Live Oak Bancshares, Inc. [LOB] Filings

10-Q 1 lob-20220930.htm 10-Q lob-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


x			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2022


o			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ________ to ________.

Commission file number: 001-37497

LIVE OAK BANCSHARES, INC.

(Exact name of registrant as specified in its charter)


North Carolina			26-4596286
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

1741 Tiburon Drive Wilmington, North Carolina			28403
(Address of principal executive offices)			(Zip Code)

(910) 790-5867


(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	x	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	o
		Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Voting Common Stock, no par value per share	LOB	The NASDAQ Stock Market LLC

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of November 1, 2022, there were 43,984,400 shares of the registrant’s voting common stock outstanding.

Table of Contents

Live Oak Bancshares, Inc.

Form 10-Q

For the Quarterly Period Ended September 30, 2022

TABLE OF CONTENTS


		Page
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021	1
	Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2022 and 2021	2
	Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2022 and 2021	3
	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three and Nine Months Ended September 30, 2022 and 2021	4
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021	6
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	60
Item 4.	Controls and Procedures	61
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	63
Item 1A.	Risk Factors	63
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	63
Item 3.	Defaults Upon Senior Securities	63
Item 4.	Mine Safety Disclosures	63
Item 5.	Other Information	63
Item 6.	Exhibits	64
	Index to Exhibits	64
	Signatures	65

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Live Oak Bancshares, Inc.

Condensed Consolidated Balance Sheets

As of September 30, 2022 (unaudited) and December 31, 2021*

(Dollars in thousands)


	September 30, 2022		December 31, 2021
Assets
Cash and due from banks	$	335,046	$	187,203
Federal funds sold	68,324		16,547
Certificates of deposit with other banks	4,250		4,750
Investment securities available-for-sale	1,005,372		906,052
Loans held for sale (includes $25,310 measured at fair value at December 31, 2021)	537,649		1,116,519
Loans and leases held for investment (includes $512,183 and $645,201 measured at fair value, respectively)	6,853,382		5,521,262
Allowance for credit losses on loans and leases	(78,291)		(63,584)
Net loans and leases	6,775,091		5,457,678
Premises and equipment, net	260,285		240,196
Foreclosed assets	1,178		620
Servicing assets	29,081		33,574
Other assets	298,374		250,254
Total assets	$	9,314,650	$	8,213,393
Liabilities and Shareholders’ Equity
Liabilities
Deposits:
Noninterest-bearing	$	170,336	$	89,279
Interest-bearing	8,234,573		7,022,765
Total deposits	8,404,909		7,112,044
Borrowings	35,616		318,289
Other liabilities	71,957		67,927
Total liabilities	8,512,482		7,498,260
Shareholders’ equity
Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding at September 30, 2022 and December 31, 2021	—		—
Class A common stock, no par value, 100,000,000 shares authorized, 43,981,350 and 43,494,046 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively	325,632		310,970
Class B common stock, no par value, 10,000,000 shares authorized, none issued or outstanding at September 30, 2022 and 125,024 shares issued and outstanding at December 31, 2021	—		1,324
Retained earnings	571,778		400,893
Accumulated other comprehensive (loss) income	(95,242)		1,946
Total shareholders’ equity	802,168		715,133
Total liabilities and shareholders’ equity	$	9,314,650	$	8,213,393

*Derived from audited consolidated financial statements.

See Notes to Unaudited Condensed Consolidated Financial Statements

Table of Contents

Live Oak Bancshares, Inc.

Condensed Consolidated Statements of Income

For the three and nine months ended September 30, 2022 and 2021 (unaudited)

