Live Oak Bancshares, Inc. Reports Fourth Quarter 2022 Results

Rhea-AI Summary

Live Oak Bancshares reported a $1.8 million net income for Q4 2022, translating to $0.04 per diluted share, down from $42.9 million in Q3 2022. For the full year 2022, net income reached $176.2 million, or $3.92 per diluted share. The company achieved over $1 billion in loan originations for Q4 and ended the year with a strong balance sheet, increasing total loans and leases to $7.9 billion, a 19% year-over-year increase. However, fourth-quarter revenues fell 26% sequentially, largely due to a significant decrease in noninterest income, which dropped to $19.1 million.

Positive

• Net income for 2022 increased by 6% year-over-year.
• Total loans and leases grew by 19% compared to the previous year.
• Deposits increased by 25% year-over-year, reaching $8.88 billion.

Negative

• Q4 2022 net income decreased by 96% compared to Q3 2022.
• Noninterest income fell sharply by 67% from Q3 2022.
• Total revenue for Q4 2022 decreased by 26% from Q3 2022.

WILMINGTON, N.C., Jan. 25, 2023 (GLOBE NEWSWIRE) -- Live Oak Bancshares, Inc. (NYSE: LOB) (“Live Oak” or “the Company”) today reported fourth quarter of 2022 net income of $1.8 million, or $0.04 per diluted share. Net income for the year ended December 31, 2022, totaled $176.2 million, or $3.92 per diluted share.

“Live Oak closed 2022 with a strong quarter as our teams once again produced more than $1 billion in loan originations, ending a banner year that also reflected continued deposit growth and $96 million in organic capital growth,” said Live Oak Chairman and CEO James S. (Chip) Mahan III. “The strength and determination of the small business owners we serve is profound, and we believe our strong balance sheet and approach to lending, deposits, servicing and technology continues to set us apart as we advance our mission to serve the entrepreneurs who support our country’s economy.”

Year Over Year Highlights
(Dollars in thousands, except per share data)									Increase (Decrease)
		2022				2021			Dollars				Percent
Total revenue(1)	$	565,493			$	456,985			$	108,508			24	%
Total noninterest expense		314,226				230,987				83,239			36
Income before taxes		210,324				210,788				(464	)		—
Effective tax rate		16.2	%			20.8	%			n/a			n/a
Net income	$	176,208			$	166,995			$	9,213			6	%
Diluted earnings per share		3.92				3.71				0.21			6
Loan and lease production:
Loans and leases originated	$	4,007,621			$	4,480,725			$	(473,104	)		(11	)%
% Fully funded		58.8	%			64.5	%			n/a			n/a
Total loans and leases:	$	7,898,788			$	6,637,781			$	1,261,007			19	%
Total loans and leases, excluding PPP loans:		7,885,895				6,375,903				1,509,992			24
Total assets:		9,855,498				8,213,393				1,642,105			20
Total deposits:		8,884,928				7,112,044				1,772,884			25

(1)   Total revenue consists of net interest income and total noninterest income.

Fourth Quarter 2022 Key Measures
(Dollars in thousands, except per share data)									Increase (Decrease)
	4Q 2022				3Q 2022				Dollars				Percent			4Q 2021
Total revenue(1)	$	104,973			$	141,610			$	(36,637	)		(26	)%		$	111,394
Total noninterest expense		84,585				83,048				1,537			2				59,698
Income before taxes		717				44,393				(43,676	)		(98	)			47,778
Effective tax rate	(149.9		)%			3.4	%			n/a			n/a				36.9	%
Net income	$	1,792			$	42,868			$	(41,076	)		(96	)%		$	30,147
Diluted earnings per share		0.04				0.96				(0.92	)		(96	)		$	0.66
Loan and lease production:
Loans and leases originated	$	1,177,688			$	1,005,235			$	172,453			17	%		$	1,083,623
% Fully funded		58.1	%			54.0	%			n/a			n/a				54.1	%

(1)   Total revenue consists of net interest income and total noninterest income.

