long term borrowings | 52,173 |
| | 27,473 |
| | 27,843 |
| | 28,074 |
| | 28,173 |
|
Other liabilities | 26,582 |
| | 26,220 |
| | 19,495 |
| | 24,497 |
| | 18,984 |
|
Total liabilities | 1,960,476 |
| | 1,705,936 |
| | 1,532,414 |
| | 1,455,588 |
| | 1,187,954 |
|
Shareholders’ equity | | | | | | | | | |
Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding | — |
| | — |
| | — |
| | — |
| | — |
|
Class A common stock (voting) | 150,939 |
| | 147,933 |
| | 149,966 |
| | 145,284 |
| | 141,181 |
|
Class B common stock (non-voting) | 49,168 |
| | 50,015 |
| | 50,015 |
| | 50,015 |
| | 50,015 |
|
Retained earnings | 38,041 |
| | 28,938 |
| | 23,518 |
| | 18,723 |
| | 15,928 |
|
Accumulated other comprehensive (loss) income | (517 | ) | | (697 | ) | | (652 | ) | | 130 |
| | 201 |
|
Total shareholders’ equity attributed to Live Oak Bancshares, Inc. | 237,631 |
| | 226,189 |
| | 222,847 |
| | 214,152 |
| | 207,325 |
|
Noncontrolling interest | — |
| | — |
| | — |
| | — |
| | 25 |
|
Total equity | 237,631 |
| | 226,189 |
| | 222,847 |
| | 214,152 |
| | 207,350 |
|
Total liabilities and shareholders’ equity | $ | 2,198,107 |
| | $ | 1,932,125 |
| | $ | 1,755,261 |
| | $ | 1,669,740 |
| | $ | 1,395,304 |
|
Live Oak Bancshares, Inc.
Statements of Income (unaudited)
(Dollars in thousands, except per share data)
|
| | | | | | | |
| Six months ended |
| June 30, 2017 | | June 30, 2016 |
Interest income | | | |
Loans and fees on loans | $ | 43,313 |
| | $ | 23,907 |
|
Investment securities, taxable | 639 |
| | 503 |
|
Other interest earning assets | 812 |
| | 386 |
|
Total interest income | 44,764 |
| | 24,796 |
|
Interest expense | | | |
Deposits | 10,135 |
| | 5,687 |
|
Borrowings | 596 |
| | 483 |
|
Total interest expense | 10,731 |
| | 6,170 |
|
Net interest income | 34,033 |
| | 18,626 |
|
Provision for loan losses | 3,055 |
| | 4,886 |
|
Net interest income after provision for loan losses | 30,978 |
| | 13,740 |
|
Noninterest income | | | |
Loan servicing revenue | 12,097 |
| | 9,865 |
|
Loan servicing asset revaluation | (3,173 | ) | | (1,630 | ) |
Net gains on sales of loans | 37,128 |
| | 30,980 |
|
Construction supervision fee income | 715 |
| | 1,297 |
|
Title insurance income | 3,835 |
| | — |
|
Other noninterest income | 1,818 |
| | 1,268 |
|
Total noninterest income | 52,420 |
| | 41,780 |
|
Noninterest expense | | | |
Salaries and employee benefits | 36,650 |
| | 28,404 |
|
Travel expense | 3,746 |
| | 4,176 |
|
Professional services expense | 3,160 |
| | 1,438 |
|
Advertising and marketing expense | 3,461 |
| | 2,328 |
|
Occupancy expense | 2,545 |
| | 2,248 |
|
Data processing expense | 3,554 |
| | 2,612 |
|
Equipment expense | 2,777 |
| | 1,085 |
|
Other loan origination and maintenance expense | 1,986 |
| | 1,195 |
|
FDIC insurance | 1,450 |
| | 297 |
|
Title insurance closing services expense | 1,190 |
| | — |
|
Other expense | 5,766 |
| | 3,060 |
|
Total noninterest expense | 66,285 |
| | 46,843 |
|
Income before taxes | 17,113 |
| | 8,677 |
|
Income tax expense | 1,206 |
| | 3,871 |
|
Net income | 15,907 |
| | 4,806 |
|
Net loss attributable to noncontrolling interest | — |
| | 8 |
|
Net income attributable to Live Oak Bancshares, Inc. | $ | 15,907 |
| | $ | 4,814 |
|
Earnings per share | | | |
Basic | $ | 0.46 |
| | $ | 0.14 |
|
Diluted | $ | 0.44 |
| | $ | 0.14 |
|
Weighted average shares outstanding | | | |
Basic | 34,543,229 |
| | 34,183,004 |
|
Diluted | 35,772,182 |
| | 35,079,660 |
|
Live Oak Bancshares, Inc.
