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Live Oak Bancshares, Inc. Reports Third Quarter 2023 Results

WILMINGTON, N.C., Oct. 25, 2023 (GLOBE NEWSWIRE) — Live Oak Bancshares, Inc. (NYSE: LOB) (“Live Oak” or “the Company”) today reported third quarter of 2023 net income of $39.8 million, or $0.88 per diluted share.

“The success of our quarter shows that Live Oak Bank remains on a path of sustainable and sound growth to fulfill our mission to be America’s small business bank,” said Live Oak Chairman and CEO James S. (Chip) Mahan III. “Our products continue to be delivered with a focus on high-touch service, and our branchless technology-driven platform is an efficient way to get capital into the hands of small business owners.”

Third Quarter 2023 Key Measures

(Dollars in thousands, except per share data) Â Â Â Increase (Decrease) Â Â
 3Q 2023  2Q 2023  Dollars  Percent  3Q 2022
Total revenue (1) $         127,301    $         108,458    $         18,843           17  %  $         141,610  Â
Total noninterest expense          74,262             76,457             (2,195 )          (3 )            83,048  Â
Income before taxes          42,760             18,973             23,787           125             44,393  Â
Effective tax rate          6.9  %           7.5  %  n/a  n/a           3.4  %
Net income $         39,793    $         17,544    $         22,249           127  %  $         42,868  Â
Diluted earnings per share          0.88             0.39             0.49           126             0.96  Â
Loan and lease production: Â Â Â Â Â Â Â Â Â
Loans and leases originated $         1,073,255    $         861,033    $         212,222           25  %  $         1,005,235  Â
% Fully funded          52.2  %           49.4  %  n/a  n/a           54.0  %
Total loans and leases: $         8,775,235    $         8,360,174    $         415,061           5  %  $         7,391,031  Â
Total assets:          10,950,460             10,819,196             131,264           1             9,314,650  Â
Total deposits:          10,003,642             9,879,111             124,531           1             8,404,909  Â

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


Loans and Leases

As of September 30, 2023, the total loan and lease portfolio was $8.78 billion, 5.0% above its level at June 30, 2023, and 18.7% above its level a year ago. This growth was the product of strong origination volumes. Compared to the second quarter of 2023, loans and leases held for investment increased $366.2 million, or 4.7%, to $8.20 billion while loans held for sale increased $48.8 million, or 9.3%, to $572.6 million. Average loans and leases were $8.58 billion during the third quarter of 2023 compared to $8.29 billion during the second quarter of 2023. 

The total loan and lease portfolio at September 30, 2023, and June 30, 2023, was comprised of 39.0% and 39.6% of guaranteed loans and leases, respectively.

Loan and lease originations totaled $1.07 billion during the third quarter of 2023, an increase of $212.2 million, or 24.6%, from the second quarter of 2023. Loan and lease originations increased $68.0 million, or 6.8%, from the third quarter of 2022.

Deposits

Total deposits increased to $10.00 billion at September 30, 2023, an increase of $124.5 million compared to June 30, 2023, and an increase of $1.60 billion compared to September 30, 2022. The increase in total deposits from prior periods was to support growth in the loan and lease portfolio combined with strong deposit inflows.

Average total interest-bearing deposits for the third quarter of 2023 increased $208.5 million, or 2.2%, to $9.70 billion, compared to $9.49 billion for the second quarter of 2023. The ratio of average total loans and leases to average interest-bearing deposits was 88.5% for the third quarter of 2023, compared to 87.3% for the second quarter of 2023.

Net Interest Income

Net interest income for the third quarter of 2023 was $89.4 million compared to $84.3 million for the second quarter of 2023 and $83.9 million for the third quarter of 2022. The net interest margin for the third quarter of 2023 and second quarter of 2023 was 3.37% and 3.29%, respectively, an increase of 8 basis points quarter over quarter. This increase was due to higher average loan balances and yields outpacing increases in both volume and cost of deposits. During the third quarter of 2023, the average cost of interest-bearing liabilities increased by 13 basis points while the average yield on interest-earning assets increased by 18 basis points.