Loans and Leases

At December 31, 2022, the total loan and lease portfolio was $7.90 billion, 6.9% above its level at September 30, 2022 and 19.0% above its level at December 31, 2021. This growth was the product of strong origination volumes. Compared to the third quarter of 2022, loans and leases held for investment increased $490.8 million, or 7.2%, to $7.34 billion while loans held for sale increased $17.0 million, or 3.2%, to $554.6 million. Average loans and leases were $7.64 billion during the fourth quarter of 2022 compared to $7.21 billion during the third quarter of 2022. Excluding Paycheck Protection Program (“PPP”) loans, the total loan and lease portfolio increased by $1.51 billion, or 23.7%, compared to December 31, 2021, and $518.7 million, or 7.0%, compared to September 30, 2022.

The total loan and lease portfolio of $7.90 billion includes $12.9 million of PPP loans, net of deferred fees and costs, at December 31, 2022. The total loan and lease portfolio at December 31, 2022, and September 30, 2022 was comprised of 57.7% and 56.6% of unguaranteed loans and leases, respectively.

Loan and lease originations totaled $1.18 billion during the fourth quarter of 2022, an increase of $172.5 million, or 17.2%, from the third quarter of 2022.

Deposits

Total deposits increased to $8.88 billion at December 31, 2022, an increase of $480.0 million compared to September 30, 2022, and an increase of $1.77 billion compared to December 31, 2021. The increase in total deposits from the prior periods provides support for the growth in the loan and lease portfolio.

Average total interest-bearing deposits for the fourth quarter of 2022 increased $269.0 million, or 3.3%, to $8.36 billion, compared to $8.09 billion for the third quarter of 2022. The ratio of average total loans and leases to average interest-bearing deposits was 91.4% for the fourth quarter of 2022 compared to 89.1% for the third quarter of 2022.

Borrowings

Borrowings totaled $83.2 million at December 31, 2022, compared to $35.6 million and $318.3 million at September 30, 2022 and December 31, 2021, respectively. During the fourth quarter of 2022, the Company increased borrowings by $47.6 million primarily related to providing short term support for growth in the loan and lease portfolio. The decrease in borrowings as compared to December 31, 2021 is primarily related to the repayment of the Federal Reserve’s Paycheck Protection Liquidity Facility earlier in 2022.

Net Interest Income

Net interest income for the fourth quarter of 2022 increased to $85.9 million compared to $83.9 million for the third quarter of 2022 and $77.6 million for the fourth quarter of 2021.

The net interest margin for the fourth and third quarters of 2022 was 3.76% and 3.84%, respectively, a decrease of eight basis points quarter over quarter. This decrease was due to interest rate increases where deposits are repricing more rapidly than the Company’s loan portfolio. During the fourth quarter of 2022, the average cost of interest-bearing liabilities increased by 85 basis points while the average yield on interest-earning assets increased by 67 basis points.

The increase in net interest income for the fourth quarter of 2022 compared to the fourth quarter of 2021 was driven by growth in the total loan and lease portfolio. Partially mitigating this increase was a decrease in the net interest margin arising from an increase in interest-bearing liabilities combined with average cost of funds outpacing the average yield on interest-earning assets.

Noninterest Income

Noninterest income for the fourth quarter of 2022 decreased to $19.1 million compared to $57.7 million for the third quarter of 2022 and $33.8 million for the fourth quarter of 2021. The primary drivers behind decreased noninterest income are outlined below.

The largest driver of the decrease in noninterest income for the fourth quarter of 2022 as compared to the third quarter of 2022 arose from a decrease in equity method investment income of $31.0 million. This quarter over quarter decrease of $31.0 million was principally due to the $28.4 million gain arising in the third quarter of 2022 associated with Jack Henry & Associates, Inc’s acquisition of the Company’s ownership in Payrailz, LLC (“Payrailz”). The $4.8 million decrease in equity method investment income for the fourth quarter of 2022 as compared to the fourth quarter of 2021 was principally related to higher levels of pro-rata losses of equity method investees in 2022.

The loan servicing asset revaluation resulted in a loss of $5.0 million for the fourth quarter of 2022 compared to a loss of $1.3 million for the third quarter of 2022 and $4.2 million for the fourth quarter of 2021. Higher levels of losses in the loan servicing asset revaluation compared to the prior quarters was largely the result of weaker economic conditions related to the rapidly rising interest rate environment.

