Live Oak Bancshares, Inc. [LOB] Filings

10-Q 1 lob-20240630.htm 10-Q lob-20240630

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 June 30, 2024


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)

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	New York Stock Exchange LLC

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

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 August 5, 2024, there were 45,035,289 shares of the registrant’s voting common stock outstanding.

Table of Contents

Live Oak Bancshares, Inc.

Form 10-Q

For the Quarterly Period Ended June 30, 2024

TABLE OF CONTENTS


		Page
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets as of June 30 , 2024 and December 31, 2023	1
	Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30 , 2024 and 2023	2
	Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30 , 2024 and 2023	3
	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three and Six Months Ended June 30 , 2024 and 2023	4
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30 , 2024 and 2023	6
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	62
Item 4.	Controls and Procedures	63
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	64
Item 1A.	Risk Factors	64
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	64
Item 3.	Defaults Upon Senior Securities	64
Item 4.	Mine Safety Disclosures	64
Item 5.	Other Information	64
Item 6.	Exhibits	65
	Index to Exhibits	65
	Signatures	66

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Live Oak Bancshares, Inc.

Condensed Consolidated Balance Sheets

As of June 30, 2024 (unaudited) and December 31, 2023*

(Dollars in thousands)


	June 30, 2024		December 31, 2023
Assets
Cash and due from banks	$	615,449	$	582,540

Certificates of deposit with other banks	250		250
Investment securities available-for-sale	1,151,195		1,126,160
Loans held for sale	363,632		387,037
Loans and leases held for investment (includes $363,017 and $388,036 measured at fair value, respectively)	9,172,134		8,633,847
Allowance for credit losses on loans and leases	(137,867)		(125,840)
Net loans and leases	9,034,267		8,508,007
Premises and equipment, net	267,864		257,881
Foreclosed assets	8,015		6,481
Servicing assets (includes $51,303 and $48,186 measured at fair value, respectively)	51,528		48,591
Other assets	376,370		354,476
Total assets	$	11,868,570	$	11,271,423
Liabilities and shareholders’ equity
Liabilities
Deposits:
Noninterest-bearing	$	264,013	$	259,270
Interest-bearing	10,443,018		10,015,749
Total deposits	10,707,031		10,275,019
Borrowings	117,745		23,354
Other liabilities	82,745		70,384
Total liabilities	10,907,521		10,368,757
Shareholders’ equity
Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding at June 30, 2024 and December 31, 2023	—		—
Class A common stock, no par value, 100,000,000 shares authorized, 45,003,856 and 44,617,673 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively	356,381		344,568
Class B common stock, no par value, 10,000,000 shares authorized, none issued or outstanding at June 30, 2024 and December 31, 2023	—		—
Retained earnings	695,172		642,817
Accumulated other comprehensive loss	(90,504)		(84,719)
Total shareholders’ equity	961,049		902,666
Total liabilities and shareholders’ equity	$	11,868,570	$	11,271,423

*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 six months ended June 30, 2024 and 2023 (unaudited)

(Dollars in thousands, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Interest income
Loans and fees on loans	$	181,840	$	152,362	$	357,850	$	291,414
Investment securities, taxable	9,219		8,503		18,173		16,050
Other interest earning assets	7,389		8,847		14,845		13,664
Total interest income	198,448		169,712		390,868		321,128
Interest expense
Deposits	105,358		85,003		207,356		152,598
Borrowings	1,770		407		2,081		2,211
Total interest expense	107,128		85,410		209,437		154,809
Net interest income	91,320		84,302		181,431		166,319
Provision for credit losses	11,765		13,028		28,129		32,049
Net interest income after provision for credit losses	79,555		71,274		153,302		134,270
Noninterest income
Loan servicing revenue	7,347		6,687		14,971		13,067
Loan servicing asset revaluation	(2,878)		(2,831)		(5,622)		(2,475)
Net gains on sales of loans	14,395		10,804		25,897		20,979
Net gain (loss) on loans accounted for under the fair value option	172		1,728		(47)		(2,801)
Equity method investments (loss) income	(1,767)		(2,055)		(6,789)		(5,007)
Equity security investments gains (losses), net	161		121		(368)		198
Lease income	2,423		2,535		4,876		5,070
Management fee income	3,271		3,266		6,542		6,738
Other noninterest income	11,035		3,901		20,796		7,966
Total noninterest income	34,159		24,156		60,256		43,735
Noninterest expense
Salaries and employee benefits	46,255		43,066		93,530		87,831
Travel expense	2,328		2,770		4,766		5,181
Professional services expense	3,061		1,996		4,939		2,923
Advertising and marketing expense	3,004		3,009		6,696		6,612
Occupancy expense	2,388		2,205		4,635		4,130
Technology expense	7,996		8,005		15,719		15,734
Equipment expense	3,511		4,023		6,585		7,841
Other loan origination and maintenance expense	3,659		3,442		7,570		7,369
Renewable energy tax credit investment impairment (recovery)	170		—		(757)		69
FDIC insurance	2,649		5,061		5,849		8,464

