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Live Oak Bancshares, Inc. Reports Second Quarter 2024 Results

WILMINGTON, N.C., July 24, 2024 (GLOBE NEWSWIRE) — Live Oak Bancshares, Inc. (NYSE: LOB) (â€œLive Oakâ€ or â€œthe Companyâ€) today reported second quarter of 2024 net income of $27.0 million, or $0.59 per diluted share.

â€œLive Oak delivered a solid quarter with growth in loans, deposits and revenue as we continue our mission to serve small businesses across the country,â€ said Live Oak Chairman and Chief Executive Officer James S. (Chip) Mahan III. â€œThe strength of our portfolio is due to the quality of the entrepreneurs we serve. Our focus on credit strength, specialized industries and deep expertise continues to demonstrate the power of our franchise, and we are confident in the long-term opportunities ahead.â€

Second QuarterÂ 2024 Key Measures

(Dollars in thousands, except per share data)

Increase (Decrease)

2Q 2024

1Q 2024

Dollars

Percent

2Q 2023

Total revenue ⁽¹⁾

125,479

116,208

9,271

8.0

108,458

Total noninterest expense

77,656

77,737

(81

)

(0.1)

76,457

Income before taxes

36,058

22,107

13,951

63.1

18,973

Effective tax rate

25.2

(24.8)

n/a

7.5

Net income

26,963

27,586

(623

)

(2.3)

17,544

Diluted earnings per share

0.59

0.60

(0.01

)

(1.7)

0.39

Loan and lease production:

Loans and leases originated

1,171,141

805,129

366,012

45.5

861,033

% Fully funded

38.2

43.8

n/a

49.4

Total loans and leases:

9,535,766

9,223,310

312,456

3.4

8,360,174

Total assets:

11,868,570

11,505,569

363,001

3.2

10,819,196

Total deposits:

10,707,031

10,383,361

323,670

3.1

9,879,111

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

Loans and Leases

As of JuneÂ 30, 2024, the total loan and lease portfolio was $9.54 billion, 3.4% above its level at MarchÂ 31, 2024, and 14.1% above its level a year ago. This growth was the product of strong origination volumes. Compared to the first quarter of 2024, loans and leases held for investment increased $259.6 million, or 2.9%, to $9.17 billion while loans held for sale increased $52.9 million, or 17.0%, to $363.6 million. Average loans and leases were $9.38 billion during the second quarter of 2024 compared to $9.11 billion during the first quarter of 2024.Â

The total loan and lease portfolio at JuneÂ 30, 2024, and MarchÂ 31, 2024, was comprised of 36.4% and 37.4% of guaranteed loans and leases, respectively.

Loan and lease originations totaled $1.17 billion during the second quarter of 2024, an increase of $366.0 million, or 45.5%, from the first quarter of 2024. Loan and lease originations increased $310.1 million, or 36.0%, from the second quarter of 2023.

Deposits

Total deposits increased to $10.71 billion at JuneÂ 30, 2024, an increase of $323.7 million compared to MarchÂ 31, 2024, and an increase of $827.9 million compared to JuneÂ 30, 2023. The increase in total deposits from prior periods was to support growth in the loan and lease portfolio as well as the Companyâ€™s targeted liquidity levels.

Average total interest-bearing deposits for the second quarter of 2024 increased $197.7 million, or 2.0%, to $10.27 billion, compared to $10.07 billion for the first quarter of 2024. The ratio of average total loans and leases to average interest-bearing deposits was 91.4% for the second quarter of 2024, compared to 90.4% for the first quarter of 2024.

Borrowings

Borrowings totaled $117.7 million at JuneÂ 30, 2024 compared to $120.2 million and $28.3 million at MarchÂ 31, 2024, and JuneÂ 30, 2023, respectively. During the first quarter of 2024, the Company increased long-term borrowings by $100.0 million through an unsecured 5.95% fixed rate 60-month term loan with a third party correspondent bank. This increase in borrowings was to strategically enhance capital levels in order to accommodate future growth expectations.

