×

Live Oak Bancshares, Inc. Reports Fourth Quarter 2016 Results

WILMINGTON, N.C., Jan. 25, 2017 (GLOBE NEWSWIRE) -- Live Oak Bancshares, Inc. (Nasdaq:LOB) (“Live Oak” or “the Company”) today reported fourth quarter net earnings available to common shareholders of $5.5 million, or $0.16 per diluted share, compared to $5.7 million, or $0.16 per diluted share, for the fourth quarter of 2015. The fourth quarter of 2016 included $3.4 million in expense from previously disclosed stock-based compensation awards, a $1.4 million impairment on aircraft slated for sale, and $5.5 million in income tax savings arising from a renewable energy investment. The net effect of these items on diluted earnings per share was $0.01.

“We ended 2016 in terrific fashion with our highest ever quarterly production with over $500 million in loan originations and exceeded our target of $1.5 billion for the year. We expect to continue generating strong double-digit growth in origination volumes. We are pleased with the contribution Live Oak has made to the success of American small business owners in 2016. We are committed to serving and empowering small businesses across the U.S. Our work to expand this mission in new and existing lines of business will continue in 2017 with particular focus on the renewable energy sector. Our investments in infrastructure and key strategic initiatives over the past year have positioned us for a great 2017,” said James S. Mahan, III, Chief Executive Officer of Live Oak.

Year over Year Highlights

(Dollars in thousands, except per share data) Increase (Decrease)
2016 2015 Dollars Percent
Loan production:
Loans originated$1,537,010 $1,158,640 $378,370 33%
% Fully funded48.2% 52.1% n/a n/a
Loan sales:
Guaranteed loans sold$761,933 $640,886 $121,047 19%
Net gains on sales of loans75,326 67,385 7,941 12
Average net gain on sale of loans, per million sold98.86 105.14 (6.28) (6)
Net interest income and servicing revenues64,042 41,670 22,372 54
Net income attributable to Live Oak Bancshares, Inc.13,773 20,625 (6,852) (33)
Diluted earnings per share0.39 0.65 (0.26) (40)
Non-GAAP net income (1)20,148 18,356 1,792 10
Non-GAAP diluted earnings per share (1)0.57 0.57
(1) See accompanying GAAP to Non-GAAP Reconciliation.

Fourth Quarter 2016 Highlights

(Dollars in thousands, except per share data) Increase (Decrease)
Q4 2016 Q4 2015 Dollars Percent Q3 2016
Loan production:
Loans originated$514,565 $330,798 $183,767 56% $381,050
% Fully funded48.0% 44.1% n/a n/a 36.1%
Loan sales:
Guaranteed loans sold$260,125 $219,328 $40,797 19% $210,610
Net gains on sales of loans22,513 20,781 1,732 8 21,833
Average net gain on sale of loans, per million sold86.55 94.75 (8.2) (9) 103.67
Net interest income and servicing revenues18,060 12,874 5,186 40 17,491
Net income attributable to Live Oak Bancshares, Inc.5,480 5,716 (236) (4) 3,479
Diluted earnings per share0.16 0.16 0.10
Non-GAAP net income (1)6,076 5,716 360 6 5,498
Non-GAAP diluted earnings per share (1)0.17 0.16 0.01 6 0.16
(1) See accompanying GAAP to Non-GAAP Reconciliation.

Loans

Net loans held for investment increased $137.6 million, or 18.3%, to $889.4 million at December 31, 2016, from $751.8 million at September 30, 2016. Loans held for sale increased $49.0 million, or 14.2%, to $394.3 million at December 31, 2016, from $345.3 million at September 30, 2016. The increase in both portfolios is the result of robust growth in loan origination activities. The combined total loan portfolio at December 31, 2016, and September 30, 2016, of $1.30 billion and $1.11 billion, respectively, were comprised of approximately 66.8% and 66.3% of unguaranteed loans, respectively. The combined total loan portfolio of $1.30 billion at December 31, 2016, rose by 71.2% above its level of a year ago. Loan originations grew by 32.7% in 2016 to $1.54 billion.