Other expense	2,635		2,880		5,861		9,265
Total noninterest expense	77,656		76,457		155,393		155,419
Income before taxes	36,058		18,973		58,165		22,586
Income tax expense	9,095		1,429		3,616		4,644
Net income	$	26,963	$	17,544	$	54,549	$	17,942
Basic earnings per share	$	0.60	$	0.40	$	1.22	$	0.41
Diluted earnings per share	$	0.59	$	0.39	$	1.20	$	0.40

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 six months ended June 30, 2024 and 2023 (unaudited)

(Dollars in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net income	$	26,963	$	17,544	$	54,549	$	17,942
Other comprehensive income (loss) before tax:
Net unrealized gain (loss) on investment securities available-for-sale during the period	964		(17,348)		(7,612)		(6,916)
Reclassification adjustment for gain on sale of securities available-for-sale included in net income	—		—		—		—
Other comprehensive income (loss) before tax	964		(17,348)		(7,612)		(6,916)
Income tax (expense) benefit	(231)		4,163		1,827		1,654
Other comprehensive income (loss), net of tax	733		(13,185)		(5,785)		(5,262)
Total comprehensive income	$	27,696	$	4,359	$	48,764	$	12,680

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 six months ended June 30, 2024 and 2023 (unaudited)

(Dollars in thousands)


	Three Months Ended
	Common stock				Retained earnings		Accumulated other comprehensive (loss) income		Total equity
	Shares		Amount
	Class A	Class B
Balance at March 31, 2024	44,938,673	—	$	349,648	$	669,307	$	(91,237)	$	927,718
Net income	—	—	—		26,963		—		26,963
Other comprehensive income	—	—	—		—		733		733
Issuance of restricted stock	45,613	—	—		—		—		—
Tax withholding related to vesting of restricted stock and other	—	—	(337)		—		—		(337)

Stock option exercises	19,570	—	277		—		—		277

Restricted stock compensation expense	—	—	6,793		—		—		6,793
Transfer from retained earnings to other assets for pro rata portion of equity method investee stock compensation expense	—	—	—		252		—		252
Cash dividends ($0.03 per share)	—	—	—		(1,350)		—		(1,350)
Balance at June 30, 2024	45,003,856	—	$	356,381	$	695,172	$	(90,504)	$	961,049

Balance at March 31, 2023	44,290,840	—	$	334,672	$	572,530	$	(84,395)	$	822,807
Net income	—	—	—		17,544		—		17,544
Other comprehensive loss	—	—	—		—		(13,185)		(13,185)
Issuance of restricted stock	38,145	—	—		—		—		—
Tax withholding related to vesting of restricted stock and other	—	—	(249)		—		—		(249)
Stock option exercises	22,730	—	297		—		—		297
Stock option compensation expense	—	—	4		—		—		4
Restricted stock compensation expense	—	—	6,308		—		—		6,308
Transfer from retained earnings to other assets for pro rata portion of equity method investee stock compensation expense	—	—	—		292		—		292
Cash dividends ($0.03 per share)	—	—	—		(1,330)		—		(1,330)
Balance at June 30, 2023	44,351,715	—	$	341,032	$	589,036	$	(97,580)	$	832,488

Table of Contents

Live Oak Bancshares, Inc.

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

For the three and six months ended June 30, 2024 and 2023 (unaudited)

(Dollars in thousands)


	Six Months Ended
	Common stock				Retained earnings		Accumulated other comprehensive income (loss)		Total equity
	Shares		Amount
	Class A	Class B
Balance at December 31, 2023	44,617,673	—	$	344,568	$	642,817	$	(84,719)	$	902,666
Net income	—	—	—		54,549		—		54,549
Other comprehensive loss	—	—	—		—		(5,785)		(5,785)
Issuance of restricted stock	169,283	—	—		—		—		—
Tax withholding related to vesting of restricted stock and other	—	—	(3,394)		—		—		(3,394)
Employee stock purchase program	18,485	—	702		—		—		702
Stock option exercises	198,415	—	1,406		—		—		1,406
Stock option based compensation expense	—	—	—		—		—		—
Restricted stock compensation expense	—	—	13,099		—		—		13,099

Transfer from retained earnings to other assets for pro rata portion of equity method investee stock compensation expense	—	—	—		501		—		501
Cash dividends ($0.06 per share)	—	—	—		(2,695)		—		(2,695)
Balance at June 30, 2024	45,003,856	—	$	356,381	$	695,172	$	(90,504)	$	961,049