(Dollars in thousands, except per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Interest income
Loans and fees on loans	$	107,880	$	89,388	$	291,235	$	259,161
Investment securities, taxable	5,506		3,174		12,951		9,078
Other interest earning assets	2,448		224		3,677		771
Total interest income	115,834		92,786		307,863		269,010
Interest expense
Deposits	31,553		14,159		64,678		45,923
Borrowings	395		892		1,586		3,940
Total interest expense	31,948		15,051		66,264		49,863
Net interest income	83,886		77,735		241,599		219,147
Provision for loan and lease credit losses	14,169		4,319		21,272		11,292
Net interest income after provision for loan and lease credit losses	69,717		73,416		220,327		207,855
Noninterest income
Loan servicing revenue	6,230		6,278		19,063		18,930
Loan servicing asset revaluation	(1,324)		(5,878)		(11,561)		(7,566)
Net gains on sales of loans	9,275		18,860		35,882		47,023
Net gain (loss) on loans accounted for under the fair value option	4,420		(1,030)		475		4,323
Equity method investments income (loss)	29,136		(1,250)		146,068		(4,685)
Equity security investments gains (losses), net	876		176		2,487		44,534
Lease income	2,516		2,527		7,529		7,742
Management fee income	2,844		1,489		6,890		4,896
Other noninterest income	3,751		4,104		12,088		11,247
Total noninterest income	57,724		25,276		218,921		126,444
Noninterest expense
Salaries and employee benefits	43,479		28,202		128,262		92,468
Travel expense	2,372		1,819		6,627		4,027
Professional services expense	2,505		4,251		9,284		11,411
Advertising and marketing expense	2,621		1,631		6,651		3,158
Occupancy expense	2,519		2,042		7,619		6,378
Technology expense	7,770		6,150		19,585		16,159
Equipment expense	3,761		3,706		11,361		11,128
Other loan origination and maintenance expense	3,376		3,489		9,511		10,123
Renewable energy tax credit investment impairment	7,721		60		7,771		3,187
FDIC insurance	2,697		1,670		6,833		5,139
Contributions and donations	191		523		6,429		2,003
Other expense	4,036		1,916		9,708		6,108
Total noninterest expense	83,048		55,459		229,641		171,289
Income before taxes	44,393		43,233		209,607		163,010
Income tax expense	1,525		9,394		35,191		26,162
Net income	$	42,868	$	33,839	$	174,416	$	136,848
Basic earnings per share	$	0.97	$	0.78	$	3.98	$	3.18
Diluted earnings per share	$	0.96	$	0.76	$	3.88	$	3.05

See Notes to Unaudited Condensed Consolidated Financial Statements

Table of Contents

Live Oak Bancshares, Inc.

Condensed Consolidated Statements of Comprehensive Income

For the three and nine months ended September 30, 2022 and 2021 (unaudited)

(Dollars in thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income	$	42,868	$	33,839	$	174,416	$	136,848
Other comprehensive loss before tax:
Net unrealized loss on investment securities available-for-sale during the period	(47,318)		(6,656)		(127,879)		(17,687)
Reclassification adjustment for gain on sale of securities available-for-sale included in net income	—		—		—		—
Other comprehensive loss before tax	(47,318)		(6,656)		(127,879)		(17,687)
Income tax benefit	11,359		1,598		30,691		4,245
Other comprehensive loss, net of tax	(35,959)		(5,058)		(97,188)		(13,442)
Total comprehensive income	$	6,909	$	28,781	$	77,228	$	123,406

See Notes to Unaudited Condensed Consolidated Financial Statements

Table of Contents

Live Oak Bancshares, Inc.

Condensed Consolidated Statements of Changes in Shareholders’ Equity

For the three and nine months ended September 30, 2022 and 2021 (unaudited)

(Dollars in thousands)


	Three Months Ended
	Common stock				Retained earnings		Accumulated other comprehensive income (loss)		Total equity
	Shares		Amount
	Class A	Class B
Balance at June 30, 2022	43,854,011	—	$	320,924	$	530,021	$	(59,283)	$	791,662
Net income	—	—	—		42,868		—		42,868
Other comprehensive loss	—	—	—		—		(35,959)		(35,959)
Issuance of restricted stock	59,603	—	—		—		—		—
Tax withholding related to vesting of restricted stock and other	—	—	(1,362)		—		—		(1,362)
Employee stock purchase program	18,264	—	532		—		—		532
Stock option exercises	49,472	—	497		—		—		497
Stock option compensation expense	—	—	261		—		—		261
Restricted stock compensation expense	—	—	4,780		—		—		4,780
Transfer from retained earnings to other assets for pro rata portion of equity method investee stock compensation expense	—	—	—		208		—		208
Cash dividends ($0.03 per share)	—	—	—		(1,319)		—		(1,319)
Balance at September 30, 2022	43,981,350	—	$	325,632	$	571,778	$	(95,242)	$	802,168