Average loans were $1.21 billion during the fourth quarter of 2016 compared to $1.09 billion during the third quarter of 2016.

Net Interest Income

Net interest income for the fourth quarter of 2016 increased to $12.4 million compared to $8.5 million for the fourth quarter of 2015. The increase was driven by the significant growth in the combined held for sale and held for investment loan portfolios attributable to steadily rising loan originations, along with the Company's efforts to grow recurring revenue sources by increasing the level of loans on the balance sheet. The net interest margin declined from 3.66% for the fourth quarter of 2015 and 3.32% for the third quarter of 2016 to 3.08% for the fourth quarter of 2016. This decline in net interest margin was primarily attributable to the strong growth in USDA-guaranteed loans which typically carry a lower yield.

Noninterest Income

Noninterest income for the fourth quarter of 2016 totaled $26.3 million, compared to $24.4 million for the fourth quarter of 2015. Net gains on sales of loans increased to $22.5 million in the fourth quarter of 2016 compared to $21.8 million in the third quarter of 2016 and $20.8 million in the fourth quarter of 2015 due to a much higher volume of loan sales. The volume of loan sales rose by 18.9% in 2016 to $761.9 million. Loan servicing revenues rose by $1.3 million from the fourth quarter of 2015 to $5.7 million.

Noninterest Expense

Noninterest expense for the fourth quarter of 2016 was $32.4 million compared to $27.2 million for the third quarter of 2016 and $22.1 million for the fourth quarter of 2015. Salaries and employee benefits increased to $17.1 million from $12.7 million for the fourth quarter of 2015 as a result of increased staffing and expanding infrastructure to support growing loan demand and multiple new initiatives of the Company, along with $3.4 million in stock based compensation expense related to restricted stock awards with an effective grant date of May 24, 2016, for key employee retention, as discussed in Note 10 of our March 31, 2016 Form 10-Q. Excluding the $3.4 million in stock based compensation, salaries and benefits for the fourth quarter of 2016 increased a modest $1.0 million from fourth quarter 2015. Total stock based compensation related to these restricted stock awards was $9.0 million for calendar year 2016. Future expense associated with these restricted stock awards is expected to be approximately $346 thousand each quarter through the end of the implied term. Total stock based compensation expense in the fourth quarter of 2016 was $4.4 million compared to $4.1 million for the third quarter of 2016 and $617 thousand for the fourth quarter of 2015.

The Other expense component of noninterest expense was $3.9 million for the fourth quarter of 2016 as compared to $1.8 million for the third quarter of 2016 and $2.0 million for the fourth quarter of 2015. The primary reason for this increase was recognition of a $1.4 million impairment loss on aircraft as management committed to a plan to sell the aircraft prior to year-end. The sale of this aircraft took place subsequent to year end with no additional losses.

Noninterest expense for the fourth quarter of 2016 also included $3.2 million in impairment charges related to a $4.6 million renewable energy tax credit investment. Investments of this type generate a return primarily through the realization of federal and state income tax credits and other tax benefits; accordingly, impairment of the investment amount is recognized in conjunction with the realization of related tax benefits. This investment generated tax savings of $5.5 million for 2016. This equity method investment aligns with the Company's strategic emphasis in the renewable energy sector. In line with this strategic industry emphasis, the Company originated $124.1 million in loans that support the renewable energy industry during the fourth quarter of 2016. These loans have no tax credit benefit to the Company.

Income Tax

The fourth quarter of 2016 had an income tax benefit of ($3.0) million as compared to income tax expense of $2.6 million for the third quarter of 2016 and $3.5 million for the fourth quarter of 2015. This decrease in income tax expense in the fourth quarter of 2016 was the product of the above discussed renewable energy tax credit investment.

