• Live Oak Bancshares, Inc. Reports Fourth Quarter 2021 Results

    المصدر: Nasdaq GlobeNewswire / 25 يناير 2022 16:45:01   America/New_York

    WILMINGTON, N.C., Jan. 25, 2022 (GLOBE NEWSWIRE) -- Live Oak Bancshares, Inc. (Nasdaq: LOB) (“Live Oak” or “the Company”) today reported fourth quarter 2021 net earnings available to common shareholders of $30.1 million, or $0.66 per diluted share.   Net earnings for the year ended December 31, 2021, totaled $167.0 million, or $3.71 per diluted share.

    “Live Oak closed 2021 with one of our strongest quarters in the Company’s history,” said Live Oak Chairman and CEO James S. (Chip) Mahan, III. “For three consecutive quarters we have exceeded $1.0 billion in loan originations, with year-over-year organic growth of 32% in total loans outside of PPP and 24% in total deposits. We also ended the year by marking a new chapter in our model with the launch of our small business checking account on a next-generation platform. Live Oak continues to be strongly positioned to serve small businesses across America while continuing to redefine what it means to be a community bank.”

    Year over Year Highlights

    (Dollars in thousands, except per share data)         Increase (Decrease) 
      2021  2020  Dollars  Percent 
    Total revenue (1) $456,985  $280,723  $176,262   63%
    Total noninterest expense  230,987   192,676   38,311   20 
    Income before taxes  210,788   47,389   163,399   345 
    Effective tax rate  20.8%  (25.6)% n/a  n/a 
    Net income $166,995  $59,543  $107,452   180%
    Diluted earnings per share  3.71   1.43   2.28   159 
    Loan and lease production:                
    Loans and leases originated $4,480,725  $4,450,198  $30,527   1%
    % Fully funded  64.5%  78.6% n/a  n/a 
    Loans and leases originated, excluding PPP loans $3,933,207  $2,687,542  $1,245,665   46%
    Total loans and leases:  6,637,781   6,320,400   317,381   5 
    Total loans and leases, excluding PPP loans:  6,375,903   4,821,783   1,554,120   32 
    Total assets:  8,213,393   7,872,303   341,090   4 
    Total deposits:  7,112,044   5,712,828   1,399,216   24 

    Fourth Quarter 2021 Key Measures

    (Dollars in thousands, except per share data)         Increase (Decrease)     
      Q4 2021  Q3 2021  Dollars  Percent  Q4 2020 
    Total revenue (1) $111,394  $103,011  $8,383   8% $73,104 
    Total noninterest expense  59,698   55,459   4,239   8   52,435 
    Income before taxes  47,778   43,233   4,545   11   12,035 
    Effective tax rate  36.9%  21.7% n/a  n/a   (145.8)%
    Net income $30,147  $33,839  $(3,692)  (11)% $29,588 
    Diluted earnings per share  0.66   0.76   (0.10)  (13)  0.68 
    Loan and lease production:                    
    Loans and leases originated $1,083,623  $1,063,190  $20,433   2% $808,010 
    % Fully funded  54.1%  55.1% n/a  n/a   55.6%

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

    Loans and Leases

    At December 31, 2021, the total loan and lease portfolio was $6.64 billion, 5.0% above its level at December 31, 2020 and 2.7% above its level at September 30, 2021. Compared to the third quarter of 2021, loans and leases held for investment increased $102.7 million, or 1.9%, to $5.52 billion while loans held for sale increased $73.8 million, or 7.1%, to $1.12 billion. Average loans and leases were $6.45 billion during the fourth quarter of 2021 compared to $6.47 billion during the third quarter of 2021. Excluding Paycheck Protection Program (“PPP”) loans, the total loan and lease portfolio increased by $1.55 billion, or 32.2%, compared to December 31, 2020, and $404.3 million, or 6.8%, compared to September 30, 2021.

    The total loan and lease portfolio of $6.64 billion includes $261.9 million of PPP loans, net of deferred fees and costs, at December 31, 2021. The unguaranteed percentage of the total loan and lease portfolio, influenced by the inclusion of PPP loans carrying a 100% government guarantee, continues to lessen as PPP balances decline. The total loan and lease portfolio at December 31, 2021, and September 30, 2021, of $6.64 billion and $6.46 billion, respectively, was comprised of 51.6% and 47.8% of unguaranteed loans and leases, respectively.

