Live Oak Bancshares, Inc. [LOB] Filings

10-Q 1 lob-10q_20220331.htm 10-Q lob-10q_20220331.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2022

☐	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 ☒ No ☐

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 ☒ No ☐

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	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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. ☐

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

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 May 3, 2022, there were 43,801,292 shares of the registrant’s voting common stock outstanding.

Live Oak Bancshares, Inc.

Form 10-Q

For the Quarterly Period Ended March 31, 2022

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)		1
	Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021		1
	Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2022 and 2021		2
	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2022 and 2021		3
	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three Months Ended March 31, 2022 and 2021		4
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021		5
	Notes to Unaudited Condensed Consolidated Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		32
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		49
Item 4.	Controls and Procedures		50
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		51
Item 1A.	Risk Factors		51
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		51
Item 3.	Defaults Upon Senior Securities		51
Item 4.	Mine Safety Disclosures		51
Item 5.	Other Information		51
Item 6.	Exhibits		52
	Index to Exhibits		52
	Signatures		53

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Live Oak Bancshares, Inc.

Condensed Consolidated Balance Sheets

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

(Dollars in thousands)

	March 31, 2022			December 31, 2021
Assets
Cash and due from banks	$	477,778		$	187,203
Federal funds sold		29,993			16,547
Certificates of deposit with other banks		4,250			4,750
Investment securities available-for-sale		844,577			906,052
Loans held for sale (includes $25,056 and $25,310 measured at fair value, respectively)		1,028,635			1,116,519
Loans and leases held for investment (includes $600,571 and $645,201 measured at fair value, respectively)		5,738,241			5,521,262
Allowance for credit losses on loans and leases		(63,058	)		(63,584	)
Net loans and leases		5,675,183			5,457,678
Premises and equipment, net		254,865			240,196
Foreclosed assets		198			620
Servicing assets		36,286			33,574
Other assets		268,201			250,254
Total assets	$	8,619,966		$	8,213,393
Liabilities and Shareholders’ Equity
Liabilities
Deposits:
Noninterest-bearing	$	86,342		$	89,279
Interest-bearing		7,550,821			7,022,765
Total deposits		7,637,163			7,112,044
Borrowings		196,911			318,289
Other liabilities		72,565			67,927
Total liabilities		7,906,639			7,498,260
Shareholders’ equity
Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding at March 31, 2022 and December 31, 2021		—			—
Class A common stock, no par value, 100,000,000 shares authorized, 43,787,660 and 43,494,046 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively		315,607			310,970
Class B common stock, no par value, 10,000,000 shares authorized, none issued or outstanding at March 31, 2022 and 125,024 shares issued and outstanding at December 31, 2021		—			1,324
Retained earnings		434,226			400,893
Accumulated other comprehensive (loss) income		(36,506	)		1,946
Total shareholders’ equity		713,327			715,133
Total liabilities and shareholders’ equity	$	8,619,966		$	8,213,393

*	Derived from audited consolidated financial statements.

See Notes to Unaudited Condensed Consolidated Financial Statements

Live Oak Bancshares, Inc.

Condensed Consolidated Statements of Income

For the three months ended March 31, 2022 and 2021 (unaudited)

(Dollars in thousands, except per share data)

	Three Months Ended March 31,
	2022			2021
Interest income
Loans and fees on loans	$	89,198		$	84,993
Investment securities, taxable		3,399			2,929
Other interest earning assets		185			303
Total interest income		92,782			88,225
Interest expense
Deposits		14,348			16,944
Borrowings		655			1,331
Total interest expense		15,003			18,275
Net interest income		77,779			69,950
Provision for (recovery of) loan and lease credit losses		1,836			(873	)
Net interest income after provision for (recovery of) loan and lease credit losses		75,943			70,823
Noninterest income
Loan servicing revenue		6,356			6,434
Loan servicing asset revaluation		(1,569	)		1,493
Net gains on sales of loans		20,977			11,929
Net gain on loans accounted for under the fair value option		516			4,218
Equity method investments income (loss)		(2,124	)		(1,157	)
Equity security investments gains (losses), net		(44	)		105
Lease income		2,503			2,599
Management fee income		1,488			1,934
Other noninterest income		4,565			3,502
Total noninterest income		32,668			31,057
Noninterest expense
Salaries and employee benefits		38,507			31,366
Travel expense		1,897			659
Professional services expense		2,791			3,831
Advertising and marketing expense		1,729			652
Occupancy expense		2,327			2,112
Technology expense		6,053			4,878
Equipment expense		3,816			3,701
Other loan origination and maintenance expense		3,113			3,327
Renewable energy tax credit investment impairment		—			3,127
FDIC insurance		1,972			1,765
Other expense		3,509			2,854
Total noninterest expense		65,714			58,272
Income before taxes		42,897			43,608
Income tax expense		8,388			4,181
Net income	$	34,509		$	39,427
Basic earnings per share	$	0.79		$	0.92
Diluted earnings per share	$	0.76		$	0.88

See Notes to Unaudited Condensed Consolidated Financial Statements

Live Oak Bancshares, Inc.

Condensed Consolidated Statements of Comprehensive Income

For the three months ended March 31, 2022 and 2021 (unaudited)

(Dollars in thousands)

	Three Months Ended March 31,
	2022			2021
Net income	$	34,509		$	39,427
Other comprehensive loss before tax:
Net unrealized loss on investment securities arising during the period		(50,594	)		(16,288	)
Reclassification adjustment for gain on sale of securities available-for-sale included in net income		—			—
Other comprehensive loss before tax		(50,594	)		(16,288	)
Income tax benefit		12,142			3,909
Other comprehensive loss, net of tax		(38,452	)		(12,379	)
Total comprehensive (loss) income	$	(3,943	)	$	27,048

See Notes to Unaudited Condensed Consolidated Financial Statements

Live Oak Bancshares, Inc.

Condensed Consolidated Statements of Changes in Shareholders’ Equity

For the three months ended March 31, 2022 and 2021 (unaudited)

(Dollars in thousands)

	Three Months Ended
	Common stock										Accumulated other
	Shares								Retained		comprehensive			Total
	Class A		Class B			Amount			earnings		income (loss)			equity
Balance at December 31, 2021		43,494,046		125,024		$	312,294		$	400,893	$	1,946		$	715,133
Net income		—		—			—			34,509		—			34,509
Other comprehensive loss		—		—			—			—		(38,452	)		(38,452	)
Issuance of restricted stock		95,537		—			—			—		—			—
Tax withholding related to vesting of restricted stock and other		—		—			(2,894	)		—		—			(2,894	)
Employee stock purchase program		11,119		—			534			—		—			534
Stock option exercises		61,934		—			719			—		—			719
Stock option based compensation expense		—		—			391			—		—			391
Restricted stock expense		—		—			4,563			—		—			4,563
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		—		—			—			136		—			136
Cash dividends ($0.03 per share)		—		—			—

Live Oak Bancshares, Inc. [LOB] Filings
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]