Asset Quality

The unguaranteed exposure of nonperforming loans amounted to $4.8 million at December 31, 2016, compared to $3.4 million at September 30, 2016. Total nonperforming loans increased to $23.8 million from $14.0 million at the end of the prior quarter. No systemic issues were noted in this increase of nonperforming loans which was comprised of a small number of borrowers in our most mature verticals. Total unguaranteed nonperforming loans as a percentage of total held for investment loans was 0.53% and 0.44% as of December 30, 2016, and September 30, 2016, respectively.

Foreclosed assets decreased $587 thousand to $1.6 million at December 31, 2016, from $2.2 million at September 30, 2016.

Net charge-offs were $813 thousand in the fourth quarter of 2016 compared to $937 thousand in the third quarter of 2016 and $205 thousand in the fourth quarter of 2015. Net charge-offs as a percentage of average held for investment loans, annualized, for the quarters ended December 31, 2016 and 2015, were 0.39% and 0.30%, respectively. Net charge-offs for 2016 totaled $1.7 million as compared to $799 thousand for 2015.

Provision for Loan Losses

The provision for loan losses remained at $3.8 million for both the fourth and third quarters of 2016 and was $1.5 million for the fourth quarter of 2015. The level of provision in the fourth quarter of 2016 reflects the continued strong growth in the loan portfolio and remained above net charge-off levels which contributed to the increase in the allowance for loan losses.

The allowance for loan losses increased $3.0 million, or 20.0%, to $18.2 million at December 31, 2016, from $15.2 million at September 30, 2016. The allowance for loan losses as a percentage of total loans held for investment increased from 1.98% at September 30, 2016 to 2.01% at December 31, 2016.

Deposits

Total deposits increased by $82.1 million, or 5.8%, to $1.49 billion at December 31, 2016, compared to $1.40 billion at September 30, 2016, following successful deposit gathering campaigns. Average total interest bearing deposits for the fourth quarter of 2016 increased $197.5 million, or 15.9%, to $1.44 billion, compared to $1.24 billion for the third quarter of 2016. The ratio of average total loans to average interest bearing deposits was 84.3% for the fourth quarter of 2016, compared to 87.7% for the third quarter of 2016.

Conference Call

Live Oak will host a conference call to discuss quarterly results at 9:00 a.m. ET tomorrow morning (January 26, 2017). 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 48919345. 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 webcast will be archived on the Company's website for one year. A replay of the conference call will also be available until 5:00 p.m. ET February 2, 2017, 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; 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; 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 Banking Company, a national online platform for small business lending.