Quarterly Selected Financial Data
(Dollars in thousands, except per share data)
|
| | | | | | | | | | | | | | | | | | | |
| As of and for the three months ended |
| 2Q 2017 | | 1Q 2017 | | 4Q 2016 | | 3Q 2016 | | 2Q 2016 |
Income Statement Data | | | | | | | | | |
Net income attributable to Live Oak Bancshares, Inc. | $ | 9,795 |
| | $ | 6,112 |
| | $ | 5,480 |
| | $ | 3,479 |
| | $ | 123 |
|
Per Common Share | | | | | | | | | |
Net income, basic | $ | 0.28 |
| | $ | 0.18 |
| | $ | 0.16 |
| | $ | 0.10 |
| | $ | 0.00 |
|
Net income, diluted | 0.27 |
| | 0.17 |
| | 0.16 |
| | 0.10 |
| | 0.00 |
|
Dividends declared | 0.02 |
| | 0.02 |
| | 0.02 |
| | 0.02 |
| | 0.01 |
|
Book value | 6.86 |
| | 6.54 |
| | 6.51 |
| | 6.26 |
| | 6.06 |
|
Tangible book value (1) | 6.50 |
| | 6.17 |
| | 6.51 |
| | 6.26 |
| | 6.06 |
|
Performance Ratios | | | | | | | | | |
Return on average assets (annualized) | 1.89 | % | | 1.33 | % | | 1.26 | % | | 0.91 | % | | 0.04 | % |
Return on average equity (annualized) | 16.53 |
| | 10.93 |
| | 9.95 |
| | 6.54 |
| | 0.24 |
|
Net interest margin | 3.92 |
| | 3.76 |
| | 3.08 |
| | 3.32 |
| | 3.26 |
|
Efficiency ratio (1) | 73.90 |
| | 79.69 |
| | 83.64 |
| | 73.44 |
| | 85.88 |
|
Noninterest income to total revenue | 59.18 |
| | 62.21 |
| | 68.00 |
| | 68.62 |
| | 66.11 |
|
Selected Loan Metrics | | | | | | | | | |
Loans and leases originated | $ | 586,471 |
| | $ | 468,663 |
| | $ | 514,565 |
| | $ | 381,050 |
| | $ | 356,865 |
|
Guaranteed loans sold | 203,714 |
| | 208,715 |
| | 260,125 |
| | 210,610 |
| | 135,555 |
|
Average net gain on sale of guaranteed loans | 91.68 |
| | 90.80 |
| | 86.55 |
| | 103.67 |
| | 107.37 |
|
Held for sale guaranteed loans (note amount) (2) | 1,005,753 |
| | 866,260 |
| | 754,834 |
| | 692,278 |
| | 639,356 |
|
Quarterly increase (decrease) in note amount of held for sale guaranteed loans | 139,493 |
| | 111,426 |
| | 62,556 |
| | 52,922 |
| | 97,761 |
|
Estimated net gain to be recognized on quarterly increase in guaranteed loans held for sale (3) | 12,789 |
| | 10,117 |
| | 5,414 |
| | 5,486 |
| | 10,497 |
|
Asset Quality Ratios | | | | | | | | | |
Allowance for loan losses to loans and leases held for investment | 1.80 | % | | 1.82 | % | | 2.01 | % | | 1.98 | % | | 1.78 | % |
Net charge-offs (recoveries) | $ | 191 |
| | $ | 1,513 |
| | $ | 813 |
| | $ | 937 |
| | $ | (240 | ) |
Net charge-offs (recoveries) to average loans and leases held for investment (4) | 0.07 | % | | 0.63 | % | | 0.39 | % | | 0.51 | % | | (0.18 | )% |
Nonperforming loans | $ | 21,856 |
| | $ | 22,469 |
| | $ | 23,781 |
| | $ | 14,023 |
| | $ | 12,902 |
|
Foreclosed assets | 2,140 |
| | 1,706 |
| | 1,648 |
| | 2,235 |
| | 2,971 |
|
Nonperforming loans (unguaranteed exposure) | 3,546 |