Net Interest Income

Net interest income for the second quarter of 2024 was $91.3 million compared to $90.1 million for the first quarter of 2024 and $84.3 million for the second quarter of 2023. The net interest marginÂ for the second quarter of 2024 and first quarter of 2024 was 3.28% and 3.33%, respectively, a decrease of five basis points quarter over quarter. During the second quarter of 2024, the average cost of interest-bearing liabilities increased by eight basis points, partially driven by a full quarterâ€™s worth of interest expense on the $100.0 million incremental borrowing added in late first quarter of 2024, while the average yield on interest-earning assets increased by one basis point.

The increase in net interest income for the second quarter of 2024 compared to the second quarter of 2023 was driven by growth in average loans and leases held for investment. Partially mitigating this increase was a decrease in the net interest margin by one basis point arising from an increase in deposits and borrowings, combined with the increase in average cost of funds, outpacing the increase in average yield on interest-earning assets.

Noninterest Income

Noninterest income for the second quarter of 2024 was $34.2 million, an increase of $8.1 million compared to the first quarter of 2024, and an increase of $10.0 million compared to the second quarter of 2023. The primary drivers in noninterest income changes are outlined below.

Net gains on sales of loans was $14.4 million, a $2.9 million increase compared to the first quarter of 2024 and a $3.6 million increase compared to the second quarter of 2023. The quarter over quarter increase in net gains on sales of loans was largely the result of increased loan sale volumes, and the increase over the second quarter of 2023 was largely related to higher premiums while loan sale volumes remained somewhat consistent. The average guaranteed loan sale premium was 106%, 107% and 105% for the second and first quarters of 2024 and second quarter of 2023, respectively. The volume of guaranteed loans sold was $250.5 million for the second quarter of 2024 compared to $186.7 million sold in the first quarter of 2024 and $245.1 million sold in the second quarter of 2023.

Equity method investment losses totaled $1.8 million for the secondÂ quarter of 2024, a $3.3 million decrease from $5.0 million in losses in the first quarter of 2024. The decrease was principally related to lower levels of underlying losses in several of the Companyâ€™s equity method investees.

Other noninterest income for the second quarter of 2024 totaled $11.0 million compared to $3.9 million for the second quarter of 2023. This $7.1 million increase in noninterest income was largely related to a $6.7 million gain arising from the sale of one of the Companyâ€™s aircraft in the second quarter of 2024.

Noninterest Expense

Noninterest expense for the second quarter of 2024 totaled $77.7 million compared to $77.7 million for the first quarter of 2024 and $76.5 million for the second quarter of 2023. Compared to the second quarter of 2023, noninterest expense was principally impacted by increased salaries and employee benefits of $3.2 million, partially offset by $2.4 million in decreased levels of FDIC insurance expense. The increase in salaries and employee benefits was largely the product of continued investment in human resources to support strategic and growth initiative, while the decrease in FDIC insurance expense was the product of favorable changes in the Companyâ€™s FDIC assessment rates.

Asset Quality

During the second quarter of 2024, the Company recognized net charge-offs for loans carried at historical cost of $8.3 million, compared to $3.2 million in the first quarter of 2024 and $1.2 million in the second quarter of 2023. Net charge-offs as a percentage of average held for investment loans and leases carried at historical cost, annualized, for the quarters ended JuneÂ 30, 2024, MarchÂ 31, 2024, and JuneÂ 30, 2023, was 0.38%, 0.15% and 0.06%, respectively.

Unguaranteed nonperforming (nonaccrual) loans and leases, excluding $9.6 million and $7.9 million accounted for under the fair value option at JuneÂ 30, 2024, and MarchÂ 31, 2024, respectively, decreased to $37.3 million, or 0.42% of loans and leases held for investment which are carried at historical cost, at JuneÂ 30, 2024, compared to $43.1 million, or 0.51%, at MarchÂ 31, 2024.

Provision for Credit Losses

The provision for credit losses for the second quarter of 2024 totaled $11.8 million compared to $16.4 million for the first quarter of 2024 and $13.0 million for the second quarter of 2023. The lower level of provision expense in the second quarter of 2024 was primarily the result of a decrease in specific reserves required for loans individually evaluated for impairment.