    Loan and lease originations totaled $1.08 billion during the fourth quarter of 2021, an increase of $20.4 million, or 1.9%, from the third quarter of 2021.

    Deposits

    Total deposits increased to $7.11 billion at December 31, 2021, an increase of $1.40 billion compared to December 31, 2020, and an increase of $295.4 million compared to September 30, 2021.

    The increase in total deposits from the prior quarter provides support for the growth in the loan and lease portfolio and origination activities during the fourth quarter of 2021. Average total interest-bearing deposits for the fourth quarter of 2021 increased $276.9 million, or 4.2%, to $6.91 billion, compared to $6.63 billion for the third quarter of 2021. The ratio of average total loans and leases to average interest-bearing deposits was 93.4% for the fourth quarter of 2021, compared to 97.5% for the third quarter of 2021. This ratio is influenced by average PPP loan volume and the use of the Federal Reserve’s Paycheck Protection Program Liquidity Facility (“PPPLF”) classified as long-term borrowings; however, its impact also continues to lessen as PPP related balances decline.

    Borrowings

    Borrowings totaled $318.3 million at December 31, 2021, compared to $1.54 billion and $575.0 million at December 31, 2020, and September 30, 2021, respectively. During the fourth quarter of 2021, the Company decreased borrowings by $256.7 million primarily by reducing the outstanding balance in the Federal Reserve’s PPPLF to $267.5 million as of December 31, 2021, compared to $526.0 million at September 30, 2021. The PPPLF has a 100% advance rate equal to the principal amount of PPP loans pledged as security and carries an interest rate of 0.35%, and loans financed under the PPPLF have a neutral impact on regulatory leverage capital ratios.   Including borrowings, the ratio of average total loans and leases to total average interest-bearing liabilities was 88.0% for the fourth quarter of 2021, compared to 86.8% for the third quarter of 2021.

    Net Interest Income

    Net interest income for the fourth quarter of 2021 was $77.6 million compared to $62.3 million for the fourth quarter of 2020 and $77.7 million for the third quarter of 2021.  

    The increase for the fourth quarter of 2021 compared to the fourth quarter of 2020 was driven by significant growth in the total loan and lease portfolio, excluding PPP loans. The increase in net interest income comparing these two periods was also driven by the reduction in the average rate on interest-bearing liabilities from 1.13% for the fourth quarter of 2020 to 0.79% for the fourth quarter of 2021.

    The net interest margin increased from the third quarter of 2021 by three basis points, from 3.99% to 4.02%. The yield on interest earning assets for the fourth quarter of 2021 increased one basis point compared to the third quarter of 2021. The increase in asset yield was further enhanced by a one basis point reduction in the average cost of interest-bearing liabilities from 0.80% for the quarter ended September 30, 2021, to 0.79% for the quarter ended December 31, 2021.

    Noninterest Income

    Noninterest income for the fourth quarter of 2021 increased to $33.8 million compared to $10.8 million for the fourth quarter of 2020 and $25.3 million for the third quarter of 2021. The primary drivers behind increased noninterest income are outlined below.

    The largest driver of the increase in noninterest income for the fourth quarter of 2021 arose from equity method investment income which increased $11.7 million over the fourth quarter of 2020 and $4.2 million over the third quarter of 2021. The increase compared to fourth quarter of 2020 was largely a product of the Company’s pro rata portion of income tax expense of $7.8 million recorded during the prior year arising from an investee’s conversion from a partnership to a corporation. Also contributing to the increase for both compared periods was heightened levels of financial performance from the Company’s investments in fintech oriented investment funds.

    The loan servicing asset revaluation resulted in a loss of $4.2 million for the fourth quarter of 2021 compared to a loss of $5.8 million for the fourth quarter of 2020 and a loss of $5.9 million for the third quarter of 2021. Lower levels of losses in the loan servicing asset revaluation compared to the prior quarters was largely the result of the ongoing amortization of the guaranteed serviced loan portfolio.

    Net gains on sales of loans increased $5.3 million compared to the fourth quarter of 2020 and $1.4 million compared to the third quarter of 2021. The average net gain on guaranteed loan sales was $98.8, $91.0 and $115.9 thousand per million sold for the fourth quarter of 2021, third quarter of 2021 and fourth quarter of 2020, respectively. The change in the average net gain per million on guaranteed loan sales was largely driven by the mix of loan sales while overall market pricing remained relatively consistent for each of the compared periods. The volume of guaranteed loans sold remained relatively flat at $199.0 million for the fourth quarter of 2021 compared to $201.9 million sold in the prior quarter.