| | 3,643 |
| | 4,784 |
| | 3,354 |
| | 2,174 |
|
Foreclosed assets (unguaranteed exposure) | 345 |
| | 304 |
| | 246 |
| | 304 |
| | 433 |
|
Nonperforming loans not guaranteed by the SBA and foreclosures | 3,891 |
| | 3,947 |
| | 5,030 |
| | 3,658 |
| | 2,607 |
|
Nonperforming loans and foreclosures, not guaranteed by the SBA, to total assets | 0.18 | % | | 0.20 | % | | 0.29 | % | | 0.22 | % | | 0.19 | % |
Capital Ratios | | | | | | | | | |
Common equity tier 1 capital (to risk-weighted assets) | 11.93 | % | | 12.79 | % | | 15.35 | % | | 16.63 | % | | 18.26 | % |
Total capital (to risk-weighted assets) | 13.08 |
| | 14.01 |
| | 16.60 |
| | 17.88 |
| | 19.43 |
|
Tier 1 risk based capital (to risk-weighted assets) | 11.93 |
| | 12.79 |
| | 15.35 |
| | 16.63 |
| | 18.26 |
|
Tier 1 leverage capital (to average assets) | 9.93 |
| | 10.60 |
| | 12.03 |
| | 13.18 |
| | 14.32 |
|
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. This is an estimate based on the respective quarter activity and does not reflect actual gains to be recognized.
(4) 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 June 30, 2017 | | Three months ended March 31, 2017 |
| | Average Balance | | Interest | | Average Yield/Rate | | Average Balance | | Interest | | Average Yield/Rate |
Interest earning assets: | | | | | | | | | | | | |
Interest earning balances in other banks | | $ | 199,904 |
| | $ | 470 |
| | 0.94 | % | | $ | 194,176 |
| | $ | 342 |
| | 0.71 | % |
Investment securities | | 69,544 |
| | 316 |
| | 1.82 |
| | 71,075 |
| | 323 |
| | 1.84 |
|
Loans held for sale | | 562,984 |
| | 8,226 |
| | 5.86 |
| | 466,567 |
| | 6,521 |
| | 5.67 |
|
Loans and leases held for investment (1) | | 1,050,074 |
| | 15,333 |
| | 5.86 |
| | 955,021 |
| | 13,233 |
| | 5.62 |
|
Total interest earning assets | | 1,882,506 |
| | 24,345 |
| | 5.19 |
| | 1,686,839 |
| | 20,419 |
| | 4.91 |
|
Less: allowance for loan and lease losses | | (18,198 | ) | | | | | | (18,199 | ) | | | | |
Non-interest earning assets | | 209,484 |
| | | | | | 167,644 |
| | | | |
Total assets | | $ | 2,073,792 |
| | | | | | $ | 1,836,284 |
| | | | |
| | | | | | | | | | | | |
Interest bearing liabilities: | | | | | | | | | | | | |
Interest bearing checking | | $ | 40,541 |
| | $ | 57 |
| | 0.56 | % | | $ | 44,351 |
| | $ | 65 |
| | 0.59 | % |
Savings | | 3,809 |
| | 12 |
| | 1.26 |
| | — |
| | — |
| | — |
|
Money market accounts | | 475,265 |
| | 1,114 |
| | 0.94 |
| | 479,545 |
| | 948 |
| | 0.80 |
|
Certificates of deposit | | 1,219,542 |
| | 4,409 |
| | 1.45 |
| | 1,009,915 |
| | 3,530 |
| | 1.42 |
|
Total interest bearing deposits | | 1,739,157 |
| | 5,592 |
| | 1.29 |
| | 1,533,811 |
| | 4,543 |
| | 1.20 |
|
Other borrowings | | 42,765 |
| | 361 |
| | 3.39 |
| | 28,068 |