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

Three months ended
4Q 2016 3Q 2016 2Q 2016 1Q 2016 4Q 2015
Interest income
Loans and fees on loans$16,239 $14,961 $12,902 $11,005 $10,474
Investment securities, taxable292 337 252 251 224
Other interest earning assets383 264 248 138 80
Total interest income16,914 15,562 13,402 11,394 10,778
Interest expense
Deposits4,283 3,689 3,243 2,444 2,105
Borrowings239 242 242 241 203
Total interest expense4,522 3,931 3,485 2,685 2,308
Net interest income12,392 11,631 9,917 8,709 8,470
Provision for loan losses3,844 3,806 3,453 1,433 1,467
Net interest income after provision for loan losses8,548 7,825 6,464 7,276 7,003
Noninterest income
Loan servicing revenue5,668 5,860 5,081 4,784 4,404
Loan servicing asset revaluation(3,340) (3,421) (1,604) (26) (1,996)
Net gains on sales of loans22,513 21,833 14,555 16,425 20,781
Gain on sale of securities available-for-sale 1 1
Construction supervision fee income868 502 667 630 745
Other noninterest income618 657 649 619 433
Total noninterest income26,327 25,432 19,348 22,432 24,368
Noninterest expense
Salaries and employee benefits17,121 17,471 15,411 12,993 12,700
Travel expense1,811 2,218 2,330 1,846 1,465
Professional services expense1,137 907 910 528 752
Advertising and marketing expense1,109 1,097 1,365 963 1,156
Occupancy expense1,267 1,058 1,055 1,193 1,555
Data processing expense1,435 1,252 1,404 1,208 1,195
Equipment expense550 611 534 551 646
Other loan origination and maintenance expense824 806 621 574 685
Renewable energy tax credit investment impairment3,197
Other expense3,933 1,798 1,502 1,855 1,979
Total noninterest expense32,384 27,218 25,132 21,711 22,133
Income before taxes2,491 6,039 680 7,997 9,238
Income tax (benefit) expense(2,989) 2,561 557 3,314 3,523
Net income5,480 3,478 123 4,683 5,715
Net loss attributable to noncontrolling interest 1 8 1
Net income attributable to Live Oak Bancshares, Inc.$5,480 $3,479 $123 $4,691 $5,716
Earnings per share
Basic$0.16 $0.10 $0.00 $0.14 $0.17
Diluted$0.16 $0.10 $0.00 $0.13 $0.16
Weighted average shares outstanding
Basic34,235,375 34,206,943 34,189,217 34,176,753 34,169,855
Diluted35,208,433 35,001,817 35,206,125 34,954,592 35,079,486

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

As of the quarter ended
4Q 2016 3Q 2016 2Q 2016 1Q 2016 4Q 2015
Assets
Cash and due from banks$238,008 $355,485 $175,506 $226,556 $102,607
Certificates of deposit with other banks7,250 7,500 8,500 9,000 10,250
Investment securities available-for-sale71,056 70,334 66,804 55,674 53,762
Loans held for sale394,278 345,277 329,206 537,293 480,619
Loans held for investment907,566 766,977 690,517 313,633 279,969
Allowance for loan losses(18,209) (15,178) (12,309) (8,616) (7,415)
Net loans889,357 751,799 678,208 305,017 272,554
Premises and equipment, net64,661 60,646 61,064 61,839 62,653
Foreclosed assets1,648 2,235 2,971 3,020 2,666
Servicing assets51,994 49,729 48,454 47,377 44,230
Other assets37,009 26,735 24,591 22,765 23,281
Total assets$1,755,261 $1,669,740 $1,395,304 $1,268,541 $1,052,622
Liabilities and Shareholders’ Equity
Liabilities
Deposits:
Noninterest-bearing$27,990 $28,461 $22,942 $21,125 $21,502
Interest-bearing1,457,086 1,374,556 1,117,855 994,340 783,286
Total deposits1,485,076 1,403,017 1,140,797 1,015,465 804,788
Long term borrowings27,843 28,074 28,173 28,271 28,375
Other liabilities19,495 24,497 18,984 20,372 19,971
Total liabilities1,532,414 1,455,588 1,187,954 1,064,108 853,134
Shareholders’ equity
Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding
Class A common stock (voting)149,966 145,284 141,181 138,199 137,492
Class B common stock (non-voting)50,015 50,015 50,015 50,015 50,015
Retained earnings23,518 18,723 15,928 16,147 12,140
Accumulated other comprehensive (loss) income(652) 130 201 47 (192)
Total shareholders’ equity attributed to Live Oak Bancshares, Inc.222,847 214,152 207,325 204,408 199,455
Noncontrolling interest 25 25 33
Total equity222,847 214,152 207,350 204,433 199,488
Total liabilities and shareholders’ equity$1,755,261 $1,669,740 $1,395,304 $1,268,541 $1,052,622