Net gains on sales of loans was $7.4 million, a $1.9 million decrease compared to the third quarter of 2022 and a $12.9 million decrease compared to the fourth quarter of 2021. During the second quarter of 2022, the Company began significantly decreasing loan sale volumes due to unusually weak market conditions depressing market premiums. The decrease in net gains on sales of loans compared to the third quarter of 2022 and fourth quarter of 2021 was largely the result of lower volume of loan sales combined with overall weaker market conditions compared to those experienced in the prior periods. The average guaranteed loan sale premium was 105%, 108% and 110% for the fourth quarter of 2022, third quarter of 2022 and fourth quarter of 2021, respectively. The volume of guaranteed loans sold was $144.3 million for the fourth quarter of 2022 compared to $148.1 million sold in the third quarter of 2022 and $199.0 million sold in the fourth quarter of 2021.

The net gain on loans accounted for under the fair value option totaled $571 thousand for the fourth quarter of 2022, a $3.8 million decrease compared to the $4.4 million net gain for the third quarter of 2022. This reduced gain in valuation of loans accounted for under the fair value option was largely the result of the above referenced negative market pricing trends combined with continued amortization of the portfolio of loans accounted for under the fair value option.

Noninterest Expense

Noninterest expense for the fourth quarter of 2022 totaled $84.6 million compared to $83.0 million for the third quarter of 2022 and $59.7 million for the fourth quarter of 2021. The primary drivers in the noninterest expense changes are outlined below.

Salaries and employee benefits for the fourth quarter of 2022 decreased $919 thousand compared to the third quarter of 2022 and increased $10.1 million compared to the fourth quarter of 2021. Driving the quarter over quarter decrease was an additional bonus accrual of $3.0 million that was included in the third quarter of 2022 related to the earlier discussed Payrailz gain. The increase over the fourth quarter of 2021 was principally the result of continued investment in human resources to support strategic and growth initiatives.

Advertising and marketing expense increased $1.3 million compared to the third quarter of 2022 and $2.0 million compared to the fourth quarter of 2021 as a continued investment in the Company’s lending and deposit market growth.

Technology expenses increased $1.1 million compared to the third quarter of 2022 and $2.4 million compared to the fourth quarter of 2021. The increase for both periods was primarily related to enhanced investments in the Company’s technology resources.

The Company incurred impairment charges related to new renewable energy tax credit investment transactions of $8.4 million in the fourth quarter of 2022 compared to $7.7 million in the third quarter of 2022. Investments of this type generate a return primarily through the realization of income tax credits and other benefits; accordingly, impairment of the investment amount is recognized in conjunction with the realization of related tax benefits. These investments generated federal investment tax credits in the fourth and third quarters of 2022 of $10.3 million and $6.1 million, respectively, which are reflected in the Company’s 2022 effective tax rate. Investments of this nature are part of the Company’s ongoing initiative to promote renewable energy sources.

Asset Quality

During the fourth quarter of 2022, the Company recognized net charge-offs for loans carried at historical cost of $1.4 million compared to $1.7 million in the third quarter of 2022 and $15 thousand in the fourth quarter of 2021. Net charge-offs as a percentage of average held for investment loans and leases carried at historical cost, annualized, for the quarters ended December 31, 2022, September 30, 2022 and December 30, 2021, was 0.09%, 0.12% and 0.00%, respectively. Net charge-offs as a percentage of total average held for investment loans and leases carried at historical cost for the years ended December 31, 2022 and 2021, were 0.14% and 0.09%, respectively.

Unguaranteed nonperforming (nonaccrual) loans and leases, excluding $6.7 million and $2.7 million accounted for under the fair value option at December 31, 2022, and September 30, 2022, respectively, increased to $18.8 million, or 0.27% of loans and leases held for investment which are carried at historical cost, at December 31, 2022, compared to $14.3 million, or 0.23%, at September 30, 2022.

Provision for Loan and Lease Credit Losses

The provision for loan and lease credit losses for the fourth quarter of 2022 totaled $19.7 million compared to $14.2 million for the third quarter of 2022 and $3.9 million for the fourth quarter of 2021. The higher provision expense in the fourth quarter of 2022 was primarily the result of continued growth of the loan and lease portfolio combined with charge-off experience impacts and specific reserve growth related to a small number of relationships.

The allowance for credit losses on loans and leases totaled $96.6 million at December 31, 2022, compared to $78.3 million at September 30, 2022. The allowance for credit losses on loans and leases as a percentage of total loans and leases held for investment carried at historical cost was 1.41% and 1.23% at December 31, 2022, and September 30, 2022, respectively.