| | 235 |
| | 3.40 |
|
Total interest bearing liabilities | | 1,781,922 |
| | 5,953 |
| | 1.34 |
| | 1,561,879 |
| | 4,778 |
| | 1.24 |
|
Non-interest bearing deposits | | 32,718 |
| | | | | | 28,686 |
| | | | |
Non-interest bearing liabilities | | 22,165 |
| | | | | | 22,042 |
| | | | |
Shareholders' equity | | 236,987 |
| | | | | | 223,677 |
| | | | |
Noncontrolling interest | | — |
| | | | | | — |
| | | | |
Total liabilities and shareholders' equity | | $ | 2,073,792 |
| | | | | | $ | 1,836,284 |
| | | | |
| | | | | | | | | | | | |
Net interest income and interest rate spread | | | | $ | 18,392 |
| | 3.85 | % | | | | $ | 15,641 |
| | 3.67 | % |
| | | | | | | | | | | | |
Net interest margin | | | | | | 3.92 |
| | | | | | 3.76 |
|
| | | | | | | | | | | | |
Ratio of average interest-earning assets to average interest-bearing liabilities | | | | | | 105.64 | % | | | | | | 108.00 | % |
(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 2017 | | 1Q 2017 | | 4Q 2016 | | 3Q 2016 | | 2Q 2016 |
Total shareholders’ equity | $ | 237,631 |
| | $ | 226,189 |
| | $ | 222,847 |
| | $ | 214,152 |
| | $ | 207,350 |
|
Less: | | | | | | | | | |
Goodwill | 7,266 |
| | 7,165 |
| | — |
| | — |
| | — |
|
Other intangible assets | 5,292 |
| | 5,410 |
| | — |
| | — |
| | — |
|
Tangible shareholders’ equity (a) | $ | 225,073 |
| | $ | 213,614 |
| | $ | 222,847 |
| | $ | 214,152 |
| | $ | 207,350 |
|
Shares outstanding (c) | 34,639,848 |
| | 34,600,819 |
| | 34,253,602 |
| | 34,215,050 |
| | 34,192,382 |
|
Total assets | $ | 2,198,107 |
| | $ | 1,932,125 |
| | $ | 1,755,261 |
| | $ | 1,669,740 |
| | $ | 1,395,304 |
|
Less: | | | | | | | | | |
Goodwill | 7,266 |
| | 7,165 |
| | — |
| | — |
| | — |
|
Other intangible assets | 5,292 |
| | 5,410 |
| | — |
| | — |
| | — |
|
Tangible assets (b) | $ | 2,185,549 |
| | $ | 1,919,550 |
| | $ | 1,755,261 |
| | $ | 1,669,740 |
| | $ | 1,395,304 |
|
Tangible shareholders’ equity to tangible assets (a/b) | 10.30 | % | | 11.13 | % | | 12.70 | % | | 12.83 | % | | 14.86 | % |
Tangible book value per share (a/c) | $ | 6.50 |
| | $ | 6.17 |
| | $ | 6.51 |
| | $ | 6.26 |
| | $ | 6.06 |
|
Efficiency ratio: | | | | | | | | | |
Noninterest expense (d) | $ | 33,300 |
| | $ | 32,985 |
| | $ | 32,384 |
| | $ | 27,218 |
| | $ | 25,132 |
|
Net interest income | 18,392 |
| | 15,641 |
| | 12,392 |
| | 11,631 |
| | 9,917 |
|
Noninterest income | 26,667 |
| | 25,753 |
| | 26,327 |
| | 25,432 |
| | 19,348 |
|
Less: gain on sale of securities | — |
| | — |
| | — |
| | 1 |
| | — |
|
Adjusted operating revenue (e) | $ | 45,059 |
| | $ | 41,394 |
| | $ | 38,719 |
| | $ | 37,062 |
| | $ | 29,265 |
|
Efficiency ratio (d/e) | 73.90 | % | | 79.69 | % | | 83.64 | % | | 73.44 | % | | 85.88 | % |
Live Oak Bancshares, Inc.