The allowance for credit losses on loans and leases totaled $137.9 million at JuneÂ 30, 2024, compared to $139.0 million at MarchÂ 31, 2024. 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 1.57% and 1.63% at JuneÂ 30, 2024, and MarchÂ 31, 2024, respectively.

Income Tax

Income tax expense (benefit) and related effective tax rate was $9.1 million and 25.2% for the second quarter of 2024, $(5.5) million and (24.8)% for the first quarter of 2024 and $1.4 million and 7.5% for the second quarter of 2023, respectively. The higher level of income tax expense for the second quarter of 2024 compared to the first quarter of 2024 was primarily the result of $10.6 million in increased levels of investment tax credits in the first quarter of 2024, arising from the Internal Revenue Serviceâ€™s expansion of qualifying energy communities guidance during that quarter. The higher level of income tax expense for the second quarter of 2024 as compared to the second quarter of 2023 was primarily the result of the combination of increased pretax income and lower levels of anticipated investment tax credits in 2024 as compared to the prior year.

Conference Call

Live Oak will host a conference call to discuss the Company’s financial results and business outlook tomorrow, JulyÂ 25, 2024, atÂ 9:00 a.m. ET. The call will be accessible by telephone and webcast using Conference ID: 54806566. A supplementary slide presentation will be posted to the website prior to the event, and a replay will be available for 12 months following the event. The conference call details are as follows:

Live Telephone Dial-In

U.S.: 888.259.6580
International: +1 416.764.8624
Pass Code: None Required

Live Webcast Log-In

Webcast Link: investor.liveoakbank.com
Registration: Name and Email Required
Multi-Factor Code: Provided After Registration

Important Note Regarding Forward-Looking Statements

Statements in this press release that are based on other than historical data or that express the Companyâ€™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 Companyâ€™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 managementâ€™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 (â€œSBAâ€) rules, regulations or loan products, including the SectionÂ 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 impacts of global health crises and pandemics, such as 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; adverse developments in the banking industry highlighted by high-profile bank failures and the potential impact of such developments on customer confidence, liquidity, and regulatory responses to these developments; 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 or those of its third-party service providers; technological risks and developments, including cyber threats, attacks, or events; 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; changes in political and economic conditions, including any prolonged U.S. government shutdown; 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 Companyâ€™s Annual Report on Form 10-K filed with the Securities and Exchange Commission (â€œSECâ€) and available at the SECâ€™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:

Live Oak Bancshares, Inc.
Quarterly Statements of Income (unaudited)
(Dollars in thousands, except per share data)

Three Months Ended

2Q 2024 Change vs.

2Q 2024

1Q 2024

4Q 2023

3Q 2023

2Q 2023

1Q 2024

2Q 2023

Interest income

Loans and fees on loans

181,840

176,010

169,531

162,722

152,362

3.3

19.3

Investment securities, taxable

9,219

8,954

8,746

8,701

8,503

3.0

8.4

Other interest earning assets

7,389

7,456

8,259

9,188

8,847

(0.9

)

(16.5

)

Total interest income

198,448

192,420

186,536

180,611

169,712

3.1

16.9

Interest expense

Deposits

105,358

101,998

96,695

90,914

85,003

3.3

23.9

Borrowings

1,770

311

265

287

407

469.1

334.9

Total interest expense

107,128

102,309

96,960

91,201

85,410

4.7

25.4

Net interest income

91,320

90,111

89,576

89,410

84,302

1.3

8.3

Provision for credit losses

11,765

16,364

8,995

10,279

13,028

(28.1

)

(9.7

)

Net interest income after provision for credit losses

79,555

73,747

80,581

79,131

71,274

7.9

11.6

Noninterest income

Loan servicing revenue

7,347

7,624

7,342

6,990

6,687

(3.6

)

9.9

Loan servicing asset revaluation

(2,878

)

(2,744

)

(3,974

)

11,335

(2,831

)