Balance at December 31, 2022	44,061,244	—	$	330,854	$	572,497	$	(92,318)	$	811,033
Net income	—	—	—		17,942		—		17,942
Other comprehensive loss	—	—	—		—		(5,262)		(5,262)
Issuance of restricted stock	201,019	—	—		—		—		—
Tax withholding related to vesting of restricted stock and other	—	—	(3,602)		—		—		(3,602)
Employee stock purchase program	31,059	—	631		—		—		631
Stock option exercises	58,393	—	664		—		—		664
Stock option based compensation expense	—	—	137		—		—		137
Restricted stock compensation expense	—	—	12,348		—		—		12,348
Adoption of ASU 2022-02	—	—	—		676		—		676
Transfer from retained earnings to other assets for pro rata portion of equity method investee stock compensation expense	—	—	—		578		—		578
Cash dividends ($0.06 per share)	—	—	—		(2,657)		—		(2,657)
Balance at June 30, 2023	44,351,715	—	$	341,032	$	589,036	$	(97,580)	$	832,488

See Notes to Unaudited Condensed Consolidated Financial Statements

Table of Contents

Live Oak Bancshares, Inc.

Condensed Consolidated Statements of Cash Flows

For the six months ended June 30, 2024 and 2023 (unaudited)

(Dollars in thousands)


	Six Months Ended June 30,
	2024		2023
Cash flows from operating activities
Net income	$	54,549	$	17,942
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	10,324		10,447
Provision for credit losses	28,129		32,049
(Accretion) amortization of (discount) premium on securities, net	(497)		132
Deferred tax benefit	(278)		(9,723)
Originations of loans held for sale	(467,005)		(425,441)
Proceeds from sales of loans held for sale	577,817		649,306
Net gains on sale of loans held for sale	(25,897)		(20,979)
Net loss on sale of foreclosed assets	9		—
Net loss on loans accounted for under fair value option	47		2,801
Net change in servicing assets	(2,937)		(4,719)
Net gain on disposal of long-lived asset	(6,663)		—
Net loss on disposal of property and equipment	177		402

Equity method investments loss (income)	6,789		5,007
Equity security investments losses (gains), net	368		(198)
Gain on equity warrant assets	(6,246)		—
Renewable energy tax credit investment (recovery) impairment	(757)		69
Stock option compensation expense	—		137
Restricted stock compensation expense	13,099		12,348
Stock based compensation excess tax benefit (deficiency)	988		(574)
Lease right-of-use assets and liabilities, net	195		(30)
Changes in assets and liabilities:
Other assets	(13,536)		20,429
Other liabilities	6,094		5,533
Net cash provided by operating activities	174,769		294,938
Cash flows from investing activities
Purchases of investment securities available-for-sale	(109,829)		(174,710)
Proceeds from maturities, calls, and principal paydown of investment securities available-for-sale	77,679		49,235
Proceeds from SBA reimbursement/sale of foreclosed assets, net	583		—

Loan and lease originations and principal collections, net	(613,385)		(689,804)
Proceeds from sale of long-lived asset	22,641		—
Purchases of equity security investments	(3,676)		(1,206)
Purchases of equity method investments	(1,872)		(4,323)
Proceeds from equity security investment	957		—
Proceeds from equity method investments	524		—
Proceeds from sale of premises and equipment	978		—
Purchases of premises and equipment, net	(38,882)		(16,968)
Net cash used by investing activities	(664,282)		(837,776)

Table of Contents

Live Oak Bancshares, Inc.

Condensed Consolidated Statements of Cash Flows (Continued)

For the six months ended June 30, 2024 and 2023 (unaudited)

(Dollars in thousands)


	Six Months Ended June 30,
	2024		2023
Cash flows from financing activities
Net increase in deposits	$	432,012	$	994,183
Proceeds from borrowings	99,462		2,906,039
Repayment of borrowings	(5,071)		(2,960,925)
Stock option exercises	1,406		664
Employee stock purchase program	702		631
Withholding cash issued in lieu of restricted stock and other	(3,394)		(3,602)
Shareholder dividend distributions	(2,695)		(2,657)
Net cash provided by financing activities	522,422		934,333
Net increase in cash and cash equivalents	32,909		391,495
Cash and cash equivalents, beginning	582,540		416,636
Cash and cash equivalents, ending	$	615,449	$	808,131

Supplemental disclosures of cash flow information
Interest paid	$	209,811	$	153,724
Income tax paid, net	22,888		5,233

Supplemental disclosures of noncash investing and financing activities
Unrealized holding losses on investment securities available-for-sale, net of taxes	$	(5,785)	$	(5,262)
Transfers from loans and leases to foreclosed real estate and other repossessions or SBA receivable	2,125		14,908

Live Oak Bancshares, Inc. [LOB] Filings
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10-K	[2024-02-22]
10-Q	[2023-11-03]
10-Q	[2023-08-02]
10-Q	[2023-05-03]
10-K	[2023-02-23]
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]