    The net loss on loans accounted for under the fair value option totaled $66 thousand for the fourth quarter of 2021, a $4.7 million decrease compared to the $4.8 million net loss for the fourth quarter of 2020 and a $964 thousand decrease compared to the net loss of $1.0 million for the third quarter of 2021. The decreased level of loss in marking loans to fair value for the above periods was largely the result of continued improvements in economic forecasts used in measuring fair value.

    Noninterest Expense

    Noninterest expense for the fourth quarter of 2021 totaled $59.7 million compared to $52.4 million for the fourth quarter of 2020 and $55.5 million for the third quarter of 2021.   The primary drivers in the noninterest expense changes are outlined below.

    Salaries and employee benefits for the fourth quarter of 2021 increased to $32.5 million compared to $29.5 million for the fourth quarter of 2020 and $28.2 million for the third quarter of 2021. The increase in salaries and employee benefits was principally related to continued investment in human resources to support strategic and growth initiatives.

    Professional services expense increased to $3.7 million for the fourth quarter of 2021 compared to $1.7 million for the fourth quarter of 2020. The $2.0 million increase over the fourth quarter of 2020 was largely driven by an increase in legal and consulting fees.

    Data processing expense for the fourth quarter of 2021 totaled $5.2 million compared to $3.4 million for the fourth quarter of 2020. The increase in 2021 was principally due to enhanced investments in the Company’s internal software technology resources.

    Asset Quality

    During the fourth quarter of 2021, the Company recognized net charge-offs for loans carried at historical cost of $15 thousand compared to $537 thousand in the fourth quarter of 2020 and $2.5 million in the third 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, 2021 and 2020 and September 30, 2021, was 0.00%, 0.05% and 0.21%, 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, 2021 and 2020, were 0.09% and 0.45%, respectively. The decrease in net charge-offs as a percentage of total average held for investment loans and leases carried at historical cost for the year ended December 31, 2021 compared to 2020 was largely the result of a 2020 reclassification of fifteen hotel loans totaling $81.2 million in net investment from held for investment to held for sale.  This reclassification resulted in a write down reflected in charge-offs of $9.8 million in 2020.

    Unguaranteed nonperforming (nonaccrual) loans and leases, excluding $4.8 million and $6.3 million accounted for under the fair value option at December 31, 2021, and September 30, 2021, respectively, decreased to $16.0 million, or 0.33% of loans and leases held for investment which are carried at historical cost, at December 31, 2021, compared to $20.4 million, or 0.43%, at September 30, 2021.

    Provision for Loan and Lease Credit Losses

    The provision for loan and lease credit losses for the fourth quarter of 2021 totaled $3.9 million compared to $8.6 million for the fourth quarter of 2020 and $4.3 million for the third quarter of 2021. The lower provision expense in the fourth quarter of 2021 was primarily the result of continued improvement in forecasts related to employment and default expectations, combined with the effects of the earlier discussed portfolio performance metrics, outpacing the impact of the growing loan and lease portfolio.

    The allowance for credit losses on loans and leases totaled $63.6 million at December 31, 2021, compared to $59.7 million at September 30, 2021. 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 1.30% and 1.26% at December 31, 2021, and September 30, 2021, respectively. While the level of impact continues to decline, the allowance for credit losses on loans and leases as a percentage of total loans and leases held for investment carried at historical cost continues to be influenced by the 100% guaranteed PPP loans.

    Income Tax

    Income tax expense and related effective tax rate was $17.6 million and 36.9% for the fourth quarter of 2021, compared to an income tax benefit of $17.6 million and effective tax rate of (145.8)% for the fourth quarter of 2020, and income tax expense of $9.4 million and effective tax rate of 21.7% for the third quarter of 2021, respectively. The effective tax rate for the fourth quarter of 2021 was principally influenced by recognition of fewer investment tax credits in that quarter than the Company previously anticipated. These expected tax credits, amounting to $10.0 million, were reflected in the effective tax rate calculations reported for the first three quarters of 2021 and are associated with renewable energy investments that have been delayed primarily due to supply chain issues related to the COVID-19 pandemic. While no longer reflected in the effective tax rate for 2021, the Company expects to recognize most of these investment tax credits in 2022.