(4.9

)

(1.7

)

Net gains on sales of loans

14,395

11,502

12,891

12,675

10,804

25.2

33.2

Net gain (loss) on loans accounted for under the fair value option

172

(219

)

(170

)

(568

)

1,728

178.5

(90.0

)

Equity method investments (loss) income

(1,767

)

(5,022

)

(1,034

)

(2,055

)

64.8

14.0

Equity security investments gains (losses), net

161

(529

)

(384

)

(783

)

121

130.4

33.1

Lease income

2,423

2,453

2,439

2,498

2,535

(1.2

)

(4.4

)

Management fee income

3,271

3,309

3,277

3,266

â€”

0.2

Other noninterest income

11,035

9,761

8,607

3,501

3,901

13.1

182.9

Total noninterest income

34,159

26,097

30,107

37,891

24,156

30.9

41.4

Noninterest expense

Salaries and employee benefits

46,255

47,275

44,274

42,947

43,066

(2.2

)

7.4

Travel expense

2,328

2,438

1,544

2,197

2,770

(4.5

)

(16.0

)

Professional services expense

3,061

1,878

3,052

1,762

1,996

63.0

53.4

Advertising and marketing expense

3,004

3,692

2,501

3,446

3,009

(18.6

)

(0.2

)

Occupancy expense

2,388

2,247

2,231

2,129

2,205

6.3

8.3

Technology expense

7,996

7,723

8,402

7,722

8,005

3.5

(0.1

)

Equipment expense

3,511

3,074

3,480

3,676

4,023

14.2

(12.7

)

Other loan origination and maintenance expense

3,659

3,911

3,937

3,498

3,442

(6.4

)

6.3

Renewable energy tax credit investment impairment (recovery)

170

(927

)

14,575

â€”

118.3

100.0

FDIC insurance

2,649

3,200

4,091

4,115

5,061

(17.2

)

(47.7

)

Other expense

2,635

3,226

5,117

2,770

2,880

(18.3

)

(8.5

)

Total noninterest expense

77,656

77,737

93,204

74,262

76,457

(0.1

)

1.6

Income before taxes

36,058

22,107

17,484

42,760

18,973

63.1

90.0

Income tax expense (benefit)

9,095

(5,479

)

1,321

2,967

1,429

266.0

536.5

Net income

26,963

27,586

16,163

39,793

17,544

(2.3

)

53.7

Earnings per share

Basic

0.60

0.62

0.36

0.89

0.40

(3.2

)

50.0

Diluted

0.59

0.60

0.36

0.88

0.39

(1.7

)

51.3

Weighted average shares outstanding

Basic

44,974,942

44,762,308

44,516,646

44,408,997

44,327,474

Diluted

45,525,082

45,641,210

45,306,506

45,268,745

44,835,089

Live Oak Bancshares, Inc.
Quarterly Balance Sheets (unaudited)
(Dollars in thousands)

As of the quarter ended

2Q 2024 Change vs.

2Q 2024

1Q 2024

4Q 2023

3Q 2023

2Q 2023

1Q 2024

2Q 2023

Assets

Cash and due from banks

615,449

597,394

582,540

534,774

808,131

3.0

(23.8

)

Certificates of deposit with other banks

250

3,750

4,000

â€”

(93.8

)

Investment securities available-for-sale

1,151,195

1,120,622

1,126,160

1,099,878

1,133,146

2.7

1.6

Loans held for sale

363,632

310,749

387,037

572,604

523,776

17.0

(30.6

)

Loans and leases held for investment ⁽¹⁾

9,172,134

8,912,561

8,633,847

8,202,631

7,836,398

2.9

17.0

Allowance for credit losses on loans and leases

(137,867

)

(139,041

)

(125,840

)

(121,273

)

(120,116

)

0.8

(14.8

)

Net loans and leases

9,034,267

8,773,520

8,508,007

8,081,358

7,716,282

3.0

17.1

Premises and equipment, net

267,864

258,071

257,881

258,041

269,485

3.8

(0.6

)