The increase in net interest income for the third quarter of 2023 compared to the third quarter of 2022 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 47 basis points arising from an increase in deposits 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 third quarter of 2023 was $37.9 million, an increase of $13.7 million compared to the second quarter of 2023, and a decrease of $19.8 million compared to the third quarter of 2022. The primary drivers in noninterest income changes are outlined below.

The Company changed the valuation techniques used to estimate the fair value of servicing rights and loans measured at fair value as a result of rising interest rates and their impacts on market conditions. These revisions provide estimates that the Company believes are more representative of fair value. These estimate changes were implemented as of July 1, 2023, and resulted in one-time adjustments on that date to increase the estimated value of the servicing asset by $13.7 million and loans measured at fair value by $1.3 million, or a total impact to noninterest income of $15.0 million.

The loan servicing asset revaluation resulted in a gain of $11.3 million for the third quarter of 2023 (inclusive of the one-time adjustment discussed above) compared to a $2.8 million loss for the second quarter of 2023 and a $1.3 million loss for the third quarter of 2022. The increase in the servicing asset revaluation for both comparative periods was principally the result of the above discussed third quarter of 2023 change in estimate.

Net gains on sales of loans for the third quarter of 2023 was $12.7 million, a $1.9 million increase compared to the second quarter of 2023, and a $3.4 million increase compared to the third quarter of 2022. The increase in net gains on sales of loans compared to the second quarter of 2023 was principally the result of the above discussed change in estimate effective during the third quarter of 2023, resulting in incrementally higher servicing asset values recognized when loans are sold and corresponding higher gains on sale. The increase in net gains on sales of loans compared to the third quarter of 2022 was principally the result of a higher volume of loan sales in the third quarter of 2023. The volume of guaranteed loans sold was $225.6 million for the third quarter of 2023, compared to $245.1 million sold in the second quarter of 2023, and $148.1 million sold in the third quarter of 2022. Partially mitigating the increase in net gains on loan sales was lower premiums in the third quarter of 2023 compared to the third quarter of 2022. The average gain on sale premium of guaranteed loans was 105%, 105% and 108% for the third quarter of 2023, second quarter of 2023 and third quarter of 2022, respectively.

Loans accounted for under the fair value option had a net loss of $568 thousand for the third quarter of 2023 (inclusive of the one-time adjustment discussed above), a $1.7 million net gain for the second quarter of 2023, and a $4.4 million net gain for the third quarter of 2022. The decrease in valuation of loans accounted for under the fair value option compared to the second quarter of 2023 was largely the result of credit losses partially offset by the previously discussed change in estimate. The decrease compared to the third quarter of 2022 was principally the result of negative market trends between the comparative periods.

Equity method investment losses totaled $1.0 million for the third quarter of 2023, a $30.2 million decrease from the net gain of $29.1 million in the third quarter of 2022. The decrease was principally related to the $28.4 million gain arising in the third quarter of 2022 associated with the acquisition of the Company’s ownership in Payrailz, LLC.

Noninterest Expense

Noninterest expense for the third quarter of 2023 totaled $74.3 million compared to $76.5 million for the second quarter of 2023 and $83.0 million for the third quarter of 2022. The primary driver for the decrease compared to the third quarter of 2022 was $7.7 million of impairment charges in the third quarter of 2022 primarily related to a new renewable energy tax credit investment.

Asset Quality

During the third quarter of 2023, the Company recognized net charge-offs for loans carried at historical cost of $9.1 million, compared to $1.2 million in the second quarter of 2023 and $1.7 million in the third quarter of 2022. The increase in net charge-offs was primarily related to a single borrower relationship for which a significant portion was reserved 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 September 30, 2023, June 30, 2023 and September 30, 2022, was 0.48%, 0.06% and 0.12%, respectively.

