WILMINGTON, N.C., Jan. 25, 2023 (GLOBE NEWSWIRE) -- Live Oak Bancshares, Inc. (NYSE:LOB) ("Live Oak" or "the Company") today reported fourth quarter of 2022 net income of $1.8 million, or $0.04 per diluted share. Net income for the year ended December 31, 2022, totaled $176.2 million, or $3.92 per diluted share.

"Live Oak closed 2022 with a strong quarter as our teams once again produced more than $1 billion in loan originations, ending a banner year that also reflected continued deposit growth and $96 million in organic capital growth," said Live Oak Chairman and CEO James S. (Chip) Mahan III. "The strength and determination of the small business owners we serve is profound, and we believe our strong balance sheet and approach to lending, deposits, servicing and technology continues to set us apart as we advance our mission to serve the entrepreneurs who support our country's economy."


Year Over Year Highlights

(Dollars in thousands, except per share data)							Increase (Decrease)
		2022			2021		Dollars			Percent
Total revenue⁽¹⁾	$	565,493		$	456,985		$	108,508		24	%
Total noninterest expense		314,226			230,987			83,239		36
Income before taxes		210,324			210,788			(464	)	—
Effective tax rate		16.2	%		20.8	%		n/a		n/a
Net income	$	176,208		$	166,995		$	9,213		6	%
Diluted earnings per share		3.92			3.71			0.21		6
Loan and lease production:
Loans and leases originated	$	4,007,621		$	4,480,725		$	(473,104	)	(11	)%
% Fully funded		58.8	%		64.5	%		n/a		n/a
Total loans and leases:	$	7,898,788		$	6,637,781		$	1,261,007		19	%
Total loans and leases, excluding PPP loans:		7,885,895			6,375,903			1,509,992		24
Total assets:		9,855,498			8,213,393			1,642,105		20
Total deposits:		8,884,928			7,112,044			1,772,884		25

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


Fourth Quarter 2022 Key Measures

(Dollars in thousands, except per share data)							Increase (Decrease)
	4Q 2022			3Q 2022			Dollars			Percent		4Q 2021
Total revenue⁽¹⁾	$	104,973		$	141,610		$	(36,637	)	(26	)%	$	111,394
Total noninterest expense		84,585			83,048			1,537		2			59,698
Income before taxes		717			44,393			(43,676	)	(98	)		47,778
Effective tax rate	(149.9		)%		3.4	%		n/a		n/a			36.9	%
Net income	$	1,792		$	42,868		$	(41,076	)	(96	)%	$	30,147
Diluted earnings per share		0.04			0.96			(0.92	)	(96	)	$	0.66
Loan and lease production:
Loans and leases originated	$	1,177,688		$	1,005,235		$	172,453		17	%	$	1,083,623
% Fully funded		58.1	%		54.0	%		n/a		n/a			54.1	%

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

Loans and Leases

At December 31, 2022, the total loan and lease portfolio was $7.90 billion, 6.9% above its level at September 30, 2022 and 19.0% above its level at December 31, 2021. This growth was the product of strong origination volumes. Compared to the third quarter of 2022, loans and leases held for investment increased $490.8 million, or 7.2%, to $7.34 billion while loans held for sale increased $17.0 million, or 3.2%, to $554.6 million. Average loans and leases were $7.64 billion during the fourth quarter of 2022 compared to $7.21 billion during the third quarter of 2022. Excluding Paycheck Protection Program ("PPP") loans, the total loan and lease portfolio increased by $1.51 billion, or 23.7%, compared to December 31, 2021, and $518.7 million, or 7.0%, compared to September 30, 2022.

The total loan and lease portfolio of $7.90 billion includes $12.9 million of PPP loans, net of deferred fees and costs, at December 31, 2022. The total loan and lease portfolio at December 31, 2022, and September 30, 2022 was comprised of 57.7% and 56.6% of unguaranteed loans and leases, respectively.

Loan and lease originations totaled $1.18 billion during the fourth quarter of 2022, an increase of $172.5 million, or 17.2%, from the third quarter of 2022.