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

Twelve months ended
12/31/16 12/31/15 12/31/14
Interest income
Loans and fees on loans$55,107 $33,340 $19,947
Investment securities, taxable1,132 811 455
Other interest earning assets1,033 300 163
Total interest income57,272 34,451 20,565
Interest expense
Deposits13,659 7,379 4,731
Borrowings964 1,483 1,121
Total interest expense14,623 8,862 5,852
Net interest income42,649 25,589 14,713
Provision for loan losses12,536 3,806 2,793
Net interest income after provision for loan losses30,113 21,783 11,920
Noninterest income
Loan servicing revenue21,393 16,081 12,823
Loan servicing asset revaluation(8,391) (6,229) (2,201)
Net gains on sales of loans75,326 67,385 49,977
Equity in earnings (loss) of non-consolidated affiliates (26) (2,221)
Gain on sale of investment in non-consolidated affiliate 3,782
Gain (loss) on sale of securities available-for-sale1 13 (74)
Construction supervision fee income2,667 1,623 361
Other noninterest income2,543 1,699 1,377
Total noninterest income93,539 84,328 60,042
Noninterest expense
Salaries and employee benefits62,996 40,323 29,165
Travel expense8,205 7,379 5,392
Professional services expense3,482 2,643 3,775
Advertising and marketing expense4,534 4,333 3,316
Occupancy expense4,573 3,475 1,851
Data processing expense5,299 3,583 2,660
Equipment expense2,246 2,119 1,566
Other loan origination and maintenance expense2,825 2,069 1,652
Renewable energy tax credit investment impairment3,197
Other expense9,088 5,791 5,149
Total noninterest expense106,445 71,715 54,526
Income before taxes17,207 34,396 17,436
Income tax expense3,443 13,795 7,388
Net income13,764 20,601 10,048
Net loss attributable to noncontrolling interest9 24
Net income attributable to Live Oak Bancshares, Inc.$13,773 $20,625 $10,048
Earnings per share
Basic$0.40 $0.66 $0.42
Diluted$0.39 $0.65 $0.41
Weighted average shares outstanding
Basic34,202,168 31,079,032 23,973,398
Diluted35,086,959 31,973,146 24,424,181

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

As of and for the three months ended
4Q 2016 3Q 2016 2Q 2016 1Q 2016 4Q 2015
Income Statement Data
Net income attributable to Live Oak Bancshares, Inc.$5,480 $3,479 $123 $4,691 $5,716
Per Common Share
Net income, basic$0.16 $0.10 $0.00 $0.14 $0.17
Net income, diluted0.16 0.10 0.00 0.13 0.16
Dividends declared0.02 0.02 0.01 0.02 0.01
Book value6.51 6.26 6.06 5.98 5.84
Performance Ratios
Return on average assets (annualized)1.26% 0.91% 0.04% 1.67% 2.18%
Return on average equity (annualized)9.95 6.54 0.24 9.38 11.60
Net interest margin3.08 3.32 3.26 3.52 3.66
Efficiency ratio (1)83.64 73.44 85.88 69.72 67.40
Noninterest income to total revenue68.00 68.62 66.11 72.03 74.21
Selected Loan Metrics
Loans originated$514,565 $381,050 $356,865 $284,530 $330,798
Guaranteed loans sold260,125 210,610 135,555 155,643 219,328
Average net gain on sale of loans86.55 103.67 107.37 105.53 94.75
Held for sale guaranteed loans (note amount) (2)754,834 692,278 639,356 541,595 497,875
Quarterly increase (decrease) in note amount of held for sale guaranteed loans62,556 52,922 97,761 43,720 (1,428)
Estimated net gain to be recognized on quarterly increase in guaranteed loans held for sale (3)5,414 5,486 10,497 4,614 N/A
Asset Quality Ratios
Allowance for loan losses to loans held for investment2.01% 1.98% 1.78% 2.75% 2.65%
Net charge-offs (recoveries)$813 $937 $(240) $232 $205
Net charge-offs (recoveries) to average loans held for investment (4)0.39% 0.51% (0.18)% 0.30% 0.30%
Nonperforming loans$23,781 $14,023 $12,902 $14,829 $12,367
Foreclosed assets1,648 2,235 2,971 3,020 2,666
Nonperforming loans (unguaranteed exposure)4,784 3,354 2,174 2,421 2,037
Foreclosed assets (unguaranteed exposure)246 304 433 438 373
Nonperforming loans not guaranteed by the SBA and foreclosures5,030 3,658 2,607 2,859 2,410
Nonperforming loans and foreclosures, not guaranteed by the SBA, to total assets0.29% 0.22% 0.19% 0.23% 0.23%
Capital Ratios
Common equity tier 1 capital (to risk-weighted assets)15.35% 16.63% 18.26% 20.61% 23.22%
Total capital (to risk-weighted assets)16.60 17.88 19.43 21.54 24.12
Tier 1 risk based capital (to risk-weighted assets)15.35 16.63 18.26 20.61 23.22
Tier 1 leverage capital (to average assets)12.03 13.18 14.32 17.09 18.36