Unguaranteed nonperforming (nonaccrual) loans and leases, excluding $6.5 million and $8.6 million accounted for under the fair value option at September 30, 2023, and June 30, 2023, respectively, decreased to $33.3 million, or 0.43%, of loans and leases held for investment which are carried at historical cost, at September 30, 2023, compared to $44.9 million, or 0.61%, at June 30, 2023.

Provision for Loan and Lease Credit Losses

The provision for loan and lease credit losses for the third quarter of 2023 totaled $10.3 million compared to $13.0 million for the second quarter of 2023 and $14.2 million for the third quarter of 2022. The provision expense in the third quarter of 2023 was primarily the result of continued growth of the loan and lease portfolio combined with specific reserve changes on individually evaluated loans and charge-off related impacts.

The allowance for credit losses on loans and leases totaled $121.3 million at September 30, 2023, compared to $120.1 million at June 30, 2023. 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 1.56% and 1.62% at September 30, 2023, and June 30, 2023, respectively.

Income Tax

Income tax expense and related effective tax rate was $3.0 million and 6.9% for the third quarter of 2023, $1.4 million and 7.5% for the second quarter of 2023 and $1.5 million and 3.4% for the third quarter of 2022, respectively. The higher level of income tax expense for the third quarter of 2023 compared to the second quarter of 2023 was principally related to increased pretax income. The higher level of income tax expense in the third quarter of 2023 compared to the third quarter of 2022 was primarily the result of higher than anticipated investment tax credits in the third quarter of 2022 related to renewable energy investments, arising from the impacts of the passage of the Inflation Reduction Act of 2022 combined with higher than expected costs, as a result of the inflationary environment.