Deposits

Total deposits increased to $8.88 billion at December 31, 2022, an increase of $480.0 million compared to September 30, 2022, and an increase of $1.77 billion compared to December 31, 2021. The increase in total deposits from the prior periods provides support for the growth in the loan and lease portfolio.

Average total interest-bearing deposits for the fourth quarter of 2022 increased $269.0 million, or 3.3%, to $8.36 billion, compared to $8.09 billion for the third quarter of 2022. The ratio of average total loans and leases to average interest-bearing deposits was 91.4% for the fourth quarter of 2022 compared to 89.1% for the third quarter of 2022.

Borrowings

Borrowings totaled $83.2 million at December 31, 2022, compared to $35.6 million and $318.3 million at September 30, 2022 and December 31, 2021, respectively. During the fourth quarter of 2022, the Company increased borrowings by $47.6 million primarily related to providing short term support for growth in the loan and lease portfolio. The decrease in borrowings as compared to December 31, 2021 is primarily related to the repayment of the Federal Reserve's Paycheck Protection Liquidity Facility earlier in 2022.

Net Interest Income

Net interest income for the fourth quarter of 2022 increased to $85.9 million compared to $83.9 million for the third quarter of 2022 and $77.6 million for the fourth quarter of 2021.

The net interest margin for the fourth and third quarters of 2022 was 3.76% and 3.84%, respectively, a decrease of eight basis points quarter over quarter. This decrease was due to interest rate increases where deposits are repricing more rapidly than the Company's loan portfolio. During the fourth quarter of 2022, the average cost of interest-bearing liabilities increased by 85 basis points while the average yield on interest-earning assets increased by 67 basis points.

The increase in net interest income for the fourth quarter of 2022 compared to the fourth quarter of 2021 was driven by growth in the total loan and lease portfolio. Partially mitigating this increase was a decrease in the net interest margin arising from an increase in interest-bearing liabilities combined with average cost of funds outpacing the average yield on interest-earning assets.

Noninterest Income

Noninterest income for the fourth quarter of 2022 decreased to $19.1 million compared to $57.7 million for the third quarter of 2022 and $33.8 million for the fourth quarter of 2021. The primary drivers behind decreased noninterest income are outlined below.

The largest driver of the decrease in noninterest income for the fourth quarter of 2022 as compared to the third quarter of 2022 arose from a decrease in equity method investment income of $31.0 million. This quarter over quarter decrease of $31.0 million was principally due to the $28.4 million gain arising in the third quarter of 2022 associated with Jack Henry & Associates, Inc's acquisition of the Company's ownership in Payrailz, LLC ("Payrailz"). The $4.8 million decrease in equity method investment income for the fourth quarter of 2022 as compared to the fourth quarter of 2021 was principally related to higher levels of pro-rata losses of equity method investees in 2022.

The loan servicing asset revaluation resulted in a loss of $5.0 million for the fourth quarter of 2022 compared to a loss of $1.3 million for the third quarter of 2022 and $4.2 million for the fourth quarter of 2021. Higher levels of losses in the loan servicing asset revaluation compared to the prior quarters was largely the result of weaker economic conditions related to the rapidly rising interest rate environment.

Net gains on sales of loans was $7.4 million, a $1.9 million decrease compared to the third quarter of 2022 and a $12.9 million decrease compared to the fourth quarter of 2021. During the second quarter of 2022, the Company began significantly decreasing loan sale volumes due to unusually weak market conditions depressing market premiums. The decrease in net gains on sales of loans compared to the third quarter of 2022 and fourth quarter of 2021 was largely the result of lower volume of loan sales combined with overall weaker market conditions compared to those experienced in the prior periods. The average guaranteed loan sale premium was 105%, 108% and 110% for the fourth quarter of 2022, third quarter of 2022 and fourth quarter of 2021, respectively. The volume of guaranteed loans sold was $144.3 million for the fourth quarter of 2022 compared to $148.1 million sold in the third quarter of 2022 and $199.0 million sold in the fourth quarter of 2021.

The net gain on loans accounted for under the fair value option totaled $571 thousand for the fourth quarter of 2022, a $3.8 million decrease compared to the $4.4 million net gain for the third quarter of 2022. This reduced gain in valuation of loans accounted for under the fair value option was largely the result of the above referenced negative market pricing trends combined with continued amortization of the portfolio of loans accounted for under the fair value option.