    The income tax benefit for the fourth quarter of 2020 was principally the product of the vesting of restricted stock unit awards with market price conditions during the fourth quarter.  Upon vesting, the fair value of these awards exceeded the total compensation cost recognized by the Company for book purposes, which resulted in the recognition of a tax benefit of $22.1 million. 

    Shareholders’ Equity

    Total shareholders’ equity increased by $25.7 million, or 3.7%, during the fourth quarter of 2021. This increase was primarily due to net income.

    Conference Call

    Live Oak will host a conference call to discuss quarterly results at 8:30 a.m. ET tomorrow morning (January 26, 2022). Media representatives, analysts and the public are invited to listen to this discussion by calling (844) 743-2494 (domestic) or (661) 378-9528 (international) with conference ID 2079907. A live webcast of the conference call along with presentation materials referenced during the conference call will be available on the Investor Relations page of the Company’s website at http://investor.liveoakbank.com. A replay of the conference call will also be available until February 2, 2022 and can be accessed by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international).

    Important Note Regarding Forward-Looking Statements

    Statements in this press release that are based on other than historical data or that express the Company’s plans or expectations regarding future events or determinations are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Statements based on historical data are not intended and should not be understood to indicate the Company’s expectations regarding future events. Forward-looking statements provide current expectations or forecasts of future events or determinations. These forward-looking statements are not guarantees of future performance or determinations, nor should they be relied upon as representing management’s views as of any subsequent date. Forward-looking statements involve significant risks and uncertainties, and actual results may differ materially from those presented, either expressed or implied, in this press release. Factors that could cause actual results to differ materially from those expressed in the forward-looking statements include changes in Small Business Administration (“SBA”) rules, regulations or loan products, including the Section 7(a) program, changes in SBA standard operating procedures or changes in Live Oak Banking Company's status as an SBA Preferred Lender; changes in rules, regulations or procedures for other government loan programs, including those of the United States Department of Agriculture; 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; 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. (Nasdaq: 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 | Investor Relations | 910.218.2173

    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 2021 Change vs. 
      4Q 2021  3Q 2021  2Q 2021  1Q 2021  4Q 2020  3Q 2021  4Q 2020 
    Interest income                     %  % 
    Loans and fees on loans $88,577  $89,388  $84,780  $84,993  $79,166   (0.9)  11.9 
    Investment securities, taxable  3,455   3,174   2,975   2,929   3,345   8.9   3.3 
    Other interest earning assets  171   224   244   303   529   (23.7)  (67.7)
    Total interest income  92,203   92,786   87,999   88,225   83,040   (0.6)  11.0 
    Interest expense                            
    Deposits  13,817   14,159   14,820   16,944   19,195   (2.4)  (28.0)
    Borrowings  748   892   1,717   1,331   1,544   (16.1)  (51.6)
    Total interest expense  14,565   15,051   16,537   18,275   20,739   (3.2)  (29.8)
    Net interest income  77,638   77,735   71,462   69,950   62,301   (0.1)  24.6 
    Provision for (recovery of) loan and lease credit
    losses    		  3,918   4,319   7,846   (873)  8,634   (9.3)  (54.6)
    Net interest income after provision for (recovery of)
    loan and lease credit losses    		  73,720   73,416   63,616   70,823   53,667   0.4   37.4 
    Noninterest income                            
    Loan servicing revenue  6,289   6,278   6,218   6,434   6,684   0.2   (5.9)
    Loan servicing asset revaluation  (4,160)  (5,878)  (3,181)  1,493   (5,756)  (29.2)  (27.7)
    Net gains on sales of loans  20,257   18,860   16,234   11,929   14,976   7.4   35.3 
    Net (loss) gain on loans accounted for under the fair
    value option    		  (66)  (1,030)  1,135   4,218   (4,759)  (93.6)  (98.6)
    Equity method investments income (loss)  2,969   (1,250)  (2,278)  (1,157)  (8,739)  (337.5)  (134.0)
    Equity security investments gains (losses), net  218   176   44,253   105   107   23.9   103.7 
    Lease income  2,521   2,527   2,616   2,599   2,615   (0.2)  (3.6)
    Management fee income  1,482   1,489   1,473   1,934   2,206   (0.5)  (32.8)
    Other noninterest income  4,246   4,104   3,641   3,502   3,469   3.5   22.4 
    Total noninterest income  33,756   25,276   70,111   31,057   10,803   33.5   212.5 
    Noninterest expense                            
    Salaries and employee benefits  32,464   28,202   32,900   31,366   29,477   15.1   10.1 
    Travel expense  1,782   1,819   1,549   659   1,056   (2.0)  68.8 
    Professional services expense  3,724   4,251   3,329   3,831   1,691   (12.4)  120.2 
    Advertising and marketing expense  1,844   1,631   875   652   973   13.1   89.5 
    Occupancy expense  2,045   2,042   2,224   2,112   2,302   0.1   (11.2)
    Data processing expense  5,186   4,867   4,234   3,894   3,414   6.6   51.9 
    Equipment expense  4,644   4,567   4,385   4,354   4,002   1.7   16.0 
    Other loan origination and maintenance expense  3,406   3,489   3,307   3,327   3,173   (2.4)  7.3 
    Renewable energy tax credit investment impairment  —   60   —   3,127   —   (100.0)  — 
    FDIC insurance  1,931   1,670   1,704   1,765   2,147   15.6   (10.1)
    Other expense  2,672   2,861   3,051   3,185   4,200   (6.6)  (36.4)
    Total noninterest expense  59,698   55,459   57,558   58,272   52,435   7.6   13.9 
    Income before taxes  47,778   43,233   76,169   43,608   12,035   10.5   297.0 
    Income tax expense (benefit)  17,631   9,394   12,587   4,181   (17,553)  87.7   (200.4)
    Net income $30,147  $33,839  $63,582  $39,427  $29,588   (10.9)  1.9 
    Earnings per share                            
    Basic $0.69  $0.78  $1.48  $0.92  $0.72   (11.5)  (4.2)
    Diluted $0.66  $0.76  $1.41  $0.88  $0.68   (13.2)  (2.9)
    Weighted average shares outstanding                            
    Basic  43,492,172   43,329,889   43,173,312   42,673,615   41,320,851         
    Diluted  45,474,530   45,040,690   45,062,392   44,696,850   43,333,707         