Conference Call

Live Oak will host a conference call to discuss the company’s financial results and business outlook tomorrow, October 26, 2023, at 9:00 a.m. ET. The call will be accessible by telephone and webcast using Conference ID: 73371580. 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 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 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; recent 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; 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 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 | President & CFO | Investor Relations | 910.202.6926
Claire Parker | 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  3Q 2023 Change vs.
 3Q 2023  2Q 2023  1Q 2023  4Q 2022  3Q 2022  2Q 2023  3Q 2022
Interest income           %  %
Loans and fees on loans $         162,722   $         152,362   $         139,052   $         127,310   $         107,880           6.8           50.8 Â
Investment securities, taxable          8,701            8,503            7,547            6,716            5,506           2.3           58.0 Â
Other interest earning assets          9,188            8,847            4,817            2,584            2,448           3.9           275.3 Â
Total interest income          180,611            169,712            151,416            136,610            115,834           6.4           55.9 Â
Interest expense             Â
Deposits          90,914            85,003            67,595            50,357            31,553           7.0           188.1 Â
Borrowings          287            407            1,804            351            395           (29.5 )          (27.3 )
Total interest expense          91,201            85,410            69,399            50,708            31,948           6.8           185.5 Â
Net interest income          89,410            84,302            82,017            85,902            83,886           6.1           6.6 Â
Provision for loan and lease credit losses          10,279            13,028            19,021            19,671            14,169           (21.1 )          (27.5 )
Net interest income after provision for loan and lease credit losses          79,131            71,274            62,996            66,231            69,717           11.0           13.5 Â
Noninterest income             Â
Loan servicing revenue          6,990            6,687            6,380            6,296            6,230           4.5           12.2 Â
Loan servicing asset revaluation          11,335            (2,831 )           356            (5,016 )           (1,324 )          500.4           956.1 Â
Net gains on sales of loans          12,675            10,804            10,175            7,362            9,275           17.3           36.7 Â
Net (loss) gain on loans accounted for under the fair value option          (568 )           1,728            (4,529 )           571            4,420           (132.9 )          (112.9 )
Equity method investments (loss) income          (1,034 )           (2,055 )           (2,952 )           (1,818 )           29,136           49.7           (103.5 )
Equity security investments (losses) gains, net          (783 )           121            77            868            876           (747.1 )          (189.4 )
Lease income          2,498            2,535            2,535            2,555            2,516           (1.5 )          (0.7 )
Management fee income          3,277            3,266            3,472            3,200            2,844           0.3           15.2 Â
Other noninterest income          3,501            3,901            4,065            5,053            3,751           (10.3 )          (6.7 )
Total noninterest income          37,891            24,156            19,579            19,071            57,724           56.9           (34.4 )
Noninterest expense             Â
Salaries and employee benefits          42,947            43,066            44,765            42,560            43,479           (0.3 )          (1.2 )
Travel expense          2,197            2,770            2,411            1,872            2,372           (20.7 )          (7.4 )
Professional services expense          1,762            1,996            927            2,453            2,505           (11.7 )          (29.7 )
Advertising and marketing expense          3,446            3,009            3,603            3,892            2,621           14.5           31.5 Â
Occupancy expense          2,129            2,205            1,925            3,469            2,519           (3.4 )          (15.5 )
Technology expense          7,722            8,005            7,729            8,849            7,770           (3.5 )          (0.6 )
Equipment expense          3,676            4,023            3,818            3,759            3,761           (8.6 )          (2.3 )
Other loan origination and maintenance expense          3,498            3,442            3,927            3,657            3,376           1.6           3.6 Â
Renewable energy tax credit investment impairment          —            —            69            8,446            7,721           —           (100.0 )
FDIC insurance          4,115            5,061            3,403            2,923            2,697           (18.7 )          52.6 Â
Contributions and donations          —            —            —            33            191           —           (100.0 )
Other expense          2,770            2,880            6,385            2,672            4,036           (3.8 )          (31.4 )
Total noninterest expense          74,262            76,457            78,962            84,585            83,048           (2.9 )          (10.6 )
Income before taxes          42,760            18,973            3,613            717            44,393           125.4           (3.7 )
Income tax expense (benefit)          2,967            1,429            3,215            (1,075 )           1,525           107.6           94.6 Â
Net income $         39,793   $         17,544   $         398   $         1,792   $         42,868           126.8           (7.2 )
Earnings per share             Â
Basic $         0.89   $         0.40   $         0.01   $         0.04   $         0.97           122.5           (8.2 )
Diluted $         0.88   $         0.39   $         0.01   $         0.04   $         0.96           125.6           (8.3 )
Weighted average shares outstanding             Â
Basic          44,408,997            44,327,474            44,157,156            44,005,220            43,914,920     Â
Diluted          45,268,745            44,835,089            44,964,616            44,794,941            44,797,109     Â