Noninterest Expense

Noninterest expense for the fourth quarter of 2022 totaled $84.6 million compared to $83.0 million for the third quarter of 2022 and $59.7 million for the fourth quarter of 2021. The primary drivers in the noninterest expense changes are outlined below.

Salaries and employee benefits for the fourth quarter of 2022 decreased $919 thousand compared to the third quarter of 2022 and increased $10.1 million compared to the fourth quarter of 2021. Driving the quarter over quarter decrease was an additional bonus accrual of $3.0 million that was included in the third quarter of 2022 related to the earlier discussed Payrailz gain. The increase over the fourth quarter of 2021 was principally the result of continued investment in human resources to support strategic and growth initiatives.

Advertising and marketing expense increased $1.3 million compared to the third quarter of 2022 and $2.0 million compared to the fourth quarter of 2021 as a continued investment in the Company's lending and deposit market growth.

Technology expenses increased $1.1 million compared to the third quarter of 2022 and $2.4 million compared to the fourth quarter of 2021. The increase for both periods was primarily related to enhanced investments in the Company's technology resources.

The Company incurred impairment charges related to new renewable energy tax credit investment transactions of $8.4 million in the fourth quarter of 2022 compared to $7.7 million in the third quarter of 2022. Investments of this type generate a return primarily through the realization of income tax credits and other benefits; accordingly, impairment of the investment amount is recognized in conjunction with the realization of related tax benefits. These investments generated federal investment tax credits in the fourth and third quarters of 2022 of $10.3 million and $6.1 million, respectively, which are reflected in the Company's 2022 effective tax rate. Investments of this nature are part of the Company's ongoing initiative to promote renewable energy sources.

Asset Quality

During the fourth quarter of 2022, the Company recognized net charge-offs for loans carried at historical cost of $1.4 million compared to $1.7 million in the third quarter of 2022 and $15 thousand in the fourth 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, 2022, September 30, 2022 and December 30, 2021, was 0.09%, 0.12% and 0.00%, 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, 2022 and 2021, were 0.14% and 0.09%, respectively.

Unguaranteed nonperforming (nonaccrual) loans and leases, excluding $6.7 million and $2.7 million accounted for under the fair value option at December 31, 2022, and September 30, 2022, respectively, increased to $18.8 million, or 0.27% of loans and leases held for investment which are carried at historical cost, at December 31, 2022, compared to $14.3 million, or 0.23%, at September 30, 2022.

Provision for Loan and Lease Credit Losses

The provision for loan and lease credit losses for the fourth quarter of 2022 totaled $19.7 million compared to $14.2 million for the third quarter of 2022 and $3.9 million for the fourth quarter of 2021. The higher provision expense in the fourth quarter of 2022 was primarily the result of continued growth of the loan and lease portfolio combined with charge-off experience impacts and specific reserve growth related to a small number of relationships.

The allowance for credit losses on loans and leases totaled $96.6 million at December 31, 2022, compared to $78.3 million at September 30, 2022. 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 1.41% and 1.23% at December 31, 2022, and September 30, 2022, respectively.

Income Tax

Income tax benefit and related effective tax rate was $1.1 million and (149.9)% for the fourth quarter of 2022. In comparison, income tax expense and related effective tax rates for the third quarter of 2022 and fourth quarter of 2021 were $1.5 million and 3.4%, and $17.6 million and 36.9%, respectively. The lower level of income tax expense for the fourth quarter of 2022 compared to the third quarter of 2022 was primarily the result of decreased pretax income combined with a research credit recognized during the quarter related to the Company's ongoing investment in developing its technology-based platform. The lower level of income tax expense for the fourth quarter of 2022 compared to the fourth quarter of 2021 was primarily the result of a lower level of pretax income combined with higher levels of investment tax credits related to renewable energy investment transactions and additional impacts discussed above related to research credits.