Notes to Quarterly Selected Financial Data

(1) See accompanying GAAP to Non-GAAP Reconciliation.

(2) Includes the entire note amount, including undisbursed funds for the multi-advance loans.

(3) The estimated revenue from the sale of the quarterly increase in guaranteed loans is based on the average net gain on sale of loans for that quarter. This is an estimate based on the respective quarter activity and does not reflect actual gains to be recognized.

(4) Quarterly net charge-offs as a percentage of quarterly average loans held for investment, annualized.

Live Oak Bancshares, Inc.
Quarterly Average Balances and Net Interest Margin
(Dollars in thousands)

Three months ended December 31, 2016 Three months ended September 30, 2016
Average
Balance
Interest Average
Yield/Rate
Average
Balance
Interest Average
Yield/Rate
Interest earning assets:
Interest earning balances in other banks $320,270 $383 0.48% $231,238 $264 0.45%
Investment securities 70,755 292 1.64 69,869 337 1.91
Loans held for sale 369,057 4,995 5.38 358,867 4,996 5.52
Loans held for investment (1) 841,676 11,244 5.31 728,041 9,965 5.43
Total interest earning assets 1,601,758 16,914 4.20 1,388,015 15,562 4.45
Less: allowance for loan losses (15,174) (12,188)
Non-interest earning assets 153,000 146,159
Total assets $1,739,584 $1,521,986
Interest bearing liabilities:
Interest bearing checking $28,091 $42 0.59% $23,529 $33 0.56%
Money market accounts 473,495 887 0.75 447,918 833 0.74
Certificates of deposit 935,274 3,354 1.43 767,887 2,823 1.46
Total interest bearing deposits 1,436,860 4,283 1.19 1,239,334 3,689 1.18
Other borrowings 27,969 239 3.40 28,172 242 3.41
Total interest bearing liabilities 1,464,829 4,522 1.23 1,267,506 3,931 1.23
Non-interest bearing deposits 28,669 20,742
Non-interest bearing liabilities 25,816 20,807
Shareholders' equity 220,270 212,914
Noncontrolling interest 17
Total liabilities and shareholders' equity $1,739,584 $1,521,986
Net interest income and interest rate spread $12,392 2.97% $11,631 3.22%
Net interest margin 3.08 3.32
Ratio of average interest-earning assets to average interest-bearing liabilities 109.35% 109.51%