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

 As of the quarter ended  3Q 2023 Change vs.
 3Q 2023  2Q 2023  1Q 2023  4Q 2022  3Q 2022  2Q 2023  3Q 2022
Assets           %  %
Cash and due from banks $         534,774   $         808,131   $         463,186   $         280,239   $         335,046           (33.8 )          59.6 Â
Federal funds sold          —            —            —            136,397            68,324           —           (100.0 )
Certificates of deposit with other banks          3,750            4,000            4,000            4,000            4,250           (6.3 )          (11.8 )
Investment securities available-for-sale          1,099,878            1,133,146            1,149,691            1,014,719            1,005,372           (2.9 )          9.4 Â
Loans held for sale          572,604            523,776            533,292            554,610            537,649           9.3           6.5 Â
Loans and leases held for investment (1)          8,202,631            7,836,398            7,686,987            7,344,178            6,853,382           4.7           19.7 Â
Allowance for credit losses on loans and leases          (121,273 )           (120,116 )           (108,242 )           (96,566 )           (78,291 )          (1.0 )          (54.9 )
Net loans and leases          8,081,358            7,716,282            7,578,745            7,247,612            6,775,091           4.7           19.3 Â
Premises and equipment, net          258,041            269,485            268,138            263,290            260,285           (4.2 )          (0.9 )
Foreclosed assets          6,701            —            —            —            1,178           100.0           468.8 Â
Servicing assets          47,127            31,042            29,357            26,323            29,081           51.8           62.1 Â
Other assets          346,227            333,334            337,888            328,308            298,374           3.9           16.0 Â
Total assets $         10,950,460   $         10,819,196   $         10,364,297   $         9,855,498   $         9,314,650           1.2           17.6 Â
Liabilities and shareholders’ equity             Â
Liabilities             Â
Deposits: Â Â Â Â Â Â Â Â Â Â Â Â Â
Noninterest-bearing $         239,536   $         229,833   $         176,439   $         194,100   $         170,336           4.2           40.6 Â
Interest-bearing          9,764,106            9,649,278            9,245,555            8,690,828            8,234,573           1.2           18.6 Â
Total deposits          10,003,642            9,879,111            9,421,994            8,884,928            8,404,909           1.3           19.0 Â
Borrowings          25,847            28,317            30,767            83,203            35,616           (8.7 )          (27.4 )
Other liabilities          70,603            79,280            88,729            76,334            71,957           (10.9 )          (1.9 )
Total liabilities          10,100,092            9,986,708            9,541,490            9,044,465            8,512,482           1.1           18.7 Â
Shareholders’ equity             Â
Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding          —            —            —            —            —           —           — Â
Class A common stock (voting)          340,929            341,032            334,672            330,854            325,632           —           4.7 Â
Class B common stock (non-voting)          —            —            —            —            —           —           — Â
Retained earnings          627,759            589,036            572,530            572,497            571,778           6.6           9.8 Â
Accumulated other comprehensive loss          (118,320 )           (97,580 )           (84,395 )           (92,318 )           (95,242 )          21.3           24.2 Â
Total shareholders’ equity          850,368            832,488            822,807            811,033            802,168           2.1           6.0 Â
Total liabilities and shareholders’ equity $         10,950,460   $         10,819,196   $         10,364,297   $         9,855,498   $         9,314,650           1.2           17.6 Â

(1) Includes $410.1 million, $441.8 million, $467.0 million, $494.5 million and $512.2 million measured at fair value for the quarters ended September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022, and September 30, 2022 respectively.

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

 Nine Months Ended
 September 30, 2023  September 30, 2022
Interest income   Â
Loans and fees on loans $         454,136   $         291,235 Â
Investment securities, taxable          24,751            12,951 Â
Other interest earning assets          22,852            3,677 Â
Total interest income          501,739            307,863 Â
Interest expense   Â
Deposits          243,512            64,678 Â
Borrowings          2,498            1,586 Â
Total interest expense          246,010            66,264 Â
Net interest income          255,729            241,599 Â
Provision for loan and lease credit losses          42,328            21,272 Â
Net interest income after provision for loan and lease credit losses          213,401            220,327 Â
Noninterest income   Â
Loan servicing revenue          20,057            19,063 Â
Loan servicing asset revaluation          8,860            (11,561 )
Net gains on sales of loans          33,654            35,882 Â
Net (loss) gain on loans accounted for under the fair value option          (3,369 )           475 Â
Equity method investments (loss) income          (6,041 )           146,068 Â
Equity security investments (losses) gains, net          (585 )           2,487 Â
Lease income          7,568            7,529 Â
Management fee income          10,015            6,890 Â
Other noninterest income          11,467            12,088 Â
Total noninterest income          81,626            218,921 Â
Noninterest expense   Â
Salaries and employee benefits          130,778            128,262 Â
Travel expense          7,378            6,627 Â
Professional services expense          4,685            9,284 Â
Advertising and marketing expense          10,058            6,651 Â
Occupancy expense          6,259            7,619 Â
Technology expense          23,456            19,585 Â
Equipment expense          11,517            11,361 Â
Other loan origination and maintenance expense          10,867            9,511 Â
Renewable energy tax credit investment impairment          69            7,771 Â
FDIC insurance          12,579            6,833 Â
Contributions and donations          —            6,429 Â
Other expense          12,035            9,708 Â
Total noninterest expense          229,681            229,641 Â
Income before taxes          65,346            209,607 Â
Income tax expense          7,611            35,191 Â
Net income $         57,735   $         174,416 Â
Earnings per share   Â
Basic $         1.30   $         3.98 Â
Diluted $         1.28   $         3.88 Â
Weighted average shares outstanding   Â
Basic          44,298,798            43,814,648 Â
Diluted          45,023,739            44,943,432 Â