GAAP to Non-GAAP Reconciliation (Continued)
(Dollars in thousands)
|
| | | | | | | | | | | | | | | | | | | |
| Three months ended | | Six months ended |
| 6/30/2017 | | 3/31/2017 | | 6/30/2016 | | 6/30/2017 | | 6/30/2016 |
Reconciliation of net income to non-GAAP net income for non-routine income and expenses: | | | | | | | | | |
Net income attributable to Live Oak Bancshares, Inc. | $ | 9,795 |
| | $ | 6,112 |
| | $ | 123 |
| | $ | 15,907 |
| | $ | 4,814 |
|
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 | 378 |
| | 346 |
| | 2,243 |
| | 724 |
| | 2,243 |
|
Merger costs for acquisition of Reltco | 250 |
| | 516 |
| | — |
| | 766 |
| | — |
|
Trade-in loss on aircraft | — |
| | 206 |
| | — |
| | 206 |
| | — |
|
Renewable energy tax credit investment income, impairment and loss | 19 |
| | 19 |
| | — |
| | 38 |
| | — |
|
Income tax effects and adjustments for non-GAAP items * | (259 | ) | | (435 | ) | | (2,506 | ) | | (694 | ) | | (2,506 | ) |
Other renewable energy tax expense | 44 |
| | 44 |
| | — |
| | 88 |
| | — |
|
Non-GAAP net income | $ | 10,227 |
| | $ | 6,808 |
| | $ | 3,883 |
| | $ | 17,035 |
| | $ | 8,574 |
|
* Estimated at 40.0% | | | | | | | | | |
Non-GAAP earnings per share: | | | | | | | | | |
Basic | $ | 0.30 |
| | $ | 0.20 |
| | $ | 0.11 |
| | $ | 0.49 |
| | $ | 0.25 |
|
Diluted | $ | 0.28 |
| | $ | 0.19 |
| | $ | 0.11 |
| | $ | 0.48 |
| | $ | 0.24 |
|
| | | | | | | | | |
Weighted-average shares outstanding: | | | | | | | | | |
Basic | 34,618,721 |
| | 34,466,904 |
| | 34,189,217 |
| | 34,543,229 |
| | 34,183,004 |
|
Diluted | 35,942,041 |
| | 35,646,918 |
| | 35,206,125 |
| | 35,772,182 |
| | 35,079,660 |
|
| | | | | | | | | |
Reconciliation of financial statement line items as reported to adjusted for non-routine income and expenses: | | | | | | | | | |
Noninterest income, as reported | $ | 26,667 |
| | $ | 25,753 |
| | $ | 19,348 |
| | $ | 52,420 |
| | $ | 41,780 |
|
Renewable energy tax credit investment income | (10 | ) | | (10 | ) | | — |
| | (20 | ) | | — |
|
Noninterest income, as adjusted | 26,657 |
| | 25,743 |
| | 19,348 |
| | 52,400 |
| | 41,780 |
|
| | | | | | | | | |
Provision for loan losses, as reported | 1,556 |
| | 1,499 |
| | 3,453 |
| | 3,055 |
| | 4,886 |
|
Provision for loans reclassified as held for investment | — |
| | — |
| | (4,023 | ) | | — |
| | (4,023 | ) |
Provision for loan losses, as adjusted | 1,556 |
| | 1,499 |
| | (570 | ) | | 3,055 |
| | 863 |
|
| | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
| Three months ended | | Six months ended |
| 6/30/2017 | | 3/31/2017 | | 6/30/2016 | | 6/30/2017 | | 6/30/2016 |
Noninterest expense, as reported | 33,300 |
| | 32,985 |
| | 25,132 |
| | 66,285 |
| | 46,843 |
|
Stock based compensation expense | (378 | ) | | (346 | ) | | (2,243 | ) | | (724 | ) | | (2,243 | ) |
Merger costs associated with Reltco | (250 | ) | | (516 | ) | | — |
| | (766 | ) | | — |
|
Trade-in loss on aircraft | — |
| | (206 | ) | | — |
| | (206 | ) | | — |
|
Renewable energy tax credit investment impairment and loss | (29 | ) | | (29 | ) | | — |
| | (58 | ) | | — |
|
Noninterest expense, as adjusted | 32,643 |
| | 31,888 |
| | 22,889 |
| | 64,531 |
| | 44,600 |
|
| | | | | | | | | |
Income tax expense, as reported | 408 |
| | 798 |
| | 557 |
| | 1,206 |
| | 3,871 |
|
Income tax effects and adjustments for non-recurring income and expenses | 259 |
|
| 435 |
|
| 2,506 |
|
| 694 |
|
| 2,506 |
|
Other renewable energy tax expense | (44 | ) | | (44 | ) | | — |
| | $ | (88 | ) | | — |
|
Income tax expense, as adjusted | $ | 623 |
| | $ | 1,189 |
| | $ | 3,063 |
| | $ | 1,812 |
| | $ | 6,377 |
|
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.