Balance at June 30, 2021	42,754,133	510,327	$	305,213	$	339,011	$	13,123	$	657,347
Net income	—	—	—		33,839		—		33,839
Other comprehensive loss	—	—	—		—		(5,058)		(5,058)
Issuance of restricted stock	16,819	—	—		—		—		—
Tax withholding related to vesting of restricted stock and other	—	—	(504)		—		—		(504)
Employee stock purchase program	7,988	—	374		—		—		374
Stock option exercises	91,747	—	693		—		—		693
Stock option compensation expense	—	—	384		—		—		384
Restricted stock compensation expense	—	—	3,329		—		—		3,329
Transfer from retained earnings to other assets for pro rata portion of equity method investee stock compensation expense	—	—	—		320		—		320
Cash dividends ($0.03 per share)	—	—	—		(1,301)		—		(1,301)
Balance at September 30, 2021	42,870,687	510,327	$	309,489	$	371,869	$	8,065	$	689,423

See Notes to Unaudited Condensed Consolidated Financial Statements

Table of Contents

Live Oak Bancshares, Inc.

Condensed Consolidated Statements of Changes in Shareholders’ Equity (Continued)

For the three and nine months ended September 30, 2022 and 2021 (unaudited)

(Dollars in thousands)


	Nine Months Ended
	Common stock				Retained earnings		Accumulated other comprehensive income (loss)		Total equity
	Shares		Amount
	Class A	Class B
Balance at December 31, 2021	43,494,046	125,024	$	312,294	$	400,893	$	1,946	$	715,133
Net income	—	—	—		174,416		—		174,416
Other comprehensive loss	—	—	—		—		(97,188)		(97,188)
Issuance of restricted stock	172,296	—	—		—		—		—
Tax withholding related to vesting of restricted stock and other	—	—	(4,453)		—		—		(4,453)
Employee stock purchase program	29,383	—	1,066		—		—		1,066
Stock option exercises	160,601	—	1,650		—		—		1,650
Stock option compensation expense	—	—	886		—		—		886
Restricted stock compensation expense	—	—	14,189		—		—		14,189
Non-voting common stock converted to voting common stock in private sale	125,024	(125,024)	—		—		—		—
Transfer from retained earnings to other assets for pro rata portion of equity method investee stock compensation expense	—	—	—		415		—		415
Cash dividends ($0.09 per share)	—	—	—		(3,946)		—		(3,946)
Balance at September 30, 2022	43,981,350	—	$	325,632	$	571,778	$	(95,242)	$	802,168

Balance at December 31, 2020	41,344,689	1,107,757	$	310,619	$	235,724	$	21,507	$	567,850
Net income	—	—	—		136,848		—		136,848
Other comprehensive loss	—	—	—		—		(13,442)		(13,442)
Issuance of restricted stock	433,642	—	—		—		—		—
Tax withholding related to vesting of restricted stock and other	—	—	(17,504)		—		—		(17,504)
Employee stock purchase program	13,674	—	670		—		—		670
Stock option exercises	481,252	—	2,857		—		—		2,857
Stock option compensation expense	—	—	1,081		—		—		1,081
Restricted stock compensation expense	—	—	11,766		—		—

Live Oak Bancshares, Inc. [LOB] Filings
10-Q	[2022-11-02]
10-Q	[2022-08-03]
10-Q	[2022-05-04]
10-K	[2022-02-24]
10-Q	[2021-11-03]
10-Q	[2021-08-04]
10-Q	[2021-05-05]
10-K	[2021-02-25]
10-Q	[2020-11-04]
10-Q	[2020-08-05]
10-Q	[2020-05-06]
10-K	[2020-02-27]
10-Q	[2019-11-07]
10-Q	[2019-08-06]
10-Q	[2019-05-07]
10-K	[2019-02-27]
10-Q	[2018-11-07]
10-Q	[2018-08-07]
10-Q	[2018-05-07]
10-K	[2018-03-08]
10-Q	[2017-11-06]
10-Q	[2017-08-07]
10-Q	[2017-05-08]
10-K	[2017-03-09]
10-Q	[2016-11-08]
10-Q	[2016-08-08]
10-Q	[2016-05-12]
10-K	[2016-03-14]
10-Q	[2015-11-13]
10-Q	[2015-09-03]
S-1	[2015-06-19]
S-1	[2014-04-14]