Conference Call

Live Oak will host a conference call to discuss the company's financial results and business outlook tomorrow, January 26, 2023, at 9:00 a.m. ET. To listen to the call via a live audio webcast, visit http://investor.liveoakbank.com/. To participate via telephone, please register in advance at https://register.vevent.com/register/BI38276e2e147f4289a0d59072d04a6f09. Upon registration, participants will receive a confirmation email detailing how to join the conference call, including the dial-in number and unique passcode and that can be used to access the call. After the conference call, a replay will be available until February 2, 2023, at the same audio webcast link.

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; 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:



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

	Three Months Ended															4Q 2022 Changes vs.
	4Q 2022			3Q 2022			2Q 2022			1Q 2022			4Q 2021			3Q 2022		4Q 2021
Interest income																%		%
Loans and fees on loans	$	127,310		$	107,880		$	94,157		$	89,198		$	88,577		18.0		43.7
Investment securities, taxable		6,716			5,506			4,046			3,399			3,455		22.0		94.4
Other interest earning assets		2,584			2,448			1,044			185			171		5.6		1411.1
Total interest income		136,610			115,834			99,247			92,782			92,203		17.9		48.2
Interest expense
Deposits		50,357			31,553			18,777			14,348			13,817		59.6		264.5
Borrowings		351			395			536			655			748		(11.1	)	(53.1	)
Total interest expense		50,708			31,948			19,313			15,003			14,565		58.7		248.1
Net interest income		85,902			83,886			79,934			77,779			77,638		2.4		10.6
Provision for loan and lease credit losses		19,671			14,169			5,267			1,836			3,918		38.8		402.1
Net interest income after provision for loan and lease credit losses		66,231			69,717			74,667			75,943			73,720		(5.0	)	(10.2	)
Noninterest income
Loan servicing revenue		6,296			6,230			6,477			6,356			6,289		1.1		0.1
Loan servicing asset revaluation		(5,016	)		(1,324	)		(8,668	)		(1,569	)		(4,160	)	(278.9	)	(20.6	)
Net gains on sales of loans		7,362			9,275			5,630			20,977			20,257		(20.6	)	(63.7	)
Net gain (loss) on loans accounted for under the fair value option		571			4,420			(4,461	)		516			(66	)	(87.1	)	965.2
Equity method investments income (loss)		(1,818	)		29,136			119,056			(2,124	)		2,969		(106.2	)	(161.2	)
Equity security investments gains (losses), net		868			876			1,655			(44	)		218		(0.9	)	298.2
Lease income		2,555			2,516			2,510			2,503			2,521		1.6		1.3
Management fee income		3,200			2,844			2,558			1,488			1,482		12.5		115.9
Other noninterest income		5,053			3,751			3,772			4,565			4,246		34.7		19.0
Total noninterest income		19,071			57,724			128,529			32,668			33,756		(67.0	)	(43.5	)
Noninterest expense
Salaries and employee benefits		42,560			43,479			46,276			38,507			32,464		(2.1	)	31.1
Travel expense		1,872			2,372			2,358			1,897			1,782		(21.1	)	5.1
Professional services expense		2,453			2,505			3,988			2,791			3,724		(2.1	)	(34.1	)
Advertising and marketing expense		3,892			2,621			2,301			1,729			1,844		48.5		111.1
Occupancy expense		3,469			2,519			2,773			2,327			2,045		37.7		69.6
Technology expense		8,849			7,770			5,762			6,053			6,489		13.9		36.4
Equipment expense		3,759			3,761			3,784			3,816			3,741		(0.1	)	0.5
Other loan origination and maintenance expense		3,657			3,376			3,022			3,113			3,406		8.3		7.4
Renewable energy tax credit investment impairment		8,446			7,721			50			—			—		9.4		100.0
FDIC insurance		2,923			2,697			2,164			1,972			1,931		8.4		51.4
Contributions and donations		33			191			5,515			723			328		(82.7	)	(89.9	)
Other expense		2,672			4,036			2,886			2,786			1,944		(33.8	)	37.4
Total noninterest expense		84,585			83,048			80,879			65,714			59,698		1.9		41.7
Income before taxes		717			44,393			122,317			42,897			47,778		(98.4	)	(98.5	)
Income tax (benefit) expense		(1,075	)		1,525			25,278			8,388			17,631		(170.5	)	(106.1	)
Net income	$	1,792		$	42,868		$	97,039		$	34,509		$	30,147		(95.8	)	(94.1	)
Earnings per share
Basic	$	0.04		$	0.97		$	2.22		$	0.79		$	0.69		(95.9	)	(94.2	)
Diluted	$	0.04		$	0.96		$	2.16		$	0.76		$	0.66		(95.8	)	(93.9	)
Weighted average shares outstanding
Basic		44,005,220			43,914,920			43,824,707			43,701,943			43,492,172
Diluted		44,794,941			44,797,109			44,803,278			45,227,536			45,474,530