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

      As of the quarter ended  4Q 2021 Change vs. 
      4Q 2021  3Q 2021  2Q 2021  1Q 2021  4Q 2020  3Q 2021  4Q 2020 
    Assets                     %  % 
    Cash and due from banks $187,203  $336,362  $428,907  $630,081  $297,167   (44.3)  (37.0)
    Federal funds sold  16,547   10,672   9,917   5,461   21,153   55.1   (21.8)
    Certificates of deposit with other banks  4,750   6,000   6,000   6,500   6,500   (20.8)  (26.9)
    Investment securities available-for-sale  906,052   861,377   817,896   775,177   750,098   5.2   20.8 
    Loans held for sale (1)  1,116,519   1,042,756   1,064,911   1,076,741   1,175,470   7.1   (5.0)
    Loans and leases held for investment (2)  5,521,262   5,418,611   5,441,423   5,456,754   5,144,930   1.9   7.3 
    Allowance for credit losses on loans and leases  (63,584)  (59,681)  (57,848)  (52,417)  (52,306)  6.5   21.6 
    Net loans and leases  5,457,678   5,358,930   5,383,575   5,404,337   5,092,624   1.8   7.2 
    Premises and equipment, net  240,196   244,212   249,069   253,774   259,267   (1.6)  (7.4)
    Foreclosed assets  620   883   1,793   4,185   4,155   (29.8)  (85.1)
    Servicing assets  33,574   33,968   36,966   37,744   33,918   (1.2)  (1.0)
    Other assets  250,254   242,181   244,152   223,875   231,951   3.3   7.9 
    Total assets $8,213,393  $8,137,341  $8,243,186  $8,417,875  $7,872,303   0.9   4.3 
    Liabilities and Shareholders’ Equity                            
    Liabilities                            
    Deposits:                            
    Noninterest-bearing $89,279  $77,026  $89,768  $75,794  $75,287   15.9   18.6 
    Interest-bearing  7,022,765   6,739,587   6,431,065   6,240,210   5,637,541   4.2   24.6 
    Total deposits  7,112,044   6,816,613   6,520,833   6,316,004   5,712,828   4.3   24.5 
    Borrowings  318,289   575,021   1,012,431   1,465,961   1,542,093   (44.6)  (79.4)
    Other liabilities  67,927   56,284   52,575   45,550   49,532   20.7   37.1 
    Total liabilities  7,498,260   7,447,918   7,585,839   7,827,515   7,304,453   0.7   2.7 
    Shareholders’ equity                            
    Preferred stock, no par value, 1,000,000 shares
    authorized, none issued or outstanding    		  —   —   —   —   —   —   — 
    Class A common stock (voting)  310,970   304,085   299,809   298,525   298,890   2.3   4.0 
    Class B common stock (non-voting)  1,324   5,404   5,404   7,330   11,729   (75.5)  (88.7)
    Retained earnings  400,893   371,869   339,011   275,377   235,724   7.8   70.1 
    Accumulated other comprehensive income  1,946   8,065   13,123   9,128   21,507   (75.9)  (91.0)
    Total shareholders' equity  715,133   689,423   657,347   590,360   567,850   3.7   25.9 
    Total liabilities and shareholders’ equity $8,213,393  $8,137,341  $8,243,186  $8,417,875  $7,872,303   0.9   4.3 