Income Tax

Income tax benefit and related effective tax rate was $1.1 million and (149.9)% for the fourth quarter of 2022. In comparison, income tax expense and related effective tax rates for the third quarter of 2022 and fourth quarter of 2021 were $1.5 million and 3.4%, and $17.6 million and 36.9%, respectively. The lower level of income tax expense for the fourth quarter of 2022 compared to the third quarter of 2022 was primarily the result of decreased pretax income combined with a research credit recognized during the quarter related to the Company’s ongoing investment in developing its technology-based platform. The lower level of income tax expense for the fourth quarter of 2022 compared to the fourth quarter of 2021 was primarily the result of a lower level of pretax income combined with higher levels of investment tax credits related to renewable energy investment transactions and additional impacts discussed above related to research credits.

Conference Call

Live Oak will host a conference call to discuss the company’s financial results and business outlook tomorrow, January 26, 2023, at 9:00 a.m. ET. To listen to the call via a live audio webcast, visit http://investor.liveoakbank.com/. To participate via telephone, please register in advance at https://register.vevent.com/register/BI38276e2e147f4289a0d59072d04a6f09. Upon registration, participants will receive a confirmation email detailing how to join the conference call, including the dial-in number and unique passcode and that can be used to access the call. After the conference call, a replay will be available until February 2, 2023, at the same audio webcast link.

Important Note Regarding Forward-Looking Statements

Statements in this press release that are based on other than historical data or that express the Company’s plans or expectations regarding future events or determinations are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Statements based on historical data are not intended and should not be understood to indicate the Company’s expectations regarding future events. Forward-looking statements provide current expectations or forecasts of future events or determinations. These forward-looking statements are not guarantees of future performance or determinations, nor should they be relied upon as representing management’s views as of any subsequent date. Forward-looking statements involve significant risks and uncertainties, and actual results may differ materially from those presented, either expressed or implied, in this press release. Factors that could cause actual results to differ materially from those expressed in the forward-looking statements include changes in Small Business Administration (“SBA”) rules, regulations or loan products, including the Section 7(a) program, changes in SBA standard operating procedures or changes in Live Oak Banking Company's status as an SBA Preferred Lender; changes in rules, regulations or procedures for other government loan programs, including those of the United States Department of Agriculture; the potential impacts of the Coronavirus Disease 2019 (COVID-19) pandemic on trade (including supply chains and export levels), travel, employee productivity and other economic activities that may have a destabilizing and negative effect on financial markets, economic activity and customer behavior; a reduction in or the termination of the Company's ability to use the technology-based platform that is critical to the success of its business model, including a failure in or a breach of operational or security systems; competition from other lenders; the Company's ability to attract and retain key personnel; market and economic conditions and the associated impact on the Company; operational, liquidity and credit risks associated with the Company's business; the impact of heightened regulatory scrutiny of financial products and services and the Company's ability to comply with regulatory requirements and expectations; a deterioration of the credit rating for U.S. long-term sovereign debt, actions that the U.S. government may take to avoid exceeding the debt ceiling, and uncertainties surrounding the debt ceiling and the federal budget; adverse results, including related fees and expenses, from pending or future lawsuits, government investigations or private actions; 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. (NYSE: LOB) is a financial holding company and the parent company of Live Oak Bank. Live Oak Bancshares and its subsidiaries partner with businesses that share a groundbreaking focus on service and technology to redefine banking. To learn more, visit www.liveoakbank.com.

Contacts:

William C. (BJ) Losch, III | CFO & Chief Banking Officer | Investor Relations | 910.765.9966
Claire Parker | SVP Corporate Communications | Media Relations | 910.597.1592