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

	As of the quarter ended															4Q 2022 Change vs.
	4Q 2022			3Q 2022			2Q 2022			1Q 2022			4Q 2021			3Q 2022		4Q 2021
Assets																%		%
Cash and due from banks	$	280,239		$	335,046		$	580,493		$	477,778		$	187,203		(16.4	)	49.7
Federal funds sold		136,397			68,324			51,694			29,993			16,547		99.6		724.3
Certificates of deposit with other banks		4,000			4,250			4,250			4,250			4,750		(5.9	)	(15.8	)
Investment securities available-for-sale		1,014,719			1,005,372			927,968			844,577			906,052		0.9		12.0
Loans held for sale ⁽¹⁾		554,610			537,649			1,199,734			1,028,635			1,116,519		3.2		(50.3	)
Loans and leases held for investment ⁽²⁾		7,344,178			6,853,382			5,860,209			5,738,241			5,521,262		7.2		33.0
Allowance for credit losses on loans and leases		(96,566	)		(78,291	)		(65,863	)		(63,058	)		(63,584	)	23.3		51.9
Net loans and leases		7,247,612			6,775,091			5,794,346			5,675,183			5,457,678		7.0		32.8
Premises and equipment, net		263,290			260,285			257,926			254,865			240,196		1.2		9.6
Foreclosed assets		—			1,178			191			198			620		(100.0	)	(100.0	)
Servicing assets		26,323			29,081			28,661			36,286			33,574		(9.5	)	(21.6	)
Other assets		328,308			298,374			275,634			268,201			250,254		10.0		31.2
Total assets	$	9,855,498		$	9,314,650		$	9,120,897		$	8,619,966		$	8,213,393		5.8		20.0
Liabilities and Shareholders' Equity
*Liabilities*
Deposits:
Noninterest-bearing	$	194,100		$	170,336		$	119,371		$	86,342		$	89,279		14.0		117.4
Interest-bearing		8,690,828			8,234,573			8,036,373			7,550,821			7,022,765		5.5		23.8
Total deposits		8,884,928			8,404,909			8,155,744			7,637,163			7,112,044		5.7		24.9
Borrowings		83,203			35,616			86,209			196,911			318,289		133.6		(73.9	)
Other liabilities		76,334			71,957			87,282			72,565			67,927		6.1		12.4
Total liabilities		9,044,465			8,512,482			8,329,235			7,906,639			7,498,260		6.2		20.6
*Shareholders' equity*
Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding		—			—			—			—			—		—		—
Class A common stock (voting)		330,854			325,632			320,924			315,607			310,970		1.6		6.4
Class B common stock (non-voting)		—			—			—			—			1,324		—		(100.0	)
Retained earnings		572,497			571,778			530,021			434,226			400,893		0.1		42.8
Accumulated other comprehensive (loss) income		(92,318	)		(95,242	)		(59,283	)		(36,506	)		1,946		3.1		(4,844.0	)
Total shareholders' equity		811,033			802,168			791,662			713,327			715,133		1.1		13.4
Total liabilities and shareholders' equity	$	9,855,498		$	9,314,650		$	9,120,897		$	8,619,966		$	8,213,393		5.8		20.0

(1) Includes $23.5 million, $25.1 million, and $25.3 million measured at fair value for the quarters ended June 30, 2022, March 31, 2022, and December 31, 2021, respectively.

(2) Includes $494.5 million, $512.2 million, $530.6 million, $600.6 million, and $645.2 million measured at fair value for the quarters ended December 31, 2022, September 30, 2022, June 30, 2022, March 31, 2022, and December 31, 2021, respectively.