          (1)   Includes $25.3 million, $27.4 million, $29.0 million, $35.9 million and $36.1 million measured at fair value for the quarters ended December 31, 2021, September 30, 2021, June 30, 2021, March 31, 2021 and December 31, 2020, respectively.

          (2)   Includes $645.2 million, $698.0 million, $743.2 million, $790.8 million and $815.4 million measured at fair value for the quarters ended December 31, 2021, September 30, 2021, June 30, 2021, March 31, 2021 and December 31, 2020, respectively.

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

      Twelve months ended 
      December 31, 2021  December 31, 2020 
    Interest income        
    Loans and fees on loans $347,738  $270,770 
    Investment securities, taxable  12,533   15,016 
    Other interest earning assets  942   2,622 
    Total interest income  361,213   288,408 
    Interest expense        
    Deposits  59,740   89,726 
    Borrowings  4,688   3,959 
    Total interest expense  64,428   93,685 
    Net interest income  296,785   194,723 
    Provision for loan and lease credit losses  15,210   40,658 
    Net interest income after provision for loan and
    lease credit losses    		  281,575   154,065 
    Noninterest income        
    Loan servicing revenue  25,219   26,600 
    Loan servicing asset revaluation  (11,726)  (9,958)
    Net gains on sales of loans  67,280   49,473 
    Net gain (loss) on loans accounted for under the fair
    value option    		  4,257   (13,083)
    Equity method investments income (loss)  (1,716)  (14,691)
    Equity security investments gains (losses), net  44,752   14,909 
    Gain on sale of investment securities available-for-sale, net  —   1,880 
    Lease income  10,263   10,508 
    Management fee income  6,378   6,352 
    Other noninterest income  15,493   14,010 
    Total noninterest income  160,200   86,000 
    Noninterest expense        
    Salaries and employee benefits  124,932   112,525 
    Travel expense  5,809   3,451 
    Professional services expense  15,135   6,359 
    Advertising and marketing expense  5,002   3,510 
    Occupancy expense  8,423   8,757 
    Data processing expense  18,181   12,344 
    Equipment expense  17,950   17,603 
    Other loan origination and maintenance expense  13,529   10,790 
    Renewable energy tax credit investment impairment  3,187   — 
    FDIC insurance  7,070   7,473 
    Other expense  11,769   9,864 
    Total noninterest expense  230,987   192,676 
    Income before taxes  210,788   47,389 
    Income tax expense (benefit)  43,793   (12,154)
    Net income $166,995  $59,543 
    Earnings per share        
    Basic $3.87  $1.46 
    Diluted $3.71  $1.43 
    Weighted average shares outstanding        
    Basic  43,169,935   40,677,496 
    Diluted  45,071,304   41,771,250 