Live Oak Bancshares, Inc. Quarterly Statements of Income (unaudited) (Dollars in thousands, except per share data)
	Three Months Ended																				4Q 2022 Changes vs.
	4Q 2022				3Q 2022				2Q 2022				1Q 2022				4Q 2021				3Q 2022			4Q 2021
Interest income																					%			%
Loans and fees on loans	$	127,310			$	107,880			$	94,157			$	89,198			$	88,577			18.0			43.7
Investment securities, taxable		6,716				5,506				4,046				3,399				3,455			22.0			94.4
Other interest earning assets		2,584				2,448				1,044				185				171			5.6			1411.1
Total interest income		136,610				115,834				99,247				92,782				92,203			17.9			48.2
Interest expense
Deposits		50,357				31,553				18,777				14,348				13,817			59.6			264.5
Borrowings		351				395				536				655				748			(11.1	)		(53.1	)
Total interest expense		50,708				31,948				19,313				15,003				14,565			58.7			248.1
Net interest income		85,902				83,886				79,934				77,779				77,638			2.4			10.6
Provision for loan and lease credit losses		19,671				14,169				5,267				1,836				3,918			38.8			402.1
Net interest income after provision for loan and lease credit losses		66,231				69,717				74,667				75,943				73,720			(5.0	)		(10.2	)
Noninterest income
Loan servicing revenue		6,296				6,230				6,477				6,356				6,289			1.1			0.1
Loan servicing asset revaluation		(5,016	)			(1,324	)			(8,668	)			(1,569	)			(4,160	)		(278.9	)		(20.6	)
Net gains on sales of loans		7,362				9,275				5,630				20,977				20,257			(20.6	)		(63.7	)
Net gain (loss) on loans accounted for under the fair value option		571				4,420				(4,461	)			516				(66	)		(87.1	)		965.2
Equity method investments income (loss)		(1,818	)			29,136				119,056				(2,124	)			2,969			(106.2	)		(161.2	)
Equity security investments gains (losses), net		868				876				1,655				(44	)			218			(0.9	)		298.2
Lease income		2,555				2,516				2,510				2,503				2,521			1.6			1.3
Management fee income		3,200				2,844				2,558				1,488				1,482			12.5			115.9
Other noninterest income		5,053				3,751				3,772				4,565				4,246			34.7			19.0
Total noninterest income		19,071				57,724				128,529				32,668				33,756			(67.0	)		(43.5	)
Noninterest expense
Salaries and employee benefits		42,560				43,479				46,276				38,507				32,464			(2.1	)		31.1
Travel expense		1,872				2,372				2,358				1,897				1,782			(21.1	)		5.1
Professional services expense		2,453				2,505				3,988				2,791				3,724			(2.1	)		(34.1	)
Advertising and marketing expense		3,892				2,621				2,301				1,729				1,844			48.5			111.1
Occupancy expense		3,469				2,519				2,773				2,327				2,045			37.7			69.6
Technology expense		8,849				7,770				5,762				6,053				6,489			13.9			36.4
Equipment expense		3,759				3,761				3,784				3,816				3,741			(0.1	)		0.5
Other loan origination and maintenance expense		3,657				3,376				3,022				3,113				3,406			8.3			7.4
Renewable energy tax credit investment impairment		8,446				7,721				50				—				—			9.4			100.0
FDIC insurance		2,923				2,697				2,164				1,972				1,931			8.4			51.4
Contributions and donations		33				191				5,515				723				328			(82.7	)		(89.9	)
Other expense		2,672				4,036				2,886				2,786				1,944			(33.8	)		37.4
Total noninterest expense		84,585				83,048				80,879				65,714				59,698			1.9			41.7
Income before taxes		717				44,393				122,317				42,897				47,778			(98.4	)		(98.5	)
Income tax (benefit) expense		(1,075	)			1,525				25,278				8,388				17,631			(170.5	)		(106.1	)
Net income	$	1,792			$	42,868			$	97,039			$	34,509			$	30,147			(95.8	)		(94.1	)
Earnings per share
Basic	$	0.04			$	0.97			$	2.22			$	0.79			$	0.69			(95.9	)		(94.2	)
Diluted	$	0.04			$	0.96			$	2.16			$	0.76			$	0.66			(95.8	)		(93.9	)
Weighted average shares outstanding
Basic		44,005,220				43,914,920				43,824,707				43,701,943				43,492,172
Diluted		44,794,941				44,797,109				44,803,278				45,227,536				45,474,530