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

 As of and for the three months ended
 3Q 2023  2Q 2023  1Q 2023  4Q 2022  3Q 2022
Income Statement Data         Â
Net income $         39,793    $         17,544    $         398    $         1,792    $         42,868  Â
Per Common Share         Â
Net income, diluted $         0.88    $         0.39    $         0.01    $         0.04    $         0.96  Â
Dividends declared          0.03             0.03             0.03             0.03             0.03  Â
Book value          19.12             18.77             18.58             18.41             18.24  Â
Tangible book value (1)          19.04             18.69             18.50             18.32             18.15  Â
Performance Ratios         Â
Return on average assets (annualized)          1.46  %           0.66  %           0.02  %           0.08  %           1.86  %
Return on average equity (annualized)          18.68             8.26             0.19             0.88             20.79  Â
Net interest margin          3.37             3.29             3.46             3.76             3.84  Â
Efficiency ratio (1)          58.34             70.49             77.72             80.58             58.65  Â
Noninterest income to total revenue          29.76             22.27             19.27             18.17             40.76  Â
Selected Loan Metrics         Â
Loans and leases originated $         1,073,255    $         861,033    $         1,030,882    $         1,177,688    $         1,005,235  Â
Outstanding balance of sold loans serviced          4,028,575             3,813,852             3,616,701             3,481,885             3,345,907  Â
Asset Quality Ratios         Â
Allowance for credit losses to loans and leases held for investment (3)          1.56  %           1.62  %           1.50  %           1.41  %           1.23  %
Net charge-offs (3) $         9,122    $         1,154    $         6,669    $         1,396    $         1,741  Â
Net charge-offs to average loans and leases held for investment (2) (3)          0.48  %           0.06  %           0.38  %           0.09  %           0.12  %
         Â
Nonperforming loans and leases at historical cost (3) Â Â Â Â Â Â Â Â Â
Unguaranteed $         33,255    $         44,899    $         22,002    $         18,784    $         14,334  Â
Guaranteed          65,837             66,322             63,696             54,608             45,730  Â
Total          99,092             111,221             85,698             73,392             60,064  Â
Unguaranteed nonperforming historical cost loans and leases, to loans and leases held for investment (3)          0.43  %           0.61  %           0.30  %           0.27  %           0.23  %
         Â
Nonperforming loans at fair value (4) Â Â Â Â Â Â Â Â Â
Unguaranteed $         6,518    $         8,602    $         8,193    $         6,678    $         2,736  Â
Guaranteed          39,378             45,114             43,968             38,212             25,169  Â
Total          45,896             53,716             52,161             44,890             27,905  Â
Unguaranteed nonperforming fair value loans to fair value loans held for investment (4)          1.59  %           1.95  %           1.75  %           1.35  %           0.53  %
         Â
Capital Ratios         Â
Common equity tier 1 capital (to risk-weighted assets)          11.63  %           11.55  %           11.67  %           12.46  %           13.16  %
Tier 1 leverage capital (to average assets)          8.56             8.46             8.70             9.26             9.49  Â