Foreclosed assets

8,015

8,561

6,481

6,701

â€”

(6.4

)

100.0

Servicing assets

51,528

49,343

48,591

47,127

31,042

4.4

66.0

Other assets

376,370

387,059

354,476

346,227

333,334

(2.8

)

12.9

Total assets

11,868,570

11,505,569

11,271,423

10,950,460

10,819,196

3.2

9.7

Liabilities and shareholdersâ€™ equity

Liabilities

Deposits:

Noninterest-bearing

264,013

226,668

259,270

239,536

229,833

16.5

14.9

Interest-bearing

10,443,018

10,156,693

10,015,749

9,764,106

9,649,278

2.8

8.2

Total deposits

10,707,031

10,383,361

10,275,019

10,003,642

9,879,111

3.1

8.4

Borrowings

117,745

120,242

23,354

25,847

28,317

(2.1

)

315.8

Other liabilities

82,745

74,248

70,384

70,603

79,280

11.4

4.4

Total liabilities

10,907,521

10,577,851

10,368,757

10,100,092

9,986,708

3.1

9.2

Shareholdersâ€™ equity

Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding

â€”

Class A common stock (voting)

356,381

349,648

344,568

340,929

341,032

1.9

4.5

Class B common stock (non-voting)

â€”

Retained earnings

695,172

669,307

642,817

627,759

589,036

3.9

18.0

Accumulated other comprehensive loss

(90,504

)

(91,237

)

(84,719

)

(118,320

)

(97,580

)

0.8

7.3

Total shareholders’ equity

961,049

927,718

902,666

850,368

832,488

3.6

15.4

Total liabilities and shareholdersâ€™ equity

11,868,570

11,505,569

11,271,423

10,950,460

10,819,196

3.2

9.7

(1)Â Â Â Â Â Â Includes $363.0 million, $379.2 million, $388.0 million, $410.1 million and $441.8 million measured at fair value for the quarters ended JuneÂ 30, 2024, MarchÂ 31, 2024, DecemberÂ 31, 2023, SeptemberÂ 30, 2023, and JuneÂ 30, 2023, respectively.Â Â Â

Live Oak Bancshares, Inc.
Statements of Income (unaudited)
(Dollars in thousands, except per share data)

Â	Six Months Ended
Â	June 30, 2024			Â	June 30, 2023
Interest income	Â			Â	Â
Loans and fees on loans	$	357,850	Â	Â	$	291,414	Â
Investment securities, taxable	Â	18,173	Â	Â	Â	16,050	Â
Other interest earning assets	Â	14,845	Â	Â	Â	13,664	Â
Total interest income	Â	390,868	Â	Â	Â	321,128	Â
Interest expense	Â			Â	Â
Deposits	Â	207,356	Â	Â	Â	152,598	Â
Borrowings	Â	2,081	Â	Â	Â	2,211	Â
Total interest expense	Â	209,437	Â	Â	Â	154,809	Â
Net interest income	Â	181,431	Â	Â	Â	166,319	Â
Provision for credit losses	Â	28,129	Â	Â	Â	32,049	Â
Net interest income after provision for credit losses	Â	153,302	Â	Â	Â	134,270	Â
Noninterest income	Â			Â	Â
Loan servicing revenue	Â	14,971	Â	Â	Â	13,067	Â
Loan servicing asset revaluation	Â	(5,622	)	Â	Â	(2,475	)
Net gains on sales of loans	Â	25,897	Â	Â	Â	20,979	Â
Net loss on loans accounted for under the fair value option	Â	(47	)	Â	Â	(2,801	)
Equity method investments (loss) income	Â	(6,789	)	Â	Â	(5,007	)
Equity security investments (losses) gains, net	Â	(368	)	Â	Â	198	Â
Lease income	Â	4,876	Â	Â	Â	5,070	Â
Management fee income	Â	6,542	Â	Â	Â	6,738	Â
Other noninterest income	Â	20,796	Â	Â	Â	7,966	Â
Total noninterest income	Â	60,256	Â	Â	Â	43,735	Â
Noninterest expense	Â			Â	Â
Salaries and employee benefits	Â	93,530	Â	Â	Â	87,831	Â
Travel expense	Â	4,766	Â	Â	Â	5,181	Â
Professional services expense	Â	4,939	Â	Â	Â	2,923	Â
Advertising and marketing expense	Â	6,696	Â	Â	Â	6,612	Â
Occupancy expense	Â	4,635	Â	Â	Â	4,130	Â
Technology expense	Â	15,719	Â	Â	Â	15,734	Â
Equipment expense	Â	6,585	Â	Â	Â	7,841	Â
Other loan origination and maintenance expense	Â	7,570	Â	Â	Â	7,369	Â
Renewable energy tax credit investment (recovery) impairment	Â	(757	)	Â	Â	69	Â
FDIC insurance	Â	5,849	Â	Â	Â	8,464	Â
Other expense	Â	5,861	Â	Â	Â	9,265	Â
Total noninterest expense	Â	155,393	Â	Â	Â	155,419	Â
Income before taxes	Â	58,165	Â	Â	Â	22,586	Â
Income tax expense	Â	3,616	Â	Â	Â	4,644	Â
Net income	$	54,549	Â	Â	$	17,942	Â
Earnings per share	Â			Â	Â
Basic	$	1.22	Â	Â	$	0.41	Â
Diluted	$	1.20	Â	Â	$	0.40	Â
Weighted average shares outstanding	Â			Â	Â
Basic	Â	44,868,625	Â	Â	Â	44,242,785	Â
Diluted	Â	45,583,146	Â	Â	Â	44,900,323	Â
Â	Â	Â	Â	Â	Â	Â	Â