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

      As of and for the three months ended 
      4Q 2021  3Q 2021  2Q 2021  1Q 2021  4Q 2020 
    Income Statement Data                    
    Net income $30,147  $33,839  $63,582  $39,427  $29,588 
    Per Common Share                    
    Net income, diluted $0.66  $0.76  $1.41  $0.88  $0.68 
    Dividends declared  0.03   0.03   0.03   0.03   0.03 
    Book value  16.39   15.89   15.19   13.74   13.38 
    Tangible book value (1)  16.31   15.80   15.10   13.65   13.28 
    Performance Ratios                    
    Return on average assets (annualized)  1.47%  1.64%  3.01%  1.98%  1.49%
    Return on average equity (annualized)  16.80   19.67   41.30   26.89   19.86 
    Net interest margin  4.02   3.99   3.63   3.81   3.33 
    Efficiency ratio (1)  53.59   53.84   40.66   57.69   71.73 
    Noninterest income to total revenue  30.30   24.54   49.52   30.75   14.78 
    Selected Loan Metrics                    
    Loans and leases originated $1,083,623  $1,063,190  $1,153,693  $1,180,219  $808,010 
    Outstanding balance of sold loans serviced  3,298,828   3,212,271   3,134,068   3,216,727   3,205,623 
    Asset Quality Ratios                    
    Allowance for credit losses to loans and leases held for
    investment (3)    		  1.30%  1.26%  1.23%  1.12%  1.21%
    Net charge-offs (3) $15  $2,485  $2,417  $(984) $537 
    Net charge-offs to average loans and leases held for
    investment (2) (3)    		  —%  0.21%  0.21%  (0.09)%  0.05%
                         
    Nonperforming loans and leases at historical cost (3) (4)                    
    Unguaranteed $15,987  $20,450  $22,458  $24,738  $20,078 
    Guaranteed  26,546   28,888   25,551   32,633   26,032 
    Total  42,533   49,338   48,009   57,371   46,110 
    Unguaranteed nonperforming historical cost loans and
    leases, to loans and leases held for investment (3) (4)    		  0.33%  0.43%  0.48%  0.53%  0.46%
                         
    Nonperforming loans at fair value (5)                    
    Unguaranteed $4,791  $6,303  $5,503  $5,838  $5,387 
    Guaranteed  33,471   36,708   34,323   34,396   30,112 
    Total  38,262   43,011   39,826   40,234   35,499 
    Unguaranteed nonperforming fair value loans to loans
    held for investment (5)    		  0.74%  0.90%  0.74%  0.74%  0.66%
    Capital Ratios                    
    Common equity tier 1 capital (to risk-weighted assets)  12.38%  12.56%  12.45%  12.16%  12.15%
    Tier 1 leverage capital (to average assets)  8.87   8.82   8.70   8.50   8.40 

    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) The quarter ended December 31, 2020 excludes one $6.1 million hotel loan classified as held for sale.
    (5) 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, 2021    		  Three months ended
    September 30, 2021    		 
      Average Balance  Interest  Average Yield/Rate  Average Balance  Interest  Average Yield/Rate 
    Interest earning assets:                        
    Interest earning balances in other banks $331,077  $168   0.20% $452,830  $221   0.19%
    Federal funds sold  8,515   3   0.14   9,260   3   0.13 
    Investment securities  879,138   3,455   1.56   808,697   3,174   1.56 
    Loans held for sale  1,059,672   14,661   5.49   1,098,940   15,090   5.45 
    Loans and leases held for investment (1)  5,391,283   73,916   5.44   5,366,088   74,298   5.49 
    Total interest earning assets  7,669,685   92,203   4.77   7,735,815   92,786   4.76 
    Less: allowance for credit losses on loans and
    leases    		  (59,088)          (56,411)        
    Non-interest earning assets  569,493           581,771         
    Total assets $8,180,090          $8,261,175         
    Interest bearing liabilities:                        
    Interest bearing checking $—  $—   —% $—  $—   —%
    Savings  3,470,813   4,487   0.51   3,367,168   4,359   0.51 
    Money market accounts  97,230   61   0.25   104,576   74   0.28 
    Certificates of deposit  3,337,399   9,269   1.10   3,156,834   9,726   1.22 
    Total interest bearing deposits  6,905,442   13,817   0.79   6,628,578   14,159   0.85 
    Borrowings  427,044   748   0.69   818,511   892   0.43 
    Total interest bearing liabilities  7,332,486   14,565   0.79   7,447,089   15,051   0.80 
    Non-interest bearing deposits  79,479           79,006         
    Non-interest bearing liabilities  50,190           46,907         
    Shareholders' equity  717,935           688,173         
    Total liabilities and shareholders' equity $8,180,090          $8,261,175         
    Net interest income and interest rate spread     $77,638   3.98%     $77,735   3.96%
    Net interest margin          4.02           3.99 
    Ratio of average interest-earning assets to average
    interest-bearing liabilities    		          104.60%          103.88%