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

	Twelve Months Ended
	December 31, 2022			December 31, 2021
Interest income
Loans and fees on loans	$	418,545		$	347,738
Investment securities, taxable		19,667			12,533
Other interest earning assets		6,261			942
Total interest income		444,473			361,213
Interest expense
Deposits		115,035			59,740
Borrowings		1,937			4,688
Total interest expense		116,972			64,428
Net interest income		327,501			296,785
Provision for loan and lease credit losses		40,943			15,210
Net interest income after provision for loan and lease credit losses		286,558			281,575
Noninterest income
Loan servicing revenue		25,359			25,219
Loan servicing asset revaluation		(16,577	)		(11,726	)
Net gains on sales of loans		43,244			67,280
Net gain on loans accounted for under the fair value option		1,046			4,257
Equity method investments income (loss)		144,250			(1,716	)
Equity security investments gains (losses), net		3,355			44,752
Lease income		10,084			10,263
Management fee income		10,090			6,378
Other noninterest income		17,141			15,493
Total noninterest income		237,992			160,200
Noninterest expense
Salaries and employee benefits		170,822			124,932
Travel expense		8,499			5,809
Professional services expense		11,737			15,135
Advertising and marketing expense		10,543			5,002
Occupancy expense		11,088			8,423
Technology expense		28,434			22,648
Equipment expense		15,120			14,869
Other loan origination and maintenance expense		13,168			13,529
Renewable energy tax credit investment impairment		16,217			3,187
FDIC insurance		9,756			7,070
Contributions and donations		6,462			2,331
Other expense		12,380			8,052
Total noninterest expense		314,226			230,987
Income before taxes		210,324			210,788
Income tax expense		34,116			43,793
Net income	$	176,208		$	166,995
Earnings per share
Basic	$	4.02		$	3.87
Diluted	$	3.92		$	3.71
Weighted average shares outstanding
Basic		43,862,291			43,169,935
Diluted		44,906,310			45,071,304


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

	As of and for the three months ended
	4Q 2022			3Q 2022			2Q 2022			1Q 2022			4Q 2021
Income Statement Data
Net income	$	1,792		$	42,868		$	97,039		$	34,509		$	30,147
Per Common Share
Net income, diluted	$	0.04		$	0.96		$	2.16		$	0.76		$	0.66
Dividends declared		0.03			0.03			0.03			0.03			0.03
Book value		18.41			18.24			18.05			16.29			16.39
Tangible book value (1)		18.32			18.15			17.97			16.20			16.31
Performance Ratios
Return on average assets (annualized)		0.08	%		1.86	%		4.40	%		1.65	%		1.47	%
Return on average equity (annualized)		0.88			20.79			46.14			18.94			16.80
Net interest margin		3.76			3.84			3.89			4.02			4.02
Efficiency ratio (1)		80.58			58.65			38.80			59.50			53.59
Noninterest income to total revenue		18.17			40.76			61.66			29.58			30.30
Selected Loan Metrics
Loans and leases originated	$	1,177,688		$	1,005,235		$	959,635		$	865,063		$	1,083,623
Outstanding balance of sold loans serviced		3,481,885			3,345,907			3,329,616			3,381,883			3,298,828
Asset Quality Ratios
Allowance for credit losses to loans and leases held for investment (3)		1.41	%		1.23	%		1.24	%		1.23	%		1.30	%
Net charge-offs (3)	$	1,396		$	1,741		$	2,462		$	2,362		$	15
Net charge-offs to average loans and leases held for investment (2) (3)		0.09	%		0.12	%		0.19	%		0.19	%		—	%

Nonperforming loans and leases at historical cost (3)
Unguaranteed	$	18,784		$	14,334		$	11,974		$	19,475		$	15,987
Guaranteed		54,608			45,730			33,794			32,828			26,546
Total		73,392			60,064			45,768			52,303			42,533
Unguaranteed nonperforming historical cost loans and leases, to loans and leases held for investment (3)		0.27	%		0.23	%		0.22	%		0.38	%		0.33	%