(1) Average loan 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 2016 3Q 2016 2Q 2016 1Q 2016 4Q 2015
Total shareholders’ equity$222,847 $214,152 $207,350 $204,433 $199,488
Less:
Goodwill
Other intangible assets
Tangible shareholders’ equity (a)$222,847 $214,152 $207,350 $204,433 $199,488
Shares outstanding (c)34,253,602 34,215,050 34,192,382 34,183,878 34,172,899
Total assets$1,755,261 $1,669,740 $1,395,304 $1,268,541 $1,052,622
Less:
Goodwill
Other intangible assets
Tangible assets (b)$1,755,261 $1,669,740 $1,395,304 $1,268,541 $1,052,622
Tangible shareholders’ equity to tangible assets (a/b)12.70% 12.83% 14.86% 16.12% 18.95%
Tangible book value per share (a/c)$6.51 $6.26 $6.06 $5.98 $5.84
Efficiency ratio:
Noninterest expense (d)$32,384 $27,218 $25,132 $21,711 $22,133
Net interest income12,392 11,631 9,917 8,709 8,470
Noninterest income26,327 25,432 19,348 22,432 24,368
Less: gain (loss) on sale of securities 1 1
Adjusted operating revenue (e)$38,719 $37,062 $29,265 $31,141 $32,837
Efficiency ratio (d/e)83.64% 73.44% 85.88% 69.72% 67.40%

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

Three months ended Twelve months ended
12/31/2016 9/30/2016 12/31/2015 12/31/2016 12/31/2015
Reconciliation of net income to non-GAAP net income for non-routine income and expenses:
Net income attributable to Live Oak Bancshares, Inc.$5,480 $3,479 $5,716 $13,773 $20,625
Gain on sale of investment in non-consolidated affiliate (3,782)
Provision for loans reclassified as held for investment 4,023
Stock based compensation expense for restricted stock awards with an effective grant date of May 24, 2016, as discussed in Note 10 of our March 31, 2016 Form 10-Q3,365 3,365 8,973
Impairment charge taken on aircraft held for sale1,422 1,422
Renewable energy tax credit investment impairment and loss3,239 3,239
Income tax effects and adjustments for non-GAAP items *(3,210) (1,346) (7,062) 1,513
Other renewable energy tax expense176 176
Renewable energy tax credit(4,396) (4,396)
Non-GAAP net income$6,076 $5,498 $5,716 $20,148 $18,356
* Estimated at 40.0%
Non-GAAP earnings per share:
Basic$0.18 $0.16 $0.17 $0.59 $0.59
Diluted$0.17 $0.16 $0.16 $0.57 $0.57
Weighted-average shares outstanding:
Basic34,235,375 34,206,943 34,169,855 34,202,168 31,079,032
Diluted35,208,433 35,001,817 35,079,486 35,086,959 31,973,146
Reconciliation of financial statement line items as reported to adjusted for non-routine income and expenses:
Noninterest income, as reported$26,327 $25,432 $24,368 $93,539 $84,328
Gain on sale of investment in non-consolidated affiliate (3,782)
Renewable energy tax credit investment loss42 42
Noninterest income, as adjusted26,369 25,432 24,368 93,581 80,546
Provision for loan losses, as reported3,844 3,806 1,467 12,536 3,806
Provision for loans reclassified as held for investment (4,023)
Provision for loan losses, as adjusted3,844 3,806 1,467 8,513 3,806
Noninterest expense, as reported$32,384 $27,218 $22,133 $106,445 $71,715
Stock based compensation expense(3,365) (3,365) (8,973)
Impairment charge taken on aircraft(1,422) (1,422)
Renewable energy tax credit investment impairment(3,197) (3,197)
Noninterest expense, as adjusted24,400 23,853 22,133 92,853 71,715
Income tax (benefit) expense, as reported(2,989) 2,561 3,523 3,443 13,795
Income tax effects and adjustments for non-recurring income and expenses3,210 1,346 7,062 (1,513)
Other renewable energy tax expense(176) (176)
Renewable energy tax credit4,396 4,396
Income tax expense, as adjusted$4,441 $3,907 $3,523 $14,725 $12,282

This press release presents the non-GAAP financial measures previously shown. The adjustments to reconcile from the applicable GAAP financial measure to the non-GAAP financial measures 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.

Contacts: Brett Caines | CFO | Investor Relations | 910.796.1645 Micah Davis | Marketing Director | Media Relations | 910.550.2255

Source:Live Oak Bancshares

More From Press Releases