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

    Live Oak Bancshares, Inc.   
    GAAP to Non-GAAP Reconciliation
    (Dollars in thousands)

      As of and for the three months ended 
      4Q 2021  3Q 2021  2Q 2021  1Q 2021  4Q 2020 
    Total shareholders’ equity $715,133  $689,423  $657,347  $590,360  $567,850 
    Less:                    
    Goodwill  1,797   1,797   1,797   1,797   1,797 
    Other intangible assets  2,026   2,065   2,103   2,141   2,179 
    Tangible shareholders’ equity (a) $711,310  $685,561  $653,447  $586,422  $563,874 
    Shares outstanding (c)  43,619,070   43,381,014   43,264,460   42,951,344   42,452,446 
    Total assets $8,213,393  $8,137,341  $8,243,186  $8,417,875  $7,872,303 
    Less:                    
    Goodwill  1,797   1,797   1,797   1,797   1,797 
    Other intangible assets  2,026   2,065   2,103   2,141   2,179 
    Tangible assets (b) $8,209,570  $8,133,479  $8,239,286  $8,413,937  $7,868,327 
    Tangible shareholders’ equity to tangible assets
    (a/b)    		  8.66%  8.43%  7.93%  6.97%  7.17%
    Tangible book value per share (a/c) $16.31  $15.80  $15.10  $13.65  $13.28 
    Efficiency ratio:                    
    Noninterest expense (d) $59,698  $55,459  $57,558  $58,272  $52,435 
    Net interest income  77,638   77,735   71,462   69,950   62,301 
    Noninterest income  33,756   25,276   70,111   31,057   10,803 
    Less: gain on sale of securities  —   —   —   —   — 
    Adjusted operating revenue (e) $111,394  $103,011  $141,573  $101,007  $73,104 
    Efficiency ratio (d/e)  53.59%  53.84%  40.66%  57.69%  71.73%

    Live Oak Bancshares, Inc.
    GAAP to Non-GAAP Reconciliation (Continued)
    (Dollars in thousands)

      Three months ended  Twelve months ended 
      4Q 2021  3Q 2021  4Q 2020  4Q 2021  4Q 2020 
    Reconciliation of net income to non-GAAP net income:                    
    Net income $30,147  $33,839  $29,588  $166,995  $59,543 
    Loss (gain) on sale of aircraft  —   —   6   (114)  6 
    Impairment on aircraft held for sale  —   —   244   —   1,263 
    Income tax effects and adjustments for non-GAAP
    items *    		  —   —   (60)  27   (305)
    Non-GAAP net income $30,147  $33,839  $29,778  $166,908  $60,507 
    * Estimated at 24.0%                    
    Non-GAAP earnings per share:                    
    Basic $0.69  $0.78  $0.72  $3.87  $1.49 
    Diluted $0.66  $0.76  $0.69  $3.70  $1.45 
    Weighted-average shares outstanding:                    
    Basic  43,492,172   43,329,889   41,320,851   43,169,935   40,677,496 
    Diluted  45,474,530   45,040,690   43,333,707   45,071,304   41,771,250 
    Reconciliation of financial statement line items as
    reported to non-GAAP:    		                    
    Noninterest income, as reported $33,756  $25,276  $10,803  $160,200  $86,000 
    Gain on sale of aircraft  —   —   —   (114)  — 
    Noninterest income, non-GAAP $33,756  $25,276  $10,803  $160,086  $86,000 
    Noninterest expense, as reported $59,698  $55,459  $52,435  $230,987  $192,676 
    Loss on sale of aircraft  —   —   (6)  —   (6)
    Impairment on aircraft held for sale  —   —   (244)  —   (1,263)
    Noninterest expense, non-GAAP $59,698  $55,459  $52,185  $230,987  $191,407 
    Income before taxes, as reported $47,778  $43,233  $12,035  $210,788  $47,389 
    Loss (gain) on sale of aircraft  —   —   6   (114)  6 
    Impairment on aircraft held for sale  —   —   244   —   1,263 
    Income before taxes, non-GAAP $47,778  $43,233  $12,285  $210,674  $48,658 
    Income tax expense (benefit), as reported $17,631  $9,394  $(17,553) $43,793  $(12,154)
    Income tax effects and adjustments for non-GAAP
    items    		  —   —   60   (27)  305 
    Income tax expense (benefit), non-GAAP $17,631  $9,394  $(17,493) $43,766  $(11,849)

    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.


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