Nonperforming loans at fair value (4)
Unguaranteed	$	6,678		$	2,736		$	3,615		$	4,451		$	4,791
Guaranteed		38,212			25,169			27,895			30,850			33,471
Total		44,890			27,905			31,510			35,301			38,262
Unguaranteed nonperforming fair value loans to loans held for investment (4)		1.35	%		0.53	%		0.68	%		0.74	%		0.74	%
Capital Ratios
Common equity tier 1 capital (to risk-weighted assets)		12.46	%		13.16	%		13.14	%		12.10	%		12.38	%
Tier 1 leverage capital (to average assets)		9.26			9.49			9.44			8.87			8.87

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 December 31, 2022							Three Months Ended September 30, 2022
	Average Balance			Interest		Average Yield/Rate		Average Balance			Interest		Average Yield/Rate
Interest-earning assets:
Interest-earning balances in other banks	$	138,819		$	1,063	3.04	%	$	225,959		$	1,375	2.41	%
Federal funds sold		160,944			1,521	3.75			187,014			1,073	2.28
Investment securities		1,128,105			6,716	2.36			1,040,076			5,506	2.10
Loans held for sale		573,280			11,635	8.05			1,000,912			16,156	6.40
Loans and leases held for investment⁽¹⁾		7,066,106			115,675	6.49			6,208,447			91,724	5.86
Total interest-earning assets		9,067,254			136,610	5.98			8,662,408			115,834	5.31
Less: Allowance for credit losses on loans and leases		(77,977	)						(65,511	)
Noninterest-earning assets		476,204							598,220
Total assets	$	9,465,481						$	9,195,117
Interest-bearing liabilities:
Savings	$	4,096,034		$	28,587	2.77	%	$	4,009,928		$	16,775	1.66	%
Money market accounts		117,843			121	0.41			100,074			72	0.29
Certificates of deposit		4,143,894			21,649	2.07			3,978,793			14,706	1.47
Total deposits		8,357,771			50,357	2.39			8,088,795			31,553	1.55
Borrowings		36,264			351	3.84			63,207			395	2.48
Total interest-bearing liabilities		8,394,035			50,708	2.40			8,152,002			31,948	1.55
Noninterest-bearing deposits		182,727							133,676
Noninterest-bearing liabilities		69,814							84,597
Shareholders' equity		818,905							824,842
Total liabilities and shareholders' equity	$	9,465,481						$	9,195,117
Net interest income and interest rate spread				$	85,902	3.58	%				$	83,886	3.76	%
Net interest margin						3.76							3.84
Ratio of average interest-earning assets to average interest-bearing liabilities						108.02	%						106.26	%

(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
	4Q 2022			3Q 2022			2Q 2022			1Q 2022			4Q 2021
Total shareholders' equity	$	811,033		$	802,168		$	791,662		$	713,327		$	715,133
Less:
Goodwill		1,797			1,797			1,797			1,797			1,797
Other intangible assets		1,873			1,912			1,950			1,988			2,026
Tangible shareholders' equity (a)	$	807,363		$	798,459		$	787,915		$	709,542		$	711,310
Shares outstanding (c)		44,061,244			43,981,350			43,854,011			43,787,660			43,619,070
Total assets	$	9,855,498		$	9,314,650		$	9,120,897		$	8,619,966		$	8,213,393
Less:
Goodwill		1,797			1,797			1,797			1,797			1,797
Other intangible assets		1,873			1,912			1,950			1,988			2,026
Tangible assets (b)	$	9,851,828		$	9,310,941		$	9,117,150		$	8,616,181		$	8,209,570
Tangible shareholders' equity to tangible assets (a/b)		8.20	%		8.58	%		8.64	%		8.23	%		8.66	%
Tangible book value per share (a/c)	$	18.32		$	18.15		$	17.97		$	16.20		$	16.31
Efficiency ratio:
Noninterest expense (d)	$	84,585		$	83,048		$	80,879		$	65,714		$	59,698
Net interest income		85,902			83,886			79,934			77,779			77,638
Noninterest income		19,071			57,724			128,529			32,668			33,756
Total revenue (e)	$	104,973		$	141,610		$	208,463		$	110,447		$	111,394
Efficiency ratio (d/e)		80.58	%		58.65	%		38.80	%		59.50	%		53.59	%

This press release presents the 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.

Live Oak Bancshares, Inc. Reports Fourth Quarter 2022 Results