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
September 30, 2023 		Â Three Months Ended
June 30, 2023
 Average Balance  Interest  Average Yield/Rate  Average Balance  Interest  Average Yield/Rate
Interest-earning assets: Â Â Â Â Â Â Â Â Â Â Â
Interest-earning balances in other banks $         677,857   $         9,188           5.38  %  $         731,427   $         8,847           4.85  %
Investment securities          1,257,740            8,701           2.74             1,252,320            8,503           2.72  Â
Loans held for sale          602,109            13,271           8.74             516,378            12,153           9.44  Â
Loans and leases held for investment (1)          7,978,870            149,451           7.43             7,773,816            140,209           7.23  Â
Total interest-earning assets          10,516,576            180,611           6.81             10,273,941            169,712           6.63  Â
Less: Allowance for credit losses on loans and leases          (119,941 )               (108,552 )    Â
Noninterest-earning assets         499,508                499,661     Â
Total assets $         10,896,143       $         10,665,050     Â
Interest-bearing liabilities: Â Â Â Â Â Â Â Â Â Â Â
Interest-bearing checking $         300,059   $         4,217           5.58  %  $         300,046   $         3,968           5.30  %
Savings          4,588,085            45,778           3.96             4,277,850            41,930           3.93  Â
Money market accounts          136,879            202           0.59             121,382            184           0.61  Â
Certificates of deposit          4,675,075            40,717           3.46             4,792,289            38,921           3.26  Â
Total deposits          9,700,098            90,914           3.72             9,491,567            85,003           3.59  Â
Borrowings          27,425            287           4.15             37,997            407           4.30  Â
Total interest-bearing liabilities          9,727,523            91,201           3.72             9,529,564            85,410           3.59  Â
Noninterest-bearing deposits          237,545                205,741     Â
Noninterest-bearing liabilities          78,930                80,427     Â
Shareholders’ equity          852,145                849,318     Â
Total liabilities and shareholders’ equity $         10,896,143       $         10,665,050     Â
Net interest income and interest rate spread   $         89,410           3.09  %    $         84,302           3.04  %
Net interest margin             3.37                3.29  Â
Ratio of average interest-earning assets to average interest-bearing liabilities             108.11  %              107.81  %

(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
 3Q 2023  2Q 2023  1Q 2023  4Q 2022  3Q 2022
Total shareholders’ equity $         850,368    $         832,488    $         822,807    $         811,033    $         802,168  Â
Less: Â Â Â Â Â Â Â Â Â
Goodwill          1,797             1,797             1,797             1,797             1,797  Â
Other intangible assets          1,759             1,797             1,835             1,873             1,912  Â
Tangible shareholders’ equity (a) $         846,812    $         828,894    $         819,175    $         807,363    $         798,459  Â
Shares outstanding (c)          44,480,215             44,351,715             44,290,840             44,061,244             43,981,350  Â
Total assets $         10,950,460    $         10,819,196    $         10,364,297    $         9,855,498    $         9,314,650  Â
Less: Â Â Â Â Â Â Â Â Â
Goodwill          1,797             1,797             1,797             1,797             1,797  Â
Other intangible assets          1,759             1,797             1,835             1,873             1,912  Â
Tangible assets (b) $         10,946,904    $         10,815,602    $         10,360,665    $         9,851,828    $         9,310,941  Â
Tangible shareholders’ equity to tangible assets (a/b)          7.74  %           7.66  %           7.91  %           8.20  %           8.58  %
Tangible book value per share (a/c) $         19.04    $         18.69    $         18.50    $         18.32    $         18.15  Â
Efficiency ratio: Â Â Â Â Â Â Â Â Â
Noninterest expense (d) $         74,262    $         76,457    $         78,962    $         84,585    $         83,048  Â
Net interest income          89,410             84,302             82,017             85,902             83,886  Â
Noninterest income          37,891             24,156             19,579             19,071             57,724  Â
Total revenue (e) $         127,301    $         108,458    $         101,596    $         104,973    $         141,610  Â
Efficiency ratio (d/e)          58.34  %           70.49  %           77.72  %           80.58  %           58.65  %

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 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.
Alex:
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