Live Oak Bancshares, Inc.
Quarterly Selected Financial Data
(Dollars in thousands, except per share data)

As of and for the three months ended

2Q 2024

1Q 2024

4Q 2023

3Q 2023

2Q 2023

Income Statement Data

Net income

26,963

27,586

16,163

39,793

17,544

Per Common Share

Net income, diluted

0.59

0.60

0.36

0.88

0.39

Dividends declared

0.03

Book value

21.35

20.64

20.23

19.12

18.77

Tangible book value ⁽¹⁾

21.28

20.57

20.15

19.04

18.69

Performance Ratios

Return on average assets (annualized)

0.93

0.98

0.58

1.46

0.66

Return on average equity (annualized)

11.39

11.93

7.36

18.68

8.26

Net interest margin

3.28

3.33

3.32

3.37

3.29

Efficiency ratio ⁽¹⁾

61.89

66.89

77.88

58.34

70.49

Noninterest income to total revenue

27.22

22.46

25.16

29.76

22.27

Selected Loan Metrics

Loans and leases originated

1,171,141

805,129

981,703

1,073,255

861,033

Outstanding balance of sold loans serviced

4,292,857

4,329,097

4,238,328

4,028,575

3,813,852

Asset Quality Ratios

Allowance for credit losses to loans and leases held for investment ⁽³⁾

1.57

1.63

1.53

1.56

1.62

Net charge-offs ⁽³⁾

8,253

3,163

4,428

9,122

1,154

Net charge-offs to average loans and leases held for investment ^{(2) (3)}

0.38

0.15

0.22

0.48

0.06

Nonperforming loans and leases at historical cost ⁽³⁾

Unguaranteed

37,340

43,117

39,285

33,255

44,899

Guaranteed

122,752

105,351

95,678

65,837

66,322

Total

160,092

148,468

134,963

99,092

111,221

Unguaranteed nonperforming historical cost loans and leases, to loans and leases held for investment ⁽³⁾

0.42

0.51

0.48

0.43

0.61

Nonperforming loans at fair value ⁽⁴⁾

Unguaranteed

9,590

7,942

7,230

6,518

8,602

Guaranteed

51,570

47,620

41,244

39,378

45,114

Total

61,160

55,562

48,474

45,896

53,716

Unguaranteed nonperforming fair value loans to fair value loansÂ held for investment ⁽⁴⁾