Live Oak Bancshares, Inc. Quarterly Balance Sheets (unaudited) (Dollars in thousands)
	As of the quarter ended																				4Q 2022 Change vs.
	4Q 2022				3Q 2022				2Q 2022				1Q 2022				4Q 2021				3Q 2022			4Q 2021
Assets																					%			%
Cash and due from banks	$	280,239			$	335,046			$	580,493			$	477,778			$	187,203			(16.4	)		49.7
Federal funds sold		136,397				68,324				51,694				29,993				16,547			99.6			724.3
Certificates of deposit with other banks		4,000				4,250				4,250				4,250				4,750			(5.9	)		(15.8	)
Investment securities available-for-sale		1,014,719				1,005,372				927,968				844,577				906,052			0.9			12.0
Loans held for sale (1)		554,610				537,649				1,199,734				1,028,635				1,116,519			3.2			(50.3	)
Loans and leases held for investment (2)		7,344,178				6,853,382				5,860,209				5,738,241				5,521,262			7.2			33.0
Allowance for credit losses on loans and leases		(96,566	)			(78,291	)			(65,863	)			(63,058	)			(63,584	)		23.3			51.9
Net loans and leases		7,247,612				6,775,091				5,794,346				5,675,183				5,457,678			7.0			32.8
Premises and equipment, net		263,290				260,285				257,926				254,865				240,196			1.2			9.6
Foreclosed assets		—				1,178				191				198				620			(100.0	)		(100.0	)
Servicing assets		26,323				29,081				28,661				36,286				33,574			(9.5	)		(21.6	)
Other assets		328,308				298,374				275,634				268,201				250,254			10.0			31.2
Total assets	$	9,855,498			$	9,314,650			$	9,120,897			$	8,619,966			$	8,213,393			5.8			20.0
Liabilities and Shareholders’ Equity
Liabilities
Deposits:
Noninterest-bearing	$	194,100			$	170,336			$	119,371			$	86,342			$	89,279			14.0			117.4
Interest-bearing		8,690,828				8,234,573				8,036,373				7,550,821				7,022,765			5.5			23.8
Total deposits		8,884,928				8,404,909				8,155,744				7,637,163				7,112,044			5.7			24.9
Borrowings		83,203				35,616				86,209				196,911				318,289			133.6			(73.9	)
Other liabilities		76,334				71,957				87,282				72,565				67,927			6.1			12.4
Total liabilities		9,044,465				8,512,482				8,329,235				7,906,639				7,498,260			6.2			20.6
Shareholders’ equity
Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding		—				—				—				—				—			—			—
Class A common stock (voting)		330,854				325,632				320,924				315,607				310,970			1.6			6.4
Class B common stock (non-voting)		—				—				—				—				1,324			—			(100.0	)
Retained earnings		572,497				571,778				530,021				434,226				400,893			0.1			42.8
Accumulated other comprehensive (loss) income		(92,318	)			(95,242	)			(59,283	)			(36,506	)			1,946			3.1			(4,844.0	)
Total shareholders’ equity		811,033				802,168				791,662				713,327				715,133			1.1			13.4
Total liabilities and shareholders’ equity	$	9,855,498			$	9,314,650			$	9,120,897			$	8,619,966			$	8,213,393			5.8			20.0

(1)   Includes $23.5 million, $25.1 million, and $25.3 million measured at fair value for the quarters ended June 30, 2022, March 31, 2022, and December 31, 2021, respectively.

(2)   Includes $494.5 million, $512.2 million, $530.6 million, $600.6 million, and $645.2 million measured at fair value for the quarters ended December 31, 2022, September 30, 2022, June 30, 2022, March 31, 2022, and December 31, 2021, respectively.

Live Oak Bancshares, Inc. Statements of Income (unaudited) (Dollars in thousands, except per share data)
	Twelve Months Ended
	December 31, 2022				December 31, 2021
Interest income
Loans and fees on loans	$	418,545			$	347,738
Investment securities, taxable		19,667				12,533
Other interest earning assets		6,261				942
Total interest income		444,473				361,213
Interest expense
Deposits		115,035				59,740
Borrowings		1,937				4,688
Total interest expense		116,972				64,428
Net interest income		327,501				296,785
Provision for loan and lease credit losses		40,943				15,210
Net interest income after provision for loan and lease credit losses		286,558				281,575
Noninterest income
Loan servicing revenue		25,359				25,219
Loan servicing asset revaluation		(16,577	)			(11,726	)
Net gains on sales of loans		43,244				67,280
Net gain on loans accounted for under the fair value option		1,046				4,257
Equity method investments income (loss)		144,250				(1,716	)
Equity security investments gains (losses), net		3,355				44,752
Lease income		10,084				10,263
Management fee income		10,090				6,378
Other noninterest income		17,141				15,493
Total noninterest income		237,992				160,200
Noninterest expense
Salaries and employee benefits		170,822				124,932
Travel expense		8,499				5,809
Professional services expense		11,737				15,135
Advertising and marketing expense		10,543				5,002
Occupancy expense		11,088				8,423
Technology expense		28,434				22,648
Equipment expense		15,120				14,869
Other loan origination and maintenance expense		13,168				13,529
Renewable energy tax credit investment impairment		16,217				3,187
FDIC insurance		9,756				7,070
Contributions and donations		6,462				2,331
Other expense		12,380				8,052
Total noninterest expense		314,226				230,987
Income before taxes		210,324				210,788
Income tax expense		34,116				43,793
Net income	$	176,208			$	166,995
Earnings per share
Basic	$	4.02			$	3.87
Diluted	$	3.92			$	3.71
Weighted average shares outstanding
Basic		43,862,291				43,169,935
Diluted		44,906,310				45,071,304

Live Oak Bancshares, Inc. Quarterly Selected Financial Data (Dollars in thousands, except per share data)
	As of and for the three months ended
	4Q 2022				3Q 2022				2Q 2022				1Q 2022				4Q 2021
Income Statement Data
Net income	$	1,792			$	42,868			$	97,039			$	34,509			$	30,147
Per Common Share
Net income, diluted	$	0.04			$	0.96			$	2.16			$	0.76			$	0.66
Dividends declared		0.03				0.03				0.03				0.03				0.03
Book value		18.41				18.24				18.05				16.29				16.39
Tangible book value (1)		18.32				18.15				17.97				16.20				16.31
Performance Ratios
Return on average assets (annualized)		0.08	%			1.86	%			4.40	%			1.65	%			1.47	%
Return on average equity (annualized)		0.88				20.79				46.14				18.94				16.80
Net interest margin		3.76				3.84				3.89				4.02				4.02
Efficiency ratio (1)		80.58				58.65				38.80				59.50				53.59
Noninterest income to total revenue		18.17				40.76				61.66				29.58				30.30
Selected Loan Metrics
Loans and leases originated	$	1,177,688			$	1,005,235			$	959,635			$	865,063			$	1,083,623
Outstanding balance of sold loans serviced		3,481,885				3,345,907				3,329,616				3,381,883				3,298,828
Asset Quality Ratios
Allowance for credit losses to loans and leases held for investment (3)		1.41	%			1.23	%			1.24	%			1.23	%			1.30	%
Net charge-offs (3)	$	1,396			$	1,741			$	2,462			$	2,362			$	15
Net charge-offs to average loans and leases held for investment (2) (3)		0.09	%			0.12	%			0.19	%			0.19	%			—	%
Nonperforming loans and leases at historical cost (3)
Unguaranteed	$	18,784			$	14,334			$	11,974			$	19,475			$	15,987
Guaranteed		54,608				45,730				33,794				32,828				26,546
Total		73,392				60,064				45,768				52,303				42,533
Unguaranteed nonperforming historical cost loans and leases, to loans and leases held for investment (3)		0.27	%			0.23	%			0.22	%			0.38	%			0.33	%
Nonperforming loans at fair value (4)
Unguaranteed	$	6,678			$	2,736			$	3,615			$	4,451			$	4,791
Guaranteed		38,212				25,169				27,895				30,850				33,471
Total		44,890				27,905				31,510				35,301				38,262
Unguaranteed nonperforming fair value loans to loans held for investment (4)		1.35	%			0.53	%			0.68	%			0.74	%			0.74	%
Capital Ratios
Common equity tier 1 capital (to risk-weighted assets)		12.46	%			13.16	%			13.14	%			12.10	%			12.38	%
Tier 1 leverage capital (to average assets)		9.26				9.49				9.44				8.87				8.87

Notes to Quarterly Selected Financial Data
(1)   See accompanying GAAP to Non-GAAP Reconciliation.
(2)   Quarterly net charge-offs as a percentage of quarterly average loans and leases held for investment, annualized.
(3)   Loans and leases at historical cost only (excludes loans measured at fair value).
(4)   Loans accounted for under the fair value option only (excludes loans and leases carried at historical cost).