2.64

2.09

1.86

1.59

1.95

Capital Ratios

Common equity tier 1 capital (to risk-weighted assets)

11.85

11.89

11.73

11.63

11.55

Tier 1 leverage capital (to average assets)

8.71

8.69

8.58

8.56

8.46

Notes to Quarterly Selected Financial Data
(1)Â Â Â Â Â Â See accompanying GAAP to Non-GAAP Reconciliation.
(2)Â Â Â Â Â Â Quarterly net charge-offs as a percentage of quarterly average loans and leases held for investment, annualized.
(3)Â Â Â Â Â Â Loans and leases at historical cost only (excludes loans measured at fair value).
(4)Â Â Â Â Â Â 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
June 30, 2024

Three Months Ended
MarchÂ 31, 2024

Average Balance

Interest

Average Yield/Rate

Average Balance

Interest

Average Yield/Rate

Interest-earning assets:

Interest-earning balances in other banks

555,570

7,389

5.35

542,243

7,456

5.53

Investment securities

1,263,675

9,219

2.93

1,240,861

8,954

2.90

Loans held for sale

387,824

9,329

9.67

353,476

8,354

9.51

Loans and leases held for investment ⁽¹⁾

8,997,164

172,511

7.71

8,753,232

167,656

7.70

Total interest-earning assets

11,204,233

198,448

7.12

10,889,812

192,420

7.11

Less: Allowance for credit losses on loans and leases

(136,668

)

(125,447

)

Noninterest-earning assets

562,488

550,839

Total assets

11,630,053

11,315,204

Interest-bearing liabilities:

Interest-bearing checking

304,505

4,267

5.64

300,067

4,183

5.61

Savings

4,804,037

48,617

4.07

4,552,390

46,171

4.08

Money market accounts

128,625

186

0.58

125,317

187

0.60

Certificates of deposit

5,032,856

52,288

4.18

5,094,553

51,457

4.06

Total deposits

10,270,023

105,358

4.13

10,072,327

101,998

4.07

Borrowings

119,321

1,770

5.97

26,772

311

4.67

Total interest-bearing liabilities

10,389,344

107,128

4.15

10,099,099

102,309

4.07

Noninterest-bearing deposits

223,026

213,571

Noninterest-bearing liabilities

70,667

77,942

Shareholders’ equity

947,016

924,592

Total liabilities and shareholders’ equity

11,630,053

11,315,204

Net interest income and interest rate spread

91,320

2.97

90,111

3.04

Net interest margin

3.28

3.33

Ratio of average interest-earning assets to average interest-bearing liabilities

107.84

107.83

(1)Â Â Â Â Â Â 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

2Q 2024

1Q 2024

4Q 2023

3Q 2023

2Q 2023

Total shareholdersâ€™ equity

961,049

927,718

902,666

850,368

832,488

Less:

Goodwill

1,797

Other intangible assets

1,644

1,682

1,721

1,759

1,797

Tangible shareholdersâ€™ equity (a)

957,608

924,239

899,148

846,812

828,894

Shares outstanding (c)

45,003,856

44,938,673

44,617,673

44,480,215

44,351,715

Total assets

11,868,570

11,505,569

11,271,423

10,950,460

10,819,196

Less:

Goodwill

1,797

Other intangible assets

1,644

1,682

1,721

1,759

1,797

Tangible assets (b)

11,865,129

11,502,090

11,267,905

10,946,904

10,815,602

Tangible shareholdersâ€™ equity to tangible assets (a/b)

8.07

8.04

7.98

7.74

7.66

Tangible book value per share (a/c)

21.28

20.57

20.15

19.04

18.69

Efficiency ratio:

Noninterest expense (d)

77,656

77,737

93,204

74,262

76,457

Net interest income

91,320

90,111

89,576

89,410

84,302

Noninterest income

34,159

26,097

30,107

37,891

24,156

Total revenue (e)

125,479

116,208

119,683

127,301

108,458

Efficiency ratio (d/e)

61.89

66.89

77.88

58.34

70.49

This press release presents 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 Companyâ€™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.

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