Live Oak Bancshares, Inc. Quarterly Average Balances and Net Interest Margin (Dollars in thousands)
	Three Months Ended December 31, 2022										Three Months Ended September 30, 2022
	Average Balance				Interest			Average Yield/Rate			Average Balance				Interest			Average Yield/Rate
Interest-earning assets:
Interest-earning balances in other banks	$	138,819			$	1,063		3.04	%		$	225,959			$	1,375		2.41	%
Federal funds sold		160,944				1,521		3.75				187,014				1,073		2.28
Investment securities		1,128,105				6,716		2.36				1,040,076				5,506		2.10
Loans held for sale		573,280				11,635		8.05				1,000,912				16,156		6.40
Loans and leases held for investment(1)		7,066,106				115,675		6.49				6,208,447				91,724		5.86
Total interest-earning assets		9,067,254				136,610		5.98				8,662,408				115,834		5.31
Less: Allowance for credit losses on loans and leases		(77,977	)									(65,511	)
Noninterest-earning assets		476,204										598,220
Total assets	$	9,465,481									$	9,195,117
Interest-bearing liabilities:
Savings	$	4,096,034			$	28,587		2.77	%		$	4,009,928			$	16,775		1.66	%
Money market accounts		117,843				121		0.41				100,074				72		0.29
Certificates of deposit		4,143,894				21,649		2.07				3,978,793				14,706		1.47
Total deposits		8,357,771				50,357		2.39				8,088,795				31,553		1.55
Borrowings		36,264				351		3.84				63,207				395		2.48
Total interest-bearing liabilities		8,394,035				50,708		2.40				8,152,002				31,948		1.55
Noninterest-bearing deposits		182,727										133,676
Noninterest-bearing liabilities		69,814										84,597
Shareholders' equity		818,905										824,842
Total liabilities and shareholders' equity	$	9,465,481									$	9,195,117
Net interest income and interest rate spread					$	85,902		3.58	%						$	83,886		3.76	%
Net interest margin								3.76										3.84
Ratio of average interest-earning assets to average interest-bearing liabilities								108.02	%									106.26	%

(1)   Average loan and lease balances include non-accruing loans and leases.

Live Oak Bancshares, Inc. GAAP to Non-GAAP Reconciliation (Dollars in thousands)
	As of and for the three months ended
	4Q 2022				3Q 2022				2Q 2022				1Q 2022				4Q 2021
Total shareholders’ equity	$	811,033			$	802,168			$	791,662			$	713,327			$	715,133
Less:
Goodwill		1,797				1,797				1,797				1,797				1,797
Other intangible assets		1,873				1,912				1,950				1,988				2,026
Tangible shareholders’ equity (a)	$	807,363			$	798,459			$	787,915			$	709,542			$	711,310
Shares outstanding (c)		44,061,244				43,981,350				43,854,011				43,787,660				43,619,070
Total assets	$	9,855,498			$	9,314,650			$	9,120,897			$	8,619,966			$	8,213,393
Less:
Goodwill		1,797				1,797				1,797				1,797				1,797
Other intangible assets		1,873				1,912				1,950				1,988				2,026
Tangible assets (b)	$	9,851,828			$	9,310,941			$	9,117,150			$	8,616,181			$	8,209,570
Tangible shareholders’ equity to tangible assets (a/b)		8.20	%			8.58	%			8.64	%			8.23	%			8.66	%
Tangible book value per share (a/c)	$	18.32			$	18.15			$	17.97			$	16.20			$	16.31
Efficiency ratio:
Noninterest expense (d)	$	84,585			$	83,048			$	80,879			$	65,714			$	59,698
Net interest income		85,902				83,886				79,934				77,779				77,638
Noninterest income		19,071				57,724				128,529				32,668				33,756
Total revenue (e)	$	104,973			$	141,610			$	208,463			$	110,447			$	111,394
Efficiency ratio (d/e)		80.58	%			58.65	%			38.80	%			59.50	%			53.59	%

This press release presents the non-GAAP financial measures. The adjustments to reconcile from the non-GAAP financial measures to the applicable GAAP financial measure 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. 

FAQ

What was the net income of Live Oak Bancshares for Q4 2022?

Live Oak Bancshares reported a net income of $1.8 million for Q4 2022.

How much did Live Oak Bancshares' total revenue decline in Q4 2022?

Total revenue for Q4 2022 declined by 26% compared to Q3 2022.

What is Live Oak Bancshares' stock symbol?

The stock symbol for Live Oak Bancshares is LOB.

What were Live Oak Bancshares' total loans and leases as of December 31, 2022?

As of December 31, 2022, total loans and leases were $7.9 billion.

How did Live Oak's deposits change over the year?

Total deposits increased by 25% year-over-year, reaching $8.88 billion.